BioteQ Environmental Technologies Inc.
TSX : BQE

BioteQ Environmental Technologies Inc.

November 13, 2013 17:00 ET

BioteQ Releases Results for Q3 2013

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 13, 2013) - BioteQ Environmental Technologies Inc. (TSX:BQE), a leader in industrial wastewater treatment, releases its financial and operating results for the third quarter ended September 30, 2013. Further information on the third quarter results can be obtained from the Company's Q3 2013 Unaudited Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A").

BioteQ will hold a conference call on November 14, 2013 at 11:00 AM EDT to discuss results for Q3 2013. Participants can dial in as follows:

North America: 1-416-644-3415; 1-877-974-0445 (toll free)
United Kingdom: 44-20-7190-1596; 0800-358-5256 (toll free)
Switzerland: 41-22-592-7311; 0800-560-749 (toll free)
Participant pass code: 4647657

As noted at the beginning of 2013, due to recent changes in Generally Accepted Accounting Standards ("GAAP") effective Q1 2013, the results of the Company's joint ventures will be accounted for as equity investments in BioteQ's current and future financial statements. In prior years, the results of the Company's joint ventures were accounted for through proportionate consolidation.

To ensure clarity and comparability with historic results, certain statements in this news release and in the MD&A are characterized as BioteQ's "proportional" share, which means the effective portion of results that BioteQ would have reported if each of its joint ventures had been reported in accordance with past accounting standards. For further details, please see "Non-GAAP Financial Measures" in the Company's Q3 2013 MD&A.

Q3 2013 Financial Results

  • Proportional Revenue for the three months ended September 30, 2013 was $2.2 million compared to $2.8 million in Q3 2012. The decrease was due to lower volumes of copper recovered at the Bisbee and Dexing operations and lower market prices for copper;
  • Proportional gross margins for Q3 2013, which include BioteQ's share of joint venture activities, were $932,000 compared to $1.2 million in Q3 2012. The decrease was also largely due to lower volumes of copper recovered at the Bisbee and Dexing operations and lower market prices for copper;
  • Revenue as reported under GAAP was $1.2 million in Q2 2013 compared to $1.4 million in Q3 2012. Gross margins as reported under GAAP were $701,000 in Q3 2013 compared to $660,000 in Q3 2012;
  • Net loss for the quarter was $2.1 million in Q3 2013 compared to net loss of $1.3 million in Q3 2012;
  • Comprehensive loss for Q3 2013 was $2.3 million compared to comprehensive loss of $1.5 million in Q3 2012;
  • Subsequent to the end of the quarter, BioteQ announced that the copper recovery facility in Bisbee, Arizona had been furloughed (see Bisbee Operation section below for further details). As a result, the current quarter reflects the impact of a full impairment of the carrying value of BioteQ's investment in the Bisbee joint venture of $1.4 million. This write down has a non-cash impact on results for the current period;
  • Adjusted EBITDA for the quarter was ($1.8) million compared to ($872,000) in Q3 2012. Excluding the impairment of the Bisbee joint venture, adjusted EBITDA for Q3 2013 was ($399,000); and
  • At the end of Q3 2013, total cash, including restricted cash, and short term investments held by the Company outside of its joint ventures was $1.9 million. In addition, BioteQ's proportionate share of cash and short term investments held in joint ventures was $ 2.6 million. Combined, total cash, including restricted cash, and short term investments was $4.5 million.

Operational Results

  • The Dexing, China operation recovered approximately 478,000 pounds of copper and treated 2.4 million cubic metres of water during the third quarter. Year to date, the plant has recovered 1.6 million pounds of copper and treated 8 million cubic metres of water. In Q3 2012, the plant recovered 716,000 pounds of copper and treated 2.9 million cubic metres of water. In 2012 year to date, the operation recovered 1.8 million pounds of copper and treated 7 million cubic metres of water.
  • During the third quarter, the Raglan plant treated and discharged 645,000 cubic metres of water. Year to date, the operation has treated and discharged 700,000 cubic metres of water. In Q3 2012, the operations treated and discharged 562,000 cubic metres of water. In 2012 year to date, the operation the operations treated and discharged 623,000 cubic metres of water.
  • As previously announced in the Company's press release dated November 11, 2013, BioteQ announced that the copper recovery facility in Bisbee, Arizona had been placed on furlough. BioteQ and its joint venture partner, Freeport-McMoRan Copper & Gold ("FMI"), have further agreed that the plant shall not restart under the existing operating arrangement.

New Plants - Update

The Company is currently completing construction of three new, previously announced water treatment plants with joint venture partner Jiangxi Copper Company ("JCC") in China. At JCC's Dexing Mine site, the nickel/cobalt recovery ion exchange plant is expected to be fully commissioned during the fourth quarter of 2013. Also at the Dexing site, a second copper recovery plant is expected to be completed by Q2 2014. At JCC's Yinshan mine site, a new copper recovery plant is expected to be completed by Q2 2014.

Collectively the three new Chinese plants represent significant financial and personnel investments by BioteQ in 2013. However, while these plants create only costs for BioteQ in 2013, they will add significant revenues to the company's recurring revenue base in 2014 and beyond. Collectively these three plants are expected to add approximately $2.5 million to BioteQ's Proportional Revenues in 2014 and approximately $3.0 million in 2015 and beyond.

Selen-IX™ Technology Developments and Teck Project Update

Over the past 18 months, BioteQ has been developing an ion exchange process to remove selenium from mine impacted water streams. BioteQ views the selenium removal market as a significant near term opportunity in Canada and the United States.

In recent years regulators in both Canada and the US have become increasingly concerned with selenium discharge. Both Canada and the US are examining the implementation of significantly more stringent water quality guidelines relating to selenium. There has also been a trend in both countries towards mine permits tightening selenium limits or adding selenium to the list of regulated elements.

Key developments for the Company with regard to Selen-IX™ over the past 9 months have included:

  • In March 2013, Company was awarded funding under the Industrial Research Assistance Program of Canada to help defray some of the development costs we have been investing in the development of this new technology;
  • In May 2013, the Company secured a $900,000 contract from Teck Resources Limited (Teck) to conduct lab and pilot scale testing for selenium removal. Under the terms of the agreement, the Company committed to construct and deploy a pilot scale plant for on-site field testing. BioteQ will retain ownership of the pilot plant and all associated intellectual property;
  • Near the end of Q3 2013, BioteQ completed design and construction of a selenium removal pilot plant and deployed it to a Teck site to conduct pilot scale testing. These pilot operations are currently in progress and are expected to conclude in early December. Upon completion of the pilot campaign, results will be analyzed with the customer and next steps will be determined; and
  • In October 2013, BioteQ filed provisional patent application # 61888908 with the United States Patent and Trademark Office titled "Selective Removal of Dissolved Selenium from Aqueous Solutions".

The BioteQ Selen-IX™ technology is presently still in the pre-commercial phase. BioteQ is however devoting very significant resources to the development and furtherance of this platform. BioteQ believes that the emerging selenium removal market is significant and will eventually be very large. BioteQ believes that the drivers for solution implementation are strong and that the Company's technology, once technically proven, will offer an extremely compelling value proposition to prospective customers.

Outlook

The business environment in the mining industry over the past 6-8 months has been a challenging one. As was noted in the discussion of our Q2 results, this has had its impact on BioteQ in at least a couple of ways:

  • The recent decline in metal prices has impacted the financial performance of BioteQ's copper recovery operations; and
  • Significant constraints that have been imposed on capital spending by mining companies have resulted in the cancellation or delay of several projects on which BioteQ had been actively working and have resulted in a significant slowdown in new project development more generally.

These factors coupled with recent the shutdown of the Bisbee operation have had an impact on BioteQ's expectations for 2013. In August 2013, BioteQ had indicated that proportional revenue for the year would be in the range of $8.5 million to $9.5 million and adjusted EBITDA for the year to be in the range of ($1.5 million) to ($2 million).

The shut down and furlough at Bisbee has reduced revenue expectations by approximately ($400,000) and adjusted EBITDA expectations by ($300,000) for the year. This, coupled with continuing slow sales volumes have caused the Company to revise guidance ranges to:

  • Proportional Revenue: to be in the range of $7.5-$8 million; and
  • Adjusted EBITDA: to be in the range of ($3.5) million to ($4) million - including the impairment associated with the Bisbee plant. Excluding the impact of the impairment on our Bisbee joint venture investment, our adjusted EBITDA loss will be in the range of ($2.1 million) to ($2.6 million).

While the general downturn in the mining industry and the recent issues at the Bisbee facility have tempered BioteQ's expectations regarding its 2013 financial results, the company remains very positive regarding prospects for 2014 and beyond. Specifically:

  • Within the next 12 months, BioteQ will have operational three new recurring revenue generating assets which will bring the Company's recurring revenues (excluding any revenues from Bisbee) to approximately $7-7.5 million/year from the current level of approximately $5 million/year. Note that while the Bisbee facility furlough will have an impact on revenues going forward it will have no impact on cash flow and adjusted EBITDA figures in 2014 and beyond;
  • The work that BioteQ has been doing over the past 18 months relating to selenium removal is progressing rapidly. BioteQ recently filed a relevant patent application and the pilot plant that it has built and sent to a Teck site has been performing well in the field. The market opportunity for this technology appears to be large and the value proposition - assuming continuing strong technical performance - appears to be highly attractive;
  • BioteQ's sulphate removal technology is also moving rapidly into the commercial realm. The mobile Sulf-IX™ pilot plant that was built by BioteQ and is now owned by Newalta has completed a second set of tests at a prospective customer site in the US. BioteQ expects a decision by the customer with respect to next steps in the new year;
  • While the overall market for metals recovery and removal systems has been slow of late, BioteQ is continuing to see significant demand in a few areas - most particularly relating to SART. The company is progressing discussions relating to a SART project in Eastern Europe and is also engaged in discussions and test work relating to a number of other potential SART prospects; and
  • In Q3 we saw progress associated with internal G&A measures we have recently implemented. We intend to continue to optimize corporate cost control going forward.

The various developments noted above make us confident that the company will in fact achieve a position of being cash flow from operations positive commencing in the second half of 2014. This would represent an enormous step forward for the company towards a future in which the company will begin to generate positive cash flows on a consistent and sustainable basis. However, it should also be noted that given the seasonality of cash flows through the fourth quarter of 2013 and the first quarter of 2014 - when some seasonal facilities do not operate and when the new Chinese facilities are not yet on stream - the company will need to carefully manage its working capital balances, review and mitigate costs where necessary, and explore options to provide financial flexibility for the company until cash flows increase in the second half of 2014.

Third Quarter 2013 Financial Highlights Summary
For a complete set of Financial Statements and Management Discussion and Analysis, please go to www.bioteq.ca.
unaudited, in $'000 except for per share amounts
Q3 2013 Q3 2012 To Sep 30,
2013
To Sep 30,
2012
$ $ $ $
Revenues 1,234 1,434 2,954 3,843
less: Plant & other operating costs (excluding depreciation) 533 774 1,795 2,756
701 660 1,159 1,087
General and administrative 726 1,151 2,763 3,172
Sales and development 523 428 1,446 1,100
Share of results of equity accounted joint ventures (33) 143 (350) (272)
Impairment of investment in joint venture 1,401 - 1,401 -
(1,916) (1,062) (4,101) (2,913)
Depreciation and amortization 123 125 396 377
Stock-based compensation 30 39 96 99
Loss before other income (2,069) (1,226) (4,101) (3,389)
Other income - net (37) (34) 70 63
Reversal of capital asset impairment - - 400 1,227
Gain on disposal of equipment - - 239 -
Income tax - 2 (80) (73)
Net loss for the period (2,106) (1,258) (3,964) (2,172)
Translation gain (loss) on foreign operations (150) (197) 403 (178)
Comprehensive loss for the period (2,256) (1,455) (3,561) (2,350)
Net loss per share (basic and diluted) $(0.03) $(0.02) $(0.06) $(0.03)
Proportional Revenue* 2,206 2,772 6,152 7,335
Adjusted EBITDA* (1,800) (872) (3,020) (1,099)
Adjusted EBITDA* excluding impairment of Bisbee investment (399) (872) (1,619) (1,099)
At Sep 30,
2013
At Dec. 31,
2012
$ $
Cash, restricted cash and short term investments 1,940 3,868
Proportional share held in joint ventures 2,576 3,660
Total cash, restricted cash and short term investments 4,516 7,528
Working capital 2,702 3,913
Total assets 10,763 14,578
Total long term liabilities 89 128
Shareholders' equity 9,282 12,747
* See "Non-GAAP Measures" in the Company's Q3 2013 MD&A.

BioteQ Corporate Profile

BioteQ is an innovative clean technology leader in global industrial water treatment, serving the mining and energy markets. The company has technology expertise and proven operational capabilities in sulphide precipitation, ion exchange, alkali/lime precipitation, leaching, sulphate removal and SART technology. Over the past decade, BioteQ has designed and commissioned waste water treatment plants at mine sites for leading organizations including Xstrata, Freeport McMoran, Jiangxi Copper and the US EPA. These plants recover dissolved metals and/or remove substances such as sulphate and selenium, producing clean water and minimizing or eliminating residual waste. BioteQ is headquartered in Vancouver, Canada and trades on the TSX under the symbol BQE. Please visit our website at www.bioteq.ca for additional information.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or the accuracy of this release.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain information contained herein may not be based on historical fact and therefore constitutes "forward-looking information" under applicable Canadian securities legislation. This includes without limitation statements containing the words "plan", "expect", "project", "estimate", "intend", "believe", "anticipate", "may", "will" and other similar words or expressions. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks, uncertainties and other factors that may cause actual events or results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the Company's dependence on key personnel and contracts, uncertainty with respect to the profitability of the Company's technologies, competition, technology risk, the Company's ability to protect its intellectual property and proprietary information, fluctuations in commodity prices, currency risk, environmental regulation and the Company's ability to manage growth and other factors described in the Company's filings with the Canadian securities regulators at www.sedar.com (including without limitation the factors described in the section entitled "Risks and Uncertainties" in the Company's Annual Report for the year ended December 31, 2012 and the section entitled "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2012). Given these risks and uncertainties, the reader is cautioned not to place undue reliance on forward-looking statements. All forward-looking information contained herein is based on management's current expectations and the Company undertakes no obligation to revise or update such forward-looking information to reflect subsequent events or circumstances, except as required by law.

Contact Information