Mr. Bernard Tourillon reports

HPQ OUTLINES KEY MILESTONES DRIVING THE COMPANY TOWARDS SUPPLYING SILICON, SILICON POWDERS AND SILICON WAFERS FOR LITHIUM-ION BATTERY MARKET IN 2020

HPQ-Silicon Resources Inc. has provided an update on the corporation's plans for 2020.

Key 2020 Purevap developments that will drive HPQ-Silicon forward

Gen 3 Purevap quartz reduction reactor pilot plant operational in the first quarter of 2020

PyroGenesis Canada Inc. informed HPQ-Silicon that the pilot plant commissioning and testing program will start in full force in Q1 2020.

"As previously discussed, a good part of the past year saw us divert assets from paying projects to non-paying projects. This enabled PyroGenesis to secure the large breakout contract it recently announced as well as the upcoming Navy project, which was also recently announced. As a result, our signed backlog increased from $6-million in Q2 2019 to almost $30-million at the end of Q3 2019. The successful closing of the Navy project will further increase this backlog by an additional $13-million. This increase in backlog derisks the company significantly, all to the benefit of our clients, like HPQ, and their shareholders," commented P. Peter Pascali, president and chief executive officer of PyroGenesis Canada. "We are now in position to refocus, and accelerate, the Purevap initiative focus on the multitude of opportunities that have come to light since defining our original mandate. As a result, we are confident that HPQ is going to make some significant headway over the coming months, the least of which will be to start the Gen 3 Purevap plant commissioning and testing program."

"HPQ congratulates our partner, P. Peter Pascali, and his PyroGenesis team on their $20-million contract award, which, once again, proves their ability to commercialize high-tech applications on a global scale," commented Bernard Tourillon, president and chief executive officer of HPQ-Silicon. "With the Purevap pilot plant becoming operational in Q1 2020, we now have even greater confidence in our joint ability to deliver the critical silicon material required by the surging lithium-ion battery market in 2020 and beyond."

The Purevap QRR technology is a unique carbothermic process that will allow HPQ-Silicon to have a significant impact, short and long term, on several silicon markets and industries.

Nanoscale structure silicon powders manufacturing for lithium-ion batteries

HPQ-Silicon and PyroGenesis recently announced plans regarding the creation of a joint venture to produce nanoscale structure silicon powders for lithium-ion batteries. In the first quarter of 2020, the plan is to have a modified Gen 2 Purevap reactor operational in parallel with the pilot plant, validating that the company's approach works and producing nanoscale structure silicon powders samples for industry participants and research institutions.

Nanoscale structure silicon powders improve lithium-ion battery performance, but high-performance silicon anodes made using powders selling for $30,000 (U.S.) per kilogram are not commercially feasible. Combining HPQ-Silicon Purevap quartz reduction reactor technology with PyroGenesis plasma atomization know-how to produce nanoscale structure silicon powders represents a unique multibillion-dollar business opportunity that could subsequently lead to their wide-scale adoption in the battery market. If this occurs, HPQ-Silicon and PyroGenesis would then be well positioned to assume a dominant market position.

Silicon's potential to meet energy storage demand is undeniable and generating massive investments, as well as serious industry interest, so HPQ-Silicon's and PyroGenesis's timing could not be better. A recent report by Wood Mackenzie Power projects that energy storage deployments are estimated to grow 1,300 per cent from a 12-gigawatt-hour market in 2018 to a 158-gigawatt-hour market in 2024. An estimated $71-billion (U.S.) in investments will be made into storage systems where batteries will make up the lion's share of capital deployment.

Porous silicon wafers for solid-state lithium-ion batteries

During the third quarter of 2019, HPQ-Silicon started discussions with a battery manufacturer regarding using silicon produced by the company's Gen 3 Purevap QRR pilot plant to manufacture porous silicon wafers needed for its operations. Furthermore, HPQ-Silicon negotiated with Apollon Solar SAS an amended agreement that broadens the scope of the 2017 collaboration to include, going forward, evaluating manufacturing porous silicon wafers for solid-state lithium-ion batteries, combining its patented process with silicon produced with HPQ-Silicon Purevap QRR.

In November, 2019, HPQ-Silicon and its partner, Apollon Solar, acting as one party, signed a non-disclosure agreement (NDA) with the battery manufacturer for the purposes of exchanging technical information and sending testing materials. The company is still at the beginning of the process of exchanging technical information, and yet it is already looking into the possibility of supplying the battery manufacturer with the first silicon wafer for testing by year-end or the beginning of 2020.

The probabilities that the discussions started under the NDA will evolve during the Q1 2020 to a more formal process are very encouraging.

High-purity silicon oxide (SiOx) nanopowders for lithium-ion batteries

In addition to its wafer work, HPQ-Silicon intends to study, during the first half of 2020, the possibility of utilizing an Apollon Solar-patented process to optimize the porous structure of HPQ-Silicon Purevap silicon between microporous (pore size of 50 nanometres) in order to evaluate the potential of producing low-cost, high-purity SiOx nanopowders.

The infancy of silicon anode technology based on nanoscale structure silicon powders explains why presently only limited performance improvements are obtained using high-purity silicon oxide nanopowders, selling for about $100 (U.S.) per square kilogram, used in a blended form with graphite in traditional lithium-ion batteries. The quantity used is typically less than 5 weight per cent of the material used to make the batteries; yet even at these levels of utilization, this is estimated to represent an addressable market of $1-billion (U.S.) by 2022, expanding at a compound annual growth rate of 38.9 per cent between 2019 and 2024.

Standard-purity silicon (up to 2N purity)

Up to now, market participants with significant quartz assets have shown a keen interest in the company's process. As such, HPQ-Silicon anticipates silicon industry participants will show a keen interest in Purevap once the pilot plant is operational and validates the company's unique operational advantages.

The addressable market for magnesium silicide is in the multibillion range, with demand projected to increase by a CAGR of 19 per cent over the next five years ($7.5-billion (U.S.) in 2018 to $12-billion (U.S.) in 2023). The bulk of the growth is expected to come from the 2N segment of the market, where the Purevap QRR process should have massive opex (operating expenditures) and capex (capital expenditures) advantage over traditional manufacturers.

Solar-grade silicon using a Purevap UMG metallurgical process

The market for solar-grade silicon is massive and evolving at such an accelerated pace that some of the company's original product development hypotheses are not as relevant as before. Having said this, working with Apollon Solar, the company strongly believes that if the Purevap QRR can produce, as HPQ-Silicon believes it can, silicon material of greater than 4N purity with low boron count (less than one part per million), the company can develop a very competitive UMG metallurgical route to produce solar-grade silicon.

Other corporate news

Annual minimum royalties payment due to PyroGenesis

Under the terms of the company's agreement with PyroGenesis, HPQ-Silicon was obliged to pay minimum royalty payment obligations of $150,000 for 2018 and $200,000 for 2019. Due to delays in the project beyond HPQ-Silicon's control, PyroGenesis has agreed to wave HPQ-Silicon minimum royalty payment obligations for 2018 and 2019. This represents a Q4 2019 reduction in HPQ-Silicon current liabilities of $350,000. Minimum royalty obligations will resume with the scheduled 2020 payment to PyroGenesis.

Warrants extension

The HPQ-Silicon board of directors has authorized the application to the TSX Venture Exchange for approval of the extension, until Jan. 31, 2022, of the exercise date of 4,152,000 outstanding common share purchase warrants issued by the company on July 17, 2018. The 4,152,000 warrants are set to expire on Jan. 17, 2020, and have an exercise price of 15.5 cents. As of today, none of these purchase warrants has been exercised. All other terms and conditions of the warrants will remain the same. The proposed extension is conditional upon the receipt of the approval of the exchange.

Debt for shares

In accordance with the agreement between HPQ-Silicon and Agoracom entered into on July 15, 2018, for the term ending July 15, 2020, HPQ-Silicon's board has approved the issuance of 156,944 common shares at a deemed price of nine cents per share to pay $14,125 for services rendered during the period from Jan. 16, 2019, ending April 15, 2019. The HPQ-Silicon board has also approved the issuance of 156,944 common shares at a deemed price of nine cents per share to pay $14,125 for services rendered during the period from April 16, 2019, ending July 15, 2019. The HPQ-Silicon board has also approved the issuance of 166,176 common shares at a deemed price of 8.5 cents per share to pay $14,125 for services rendered during the period from July 16, 2019, ending Oct. 15, 2019. Each share issued pursuant to the debt settlements will have a mandatory four-month-and-one-day holding period from the date of closing.

About HPQ-Silicon Resources Inc.

HPQ-Silicon is a company developing, in collaboration with industry leader PyroGenesis, the innovative Purevap QRR, a truly 2.0 carbothermic process (patent pending), which will permit the transformation and purification of quartz (silicon dioxide) into metallurgical-grade silicon at prices that will propagate its significant renewable energy potential.

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