Internal Technical and Economic Study Indicates HPQ Fumed Silica Reactor’s Robust Potential at Commercial Scale

MONTREAL, Canada — HPQ Silicon Inc. (“HPQ” or the “Company”) (TSX-V: HPQ) (OTCQB: HPQFF) (FRA: O08), a technology company specializing in green engineering processes for silica and silicon material production is pleased to announce the completion of an internal technical and economic study (the “Study”) related to its proprietary Fumed Silica Reactor technology. The study was prompted by an inquiry from a participant in the Fumed Silica industry under NDA.

The study assessed the technical and economic viability of quickly scaling up the HPQ Silica Polvere’s Fumed Silica Reactor (FSR) from the current 50 tonnes per year (TPY) pilot plant configuration to a 1,000 TPY commercial configuration, following the successful completion of the pilot plant testing phase.

The significance of this preliminary assessment lies in its confirmation of the technical feasibility of rapid scaling up to a 1,000 TPY FRS [1] while preserving the best-in-class environmental advantages inherent in the FSR technology [2]. Moreover, the study unveiled its robust economic potential, emphasizing potential EBITDA margins three times higher than the industry average of 20% [3] and a capital investment 93% less than that required for building a conventional Fumed Silica plant [4].

“The shift of interest in our Fumed Silica offering, from the initial signing of our first NDA to explore the material commercial potential to a current keen focus on the commercial scalability potential of our proprietary Fumed Silica Reactor technology, marks another major step forward for HPQ Silica Polvere,” said Mr. Bernard Tourillon, President and CEO of HPQ Silica Polvere Inc. and HPQ Silicon Inc.

IMPLEMENTING AN INCREMENTAL COMMERCIALISATION STRATEGY FOR HPQ POLVERE FUMED SILICA

To meet the anticipated demand for low carbon fumed silica materials, HPQ Polvere commercialisation strategy is based on building a 1,000 tonnes per year (TPY) Fumed Silica Reactor and scaling up capacity to meet demand with an additional 1,000 TPY Fumed Silica Reactor.

To prepare the internal economic study, HPQ Polvere management used technology provider and equipment supplier PyroGenesis Canada Inc. (TSX: PYR) (OTCQX: PYRGF) (FRA: 8PY) (PyroGenesis) rough order of magnitude study regarding the cost of building the first 1,000 tonnes per year (TPY) Fumed Silica Reactor. HPQ management then used selling prices for the Fumed Silica and potential operating costs from information derived from third party sources and publicly available data.

The salient points of the internal economic study indicate that the HPQ Fumed Silica Reactor will have:

• Capex between US$ 9.00 and US$ 10.00 cost per Kg of annual capacity [5]
• Energy consumptions between 10 – 15 KWh per Kg of Fumed Silica [6]
• EBITDA margins between 60% and 65% [7]
• Payback period per 1,000 TPY Reactor of around 1.7 years [8]

“HPQ Silica is uniquely positioned to be the sole provider capable of supplying the materials required to meet the increasing demand for low carbon Fumed Silica products,” added Mr. Tourillon. “This demand is anticipated to necessitate the deployment of numerous 1,000 TPY Fumed Silica Reactors in the future.”

While HPQ Polvere technology is the only ultra–low carbon footprint process, no green premium was used when calculated the selling price of the material used for the internal economic study.

HPQ POLVERE DISRUPTIVE ADVANTAGES IN ONE TABLE

“This table clearly shows that HPQ Polvere Fumed Silica Reactor (FSR) has many disruptive advantages that can threaten traditional Fumed Silica Manufacturing and can be a significant opportunity for HPQ and its shareholders,” continued Mr. Tourillon.

HPQ management plans to update and further validate these projections when more data is collected from an upcoming pilot plant testing phase later in the year. This will be achieved with the completion of an engineering cost and feasibility study that will be conducted by an independent party at the appropriate time.

REFERENCE SOURCES

[1] The scale-up from the 50 TPY pilot plant to a commercial 1,000 TPY represents a factor of 20. Literature on the subject, such as ‘Plant Design and Economics for Chemical Engineers’ by Peters & Timmerhaus, suggests that scale-ups of pilot equipment to industrial scale, by a factor of 5, 10, or 20, are reasonable and easily achievable.
[2] HPQ Silicon June 13, 2023, and November 8, 2023 releases.
[3] Average EBITDA margins of 20% are derived from two sources, with Link #1 leading to Source #1 and Link #2 leading to Source #2 (Specialty Additives division). Management has calculated the EBITDA margins for the Fumed Silica Reactor (FSR) based on data derived from third party sources and publicly available information. These figures will be updated upon completion of the pilot testing phase. The 5% range in HPQ Polvere’s EBITDA margins takes into account PyroGenesis’ option to convert its 10% royalties into a 50% ownership stake in HPQ Polvere’s remaining equity.
[4] Traditional Fumed Silica manufacturing involves a complex three-step process. Step 1: Conversion of Quartz to Silicon Metal (Si), with an average Capex of around US$9.38 per kilogram of annual capacity (for reference, the PCC BakkiSilicon Plant in Iceland cost US$300 million for an annual capacity of 32,000 tonnes). Step 2: Conversion of Si to Silicon Tetrachloride (SiCl4), with an average Capex of approximately US$125.00 per kilogram of annual capacity (e.g., Wacker Chemie AG Polysilicon’s US production plant cost US$2.5 billion for an annual capacity of 20,000 tonnes). Step 3: Burning Silicon Tetrachloride (SiCl4) with Hydrogen and Oxygen to produce Fumed Silica (SiO2), incurring an average Capex of around US$11.54 per kilogram of annual capacity (Wacker Chemie AG’s US Fumed Silica plant cost US$150 million for an annual capacity of 20,000 tonnes). The combined Capex for these three steps averages at US$145.92 per kilogram of annual capacity. According to a rough order of magnitude study by PyroGenesis, our one-step process for making Fumed Silica is estimated to have an average Capex per kilogram of annual capacity between US$9.00 and US$10.00, which is approximately 93% less than traditional processes.
[5] According to a rough order of magnitude study by PyroGenesis, our one-step process for making Fumed Silica is estimated to cost about CAD$13 million, which equals an average Capex per kilogram of annual capacity between US$9.00 and US$10.00.
[6] The 1 Kg eq of CO2 per Kg of Fumed Silica is based on Hydro Quebec data that indicate in Quebec 1.3 g of CO2 are generated eq per KWh. While the 2.5 is based on the Canadian average for electricity generation carbon intensity of 150 g per KWh.
[7] Management has calculated the EBITDA margins for the Fumed Silica Reactor (FSR) based on data derived from third party sources and publicly available information. These figures will be updated upon completion of the pilot testing phase. The 5% range in HPQ Polvere’s EBITDA margins takes into account PyroGenesis’ option to convert its 10% royalties into a 50% ownership stake in HPQ Polvere’s remaining equity.”
[8] Management has calculated the Payback for the Fumed Silica Reactor (FSR) based data derived from third party sources and publicly available information. These figures will be updated upon completion of the pilot testing phase.
[9] Frischknecht, Rolf, et al. “Life cycle inventories and life cycle assessment of photovoltaic systems.” International Energy Agency (IEA) PVPS Task 12 (2020).
[10] PyroGenesis Canada Inc.
[11] The Wall Street Journal article, April 18, 2023, “World’s First Carbon Import Tax Approved by EU Lawmakers”
[12] Cai, H., Wang, X., Kelly, J. C., & Wang, M. (2021). Building Life-Cycle Analysis with the GREET Building Module: Methodology, Data, and Case Studies (No. ANL/ESD-21/13). Argonne National Lab. (ANL), Argonne, IL (United States).

Cautionary Statements
There can be no assurance that the economic projections upon which this Study is founded will be realized. Not limited to the viability of mass production scale-up, product optimization, financial considerations, and macroeconomic and environmental factors, several risks and uncertainties are inherently associated with any nascent technology commercialization. The Study is intended to be comprehended as a cohesive whole, and individual sections should not be interpreted or relied upon in isolation or without the accompanying context. Readers are duly advised to consider all assumptions, limitations, and exclusions that pertain to the information provided in the Study.”