PyroGenesis Canada Inc. (TSX-V: PYR; OTCQB: PYRNF; FRA: 8PY) (the
“
Company” or “
PyroGenesis”), a
high-tech company that designs, develops, manufactures and
commercializes advanced plasma processes and products, is pleased
to provide an update on the Company’s iron ore pelletization plasma
torch business.
Mr. P. Peter Pascali, CEO and Chair of
PyroGenesis, provides this update in the following Q&A format.
The questions, for the most part, are derived from inquiries
received from investors, and analysts:
Q1. For
those who are new to the story,
could you please provide
us with some background
on your high-powered (~ 1 MW
range) plasma torch
business and how
it relates
to the iron ore
pelletization
industry?
A. Most certainly.
For background, pelletization is the process in
which iron ore is concentrated before shipment, thus significantly
reducing the cost of transportation, and providing a required
feedstock for blast furnaces. In conventional technologies, the
process heat is provided by fuel oil or natural gas burners (both
environmentally damaging). The combustion, in the burners, of
fossil fuels results in the production of greenhouse gases (“GHG”),
mainly CO2. Plasma torches, by contrast, utilize renewable
electricity and as such offer an environmentally attractive
alternative to fossil fuel burners.
In January 2019, PyroGenesis was contracted for
a 900kW plasma torch with a client which we later disclosed to be
RISE Energy Technology Center AB (“RISE”) of Sweden. RISE was
engaged in addressing the Swedish government’s commitment to zero
carbon emissions1; namely that within the iron ore pelletization
industry. The ultimate objective was to determine the benefits, if
any, of replacing traditional fossil fuel burners used in iron ore
pelletization with plasma torches. We delivered the plasma torch
and completed testing in 9 months.
Of note, PyroGenesis has a patented process to
replace fossil fuel burners with PyroGenesis’ clean burning plasma
torches, thereby reducing GHG emissions, for the iron ore
pelletization industry.
Q2.
So,
PyroGenesis has the
patent to replace fossil
fuel burners
with plasma torches in the
iron ore pelletization
industry?
A. Yes, we do. In other
industries, we expect to leverage off of our first mover advantage
developed in the iron ore pelletization industry.
Q3.
The RISE contract went well.
What happened next?
A. Our original goal was simply
to have our torches be a contender in Sweden’s strategy to reduce
GHG emissions in the iron ore pelletization industry. What we did
not realize at the time, was the impact this would have on the
industry as a whole. As noted above, we successfully completed the
RISE contract in 9 months, which once made public, had a resounding
effect as we apparently were addressing a significant concern in
the industry with respect to GHG emissions reduction. Given this
interest, we were approached by several companies in the industry
which we have come to term Client A, B and C. Two of the three
wanted to immediately engage in a modelling contract, and the third
is in the process of considering such. We prefer to engage in a
modelling-first-step as it helps quantify parameters that may be
specific to the client.
Modelling is a computer-based simulation of the
performance of PyroGenesis’ proprietary plasma torches using the
specific parameters in a particular iron ore pelletization plant.
The goal is to demonstrate the benefits of replacing existing
fossil fuel burners with plasma torches and/or identify
unanticipated or hidden costs/side effects.
To date, between RISE and the modelling we have
done, two of the most important benefits demonstrated were i) that
replacing fossil fuel burners with plasma torches was a simple
replacement, plug and play process, and ii) that PyroGenesis’
proprietary plasma torches significantly reduce GHG emissions.
There have been no unanticipated or hidden costs.
Furthermore, we have noticed that our patented
plasma torch technology, not only has economic and environmental
advantages, but may also address environmental policies and
legislation being implemented worldwide. For example, the European
Union (EU), as part of the EU's 2030 climate and energy
framework and contribution to the Paris Agreement2, has
put in place legislation to reduce emissions by at least
40% by 2030.
As a result, many companies in the field are
implementing business strategies directed at reducing GHG
emissions. As an example, a major international iron ore pelletizer
has dedicated approx. US $2B towards their goal of reducing their
carbon emission by 33% by 20303.
We believe PyroGenesis is uniquely positioned to
address such opportunities.
Q4.
Interesting...so replacing fossil
fuel burners with plasma torches
might be able to
economically,
and
significantly, reduce
the GHG emissions
in the iron ore pelletization
industry?
A. Correct.
Management has internally estimated that a
typical pellet plant producing 10 million metric tonnes of pellets
annually emits approximately one million metric tonnes of CO24. The
total world pellet production of 400 million metric tonnes of
pellets represents a potential market for torch sales in excess of
$10B worldwide. The world pellet industry generates about 40
million metric tonnes of CO2 every year. The use of plasma torches
running off a clean electrical grid would reduce these emissions
significantly. For reference, 40 million tonnes of CO2 represent
the combined yearly emissions of 8.7 million US passenger
vehicles5.
The impact of replacing fossil fuel burners with
plasma torches not only resonates in the iron ore pelletization
industry, where we are patent protected, but also in other
industries such as the aluminum, cement and glass industries, who
are also pressured to reduce GHG emissions.
Q5. What
is your business model for
replacing fossil fuel burners with plasma
torches, specifically in the iron
ore pelletization industry which
seems to be the low-hanging
fruit?
A. This is a very good
question.
Our offering is geared to address the need to
develop fossil fuel free energy-mining-iron-steel value chain and
thereby provide a basis for governance and industrial strategies
for transformative change. Until recently, the business model was
simply to sell torches (with an internal target of $3MM NPV per
torch) with the recurring revenue derived from typical maintenance
and spare parts contracts.
We now have come to appreciate the economics of
leasing torches instead of an outright sell. This model has clear
advantages to both parties; little-to-no CAPEX to the buyer,
healthy recurring revenue stream to the seller. At this stage, we
see this to be the fastest way to grow this business segment, and
is a significant strategy-shift for the Company as it relates to
this offering, and which we expect will play a key role in our
position/ongoing discussions with clients.
Q6.
Wouldn’t this leasing
model be capital intensive?
A. Yes and no.
It is capital intensive of course, however,
there are major leasing companies we can team up with to provide
this service. Given the size and credit worthiness of the client,
together with a proven technology, we do not see this to be an
issue. Had the client been small, their credit worthiness not be
conducive to leasing, or the technology not be proven, then the
burden would be on PyroGenesis to provide that capital, and we do
not see ourselves engaging in that type of financing.
Q7.
In closing, can you give
us a
status/update
on the existing
agreements/contracts
under
discussion?
A.
Certainly.
All of our projects are on track and progressing
nicely. As previously disclosed on September 1st, 2020, we have
received a draft contract from Client A, which is still in the
final stages of completion. The fact that we received this contract
from Client A, on the heels of a successful modelling contract, who
is a significant player in the industry, clearly demonstrates the
impact that PyroGenesis’ proprietary plasma torches are having on
iron ore pelletization GHG reduction strategies. If signed, and
successfully deployed, one might expect they would start a program
to replace their fossil fuel burners with PyroGenesis’ plasma
torches. Although nothing is certain, we are definitely on the
right track with Client A.
Client B has finalized their modelling contract,
and like Client A, has moved to contract negotiations and requested
a quote for an initial order of four torches which we have recently
provided.
Client C is moving forward as well. We are
confident that they will agree to enter into a modeling contract
before an initial order of torches is placed. We find this to be
the most prudent next step.
We are also in discussion with potential clients
in other industries to replace their fossil fuel burners with
PyroGenesis’ plasma torches.
About
PyroGenesis Canada Inc.
PyroGenesis Canada Inc., a high-tech company, is
a leader in the design, development, manufacture and
commercialization of advanced plasma processes and products. The
Company provides its engineering and manufacturing expertise and
its turnkey process equipment packages to customers in the defense,
metallurgical, mining, advanced materials (including 3D printing),
and environmental industries. With a team of experienced engineers,
scientists and technicians working out of its Montreal office and
its 3,800 m2 manufacturing facility, PyroGenesis maintains its
competitive advantage by remaining at the forefront of technology
development and commercialization. The Company’s core competencies
allow PyroGenesis to provide innovative plasma torches, plasma
waste processes, high-temperature metallurgical processes, and
engineering services to the global marketplace. PyroGenesis’
operations are ISO 9001:2015 and AS9100D certified. For more
information, please visit www.pyrogenesis.com.
This press release contains certain
forward-looking statements, including, without limitation,
statements containing the words “may”, “plan”, “will”, “estimate”,
“continue”, “anticipate”, “intend”, “expect”, “in the process” and
other similar expressions which constitute “forward- looking
information” within the meaning of applicable securities laws.
Forward-looking statements reflect the Company’s current
expectation and assumptions and are subject to a number of risks
and uncertainties that could cause actual results to differ
materially from those anticipated. These forward-looking statements
involve risks and uncertainties including, but not limited to, the
closing and timing of the Company’s public offering. Such
statements reflect the current views of the Company with respect to
future events and are subject to certain risks and uncertainties
and other risks detailed from time-to-time in the Company’s ongoing
filings with the securities regulatory authorities, including under
“Risk Factors” in the Company’s most recent annual information
form, which filings can be found under the Company’s profile at
www.sedar.com, or at www.otcmarkets.com. Actual results, events,
and performance may differ materially. Readers are cautioned not to
place undue reliance on these forward-looking statements. The
Company undertakes no obligation to publicly update or revise any
forward- looking statements either as a result of new information,
future events or otherwise, except as required by applicable
securities laws. Neither the TSX Venture Exchange, its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) nor the Toronto Stock Exchange nor the OTCQB
accepts responsibility for the adequacy or accuracy of this press
release.
SOURCE PyroGenesis Canada Inc. For further
information please contact: Rodayna Kafal, Vice President, Investor
Relations and Strategic Business Development, Phone: (514)
937-0002, E-mail: ir@pyrogenesis.com RELATED LINK:
http://www.pyrogenesis.com/
1
https://www.ssab.com/company/sustainability/sustainable-operations/hybrit2
https://ec.europa.eu/clima/policies/strategies/progress_en3
http://www.vale.com/brasil/EN/sustainability/Pages/carbonneutral.aspx4
M. Huerta, J. Bolen, M. Okrutny, I. Cameron and K. O’Leary,
“Guidelines for Selecting Pellet Plant Technology”, Iron Ore
Conference 2015 Proceedings, Perth, WA, July 13-15, 20155
https://www.epa.gov/greenvehicles/greenhouse-gas-emissions-typical-passenger-vehicle
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