PyroGenesis client HPQ signs MOU for fumed silica plant

Executive Summary

• PyroGenesis Inc.'s client, HPQ Silicon Inc. (via subsidiary HPQ Silica Polvere Inc.), has signed a non-binding Memorandum of Understanding (MOU) with an undisclosed industrial partner to form a Joint Venture (JV) for a commercial-scale fumed silica production plant.
• PyroGenesis holds an exclusive manufacturing arrangement to build the Fumed Silica Reactor (FSR) for the JV at a cost of $20 million USD (approx. $27.3 million CAD). The JV partner has secured financing for the system.
• PyroGenesis is in the final stages of exercising its option to acquire a 50% interest in HPQ Silica Polvere Inc. (HSPI), which converts its annual royalty rights into equity.

Key Details

• Joint Venture Structure: The JV aims to operate a 1,000-tonne-per-year fumed silica production plant. The identity of the JV partner is withheld for competitive reasons.
• Equipment and Cost: PyroGenesis will supply the FSR under an exclusive arrangement. The reactor costs $20 million USD ($27.3 million CAD).
• Financing: The JV partner has already secured financing for the system; specific terms and conditions are yet to be agreed upon.
• Royalties and Profit Sharing: HSPI will charge a royalty per kilogram of fumed silica sold by the JV (price TBD). Profit-sharing distributions to JV partners are also subject to future agreement.
• OfTake Agreement: The MOU includes an implied oftake agreement between the JV partner and the JV to justify the formation.
• Timeline and Conditions: Definitive agreements are expected to be completed and signed no later than the end of Q2 2026. Formation is contingent on successful negotiation and confirmation of chemical/compositional characteristics of silica produced by the existing pilot plant.
• Pilot Plant Status: Fumed silica samples from the FSR pilot plant have been produced and delivered to the client and a U.S. specialty testing laboratory. Tests are underway to confirm suitability.
• PyroGenesis Equity Stake: PyroGenesis is exercising an option to acquire a 50% interest in HSPI, converting annual royalty rights into equity. This action is currently underway.
• Production Expectations: The commercial plant is expected to be delivered within 12 months of JV formation. Additional plants of the same or larger size are anticipated.
• Technology Benefits: The FSR uses plasma-based technology to convert quartz into fumed silica in a single, eco-friendly step without hazardous chemicals, offering lower capital/operating costs, reduced CO2 emissions, and simplified logistics.

Notable Quotes

• "On-site production using our FSR plant would represent a significant development for manufacturers that rely on fumed silica," said P. Peter Pascali, president and chief executive officer of PyroGenesis. "Localized production at, or near, the point of use fundamentally restructures the supply chain, streamlines logistics and secures reliable access to material that is critical to manufacturing operations. This is a quickly emerging consideration within global supply chains. This MOU is an important first step, but it must be noted that only upon successful completion of negotiations and the signing of definitive agreements by all parties will the joint venture and the production plant project(s) proceed. Negotiations with respect to these definitive agreements are ongoing and should be completed before the end of Q2 2026."