It is of little wonder that PyroGenesis Canada is currently ranked in the TSX Venture 50® for the second year in a row. Since December the company has secured a new international patent on its plasma fired steam generator and signed a deal with an international military consortium to develop a mobile plasma system for the destruction of chemical warfare agents, culminating yesterday when the company announced entering into a lucrative long-term marketing license agreement with a top Asian clean-tech project developer. PyroGenesis CEO, P. Peter Pascali, sat down to tell us more about the company’s ever-increasing success story.
For the uninitiated, can you give us a brief description of PyroGenesis Canada and its services?
PyroGenesis is a TSX Venture 50® clean-tech company that designs, develops, manufactures and commercializes plasma waste-to-energy systems and plasma torch products. PyroGenesis provides engineering and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, advanced materials, oil & gas, and environmental industries.
Can you tell us what this latest transformative deal with the Asian clean-tech developer entails?
PyroGenesis has signed an exclusive marketing license agreement with a large Asian clean-tech project developer with whom the company has been working closely with for over 3 years. The terms of the License allow the Licensee to market PyroGenesis' line of plasma waste processing systems in the Licensee’s country of origin for a period of five (5) years with an automatic five (5) year renewal based on certain performance milestones. The Agreement calls for: i) a non-refundable payment of $250,000 over the next two (2) weeks; and ii) a further payment of $250,000 within six (6) weeks, together with a signed order for six (6) 50 TPD waste treatment systems (the “Systems”). These Systems, wherein PyroGenesis uses high-temperature and highly-reactive plasma to destroy a wide range of municipal, hazardous, biomedical and other high-value wastes, often to recover both energy and other useful by-products, typically sell for $20-30 MM, each, depending on the features requested (such as energy recover for example) and/or the waste stream being processed.
Any there any other opportunities that you see arising from this licensing agreement that you want to tell investors about?
Yes indeed there are. We are discussing sales in terms of "groupings" of products. For instance, the announcement today envisions the purchase of a grouping of six (6) 50 TPD waste treatment systems however we are currently in discussions for further sales of two other groupings: one consisting of hospital/low level radioactive waste with a value of approximately $30MM and a second for 64 small transportable mobile systems totalling over $107MM. We don't expect either of these contracts to close before Q4-2015.
Now that the stock has popped 26% on the news of the licensing deal, can you tell us why smart investors should still be jumping on the PyroGenesis investment train?
Given that PyroGenesis has recently announced a signed backlog of orders in excess of $15MM (which is 3x the company’s most recently publicized annual revenues posted in 2013) which are all expected to roll out over the next 12 months, together with the news announced today which opens the door to a contract in excess of $120MM; all at historical gross margins in excess of 35% one can easily understand why the company is highly undervalued. Of note, analysts recently recommended PyroGenesis stock as a BUY with a 12 month target of $0.70-$1.00; and that was before Wednesday’s announcement. Investors should also take advantage of the fact that PyroGenesis is still a relatively unknown entity…with news such as that recently announced that won’t remain that way for long.
All in all, the astute investor should recognize that the successful diversification of the Company’s product line, which was embarked on over 18 months ago, into amongst other industries, Oil and Gas, and Additive Manufacturing (3D printing) together with an increased focus on business development, is proving successful.
Waste to energy markets are expected to increase 11.2% annually with plasma gasification, pyrolysis and gasification expected to take up 30% of that market, how are Pyrogenesis’ manufacturing capabilities positioned to grow with these explosive trends?
We would be remiss if we lead you to believe that everything is in place to handle the contract announced today, or the additional business under discussion; nor should it be under the circumstances. The Company is currently reviewing all options including acquiring manufacturing capabilities to efficiently carry out these orders.
Separately, PyroGenesis has ensured that the License allows it ample time to rollout these systems. Of note is that the six (6) Systems are essentially all the same design, which puts significantly less pressure on execution.
Now that this licensing deal has been finalized are there any more agreements in the pipeline that the markets should be aware of?
As one might suspect, there are, but regretfully we cannot go into any details further than we have already. Suffice it to say that the diversification strategy embarked on over 18 months ago is proving highly successful.
What other milestones does PyroGenesis Canada have left to achieve in fiscal 2015?
We have internal business development goals which call for significantly expanding our customer base within each business segment, while at the same time diversifying geographically, by end of 2015. So far, only 3 months in the year, we are well ahead of expectations.
What are the biggest challenges PyroGenesis Canada faces this year in reaching those milestones?
As with any company in “hockey stick” growth mode, executing and delivering on contracts in hand is always the biggest challenge. Fortunately, management has been well aware of this for some time now and has positioned the company to be able to execute in a timely fashion. Our seasoned Board of Directors also have significant experience in this area which has proven most useful. All in all these challenges are nice to have and the solutions are readily available in the marketplace.
FULL DISCLOSURE: PyroGenesis Canada is a Stockhouse Publishing client.