2024 will be the PYRO year! A basher's nightmare! Business Line Developments
The upcoming milestones which are expected to confirm the validity of our strategies are outlined below (please note that these timelines are estimates based on information provided to us by the clients/potential clients, and while we do our best to be accurate, timelines can and will shift, due to protracted negotiations, client technical and resource challenges, or other unexpected situations beyond our or the clients’ control):
Business Line Developments: Near Term (0 – 3 months)
Energy Transition & Emission Reduction
Aluminum Remelting Furnaces : As mentioned in the Q2 2023 Outlook, the Company has been working on the development of aluminum remelting furnace solutions using plasma, for use by secondary aluminum producers or any manufacturer of aluminum components that uses recycled or scrap aluminum.
With gas-fired furnaces responsible for much of the scope 1 emissions of secondary aluminum production, aluminum companies have been searching for solutions that can help in the decarbonization efforts of aluminum remelting and cast houses.
The Company has two concepts: the retro-fitting of plasma torches in existing remelting and cast house furnaces that currently use other forms of heating, such as natural gas; and the manufacturing and sale of a PyroGenesis produced furnace based off the Company’s existing Drosrite™ metal recovery furnace design, which has been in use commercially for several years.
Also as mentioned in the Q2 2023 and Q3 2023 Outlooks, the Company has been working with a number of different companies over the past few years towards these goals. The results from the conclusion of recent major tests, conducted in conjunction with these companies, have been very positive, and negotiations are underway for next step deployments and/or sales, with more detailed announcements on these projects expected during Q2 2024.
Aluminum Furnace Tests : The Company is in final discussions with two (2) major aluminum companies for live furnace tests of plasma as a process heat source in melting and holding furnaces. If confirmed, these companies will each ship aluminum furnaces to PyroGenesis for installation at PyroGenesis’ factory, where plasma will be tested within the furnaces as a potential replacement for natural gas. These tests are similar to furnace tests that occurred during 2023 on site at PyroGenesis with another client, but these new potential tests will be conducted using larger furnaces.
Steel Industry Energy Transition : the Company has received notice from one of the top 5 largest steelmakers globally of its intent to engage the Company in respect of a fuel transition study, to examine the potential use of plasma torches as a heat source at a major steel production facility. Contractual discussions in this regard are set to commence in the short term.
New Industry Contract for Plasma Torches : as noted in the Q3 Outlook, the Company has been negotiating a large first-phase contract with a client (whose name is being withheld at present) in excess of $10 million that would signal PyroGenesis’ resumption of work in an industry that previously showed promise. Important players in this industry, which shall remain confidential at present, had previously heralded the potential use of plasma torches in conducting its primary objective, due to the increased speed and other advanced criteria at which the projects could be completed by using plasma torches compared to traditional approaches.
In January 2024, the Company announced the signing of a framework master agreement with this client, which included the payment to the Company of a non-refundable downpayment of $667,000. Negotiations of a first substantial statement of work are ongoing and remain positive but depend in large part on the client’s ability to secure funding in a timely manner. While there is no guarantee this statement of work will be completed, if successful the Company foresees the potential for a multi-phase, multi-year partnership with the client that may result in many additional plasma torch orders over the next few years.
Iron Ore Pelletization Torch Trials : as mentioned in previous Outlooks, the commissioning of the plasma torch systems – for use in the pelletization furnaces of a client previously identified as Client B – was underway, with the Company’s engineers onsite at Client B’s iron ore facility. The commissioning process includes installation, start-up, and site acceptance testing (SAT). The Company previously announced that it had shipped four 1 MW plasma torch systems for use in Client B’s iron ore pelletization furnaces, for trials toward potentially replacing fossil-fuel burners with plasma torches in the Client’s furnaces.
As mentioned in the Q3 2023 Outlook, this project continues to move forward, however the commissioning suffered a series of unforeseeable delays caused by, among other things, damaging regional torrential rainstorms that flooded and damaged the facility’s electrical system and furnace components.
Client B has informed the Company that they continued to experience technical challenges of its own at different stages during Q4, and the SAT was not completed as expected during the quarter. While frustrating, Client B has assured the Company that the project is not in jeopardy, and it remains committed to the trials.
As of the date of this MD&A, Client B has indicated that they were continuing to move forward in resolving their own technical issues, and that the acceptance testing, and full trials will regain momentum. Although the timeframe remains uncertain, it is moving forward, and the Company believes the series of stops and starts are indicative of most if not all paradigm-shifting innovations within complex heavy industry factory settings, where the effects of existing atmospheric pollutants on new technology installations are unknown until attempted. In short, the factory settings of these trials are by nature extremely dirty and hazardous, which can cause a variety of unplanned, unforeseen challenges, each of which are dealt with by the committed group of scientists and engineers of both Client B and PyroGenesis.
The client previously identified as Client A, a large international mining company which has also purchased a full plasma torch system for use in trials in its pelletization furnaces, continues its plasma torch initiative at its own pace, with no recent developments to report as per project timing or completion.
Pyro Green-Gas : The Company’s wholly owned subsidiary, Pyro Green-Gas, is in advanced discussions with an international steel company for a project with a value of approximately $1.1 million.
Aluminum Cast House Decarbonization : The Company is part of a tendered bid process for the testing of plasma within an aluminum cast house of a leading global aluminum company.
Mining Industry Parts Manufacturer Decarbonization : The Company is in advanced discussions with a global parts manufacturer that supplies the metals and mining industries, to test plasma as a heat source in the client’s cast furnaces.
Commodity Security & Optimization
New Laser Cut Titanium Metal Powder Order : the Company has received notice from a global organization for a potential initial order of titanium metal powder “laser cut” that, if completed, is expected to occur in Q2 2024.
Additive for Green Cement : the Company had previously announced a project with client Progressive Planet, for the development of amorphous silica from crystalline silica, for use as an additive to replace fly ash in cement, thereby creating green cement. With recent results announced by the Client showing promise, the Company expects additional information and next steps to be announced in Q2 2024.
Product Qualification Process for Global Aerospace Firm : As mentioned in the Q3 2023 Outlook, based on information flow between the Company and the aerospace client previously announced, the Company believes that the 2-year long qualification process to approve the Company’s titanium metal powers for use by a global aerospace firm and their suppliers, will conclude in the near term. The Company continues to have strong confidence in this endeavour and that the final decision from the client is slated for the very near future.
Of note, the Company previously confirmed that the qualification process includes both PyroGenesis’ “coarse cut” titanium metal powder, in addition to the “fine cut” titanium metal powder that had been previously discussed as undergoing the qualification process. The Company has some expectations that the course cut may receive qualification first, which would be advantageous to the Company, as the course cut has been produced and stockpiled in large amounts at the PyroGenesis facility, so delivery readiness would be enhanced.
“FSR” Project : Fumed Silica (also known as Pyrogenic Silica) is a particle-size food-safe additive with a large surface area, used worldwide as a thickening agent in thousands of products such as milkshakes, adhesives, powdered foods, paints, inks, cosmetics, and beverages, to increase strength, viscosity, and flow control.
PyroGenesis, on behalf of its client HPQ Silicon Inc., developed the Fumed Silica Reactor (“FSR”), a plasma-based process that creates fumed silica from quartz in a single and eco-friendly step. By eliminating the use of harmful chemicals generated by conventional fumed silica production methods, the groundbreaking FSR approach, if successful, will help contribute to the repatriation of silica production to North America while lowering the CO 2 emissions and carbon footprint of the process.
In a major step towards commercial-scale production, PyroGenesis successfully deployed [news release dated Oct 3, 2023] the FSR on a laboratory scale to produce fumed silica. A subsequent independent analysis [news release dated Nov 9, 2023] of the material conducted by McGill University confirmed the commercial-quality and thickening efficiency of the fumed silica produced by the FSR.
The build of a pilot plant has commenced for pre-commercial sample batch production, for launch in Q2 2024.
In addition to being the engineering services provider and developer of the forthcoming pilot plant, PyroGenesis owns a 10% royalty of client HPQ’s eventual fumed silica sales, with set minimums. This royalty stream, can, at any time, be converted by PyroGenesis into a 50% ownership in HPQ Silica Polvere Inc., the wholly owned subsidiary of HPQ Silicon that controls the fumed silica initiative and rights.
Waste Remediation
SPARC Refrigerant Waste Destruction System : The Company is in the final phase of a tendered bid process for the safe destruction of hazardous end-of-life refrigerants, such as CFCs, HCFCs, and HFCs, for a contract amount of approximately $6.5 million. The Company’s Steam Plasma Refrigerant Cracking (SPARC) system is a finalist for this Asian client’s initiative.
Financial
Payments for Outstanding Major Receivables : The Company has remained 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.
These discussions have been positive, both in regard to the ongoing payment plan, and in regard to a potential new order of additional Drosrite™ systems, as the client’s cash flow situation and their new business opportunities move closer to resolution.
The Company now expects payment of this receivable to be received in full within Q2 2024.
Innovation Grants : as mentioned in the Q1 and Q2 Outlooks, the Company has applied for grants tailored to technology innovation and/or carbon reduction and expects to have results regarding these applications. Indications are positive and the Company expects to be in a position to make an announcement on these grants in Q2 2024. These grants are in the order of $1-2 million.
Business Line Developments: Mid Term (3 – 6 months)
Energy Transition & Emission Reduction
Pyro Green-Gas : The Company previously announced that its wholly-owned subsidiary, Pyro Green-Gas, is expected to sign a contract with a value of approximately between $10-15 million. The Company has significant doubts that, if the project commences, Pyro Green-Gas will participate. This project is not reflected in the stated backlog of either the financial statement or the MD&A.
Commodity Security & Optimization
Drosrite ™ Factory Trials : The Company is in discussions with multiple aluminum manufacturers to conduct paid tests of its Drosrite™ aluminum dross processing systems within client factories, as a first step towards potential purchase of Drosrite™ systems. These potential clients are in France, the United States, southern Europe and Central Europe.
Drosrite ™ Systems : Separately, the Company is in various stage discussions with multiple aluminum manufacturers for potential purchase of Drosrite™ aluminum dross processing systems.
Waste Remediation
Plasma Resource Recovery System (PRRS) : The Company is in early-stage discussions for the sale of a PRRS system, to a European entity, to transform municipal solid waste (MSW) into both energy and chemical products. PyroGenesis’ PRRS system is designed to process MSW, industrial waste, and hazardous waste, transforming them into commercially valuable products. These products include gaseous fuel for electricity and heat generation, slag, aggregates suitable for construction, and recoverable metals for recycling. The value for this potential contract is between approximately $25 to $30 million.
Potential PAWDS Order : The Company is in initial negotiations with a company that conducts cleanup and destruction of waste from seawater. It has also indicated interest in carrying out similar initiatives on land in remote locations. Negotiations for a PyroGenesis Plasma Arc Waste Destruction System (PAWDS), similar to the type the Company designed and built for several of the U.S. Navy aircraft carriers, are in early stage. While there is no guarantee this contract is completed, if successful the Company may be contracted for multiple PAWDS systems over time.
** Please note that projects or potential projects previously announced that do not appear in the above summary updates should not be considered as at risk. Noteworthy developments can occur at any time based on project stages, and the information presented above reflects information on hand. Projects not mentioned may have simply not concluded or not passed milestones worthy of discussion.