BQE Water Reports Audited Year End 2023 Results
"We are extremely pleased with our annual results which reflect the stage of the Company's growth as we establish new streams of recurring revenue from water treatment plant operations," said David Kratochvil, President & CEO of
FINANCIAL HIGHLIGHTS
- Achieved record Proportional Revenues of
$22.7 million in 2023, a 20% increase from 2022. - Recorded historic high revenues under GAAP of
$18.1 million in 2023, a 49% increase compared to 2022. - Share of income from
China joint ventures was$419,000 ,$1.1 million lower than in 2022. - Net income for the year was
$2.6 million compared to$1.2 million in 2022, a 128% increase. - Adjusted EBITDA was
$4.6 million compared to$3.1 million the year prior, a 52% increase. - Increased working capital by 47% year-over-year to
$10.5 million as atDecember 31, 2023 . - Grew net cash and cash equivalents by 27% year-over-year to
$7.9 million as ofDecember 31, 2023 .
Selected financial results for the 3 and 12 months ended
(in '000s) |
3 months ended |
|
12 months ended |
||
|
2023 |
2022 |
|
2023 |
2022 |
Revenues under GAAP |
5,014 |
3,465 |
|
18,137 |
12,158 |
Proportional Revenues |
5,431 |
4,479 |
|
22,726 |
18,879 |
Net income (loss) |
249 |
(244) |
|
2,654 |
1,162 |
Adjusted EBITDA |
541 |
(90) |
|
4,656 |
3,059 |
Selected financial results for the last 5 years are as follows:
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 |
|
Sales of recovered metals |
MWT-BQE Joint Venture |
|
Sales of recovered metals |
|
|
Water treatment fees |
|
|
Water treatment fees |
Zhongkuang Metallurgical Facilities for MWT |
|
Operations support fees |
Zhaojin Metallurgical Facilities for MWT |
|
Operations support fees |
Power utility ash pond for WesTech |
|
Water treatment fees |
Base metal project for a metal producer |
|
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
(in '000s) |
2023 |
2022 |
Water treated (cubic metres) |
19,493 |
17,704 |
Copper recovered (pounds) |
1,935 |
2,829 |
During 2023, all three plants met mechanical availability and process performance set by the Company. While the volume of water treated increased by 10% year-over-year, the mass of copper recovered decreased by 32%. The notable decrease in copper recovery compared to previous year can largely be attributed to the resource depletion in the waste rock dumps. We expect copper production in the coming years to fluctuate around this decreased level based on the lower grade waste rock currently stockpiled.
MWT-BQE Joint Venture Operations
Our 20% share of MWT-BQE is with our 80% partner
(in '000s pounds) |
2023 |
2022 |
Zinc recovered |
162 |
527 |
Copper recovered |
49 |
218 |
The mass of zinc and copper recovered decreased by 69% and 78% respectively. The smelter 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. During 2023, the plant was shut down intermittently as the value of zinc and copper in the feed was lower than the recovery cost of the metals.
BQE Water Operations
The number of operating days contributing to water treatment or support fees for the 12 months ended
(in days) |
2023 |
2022 |
|
206 |
157 |
|
312 |
127 |
Zhongkuang SART plant |
364 |
349 |
Zhaojin SART plant |
354 |
159 |
Water treatment plant for ash pond in |
238 |
328 |
Water treatment plants in |
363 |
248 |
The volume of water treated for the 12 months ended
(in '000s cubic metres) |
2023 |
2022 |
|
2,218 |
1,870 |
|
938 |
378 |
SART plants in |
602 |
411 |
Water treatment plants in the |
168 |
18 |
The Company, with our Inuit partner
Since
In 2021, we began operations of the Zhongkuang SART plant and the Zhaojin SART plant at metallurgical facilities in
In 2022, we began operations of a treatment plant utilizing our Selen-IX™ process to remove selenium from ash pond water for
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 2023, our team completed the performance test milestone for a 2nd newly constructed selenium removal water treatment plant which entered the operation phase in August. As a result, we are currently providing water treatment operation services for two water treatment plants in the American Southwest.
TECHNICAL SERVICES HIGHLIGHTS
Trusted Advisory Services (Water Management and Water Studies)
- Completed a pilot demonstration of selenium removal from mine water using Selen-IX™ at a gold mine in the US to meet end-of-pipe limit of less than 2 parts per billion.
- Completed a technical assessment of water treatment requirements and options for closure and post-closure at a mine in the
Yukon overseen by the provincial government. - Successfully completed commissioning of a new water treatment plant at a base metal mine in the US.
- Provided water treatment expertise to the executive team of a top tier metal producer in due diligence for an acquisition of an existing mining operation.
- Continued to provide engineering design services for three water treatment plants to support permitting of the KSM gold-copper project in
British Columbia . - Continued to provide engineering services for design for the construction of a new water treatment plant for water recycle at a gold mine in
Mexico . - Completed the water treatment pilot test campaign integrated into a rare earth elements metallurgical extraction project in
Chile . - Provided water treatment expertise and laboratory testing services in investigations of effluent toxicity at a mine in
Eastern Canada . - Completed a pilot scale demonstration of a new innovative method of managing thiosalts in mine effluents at an operating mine in
Canada . - Completed an operations performance and engineering analysis of bottlenecks in an existing reverse osmosis plant in
Chile , and prepared a plan for upgrades to increase the plant capacity with minimal capital expense. - Completed a laboratory scale program aimed at increasing water recovery and reducing brine waste for a reverse osmosis system being planned for implementation at a gold mine in BC.
Cyanide Management (Destruction and Recycle)
- Completed laboratory testing and scoping level engineering design for a cyanide removal plant to meet effluent discharge of less than 7 parts per billion for a mine in development in the US.
- Completed a treatability assessment for the removal of cobalt and associated cyanide from an existing gold mine in
Ontario . - Continued with the engineering design for a third SART plant for Shandong Gold in
China .
COMMENTARY AND OUTLOOK
We are extremely pleased with our 2023 results, which delivered another set of new highs in several key financial metrics including Proportional Revenue, GAAP revenue, Adjusted EBITDA, and working capital.
Despite our positive overall results in 2023, there are also risks and opportunities for improvement. Firstly, in 2023, we reported a bad debt write-off due to the insolvency of Minto Metals Corporation ("Minto"). This non-recurring expense relates to unpaid amounts owed to the Company for services rendered in 2023. When BQE entered into a contract with Minto in 2022, management weighed the risk of the customer's low working capital against the opportunity to provide services to a mine with significant water treatment requirements. When Minto entered receivership in
In 2023,
Lastly, sales & development expenses and general & administration expenses together increased 27% in 2023. While some of these expenses are expected to increase due to the Company's growth, we have identified multiple opportunities to improve efficiency across the organization with respect to workflow, communication, and resource allocation. Executing these opportunities will be management's focus in 2024. Investors can nevertheless expect higher costs resulting from more proactive business development, marketing and investor relations activities, as well as increases in insurance costs and financial audit expenses. Overall, however, we believe our operating and profit margins can continue to improve year-over-year due to active management of costs, internal efficiencies, and economies of scale. In terms of labor resources, our focus will be on improving the utilization of existing resources prior to embarking on any further hiring initiatives. The figure below shows the evolution of our team from 2017 to 2023, including our projections for 2024, which highlights our focus in 2024 on the consolidation of the rapid growth of the past two years.
With respect to our outlook for 2024, we have relatively good visibility and certainty over key projects and activities. For operational services, we expect our recurring revenues will continue to increase. In 2024, we will have the first full year of operations at the newest selenium removal plant commissioned in Q3 2023. We also anticipate new contracts for operational services in 2024 with North American customers who complete the construction of new plants in 2024 and begin the transition to the operations phase in the second half of 2024 or early 2025. This momentum will be supported by the expected commissioning of our third SART plant in
In the long-term, the drivers for continued growth remain firmly in place and include:
- Tightening government regulations and increased enforcement around water quality.
- Social acceptability of new mines creating a major driver for water management and treatment decisions.
- Global decarbonization driving demand for metals production.
- Outsourcing of innovation in the mine water space combined with our track record of bringing innovation to market.
- Increased role of Indigenous communities in clean water production and environmental monitoring.
- 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 2024, we continue to caution readers about the risks that may create sudden and potentially significant headwinds for us and our business. These include geopolitical risks with
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) |
2023 |
2022 |
|
$ |
$ |
Revenues |
18,137 |
12,158 |
Operating expenses |
(9,075) |
(7,107) |
Operating margin |
9,062 |
5,051 |
|
|
|
Share of income from joint ventures |
419 |
1,487 |
General and administration |
(2,727) |
(2,464) |
Sales and development |
(2,655) |
(1,768) |
Share-based payments |
(466) |
(671) |
Depreciation and amortization |
(430) |
(264) |
Income from operations and joint ventures |
3,203 |
1,371 |
|
|
|
Other income, net |
115 |
108 |
Bad debt expense |
(473) |
(8) |
Income tax expenses |
(191) |
(309) |
|
|
|
Net income for the year |
2,654 |
1,162 |
|
|
|
Earnings per share (basic) |
2.12 |
0.93 |
Earnings per share (diluted) |
2.08 |
0.92 |
|
|
|
Proportional Revenues (Non-GAAP measures) |
22,726 |
18,879 |
Adjusted EBITDA (Non-GAAP measures) |
4,656 |
3,059 |
Comprehensive income |
2,302 |
994 |
|
|
|
|
|
|
|
at |
at |
|
2023 |
2022 |
|
$ |
$ |
Cash and cash equivalents |
7,928 |
6,234 |
Proportional cash (Non-GAAP measures) |
9,790 |
9,582 |
Working capital |
10,529 |
7,165 |
Total assets |
18,856 |
15,988 |
Total non-current liabilities |
1,900 |
555 |
Shareholders' equity |
14,776 |
12,638 |
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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
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