As always, the Company monitors the impact of macroeconomic events and conditions on the business, operations, and financial or potential financial conditions.
Generally, the Company believes that broad-based threats to global supply chains can afford the Company additional prominence, especially to the minerals and metals industries, as manufacturers seek alternatives to off-shore suppliers as well as technology that can optimize output or regain critical material or minerals from byproducts or waste – solutions that the Company currently offers.
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.
