Overall Strategy 

The Company continues to build on its strategy to offer technology solutions that produce benefits through greenhouse gas (“GHG”) emissions reduction, clean electric fuel sources, safe waste destruction, and improved production output and quality, that take advantage of the Company’s expertise in patented ultra-high temperature processes for heavy industry.

We have acknowledged our strategy to be timely, as many governments in jurisdictions around the world promote and fund environmental technologies and infrastructure projects. After 2021 proved an even greater affirmation of this approach as major industries targeted by the Company not only recommitted to their targets, but in some cases raised them significantly, 2022 has brought about more circumstances that highlight how technology solutions like those from PyroGenesis will be in even greater demand.  

In particular, the conflict in Ukraine has exhibited how geopolitical influences will continue to impact the supply of metals that are already under extraordinary market demand. As supply chain issues, worries about supply reductions, and additional sanctions on Russia (a major producer of the world’s aluminum supply) caused massive fluctuations to aluminum spot-prices, the conflict also more fully exposed the vulnerability of aluminum producers to power availability and energy price uncertainty, as energy supply challenges that were already being experienced by European and Asian metal producers were exacerbated during the war. 

All of these factors show that with global metal demand growing (anticipated to grow by 80% by 2050)³, and industry carbon-reduction targets not yet on track to meet their goals, aluminum producers must find ways to improve their efficiency, and increase their yield of high-quality metal from current production – all while lowering their carbon footprint. PyroGenesis’ range of technology solutions provide just such an opportunity, with the Company’s DROSRITE™ systems providing industry-leading dross recovery rates of high-quality aluminum, inline and on-site, with a lower operating expense and lower carbon footprint than all competing technologies; meanwhile, the Company’s mainstay plasma torch offering provides another technology-driven solution for metal producers looking to reduce their reliance on a volatile natural gas and diesel supply chain within any aspect of their operations that require metal melting or heating, while again eliminating fossil fuel emissions. 

These same or similar pressures are affecting the global steelmaking industry, into which the Company has already sold and now delivered initial clean electric, non-combustion plasma torches for final pre-order test runs. Macroeconomic pressures may in fact serve to expedite the need for faster implementation over the next year or more.

For clarity, as stated often, PyroGenesis’ product lines do not depend on environmental incentives (tax credits, GHG certificates, environmental subsidies, etc.) to be economically viable; with the increased industry carbon reduction commitments, it is anticipated that the Company’s growth drivers will expand, and shareholders will see increased value. 

While the Company is not immune to how COVID-19 and other external factors negatively impacted businesses over the past two years, specifically related to the work force and, more importantly, the supply chain, Management believes that – while it can do little about the strain on its customers’ and prospects’ – the Company itself is well structured, and through various mitigation measures these challenges continue to be dealt with in an effective manner. The Company expects even greater improvements as the impact of COVID-19 and other external factors continues to recede during the remainder of 2022.

Organic Growth 

Organic growth will be spurred on by (i) the natural growth of our existing offerings; (ii) leveraging off the insider “golden ticket” advantage we have with several industrial customers due to how some of our industrial systems are installed inside a customer’s facility (vs. the legacy systems that are installed off-site) – enabling us to see first-hand some of the additional daily challenges faced by our customers, and then upsell to them accordingly; (iii) exploring new ways scientifically (and to corresponding markets laterally) to provide unique solutions and value that helps industries deal with some of the most pressing environmental, engineering, and energy problems; and (iv) building new manufacturing and chemical recovery facilities in overseas markets, as per our recent announcement to pursue the construction of a European production facility for metal powder production.

Over the past several years, PyroGenesis has successfully positioned each of its business lines for rapid growth by strategically partnering with multi-billion-dollar entities. These entities have identified PyroGenesis’ offerings to be unique, in demand, and of such a commercial nature as to warrant the unique, long-term, supportive relationships that the Company has experienced while it ramps up various technologies to commercialization. We expect that these relationships have us well positioned to transition into significant revenue streams once full commercialization is achieved. 

Aluminum Industry Process Improvement 

As mentioned in previous reports, momentum with PyroGenesis’ aluminum Industry strategy and offering continues to expand. 

During the quarter, the company announced that its DROSRITE™ waste metal recovery technology had been successfully commissioned for Ma’aden Aluminum in Saudi Arabia, one of the world’s largest primary aluminum producers with 2021 revenue in excess of US $7 billion. There, the DROSRITE™ technology is helping to service the Ma’aden plant in Ras Al-Khair, a joint venture corporation with Alcoa that is the largest and most efficient vertically integrated aluminum complex in the world and includes one of the world’s largest smelters. At Ma’aden, the first three DROSRITE™ systems passed site acceptance testing and were fully commissioned, with the remaining four already manufactured and awaiting final shipment at the end-user’s request.

In addition to the DROSRITE™ waste metal recovery system – one of the largest and fastest growing dross recovery solutions in the world, with 11 large DROSRITE™ systems in use or slated for delivery to markets around the world, and three more LOI’s in play – during the quarter the Company provided a comprehensive update on the aluminum business line as a whole, outlining how increasing demand, global supply shortages, and fluctuating prices and energy availability were impacting aluminum producers, allowing PyroGenesis to announce new-use markets after numerous inquiries for many different aspects of the aluminum production process. As the aluminum industry eyes greater technological innovation to improve production and reduce fossil fuel reliance, few technologies are as ready as PyroGenesis.

Subsequent announcements in the quarter outlined even more areas where the Company’s technology is being considered. Combined, the various announcements revealed that PyroGenesis’ technology is being used, studied, or actively evaluated for use in the upstream carbon anode baking process, as a fuel replacement in scrap re-melting furnaces, in molten holding furnaces, in new furnace production, in downstream cast-house furnaces, and in retrofitting of existing aluminum recycling furnaces.

With the relationships the Company has been developing throughout the industry, and as a result of the success seen by its technologies in the primary aluminum sector, interest has now expanded into secondary scrap-based producers, as well as downstream parts manufacturers. This represents a significant change and advancement from just 18 months ago.

Finally, the various joint ventures announced in prior quarters continue to evolve.

For the joint venture technology geared to handle the leftover residues resulting from the processing of waste stream metal dross, the pre-launch requirements and considerations have entered the final stage. Chemical residue samples from dross produced at one of the Company’s clients’ facilities are being tested in two different countries, and the results of those tests will inform final steps.

As stated previously, we believe that valorizing the residues and producing high end products will further define us as the go-to company for all dross-related processing.

For the partnership with Aluminerie Alouette (the largest primary aluminum smelter in the Americas and co-owned by Rio Tinto and Norsk Hydro), for the development of a solution to safely recover various metals and compounds from the heavily contaminated carbon lining of aluminum smelters (known as “spent pot linings”), work continues, with lab-scale tests concluded and initial pilot phase in development.

Steel Industry Process Improvement 

With steelmaking being one of the most carbon-emission intensive industries in the world, estimated to be responsible for between 7 to 12 per cent of all global fossil fuel and greenhouse gas emissions, that industry continues to be under intense pressure, including huge financial penalties, to find emission reductions. 

This pressure on the steelmaking industry allows PyroGenesis to expect demand for its upstream, iron ore pelletization solution to increase significantly, as steelmakers look to all aspects of the production lifecycle for carbon reduction opportunities.