A Vancouver developer of proprietary wastewater technology is starting to make progress toward its ultimate goal of generating positive cash flow.
Over the last month, the company BioteQ Environmental Technologies (TSX:BQE) has announced three contracts to test its technology at project sites of senior miners. According to BioteQ president and CEO Jonathan Wilkinson, the contracts are the first step to wastewater plant sales that can range from $5 million to $10 million. He anticipates the preliminary work translating into potential sales by later this year or in 2013.
BioteQ's technology removes contaminants from industrial wastewater, recovers valuable metals missed in previous mine-processing stages and eliminates environmentally unfriendly waste sludge.
The company is also a leader in advancing and refining SART (sulphidization, acidification, recycling and thickening), a process first developed by engineering testing firm SGS Lakefield and Teck Resources Ltd. (TSX:TCK).
SART can recover copper and zinc and regenerate cyanide so that it can be recycled for further gold processing.
BioteQ can design, build and operate entire wastewater plants or bolt on its technology to existing sites. Its technology has applications for multiple industries, including mining, power generation and oil and gas. The company has thus far designed and built 16 water treatment plants in six countries.
Although its technology is proven, BioteQ's business plan has suffered through a few hiccups. Historically, the company has participated in build-and-operate joint venture projects with mining companies ranging from fledgling new miners to international giants – in some cases, splitting both the capital costs and proceeds from metal recoveries.
Unfortunately, two of those relationships soon soured. That left BioteQ out of pocket after its junior venture partners became insolvent. The bad news, combined with general market free-fall, dragged down the company's stock. In 2011, BioteQ reported a net loss of $5.09 million on revenue of $7.41 million. For fiscal 2012's second half, the company posted a net loss of $913,000 on $4.6 million in revenue.
Wilkinson, who took the helm of BioteQ last October, said the company has underperformed and must now prove it can generate profit. As president and CEO of QuestAir Technologies, he led the company from rough R&D ideas to commercial sales in the oil refining and biogas sectors, partnering with global companies along the way. QuestAir, with 99% support of its shareholders, was later acquired by privately held clean-tech firm Xebec Adsorption Inc.
Canaccord Genuity analyst Sara Elford said Wilkinson has brought new "focus and rigour" to BioteQ.
In a few short months, Wilkinson has shifted the firm's focus largely to the straight design-build-sale of its wastewater technologies to the mining sector. The company estimates that there is a $500 million annual market for its proprietary technology and a $350 million to $500 million market for SART.
The sweet spot of BioteQ's SART technology is South America, where many gold-copper mines are in development and production and Latin American countries like Chile are toughening up water discharge rules.
Wilkinson said that while SART is not new technology, it hadn't been successfully implemented until BioteQ built facilities in Turkey and Mexico.
"One of the reasons people are coming to us is not that we own the IP; it's that we've figured how to make it work."
Wilkinson's other targets include:
- increasing revenue 35% to $10 million in 2012;
- reducing cash expenditures from $2.5 million in 2011 to less than $1.5 million by year's end; and
- achieving positive cash flow within the next 18 months.
In 2011, BioteQ's engineering services and plant sales plants accounted for approximately 20% of the company's revenue. Most of its cash flow came from its joint-venture share of metal recoveries. By 2014, Wilkinson wants plant sales and supporting engineering services to generate more than two-thirds of company revenue.
Save for French heavyweight Veolia (NYSE:VE), Wilkinson said BioteQ operates in a niche industry with few peers.
However, Calgary-based Newalta (TSX:NAL), Canada's largest industrial waste management and environmental services firm, is showing real interest in the mining sector. Largely focused on the oil and gas sector, Newalta has formed a strategic alliance with BioteQ as part of a broader strategy to enter the mining market and now has a 5% equity stake in BioteQ.
Elford said Wilkinson is "doing the right things."
"The pace of their announcements and a lot of things they're talking about suggest there's no shortage of interest in what it is they have to offer." •
