PYR.V Outlook for 2016
PyroGenesis Canada Inc., a TSX Venture 50® company, is the world leader in the
design, development, manufacturing and commercialization of advanced plasma
processes. The Company provides engineering and manufacturing expertise, cutting-edge
contract research, as well as turnkey process equipment packages to the defense,
metallurgical, mining, advanced materials (specifically 3D printing), oil & gas, and
environmental industries. With a team of experienced engineers, scientists and
technicians working from its Montreal office and its 3,800m2 production facility,
PyroGenesis maintains its competitive advantage by remaining at the forefront of
technology development and commercialization. PyroGenesis’ core competencies allows
the Company to be a leader in providing innovative plasma torches, plasma waste
processes, high-temperature metallurgical processes, and engineering services, to the
global marketplace. PyroGenesis’ operations are ISO 9001:2008 certified, and have been
certified under ISO standards since 1997. PyroGenesis is a publicly-traded Canadian
company whose common shares trade on the TSX Venture Exchange (Ticker symbol
PYR.V) and on the OTCQB in the United States (Ticker symbol PYRNF).
BUSINESS SEGMENTS - UPDATE
For over 20 years, PyroGenesis has been manufacturing plasma torch systems for some
of the most demanding applications in the world. As a cleantech alternative to burning
fossil fuel, PyroGenesis’ electricity-driven plasma torch systems are easy to operate and
offer a high level of safety, reliability and service life. PyroGenesis’ plasma torch systems
are the backbone of the solutions that the Company has developed to resolve problems
plaguing niche markets within the industries served. These industries have been
organised into five, clearly defined, business segments: Defense; Environmental; Oil &
Gas; Additive Manufacturing (3D Printing); and Mining & Metals.
DEFENSE SEGMENT
PyroGenesis’ recent activities within its defense business segment include the design,
manufacture and supply of a second PAWDS-Marine system to the US Navy, and the
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design and manufacture of the first Tactical PACWADS (for the destruction of chemical
warfare agents) for an International Military Consortium.
PAWDS-Marine
Recognized by the US Navy as the premier shipboard waste processing technology in the
market, the Plasma Arc Waste Destruction System - Marine (PAWDS-Marine) is the
world’s most compact, easy-to-operate, high temperature, plasma-based waste treatment
system. With one-button rapid start-up and shutdown capabilities, PAWDS-Marine
effectively destroys combustible wastes such as paper, plastics, food, oily rags, and waste
oil, all with minimal segregation. Developed by PyroGenesis in partnership with the US
Department of Defense, PAWDS-Marine has been specified into the design of all of the
Gerald R. Ford Class supercarriers, and the first two ships in this class, the CVN-78 USS
Gerald R. Ford and the CVN-79 USS John F. Kennedy have been ordered and delivered
to the contracted shipyard by PyroGenesis.
The US Navy plans to commission the USS Gerald R. Ford in June 2016, following
which PyroGenesis will start to supply consumables and spare parts, estimated at
hundreds of thousands of dollars for each PAWDS-Marine system, , thus creating a
significant recurring revenue stream.
In the lead-up to commissioning, PyroGenesis recently executed an agreement to train US
Navy sailors on its PAWDS Engineering Design Model at its manufacturing facility in
Montreal. The first group of sailors, to be trained on mechanical and electrical
maintenance as well as system operations, arrived for training in November 2015.
PyroGenesis delivered the second PAWDS-Marine system, intended for CVN-79, in the
second quarter of 2015 and anticipates receiving the next order in 2018.
Tactical PACWADS
The growing list of terrorist organisations and conflict zones around the world, together
with the apparent increased willingness to deploy Chemical Warfare Agents (“CWA”),
has brought to the forefront the striking need for a safe, versatile, and efficient mobile
system, deployable at a moment’s notice, to eliminate CWA stockpiles.
Using, the US Navy-selected PAWDS-Marine process for waste destruction on board the
Gerald R. Ford Class aircraft carriers as a platform, the Tactical Plasma Arc Chemical
Warfare Agents Destruction System, (“Tactical PACWADS”) is designed to rapidly and
safely destroy a wide range of CWAs, as well as their precursor reagents, in the field. As
opposed to the risky proposition of transporting enemy CWAs to another location, putting
soldiers and civilians at risk of ambush as well as the risk of the catastrophic release of
these highly toxic chemicals, the Tactical PACWADS would be used in situ to destroy
CWAs such as Sarin (GB), Mustard (HD), and VX nerve agent.
PyroGenesis completed the design and manufacture of the first Tactical PACWADS for
an International Military Consortium in the third quarter of 2015. The project has now
moved on to an initial testing phase which, once completed, is expected to be followed by
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extensive field testing using simulated and actual chemical warfare agents. Testing costs,
which are covered by the Consortium, are expected to total over $100 million, which
demonstrates their commitment to validate this technical solution.
Upon successful demonstration testing of the Tactical PACWADS ability to destroy
chemical warfare agents, the Company believes that there is the potential for orders for
additional systems in the future.
ENVIRONMENTAL SEGMENT
The human influence on the health of the planet continues to place a tremendous pressure
on the global ecosystem through climate change, population growth, and urban sprawl.
Advanced waste management practices through Reduction, Re-use and Recycling (the
“3Rs”) have condensed the amount of waste that society needs to dispose of, but landfill
are often inadequately constructed and are near capacity, greenhouse gases are being
released daily from fossil fuel consumption, and more complex, and often toxic, chemical
residues are accumulating in our food chain. Simply burning, or burying, such residual
waste merely amplifies the damage caused to the planet.
Using plasma technology to create smart alternatives to incinerators and landfills,
PyroGenesis represents tomorrow’s waste management cleantech standard. Through
innovation, collaboration and partnerships, PyroGenesis has developed a suite of highly
advanced, easy-to-operate, processes that not only integrate well with the 3Rs, but also
maximize the energy and/or resource recovery from a vast range of waste streams.
PyroGenesis remains extremely active in the environmental business segment, recently
signing an exclusive marketing license with Yasui Facilities, Inc. of Japan, terminating a
customer’s rights to PyroGenesis' technology and recovering the SPARC™ System for
redeployment in a fully commercial environment in either Asia or the United States,
finalising negotiations for the final phase of a $2.2 million plasma torch contract
previously announced to an Asian company, and progressing negotiations for the delivery
of a 10 tons per day (“TPD”) Plasma Waste to Energy system to Europe.
Exclusive Marketing License, Japan
In the third quarter of 2015, PyroGenesis entered into an exclusive marketing agreement
with Yasui Facilities, Inc. (“Yasui”), one of Japan's preeminent Architectural/Engineering
firms, providing much needed local engineering and permitting expertise that is expected
to expedite the conclusion of various multi-million dollar contracts under discussion in
Japan.
Under the terms of the agreement, Yasui will exclusively market PyroGenesis' line of
plasma waste processing systems in Japan for a period of five years with the option for an
automatic five year renewal, based on certain performance milestones. In exchange,
Yasui will pay all costs associated with the Japanese permitting process, which has
already commenced and is estimated to run into the $100,000's, and to reimburse
PyroGenesis for certain costs incurred in developing the Japanese market. Furthermore,
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upon receipt of the permit, which is expected in the first half of 2016, Yasui will pay
PyroGenesis a onetime exclusivity fee of $1.5M.
Current negotiations include potential contracts for groupings of 50 TPD waste treatment
systems, hospital/low level radioactive waste systems, multiple small transportable
mobile systems, as well as several niche applications including an opportunity to process
100 TPD of a specialty waste stream, with each 25 TPD system costing approximately
$15M. The end-user visited Montreal in November 2015 to witness a successful
demonstration of the destruction of their waste stream and contract negotiations are now
progressing to the next stage.
Recovery and Redeployment of SPARC™ System
PyroGenesis recently reached mutual agreement with one of its customers to terminate a
Development Use and Commercialization Agreement related to PyroGenesis' SPARC™
technology. Under the terms of the agreement, PyroGenesis recovered a system that
utilises the patented PyroGenesis SPARC™ technology, designed to destroy ozone
depleting substances such as end-of-life refrigerants like CFCs, HCFs, and HFCs, which
have high global warming potential. Furthermore, PyroGenesis maintains all intellectual
property rights, preventing the customer from commercialising the technology
PyroGenesis paid the customer $300,000 in consideration for the SPARC™ System and
provided an undertaking not to destroy ozone depleting substances in Canada before July
7th, 2017, unless for research and development purposes. As a result of the termination of
this agreement, Management recorded an inventory of $846,241.
PyroGenesis plans to redeploy this system in a fully commercial environment in either
Asia, or with an international oil and gas company in the US. Negotiations are
progressing well and the Company expects to execute a contract before the end of this
fiscal year. The redeployment is expected to realise a significant gross margin for
PyroGenesis and, upon successful installation and operation of this system, PyroGenesis
anticipates receiving follow-on orders for additional systems commencing in 2016.
$2.2 million Plasma Torch Contract
In the autumn of 2012, PyroGenesis was awarded a contract by a customer in Asia to
design, manufacture and deliver a fully automated plasma torch system comprised of
eight air plasma torches to be used for waste gasification. The first phase of this contract
was successfully completed and shipped in 2014. Customer-generated delays
subsequently stalled the second, and final, phase of the project. Recently, however,
PyroGenesis received confirmation for the second phase of the project, together with the
full, and final, payment. This project is expected to be completed in the first half of 2016.
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OIL & GAS SEGMENT
PyroGenesis has been working extensively with the Oil & Gas Industry and is not only
leading the way in clean energy development, but also with finding innovative ways of
reducing the sector’s carbon footprint in the production and distribution of their products.
Most recently, PyroGenesis completed the initial phases of two projects and was able to
clearly demonstrate major improvements to the carbon footprint, together with significant
financial savings, in each project. Despite these successes, amid fears that the current
downturn in oil prices could last for several years, the oil industry has slashed costs,
deferred research projects indefinitely, reduced capital investments, and sold assets, in an
effort to strengthen their balance sheets. . As a result, it is impossible for PyroGenesis to
predict when, if at all, these projects will progress to the next stage.
Recovering Valuable Metals from Waste Streams
In 2014, under a Master Services Agreement with a global oil and gas company,
PyroGenesis successfully conducted a preliminary engineering study, followed by
laboratory scale tests, to determine that valuable metals can be recovered by plasma
processing of oil and gas waste streams. Throughout these tests, it was noted that
PyroGenesis had not only established that plasma processing of these waste streams can
recover valuable metals, but that there is also a significant 50:1 volume reduction, which
decreases disposal costs by more than 90%.
In early 2015 the project proceeded to the pilot plant stage, which involved the adaptation
of an existing plant at PyroGenesis' facility to test and further demonstrate the economics
of PyroGenesis' proprietary technology. Pilot plant testing was successfully concluded in
October 2015, confirming that for an initial investment of approximately $20M in a
PyroGenesis system, the client could save over $40M/year in disposal costs and value
from recovered metal. PyroGenesis also expects to create an additional recurring revenue
stream with this project via a royalty payable on the value of recovered metal. The results
achieved with this project exceeded all expectations and Management remains optimistic
that, when the oil industry recovers, this project will progress to the commercialisation
stage.
Oil extraction from oil fields
PyroGenesis was engaged on a project to develop a plasma-based process designed to
enhance and accelerate oil extraction from oil fields. The testing phase of this project was
successfully completed in the third quarter of 2015. The patent pending process costs less
than 20% of that currently used, and is a clean, zero emissions technology utilizing
electricity as its only heat source. PyroGenesis remains optimistic that, when the oil
industry recovers, this project will progress to the commercialisation stage.
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ADDITIVE MANUFACTURING (3D PRINTING) SEGMENT
Developed by our team of engineers, scientists and technicians, the Plasma Atomization
Process (“PAP”) is an enabling technology for 3D Printing as well as other additive
manufacturing and powder metallurgy applications. Recognized as THE standard
technology for producing 3D Printing Grade reactive metal powders, our PAP units can
address the exacting requirements in terms of chemistry and properties required by the
biomedical and aerospace industries. The PAP has the distinction of producing highly
flowable and very pure spherical metallic powders. Using wire as the feedstock to the
PAP allows for a high level of traceability and unparalleled control of the particle size, a
critical requirement for the industries that the process addresses.
3D printing
In the summer of 2014, PyroGenesis announced that it had won a contract for the design,
manufacture and supply of ten powder production systems for 3D printing, for a total
contract value of $12.5 million. The contract calls for progress payments to be made for
the first system that is to be delivered and commissioned at the customer’s site in Asia,
following which production output will be scaled-up to pre-specified levels. Thereafter,
the customer is obliged to confirm the order for the remaining nine systems with payment
of a substantial deposit.
During the design and testing phases at its Montreal manufacturing facility, PyroGenesis
successfully developed an improved process that enables the Company to produce
metallic powders at higher production rates, whilst at the same time controlling powder
size distribution. The need to produce particles of a specific particle size distribution at
increasingly higher production rates is driven by the growing demand created by the
additive manufacturing industry, particularly 3D printing. PyroGenesis' technology has
the distinction of producing very small, spherical, and uniform powders which, as a
result, allows them to flow like a liquid; a highly sought after characteristic within the
additive manufacturing industry. PyroGenesis filed a provisional patent for this new
Plasma Atomization Process and expects to file a world-wide patent application by Q3,
2016.
With the newly developed PAP process fully integrated, the first system was
subsequently shipped to the customer in the summer of 2015. As of today, PyroGenesis’
engineers and technicians have completed the assembly/commissioning phase and are
currently scaling up the volume of powder output. Scale-up is expected to be completed
in the coming weeks, followed by commencement of the manufacturing of the remaining
nine systems. PyroGenesis expects to deliver, assemble and commission the remaining
nine systems during fiscal 2016.
As each powder production system becomes operational, PyroGenesis will be required to
supply consumables and spare parts, estimated at hundreds of thousands of dollars per
system, thereby creating a significant recurring revenue stream. Furthermore, upon
completion of this initial phase, the same customer has indicated a potential requirement
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for up to 40 additional systems to be delivered in the coming years. In addition,
PyroGenesis is exploring additional revenue streams for this technology, including
producing highly flowable and very pure spherical metallic powders from Titanium,
Niobium, Nitinol, Aluminum and other reactive metals, including alloys.
METALS & MINING SEGMENT
With plasma operating on “greenhouse gas-friendly” electricity only, PyroGenesis can
provide real cleantech solutions to industry. Through innovation, collaboration and
partnerships, the team at PyroGenesis has developed an array of plasma processing
approaches which bring value to organizations in the fields of mineral, metallurgical and
materials processing.
PyroGenesis has enjoyed further success in this segment with the recent signing of a
contract to supply its first DROSRITE™ system for optimizing metal recovery from
dross, and a separate contract to evaluate the feasibility of using Plasma for the purpose
of refining ore into pure metal.
DROSRITE™
DROSRITE™ is a salt-free, cost-effective, sustainable process for maximizing metal
recovery from dross, a waste generated in the metallurgical industry. DROSRITE™
avoids costly loss of metal, while reducing a smelter's carbon footprint and energy
consumption, providing an impressive return on investment. PyroGenesis' patented
DROSRITE™ process increases aluminum alloy recovery from dross and reduces
operating costs. In comparison, competing processes have significantly higher operating
costs and produce a hazardous waste that has to be disposed of at additional cost.
Earlier this year PyroGenesis entered into an agreement with a North American
automobile parts manufacturer to supply a commercial DROSRITE™ Furnace System by
the end of 2015. PyroGenesis is on track to fulfill the delivery requirement and believes
that the supply and installation of this system will be the first of 3 potential sales to the
same customer. More importantly, however, as this system represents the first sale of a
DROSRITE™ system in North America, PyroGenesis plans to leverage this reference
site to generate a continued flow of orders for additional systems from primary and/or
secondary aluminum smelters, together with large finished goods manufacturers,
primarily in the transportation sector.
Ore refining
In the summer of 2015, PyroGenesis was contracted by Uragold Bay Resources Inc.
(“Uragold”) to evaluate the feasibility of using Plasma for the purpose of refining ore into
pure metal; in this case converting quartz into pure silicon metal. The study is expected to
be completed within seven months and, once successful, is expected to result in an order
to design, manufacture and supply a pilot plant.
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Within 3 months of starting the project, PyroGenesis filed a provisional patent for a one
step process using plasma for producing high purity silicon from silica. The
PUREVAP™ Quartz Vaporisation Process is a proprietary process that uses a plasma arc
within a vacuum furnace to produce high purity, metallurgical grade silicon (MG-Si),
solar grade silicon (UMG Si) and polysilicon from quartz. According to Uragold, this
technology could revolutionize the making of solar panels into a more competitive source
of renewable energy.
PyroGenesis has granted Uragold exclusive rights to the PUREVAP™ process, solely for
the transformation of quartz. In exchange, PyroGenesis will receive royalties based upon
10% of sales of silicon metal refined by the process, with set minimums. According to
Roskill’s Global Industry Markets & Outlook report (2014) for Silicon and Ferrosilicon,
the world consumption of silicon metal in 2014 exceeded US$6B.
PyroGenesis plans to further develop this process towards refining other high grade and
valuable metals.