$PYR PyroGenesis Canada Inc. (TSX VENTURE: PYR) (OTC: PYRNF) (Frankfurt: 8PYF) is the subject of a Technology MarketWatch Journal review. PyroGenesis is arguably the most advanced plasma technology Company in the world, with one of the largest concentration of plasma expertise under one roof working out of a ~40,000 sq. ft. facility in Montreal, is considered the go-to source for the US Military when an application requires a plasma solution, it has over 57 patents (issued or pending), including being the inventors of 'plasma atomization' which is considered the current gold standard for production of Titanium-metal powder used in additive manufacturing (3D printers). The Company's latest innovations/plasma solutions in chemical warfare agent destruction, metallurgy, and especially additive manufacturing, are all revolutionary, each on the cusp of exponential growth, and position the share price of PYR.V at a major inflection point, presenting opportunity for astute shareholders. It appears only PyroGenesis' new generation plasma atomization system, able to produce any size cut, will be able to cater to what is setting up to be explosive growth in future 3D metal printing.

The full Journal article may be viewed at http://technologymarketwatch.com/pyr.htm online.

PyroGenesis has been advancing plasma solutions for over 20 years, it currently has delivered Plasma Arc Waste Destruction Systems (PAWDS) for two US aircraft carriers and its technology is built into the design of future aircraft orders. Its trusted relationship with the military (which has the very highest DD/vetting standards) speaks to PyroGenesis' credibility and reliability -- something that gives it a leg-up as it commercializes/monetizes the latest applications of its technologies. Only recently has a confluence of opportunity materialized that will see demand grow exponentially for new applications of its technologies on four key fronts:

A) Military/environment: 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.

B) Mining metallurgy DROSRITETM: PyroGenesis Canada Inc. (PYR.V) invented DROSRITETM, a process for reclaiming dross (waste) onsite at smelters without salt -- sales are gaining traction and exponential growth appears in store. Its first customer is in negotiations to buy several more, and numerous other groups have requested demos that should convert to sales. This is a ~$400 million market potential in Aluminum production alone, then there is zinc, and copper.

C) Mining metallurgy PUREVAPTM solar grade silicon production: PYR.V has ~$8M contract with HPQ Silicon Resources Inc. to develop PUREVAPTM process for it, 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.

Figure 3. (above) - Illustration. Bench test success has validated that HPQ PUREVAPTM Quartz Reduction Reactor purifies in one step while transforming quartz into silicon metal. A 200 TPY pilot plant is almost completed, operational in 2018. Commercial operation is budgeted to start in 2019.

D) Metal Injected Molding (MIM) powder production for additive manufacturing (3D Printing): PyroGenesis' new generation plasma atomization process can do what no one else can and will give it significant advantage in the marketplace; able to produce any narrow particle size with no waste, and can be adapted for different metals. If all goes according to plan, the marketplace will see PyroGenesis quickly capture market share, filling the immediate need for a credible 2nd producer of Ti-metal powder, and put a target on its back in the process, able to readily scale-in systems to service this explosive market. GE has effectively cornered the current market with old IP/technology that PyroGenesis invented (but sold before 3D metal printing evolved and became in demand). Ramp-up of PYR.V's first production tower is almost complete, and several highly motivated big potential customers have already signed NDAs and are prequalifying product now (before ramp-up completion, way before PyroGenesis had originally planned). This move into powder production appears to be the beginning of what is shaping up to be a massive growth story that will richly reward shareholders astute enough to establish a long position now. Each plasma atomization production tower PYR.V brings online, at current commodity pricing, should be capable of generating ~$12M in revenues per year (with very healthy margins) -- if the Company conservatively brings say 16 towers online over the next couple years that would represent LESS THAN 6% of the market demand. For those familiar with the shifting fundamentals afoot in the marketplace, PYR.V is poised to dwarf conservative projections as it appears to be the only entity with technology able to cater to the explosive growth in future 3D metal printing (see overview/analysis section further below.

Figure 4. PYR.V plasma atomization tower.

PYR.V currently has a market cap of ~C$54 million (107.8 million shares outstanding (~119M fully diluted) recently trading at ~C$0.50/share), miniscule compared to what is shaping up. Forward discounted metrics of revenue dictate PYR.V trade at a significantly higher valuation, the share price is apt to rise in spurts as developments/news catalysts unfold; a near-term upside share price revaluation closer to $3/share for PYR.V is in order to better reflect the reality of what is unfolding, on its way to even higher valuations from there.

PYR.V on solid footing 

The Company has started to cash flow positive on an adjusted EBTDA basis this 2017 from its core/traditional business lines alone; revenue is up in both Q1 (+67%) and Q2 (+165%) over the same periods the year prior. Its gross margins are 48%, and this is from its core business incorporating the expenses of ramping up the additive manufacturing business (the cost of the tower, the salaries, and the analytical equipment -- the Company still made 48% Gross Margin). The backlog of signed contracts from its core business is $7.63 million (which is respectable as it had been running $5M - $6M/year for the past 3 years). Its pipeline (defined as contracts it is in serious negotiations with (e.g. Aircraft Carrier PAWDS, mobile tactical chemical warfare agent destruction units, and DROSRITETM) is ~$21 million. Comforting to know that the Company is increasingly diversified and can weather an attack on its new metal powder production business line should such an unlikely scenario develop, unlikely as the demand for what PYR.V offers is just too large and the Company is working with next level/next-generation technology that should see the financial picture explode for the Company over coming years.

Overview of why PyroGenesis Canada Inc. (PYR.V) has potential for >10X market cap upside revaluation

1) Metal Injected Molding (MIM) powder production for additive manufacturing (3D Printing) - 100% Owned

The Company's first next generation plasma atomization tower is operational, nearing completion of ramp-up, and filling prequalification orders. PyroGenesis has a near-term conservative goal of being a credible 2nd producer of Ti-metal powder.

The Back-Story
How PyroGenesis came to invent plasma atomization, and the original IP ends up in the hands of GE...

Several years ago PyroGenesis was developing light-weight armor for NATO and in that process it needed small spherical titanium powders that were uniformly the same size. The powder particles required to be the same size in order to melt them and spray onto a surface -- as the powders dropped through the plasma flame they would only splat on the surface if they were precise in size; if the powders are too big they would go through the flame, if the particles are too small they bounce off the flame. It was difficult to get specific powders in the marketplace so the Company decided to make titanium metal powders for itself using thermal plasma and it patented the process. During the NATO contract the Company also found buyers for the powder in the biomedical industry which loved the powders for biomedical implants (e.g. titanium knee implants; they liked how the powders flowed into the molds and compacted tightly). When the NATO contracted ended there was insufficient market to take up the slack and keep PyroGenesis' interest, this was before 3D metal printings time/growth spurt, and it made better sense to sell the rights.

Figure 5. Scanning electron microscope 400X of PyroGenesis powders (45μm) -- small, pure, spherical, metal powders.

In 2007 AP&C bought the rights and also received a 5 year non-compete clause from Pyrogenesis. AP&C eventually had to seek creditor protection. When AP&C came out of creditor protection 3D printing started to have a need for these exact powders. Arcam was a client of AP&C, Arcam made one of the first 3D metal printers and decided to purchase AP&C out from bankruptcy for C$35M in 2013. Under Arcam AP&C became the dominant supplier of titanium powders to metal printers, using technology PyroGenesis invented. It does not seem that AP&C has improved much, if any, on the technology since it was first incepted, there was no need to as the economics made sense for them to do nothing and they have had no pressing need to change, plus they likely do not possess the plasma expertise to do any major changes.

After the non-compete was up PyroGenesis surveyed the market and at first decided it would take the conservative route of making plasma atomization towers (which make powder) for someone else, instead of Pyrogenesis itself getting into the powder manufacturing business. Within 3 months PyroGenesis received an order for 10 systems for US$10M and it was going to make ~50% margin, it was a sweet and easy contract to fill. Before fulfilling the contract PyroGenesis' engineers began to toy with improvements to its original design and soon realized it was in the wrong business, instead of selling the towers it made better economic sense for it to consider getting into the powder manufacturing business; one system, operating flat-out, could make $12 million a year with 40% to 70% margins (depending on grades) selling powders. The Company got out of its contract at the beginning of 2016 and immediately the market thought PyroGenesis was nuts, cancelling out on a $10+M contract, and that perhaps something was wrong. Just the opposite, however it was not apparent to the market that PyroGenesis was right until September 2016 when news broke of GE purchasing Arcam for $696 million. Arcam is the Company that manufactures 3d metal printers and wholly-owns the powder manufacturer AP&C which uses the first generation plasma atomization technology that PYR.V developed. That $696M valuation was in part due to GE believing it had locked up the market on the gold standard of Titanium powder for metal injecting molds (3D printing). There began a consolidation wave in the market and put the spotlight on the value of being a player in the markets.

Many printer manufacturers, distributors, and end users are eager to see PyroGenesis come into the market as consolidation has disrupted the supply chain -- there is room for a credible second supplier of Ti-metal powder.

Figure 6. (above) CONSOLIDATION & DISRUPTED SUPPLY CHAIN -- AP&C was purchased by Arcam in 2013 and became the dominant supplier of Ti64. Many suppliers of 3D printers are now buying their powders from Arcam - a competitor. GE purchased Arcam (AP&C) for US$696M. GE’s competitors now need to find other powder producers. GE also purchased ConceptLaser for US$599M. Other consolidation of note; Carpenter recently bought Puris.

Essentially GE thought they had a leg up on the market by its acquisition of AP&C via Arcam. GE caught everyone with their pants down, it secured what they thought were the only entity that could make this type of powder, spent a billion+ dollars buying printer companies, and have effectively cornered the market. Competition to GE has been very nervous, there is little doubt PyroGenesis will do VERY well -- not only can PyroGenesis do what AP&C can do, it can do it much better. GE’s competitors are reluctant to buy off of AP&C as they are essentially telling GE what they are doing through a trade of information (e.g. particle size, amounts of powder), and even if there is not a trade of information they are giving their competitor profits that they may not want to give them. Companies that purchased from AP&C will naturally gravitate to PyroGenesis as the process used to made the powder are similar (via plasma atomization) and it is easier to qualify product that was made using the same process. Only AP&C and PyroGenesis use plasma atomization, the very few other niche metal powder producers (e.g. Tekna) that are out there use alternate processes with limitations that would rule them out for most printer manufacturers, end users, and distributors.

Growth of 3D printing, and growth of metal powder demand - Clearly PyroGenesis is entering at an opportune time.

Respected independent market experts Wohlers Associates have noted (2016 Report) the cumulative number of 3D printing machines sold worldwide (for all types) will rise from 3,017 in 2015 to 14,379 in 2020, and metal powder demand will rise from 1,810,200 kg in 2015 to 8,625,000 kg in 2020.

New metal composites could propel PyroGenesis to the very fore of the industry: The above projections are based just on expansion of what is happening today -- the sandbox that PyroGenesis is playing in is very large, right now we are talking just about one corner; titanium powders. However important to note is that PyroGenesis has recently successfully switched-out titanium wire for another metal in its plasma atomization tower; the Company filled a test batch order for inconel powder. The future is obviously VERY bright for PyroGenesis in Ti-metal alone, however the Company is able, on paper, to make all sorts of composites using plasma atomization, and composites are the next new frontier for where 3D printing is going. It went from plastics, it’s going to metals, the next evolution is composites. ‘Composites’ is a mixture of material. Let’s say you want to make an aluminum nitrate composite; on paper PYR.V scientists believe they can take an aluminum wire, fuel the plasma torch with nitrogen gas, and combine the two in-flight to make a composite. This is something no one has ever looked at with plasma, PYR.V is very comfortable experimenting in that space. Beryllium for example is a very tough metal, it so happens to be used as a coating on re-entry vehicles, like missiles for the US military. If you could make beryllium powder and run it through a 3D printer you could save the US military millions of dollars – PYR.V on paper can do this.

Understanding particle size use in the marketplace for Ti-metal production, and limitations of old powder manufacturing technology. PyroGenesis has a major advantage:

PyroGenesis has invented an adjustment to its plasma atomization process which increases the production and narrows the particle sizes that come out of each production run.

Figure 8. (above) - Particle size distribution, current old technology of AP&C.

In the past, PyroGenesis' old production run (what AP&C is using) is a broad spectrum; at the edges there is waste, and in the middle the particles that are made are used by either one type of printer or another type of printer. 90% of printers use powders between 15μm and 106μm; either A) between 15μm and 45μm, or B) between 45μm and 106μm. So if you had an order from customer A you had to do a production run to satisfy customer A and then you were left with a whole bunch of another powder size and you had to find a market for the unwanted size. So this is a dilemma if you want to go into full production. PyroGenesis can produce any narrow particle size it wants, it can do so for any customer without waste, this will have more impact on the market than its original plasma atomization patent did. The original patent has allowed 3D printers like EOS, ConceptLasers, Arcam, to print, because before plasma atomization these type of powders weren’t readily available.

New ultra-fine market: Note the ultra-fine 0 to 15μm off-cuts, which were traditionally not used in printers, there are now printer manufacturers (e.g. Desktop Metals) that are looking to make a new generation of mass printing using this specific powder range (this powder range flows like water). There is discussion in 3D printing circles that this market segment is waiting for an entity capable of reliably filling the 0 - 15μm range in size. PyroGenesis is the only one that can do it this way.

Compare the old tech production distribution (seen above) to what PyroGenesis can do now (seen below):

PYR.V's new process narrows the particle size distribution and increase the production rate -- a beautiful system that can cater to different clients.

Where things sit now:

The markets have opened up to PYR.V’s strategy, the GE acquisition of Arcam shows that PyroGenesis’ powders have an impact on what is taking place in additive manufacturing. However the understanding of just how big this is going to be for PyroGenesis has not yet sunk in, when the first contract is announced we expect the valuation to rise dramatically.

In March-2017 PyroGenesis had the first of its new generation plasma atomization systems up and running. It has been in ramp-up, testing, and experimentation/innovation mode since, ensuring all the parts are communicating properly, working properly, angled properly -- the expectation was for that to take until the end of September/mid-October. PYR.V should announce shortly that ramp-up is complete. The Company did not expect interest in its powders until ramp-up was complete, however people in the industry knew that PyroGenesis were the inventors of plasma atomization, a name PyroGenesis coined in its original patent, it is a household name now. There is a buzz developing, "The inventors are back, they are producing powder, and they are going to be as good or better than AP&C" -- so far PyroGenesis has received six sample orders and so far it has delivered four. Also during this ramp-up period it has signed six NDAs, and it is currently negotiating two NDAs with major competitors to GE. PyroGenesis never expected to get this type of interest until at least a year later, in 2018, its budget called for the Company buying sieving and analytical equipment next year – turns out PYR.V needs it RIGHT NOW! There is a lot of good pressure on the company. PyroGenesis is currently on a schedule of four days of production and one day of innovation/refinement (getting the production level higher, narrowing the particle size, getting the oxygen content down – all these things no one has ever done before). PyroGenesis is going to be selling into the market with a spec sheet that is better than anyone in the world; customized particle size, at higher production rates, with no waste. The current business strategy is to be a second supplier, but it appears conversation are underway that will see PYR.V become much more than that.

There is a need for PyroGenesis’ powder, a large contract could easily dwarf production from the one first tower, so the Company is making arrangements now to cut down the turn-around time, to ~3 to 4 months by ordering long lead-time components, for commissioning of the next three tower systems. PyroGenesis will find willingness in its clients to negotiate financing of the capital costs of its new towers by forward selling production (e.g. if a buyer pays PYR.V say $25/kg up front in advance, PYR can give a matching discount off the end sale price, offering pricing at say $350/kg instead of $375/kg). Clients signing NDA's now understand the Company's position, they like the fact PyroGenesis has been around for a while, they like the Company's relationship and credibility from its arrangement with the US Military. If a client says they want production that can take up several systems, PYR can assure them a fixed time schedule.

Potential for spin-off of the 3D metal powder production division

PyroGenesis will be very popular as the Company announces NDAs converting to contracts. The markets may not understand all the other business lines the Company is engaged in, thus PyroGenesis investors would be best served (maximize shareholder value) by spinning the unit off as a standalone entity, with its own people, its own product, and it could get funding for that as/if needed. At that time PYR.V would likely have a direct dividend to existing shareholders with maybe a concurrent financing. The landscape is changing rapidly and there are a lot of developments to accommodate that will make matters that much more powerful for PyroGenesis' new metal-powder unit. The fact that GE has acquired Arcam, and PyroGenesis has pre-order samples being vetted by major players that should translate into orders, this will all increase the value. Obviously after the ramp-up once the first order(s) comes the valuation will be larger. Spinning-off has its advantages; it will be a clearly identifiable entity that can be JVed with or acquired, it can attract its own investment and probably have a much higher multiple rather than being stuck inside PyroGenesis proper. The Company has coined the name ‘Pyrogenesis Additive’ and it is already starting to work and function internally as a separate Company; separate employees, a separate accounting system, and the Company is renovating part of its facilities so it can have its own area.

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The full Journal article may be viewed at http://technologymarketwatch.com/pyr.htm online.

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