Initially HPQ was called Uragold Bay resources and the main goal of the Company was gold exploration. In 2014, Uragold had a number of gold properties in Quebec with gold being hosted in Quartz veins.
Given the lack of interest in gold exploration at the time, we looked at our assets and realized we had something of economic value - large scale Quartz deposits. Quartz (Silicon Dioxide or SiO2) is the key ingredient needed to make Silicon Metal (Si). Per the US Department of Energy, Si is one of today’s key strategic energy metals, like Lithium and Cobalt, that is needed to fulfil the renewable energy revolution presently under way.
What really turned our attention towards the space in 2015 was FerroAtlantica setting up a massive $382M project for a Silicon Metal smelter in Quebec. We wanted to sell FerroAtlantica our Quartz at the time - actually, we wanted to sell it to anyone. So we did some digging around and there were multiple parties interested in the feedstock. That's when we discovered that demand for Silicon Metal in the new energy economy was growing and looked to remain very healthy. Everything we were seeing lead our team to believe that green energy applications would drive up the demand and the value of High Purity Quartz in general. The supply side of the equation did not look as strong at all!
By early 2015, we realized that, unlike Lithium and Cobalt, having a Quartz property portfolio would not generate that much value for shareholders. One of the stated opportunities by the US DOE is technology improvements for separation technologies. Bingo! We had to become a producer of high value and high purity Si. The way we saw it we had to strive for the highest margin product, Solar Grade Silicon Metal (SoG-Si) for photovoltaic (PV) modules.
With a lot more digging and a local partnership with PyroGenesis Canada Inc (“PyroGenesis”), we saw a massive opportunity to build the solution that the industry needed. Jumping in with both feet, the Company changed names in 2016 to reflect our pivot. HPQ Silicon was born.
2) What is the problem that HPQ is trying to solve?
Without getting into all the technical details, we are solving two things for the green revolution: security of supply and cost of input material.
Firstly, like other critical metals such as REEs, Graphite and Lithium (here is a full list) most of the low cost producers of Silicon Metal are in China. Energy security and independence has been an active topic for Western nations for the last decade and the fact that supply is controlled by outside, volatile and potentially non-friendly nations is obviously a major geo-political risk that needs to be mitigated. We think we can make a real difference here.
The global solar energy market is forecasted by Deutsche Bank to grow 10x by 2035 to be a US $ 400B industry. The SoG-Is market alone is expected to grow from US $7.1B to US $11.8B by 2028. The addressable market for ultra-pure Si is enormous and the applications are growing beyond just solar. Although not commercialized yet, we know that silicon could replace Lithium in batteries - that is massive!
This all sounds great but there is one fundamental problem: Silicon Metal is not economic today. In the last 6 years, the spot prices of polysilicon ("SoG-Si") dropped from US $25/kg to less than US $10/kg. At US $10/kg not even the new high-performance plants built in China, with their all in cost around US $14/kg are profitable. It is not logical for anyone to continue operating at a net loss for a long period.
So for this market to evolve and these growth rates to occur, someone has to lower the input cost of the main ingredient. HPQ is that someone.
3) Can you tell us a bit about the relationship with Pyrogenesis (PYR-V)?
Initially PyroGenesis was a service provider we contracted to explore how we could refine our Quartz from our properties. PyroGenesis then came up with the idea of developing a disruptive process for the One Step Production of Silicon Metal (Si) and potentially Solar Grade Silicon Metal (UMG Si) from Quartz. The “PUREVAP™ Quartz Reduction Reactor (QRR)” is a proprietary process (Patent Pending) that uses a plasma arc within a vacuum furnace.
We got along so well that, in time, they became one of our largest shareholders.
Together we are building the only one step Silicon Metal process in the World. Unlike traditional methods that need a high quality input, we can use low quality, impure Quartz and produce a 4N+ (99.99+). We are demonstrating that CAPEX and OPEX for the industry will dramatically decrease.
4) What happened in 2015-16 to make the stock go from $0.02 to $0.30
HPQ has always had a solid following and investor base despite being misunderstood at times. In September 2015 HPQ announced the fundamental pivot from being a mining exploration play and we started our partnership with PyroGenesis. That’s really what sparked the initial pickup in volume and price.
In June 2016, the first successful lab scale tests using the Gen1 proof of concept was announced and results confirmed the game changing potential of the process. Not only did the system operate as designed, but also the process reached its first major milestones, the ability to transform Quartz into high purity Silicon Metal (Si) exceeding 99.9+% Si “3N”. That is a game changer in the solar industry.
The proof of concept was like a discovery hole in the mining industry - the stock popped on the future potential value of what we had discovered.
5) Since the initial appreciation of the stock, why has HPQ been so quiet?
As with most any R&D projects, after the initial discovery there is a period where you need to work on further refining the concept/product. Think of an iPhone 1 versus the X, it took over 10 years to go from the first mass market smart phone to the ubiquitous item we all have in our pockets today.
So for HPQ, with the operational success and investor interest in the Gen1, we started working on the Gen2 commercial scalability platform which could demonstrate we could use various input materials and have a stable output. This process is not sexy but it is necessary in order to scale up to a Pilot Plant. On May 23, 2019 we demonstrated to the market that the Gen2 is performing great.
The focus for us in 2019 is the Pilot Plant with PyroGenesis. The goal for the Pilot Plant is to show the industry and investors that we can produce a consistent, ultra-high quality product at scale and sell it. Already with the Gen2 we intend to ship samples to clients for them to pre-order product produced by the Pilot Plant so there should not be any major surprises and we will have enough buffer to adjust as needed.
Through our alliance to Apollon Solar we know that there is a large market for the product and, if we come in with an all in cost of less than $10/kg we will be able to completely dominate that market. This is a huge statement but that is exactly what the data is telling us.
6) Any closing comments?
Since we officially pivoted in 2016, the team at HPQ has significantly de-risked the project for current and future shareholders.
Operationally, we have advanced extremely well and the Gen2 updates from May 2019 show that.
From a financial and investment due diligence point of view, I think investors can look at the fact that on August 13, 2018, HPQ announced the closing a $5,200,000 financing at $0.12 that included the participation of the Quebec government and PyroGenesis who are now our largest shareholders. They committed those amounts of money because they see where this is going.
HPQ has been trading in a tight range for almost 2 years as we concentrated on everything we have discussed today. With the amount of information and developments going forward, I think this will change.