As outlined in previous reports, serious consideration is being given to replacing large numbers of the fossil fuel burners in iron ore pelletization with PyroGenesis’ proprietary and patented plasma torches.

During the quarter, the Company achieved a major milestone when, after extensive modeling, simulations, business case development, production, and live factory tests – during a period that was engulfed by a global pandemic – our plasma torch system for iron ore pelletization was produced, assembled, and shipped (as per the February 8 news release designating a Q2 quarter end shipping timeline) to the clients – in preparation for first-ever live factory usage and factory acceptance testing toward that carbon reduction goal.

As previously disclosed, that client is a multi-billion-dollar international producer of iron ore pellets and one of the largest in the industry, whose name will remain confidential for competitive reasons. The Client, which has committed to reduce its GHG emissions, has over ten (10) iron ore pelletization plants, each possibly requiring up to 50 plasma torches, or more than 500 torches in total. The Company has also previously disclosed, that we have provided a cost estimate for 36 plasma torches to that same Client A, at a value of $95-115 million. The range is an estimate due to usage and customization uncertainties which will be more clearly defined in due course.

Other previously announced clients – Client B, one of the largest iron ore processes in the world who has signed a $6M contract with the Company for 4 plasma torches for their pelletization system, and Client C, who is not only a significant player in the iron ore pelletization industry but is also a major player in the steel industry – continue to progress at their own pace.

For Client B, production of the four torches is underway. As previously announced, Client B has advised PyroGenesis that, upon the successful implementation of the torches, subsequent orders are expected to be for approximately 130 plasma torches.

PyroGenesis expects that the previously mentioned government initiatives, geared to stimulating their respective economies by promoting and funding environmental technologies and infrastructure projects, will only serve to increase interest in PyroGenesis’ plasma torch offerings to other companies in this space. While potential clients seeking government support for large initiatives may draw out the onset of large contracts, the sheer number of potential customers, and the fact that the Company will engage with many of them in different stages at different times, will help to ensure a long, overlapping pipeline of potential projects. 

In addition, PyroGenesis continues to target other industries which are experiencing significant pressure to reduce GHGs, and which utilize fossil fuel burners as well, such as the cement, aluminum, and automotive industries. 

Plasma Torches for Emerging / Niche Markets 

Separately, the Company also offers plasma torches to emerging / niche markets where there is a high probability of on-going sales from successful implementation.  

One such example is when, in Q1 on February 7, the Company announced that it had signed a $273,000 contract with a European research centre, to manufacture and deliver a 50Kw methane plasma torch, which will be used by the client to develop a process to convert hydrocarbons, including methane (a greenhouse gas), into useful chemicals such as olefins (e.g. ethylene, propylene, etc.), thereby significantly reducing GHGs. 

That torch and system is currently in production.

For each new market, the Company will also benefit from providing proprietary spare parts and service, which generates significant recurring revenue, thus complementing the Company’s long-term strategy to build a recurring revenue model.  

Additive Manufacturing (Metal Powders for 3D Printing) 

Our metal powders business line also saw a major milestone in Q2.

The Company’s NexGen™ facility, which incorporates all the previously disclosed benefits (increased production rates and lower capital & operating expenditures), was announced as having produced and delivered two separate 100kg orders for titanium powders – the first two commercial batch orders for the system, after months of testing and sample size production.

These orders were both an important commercial milestone, as well as further validation of the Company’s process and ability to supply some of the highest quality powder produced to the AM industry using our NexGen™ plasma atomization process. This process is a significant departure and upgrade from conventional plasma atomization – a technology the Company also invented and coined the term for, and which is still considered the gold standard for the production of metal powder.

The two orders came via our European business partner Aubert & Duval, who is a world leader in industrializing high-performance steel, super alloy, aluminum and titanium alloys for over a century. More specifically, they are a recognized supplier of metal powders for additive manufacturing, serving the Aerospace, Energy, Transport, Medical, Defense, Automotive and other large scale, demanding markets.

Of note, a major tier-one global aerospace company has already entered into an agreement with the Company to formally qualify its metal powder, at considerable expense to the global aerospace company, with a view towards having the Company become a supplier. 

Under this agreement, the Client has been performing an in-depth qualification process with PyroGenesis – a procedure typically required before a company can become an approved supplier. The process was established to, amongst other things, evaluate the Company’s manufacturing methods, test samples of powder for batch-to-batch consistency, and determine various mechanical and chemical properties. Subsequently, larger volumes of powder will be used to print test coupons to further evaluate mechanical and chemical properties.

Upon passing all steps, including acceptance tests, the Company’s process will be locked down specifically for each client, with no additional modifications permitted. Upon successful completion of the testing, PyroGenesis would expect to receive formal acceptance as an approved supplier. The formal and methodical process with this top tier aerospace company is on track and is nearing conclusion, with additional updates to investors expected throughout Q3.

There are additional major top tier aerospace companies and OEMs, in both Europe and North America, eagerly awaiting powders from this new state-of-the-art production line, and we are currently in the process of supplying sample powders to them for analysis. 

The Company expects that such developments will continue and will translate into significant improvements in contributions to revenue by this segment in the mid-long term. 

HPQ/PUREVAP™ 

With respect to HPQ, a PyroGenesis client and a company whom PyroGenesis owns significant shares and options, the goal is to continue to expand our role as HPQ’s technology provider for the game changing family of silicon processes which we are developing exclusively for HPQ and its wholly owned subsidiaries HPQ Nano Silicon Powders Inc. and HPQ Silica Polvere Inc., namely: 

The PUREVAP™ “Quartz Reduction Reactors” (QRR), an innovative process (patent pending), which should permit the one step transformation of lower purity quartz (SiO2) than any traditional processes can handle into a silicon (Si) of a higher purity level (2N-4N) that can be produced by any traditional smelter, at reduced costs, energy input, and carbon footprint. The unique capabilities of this process could position HPQ as a leading provider of the specialised silicon material needed to propagate its considerable renewable energy potential; and 

The PUREVAP™ Nano Silicon Reactor (NSiR), which, if successful, could position itself as a new proprietary low-cost process that can transform the silicon (Si) made by the PUREVAP™ QRR into the nano-silicon materials (spherical silicon powders and silicon nanowires) sought after by energy storage, batteries, electric vehicle manufactures and clean hydrogen sectors participants. The aim of the ongoing work is to position HPQ NANO as the first to market with a commercial scale low-cost nanoparticle production system. 

A new plasma-based process that could convert Silica (Quartz, SiO2) into fumed silica (Pyrogenic Silica) in one step. This new process could be a low-cost and environmentally friendly option that combines HPQ Silicon High Purity Quartz initiatives with PyroGenesis’ industry leading know-how in the development of commercial plasma processes. It is envisioned that the process will eliminate harmful chemicals presently generated by traditional methods. This new process could revolutionize the manufacturing of fumed silica, while repatriating production back to North America.  

Government participation in a $5.3M funding of the fumed silica project confirms our expectation that 2022 should be a year in which significant developments occur on all these fronts.