Mr. David Kratochvil reports

BQE WATER REPORTS Q3 2022 RESULTS

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

"In the first nine months of 2022, we added three new operations in North America, which contributed to increasing our year-to-date revenue by $903,000 or 47 per cent over the comparable period in 2021," stated David Kratochvil, president and chief executive officer of BQE Water. "Additionally, in the same period, we nearly doubled our technical services revenue compared to last year, providing an indication of the strength of our project pipeline as well as expected future growth in our recurring revenue."

Financial highlights:

• Added new recurring operational services revenues of $242,000 in Q3 2022 from a water treatment plant in Yukon that commenced operations during the quarter;
• Grew proportional revenues by $205,000 or 4 per cent and revenues by $730,000 or 26 per cent compared with Q3 2021;
• Recorded net income of $573,000 and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.4-million in Q3 2022, compared with $1.5-million and $2.1-million in Q3 2021;
• Increased working capital to $7.3-million as at Sept. 30, 2022, an increase of $3.2-million from June 30, 2022;
• Increased proportional cash to $9.7-million as at Sept. 30, 2022, an increase of $2.5-million from June 30, 2022.

Other selected financial results for the three and nine months ended Sept. 30, 2022, are shown in the attached table.

Operational services highlights

BQE Water'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 for on-site plant support services. The company's operations by source of revenue are shown in the attached table.

JCC-BQE joint venture operations

BQE Water's 50/50 joint venture with partner Jiangxi Copper Company (JCC) operates three water treatment plants at the Dexing mine and at the 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 nine months ended Sept. 30, 2022, are shown in the attached table.

In Q3 2022, all three plants met mechanical availability and process performance set by the company. 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

BQE Water's 20-per-cent share of MWT-BQE is with the company's 80-per-cent partner, Beijing MWT Water Treatment Project Limited Company (MWT), 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 nine months ended Sept. 30, 2022, are shown in the attached table.

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 the Raglan mine for Glencore Canada Corp. In May, 2022, BQE Water mobilized its operations team to site to commence the company's 19th operating season at the mine. Due to a drier season, the total volume of water treated across all four plants at the Raglan mine in Q3 2022 decreased by 19 per cent, compared with that of Q3 2021.

In August, 2022, BQE Water entered into an operational services agreement with Minto Metals to operate a water treatment plant at the Minto mine. The mine is expected to treat approximately 750,000 to one million cubic metres of water per year. BQE Water's team mobilized to site on Aug. 27, 2022, and began treating and discharging clean water.

In 2021, BQE Water 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 Q3 2022, both SART plants operated for the full quarter as the upstream circuit returned to normal operations.

At the end of 2021, BQE Water 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. BQE Water also began providing continuing plant operational services in exchange for water treatment fees with fixed and variable components. During Q3 2022, the company recommenced water treatment with the Selen-IX circuit as the upstream feed pumping system resumed operations.

In April, 2022, BQE Water completed commissioning of a treatment plant utilizing a combination of nanofiltration and the company's proprietary selenium electro-reduction process to simultaneously remove selenium and sulphate from mine water for a base metal project in the American Southwest. Upon completion of commissioning, BQE Water began providing continuing plant operational services in exchange for water treatment fees, comprising a fixed guaranteed minimum and a variable fee linked to the volume of water treated. In Q3 2022, due to a limited supply of feed water into its treatment circuits, BQE Water 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 nine months ended Sept. 30, 2022, are shown in the attached table.

The volume of water treated for the three and nine months ended Sept. 30, 2022, are shown in the attached table.

Technical services highlights

BQE Water's technical expertise and IP (intellectual property) are applicable globally across broad areas of water management. The highlights of technical services provided to clients and technical innovation projects during Q3 2022 are summarized below.

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

• Continued to provide engineering services for a third Selen-IX plant currently in the construction stage for a U.S. mine;
• Initiated lab testing and preliminary engineering for a new uranium project in North America;
• Initiated lab testing for selenium removal from flue gas desulphurization scrubber blow-down water for a U.S. utility.

Cyanide recovery, destruction and thiocyanate management:

• Initiated technical assessments to improve cyanide destruction systems at two mines in the United States;
• Initiated technical assessment to optimize cyanide destruction and effluent discharge using reverse osmosis at a large gold heap leach operation in Peru.

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

• Continued to provide engineering design services for three water treatment plants to support permitting of the KSM project in British Columbia;
• Continued to provide water treatment consulting services to support permitting of the Blackwater project in B.C.;
• Initiated a conceptual design study for water treatment to support the permitting of a new lithium project in Canada;
• Initiated the engineering design for a water treatment pilot plant to support permitting of a rare earth elements project 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;
• Continued to provide engineering design services for a water treatment plant to produce clean water for recycle at a mine in Mexico.

Commentary and outlook

Two thousand twenty-two has, to date, been a year of promising growth for BQE Water in terms of the company's active project list, cash on hand and its future project pipeline. BQE Water also recorded another profitable quarter, with multiple encouraging developments, despite uncertainties in the global economy and rising inflation.

On the positive side, the success of BQE Water's long-term business strategy and commercial model was demonstrated by:

• Signing a new multiyear plant operating services agreement for the Minto mine in Yukon;
• Bringing into operation two U.S. plants within the last nine months that are a source of steady recurring revenues;
• Nearly doubling BQE Water's technical services revenue on a year-to-date basis compared with 2021, providing a good indication of the strength of the company's project pipeline as well as expected future growth in recurring revenues since technical services often precede plant operations services;
• Reaching record levels of working capital and cash derived from operations;
• Completing a successful demonstration of BQE Water's Sulf-IX technology for sulphate removal at the first of multiple sites owned by the world's largest copper producer Codelco in Chile.

Challenges consist of a mix of those BQE Water is actively managing and those that are outside of the company's control:

• An increase in the number of employees and the associated costs of hiring, onboarding and training for new water treatment plant operations and technical roles in engineering, projects, lab and piloting has slightly reduced BQE Water's operating margin. However, investing in building BQE Water's team for the long term is essential to the company's growth and success.
• Inflation and a tight labour market are driving year-over-year increases in expenses through compensation adjustments, corporate insurance, employee health benefits and other professional service fees.
• A drought in China during a period that is normally the wet season reduces the income earned from BQE Water's China joint venture.

Looking ahead to the remainder of the year, BQE Water expects continued strong revenues from operations and technical services as these are directly underpinned by the company's solid project pipeline. However, BQE Water is anticipating a shortfall in copper sales from its China joint venture to further increase in Q4 2022 as the Dexing region enters the dry season earlier than usual. While this shortfall in copper sales will reduce the share of income received from the joint venture, BQE Water anticipates it will be partially offset by the increase in revenues from operations and technical services.

BQE Water expects results for the remainder of the year to produce another consecutive year-over-year increase in working capital driven by normal operations. BQE Water also anticipates its project pipeline will remain robust as it enters 2023. As always, BQE Water needs to caution investors about the possible negative impacts of a downturn in the global economy and particularly the resource sector on the company's performance. However, BQE Water's proven and unique expertise in supporting clients with their environmental compliance and sustainable water treatment needs is highly supportive of the company's long-term outlook for strong corporate growth.

Selected financial information

For a complete set of financial statements and MD&A (management's discussion and analysis), 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. The company is helping to transform the way the industry thinks about water in the context of natural resource projects by offering services and expertise that 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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