Mr. David Kratochvil reports

BQE WATER REPORTS Q2 2022 RESULTS

BQE Water Inc. has released its interim consolidated financial results for the three and six months ended June 30, 2022.

"After reporting strong results in 2021, we continued our growth trajectory in delivering a strong second quarter in 2022. To date this year, we have brought on-line and added two new streams of recurring revenues to our operations. The first is a facility to remove selenium from ash pond water in Virginia, and the second a plant to simultaneously remove selenium and sulphate from mine water for a base-metal project in Arizona," stated David Kratochvil, president and chief executive officer of BQE Water.

Financial highlights:

• Added new recurring operational services revenues of $344,000 in Q2 2022 from two new water treatment plants in the United States that commenced operations in 2022;
• Grew proportional revenues by $1.0-million or 24 per cent and revenues by $1.5-million or 129 per cent compared with Q2 2021;
• Increased operating margin from $244,000 in Q2 2021 to $949,000 in Q2 2022;
• Recorded net income of $642,000 and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.3-million in Q2 2022 compared with $809,000 and $1.4-million in Q2 2021;
• Ended Q2 2022 with $4.0-million in working capital, $2.9-million in cash and $7.2-million in proportional cash;
• Subsequent to the end of the reporting period, received a record $2.6-million dividend from the China joint venture;
• Other selected financial results for the three and six months ended June 30, 2022 are as shown in the attached table.

Operational services highlights

The company's operational services consist of the technical supervision and plant operation of water treatment plants, which generate recurring revenues from three main sources: sales of recovered metals, water treatment fees and operations support fees. Sales of recovered metals are based on the mass of metals recovered and market prices of metals sold. Water treatment fees mainly consist of a variable fee based on water treated and may include a fixed guaranteed minimum fee regardless of volume of water treated. Operations support fees are fixed fees in exchange of on-site plant support services. The company's operations by source of revenue are as shown in the attached table.

Operations                                                Location                Revenue source
           
JCC-BQE joint venture                      Jiangxi province, China     Sales of recovered metals
MWT-BQE joint venture                     Shandong province, China     Sales of recovered metals
Raglan mine for Glencore                   Northern Quebec, Canada          Water treatment fees     
Kemess property for Centerra                 Northern B.C., Canada          Water treatment fees     
Zhongkuang plant for MWT                  Shandong province, China       Operations support fees  
Zhaojin plant for MWT                     Shandong province, China       Operations support fees  
Power utility ash pond for WesTech         Virginia, United States          Water treatment fees     
Base-metal project for a metal producer     Arizona, United States           Water treatment fees

JCC-BQE joint venture operations

The company's 50/50 joint venture with partner Jiangxi Copper Company operates three water treatment plants at Dexing mine and at Yinshan mine in Jiangxi province of China. The volume of water treated and pounds of copper recovered by the plants fluctuate seasonally depending on precipitation levels in the region. The operating results for the three and six months ended June 30, 2022, are as shown in the attached table.

(in 000s)                    Three months ended June 30,   Six months ended June 30,
                                         2022      2021              2022      2021
      
Water treated (cubic metres)            5,925     7,702             8,788    10,126    
Copper recovered (pounds)               1,010     1,262             1,412     1,466     

In Q2 2022, all three plants met mechanical availability and process performance set by the company. Both the volume of water treated and the mass of copper recovered decreased year over year by 23 per cent and 20 per cent, respectively. Changes in water volume and feed grade are largely the result of environmental conditions beyond the control of the joint venture.

MWT-BQE joint venture operations

The company's 20-per-cent share of MWT-BQE is with its 80-per-cent partner Beijing MWT Water Treatment Project Limited Company, and together the companies operate a water treatment plant at a smelter in Shandong province of China. MWT-BQE generates revenues from the sale of zinc and copper recovered from smelter waste water. Operating results for the three and six months ended June 30, 2022, are as shown in the attached table.

(in 000s)                    Three months ended June 30,   Six months ended June 30,
                                         2022      2021              2022      2021

Water treated (cubic metres)              181       175               319       342      
Zinc recovered (pounds)                    45       319               106       589      
Copper recovered (pounds)                  52        78               106       154

The mass of zinc and copper recovered decreased by 86 per cent and 33 per cent, respectively. The smelter periodically operated its production lines with ores from different sources, leading to varying levels of zinc and copper in the feed, and a fluctuation in the volume of waste water treated by the plant. The joint venture has no control over the composition and volume of feed flowing into the plant.

BQE Water operations

The company operates four treatment plants at Raglan mine for Glencore Canada Corp. During Q2 2022, the company mobilized its operations team to site to commence its 19th operating season at the mine. Operational activities were initiated in April, and treated water began discharging in June.

In 2020, the company completed the commissioning of the first industrial-scale treatment plant utilizing its patented and award-winning Selen-IX process for selenium management at the Kemess property owned by Centerra Gold. In 2021 and to date in 2022, the Kemess property was not operating as it had been placed in an extended state of care and maintenance. Water treatment is not required under this state, and the Selen-IX plant was not operational.

In 2021, the company began operations of the Zhongkuang SART (sulphidization, acidification, recycling and thickening) plant and the Zhaojin SART plant for metallurgical facilities in China. Both plants have been under the company's technical supervision since beginning full production. During Q2 2022, the Zhongkuang SART plant operated for the full quarter, and the Zhaojin SART plant resumed operations in early June as the upstream circuit gradually returned to normal operations.

At the end of 2021, the company completed the commissioning of its first project in the power generation industry, a treatment plant utilizing its Selen-IX process to remove selenium from ash pond water for WesTech Engineering. The company also began providing continuing plant operational services in return for water treatment fees with fixed and variable components. During Q2 2022, due to issues with the upstream feed pumping system, water treatment with the Selen-IX circuit was not required and water was stored for treatment later in the year. Although the lack of feed had some effect on the recurring revenues from this operation, the company continued to collect a base fee which represents the guaranteed minimum regardless of volume of water treated.

In April, 2022, the company completed the commissioning of a treatment plant utilizing a combination of nanofiltration and its proprietary selenium electro-reduction process to simultaneously remove selenium and sulphate from mine water for a base-metal project in the U.S. Southwest. Upon completion of commissioning, the company began providing continuing plant operational services in return for water treatment fees comprising a fixed guaranteed minimum and a variable fee linked to the volume of water treated. But due to a limited supply of feed water into the company's treatment circuits, it received only the fixed guaranteed minimum fee for the months during which the plant was ready to operate.

The number of operating days contributing to water treatment or support fees for the three and six months ended June 30, 2022, are as shown in the attached table.

(in 000s)                    Three months ended June 30,   Six months ended June 30,
                                         2022      2021              2022      2021

Raglan mine water treatment plants         30        23                30        23       
Zhongkuang SART plant                      75         -               165        64       
Zhaojin SART plant                         23        64                23       154      
Water treatment plant in Virginia          91         -               181         -        
Water treatment plant in Arizona           68         -                68         -

The volume of water treated for the three and six months ended June 30, 2022, is as follows.

(in 000s of cubic metres)               Three months ended June 30,   Six months ended June 30,
                                                    2022      2021              2022      2021
     
Raglan mine water treatment plants                   218       145               218       145      
SART plants in China                                  74       108               106       156      
Water treatment plants in U.S.                         -         -                 7         -

Technical services highlights

BQE Water's technical expertise and intellectual property are applicable globally across broad areas of water management. The highlights of technical services provided to clients and technical innovation projects during Q2 2022 are summarized below.

Commercial deployment of Selen-IX and direct selenium electro-reduction (ERC) technology:

• Continued to provide engineering services for a third large-scale Selex-IX plant currently in the construction stage for a mine in the United States.

Cyanide recovery, destruction and thiocyanate management:

• Performed a site assessment to integrate SART into an existing gold metallurgical plant in Canada;
• Completed cyanide recycle and cyanide destruction tests in a laboratory as the basis for design and cost estimates for projects in Canada and Mexico;
• Completed a prefeasibility study for a thiocyanate removal plant with concurrent cyanide recovery for reuse at an active mine in Mexico.

Water consulting services -- Management, treatability, permitting assistance, toxicity mitigation:

• Continued to provide engineering design services for three water treatment plants for mine permitting in British Columbia;
• Completed lab-scale treatability testing for sulphate and metals removal to support permitting for the restart of a base-metal mine in Ontario;
• Continued to provide optimization services to an existing ammonia removal plant in Ontario;
• Completed engineering design for an ammonia removal facility for a large existing mining operation in Ontario;
• Completed lab-scale testing for water treatment integration at a rare earth elements project to provide the basis for pilot plant design and permitting in South America;
• Completed an on-site sulphate removal pilot operation for Codelco at the El Teniente operation and initiated planning to move the pilot plant to the Andina operation in Chile;
• Provided management and operations supervision services for a water treatment pilot to remove boron in Peru.

Commentary and outlook

The company recorded another solid quarter of financial results and reached several important new milestones in Q2 2022.

One milestone was the successful completion of commissioning and the start of continuing operations of a second water treatment plant in the U.S. These two plants commenced operations within the last six months and contributed new recurring revenues of $439,000 on a year-to-date basis in 2022. Due to factors beyond the company's control, both plants received only a small fraction of the designed water volume to treat. As such, revenues from these operations reflect only the company's guaranteed minimum base fees which are fixed regardless of the volume of water treated. Looking ahead, the company expects an increase in revenues from both sites as the volume of water requiring treatment increases.

A second milestone was the successful pilot demonstration of the company's Sulf-IX technology for sulphate removal at the El Teniente copper operation in Chile owned by Codelco as part of an 18-month multisite and multitechnology project. Upon completion of the pilot, the mobile pilot plant will be moved to a second location where it will be combined with a copper recovery module to demonstrate the company's BioSulphide process alongside sulphate removal.

A third milestone was the achievement of a record cash position at the end of a second quarter, which historically is the lowest due to the seasonality of the company's operations. This accomplishment was made possible due to a combination of factors including:

• New recurring revenues from the company's U.S. operations that reduced the effect of seasonality on overall revenues;
• A strong pipeline of active projects where the company provides technical engineering services. Project highlights in Canada include the design of several new water treatment plants in B.C. and Ontario for mine permitting. In Chile, in addition to the company's continuing work for Codelco, its team has been providing lab testing and design engineering services for a rare earth elements project currently entering the permitting phase.

Lastly, the company's growth has been recognized publicly by Corporate Knights as one of the 25 fastest-growing green public companies in Canada. This recognition is a sign that the company's success is being noticed by the broader business community in Canada.

Looking ahead to the remainder of the year, the company expect its strong financial performance to continue. It has a strong backlog of technical services projects and new recurring revenues from plants that commenced operations earlier in the year. As always, the company would like to caution investors with respect to the uncertainties that could affect this positive outlook. Specifically, geopolitical risks, high inflation and monetary tightening could all have negative impacts on the world economy, including the company's sector. That said, the company believes the environmental compliance and sustainability requirements of natural resource companies coupled with its healthy balance sheet and recurring revenues position it well to sustain any temporary exogenous shocks and will allow it to continue to grow as it capitalizes on long-term opportunities in mining and environmental, social, and governance trends.

Selected financial information

For a complete set of financial statements and MD&A, please go to the company's website.

About BQE Water Inc.

BQE Water is a service provider specializing in water treatment and management for metals mining, smelting and refining. It is helping to transform the way the industry thinks about water in the context of natural resource projects by offering services and expertise which enable more sustainable water management practices and improved overall project performance at reduced risks. BQE Water invests in innovation, and has developed unique intellectual property through the commercialization of several new technologies at mine sites around the world for organizations including Glencore, Jiangxi Copper, Freeport-McMoRan and the U.S. Environmental Protection Agency. BQE Water is headquartered in Vancouver, Canada, and trades on the TSX Venture Exchange under the symbol BQE.

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