VANCOUVER, BC, April 27,
2023 /CNW/ - BQE Water Inc. (TSXV: BQE), a
leader in the treatment and management of mine impacted waters, is
pleased to release its audited consolidated financial results for
the year ended December 31, 2022.
"We are pleased with our annual results which reflect the stage
of the Company's growth in the post pandemic world and the
reversion to mean of our share of income from the China JV," said
David Kratochvil, President &
CEO of BQE Water. "We added three new operations in North America which increased our recurring
revenues from clean water production by $1.9
million in the year. At the same time, we increased revenue
from technical services by 60% year-over-year which allowed us to
achieve historic highs in both GAAP and Proportional Revenues,
giving good vision on future growth potential."
FINANCIAL HIGHLIGHTS
- Achieved record Proportional Revenues of $18.9 million in 2022, a 21% increase from
2021.
- Recorded historic high revenues under GAAP of $12.2 million in 2022, a 62% increase compared to
2021.
- Share of income from joint ventures was $1.5 million, $1.3
million lower than in 2021.
- Net income for the year was $1.2
million compared to $2.6
million in 2021.
- Adjusted EBITDA was $3.1 million
compared to $4.1 million the year
prior.
- Increased working capital by 57% year-over-year to $7.2 million as of December 31, 2022.
- Grew net cash by 58% to $6.2
million and Proportional Cash by 18% to $9.6 million at the end of 2022.
Selected financial results for the last 5 years are as
follows:
Selected financial results for the 3 and 12 months ended
December 31, 2022 are as follows:
(in
'000s)
|
3 months ended Dec.
31
|
|
12 months ended Dec.
31
|
|
2022
|
2021
|
|
2022
|
2021
|
Revenues under
GAAP
|
3,465
|
2,570
|
|
12,158
|
7,511
|
Proportional
Revenues
|
4,479
|
4,389
|
|
18,879
|
15,616
|
Net income
(loss)
|
(244)
|
800
|
|
1,162
|
2,629
|
Adjusted
EBITDA
|
(90)
|
754
|
|
3,059
|
4,096
|
OPERATIONAL SERVICES HIGHLIGHTS
Our operational services consist of the operation or technical
supervision of water treatment plants, which generate recurring
revenues from three main sources: sales of recovered metals, water
treatment fees and operations support fees. The Company's active
operations for the 12 months ended December
31, 2022 and 2021 are as follows:
Operations
|
Location
|
Revenue
Source
|
JCC-BQE Joint
Venture
|
Jiangxi province,
China
|
Sales of recovered
metals
|
MWT-BQE Joint
Venture
|
Shandong province,
China
|
Sales of recovered
metals
|
Raglan Mine for
Glencore
|
Northern Québec,
Canada
|
Water treatment
fees
|
Minto Mine for Minto
Metals
|
Yukon,
Canada
|
Water treatment
fees
|
Zhongkuang
Metallurgical Facilities for MWT
|
Shandong province,
China
|
Operations support
fees
|
Zhaojin Metallurgical
Facilities for MWT
|
Shandong province,
China
|
Operations support
fees
|
Power utility ash pond
for WesTech
|
Eastern USA
|
Water treatment
fees
|
Base metal project for
a metal producer
|
Southwestern
USA
|
Water treatment
fees
|
JCC-BQE Joint Venture Operations
Our 50/50 joint venture
with partner Jiangxi Copper Company ("JCC") operates three water
treatment plants at Dexing Mine and at Yinshan Mine in Jiangxi province of China. The volume of water treated and pounds
of copper recovered by the plants fluctuate seasonally depending on
precipitation levels in the region. The operating results for the
12 months ended December 31, 2022 are
as follows:
(in
'000s)
|
2022
|
2021
|
Water treated (cubic
metres)
|
17,704
|
21,552
|
Copper recovered
(pounds)
|
2,829
|
3,337
|
During 2022, all three plants met mechanical availability and
process performance set by the Company. Both the volume of water
treated and the mass of copper recovered decreased year-over-year,
by 18% and 15% respectively. The region experienced an unusually
low volume of precipitation in the last half of 2022, with
approximately 34% of the total rainfall compared to the same period
the year prior. Lower rainfall not only lessened the water flowing
into the treatment plants but also affected copper leaching from
waste rock, reducing copper concentrations in the plant feed.
Changes in water volume and feed grade are largely the result of
environmental conditions beyond the control of the joint
venture.
MWT-BQE Joint Venture Operations
Our 20% share of MWT-BQE is with our 80% partner Beijing MWT
Water Treatment Project Limited Company ("MWT") and together we
operate a water treatment plant at a smelter in Shandong province of China. MWT-BQE generates revenues from the
sale of zinc and copper recovered from smelter wastewater. The
operating results for the 12 months ended December 31, 2022 are as follows:
(in '000s
pounds)
|
2022
|
2021
|
Zinc
recovered
|
527
|
845
|
Copper
recovered
|
218
|
237
|
The mass of zinc recovered decreased by 38% while copper recovery
decreased by 8%. The smelter periodically operated their production
lines with ores from different sources which led to varying
concentrations of zinc and copper in the feed composition and a
fluctuation in the volume of wastewater treated by the plant. The
joint venture has no control in the composition and volume of the
feed that flows into the plant.
BQE Water Operations
The Company, with our Inuit partner Nuvumiut Development,
operates four water treatment plants at Raglan Mine for Glencore
Canada Corporation.In May 2022, we
mobilized our operations team to site to commence our 19th
operating season at the mine. Due to a drier season, the total
volume of water treated across all four plants at Raglan Mine in
2022 decreased by 20% compared to 2021.
In August 2022, we entered into a
new operational services agreement with Minto Metals to operate a
water treatment plant at Minto Mine. The mine is expected to treat
approximately 750,000 to 1.5 million cubic metres of water per
year. Our team mobilized to site on August
27, 2022 and began treating and discharging clean water
without interruption.
In 2021, we began operations of the Zhongkuang SART plant and
the Zhaojin SART plant at metallurgical facilities in China. Both plants have been under our
technical supervision since the start of full production. During
2022, as government restrictions relating to the pandemic were
lifted, both SART plants resumed operations as the upstream circuit
returned to normal operation.
At the end of 2021, we completed the commissioning of our first
project in the power generation industry, a treatment plant
utilizing our Selen-IX™ process to remove selenium from ash pond
water for WesTech Engineering. We also began providing ongoing
plant operational services in exchange for water treatment fees
with fixed and variable components. In 2022, our team was onsite
providing water treatment services with the Selen-IX™ circuit to
manage the presence of selenium in the feed.
In April 2022, we completed the
commissioning of a treatment plant utilizing a combination of
nanofiltration and our proprietary selenium electro-reduction
process for the simultaneous removal of selenium and sulphate from
mine water for a base metal project in the American Southwest. Upon
completion of commissioning, we began providing ongoing plant
operations services in exchange for water treatment fees comprised
of a fixed guaranteed minimum and a variable fee linked to the
volume of water treated. In 2022, due to a limited supply of feed
water into our treatment circuits, we received only the fixed
guaranteed minimum fee for the months during which the plant was
ready to operate.
The number of operating days contributing to water treatment or
support fees for the 12 months ended December 31, 2022 are as follows:
(in
days)
|
2022
|
2021
|
Raglan Mine water
treatment plants
|
157
|
129
|
Minto Mine water
treatment plant
|
127
|
-
|
Zhongkuang SART
plant
|
349
|
126
|
Zhaojin SART
plant
|
159
|
161
|
Water treatment plant
for ash pond in Eastern USA
|
328
|
-
|
Water treatment plant
in Southwest USA
|
248
|
-
|
The volume of water treated for the 12 months ended December 31, 2022 are as follows:
(in '000s cubic
metres)
|
2022
|
2021
|
Raglan Mine water
treatment plants
|
1,870
|
2,327
|
Minto Mine water
treatment plant
|
378
|
-
|
SART plants in
China
|
411
|
336
|
Water treatment plants
in the USA
|
18
|
-
|
TECHNICAL SERVICES HIGHLIGHTS
BQE Water's technical expertise and IP are applicable globally
across broad areas of water management. Some highlights of
technical services, services outside of ongoing plant operations,
provided to clients and technical innovation projects during 2022
are summarized below.
Selenium Removal Projects
- Successfully completed the commissioning of a water treatment
plant for simultaneous selenium and sulphate removal at a mine in
the US.
- Continued to provide engineering services for the construction
of a third Selen-IX™ plant at a US mine.
- Successfully completed lab testing and preliminary engineering
for a selenium removal system to treat Flue Gas Desulphurization
(FGD) scrubber blow-down at a US power utility provider.
- Successfully completed lab testing and preliminary engineering
for a selenium removal system to support permitting of a new
uranium project in Canada.
Water Consulting Projects (Water Management, Treatability,
Permitting Assistance, Toxicity Mitigation)
- Continued to provide engineering design services for three
water treatment plants to support permitting of the KSM project in
BC.
- Completed water treatment consulting services resulting in the
issue of a permit for the Blackwater project in BC.
- Completed a water treatment conceptual design study to support
the permitting of a new lithium project in Ontario.
- Completed engineering design for a water treatment pilot plant
to support permitting of a rare earth elements project in
Chile.
- Completed pilot demonstrations of the company's sulphate
removal Sulf-IX™ technology and selective copper recovery
BioSulphide® process at multiple sites across Codelco operations
including the El Teniente and Andina mines in Chile.
- Completed process engineering design for the construction of a
water treatment plant to recycle water at a mine in Mexico.
- Initiated engineering for an expansion project of the water
treatment plant at Minto Mine in the Yukon.
Cyanide Management Projects (Cyanide Destruction,
Recycle)
- Completed site testing to investigate possible improvements in
cyanide destruction at a gold mine in Nevada.
- Completed technical assessment for a cyanide destruction plant
at the Pogo Mine in Alaska to
identify operating cost reductions through process
optimization.
- Completed a study to optimize cyanide destruction and effluent
discharge using reverse osmosis at a large gold heap leach
operation in Peru.
- Initiated engineering design of a SART plant for Shandong Gold
in China.
- Performed a trade-off study for the expansion of the existing
SART plant in Mexico to include a
zinc recovery circuit.
COMMENTARY AND OUTLOOK
When comparing our 2022 results against the previous year, it is
important to first consider the exceptional net income from our
China joint venture with JCC in
2021. Historically, our share of the annual net income from the
joint venture has averaged $1.2
million. Buoyed by high copper prices and high amounts of
copper in the wastewater, our share of this net income in 2021 was
$2.8 million, more than double the
long-term average. While our share of $1.5
million recorded in 2022 represents a return to the norm,
its comparison to the outsized share from 2021 resulted in a
year-over-year variance in some of our financial metrics.
In fact, 2022 was an exciting year for the Company, dominated by
growth in both the team's technical capabilities and overall
capacity to execute a larger number of projects, ensure the
successful operation of a growing portfolio of plants under
long-term contracts, and support sales and development activities
that included new products and services.
When asked what we consider as the main challenge for BQE Water,
our answer over the last two years has been very consistent –
managing growth; specifically as it relates to the expansion of our
team to provide successful operational services for new plants in
the pipeline. Our 2022 results reflect this challenge superimposed
on the lower net income from our China joint venture. Some of the challenges
are the same as those faced by other professional services firms
growing organically in the post pandemic world; namely, tight
labour markets and general cost increases largely driven by rising
wages. Others are more unique to BQE Water such as the need to
bring on new hires well ahead of projects entering the operations
phase due to the IP-heavy onboarding that extends the training
period and initially increases our costs as a percentage of
revenues.
Another challenge exclusive to BQE Water that impacted our 2022
results was the lack of water to be treated at the new plants we
commissioned in the last 18 months. While we protect ourselves from
incurring losses should there be limited water, our fee structure
is tilted towards earning profit from actual performance for the
volume of water treated and discharged. We are currently engaged in
discussions with our clients and partners to extend the operating
contract terms to make up for the periods where water volumes are
significantly below the anticipated design through no influence of
our own.
Lastly, another challenge unique to us has been the increase in
plant operations services and the associated shift in the balance
of services from the laboratory and engineering office out into the
field. This shift produced the need for adjustments in skillsets
and internal restructuring to manage such a transition.
Despite some natural growing pains, the Company continued to
demonstrate a positive long-term trajectory which is reflected in
our 2022 financial results as follows:
- Added new recurring operational revenues of $2.0 million from projects outside of
China, effectively doubling our
operations business.
- Achieved record technical services revenues of $8.0 million, which is a leading indicator of
future operations services.
- Reduced our reliance on metal sales in China for the recurring revenue portion of the
total net income to de-risk our exposure to commodity price
fluctuations and geopolitical uncertainties.
- Continued to increase the Company's treasury by growing working
capital to $7.2 million, which
represents the highest year-end balance since the new commercial
strategy and business model was implemented in 2014.
In terms of technical development, there were several milestone
achievements in 2022:
- Successful commissioning of the first treatment plant that
combines selenium and sulphate removal.
- Successful pilot demonstrations of our BioSulphide® process for
selective copper recovery and Sulf-IX™ process for sulphate removal
at three different sites for Codelco.
- Completion of half a dozen cyanide destruction projects which
cemented the integration of newly acquired IP in this area into the
Company's IP portfolio.
The figure below shows the evolution of our staffing from 2017
to 2022, including our projections for 2023. The graph provides
good insight into the changes that occurred during this period of
growth and the challenges therein. Between 2017 and 2020, the
turnaround in business performance was supported by resources and
infrastructure already in place when the new business strategy was
fully implemented in 2015. Since that time, the Company has
experienced a strain on existing resources and has roughly doubled
our team size.
In summary, while 2022 is the first year since 2017 where
Adjusted EBITDA and net income did not increase year-over-year, the
management team of BQE Water believes this is a direct and natural
reflection of being in the growth stage of its evolutionary
cycle.
Looking ahead, we have good visibility for projects in 2023. Our
recurring revenue and gross margin from operational services are
expected to continue to increase: there will be a full year of
operation at Minto Mine, the newest Selen-IX™ plant is expected to
start generating recurring revenue in Q4 of 2023, and the volume of
water at our power utility ash pond project is anticipated to
increase. In addition, we foresee our margins on technical services
to improve as inflation-adjusted fees were applied in January 2023.
In the long-term, the drivers for continued company growth
remains firmly in place including:
- Global decarbonization driving demand for metals
production.
- Tightening government regulations and increased enforcement
around water quality.
- Environmental responsibility and social acceptability guiding
water management and treatment decisions.
- Increased role of Indigenous communities in clean water
production and environmental monitoring.
- Outsourcing of innovation in the mine water space combined with
our track record of bringing innovation to market.
- Clean-up and closure of ash ponds as one of the largest
environmental liabilities faced by power utilities.
Despite these trends and our optimistic outlook for 2023,
readers need to be cautioned about the risks that may create sudden
and potentially significant headwinds for us and our business.
First, geopolitical tensions between China and the West may complicate our ongoing
China operations and any future
business. Second, a global recession may lead to a drop in
commodity prices and put new mine development projects on hold. For
these reasons, we remain focused on fiscal prudence and maintaining
our working capital at a level that would shield us from these
exogenous impacts. Our financial results for 2022 and the current
outlook for 2023 underpin our view that we are on track for
profitable growth and have sufficient cash reserves to mitigate
these risks.
SELECTED FINANCIAL INFORMATION
For a complete set of
Financial Statements and MD&A, please go to
www.bqewater.com.
(in $'000 except for
per share amounts)
|
2022
|
2021
|
|
$
|
$
|
Revenues
|
12,158
|
7,511
|
Operating
expenses
|
(7,107)
|
(3,949)
|
Operating
margin
|
5,051
|
3,562
|
|
|
|
Share of income from
joint
ventures
|
1,487
|
2,803
|
General and
administration
|
(2,464)
|
(1,823)
|
Sales and
development
|
(1,768)
|
(1,374)
|
Share-based
payments
|
(671)
|
(303)
|
Depreciation and
amortization
|
(264)
|
(168)
|
Income from operations
and joint ventures
|
1,371
|
2,697
|
|
|
|
Other income
(expenses)
|
108
|
(33)
|
Bad debt (expense)
recovery
|
(8)
|
95
|
Income tax
expenses
|
(309)
|
(130)
|
|
|
|
Net income for the
year
|
1,162
|
2,629
|
|
|
|
Earnings per share
(basic)
|
0.93
|
2.13
|
Earnings per share
(diluted)
|
0.92
|
2.11
|
|
|
|
Proportional
Revenues1
|
18,879
|
15,616
|
Adjusted
EBITDA1
|
3,059
|
4,096
|
Comprehensive
income
|
994
|
2,934
|
|
|
|
|
at Dec
31
|
at Dec 31
|
|
2022
|
2021
|
|
$
|
$
|
Cash
|
6,234
|
3,944
|
Proportional
cash1
|
9,582
|
8,089
|
Working
capital
|
7,165
|
4,557
|
Total assets
|
15,988
|
13,803
|
Total non-current
liabilities
|
555
|
778
|
Shareholders'
equity
|
12,638
|
11,313
|
Notes:
|
1. Non-GAAP
measures
|
|
About BQE Water
BQE Water is a service provider
specializing in water treatment and management for metals mining,
smelting and refining. We are helping to transform the way the
industry thinks about water in the context of natural resource
projects by offering services and expertise which enables more
sustainable water management practices and improved overall project
performance at reduced risks. BQE Water invests in innovation and
has developed unique intellectual property through the
commercialization of several new technologies at mine sites around
the world for organizations including Glencore, Jiangxi Copper,
Freeport-McMoRan and the US EPA. BQE Water is headquartered in
Vancouver, Canada and trades on
the TSX Venture Exchange under the symbol BQE. Visit
www.bqewater.com for more information.
****
The Toronto Venture Exchange has not reviewed and does not
accept responsibility for the adequacy or the accuracy of this
release.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain information contained herein may not be based on
historical fact and therefore constitutes "forward-looking
information" under applicable Canadian securities legislation. This
includes without limitation statements containing the words "plan",
"expect", "project", "estimate", "intend", "believe", "anticipate",
"may", "will" and other similar words or expressions.
Forward-looking statements are based on the opinions and estimates
of management at the date the statements are made, and are subject
to a variety of risks, uncertainties and other factors that may
cause actual events or results to differ materially from those
expressed or implied by such forward-looking statements. Factors
that could cause or contribute to such differences include, but are
not limited to, the Company's dependence on key personnel and
contracts, uncertainty with respect to the profitability of the
Company's technologies, competition, technology risk, the Company's
ability to protect its intellectual property and proprietary
information, fluctuations in commodity prices, currency risk,
environmental regulation and the Company's ability to manage growth
and other factors described in the Company's filings with the
Canadian securities regulators at www.sedar.com (including
without limitation the factors described in the section entitled
"Risks and Uncertainties" in the Company's MD&A for the year
ended December 31, 2022). Given these
risks and uncertainties, the reader is cautioned not to place undue
reliance on forward-looking statements. All forward-looking
information contained herein is based on management's current
expectations and the Company undertakes no obligation to revise or
update such forward-looking information to reflect subsequent
events or circumstances, except as required by law.
SOURCE BQE Water Inc.