Mr. David Kratochvil reports

BQE WATER REPORTS AUDITED YEAR END 2023 RESULTS

BQE Water Inc. has released its audited consolidated financial results for the year ended Dec. 31, 2023.

"We are extremely pleased with our annual results which reflect the stage of the company's growth as we establish new streams of recurring revenue from water treatment plant operations," said David Kratochvil, president and chief executive officer of BQE Water. "In 2023, we expanded our scope in the Yukon and added an operation in southwest America which, together, increased operational services revenues by $4.1-million over last year. Our revenues from technical services also increased by 23 per cent year over year, which helped propel us to new highs in revenues, adjusted EBITDA and net income, and provides us with good visibility with respect to our future growth potential."

Financial highlights

• Achieved record proportional revenues of $22.7-million in 2023, a 20-per-cent increase from 2022.
• Recorded historic high revenues under GAAP (generally accepted accounting principles) of $18.1-million in 2023, a 49-per-cent increase compared with 2022.
• Share of income from China joint ventures was $419,000, $1.1-million lower than in 2022.
• Net income for the year was $2.6-million compared with $1.2-million in 2022, a 128-per-cent increase.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $4.6-million compared with $3.1-million the year prior, a 52-per-cent increase.
• Increased working capital by 47 per cent year over year to $10.5-million as at Dec. 31, 2023.
• Grew net cash and cash equivalents by 27 per cent year over year to $7.9-million as of Dec. 31, 2023.

Selected financial results for the three and 12 months ended Dec. 31, 2023, are as shown in the attached table.

Selected financial results for the last five years are as displayed herein.

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 as shown in the 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 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 12 months ended Dec. 31, 2023, are as shown in the attached table.

During 2023, all three plants met mechanical availability and process performance set by the company. While the volume of water treated increased by 10 per cent year over year, the mass of copper recovered decreased by 32 per cent. The notable decrease in copper recovery compared with previous year can largely be attributed to the resource depletion in the waste rock dumps. The company expects copper production in the coming years to fluctuate around this decreased level based on the lower grade waste rock currently stockpiled.

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 (MWT) and together they 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 12 months ended Dec. 31, 2023, are as shown in the attached table.

The mass of zinc and copper recovered decreased by 69 per cent and 78 per cent respectively. The smelter operated their production lines with ores from different sources which led to varying concentrations of zinc and copper in the feed composition and a fluctuation in the volume of wastewater treated by the plant. The joint venture has no control in the composition and volume of the feed that flows into the plant. During 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 for the 12 months ended Dec. 31, 2023, are as shown in the attached table.

The volume of water treated for the 12 months ended Dec. 31, 2023, are as shown in the attached table.

The company, with its Inuit partner Nuvumiut Development, operates four water treatment plants at Raglan mine for Glencore Canada Corp. From May to December, 2023, the company mobilized its operations team for the 20th operating season at the mine. The total volume of water treated across all four plants at Raglan mine in 2023 increased by 19 per cent compared with 2022.

Since August, 2022, the company has provided operational services for Minto Metals at 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. During 2023, while working directly for the Yukon government, the company's team continued to treat and discharge clean water at the mine for the full season until plant winterization in October.

In 2021, the company began operations of the Zhongkuang SART plant and the Zhaojin SART plant at metallurgical facilities in China. Both plants have been under its technical supervision since the start of full production. Both SART plants operated fully throughout 2023 without disruption.

In 2022, the company began operations of a treatment plant utilizing the company's Selen-IX process to remove selenium from ash pond water for WesTech Engineering. In 2023, its operations team continued providing water treatment services with the Selen-IX circuit to manage the presence of selenium in the feed.

In 2022, the company 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. In 2023, the company's team completed the performance test milestone for a second newly constructed selenium removal water treatment plant which entered the operation phase in August. As a result, the company 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 are applicable globally across broad areas of water management. Highlights of some of the company's technical services and technical innovation projects during 2023 are summarized herein.

Trusted advisory services (water management and water studies)

• Completed a pilot demonstration of selenium removal from mine water using Selen-IX at a gold mine in the United States to meet end-of-pipe limit of less than two parts per billion.
• Completed a technical assessment of water treatment requirements and options for closure and postclosure at a mine in Yukon overseen by the provincial government.
• Successfully completed commissioning of a new water treatment plant at a base metal mine in the U.S.
• Provided water treatment expertise to the executive team of a top-tier metal producer in due diligence for an acquisition of an existing mining operation.
• 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.
• Provided water treatment expertise and laboratory testing services in investigations of effluent toxicity at a mine in Eastern Canada.
• Completed a pilot-scale demonstration of a new innovative method of managing thiosalts in mine effluents at an operating mine in Canada.
• Completed an operations performance and engineering analysis of bottlenecks in an existing reverse osmosis plant in Chile, and prepared a plan for upgrades to increase the plant capacity with minimal capital expense.
• 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 (destruction and recycle)

• Completed laboratory testing and scoping level engineering design for a cyanide removal plant to meet effluent discharge of less than seven parts per billion for a mine in development in the U.S.
• Completed a treatability assessment for the removal of cobalt and associated cyanide from an existing gold mine in Ontario.
• Continued with the engineering design for a third SART plant for Shandong Gold in China.

Commentary and outlook

The company is extremely pleased with its 2023 results, which delivered another set of new highs in several key financial metrics including proportional revenue, GAAP revenue, adjusted EBITDA and working capital.

BQE Water's 2023 financial performance is reflective of the success of the company's long-term business strategy, a key element of which is growing the company's recurring revenues from water treatment operations. This component of its revenues doubled between 2022 and 2023 and represented the main driver of its financial improvement year over year. The strong increase in recurring revenues in 2023 resulted from technical services delivered to customers in prior years since it typically takes several years for these technical services to mature into recurring operational services. The company's business strategy is simultaneously centered on growing recurring revenue from water treatment fees rather than from the sale of recovered metals. In 2023, metals sales represented 20 per cent of its proportional revenues, while water treatment fees grew to 36 per cent of the company's proportional revenues. The company's share of income from joint ventures, which earn revenues from metals sales, represented approximately 14 per cent of its consolidated net income.

Despite the company's positive overall results in 2023, there are also risks and opportunities for improvement. Firstly, in 2023, the company reported a bad debt writeoff due to the insolvency of Minto Metals Corp. This non-recurring expense relates to unpaid amounts owed to the company for services rendered in 2023. When BQE entered into a contract with Minto in 2022, management weighed the risk of the customer's low working capital against the opportunity to provide services to a mine with significant water treatment requirements. When Minto entered receivership in May, 2023, it was the company's presence on site that allowed us to secure a new and expanded contract directly with the government of Yukon. Over all, this new contract more than compensated for BQE's bad debt writeoff. It also provided the company with the opportunity to gain recognition from the government of Yukon, positioning the company well for potential future projects administered by the government in the province. The bulk of the company's operational services are, and will continue to be, provided to mid-tier and top-tier metal producers; however, working with junior mining companies is part of the company's business. As such, BQE will continue to carefully weigh the pros and cons of every contract it enters with a view to minimizing the risk of incurring bad debt expenses without adequate offsets.

In 2023, BQE Water also reported an unusually low share of income from its joint venture with JCC in China due primarily to lower sales of recovered copper relative to prior years. While the mass of copper recovered is expected to decline over time due resource depletion in the waste rock piles that the copper containing wastewater comes from, the waste rock piles still contain a significant quantity of copper and, in management's opinion, the drop in copper production in 2023 will not necessarily be reflective of copper recoveries in future years. The release of copper from waste rock is driven by climatic conditions such as temperature, humidity, and frequency and duration of rain events. Over all, investors should expect volatility in the mass of copper recovered from the JV operations in future years. Fluctuations in the price of copper is and will be another major determinant for the company's net income from joint ventures in the future. As noted herein, the impact from metals sales to the company's overall financial results has and will continue to decrease as its recurring revenue from water treatment plant operations continues to grow over the medium and long term.

Lastly, sales and development expenses and general and administration expenses together increased 27 per cent in 2023. While some of these expenses are expected to increase due to the company's growth, the company has identified multiple opportunities to improve efficiency across the organization with respect to workflow, communication and resource allocation. Executing these opportunities will be management's focus in 2024. Investors can nevertheless expect higher costs resulting from more proactive business development, marketing and investor relations activities, as well as increases in insurance costs and financial audit expenses. Over all, however, the company believes its operating and profit margins can continue to improve year over year due to active management of costs, internal efficiencies and economies of scale. In terms of labour resources, the company's focus will be on improving the utilization of existing resources prior to embarking on any further hiring initiatives.

With respect to the company's outlook for 2024, BQE has relatively good visibility and certainty over key projects and activities. For operational services, the company expects its recurring revenues will continue to increase. In 2024, the company will have the first full year of operations at the newest selenium removal plant commissioned in Q3 2023. The company also anticipates new contracts for operational services in 2024 with North American customers who complete the construction of new plants in 2024 and begin the transition to the operations phase in the second half of 2024 or early 2025. This momentum will be supported by the expected commissioning of its third SART plant in China that is expected to transition into operations in the first half of 2025, providing a similar revenue stream as the first two SART plants. It is important to note that the size and scope of operational services contracts vary, and will continue to vary, based on site specific requirements. For technical and advisory services, the company anticipates the start of construction of one new North American treatment facility in 2024 that BQE designed and helped with permitting in previous years. The company's outlook for 2024 as described herein does not include certain potential major projects because the timing of these projects is not sufficiently certain to include at this time.

In the long term, the drivers for continued growth remain firmly in place and include:

• Tightening government regulations and increased enforcement around water quality.
• Social acceptability of new mines creating a major driver for water management and treatment decisions.
• Global decarbonization driving demand for metals production.
• Outsourcing of innovation in the mine water space combined with the company's record of bringing innovation to market.
• Increased role of indigenous communities in clean water production and environmental monitoring.
• Cleanup and closure of ash ponds as one of the largest environmental liabilities faced by power utilities.

Despite these trends and the company's optimistic outlook for 2024, the company continues to caution readers about the risks that may create sudden and potentially significant headwinds for it and its business. These include geopolitical risks with China, weak inflows of capital into the mining sector, a global recession and/or prolonged weakness in commodity prices. For these reasons, the company remains focused on fiscal prudence and maintaining its working capital at a level that allows the company to withstand exogenous impacts. The company's financial results in 2023 and the current outlook for 2024 support its view that the company remains on track for profitable growth and has sufficient cash reserves to mitigate key risks.

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.

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