BQE Water Reports Q2 2024 Results
Press Release
August 27, 2024
VANCOUVER, BC – BQE Water Inc. (TSX-V: BQE), a leader in the treatment and management of mine impacted waters, is pleased to release its interim consolidated financial results for the three and six months ending June 30, 2024.
“In Q2 2024, we continued to see year-over-year growth in both our share of revenue from our Chinese joint venture and from recurring operation revenues in Canada and in the US,” said David Kratochvil, President & CEO of BQE Water. “Growing such recurring revenue streams remains a strategic priority for us as we expand through additional plant operations over time. While our technical services for the first half in 2024 decreased when compared to the same period in 2023, we expect it to catch up to 2023 levels over the remainder of the year as several new large projects are being initiated during Q3 2024.”
FINANCIAL HIGHLIGHTS
- Recorded Proportional and GAAP revenues of $6.1 million and $3.4 million in Q2 2024 respectively, compared to $5.7 million and $4.2 million in Q2 2023.
- Gross margin of $1.6 million in Q2 2024 compared to $2.0 million in Q2 2023, a $417,000 or 21% decrease.
- Net income of $560,000 in Q2 2024 compared to $615,000 in Q2 2023, a $55,000 or 9% decrease.
- Adjusted EBITDA of $1.3 million in Q2 2024 compared to $1.5 million in Q2 2023, a $109,000 or 8% decrease.
- Net cash and cash equivalents of $7.8 million at June 30, 2024, compared to $7.9 million at December 31, 2023.
- Working capital of $9.9 million at June 30, 2024, compared to $10.5 million at December 31, 2023.
Selected financial results for the three and six months ended June 30, 2024 are as follows:
| (in ’000s) | 3 months ended Jun. 30 | 6 months ended Jun. 30 | |||
| 2024 | 2023 | 2024 | 2023 | ||
| Revenue from Operation Services | 2,561 | 1,434 | 4,350 | 2,269 | |
| Revenue from Technical Services | 856 | 2,752 | 1,574 | 4,608 | |
| Revenue from joint ventures in China | 2,666 | 1,586 | 3,568 | 2,454 | |
| Proportional Revenues | 6,083 | 5,772 | 9,492 | 9,331 | |
| Net income | 560 | 615 | 70 | 274 | |
| Adjusted EBITDA | 1,342 | 1,451 | 1,219 | 1,372 | |
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 operations by source of revenue 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 Government of Yukon | 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 metals recovered by the plants fluctuate seasonally depending on precipitation levels in the region. The operating results for the three and six months ended June 30, 2024 are as follows:
| (in ’000s) | 3 months ended Jun. 30 | 6 months ended Jun. 30 | |||
| 2024 | 2023 | 2024 | 2023 | ||
| Water treated (cubic metres) | 8,249 | 7,538 | 12,452 | 10,437 | |
| Copper recovered (pounds) | 919 | 725 | 1,299 | 1,016 | |
| Zinc recovered (pounds) | 430 | – | 532 | – | |
In Q2 2024, all three plants met mechanical availability and process performance targets set by the Company. The volume of water treated increased by 9% and the mass of copper recovered increased by 27% compared to Q2 2023. Such changes in water volume and metal grade in feed water from period to period are largely the result of environmental conditions beyond the control of the joint venture. In 2024, the Yinshan water treatment plant began to recover zinc as part of their normal operations and recovered 430,000 pounds in Q2 2024.
MWT-BQE Joint Venture Operations
Our 20% share in 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. Operating results for the three and six months ended June 30, 2024 are as follows:
| (in ’000s) | 3 months ended Jun. 30 | 6 months ended Jun. 30 | |||
| 2024 | 2023 | 2024 | 2023 | ||
| Water treated (cubic metres) | 63 | 13 | 130 | 122 | |
| Zinc recovered (pounds) | 18 | 1 | 49 | 79 | |
| Copper recovered (pounds) | 5 | – | 10 | 41 | |
The smelter periodically operated its production lines with ores from different sources which led to varying concentrations of zinc and copper in the feed and a fluctuation in the volume of wastewater treated by the plant. The joint venture has no control over the composition and volume of feed that flows into the plant.
BQE Water Operations
The number of operating days contributing to water treatment or support fees for the three and six months ended Jun 30, 2024 are as follows:
| (in days) | 3 months ended Jun. 30 | 6 months ended Jun. 30 | |||
| 2024 | 2023 | 2024 | 2023 | ||
| Raglan Mine water treatment plants | 26 | 40 | 26 | 40 | |
| Minto Mine water treatment plant | 35 | 91 | 35 | 181 | |
| Zhongkuang SART plant | 86 | 90 | 177 | 180 | |
| Zhaojin SART plant | 87 | 87 | 178 | 177 | |
| Water treatment plant in Eastern USA | 69 | 63 | 136 | 127 | |
| Water treatment plants in Southwest USA | 91 | 91 | 182 | 179 | |
The volume of water treated by geographic location for the three and six months ended June 30, 2024 are as follows:
| (in ’000s cubic metres) | 3 months ended Jun. 30 | 6 months ended Jun. 30 | |||
| 2024 | 2023 | 2024 | 2023 | ||
| Raglan Mine water treatment plants | 210 | 221 | 210 | 221 | |
| Minto Mine water treatment plant | 156 | 279 | 156 | 502 | |
| SART plants in China | 150 | 176 | 286 | 307 | |
| Water treatment plants in USA | 183 | 4 | 384 | 9 | |
The Company, with our Inuit partner Nuvumiut Development, operates four water treatment plants at Raglan Mine for Glencore Canada Corporation (“Glencore”). During Q2 2024, we mobilized our operations team to site to commence our 21st operating season at the mine. Operational activities were initiated in June and treated water discharge began the same month.
In 2022, we began to provide water treatment services at Minto Mine in the Yukon and in 2023, the Company contracted directly with the Yukon Government to treat and discharge clean water at the mine in support of environmental protection. In Q2 2024, we mobilized our operations team to site in May and treated water discharge began in June.
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. Both SART plants operated fully throughout Q2 2024 without disruption.
In 2022, we began operations of a treatment plant utilizing our Selen-IX™ process to remove selenium from ash pond water for WesTech Engineering (“WesTech”). In Q2 2024, our team continued at site providing water treatment services with the Selen-IX™ circuit to manage the presence of selenium in the feed.
In 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. In August 2023, our team completed the performance test milestone for a second newly constructed selenium removal water treatment plant which entered the operation phase. In Q2 2024, we continued to provide water treatment operation services for both Selen-IX™ water treatment plants in the American Southwest.
TECHNICAL SERVICES HIGHLIGHTS
BQE Water’s technical expertise and IP are applicable globally across broad areas of water management. The highlights of technical services provided to clients and technical innovation projects during Q2 2024 are summarized below.
Trusted Advisory Services (Water Management and Water Studies)
- Completed laboratory treatability assessment and preliminary water treatment engineering for a new uranium project in Canada.
- Continued engineering services for the design and construction of a fourth selenium removal plant in the US using Selen-IX™ at a gold mine to meet end-of-pipe limit of less than 2 parts per billion.
- Continued to provide plant upgrade design and automation services to include sulphate removal to a discharge limit less than 1,500 mg/L at an integrated lead smelter-recycling facility in Eastern Canada.
- Completed a laboratory treatability test program on mine water for selenium removal from an existing mine in the US.
- Completed METSIM modelling of a build-up on impurities in metallurgical process water for a new project in the US.
- Performed peer reviews of water management and water quality predictions reports aiming to revise water treatment design for permitting for a new precious metals project in the Yukon.
- Assisted provincial regulators and First Nation groups on their questions about water treatment to be implemented at the Blackwater mine in BC.
- Completed technical assessment of options for the disposal of large quantities of elemental sulphur at a mine in BC.
- Continued to provide engineering design services for three water treatment plants to support permitting of the KSM gold-copper project in British Columbia.
- Initiated plant automation services for a new water treatment plant for water recycle at a gold mine in Mexico.
- Initiated selenium stability testing simulating conditions in semi-passive treatment systems to support holistic risk assessment of selenium treatment options.
Cyanide Management (Destruction and Recycle)
- Continued to provide engineering services to a project requiring cyanide recycle currently in development in Mexico.
- Continued with the engineering design for a third SART plant for Shandong Gold in China.
COMMENTARY AND OUTLOOK
Improved financial performance in Q2 2024 allowed us to narrow the gap for the six-month period in 2024 when compared to the same period a year ago. Important structural differences underlying our performance on a year-to-date basis in 2024 when compared to 2023 are:
- Recurring revenue from plant operations increased 92% year-over-year as new plants have come online.
- Revenue from technical advisory services fell 66% year-over-year mostly due to the timing of new project starts and the fact that these are typically smaller contracts linked to the earlier phases of larger multi-stage projects.
- Our share of revenue from the sale of base metals recovered in our Chinese joint venture with JCC increased 45% year-over-year due, primarily, to a higher tonnage of metal recovered and, to a lesser extent, an increase in the copper price.
The growth in recurring revenue was anticipated based on projects that entered the operations phase. As expected, demand for engineering support and operator training is higher for new operations than for well-established operations. Consequently, some of our engineering resources normally involved in new projects were deployed to assist in these new operations. Additionally, lower demand for technical advisory services also allowed us to redirect more resources towards strategic business development initiatives. Finally, the higher year-over-year tonnage of metals recovered from mine water in our Chinese joint venture with JCC strengthens our view that the low copper production experienced in 2023 was climate driven rather than due to an accelerated depletion of metal in the stockpiles.
Looking ahead, we anticipate a strong second half in 2024. Several new large projects being initiated during Q3 2024 are expected to increase the technical advisory services portion of our GAAP revenue over the next 12 months. Meanwhile, all our water treatment operations are now fully operational, and we expect the full year production from China joint venture to exceed 2023 levels. A stronger Q3 2024 is expected to set us up for growth in 2024. Our assessment of our longer-term prospects, the drivers for our growth, as well as the risks remain unchanged from our commentary in Q1 2024.
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) |
3 months ended Jun. 30 |
6 months ended Jun. 30 |
||
2024 |
2023 |
2024 |
2023 |
|
| $ | $ | $ | $ | |
| Revenues | 3,417 | 4,186 | 5,924 | 6,877 |
| Operating expenses (excluding depreciation) | (1,810) | (2,162) | (3,213) | (3,855) |
| Operating margin | 1,607 | 2,024 | 2,711 | 3,022 |
| Share of income from joint ventures | 1,129 | 407 | 1,461 | 488 |
| General and administration | (892) | (750) | (1,592) | (1,422) |
| Sales and development | (928) | (557) | (1,852) | (1,170) |
| Share-based payments | (343) | (29) | (617) | (219) |
| Depreciation and amortization | (103) | (111) | (205) | (193) |
| Income (loss) from operations and joint ventures | 470 | 984 | (94) | 506 |
| Other income (expenses) | 100 | (83) | 187 | 60 |
| Bad debt expenses | – | (259) | – | (259) |
| Income tax expenses | (10) | (27) | (23) | (33) |
|
Net income for the period
|
560 | 615 | 70 | 274 |
| Net earnings per share (basic) | 0.44 | 0.49 | 0.06 | 0.22 |
| Net earnings per share (diluted) | 0.43 | 0.48 | 0.06 | 0.21 |
| Proportional Revenues (Non-GAAP measures) | 6,083 | 5,772 | 9,492 | 9,331 |
| Adjusted EBITDA (Non-GAAP measures) | 1,342 | 1,451 | 1,219 | 1,372 |
| Comprehensive income (loss) | 574 | 144 | 128 | (187) |
| at Jun. 30, | at Dec. 31, | |||
2024 |
2023 |
|||
| $ | $ | |||
| Cash | 7,791 | 7,928 | ||
| Proportional cash (Non-GAAP measures) | 10,375 | 9,790 | ||
| Working capital | 9,858 | 10,529 | ||
| Total assets | 19,512 | 18,856 | ||
| Total non-current liabilities | 2,019 | 1,900 | ||
| Shareholders’ equity | 15,358 | 14,776 | ||
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.
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