Q3 2023 PureCycle Technologies Inc Earnings Call
Okay.
Good day, and thank you for standing by welcome to the pure cycle technologies third quarter 2023 conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising you that your hand is raised to withdraw your question. Please press star one again please.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Charlie place director of Investor Relations. Charlie. Please go ahead.
Thank you Stacey.
Welcome to the pure cycle technologies third quarter 2023, corporate update conference call I'm, Charlie place director of Investor Relations for pure cycle and joining me on the call today are dusting Olson, our chief Executive Officer, and Larry <unk>, Our Chief Financial Officer. This morning, we will be highlighting our corporate developments for the third quarter.
Subsequent to quarter end the presentation, we will be going through on this call will also be found under the investors tab of our website at www dot pure cycle Dot com.
The statements made today will be forward looking and are based on management's beliefs and assumptions and information currently available to management at this time.
These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in our safe Harbor provisions for forward looking statements that can be found at the end of our third quarter 2023, corporate update press release and in our quarterly reports on Form 10-Q as well as other reports.
On file with the SEC provide further detail about the risks related to our business.
Additionally, please note that the Companys actual results may differ materially from those anticipated and except as required by law. We undertake no obligation to update any forward looking statements. Our remarks. Today May also include preliminary non-GAAP estimates and are subject to risks and uncertainties, including among others changes.
In connection with quarter end and year end adjustments any variation between pure cycle as actual results and the preliminary financial data set forth herein may be material, you're welcome to follow along with our slide deck or is joining us by phone you can access it at anytime on pure cycle dotcom.
We're excited to share updates from the previous quarter with you I will now turn it over turn it over to Dustin Olson pure cycles, Chief Executive Officer Justin.
Thank you Charlie Thank you for joining the call. We are excited to share an important update with you today. Our focus today will primarily be on ironton operations, while Q3 was a challenging quarter for iron Jen I'm proud of the tangible operational progress we are making we have adapted and overcome numerous startup challenges thrown our way and continue to.
Push this project forward.
One notable area of progress has been in our utilities and solvent operations, which are core to reliability.
You can't run without electricity and steam and you can't run without proper control and solvents circulation over the past four months, we have made good progress improving the reliability of both operations and we believe this will continue to improve.
Despite the numerous mechanical headaches, which we will discuss we have successfully been able to process 410000 pounds of feedstock to the purification system. While this level is not what we had originally expected. This number does validate that our technology can recycle large amounts of feedstock and remove contaminants.
This never could have been dramatically higher if we had not constrained our ability to pelletize, which I will discuss shortly.
We are continuing to learn and evolve our process IP and we're confident that we can control and manage the system.
While overall production rates were limited in Q3, we have shown the ability to run high levels of rate across our three operational steps.
Correct.
He'd extrusion and product extrusion once utilities and solvent, we're working reliably we then push feed rate.
Turning these operational Windows, we were able to show the following key operational rates 14000 pounds per hour of prep feed rate, which is approximately 97% of nameplate 9.4 thousand pounds per hour of feed extruder flow rates, which is 77% of nameplate note. This was achieved with <unk>.
Only one extruder, we have two and we intend to run both extruders at the same time and $13 4000 pounds per hour or 190% of nameplate flow rates across the final product distributor.
These are good indicators of the system's ability to run nameplate rates once we get our uptime has improved we expect to see exponential increases in production rates.
We've also continued to expand the range of feedstocks, we can utilize we've run four different types of postindustrial recycled material or IR at different melt flow rates 510, 15, and 20 and also pushed both PCT prep agglomerate, which is rossiya and super sacks and <unk>.
Flake produced from post consumer recycled waste in addition to showing progress on rate. We successfully produced on spec product for our <unk> and for various P. IR PCR blends we continued to test various mixtures of feedstocks in conjunction with product quality. So that we can predictably produce reliable offtake for our.
<unk> getting.
Getting product to spec was recently verified by our first production shipments to <unk> last week and to Milligan. This week. These.
These shipments are a key initial step in enabling our customers to drive towards their sustainability goals.
One area of nice upside in the quarter was around the development of our plant utility usage or variable cost we closely monitor the electricity and natural gas consumption across the facility during all operations and it is very apparent that the actual electricity usage is significantly lower than the original.
Preconstruction estimate.
While this is still early in our learnings we are encouraged by the potential here.
This continues to support the overall business economics of our facility. Additionally, low current feedstock pricing competitive variable priced variable cost and a differentiated product pricing give support for a strong business model.
Clearly the startup in irons and has not been without challenges honestly as I think pack over the last four months and remember all of the challenges that our team has faced it gives me great pride despite the frustration.
So proud of the technical and operational resiliency of our team the unexpected.
Design installation or operational setbacks that we faced have been hard often poorly timed and very technically challenging yet our team persevered.
Look.
I know, it's incredibly difficult for the outside world to see inside of our bubble.
And with new technology, the issues, often take more time than expected.
We recognize that it can be very frustrating for our stakeholders, while we troubleshoot through these operational issues.
Please understand that the entire pure cycle team that's committed to resolving these issues and communicating our successes, but note. It is important for our team to have a clear understanding resolution path forward before communicating to the external market.
One area that has limited our production efforts. The most has been associated with the absorbent bed leaks, which resulted in speed contamination I will discuss this more in the next few slides, but an installed our ability to achieve any meaningful production progress. We worked through several different potential short term solutions, but in the end they just didn't work.
Therefore, we are now installing an automated screen changer over the next two weeks, which we believe will significantly change the trajectory of our operations. The screen changer is a commonly used piece of equipment, which will enable us to automate the removal of beads and run the pelletizing continuously.
Two days ago, we started to D inventory of the unit in preparation for a shutdown that is expected to last for two weeks. This outage is instrumental for our ability to achieve high rates. It not only allows us to install an automatic screen changer, but we plan to have the plan to also take advantage of the outage to implement a number of improvement.
Projects to fix less invasive but equally frustrating operational headaches.
In the end it is our responsibility to make product and to make profits for our shareholders and for that I'm fully committed.
After the outage is completed we will restart the production at 50% rates, we will work our rates toward higher levels would be expressed goal to make $4 $4 5 million pounds in December.
We have a well planned feet and production strategy for that activity. We have seen this progress process work and work well and we are excited to implement the changes discussed.
The key message to shareholders coming out of this update should be that our technology works. We are recycling feed we are removing contaminants and we're getting on spec product through the system.
<unk> had been a hindrance to production rates with this two week outage, we believe that we are better.
Positioned to deliver strong production.
Startups or heart. This was never expected to be easy, but we are building more operational momentum.
We're also really excited about our product quality, we had good early indication of success that we discussed in prior calls we showed the side by side appearances of the pellets in prior presentations. We are now making on spec product odor color. Both look good across the <unk> IR PCR mixed feedstocks.
Also note that we completed commercial shipments of our on spec material to both form era in Milligan, we're thankful for their continued partnership and excited about the applications. They will develop with this material.
If you take a close look at the picture on the bottom left.
You can see what the pure cycle process as removing from our feedstocks. This is our co product number one.
It represents the contaminants that were present in the feedstocks. It smells just as bad as it looks but we continue to receive numerous market inquiries for this product and construction roofing and other base petrochemical applications.
The last picture shows it freely flowing in the right picture shows it's solidified after cool.
I believe there is no greater excellent example of our technology working then St contaminants of this quality being removed from our feedstock.
They say it is unexpected that surprises and challenges you.
That is certainly the case with this plan.
Worked in polymers three years, and I have rarely encountered pellet position problems.
Just work you.
You don't have to focus on them you just turn them on and they run as we turned our focus to the production of pellets in August we knew that clearing construction debris through the extrusion system would be a normal part of the process and we knew that it could plug the diet plate and limit pellet position.
So while the initial cultivation runs showed limited success. This will start to be a function of the continued construction debris and not viewed as abnormal however, as time passed and uptime on the Pelletizing did not show meaningful progress we thought that the same process tweaks to operational conditions, where needed to keep the pellets.
Pfizer running consistently.
But as the problem persisted we knew we had to go deeper.
We have two operational meetings every day seven days, a week and ireton ever since January and I remember one day in early September all of US staring at the situation and saying there has got to be something else happening. It just shouldn't be this hard pelletizing is supposed to be the easy part.
One of the most mature parts of our process. After a deep dive troubleshooting effort. We found the core problem was leaking <unk>.
The root cause was of faulty well procedure across our absorbent beds. Once we identified the problem. We actively worked to repair the beds, but it was after the beads have already contaminated the downstream system without the problem would have been short lived we thought we could purchase system to remove the beads, but every time, we change feed melt flow index.
Ore feed rate it seemed likely leads came back.
We tried to make guyver several short term inventions all of these ideas were abnormal but we kept trying the first prototype ended up working the best but it limited feed rates to approximately two hours per day. The second prototype was invented to give more life.
But it just didn't work as expected the purging Penn was a good solution and allowed us to purge more volume it worked really well it improved a lot of long term issues, but the beads just didn't go away very quickly it's hard to express the level of frustration with being able to run this complex system would be limited by the.
Final least complicated step in the entire process and parallel to all of this we worked very hard to find and expedite and automated screen changer because of a few inventive engineers and a really good partnership with <unk>, we are able to find engineer and prepare this project for November we bill.
Please this is the key to unlocking the process and driving production. Most importantly, the screen changer is on site. The engineering is complete and the project is scheduled to finish on November 20 <unk>.
We've overcome a lot and slide nine shows a short list of some of the challenges that we've overcome or that we intend to address during the outage. There are a couple of key takeaways here, we solved a lot of operational start up issues.
Every single Green Checkmark represents hours days weeks of work and smart troubleshooting by our team, but we persevered. We found good permanent solutions and now we don't think about these elements anymore.
Secondly, we have operated the vast majority of plant functions with a new items being added to the list has declined significantly while it is inevitable that things will pop up we do not expect there to be any long lead issues with the plant at this stage.
Lastly, we are about to fix a lot of nagging headaches, the more challenging that we remove the better the operations will be.
I really spent quite some time thinking about our progress.
New technology is just hard there are no shortcuts the only way.
To solve the only way, we're going to solve and drive better outcomes for the planet, it's with the hard work dedication and grit of our team the.
The drive and determination of our team inspires me and I believe will ultimately drive our long term success, while the most critical work. During this outage will be the screen changer. Every single project completed during this outage will improve the plant operability and reliability.
As I take a step back and I look at the bigger items that have impacted us. This year. It falls into three key buckets delayed project closure five to six months seal leaks three to four months and screen lakes three months I don't want this update to turn into a detailed tech talk but I think it's.
To note some of the critical improvements that we've already made we've endured multiple seal failures across three key <unk> systems and each of them required a root cause failure analysis to find a solution for the future.
Theres, one thing to remember about seals.
Once you find the right solution. They run for years every time, we have a failure, we make significant improvements some of them were missed during the original design. Some of the problems were a result of external factors. The power outage was one good example.
In all cases, we learned we fixed and we improved our mixture steel was replaced two months ago and has run without hiccups.
<unk> has run well since the last upgrade.
And we expect the shovel mixture seal to run well after the outage.
Everyone always asks me are we getting better yes, I am statically say, yes.
This slide shows the basic progression from where we were to where we are now.
What used to take weeks now takes days what used to take days now takes minutes what used to take three people now takes one at what used to take third party support is now done better by our team.
Can tell you with absolute confidence that we are getting better everyday old problems are fading and we're solving new problems as they come.
The number of new problems popping up is greatly reduced and we expect it to continue to drop everyone. In our company at our core partners are committed to making this work.
As we've learned more about iron attendant gather more operational detail.
And continue to build our Antwerp facilities I would like to highlight two key components to our lifecycle analysis first given the reduction of utility usage indicated by the initial ironton operations, where we're showing approximately a 10% improvement to all lca's across both <unk>.
<unk> and <unk>. This is an early estimate and we'll continue to monitor the performance of report back to the market Secondly.
Note the difference between <unk> and iron.
We are so excited to be part of the Nextgen district in Antwerp, we already feel like part of the family and community in Belgium, but more importantly, we're excited about our planet placing.
Placing our facility and the Nextgen district provides for a very carbon favorable energy footprint, we will use the electricity for windmills and we will use steam created from bio hydrogen produced by a neighbor.
When you combine the location advantages with the improvements that we see in ironton, the facility and <unk> will provide great product at a very low carbon footprint at this point I would like to shift the presentation to Larry Soma our CFO.
Thank you Dustin.
As noted all focus has been on <unk> 10 during the third quarter.
But we had two important financial matters to highlight since our last call.
While we have not executed our revised bondholder agreement, we have an agreement in principle in place we are.
Very close and expect this to be finalized this week.
I will comment on the high level terms in a minute.
It was just over two months ago, now, but I'd be remiss not to highlight our third quarter capital raise our.
Of our 725% grain convertible bonds were successful on all accounts.
It was multiple times oversubscribed.
Upsized by $50 million, including the Green shoe.
And the 7.25% coupon was priced at the low end of the marketed range.
More importantly, the proceeds replenished much needed cash on our balance sheet that will be used to fund some of the equity requirements of our growth initiatives.
Moving onto the next slide.
The most important outcome of the agreement is that pure cycle will receive a three month extension for each required milestone date.
And while we will deposit an incremental $50 million to the trustee account.
<unk> will also receive an additional three months to cure any potential missed milestone before an event of default would be triggered.
Their cycle is also able to sweep the interest income that will accumulate on the $150 million of cash collateral and the trustee and liquidity reserve accounts.
Turning to the next slide we show the impact of the convertible notes, which raised $218 5 million in net proceeds.
In the quarter, we were able to continue the financing plans for some of our prep sortation equipment, which yielded another $2 5 million of proceeds.
Our objective remains the same and that is to provide sufficient capital to advance our strategic initiatives, while allowing ourselves the time needed to execute a capital efficient project financing plan for our guests.
We ended the quarter with just over $211 million in unrestricted liquidity.
Uses of cash included continual continued purchases of prep equipment and funding our Augusta project.
Our corporate and pre operational employee cash use was $7 7 million during the quarter, which included some stock compensation taxes, which were paid.
We used $23 million of cash during the quarter, our ongoing corporate and iron and operations.
This Congress expanse expenses like legal and professional services for repairs and maintenance utilities feedstock finance expenses.
Operating leases storage and various other things.
Finally, with the execution of the second limited waiver, we will be required to transfer an additional $50 million on the unrestricted funds into restricted funds.
As a reminder, we also have $150 million undrawn revolving line of credit available to us.
With that I'm going to return the call to <unk> for his concluding remarks.
Yes, Thank you Larry.
At this point I think we'd like to open.
The field for questions.
That's correct.
Okay.
Stacey.
Yes.
We are going to.
Okay.
At this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one again, please limit to one question and one follow up question. If you have additional questions you are able to get back into the queue. Please standby, while we compile the Q&A roster.
Our first question comes from Noah Kaye with Oppenheimer and company.
Noah go ahead with your question.
Hi, This is Jason <unk> on for Noah Kaye, So a few questions regarding ironton feedstock in the yield first on the 409000 pounds of feedstock run through the plant you mentioned a number of different feedstocks, but at a high level, what was the mix of Virgin versus recycled materials.
What has been put through the plant.
What is the yield of finished products you would have seen under the 409 pounds were it not for the <unk> bottleneck.
Also when you restarted operations Ironton, what mix of feedstocks does the company plan to use over the remainder of the year and what finished product yield are you expecting at 50% capacity.
Alright. So there are several questions. There. Thank you for asking the questions. Jason Yes. So as we started the operation in Ireland. We initially started with aversion feedstock, but quickly transitioned to the <unk>.
The majority of the production and run through the system has been MP IR, but most recently over the last couple of weeks we've.
Jack.
Several batches of post consumer recycled into the plant as well.
From a yield perspective.
We have seen really good yield across the planet. Let me go through a couple of the numbers.
We have pelletize over 100000 pallets now if you recall through the several presentations that we've provided we showed an.
And increasing product quality across the Politicisation steps for the majority of the early <unk> SaaS or recycled back around to improve the quality because we still have the construction debris contaminating the pallet.
Okay.
The other portion of the mass balance to keep track of is with respect to purge versus feed now that the feedstock that we referenced in this in this presentation.
Through the entire process every step of the purification process was was executed.
The final product at the end, but right before the pellet tighter.
We purged some material out and in an attempt to.
In an attempt to remove the beach in the system.
So the vast majority of the difference between 410000 pounds feed and 110000 pounds of pellets was purged material in an attempt to remove beads.
There are two more questions as you ask.
Could you ask the last few questions. One more time I think I think one question was what do we what do we intend to the process coming out of the outage.
Coming out of the outage, we have we have perhaps a lot of fee. Okay that <unk> operations are running pretty well, we started a lot of inventory, both onsite and offsite and we intend that the production.
Post outage to be effectively 100% PCR, we will use a blend of both agglomerate, which was made on site in our prep as well as PCR, which is flagged coming for post consumer recycle.
You have to be.
Have a pretty flexible plants, we have the ability to also bring external feeds in and given the market conditions, whether they're up or down or distress feedstocks. We will likely also purchase external feedstocks to bring in and supplement the operational plan in December.
Got it thank you and as a follow up question. So many of our operating challenges you identified are related to scale designer adequacy can you discuss what gives you comfort that the seal issues are permanently solvable and that there is nothing fundamental related to operating pressure and temperature or other core process.
<unk> requiring to reach time, thank you.
Yes. So the question I think is primarily around the Shiloh column. So yes, we feel very good about the Shiloh call. Sheila. This is an early this is an early design problem that we found on startup and we basically implemented at a very similar solution to what we have on a couple of other mixtures.
And in the process.
With respect to the temperature and pressure and running into the facility.
I mean.
The salt that circulation that I referenced multiple times in the presentation is a key indicator of our ability to maintain and control. This process quite frankly, we are very good at maintaining temperature and pressure across this operation and thats evidenced by the 97% uptime that we mentioned in the slides.
With respect to the decant oil filter in particular.
There is actually no.
There's no mechanical or mixing seal on mechanical builder and so im not sure where that question comes from but the process from feed all the way to the Politicisation is running very well.
Got it thank you.
Please standby for our next question.
Our next question.
It comes from Hassan Ahmad of Alembic Global Advisors Hassan. Please go ahead with your question.
Good morning Dustin.
Yeah.
Look.
Recent short report came out.
Presumably from a non chemical engineer 20, something year old Kid.
Questioning.
A variety of things.
I'd Love for you guys to sort of address those things first and foremost was.
The recycling technology.
Gentlemen, Colgate.
Butane that thats, what youre solving it is right.
Coming from mechanical engineering background.
Like to think there is much more to that so let's let's let's start with that can you just.
Talk to us about the technology yet again.
I mean is it quote unquote a bunch of butane.
Well.
Let's talk about the origin, just very briefly because I think it's all of the Humira is a lot of time.
All reports like this there are some threads of truth and then also some things that are just an accurate.
It is true that we have an ongoing litigation with them and have lives and there are a lot of comments in there about the concerns that we had with respect to the engineering material handling overall operation of that project.
And for the most part it is our opinion of the situation.
With that litigation, However, I will say that our team did a really good job of coming in and assessing that at close of the project.
But beyond that I mean.
I don't know where the information came from and quite frankly, I am going to Canada builders don't have mechanical seal. The feedstock was run through every unit operations into the process. It's not like we put pallets in the final product and sugar.
The thermal imaging showing 50 degree quite frankly shows great and installation not a down process unit.
From a safety perspective look every operation plans.
We will have safety concerns, but safety is our primary focus is our first in everyday.
<unk> intends to operate in a safe manner and quite frankly, one of the reasons that we've had some schedule slippage.
We've chosen to do things slower and more safely.
With respect to the with respect to the comments on butane is on I'm really not going to get into the details of our solvents.
What I will say is the solvents.
It is critical to the operations of the plant.
The operating conditions at a super critical temperature and pressure are incredibly important to the to the success of our operation and we see really good performance out of the solid to the polymer measures as well as the solvent extraction to remove contaminants.
Coming back in sawn.
What I think about the attack I'd take a step back and look at the tax line Alright, how are we doing here. Okay. First of all there is an enormous amount of mechanical headaches that we've had to deal with and some of this is and then make to just a normal startup even more so a first generation technology.
There was problems that we have I'm going to be and I think it will be added, but we've been moving through that but when I look into the technology as a whole we are mixing solvent with Palmer very well, we are extracting contaminants out of the Palmer and our extraction palm very well were phase changing that a polymer.
So where it can be filtered and purify the news are very well and we get it to the very last part of the process, where we have to remove the solvent front of the Palmer and Thats going very well the only step in this process that has not worked as expected has been <unk>.
And as you know as you May know pulsation as is normally very easy.
The small leak that we had in the assortment of that has really created a headache that was first elusive and then second was <unk>.
Both the salt took some time.
Fair enough.
And sorry to sort of harp on this but another claim that was made was on the environmental impact right.
And the claim that was made was that look I mean, the environmental impact is.
Similar maybe even worse than producing Virgin polypropylene. So could you could you potentially address that as well.
Yes look I mean.
We have a lot of third party reports and a lot of the data, let's say just the opposite we've done multiple lifecycle analysis to show what our actual carbon footprint is on our product relative to conversion to polypropylene production both of those independently.
Complemented one another and show that we added a significant reduction in carbon usage in our product versus others.
When it comes to the environmental footprint around the site.
We have a solvent purification system that recycle solvent and reuse as a solvent over and over and over and so the environmental impact from our site.
With our site in irons is very strong.
Lastly, I'd like to re highlight some of the items that we've been able to find in the <unk>.
Early operations of Iron look I mean, we did our best to estimate the utility usage that will be required to run this plant and we were naturally conservative, but as we've actually been able to run the plants at various conditions and Apache together, what the real energy utilization will be at a process facility.
It is much lower than expected and so I think that that will just create additional momentum behind our operation to show the positive environmental impacts of our process.
And remember for us.
And I think this gets back to really the question that Jason asked on yield I mean, this is a classic two plastic recycling process, we do not destroy the classic we do not use catalysts or solvent consumption, we just wash the molecule and so long as we can.
Wash the molecule accurately and remove contaminants from the process. This plastic plastic fully circular solution is going to be very well received in the market.
I appreciate the help thank you so much.
Thank you Hassan.
Please standby for our next question.
Our next question comes from Eric Stine with Craig Hallum. Eric. Please go ahead with your question.
Good afternoon, Hi, Larry.
Hey, Eric.
Hey, I will actually stick to two questions here.
Maybe just starting with the Bondholder agreement just curious if the two week outage was contemplated in that in <unk>.
Confidence that that does not.
Rail that process.
Yes look I mean, when we were negotiating these items with the bondholders and working at different different solutions.
We expected to need an outage at some point, we weren't entirely sure when it will happen.
But we were able to pull the plan together and executed in November which will set us up very nicely from Thanksgiving forward to achieve the milestones. We're very we're very excited to be able to run those flat without being contamination because all arrows show that we are going to be able to run it continuously at pretty high rates when we do so.
And Eric I mean.
Yes.
That's our goal for December our goal in December is to get the plant running continuously at high rates and achieved a $445 million Panama zone that will set aside in the original agreement.
Understood that's helpful.
And then maybe I'll then.
All the updated steps you've taken here.
As you take those learnings to other plants Augusta and beyond just curious what that does to Capex I mean is that something that.
Actually takes that number down given some of the new things or pieces of equipment and you have to incorporate or how should we think about that.
Yes.
Think that.
Everything that we have learned in irons and will be applied to every future plants. Okay.
Okay, we have.
We have a tremendous amount of operational learnings, where we know how the equipment should operate which will allow us to start up faster we have a tremendous amount of learnings on the behavior of the Palmer to the plant, which will allow us to very likely reduce some some key unit operations from the facility, which should provide.
Some additional capex reductions.
And I think that as we grow and learn and run run feedstock through the plant.
Think that we're going to see opportunities to either increase rates with relatively small changes or no changes or as I said before cut.
Cut capex significantly front of the plant.
Okay. Thank you.
Please standby for our next question.
Our next question comes from Gerry Sweeney with Roth Roth Capital Gary. Please go ahead with your question.
Hey, good morning, Thanks for taking my call.
Yes, Thanks, Gary.
Two questions.
I think pretty straightforward I just wanted to maybe just circle back into the produce product. It sounds like you do have a very good comfort.
With the consistency and predictability of the pellets coming out based on different inputs, what I'm really trying to say is going to differ materially.
Reals going in different ratios.
Do you have a comfort that you can predict it and manage outflows at the levels Mellifluous day you desire.
Yes, yes, we believe so Gary I mean, we've run a lot of different feeds the different outflow rates as a critical task for us too.
Validated different equipment capacity as you can imagine extruders around very differently at a five <unk> then they do it at 20.
But in addition to that we.
We've seen.
We've seen that product moves through the system and we continue to see good product quality on the backend. So we feel comfortable with our ability to make the product that we intend to make as well as good quality.
<unk>.
Alright, thanks for that and then secondarily not.
Not sure if you want to answer this question on the call, but I can throw it out there obviously, there's been some issues I know about Blenheim denim blight in the construction world everybody is always fighting at the end.
When it comes to some issues maybe around the Scheibel tower I believe there was some holdback payments to Cove modular until it hits certain.
Production levels are.
Is that still in play or is or to some of these issues and redesign sort of.
To help you out per say on some of those remaining payments.
Well, let me let me first start with the.
With the relationship and collaboration that we have coped modular code modular it's been a strong partner for a long time.
<unk> continues to be they have people at the site supporting us ongoing and they have been instrumental in helping us solve through a lot of these a lot of the side effects with respect to the contractual details for sure there's going to be applications to the overall final analysis.
Performance metric into the performance payments.
The work that we're doing around the plant now may have in some instances and impact on that overall.
Overall scheme, but I think that both companies are committed to solving the problem achieving the goals, reaching the performance milestone and then working through the closure of the contract.
Got you.
I appreciate it thanks I'll jump back in line.
Please hold for our next question.
Our next question comes from Thomas Boyes of TD Cowen Thomas. Please go ahead with your question.
Thanks for taking the taking the questions maybe just to kind of come at it more directly absent.
The beat issues, what kind of run rate as the facility capable or was the facility capable of achieving prior to even having the takedown as it makes sense as kind of that 50% run rate Youre looking forward by the end of the year and then.
I appreciate the punch list on slide nine does that kind of encompass all the things that need to occur to kind of get to a 100%.
Run rate I'm, just trying to kind of assess the relative risk between going from 50 to 100 over the next couple of months.
Yes.
Thank you for that question Thomas look, we've actually been able to achieve pretty high rates across the plant I mean like I mentioned on the Phoenix shooter, we've touched 95000 pounds per hour and $12 2000 pounds per hour is.
Effectively Max rate. So that's approximately 77% if you look at the final product extruder absent of the beads, we've already been able to touch 110%. Okay. When you look at the volume through the system and what we've been able to achieve as the polymers move through the system, we feel very confident in our ability to hit very high rates across.
The plant above the 50% Mark so yes.
What does the December entail, we're going to start at 50% and we're going to ramp up to a 100% maybe beyond and.
And see where we land.
With respect to the list of items.
Yes.
Outages like this are very challenging to plan and to organize but our team for the last several weeks has been very focused on this and all of the items that we show.
That have a let's say a turnaround icon next to it are the items that we will complete during the outage. Okay. So so and to varying levels of importance I mean, obviously the most important thing in this plant is to get the screen change you're up and running so we don't have the headache of the beads you can imagine running for two <unk>.
Hours, a day getting everything up and going and then having to shut down two hours. Later is just not an effective way to run the plant and when we have the screen changer that problem goes away immediately and completely.
Okay. The other items that are listed in that in that list or are a lot of other I would call it nuanced headaches.
More things that you can make easy for an operator to deal with or let's say benign and something you don't have to worry about the better the reliability will be in a lot of those items have been.
Things that haven't worked perfect, but they worked okay, and we're going to be able to knock those out and make the operation much much smoother.
Excellent I really appreciate the color there and then maybe just as a quick follow up or a separate topic would just be.
Some updating.
The financing process for Augusta is the goal to still have project debt.
For that facility.
Exiting the year do you think thats more of an early 2024 event.
Yes, thanks for the question Thomas.
It is our goal.
Secret the market is challenging but the most important component to any financing for Augusta is going to be consistent operations and <unk> 10.
So when we come out of the outage.
That's going to help for us to start running consistently and as soon as we do that.
We will be engaged and we've got a process, we've got a data room, which.
And many many discussions so a lot of the hard work is done but it's dependent on iron 10 consistently operating so to answer your question, it's more likely that will be it will be at 2024 of them.
Great I'll jump back in queue. Thanks again.
Thank you one moment for our next question.
Our next question comes from Jeffrey Campbell at Seaport Research Partners Jefferies Go ahead with your question.
Good morning.
Can you expand on that.
Morning Geoffrey.
Can you expand on the changed from third party, who is responsible for the prep now and does this have any meaningful effect on anything capital cost system performance operational costs.
Yes, that's a good question no no what I am trying to say with that comment is that as you. Initially commission the equipment across the plant we were engaged with the equipment vendors on site to help us run the equipment learning the equipment and tune the equipment. We've now taken over that process and we do it on our own.
And that's really across extrusion across prep across utilities.
Processes you get help initially and then you start to do it on your own and where we are now is doing it on our own.
And quite.
Quite frankly that once once you take over control of an operation you find ways to optimize and to make it even better and Thats what were seeing in prep.
Okay, great. Thanks, I appreciate that color.
With regard to kind of take a very high gear of everything we've discussed today. It sounds like the current ramp up has resulted in a variety of adjustments to the system.
The crop operation you just mentioned to the final product.
When all of this is completed and it's doing everything that you wanted to do do you believe this learn what kind of effect do you believe these learnings will have on build time and the cost in the next system construct.
I don't think it will have an enormous impact on build time.
I think the construction timeline is set generally by by other factors I do think it will have a tremendous impact on the overall final design and.
And small improvements will make the future future projects.
And I know that when we start up these facilities, we will start up these facilities with our eyes wide open.
And with much more clarity with how the how the operation will be able to run.
Okay.
Let's remember this is the first time that this process has ever been run at scale and so.
Really every single unit operation is new and it is being done for the first time and in the future. We will we will have the experience from irons into directly lay into the operational startup and commissioning phases, which will be a significant reduction in time to get to full operation.
Right so.
Presumably it could get to cash flow faster.
If I could ask one so so sorry.
Maybe to answer that question more directly I think the construction phase.
The project will not be impacted too much.
By the learnings that we received but I certainly believe that the commissioning and startup phase will happen much faster in the future.
Okay great.
Yes, it's a good way.
If I could ask one last one on slide 12, I found it interesting that the Dnb report on <unk>.
That was included in the analysis and particularly bearing in mind. The carbon market is there any chance it in Antwerp facility might proceed Augusta as the next facility after hours.
Yes look I don't I don't want to speak to the report too much or how they got the information. It's obviously not something that we were disclosing publicly.
Adding in the market but.
With respect to the carbon aspect of the market.
This is more of a regulatory and legislation discussion that I'm certain will will come forward over the next years decades.
Because because everybody will be concerned about carbon reduction and different.
Different regulatory environments different countries. They will implement solutions that they believe work best to drive carbon down and whether it's a credit system or <unk>.
Some sort of incentive mechanism.
We don't know yet, but what we're confident in is that.
<unk>.
We will continue to focus on driving efficiency in our plant to drive energy utilization down in our plant and therefore also carbon footprint serves us very well on its variable cost and it also serves us very well in terms of our carbon footprint and if in the future regulatory bodies implement.
Systems, whereby credits are generated will be in the best positioned to reap those benefits. So I look at that as a potential upside in the future thats not well defined at this moment, but definitely definitely a potential upside.
Okay I appreciate those thoughts thank you.
Thank you Jeffrey and by Sir our next question.
This question comes from Brian Brian Butler Stifel. Brian. Please go ahead with your question.
Great. Thanks for taking my questions.
Just the first one when you look at kind of the ramp up to this shutdown could you talk maybe a little bit more detail on maybe the frequency of operating incidents as you are approaching this shutdown and when you think of the screen that you are adding.
Is there a plan b if that doesn't work out I mean, it sounds like you have a lot of confidence in it but I just.
Another option.
Well, let me let me first say that screen changes are very normal. Okay. These are this is not like a novel technology that is used everywhere in the market and nearly every.
Nearly every plants in the world have screen changers on them in fact, and Ironton on our Phoenix Treaters and also on our added mixture, we have screen changes and they work really well and they removed a lot of contaminants.
Very confident in our ability to remove the beads and we're also very confident that the beads will eventually go away. We are working a couple of other parallel paths. We are upgrading the internals of the absorber columns to minimize the potential leakage of these out and we're also looking at the downstream filters from those.
<unk> <unk>. So we can ensure that the beads don't get through.
The issue was on startup we had a gross leak of beads into the system and it was.
Thousands and thousands of beads that got in but it only takes a few beads to really cause a problem and that.
That headache, just never went away. So we feel really good about the screen changer.
Problem the screen changer solving this problem in getting us to continuous rates.
Okay, and then on the financial side can you talk about whats currently the monthly cash burn and maybe also give a little color on the cost.
Located with the shutdown.
How much incremental does that add.
I'll take the cost of the shutdown and the cost of the shutdown is.
The screen changer itself.
5 million to $1 million expense that we have to incur okay.
But the rest of the shutdown is very.
Very limited in cost because it's mostly labor, it's mostly metalwork and so from an equipment perspective or materials perspective, its pretty low I think the total outage for this for this will be under $2 million.
Okay.
And to address your other question so Brian the way, we think about burn is.
Total company and then total company excluding.
<unk>.
Operations in Ireland and in corporate allocation, so I'm going to talk about the latter because thats most relevant up until this point.
We've absorbed all of the cost of Iron 10 at top Com.
But as soon as we're operating and bringing in revenue, which is very close we will be able to allocate the cost of iron tenant and a corporate allocation.
Associated with that when you net that out our corporate burn would be about.
$10 million per quarter. So that's why I would say, we will track our excluding all of Iron 10, and your corporate allocation.
And we do have a requirement to post a iron 10.
Budget submission by December 15th.
We will be doing that and there'll be more information in the market when that happens.
Okay. Thank you.
Okay.
At this time I am showing.
<unk> no further questions I'd like to hand, it back over to Dustin Olsson for closing remarks.
Yes.
Thank you very much for your time today and also with your patience as we work through the Ironton startup we know that.
Q3.
Wasn't where we wanted to be and quite frankly, we are very.
Disappointed with the beads and the situation.
<unk>, we were in but.
I think it's important to stay focused on where we're going okay. It seems like every quarter, we issue something bigger and more exciting.
I think that in December.
We will be 100% focused on delivering.
The volumes as defined in the agreement we know that the screen changer is the critical piece of equipment that we need to get this plant up and running successfully and we have a plan to complete that.
In November we have the right team we have the right experience now and we have the assets that are under our control to do what we need to do and we will look so we look forward to showing that to the market in December.
Thank you for your time, thank you for joining a pure cycle team and helping us to create a pure planet.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Okay.
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