The Client, HPQ Silicon Inc. (TSX-V: HPQ) is an advanced materials engineering provider that offers sustainable silica (SiO2) and silicon (Si) solutions. Based in Quebec, HPQ Silicon is developing a unique portfolio of value-added silicon products sought after by electric vehicle and battery manufacturers, among other industries. PyroGenesis is the engineering and development producer, but also, as part of the terms of the contract with HPQ, PyroGenesis benefits from a royalty payment representing 10% of the Client’s sales, with set minimums.
3. Waste Remediation
• In June, the Company signed two contracts with Aluminerie Alouette, for projects to valorize residue streams from primary aluminum smelters. Alouette, located in Quebec, is home to the largest aluminum smelter in the Americas.
The first contract is to further advance a spent pot lining (or SPL) valorization technology, originally announced in March of 2021 upon receipt of a research grant to study the concept. Pot linings are the insulating carbon material that helps enable electrical conductivity inside an aluminum smelter cell or pot, for the process of turning aluminum oxide into aluminum. This lining typically has an average lifespan of 5 years, after which it eventually fails from continuous use, causing the spent pot to be put out of service and the highly contaminated linings to be removed.
PyroGenesis’ SPL remediation technology has now advanced to the point where full participation of Alouette in partnership with PyroGenesis has commenced. An estimated 1.5 million tons of spent pot linings are produced annually worldwide. If PyroGenesis’ proposed process proves successful, it could address a major issue concerning the aluminum industry. The second contract is geared to develop a new valorization solution for excess electrolytic bath. In both instances, the materials, while dangerous, if processed correctly can be recovered and reused by the primary aluminum producer.
Both projects have a commercial end goal with a strategy to market the solutions industry-wide in conjunction with Aluminerie Alouette.
Q2 Financial Highlights
• In May, the Company announced the receipt of a $2 million payment (US$1.5 million) under its existing $25 million Drosrite™ contract with Drosrite International LLC, which was in turn contracted by Radian Oil and Gas Services Company for an order of 7 Drosrite™ aluminum dross recovery systems.
The first three Drosrite™ systems are in use at Ma’aden, the largest mining company in the Kingdom of Saudi Arabia, at their Ras Al-Khair location – the world’s largest integrated aluminum facility. The remaining four systems under the contract have already been manufactured and are ready for deployment subject to a renewed payment schedule.
• In June, the Company announced a “best-efforts” brokered private placement offering of up to 5,000 unsecured convertible debenture units of the Company (the “Convertible Debenture Units”) at a price of $1,000 per Debenture Unit, for proceeds of up to $5,000,000 (the “Offering”). In connection with the Offering, P. Peter Pascali, President, CEO, and Director subscribed to $2,000,000 of Convertible Debenture Units. The Company indicated it intends to use the net proceeds from the Private Placement for working capital and general corporate purposes.
• In July, the Company announced amended terms of the brokered private placement, and also in July subsequently announced final closing of the placement.
Q2 Operational Highlights
• In May, the Company announced receipt of a 180-day extension to meet the Nasdaq minimum US$1 bid requirement under NASDAQ Listing Rule 5550(a)(2).
OUTLOOK
Consistent with the Company’s past practice, and in view of the early stage of market adoption of our core lines of business, we are not providing specific revenue or net income (loss) guidance for 2023. However, various events have occurred that allow for a partial window into the remainder of 2023.
Overall Strategy
PyroGenesis provides technology solutions to heavy industry that leverage off of the Company’s proprietary position and expertise in ultra-high temperature processes. The Company has evolved from its early roots of being a specialty-engineering firm to being a provider of a robust technology eco-system for heavy industry that helps address key strategic goals.
The Company believes its strategy to be timely, as multiple heavy industries are committing to major carbon and waste reduction targets at the same time as many governments are increasingly funding environmental technologies and infrastructure projects – all while both are making efforts to ensure the availability of critical minerals during the coming decades of increased output demand.
While there can be no guarantee, the Company believes this evolution of its strategy beyond a greenhouse gas emission reduction emphasis, to an expanded focus that encapsulates the key verticals listed above, both improves the Company’s chances for success while also providing a clearer picture of how the Company’s wide array of offerings work in tandem to support heavy industry goals.
PyroGenesis’ market opportunity remains large, as major industries such as aluminum, steelmaking, manufacturing, defense, aeronautics, and government require factory-ready, technology-based solutions to help steer through the paradoxical landscape of increasing demand and tightening regulations and material availability.
As more of the Company’s offerings reach full commercialization, PyroGenesis will remain focused on attracting influential customers in broad markets, and ensuring that operating expenses are controlled to achieve profitable growth.
For the remainder of 2023, we will continue to sharpen our focus on our strategy that structures our solution ecosystem under the three verticals noted previously: energy transition & emission reduction; commodity security & optimization; and waste remediation.
Some key developments to that end, include:
Enhanced Sales and Marketing
Against the backdrop of this strategy, the Company has been increasing sales, marketing, and R&D efforts in-line – and in some cases ahead of – the growth curve for industrial change related to greenhouse gas reduction efforts.
In May, during the Company’s annual general meeting (AGM), the Company released a new corporate presentation that provides a significantly better representation of the Company, its technology offerings, and alignment to customer needs.
The Company intends to develop additional visual material throughout 2023.
Business Line Developments
Upcoming milestones which are expected to confirm the validity of our strategies, are as follows:
Business Line Developments: Near Term (0 – 3 months)
(i)
Financial
Payments for Outstanding Major Receivables: The Company remains in continuous discussions with Radian Oil and Gas Services Company regarding the outstanding receivable of approximately US$8.0 million under the Company’s existing $25 million+ Drosrite™ contract. As previously announced, PyroGenesis agreed to a strategic extension of the payment plan, by the customer and its end-customer, geared to better align the pressures on the end-user’s operating cash flows created by increased business opportunities.
