AGORACOM Small-cap Investor Relations Blog

Q2, 2018 results reflected the following highlights:

• Revenues of $1.4MM in Q2, 2018, a decrease of 35% from $2.2MM posted in Q2, 2017;
• Gross margin of 34.9% a decrease of 13.1% over the same period in Q2, 2017;
• Powder inventory increased to $611K in Q2, 2018, compared to Nil in Q2, 2017;
• An amount of $230K has been spent and capitalized for the plasma atomization system and related development;
• A Modified EBITDA loss of $1,0MM compared to a Modified EBITDA gain of $12K over the same period in Q2, 2017;
• Backlog of signed contracts as of the date of this writing is $4.1MM;
• Cash on hand on June 30, 2018 was $84K (December 31, 2017: $623K).

MONTREAL, Aug. 29, 2018 — PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX-V: PYR), a TSX Venture 50® high-tech company, (the “Company”, the “Corporation” or “PyroGenesis”) a Company that designs, develops and manufactures plasma waste-to-energy systems and plasma torch systems, is pleased to announce today its financial and operational results for the second quarter ended June 30, 2018.

2018, to date, has seen the Company enter into significant commercial discussions in all of its business lines. It is fully expected that these conversations will translate into commercial contracts towards the end of Q3, 2018.  In the first six months of 2018, the Company started putting in place the required infrastructure and personnel in order to fulfill this growth.

Q2, 2018 results reflected the following highlights:

• Revenues of $1.4MM in Q2, 2018, a decrease of 35% from $2.2MM posted in Q2, 2017;
• Gross margin of 34.9% a decrease of 13.1% over the same period in Q2, 2017;
• Powder inventory increased to $611K in Q2, 2018, compared to Nil in Q2, 2017;
• An amount of $230K has been spent and capitalized for the plasma atomization system and related development;
• A Modified EBITDA loss of $1,0MM compared to a Modified EBITDA gain of $12K over the same period in Q2, 2017;
• Backlog of signed contracts as of the date of this writing is $4.1MM;
• Cash on hand on June 30, 2018 was $84K (December 31, 2017: $623K).

The following is a summary of PyroGenesis’ main activities.

Synopsis: 

• Powder Production:

• nominated “Materials Company of the Year” at the 3D Printing Industry Awards 2018;
• recently Contracted for an order of 10 tons (minimum) of titanium powders;
• recommended by leading 3D Printer OEM to their customers as titanium powder supplier;
• strategic commercial discussions with 3D printer manufacturers, distributors, and end-users continue.

• DROSRITE™:

• construction of second demonstration unit in progress; Completion expected over the next two (2) months;
• enters the Zinc Market;
• second DROSRITE™ Furnace System Completed;
• embraces Tolling Strategy; Joint Venture discussions in progress.

• HPQ:

• HPQ secures financing for the balance of the project;
• Pilot Plant in progress after significant improvements.

• US Military:

• interest for two (2) US Aircraft Carrier systems received (US$10-12MM); Order expected Q1, 2019;
• seeking to establish a presence in the USA to, amongst other things, better serve the US Military’s needs.

• Torch/Equipment Sales:

• PyroGenesis continues to address interest for plasma torch/equipment;
• order expected before year end.

A) Powder Production:

2017 became the year in which the Company went from relative obscurity within the additive manufacturing industry, to being nominated “Materials Company of the Year” at the 3D Printing Industry Awards 2018.

During this period, not only did the Company successfully assemble and commission its first metal powder production system, but also (i) successfully delivered orders for Titanium and Inconel powders, all while still in the ramp up phase, (ii) generated new, game changing, IP which provides for more control over particle size distribution, with little to no waste, while increasing powder production even further, and (iii) entered into several NDA’s  with significant players in the industry (end users, printer manufacturers, and distributors) all with a view of providing sample orders, repeat orders, long term orders, contract R&D, and/or strategic partnerships for long term powder supply contracts, some with a view to a possible acquisition.  Given the level of activity, and the prospect of significant orders in the near term, management decided to order the long lead items for two powder production systems, both of which were scheduled to be fully operational during the summer 2018; due to summer delays this is now targeted for end of September 2018-beginning of October 2018. These new powder production units will incorporate some of the cutting-edge IP that has recently been developed and/or is in development. We expect these units will cost significantly less to manufacture, generate higher production rates, and provide greater control over particle size distributions.

Of note, although the Company’s strategic plan has always been based on its existing IP, know-how, and system (the economics of which remain true to this day), management has decided to leverage off of its significant advantage in plasma technology and dedicate certain limited assets to increasing its IP base with the goal of further significantly reducing capital and operating costs of the powder production system while at the same time improving production rates even further.  PyroGenesis is confident that these goals once achieved will significantly impact the build out strategy for the better.

The Company’s press release dated May 17, 2018 (which announced a commercial agreement for a minimum order of 10,000 kg of Titanium powder over two (2) years from Asia), together with those issued on August 14 and 20 (which announced results of powder testing by a top OEM as well as their recommendation to their clients to use such powder), has underscored the need for PyroGenesis to be even more focused than ever before on addressing market demand for its powder.

The Company decided to have, at the ready, an optimum industrialization plan for multiple powder production units (in multiples of 1, 3, and 5 units), to be executed on the back of a significant take-or-pay contract. This has now been completed and the Company is continuing to look at ways to accelerate the technological advances mentioned above.

B) DROSRITE™:

As the Company positioned itself, during 2017, to become a significant powder producer to the Additive Manufacturing Industry, it also successfully positioned its DROSRITETM Furnace System to become a fully commercial product line in and of its own right.

2017 saw the commercial acceptance of PyroGenesis’ patented DROSRITE™ System with, not only an acceptance of its first commercial sale, but a subsequent re-order by the same client at a higher price.

During this time, successful demonstrations of the DROSRITE™ System in the Middle East and India has resulted in significant interest from those regions.  Of note, the Company’s demonstration unit is fully booked in India, to the beginning of October 2018, with paid-for-demonstrations. This flurry of activity and interest for the DROSRITE™ System resulted in the Company hiring a full-time business development manager to market the DROSRITE™ System, and who’s role is exclusively to secure DROSRITE™ System sales.

The total worldwide production of Aluminum dross was 3,000,000 TPY (2017)1. PyroGenesis has designed systems to process either 500, 3,000 or 5,000 TPY representing a market potential of over $1 billion from Aluminum dross alone.

PyroGenesis is currently aggressively targeting both primary aluminum smelters in Asia and the Middle East where the market is estimated to be in excess of 1 million tons of dross2, as well as tertiary casting producers worldwide. The Company has recently added zinc recovery from dross as a target market.

Due to this high demand for on-site paid-for-demonstrations, the Company is in the process of constructing a second DROSRITE™ demonstration system which is expected to be available in Q3, 2018. There is a high probability that PyroGenesis will be profitable in 2018 from DROSRITE™ System sales when combined with existing backlog.

The Company is also investigating the prospect of providing on-site dross tolling services under long term take-or-pay contracts.  The Company has found that there is a large interest for this service from smelter operators who do not want to engage in a different business line but would be open to having on-site tolling under a benefit-sharing arrangement. PyroGenesis is also in discussions with potential partners who would provide local management and support while at the same time accelerate this opportunity.

C) US Military:

Originally it was thought that just one new US Aircraft Carrier would be ordered in 2018, with an estimated value of approximately US$6MM, but now it seems that the interest is for two, for an estimated value of between US$10-12 MM.  This contract is now expected Q1, 2019.

The chemical warfare destruction unit, that PyroGenesis developed for a consortium involving various groups within the US military, and was in the process of being tested, continues to have its schedule delayed accommodating other unrelated testing needs by the group. This testing timeline is out of the Company’s control.

Revenues from military contracts in 2017 were over $4,300,000, mainly related to providing technical support, training services and sale of spare parts.  Over the past three years, revenues from military contracts have typically represented more than $2,000,000 per year of PyroGenesis’ revenues.  As the PAWDS technology becomes fully operational on US Navy ships, management expects the level of recurring revenues from the sale of parts and services to increase over the next 2 to 5 years.

The Company is looking at ways to establish a presence in the USA to, amongst other things, better serve the US Military’s needs arising from having multiple systems in operation.

D) HPQ: 

On August 2, 2016, PyroGenesis announced that it had signed contracts totaling $8,260,000 with HPQ Silicon Resources Inc., formally Uragold Bay Resources Inc. (“HPQ”) for the sale of IP and to provide a pilot system to produce high purity silicon metal directly from quartz. Of particular note, if successful, PyroGenesis benefits from a 10% royalty on all revenues derived from the use of this system by HPQ, subject to annual minimums.

E) Torch/Equipment Sales: 

Consistent with the Company’s overall strategy to (i) remain focused on reducing PyroGenesis’ dependency on long-cycle projects by developing a strategic portfolio of volume driven, high margin/low risk products that resolve specific problems within niche markets and doing so by introducing these plasma-based technologies to industries that have yet to consider such solutions, and (ii) to actively target recurring revenue opportunities that will generate a growing, and profitable, regular cash flow to the Company, the Company continues to market its torch/equipment capabilities and expects this to start becoming a revenue contributor, with its recurring revenue stream, in the very near future.

PyroGenesis has one of the largest concentrations of plasma expertise in the world, with over 250 years of accumulated technical experience and supporting patents, combined with unique relationships with major Universities performing cutting edge plasma research and development, positions the Company well to execute its strategies.

Management’s focus will continue to be to generate an improved mix of short and long-term projects that will, in turn, facilitate operational and financial planning. Repeat orders for the same, or similar, products will further result in the standardization of manufacturing processes which will lead to improved gross margins.

All indications are that 2018 should be a profitable year for the Company given that business lines, other than non-additive manufacturing, continue to contribute significantly to PyroGenesis’ revenues.  Management expects that the Corporation’s non-additive manufacturing business lines will generate enough revenues, on their own in 2018, to make PyroGenesis profitable overall going forward.

Financial Summary 

Revenue 

PyroGenesis recorded revenue of $1,421,352 in the second quarter of 2018 (“Q2, 2018”), representing a decrease of 35% compared with $2,173,397 recorded in the second quarter of 2017 (“Q2, 2017”).

Revenues recorded in Q2, 2018 were generated primarily from:

Cost of Sales and Services and Gross Margins

Cost of sales and services was $924,954 in Q2, 2018, representing a decrease of 18% compared with $1,130,295 in Q2, 2017.

In Q2, 2018 cost of direct materials, manufacturing overhead and subcontracting decreased to $460,542 (Q2, 2017: $490,996), $141,779 (Q2, 2017: $221,573) and $30,851 (Q2, 2017 – $43,241) respectively.

The type of contracts being executed and the nature of the project activity during any given quarter has a significant impact on both the overall level of cost of sales and services reported in a period, as well as the composition of the cost of sales and services, as the mix between labor, materials and subcontracts may be significantly different.

The gross margin for Q2, 2018, was $496,398, or 34.9% of revenue. This compares with a gross margin of $1,043,102 (48% of revenue) for Q2, 2017.

Selling, General and Administrative Expenses 

Included within Selling, General and Administrative expenses (“SG&A”) are costs associated with corporate administration, business development, project proposals, operations administration, investor relations and employee training.

SG&A expenses for Q2, 2018 excluding the costs associated with share-based payments (a non-cash item in which options vest over a four-year period), were $1,177,552, representing an increase of 18% compared with $998,012 reported for Q2, 2017.

The increase in SG&A expenses in Q2, 2018 over the same period in 2017 is mainly attributable to the net effect of:

• an increase of 21% in employee compensation;
• an increase of 25% for professional fees, primarily due to an increase in patent expenses;
• a decrease of 24% in office and general expenses, due to a decrease in courses, seminar, computers and internet expenses;
• travel costs decreased by 4%, due to less travels abroad;
• depreciation on property and equipment increased by 39%, primarily due to an increase in plant and equipment assets. The asset under development in Q2, 2018 will begin to be depreciated when the asset is available or ready for use;
• government grants increased by 100% due to higher level of activities supported by such grants and;
• other expenses increased by 107%, primarily due to higher cost of freight and shipping.

Separately, share based payments increased by 118% in Q2, 2018 over the same period in 2017 as a result of the vesting structure of the stock option plan including the stock options offered on April 3, 2018 and May 10, 2018.

Research and Development (“R&D”) Costs

The Company incurred $404,017 of R&D costs in Q2, 2018, compared with $62,143 in Q2, 2017, representing an increase of 550%.

In addition to internally funded R&D projects, the Company also incurred R&D expenditures during the execution of client funded projects. These expenses are eligible for Scientific Research and Experimental Development (“SR&ED”) tax credits. SR&ED tax credits on client funded projects are applied against cost of sales and services (see “Cost of Sales” above). Investment tax credits recorded against cost of sales are primarily related to client funded projects that qualify for tax credits from the provincial government of Quebec. Qualifying tax credits decreased to $39,064 in Q2, 2018, compared with $136,994 in Q2, 2017. This represents a decrease of 71%. The Company continues to make investments in research and development projects involving strategic partners and government bodies.

Inventory

As a result of the Company’s strategy to increase powder inventory to meet increased market demand, powder inventory increased to $611,359 in Q2, 2018, compared with Nil in the same period in 2017.

Net Comprehensive Loss 

The loss from operations and comprehensive loss for Q2, 2018 was $1,534,890 compared to $608,584 in Q2, 2017 representing an increase in loss of 152% primarily attributable to a decrease in revenue of $752,045 and by the factors described above, which have been summarized as follows:

EBITDA

The EBITDA loss in Q2, 2018 was $1,274,183 compared with an EBITDA loss of $419,325 for Q2, 2017, representing an increase of 204%. The increase in the EBITDA loss in Q2, 2018 compared with Q2, 2017 is primarily attributable to lower revenues and an increase in comprehensive loss.

Adjusted EBITDA loss in Q2, 2018 was $978,642 compared with an Adjusted EBITDA of $283,881 for Q2, 2017. The increase of $694,761 in the Adjusted EBITDA loss in Q2, 2018 is mainly attributable to the increased comprehensive loss of $926,306, an increase in depreciation on property and equipment of $11,279, an increase in finance charges of $60,169 and an increase of $160,097 in share-based payments.

Modified EBITDA loss in Q2, 2018 was $1,044,642 compared with a Modified EBITDA gain of $12,197 for Q2, 2017. The increase of $1,056,839 in the Modified EBITDA loss in Q2, 2018 is mainly attributable to the increase in the Adjusted EBITDA loss of $694,761 and a decrease in the change in fair value of investments of $362,078.

Liquidity 

The Company has incurred, in the last several years, operating losses and negative cash flows from operations, resulting in an accumulated deficit of $45,764,393 and a negative working capital of $3,817,392 as at June 30, 2018 (December 31, 2017 – $46,416,352 and $9,403,371 respectively). Furthermore, as at June 30, 2018, the Company’s current liabilities and expected level of expenses for the next twelve months exceed cash on hand of $84,124 (December 31, 2017 – $622,846). The Company has relied upon external financings to fund its operations in the past, primarily through the issuance of equity, debt, and convertible debentures, as well as from investment tax credits.

As at June 30, 2018 an amount of $1,885,644 in accounts payable and accrued liabilities and $111,928 of long term debt will be settled by means of a share for debt conversion transaction. In addition, $1,152,726 in accounts payable and accrued liabilities are accrued material expenses related to percent complete revenue recognition.

As at June 30, 2018, the Company had cash on hand of $84,124 and negative working capital of $3,817,392 compared with a cash balance of $622,846 and negative working capital of $9,403,370 as at December 31, 2017.

Revenue generated from active projects does not yet produce sufficient positive cash flow to fund operations. However, based on current backlog of $4.14MM at August 21, 2018, together with the pipeline of prospective new projects, cash flow from operations are expected to become positive in the very near future.

About PyroGenesis Canada Inc.

PyroGenesis Canada Inc., a TSX Venture 50®high-tech company, is the world leader in the design, development, manufacture and commercialization of advanced plasma processes. We provide engineering and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, advanced materials (including 3D printing), oil & gas, and environmental industries. With a team of experienced engineers, scientists and technicians working out of our Montreal office and our 3,800 m2 manufacturing facility, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. Our core competencies allow PyroGenesis to lead the way in providing innovative plasma torches, plasma waste processes, high-temperature metallurgical processes, and engineering services to the global marketplace. Our operations are ISO 9001:2008 certified and have been since 1997. PyroGenesis is a publicly-traded Canadian Corporation on the TSX Venture Exchange (Ticker Symbol: PYR) and on the OTCQB Marketplace. 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 Corporation’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, our expectations regarding the acceptance of our products by the market, our strategy to develop new products and enhance the capabilities of existing products, our strategy with respect to research and development, the impact of competitive products and pricing, new product development, and uncertainties related to the regulatory approval process. Such statements reflect the current views of the Corporation with respect to future events and are subject to certain risks and uncertainties and other risks detailed from time-to-time in the Corporation’s ongoing filings with the securities regulatory authorities, which filings can be found 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 Corporation 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 OTCQB accepts responsibility for the adequacy or accuracy of this press release.

SOURCE PyroGenesis Canada Inc.

For further information please contact: Rodayna Kafal, VP, Investor Relations and Strategic Business Development, Phone: (514) 937-0002, E-mail: [email protected]

RELATED LINKS: http://www.pyrogenesis.com/

_____________________
1 AlCircle, Aluminium Dross Processing: A Global Review, 2017
2 http://www.world-aluminium.org/statistics/primary-aluminium-production/

• Further to its press release dated November 16th, 2017, that it has successfully completed the fabrication and factory acceptance test of the DROSRITE™ Furnace System  ordered last November from a North American Automobile Parts Manufacturer; the name of which remains confidential for competitive reasons
• System is now being prepared for shipment and is scheduled to be in full operation in Q4-2018

MONTREAL, July 26, 2018 – PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX-V:PYR), a TSX Venture 50® high-tech company, (the “Company”, the “Corporation” or “PyroGenesis”) a Company that designs, develops and manufactures plasma waste-to-energy systems and plasma torch systems, is pleased to announce today, further to its press release dated November 16th, 2017, that it has successfully completed the fabrication and factory acceptance test of the DROSRITE™ Furnace System (the “System” or “DROSRITE™â€) ordered last November from a North American Automobile Parts Manufacturer (the “Client”); the name of which remains confidential for competitive reasons.  The System is now being prepared for shipment and is scheduled to be in full operation in Q4-2018.

The fabrication of the System is now complete, has met all the requirements to operate efficiently, and has met the factory acceptance test required by the Client.  As previously announced, this System is the second commercial System sold to date and represents a re-order from the Client.

As previously noted, PyroGenesis’ DROSRITE™ System is a salt-free, cost-effective, sustainable process for maximizing metal recovery from dross, a waste generated in the metallurgical industry. PyroGenesis’ patented process avoids costly loss of metal while reducing a smelter’s carbon footprint and energy consumption, providing an impressive and relatively quick return on investment. The System has been designed to process and recover valuable metals such as aluminum, zinc and copper from dross.

“Additional sales, which have been described in previous press releases, are expected to be concluded and to contribute significantly to the Company’s bottom line,” said Mr. P. Peter Pascali, President & CEO of PyroGenesis. “As mentioned previously, cultural differences, time zones, political unrest, religious holidays and summer vacations have all played their part in the delays with respect to the negotiations and the conclusion of additional commercial sales.”

On a separate, but related matter, the Company announces today that it is in discussion with several smelters to provide on-site dross tolling services under long term take-or-pay contracts.  As well, the Company is in active discussions with a potential partner relative to the establishment of a joint venture which could help accelerate this line of business. A tolling service arrangement is one in which a smelter provides dross to a third party to process either on or off-site. In this case, PyroGenesis would provide a tolling service using its patented DROSRITE™ System to process the dross and recover valuable metals for a fee.

“Tolling is a logical extension of being a DROSRITE™ system supplier to smelters,” said Mr. David D’Aoust, Sales Manager – DROSRITE™. “We have found that although many smelters like the idea of operating their own systems, there are quite a few who would prefer not to and, as such, would prefer to have a third party process the dross on-site.  We can be that third party. The demand for PyroGenesis’ DROSRITE™ System is quickly gaining traction. Our original DROSRITE™ Systems process between 3,000-7,500 tons of dross per year. We recently announced the addition of a new mini-DROSRITE™ System which can economically process 500 tons of dross per year, which now effectively targets thousands of smaller smelters. The addition of tolling to this mix effectively positions PyroGenesis as a one stop shop for dross processing.”

“Tolling is something we did not think would be an option for another 18 months”, said Mr. P. Peter Pascali, President and CEO of PyroGenesis. “However, discussions have taken place which create an opportunity that deserves consideration at this time.  Tolling is the ultimate recurring revenue stream for our DROSRITE™ business line and one which we must explore.  Teaming up with a large multi-national corporation, who has the experience and organizational depth required to execute this strategy, would help accelerate our time to market.”

About PyroGenesis Canada Inc.
PyroGenesis Canada Inc., a TSX Venture 50® high-tech company, is the world leader in the design, development, manufacture and commercialization of advanced plasma processes. PyroGenesis provides technical and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, additive manufacturing (3D printing), oil & gas, and environmental industries. With a team of experienced engineers, scientists and technicians working out of our Montreal office and 3,800 m2 manufacturing facility, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. Its core competencies allow PyroGenesis to lead the way in providing innovative plasma torches, plasma waste processes, high-temperature metallurgical processes, and technical services to the global marketplace. Its operations are ISO 9001 certified, and have been ISO certified since 1997. PyroGenesis is a publicly-traded Canadian corporation on the TSX Venture Exchange (Ticker Symbol: PYR) and on the OTCQB Marketplace (Ticker Symbol: PYRNF). 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 Corporation’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, our expectations regarding the acceptance of our products by the market, our strategy to develop new products and enhance the capabilities of existing products, our strategy with respect to research and development, the impact of competitive products and pricing, new product development, and uncertainties related to the regulatory approval process. Such statements reflect the current views of the Corporation with respect to future events and are subject to certain risks and uncertainties and other risks detailed from time-to-time in the Corporation’s ongoing filings with the securities regulatory authorities, which filings can be found 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 Corporation 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 OTC Markets Group Inc. accepts responsibility for the adequacy or accuracy of this press release.
SOURCE PyroGenesis Canada Inc.

For further information: Rodayna Kafal, VP, Investor Relations and Strategic Business Development, Phone: (514) 937-0002, E-mail: [email protected] or [email protected]

• Announced today the unveiling of its new Mini- DROSRITE™ System, and provides herein a general update on its DROSRITE™ business line

MONTREAL, June 25, 2018 — PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX-V:PYR) (OTCQB:PYRNF), a TSX Venture 50® high-tech company, (the “Company”, the “Corporation” or “PyroGenesis”) a Company that designs, develops, manufactures and commercializes plasma waste-to-energy systems and plasma torch products, is pleased to announce today the unveiling of its new Mini- DROSRITE™ System, and provides herein a general update on its DROSRITE™ business line.

Mr. P. Peter Pascali, President and CEO of PyroGenesis, provides this update in the following Q&A format.  The questions are for the most part derived from inquiries received from investors, analysts, and potential customers:

Q. For those that are new to the story, could you please describe to us what DROSRITE™ is and some of its many advantages?

A.  Most certainly.

PyroGenesis’ DROSRITE™ system is a salt-free, cost-effective, sustainable process for maximizing metal recovery from dross, a waste generated in the metallurgical industry. PyroGenesis’ patented process avoids costly loss of metal while reducing a smelter’s carbon footprint and energy consumption, thereby providing an impressive return on investment.

With metal manufacturers, such as aluminum, being subjected to increased pressure from regulatory authorities to eliminate landfilling of hazardous salt cakes from traditional recovery operations, combined with tight operating margins, PyroGenesis’ DROSRITE™ system is able to (i) increase metal recovery from waste, without producing any hazardous by-products, while at the same time (ii) reducing operating costs.

A figure accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/0477bddb-0899-4efa-82b7-103f8d8a50a0

In short, our DROSRITE™ system is (i) salt-free, so no hazardous by-products, (ii) can process the dross cheaper than conventional methods, and (iii) has demonstrated higher metal recovery rates. Who could ask for more?

Click on the link below to watch the DROSRITE™ video:

http://www.pyrogenesis.com/products-services/advanced-materials-processing/drosrite/

Q. What is a Mini–DROSRITE™ System?

A.  It is a system that can process dross in much smaller capacities.  The Mini – DROSRITE™ System can economically process 500 tons of dross/year as compared to the 3,000-7,500 tons/yr that our current systems are designed for.  This smaller system enables us to target thousands of smaller facilities which were not originally in our target market.  The price tag of $600k has a similar pay-back for clients as our original designs.

Our previously announced second demonstration system will be completed shortly and it is already booked for a paid-for-demonstration in September 2018 for a North America client who has a need for a Mini – DROSRITE™ System.  If successful, this client has a need for an additional 11 Mini – DROSRITE™ Systems.

Q. How big is this market for Dross?

A.  We have targeted three (3) main dross streams; aluminum, copper, and zinc, each divided between primary, secondary and casting producers. Presently we are focusing on the three segments within aluminum dross, and we recently announced our expansion into primary zinc production with a paid-for-demonstration in India for such.

A table accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/a1ad3ce0-184b-4b8b-b0bb-9c59127a591a

Our original estimate of the total dross produced was vastly underestimated.  It was a conservative calculation derived from world-wide aluminum production figures.  We estimated that total aluminum dross produced was between 1.5 – 2 million tonnes per year1, and that represented a potential market for DROSRITE™ systems numbering in the hundreds of units.  Based on a recent report in AlCircle “Aluminum Dross Processing: A global review”, which references exact dross production, total aluminum dross produced is over 3 million tonnes per year2, more than double what we estimated. Combined with the increased market penetration we now have with the Mini-DROSRITE™ design, we estimate the market for DROSRITE™ to be in the thousands of units and not the hundreds of units we originally estimated.

Q. You mentioned your expansion into Zinc Dross handling.  Can you give us an update?

A.  Everything is on schedule.  Our demonstration system should be on site within two (2) weeks.  Demonstrations will begin immediately and last approximately one (1) month. Given the price of zinc relative to aluminium (zinc prices are $1.37/lb compared to aluminum which is $0.99/lb) we expect the economics to be significantly better than our aluminium DROSRITE™ systems.

Q. With this news and the previously announced paid-for-demonstrations, we would have expected some signed contracts by now.  Is the DROSRITE™ business line still poised to be a significant contributor in 2018?   Is there still a high probability that PyroGenesis will be profitable in 2018 from DROSRITE™ system sales alone when combined with backlog?

A.  DROSRITE™ is certainly poised to be a major contributor in 2018 and we absolutely see it being a significant reason behind profitability.

We fully expected to have additional contracts signed by now, but we are definitely not disappointed with where we are, particularly when taken in context of the full year. Cultural differences, time zones, political unrest and religious holidays have all played their part in negotiations and schedules. An additional unanticipated element is that since we now have a fully operational system in place there have been requests for site visits which, again, take time. Notwithstanding these developments and given the continued demand we have for paid-for-demonstrations, we are confident with respect to the estimates we projected for this business line for 2018 and beyond.

Let us also put these developments in their proper perspective.  After our first system was accepted by our client in Q3 2017, we did not expect a second sale until the second half of 2018.  Notwithstanding that, we did close our second system sale before the end of 2017, and as such we were significantly ahead of schedule with that estimate.

With respect to future sales, it is hard to estimate with pin point accuracy as we are introducing a new product to the market and have little data to go by, so it is not unreasonable to be off by 3-4 months.  However, having said that, we believe that orders should be concluded very shortly.  I liken it to trying to estimate when a tidal wave will reach shore.  You have a good idea it’s coming, you cannot estimate the time exactly, but you do know when it hits there is going to be a lot of water behind it.  That is exactly what is happening with DROSRITE™.

Q. Any closing comments?

A.  We mentioned in an earlier press release that the important take a way is that the demand for PyroGenesis’ DROSRITE™ system is gaining traction faster than expected.  This is truer today than it was when we first noted it.

Two major breakthrough developments over the last six months, which will have a major impact on DROSRITE™ revenue streams are (i) PyroGenesis’ expansion into zinc recovery, and (ii) today’s unveiling of the Mini-DROSRITE™ system which opens up the market to thousands of smaller smelters.

Giving the activity in this business line and the economics of a DROSRITE™ system, management is currently looking at new business strategies by which they can increase shareholder value outside of being a simple system supplier.

About PyroGenesis Canada Inc.

PyroGenesis Canada Inc. is the world leader in the design, development, manufacture and commercialization of advanced plasma processes. PyroGenesis provides technical and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, additive manufacturing (3D printing), oil & gas, and environmental industries. With a team of experienced engineers, scientists and technicians working out of our Montreal office and 3,800 m2 manufacturing facility, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. Its core competencies allow PyroGenesis to lead the way in providing innovative plasma torches, plasma waste processes, high-temperature metallurgical processes, and technical services to the global marketplace. Its operations are ISO 9001:2008 certified, and have been ISO certified since 1997. PyroGenesis is a publicly-traded Canadian corporation on the TSX Venture Exchange (Ticker Symbol: PYR) and on the OTCQB Marketplace (Ticker Symbol: PYRNF). 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 Corporation’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, our expectations regarding the acceptance of our products by the market, our strategy to develop new products and enhance the capabilities of existing products, our strategy with respect to research and development, the impact of competitive products and pricing, new product development, and uncertainties related to the regulatory approval process. Such statements reflect the current views of the Corporation with respect to future events and are subject to certain risks and uncertainties and other risks detailed from time-to-time in the Corporation’s ongoing filings with the securities regulatory authorities, which filings can be found 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 Corporation 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 OTC Markets Group Inc. accepts responsibility for the adequacy or accuracy of this press release.

SOURCE PyroGenesis Canada Inc.

For further information: Rodayna Kafal, VP, Investor Relations and Strategic Business Development, Phone: (514) 937-0002, E-mail: [email protected] or [email protected]