While many of our readers engage with us through the comments section on our articles, a fair number will also email us with questions or suggestions as to what companies we might want to take a look at. We’ll always look to research companies brought to our attention by readers which leads us to PyroGenesis. One of our readers sent over a research report about PyroGenesis, a publicly traded Canadian company (CVE:PYR) that is moving into the sale of plasma equipment that can produce 3D printing powder and nanomaterials. All numbers are in USD unless stated otherwise.
PyroGenesis is a $24 million Canadian engineering company that produces plasma torches and advanced plasma waste to energy systems. The Company had 2013 revenues of $5.07 million, up significantly from 2012 revenues of $2.9 million. With 2013 losses of $3.52 million and 2012 losses of $5.11 million, the company is far from being profitable but has succeeded in cutting costs in the past year. PyroGenesis was off the radar of most investors, but three things made this change in 2014.
They “Entered 3D Printing and Nanotechnology”
In January of this year, PyroGenesis issued the following press release:
PyroGenesis Secures Ownership to High-Tech Multi-Million Dollar Plasma Pilot Facility for Advanced Material Production; Nanotechnology; 3-D Printing
While this sounds like a compelling transaction, the details seem a bit odd:
This state of the art pilot plant is currently located at PyroGenesis’ manufacturing facility in Montreal. PyroGenesis was able to negotiate a transaction in which they will acquire the equipment from its Client at no cost to PyroGenesis. The value to design and fabricate this pilot facility was approximately $2M CAD.
How much value could this equipment received from an unnamed mining company have add if it was acquired at no cost? What is the significance of this pilot plant happening to be located at the PyroGenesis’ manufacturing facility? So PyroGenesis received some free equipment and built a facility to house it in near their manufacturing facility? At face value this does not seem so compelling.
PyroGenesis uses a Plasma Atomization Process (PAP) which takes wire as a feedstock and uses 10,000°C plasma plumes to melt the incoming wire and shear off the metal, creating tiny molten metal droplets. The process produces very pure metal powders that can address the exacting requirements in terms of chemistry and properties required by the biomedical and aerospace industries. Using plasma is a new method as many other companies such as Sandvik, Erasteel, and ALD Vacuum Technoligies use gas atomization to produce metal powders.
If PyroGenesis looks to use their in-house plasma technology to begin producing nanomaterials, they face a well established competitor. Tekna, a Canadian company which claims to be the world leader in induction plasma technology, currently produces nanomaterials using their plasma equipment which they sell as well. This brochure describes the 3 different Teknano plasma systems available for purchase that produce nanomaterials. Tekna is a private company with offices in 7 countries worldwide.
They Secured a Relatively Large Sale
On March 2014 they signed a letter of intent for the sale of multiple powder production systems with the CEO issuing appropriate caution about this only being an “intent” stage. 4 months later PyroGenesis followed through by announcing a $10.5 million contract for the sale of 10 metal powder production platforms to a major Asian based international manufacturer over an 18-month period. The Company announced last month that initial inspection of the first system had passed and it was expected to be completed before the year end, consequently triggering a second payment from their customer.
They Focused a Great Deal on “Increasing Investor Awareness”
In the past year, PyroGenesis has been focused on increasing their awareness in the financial community from investor relations firms such as Renmark Financial Communications Inc. who they hired for a monthly retainer fee of $6,150 and Imagninis who they paid a retainer of $8,785 per month for a five month term . Let’s hope that money isn’t being spent on quality videos such as this one, available to any company with $1,500 who wants that girl from InvestmentPitch.com to read a 3 minute script on video and then have it disseminated to popular financial news providers such as Reuters. Remember that Uber Research report we mentioned earlier? While that may seem like legitimate institutional interest in the stock, it isn’t. Uber Research is in fact a firm that solicits companies to pay them a fee and/or stock options to publish such reports. The research report itself states “there is an inherent conflict of interest in Ubika Research’s research statements and opinions and we do not make any claim of such statements and opinions being independent“. That makes the content of this report far less compelling.
The revenues promised with this order are significant for PyroGenesis, relative to past yearly revenues. The Company also closed a private placement for $1.32 million several days ago at the current share price which is notable. It’s just questionable why PyroGenesis would choose to engage with a “research firm” that is not independent in order to promote their value proposition. This could raise a red flag for real institutional investors. Regardless, any investor in PyroGenesis is sure to be paying very close attention to the financials going forward to see the impact this contract has on the bottom line.