Market Equities Research - Market Bulletin December 15, 2017 3:51 PM ET

 

Four PyroGenesis (PYR.V) business lines poised for break-out in 2018 (uniquely free of competition);

 

1) Rolls-Royce of 3D printing metal powder (additive manufacturing business line);

PyroGenesis is set to be major 3D metal powder manufacturer in a market currently dominated by GE (which uses the process PyroGenesis invented (and since improved upon)). Two NDA's have been signed with aircraft engine manufacturers, including Rolls-Royce -- major upside share price revaluation in order once contracts are formalized/announced.

 

2) Chemical warfare agents destruction system;

PyroGenesis' mobile plasma chemical warfare agents destruction system is currently undergoing ~US$100 million in testing for special forces, funded in-part by DARPA -- this level of in investment appears bound to translate to sizeable military contracts.

 

3) Dross smelter reclamation;

PyroGenesis' first customer has just ordered another system for reclaiming dross (waste) onsite at smelters without salt, and numerous other groups have requested demos that should convert to sales. PyroGenesis has an exclusive hold on this nascent market with >$400 million market potential in Aluminum production alone (the system is also applicable to zinc, and copper).

 

4) Ultra-low-cost silicon production;

PyroGenesis has potential to make a serious impact on the solar industry having developed the process to produce solar grade silicon in one step (at a fraction of the price).

Simon Levinson, f.william@marketequitiesresearch.com


 

PyroGenesis Canada Inc.

Technology, Military, Industrial, Mining, Energy

TSX-V: PYR,  OTC: PYRNF,  Frankfurt: 8PYF     www.PyroGenesis.com

Prices

Share: C$0.67

MCap: ~C$74.62M

On: December 14, 2017

History

52-Week: C$0.98–C$0.18

   

Prices

Shares O/S: 111,384,080

(as per StockWatch)  

 

PyroGenesis Canada Inc. (TSX-V: PYR) (OTC: PYRNF) (Frankfurt: 8PYF) is a Canadian-based technology Company offering high-end thermal plasma and metallurgical solutions.

   

Listed below are the business lines of PyroGenesis in order of magnitude of contribution we anticipate for 2018, each unique and ripe with potential catalysts (largest first):

 

1) 3D printing metal powder/additive manufacturing

 

Background: PyroGenesis invented 'plasma atomization', the current gold standard for Titanium-metal powder used in 3D printing, PyroGenesis invented the process before 3D metal printing took off, when it was making armor for NATO, it sold the intellectual property to a company that was eventually acquired by General Electric in 2016, effectively allowing GE to corner the market for Ti-metal powder in the 3D printing market. However that is clearly about to change as PyroGenesis is becoming a manufacturer and has improved on the original process, now able to manufacturer customizable narrow particle size distribution, Several highly motivated big potential customers have already signed NDAs and are prequalifying product now (see November 6, 2017 news "PyroGenesis Signs Non-Disclosure Agreement with Rolls-Royce plc for Additive Manufacturing Powders" and December 4, 2017 "PyroGenesis Signs Non-Disclosure Agreement with Second Global Aircraft Engine Manufacturer").

 

What to look for in 2018: Since GE's acquisition of Arcam (which owns powder manufacturer AP&C (which uses PyroGenesis' 1st generation production technique)) 3D printer manufacturers have had two problems/concerns, besides having to approach a competitor controlled supplier; 1) supply chain interruption of powders, and 2) the inability of the marketplace to respond to new demands from innovation that will see next generation printing machines use unique particle sizes. Since PyroGenesis' new plasma atomization towers are able to produce any narrow particle size with no waste, look for NDA's from printer manufacturers, end users (e.g. aircraft engine manufacturers), and distributors, to convert into long-term revenue contracts for PyroGenesis that will see the build-out of proprietary next-gen towers. The share price of PYR.v should respond positively with each new announcement of contracts and as the marketplace realizes the dominance characteristics of PyroGenesis materializing in a growing, yet nascent, additive manufacturing industry. 2018 will likely see shareholders be the beneficiaries of a spin-out of the additive manufacturing business line as a stand-alone high-growth entity.

  

2) Mobile plasma chemical warfare agents destruction system & PAWDS

 

Background: PyroGenesis is an experience and proven supplier to the military, having already delivered Plasma Arc Waste Destruction Systems (PAWDS) for two US aircraft carriers, plus its technology is built into the design of future aircraft orders. So it no surprise that PyroGenesis now sees itself as the sole contender offering a modified, stepped-up, version of its thermal plasma technology offering a solution for mobile chemical warfare agent destruction.

 

What to look for in 2018: Besides another PAWDS aircraft order expected for 2018 and additional land based system sales, the big catalyst in this sector will be orders for special forces as they are currently spending ~US$100 million testing PyroGenesis' mobile plasma chemical warfare agents destruction system. DARPA is funding part of this development and given the size of total investment just for testing, it is likely to translate into several orders near-term at US$6M a system, just for starters. The cumulative dollar value of contracts have potential to be sizeable, however it is the prestige and reputational goodwill generated from being a supplier of technology of this calibre to the military that has potential to add even more value -- the barriers to entry at this level position PyroGenesis in a rare group.

 

3) Mining metallurgy DROSRITE

 

Background: PyroGenesis invented DROSRITE™, a system for recovering metal from dross (a waste generated in the metallurgical industry). At smelters dross forms at the top of hot batches where the metal comes in contact with oxygen. Traditionally dross is scooped off and taken offsite to be treated with salts (salt can’t come in contact with the main batch as it will ruin it) to recover the metal content within -- the conventional process typically costs between $250/t - $350/t as it involved transport, reheating, and several steps. PyroGenesis’ DROSRITE™ allows a smelter to handle dross onsite adjacent the smelter at a cost under $100/t and achieve between 10% - 15% better recovery. PryoGenesis’ first DROSRITE™ client is an aluminum smelter in Mexico, at a subsidiary of an American mining Company, which purchased the system after successfully testing out a demo unit. They have since ordered a second unit and indicated they require two additional systems.
 

What to look for in 2018: Currently PyroGenesis is in negotiations with its repeat/first client for the other systems, negotiating pricing and trying to work out a recurring revenue stream/maintenance contract. Every smelter in the world could benefit from a
DROSRITE™ system and PyroGenesis has hired a full time global salesperson. Important to note is that the proven M.O. of 'testing a unit which then leads to a sale' is expected to play-out in 2018; so far demo units have been requested by new clients in the Middle East and India (these are large clients with ultimate need for multiple systems). In terms of magnitude, DROSRITE™ sales potential for 2018 have potential to dwarf all business lines – this is a new market in which every client would be remiss in not using the technology and PyroGenesis owns this nascent sector. Although the Company is concentrating on aluminum smelters, the system is also applicable to copper and zinc. Look for this business line to grow in multiples in 2018.
 

4) Mining metallurgy PUREVAPTM solar grade silicon production

 

Background: PyroGenesis has a contract with HPQ Silicon Resources Inc. to develop PUREVAPTM process (for HPQ's benefit), able to turn quartz into 6N (99.9999% purity) solar grade silicon in one step. HPQ will be positioned to singlehandedly disrupt the silicon market pricewise once the contract is complete -- PyroGenesis gets 10% royalty upon commercialization.

 

What to look for in 2018: HPQ Silicon Resources Inc. is a very focused well managed Company that, if all goes to plan (and there is no indication it shouldn't), is looking to achieve 6N purity in its second phase, lab scale testing program. The Gen 2 PUREVAP™ Quartz Reduction Reactor, a 1/250 scale model of the planned 200 metric tonne (MT) per year pilot plant, is undergoing testing/refinement, and will be able to improve on what was accomplished in Gen 1 PUREVAP™. So far PyroGenesis and HPQ Silicon Resources Inc. have already achieved 4N purity in the one-step process, which is a phenomenal accomplishment and in itself has important commercial application. There is a critical shortage of solar grade silicon in the market (see related Bloomberg article "Solar Companies Are Scrambling to Find a Critical Raw Material") and it is the largest material cost in producing solar panels. The PUREVAP™ process is revolutionary and will dramatically change the solar industry if PyroGenesis and HPQ accomplish what they appear on the cusp of doing -- if 6N purity is achieved in the upcoming testing the share price of HPQ Silicon Resources Inc. will skyrocket, and PYR.v will see a noticeable boost too. Note: HPQ recently had an equity financing in which demand for the placement exceeded the over allotment potential, however the Company decided to close the placement and limit dilution -- don't let the fire-sale price of HPQ's stock bias you, there are a lot of smart people jockeying for position in anticipation of a major win here.

 

 

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We have identified the following additional research links for further DD on PyroGenesis Canada Inc.

 

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This bulletin may contain forward-looking statements regarding future events that involve risk and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual events or results. Articles, excerpts, commentary and reviews herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned.
 

 
Contact information:
Simon Levinson, Editor in Chief

and Fredrick William

Market Equities Research Group
s.levinson@marketequitiesresearch.com

 

 

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