Mr. Peter Pascali reports

PYROGENESIS PROVIDES UPDATE ON THE PUREVAP(TM) QUARTZ REDUCTION REACTOR AND FUMED SILICA PROJECTS WITH HPQ SILICON INC.

PyroGenesis Canada Inc. has provided, further to HPQ Silicon Inc.'s (HPQ or the client) press release dated Sept. 28, 2023, and the company's news release dated June 1, 2023, an update on its strategic engineering partnership with HPQ on two projects: (i) the Purevap quartz reduction reaction (QRR) pilot plant; and (ii) the fumed silica reactor (FSR) project. As part of the terms of both projects with HPQ, PyroGenesis benefits from a royalty payment representing 10 per cent of the client's eventual sales, with set minimums. With respect to the FSR with HPQ Silica Polvere Inc., a wholly owned subsidiary of HPQ, this royalty stream, can, at any time, be converted by PyroGenesis into a 50-per-cent ownership in HPQ Polvere.

Given the number of inquiries received by investors, PyroGenesis has provided the following update.

Purevap quartz reduction reactor project

The innovative QRR pilot plant was designed and built to transform lower-purity quartz (SiO2 (silicon dioxide)) into high-purity silicon (Si) in a single step. The QRR, which uses electric high-temperature plasma arc, reduces production costs and significantly lowers energy consumption, with a smaller carbon footprint compared with traditional methods.

As noted by HPQ, the demand for silicon is projected to surpass 3.8 million tonnes and be valued between $15-billion (U.S.) and $20-billion (U.S.) by 2025. This projection does not consider the additional 300,000 tonnes of demand for silicon-based anode material projected by 2030 arising from demand in the battery market, representing an additional market valued at approximately $15-billion (U.S.). The global silicon anode battery market is valued at $65.5-billion (U.S.) in 2022 and is expected to reach $123.1-billion (U.S.) by 2030, for a CAGR (compound annual growth rate) of 22.3 per cent during the forecast period of 2023 to 2030.

As highlighted in HPQ's recent press release, significant milestones have been reached in the pilot plant project, leading to a silicon pouring step -- an important milestone for both PyroGenesis and HPQ that marks the completion of the pilot stage and sets the stage for commercial production.

The past few weeks have seen noteworthy progress and confirmations:

• Completion of the scaling up of the QRR process by 2,500 times from the previous laboratory scale, validating the original proof of concept;
• Demonstration of operation in a semi-continuous batch cycle;
• Production of silicon from quartz using a one-step direct carbothermal reduction process;
• 25-per-cent reduction in raw material use compared with conventional methods;
• Achievement of 3N+ (or 99.9-plus-per-cent) silicon purity, a crucial purity level for battery-grade silicon applications;
• Optimized QRR design for high performance during the tapping process, minimizing silicon contamination.

Next steps for Purevap: The path to commercialization

Further testing of the enhanced system will conclude with a silicon pouring step, which is scheduled within the next few weeks.

After a successful pour, PyroGenesis and HPQ will determine the number of Purevap QRR systems required to construct a full commercial plant, and thereafter will move toward full commercialization.

Preliminary assessments have revealed that a minimum of two initial reactors, each capable of producing 2,500 Mt (million tonnes) of high-purity silicon per year, would be required -- at a build cost to HPQ of at least $20-million each. PyroGenesis will be the engineering partner contracted to build these units. This assessment will be validated and finalized.

"The next milestone is to conclude a successful pour, however, we caution that we have had delays and interruptions in the past and, as such, nothing is certain until completed," said P. Peter Pascali, chief executive officer and president of PyroGenesis. "We are highly confident that the pour will take place and we don't have any reason to believe that it will not be successful. We believe the QRR is a major step forward for PyroGenesis and HPQ as providers of a technology that could help shape the future of silicon production. The market's enormous growth potential signals not only profitability but the protection of a key critical mineral and a brighter, more sustainable future. As we close in on a successful silicon pour, we are excited by what lies ahead in the development of the full commercial plant."

Fumed silica reactor project

The fumed silica reactor, another plasma-based process, converts quartz into fumed silica (pyrogenic silica) in a single and eco-friendly step. By eliminating the use of harmful chemicals generated by conventional methods, the groundbreaking FSR approach, if successful, will help contribute to the repatriation of silica production to North America.

Conventional fumed silica processes, which rely on silicon metal as raw material, not only have a significant carbon footprint of around 9.5 tonnes of CO2 (carbon dioxide) equivalent per tonne of fumed silica, but also present complex process challenges which include, but are not limited to, using hazardous materials.

In contrast, the FSR offers an innovative solution by converting quartz directly into fumed silica, providing a sustainable alternative. This pioneering technology not only provides a solution to increasing market demand, but also significantly reduces CO2 emissions by over 60 per cent (equivalent to around five tonnes of CO2 equivalent per tonne of fumed silica produced), while not utilizing hazardous materials in the process. Once again, this project, along with the quartz to silicon, represents an essential step toward a more sustainable and environmentally friendly future.

In a major step toward commercial-scale production, PyroGenesis has successfully deployed the FSR on a laboratory scale, resulting in the milestone production of fumed silica. Preliminary tests and analysis have confirmed that the material produced has chemical and physical characteristics compatible with those of commercially available fumed silica.

Next steps for fumed silica reactor: The path to commercialization

"In the FSR project, PyroGenesis is the unique supplier of a technology capable of using quartz (SiO2) as a raw material to produce commercial-grade fumed silica, in a single step. With the lab-scale production of commercial-grade fumed silica now complete, we now can move towards the long anticipated next phase: a pilot plant scheduled to start operations in the second quarter of 2024," continued Mr. Pascali. "In light of global demand, it is worth noting that the fumed silica market, valued at $1.3-billion (U.S.) in 2022, is expected to grow at a CAGR of 5 per cent to reach $2.1-billion (U.S.) by 2032. Fumed silica sales accounted for almost 23 per cent of the global specialty silica market at the end of 2021."

PyroGenesis's involvement in developing high-purity silicon and fumed silica from quartz is part of PyroGenesis's three-tiered solution ecosystem that aligns with economic drivers that are key to global heavy industry. High-purity silicon is part of PyroGenesis's commodity security and optimization tier, where the recovery of viable metals and the optimization of production to increase output helps to maximize raw materials and improve the availability of critical minerals. Silicon has been identified as a critical mineral by many governments worldwide.

About PyroGenesis Canada Inc.

PyroGenesis Canada, a high-technology company, is a proud leader in the design, development, manufacture and commercialization of advanced plasma processes and sustainable solutions which reduce greenhouse gases (GHGs) and are economically attractive alternatives to conventional dirty processes. PyroGenesis has created proprietary, patented and advanced plasma technologies that are being vetted and adopted by multiple multibillion-dollar industry leaders in four massive markets: iron ore pelletization, aluminum, waste management and additive manufacturing. With a team of experienced engineers, scientists and technicians working out of its Montreal office and its 3,800-square-metre and 2,940-square-metre manufacturing facilities, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. The operations are ISO 9001:2015 and AS9100D certified, having been ISO certified since 1997.

We seek Safe Harbor.