Mr. David Kratochvil reports

BQE WATER REPORTS Q3 2023 RESULTS

BQE Water Inc. has released its interim consolidated financial results for the three and nine months ended Sept. 30, 2023.

"In the third quarter, we set record highs in revenue, net income and adjusted EBITDA. Our growth was largely driven by new streams of recurring revenue through the operations established in the Yukon and in southwest USA. By the end of the third quarter, we expanded our water treatment operation services to four different sites in North America. Looking forward, we plan on executing our long-term growth strategy by expanding our project pipeline and growing our recurring revenues from water treatment services," stated David Kratochvil, president and chief executive officer of BQE Water.

Financial highlights:

• Recorded proportional and GAAP (generally accepted accounting principle) revenues of $8.0-million and $6.2-million in Q3 2023, respectively, 40-per-cent and 78-per-cent increases compared with Q3 2022, and both historic highs during a quarter largely due to new recurring revenues from operations and growth in technical services in 2023;
• Operating margin of $3.3-million in Q3 2023, compared with $1.7-million in Q3 2022, an 88-per-cent increase;
• Record high net income of $2.1-million in Q3 2023, compared with $573,000 in Q3 2022, a 272-per-cent increase;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $2.7-million in Q3 2023, compared with $1.4-million in Q3 2022, a 101-per-cent increase;
• Working capital of $10.0-million as at Sept. 30, 2023, an increase of $2.9-million or 40 per cent from Dec. 31, 2022.

Other selected financial results for the three and nine months ended Sept. 30, 2023, are provided in an attached table.

Operational services highlights

The company's operational services consist of the operation or technical supervision of water treatment plants, which generate recurring revenues from three main sources: sales of recovered metals; water treatment fees; and operations support fees. The company's operations by source of revenue are shown in an attached table.

JCC-BQE joint venture operations

The company'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, 2023, are provided in an attached table.

In Q3 2023, all three plants met mechanical availability and process performance targets set by the company. The volume of water treated increased by 4 per cent while the mass of copper recovered decreased by 32 per cent compared with Q3 2022. Changes in water volume and feed grade from period to period 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 in MWT-BQE is with BQE's 80-per-cent partner, Beijing MWT Water Treatment Project Ltd. Co. (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 wastewater. The operating results for the three and nine months ended Sept. 30, 2023, are provided in an attached table.

The smelter periodically operated its production lines with ores from different sources, which led to varying concentrations of zinc and copper in the feed and fluctuations in the volume of waste water treated by the plant. The joint venture has no control over the composition and volume of feed that flows into the plant. During Q3 2023, the plant was shut down intermittently as the value of zinc and copper in the feed was lower than the recovery cost of the metals.

BQE Water operations

The number of operating days contributing to water treatment or support fees by plant for the three and nine months ended Sept. 30, 2023, are shown in an attached table.

The volume of water treated by geographic location for the three and nine months ended Sept. 30, 2023, are shown in an attached table.

The company, with Inuit partner Nuvumiut Development, operates four treatment plants at the Raglan mine in Nunavik for Glencore Canada Corp. During Q3 2023, the total volume of water treated across all four plants at the Raglan mine is comparable with that of Q3 2022.

In September, 2022, BQE began providing operational services for Minto Metals at the Minto mine in Yukon. In May, 2023, the customer ceased active operations at the mine and the Yukon government stepped in to ensure the continuation of water management services in support of environmental protection. Throughout this transition, BQE's operators were on site to operate the water treatment plant and provide continuous water treatment. During Q3 2023, while working directly for the Yukon government, BQE's team continued to treat and discharge clean water at the mine.

In 2021, BQE began operations of the Zhongkuang SART (sulphidization, acidification, recycling and thickening) plant and the Zhaojin SART plant at metallurgical facilities in China. Both plants have been under BQE's technical supervision since the start of full production. Both SART plants operated fully throughout Q3 2023 without disruption.

In 2021, BQE 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. In Q3 2023, BQE's operations team continued providing water treatment services with the Selen-IX circuit to manage the presence of selenium in the feed.

In 2022, BQE completed the commissioning of a treatment plant utilizing a combination of nanofiltration and its proprietary selenium electro-reduction process for the simultaneous removal of selenium and sulphate from mine water for a base metal project in the American southwest. During Q3 2023, BQE's team completed the performance test milestone for a second newly constructed selenium removal water treatment plant, which entered the operation phase in August, 2023. As a result, BQE is currently providing water treatment operation services for two water treatment plants in the American southwest.

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 2023 are summarized below.

Selenium removal projects:

• Continued the wet commissioning phase of the third BQE-designed Selen-IX plant at a United States mine;
• Deployed on-site pilot testing of Selen-IX demonstration as a key component for permitting of a gold mine expansion in the U.S.;
• Completed a preliminary technical assessment to treat selenium-rich waste water at a power generation site in the U.S.

Water consulting projects (water management, treatability, permitting assistance, toxicity mitigation):

• Completed a technical assessment of water treatment requirements and options for closure and postclosure at a mine in Yukon overseen by the provincial government;
• Continued to provide engineering design services for three water treatment plants to support permitting of the KSM gold-copper project in British Columbia;
• Continued to provide engineering services for design for the construction of a new water treatment plant for water recycle at a gold mine in Mexico;
• Completed the water treatment pilot test campaign integrated into a rare earth elements metallurgical extraction project in Chile;
• Initiated work on an investigation of root causes of effluent toxicity at a mine in Eastern Canada;
• Initiated pilot-scale tests to demonstrate a new innovative method of managing thiosalts in mine effluents at an existing mine in Canada;
• Initiated an engineering review of an existing reverse osmosis plant, with a focus on increasing plant capacity through optimization to avoid major capital expense, for a customer in Chile;
• Completed a laboratory-scale program aimed at increasing water recovery and reducing brine waste for a reverse osmosis system being planned for implementation at a gold mine in British Columbia.

Cyanide management projects (cyanide destruction, recycle):

• Completed a lab-scale program to confirm the design basis for a cyanide removal plant with the discharge limit of less than 10 parts per billion for a project in the U.S.;
• Initiated proof-of-concept lab-scale testing of removal of cobalt and associated cyanide from an existing gold mine in Canada;
• Continued with the engineering design for a third SART plant for Shandong Gold in China.

Commentary and outlook

BQE is remarkably pleased with its Q3 2023 and year-to-date financial results, which demonstrate that the company's strategic focus of rebalancing its revenue sources from the sales of recovered metals to fees from recurring water treatment operations is bearing fruit. On a year-to date basis, BQE's water treatment fees from operations, for the first time, exceeded the sale of recovered metals by $1.3-million. BQE expects this trend to continue and expand in future years.

In the first nine months of 2023, BQE extended its water treatment operation services to four different sites in North America and grew its year-to-date water treatment fee revenues to $5.4-million, an increase of $2.6-million or 94 per cent compared with the same period in 2022. The growth in operation services was facilitated by a new selenium removal water treatment plant in the U.S. entering the operation phase during Q3 2023 and the company's increased role in the operation of water treatment at the Minto mine compared with 2022. Reflecting on the results of BQE's China joint venture operations, it is too early to determine whether the drop in revenue from metals sales is a one-time event due to the lack of precipitation or part of a new long-term trend of diminishing tonnage of metals available for recovery. Either way, the financial impact of BQE's long-term metals recovery operations have been mitigated with the company's current revenue model.

Revenue from technical services, which is generated from BQE's specialized professional services in water management, has always been a forerunner to future operation services. BQE's year-to-date revenues from technical services grew to $7.7-million, an increase of 31 per cent from the same period in 2022, due to several major projects worked on in 2023. BQE is pleased with the successful completion of the pilot campaign for a rare earth extraction project in Chile, where successful integration and performance of water treatment into the extraction process plays a key role on obtaining environmental approvals for the project. The company is also engaged with two new pilot projects: one involving site demonstration of its Selen-IX process at a gold mine in the U.S., where selenium treatment is required as part of the mine expansion, and another related to a site demonstration of a new innovative treatment process developed by BQE to manage thiosalts in mining effluent for a mine in Canada.

Looking ahead to the remainder of 2023, BQE plans to continue executing its existing projects. In the fourth quarter, the company's operating season at its Canadian operations will pause and be winterized due the cold climate, while its U.S. operations will continue year-round. While BQE does expect the revenue from either operation services or technical to be at a similar level when compared with the year-ago period, the company does anticipate weaker results from its China joint venture in Q4 2023 compared with Q4 2022. BQE expects its balance sheet to continue to strengthen as the company enters 2024.

Selected financial information

For a complete set of interim 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 (EPA). BQE Water is headquartered in Vancouver, Canada, and trades on the TSX Venture Exchange under the symbol BQE.

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