Worldwide, is there a single bigger public issue than water? The UN estimates that 900-million people worldwide do not have access to clean water. In 2010, the assembly called on its to “scale up their efforts to provide clean, accessible and affordable drinking water and sanitation for everyone” subsequently declaring access to clean water and sanitation a human right.
The efforts are nearly as urgent on the business side of the coin. Worldwide, water regulations have tightened considerably, particularly in the mining industry, where water contamination is a real problem.
Vancouver’s Bioteq Environmental (TSXV:BQE), which has been working with water treatment technologies since 1998, has a pitch that is hard for many of the world’s larger mining companies and utility operators to refuse. In an increasingly regulated environment, Bioteq has developed a sulphide based process that recovers metals from contaminated water and leaves behind clean water. Old sulphate based treatment systems can’t do this. What’s more, the recovered metals from Bioteq’s processes are byproducts that can be sold to offset the cost of water treatment. Cantech Letter recently talked to new CEO Jonathan Wilkinson about the companies recent refocusing of its effort.
Jonathan, you became CEO of Bioteq last October. What opportunity do you see for BioteQ that made you want to take the job?
When I looked at BioteQ as an interested observer I saw a company that has unique and well proven technologies that can add significant value for customers. Bioteq has a base of well regarded, well established customers, including tier-one mining companies, and leading regulatory bodies, is focused on a space (water remediation in industrial applications) that is large, has clear and compelling drivers and is growing rapidly. I also saw a company that has a talented core of employees. From my perspective, what the company required was a refocusing of its approach to the market in terms of the business models it offers and the channels it uses, and in terms of the skill sets and resourcing that are applied to technology commercialization. The opportunity is clear. As observers of the sustainability space will know, water remediation, has grown significantly in recent years and appears poised for dramatic growth going forward. Rising public concerns regarding water quality, climate change and the availability of clean water supplies are driving significant regulatory change. Water is so much more tangible for the average citizen than matters such as carbon emissions. We know water, we use it on a daily basis and we understand its importance in our lives.
How big do you think Bioteq can get?
I think BioteQ can be a global leader in the development and provision of water treatment solutions to industrial markets, including mining, power generation, and oil and gas. In the six months since I joined BioteQ, we have established a well-defined corporate strategy that is focused on growth. This strategy includes becoming much more proactive with respect to sales and marketing of the company’s technologies and capabilities. We recently added the company’s first VP Sales and Marketing and also recently added a Manager for Latin American Sales. Business Development will focus on the testing and early deployment of the pre-commercial technologies BioteQ has been developing. The major technology in this regard is BioteQ’s Sulf-IX technology for sulphate removal. The focus here will be on initial deployment of these systems into novel applications and into new verticals such as power generation and frac water. We have undertaken a recent reorganization of senior management that has created greater bandwidth and focus for the company’s business development activities. We’re also building systems and processes that enable ongoing process improvement and productivity gains, to ensure on-time on-budget delivery of all projects and stellar customer service. We expect that the changes we have been making will enable us to drive revenue growth and achieve positive cash flow within the next 18 to 24 months.
BioteQ treated 9.5 billion litres of contaminated water in 2011. How scalable is the business and what number do you have to reach before you are profitable?
BioteQ is an industrial process technology company that provides technology solutions for challenging water treatment issues. The original business model for the company was build- own-operate. This helped us commercialize the technology, and develop core competencies in design and operations. But it also meant that we were constrained by access to capital and by the number of customers that wanted a BOO model. Recently, we have shifted our business model to a design-supply model, while still offering operating services as an option to customers. Essentially we are endeavoring to become a technology solutions provider. Over time this will mean that revenues associated with system sales and with operating contracts will become more important than revenues derived from the sale of metals extracted at plants in which we have an ownership stake. We believe that with this shift in focus, the business will be capable of achieving scale rapidly. In 2012 we expect to increase our revenues by at least 30% and reduce cash consumption. Our expectation is that BioteQ will generate positive cash flow in 2013.
You mentioned you just hired your first sales manager in Latin America. What’s the potential of that market?
Latin American offers very significant opportunities for BioteQ, particularly in the mining industry. The mining sector in Latin America accounts for about 30% of new mine development globally. This market offers companies like BioteQ a tremendous opportunity to deliver process solutions that can address the region’s water scarcity issues and can enable mining firms to meet water discharge regulations, which have been tightening considerably in recent years. To penetrate this market, BioteQ has developed a channel partnership with EcoMetales, a wholly-owned subsidiary of Chilean mining giant Codelco – and has signed another agreement with Grupo Mexico. In addition, we have established a regional office in Santiago and have recently hired a Sales Manager for Latin America. BioteQ is presently working with Kinross Gold at its Maricunga project in Chile and we expect to secure additional projects in Latin America this year.
BioteQ recently has agreed to settle its legal action against NWM Mining. Are these types of lawsuits a risk potential shareholders of your company should consider going forward?
As BioteQ shifts away from a build-own-operate business model, we reduce the risks associated with having fixed assets on sites owned by other parties. This will reduce the likelihood of such lawsuits arising in future. In addition, BioteQ has learned from past experiences and has implemented more rigorous counter-party/customer risk assessments in our sales and contracting process, to reduce the possibility of non-payment by a customer. We do not believe that new lawsuits are likely going forward and do not believe that this issue constitutes a significant risk for the company or its shareholders.
How is the regulatory environment affecting your big picture, worldwide? Are environmental laws becoming stricter?
The regulatory environment is a key driver in the water treatment industry. We are seeing a trend toward tightening regulations for both water quality and water use plus increasing concern about environmental liabilities associated with disposal of residual waste by-products. These factors are changing the way that technologies are evaluated. While price is important, we find that our customers are equally concerned with the long-term environmental impact, and the ability to comply with strict regulations. This benefits BioteQ, as our technologies recover useful by-products, produce very clean water, and can eliminate residual waste. This ultimately reduces the life cycle cost for water treatment, which helps improve the bottom line for our customers.
You mentioned in the notes accompanying your fiscal 2011 numbers that BioteQ expects revenue will increase to at least $10-million, an increase of more than 30 per cent compared with 2011. Can you provide some detail on how that will happen? Will you be servicing more waste water treatment plants?
We expect to increase revenues by at least 30% in 2012, driven by increased revenues from existing operations and new contracts for plant sales and engineering. Our existing operations are expected to generate about $6 to $7 million in revenue, based on current commodity prices and production levels. The remaining growth is expected to come from new contracts. We have already delivered a new treatment system to a customer earlier this year which will contribute about $1 million in incremental revenues. To ensure that we secure additional new contracts, we have increased our proactive sales efforts. We have recently created a new position, and hired Andrew Hall as our VP Sales and Marketing. Andrew brings senior executive experience and a proven track record in technical sales. His skill set is a good fit for BioteQ – he has degrees in Chemical Engineering and Business Administration and has experience in the mining industry. In 2012, we expect to close a commercial plant sale with one of our channel partners, close a plant sale or significant operating contract in Latin America, and we expect to undertake a pilot in a market vertical outside of hard rock mining. Achievement of these milestones will enable BioteQ to provide robust financial performance in 2012, and will position the company for additional growth in 2013 and beyond.