Hazer Group Limited

Good morning, everyone. We're just going to be taking a few seconds to let people join the conference, and then we'll be starting the webinar. Good morning, everyone. Thank you for joining Hazel Group's webinar to update you on the company following the release of the third quarter report. On the call today, we are joined by CEO and MD Glen Corey and CTO Tim Forbes, who will discuss the report as part of a brief presentation. We will answer your pre-submitted questions at the end of the presentation. If you would like to ask a question today, please use the written Q&A facility at the bottom of your screen at any time during the webinar. The company will endeavor to answer all of the questions in the permitted time. Any questions that are not answered on the webinar will be followed up where possible. Questions have been consolidated where they cover the same topic. So your question may not be read exactly as you have written it. The webinar will be recorded and it will be posted to the Hazer website in the coming days. I will now hand over to Glenn to begin.

Thanks, Krista. Hello, everyone, and welcome to our Q3 results webinar. I'm Glenn, the CEO of the Hazer Group. It's great to be here again. Joining me on the call is Tim Forbes, our Chief Technology Officer. He'll talk to some of the positive signposts coming out of our CDP very shortly, and then we'll jump as soon as we can into Q&A. Our agenda is as follows. First, we want to touch on the quarterly highlights. That'll be myself. I'll then pass it over to Tim, who'll give an update on the CDP and speak to all the really good progress that we're making. There in particular in our first two and a half months of operation. I'll then talk briefly about our corporate update. And then before we open up for Q&A, I'd like to reiterate our strategic priorities for the 2024 calendar year. Moving into our Q3 highlights, we put our report out on Monday. You'll have seen the headlines. It's been a big and, well, very pivotal quarter for Hazen, a very important one in terms of the development of our technology at scale, in particular since our previous pilot plant between 2017 and 2021. Firstly, we have brought online our commercial demonstration plant. We're now producing hydrogen and graphite, And I really want to underline the significant milestone that this is. It is a world first commercial level demonstration of the hazer technology and the hazer process. And I believe, to be validated, I believe this is the second largest clean hydrogen production facility in Australia. So that does give you some, I guess, insight into how quickly we can scale this technology to commercialization. Secondly, it's hard to believe we've been online for only two and a half months. The test program, which Tim will talk to shortly, is on track. We've just done a third successful run post the end of the quarter. We've now achieved over 50 hours of continuous hot operation. And we've got a lot of positive signposts coming out of the CDP test program. And again, Tim will talk to that shortly. Thirdly, we have a robust funding position. for accelerating our technology and the commercialization phase of our business. Thank you to the support of all of our shareholders for the 14 and a bit million dollar capital raise, both our placement as well as our share purchase plan, which was oversubscribed. In addition to that, we've also unlocked another near on a million dollars from our arena, the Australian Renewable Energy Agency arrangement and agreement, which does again point to the good progress we're making at the CDP. Our business is low burn. We've now got an extended runway. through some really significant milestones for the company. We've got lots of funding flexibility, a discretionary portfolio, zero debt. And we've got throughout this year and into next year, other non-dilutionary inflows of capital expected. In particular, every year we receive a fairly handsome R&D rebate. Finally, I spent a week or less than a week in Houston at Sarah Week. I'll talk a little bit about the headlines coming out of there, but I do want to highlight that methane paralysis, what we do as Hazer, featured very heavily there in the spotlight. Moving on to our commercial demonstration plant, I'll hand it over to Tim very shortly, but again, just underlining, it's a significant achievement for the company to have our CDP now online. It is the first time we've had this technology operating at a commercial demonstration level and scale. It is the world's first fully integrated demonstration of the Hazer process. We're about validating the technology on a commercial basis on a continuous level. We are using biogas as a reminder. as the gas supply from the Water Corporation, which does actually make our CDP carbon negative. So that's a massive tick from an environmental perspective. And again, supported effectively all of the grant funding that came from ARENA. And we're again, proud to be working alongside Water Corporation. First hydrogen and graphite production was this year in January. We have spent $105 million on this technology over the last 15 years. We've successfully proven and scaled it up five times over that time scale. And we're now moving into the commercialization phase with bringing our CDP online. Tim, I think that's a good time to hand over to you for an update on the details and results coming out of the initial runs.

Yeah, thanks, Glenn. And good morning, everyone. Great to be here again. So in terms of where we're at with the CDP, as Glenn says, it's super exciting for us to have this facility built and now operational, and we're making good progress on our test program. So we do have a test program plan that is campaign based where we'll run some specific tests, have a plan shut down, complete inspection analysis before continuing on to the next test in the plan. The ultimate objective of this is really to demonstrate long-term sustained continuous operation. And it's that learning in the early phases that is going to enable that long-term continuous operation. Now, in terms of the benefit of the scale that we're operating at here, I just want to highlight again that this is at a commercially relevant flow regime and hydrodynamics. So what does that mean? That means that the risk in performance predictions going from this to the next large scale design is substantially de-risked. So going from pilot scale to the CDP is a big jump and the next jump is much smaller. And that's around wall effects, bubble size versus reactor and a bunch of technical details. But this is a big step in de-risking the technology. Glenn, can you jump to the next slide, please? So our early results are in line with expectation and give us confidence in the ability for the technology to perform at scale. What we've been working through in the first few runs really is finding out commissioning issues. So things like optimizing procedures, tuning control loops, adjusting valve sequencing things, typically ancillary equipment to help improve reactor control and stability. And the core technology performance in terms of hydrogen and graphite production is in line with expectation and gives us confidence in the ability for the technology to perform at scale. And as we iron out these commissioning challenges, we think we're getting pretty close to achieving the 100 hours and beyond operation. Next slide, please. So in terms of what are we really trying to achieve with the test program, that really fits into three pillars that if we achieve the objectives in these areas, that'll give us the confidence in the technology performance to convince our project partners to proceed with project commitments. So these pillars are number one, producing hydrogen and graphite, just demonstrating the technology works. And from run one, we've produced substantial amount of hydrogen from the initial startup. Next up after that, we'll be producing larger volumes of graphite with steady and continuous operation and consistent product quality to enable us to move into the next round Tim Jones- Product development testing to progress towards commercial off take that's hydrogen graphite production next up continuous operation. Tim Jones- So this is about demonstrating control of the process and also understanding long term performance and any performance degradation due to fouling and and things like that so. Off the bat, we've got the 24 hour run completed and we're up to 59 hours in run three. We'll be aiming to get to 100 hours and beyond with the ultimate objective to be running for many months continuously, as well as demonstrating steady state operation of our solids handling equipment. And then lastly, the hydrogen and graphite production rates from the equipment will be used to validate large scale commercial reactor design, hydrogen production requirements, prove the ability to produce high purity graphite at a reasonable amount of catalyst consumption. And in general, we'd say we're on track and we're confident we've got sufficient margin in our design and we directionally expect improved results as our reactors get bigger in the larger scale design. So things are progressing well. We'll be looking to provide results, material results when they're available. We're looking forward to reporting back with some green dots on the scorecard here in the near term. And I'll hand over to Glenn from here, thanks.

All right, thanks, Tim. I will add that myself and the board spent half a day yesterday at the CDP. I think it's fair to say that with the mods and the tweaks that Tim and the team and the operations group down the side have made, we're going into the next campaign with quite a lot of confidence in our ability to continue that progress of ramping up run times and results. Just shifting gears into Sarah Week, for those who are not or less familiar with what Sarah Week is, I guess it's called the Super Bowl of Energy, but it is one of the, I guess, more prestigious gatherings of energy leaders. So it had more or less all of the oil and gas, the global energy CEOs, boards, national companies, global energy leaders, think tanks. So a big gathering, I think it was over 9,000 participants. We were excited to be there. We were invited actually by an Australian delegation. So again, just great to be there showcasing our technology up against others and being part of the dialogue on the world's largest energy stage. The big players were there. I had the opportunity to spend time with many of them, in particular, our foundation partners. that we've got from Canada, Europe, and Asia, as well as tier one prospective customers for our technology. So being able to connect face to face with existing as well as prospective customers was a really important forum for us. Two things I really wanted to point out here that I think are relevant to Hazer technology, gas, the second point there, gas is a transition fuel. It's often referred to as that, but it's also a long-term fuel. And that was a consistent message Coming out of CERA week from many of the leaders, the longevity of gas and its significant role in the energy transition will be fundamental. And why is this important is because Hazer uses methane rich gas, LNG, natural gas, biogas, wastewater treatment gases as feedstock. And this underscores the advantage that Hazer has as a technology to accelerate the transition to clean hydrogen much faster than any available technology today. The second thing, probably more exciting, is that methane paralysis is what Hazer does, is on the map. It featured very heavily in many discussions, many debates, as the most, if not the, well, as a very affordable, if not the most affordable pathway to clean hydrogen. And I do remember a panel where one of the senior representatives from the DOE, the US DOE, the Department of Energy, referred to methane pyrolysis as being in vogue and sexy. So I think our strategy is clear. We're in the sweet spot now. Pyrolysis and the narrative is shifting towards gas and pyrolysis. So we feel like we're in a really strong position from a strategic perspective. You've seen this slide many times. For those who haven't been around the story, just a quick recap on what we're about as Hazer. We're developing a very innovative, disruptive, low-cost, low-emissions methane pyrolysis technology that essentially takes a methane-rich feedstock, gas, pipeline gas, LNG, biogas, wastewater treatment gas, and we essentially split it into clean hydrogen and hydrogen high purity graphite. We use iron ore as a catalyst. That's the intellectual property on the company that significantly reduces the process temperature of what we do relative to the competition and the others that are out there doing pyrolysis. Think of us as one technology that serves three very valuable markets, the growing hydrogen market, the critical mineral market through graphite and industry decarbonisation. One of the hearts or at the heart of our technology is fluidized bed reactors, which is a proven technology that's been repurposed from the refining and metallurgical industries. And that's attracting a lot of interest in HAZR and our ability to scale. Tim, I don't know if you'd like to kind of refer to or mention anything about fluidized bed reactors in your perspective.

Yeah, just briefly mindful of time, want to get to the Q&A, but I've been working on fluid bed reactors in the refining industry for 17 years now, and I've seen a lot of large ones. And so when we look at the Hazer technology, we're redeploying existing tech in a new application. And so we see that as fairly low risk technology. but it is really exciting in terms of the scale of fluid bed reactors are deployed already gives us confidence that we can compete on scale with incumbent technology, steam methane reforming. So what does that mean? We have line of sight to achieving 50,000 tons per annum, single train reactor capacity. And when we look at our competitors, it's not clear that technologies like plasma, methane pyrolysis, are going to be capable of going beyond 5,000 tons per annum. But we see that as a key differentiator and may be able to achieve up to 10 times the capacity of competitors. And we see that as a significant advantage and opportunity to deploy at low cost. Thanks, Glenn.

Size is big. You've seen this in many of our investor presentations. The chart on the left shows today's hydrogen market. The number in the green box I refer to many times. The size of the market is large. I mean, the hydrogen market today is almost 100 million tonnes per annum. It's at least a quarter of the global LNG market. It's valued at $180 billion. As Tim referred to, that grey wedge of today's hydrogen production is dominated by a process called steam methane reforming. every tonne of hydrogen produced with steam ethane reforming or SMR comes with 10 tonnes of waste CO2. So it's a significant issue for industry where you have a large footprint of CO2. That is Hayes' disruption, the ability to replace and disrupt today's market with a technology that is quite similar, where we have the same feedstock, SMR has CO2 as a waste product. Hazer has both hydrogen and graphite as a co-product with zero emissions. So a real disruption for market. Tim referred to electrolysis and electrolysis, just pure chemistry. It's seven times harder to split water than it is to split gas. So always going to see electrolysis on the higher end of the cost curve. Hazer, unique position in this market and disruptive against the incumbent technology today. We'll finish off with the strategic priorities for the business. It's a transformational year ahead. You've heard me say that many times. We're catalyst rich. We've got three focus priority areas, which are aligned with our strategy of commercializing, scale up and growing our technology. First of all, we're laser focused on delivering the CDP test program, as Tim referred to, and validating commercial readiness for our tech. as well as unlocking the graphite value. We haven't spoken a lot about that this morning, but there's a real value kicker as a co-product here and a critical mineral. And I don't want to lose sight of that because we are seeing a growing interest in our graphite. We've got a strong partnership with Mitsui in Japan, which is helping us to to market and explore the potential offtake for graphite. Secondly, we are making material progress on foundation projects. We're advancing our first commercial project in Canada with Fortis towards a development decision. First project's always a bit harder. The last 5% is never the easiest, but we're continuing to drive forward there and building momentum. And then, of course, fast followers through France and Japan. And then thirdly, we've got a deep pipeline. We've got a bunch of strategic discussions, strategic partnerships with other leading tier one companies. customers in sectors like steelmaking, refining, petrochemicals, on the graphite side, energy storage. So there's lots of dialogue. There's at least 20 to 25 potential customers in the pipeline already. The interest has multiplied since our CDP has come online. We're not where we need to be yet, but I would be very disappointed if this year we don't have more customers to report. I'll finish there, Krista. You've seen our compelling investment thesis many times. This is a disruptive technology, very uniquely positioned with tier one partners helping us to validate the technology and decarbonize their business. We co-locate like that photograph or that image there alongside customers where we can decarbonize their businesses on site where the demand is for the molecules. We execute a CapEx light model that minimizes our upfront CapEx or an exposure to to CapEx and unlocks early free cash flow for our business. And, you know, yes, there's risk in technology plays, but the upside, as you've seen, is fairly significant here. We've done significant de-risking of our CDP and our technology. And I think we've got a really clear pathway now to commercialization. We've been on this journey 15 years. It was a concept back then. It's now a business and we're looking forward to driving momentum this year.

Thank you, Glenn. We'll now move on to the Q&A session of the webinar. I'd like to remind you now that if you wish to ask a question, please use the Q&A button at the bottom of your screen. We'll try to answer as many questions as we can during the session. We'll kick off with some questions we received in advance. Keep in mind, your question might have been consolidated and you might not hear it exactly as you've written it in. The first question is one that we did receive from multiple people in advance. The question is, when will you reach 100 hours? What does 100 hours mean as a milestone? And when can the market expect to be updated in respect to the plan's results in this regard?

Tim, I'll let you take the 100 hours and beyond point. But in terms of reporting, we're going to report a lot, you know, to the extent we can. You know, this is a very, look, we've got IP around the technology. It's important we protect that. We're a public company and there's a lot of peers and competitors out there that, of course, will benefit from us reporting stuff. But to that extent. We've got a leading position. We've got a lot of results to report. We'll report them as and when the material ones come to hand like we have been. So expect a number of updates this year and in the short term as we get through some of those key milestones that Tim talked to. Tim, would you like to add on the $100?

Glen Robson- That was point yeah yeah thanks Glenn so when are we going to achieve it, I think the best answer I can give there is as soon as possible. Glen Robson- And it's it's going to be pretty close, but you know if I look at the plan operation, the first 24 hours is hardest because you're working through any number of commissioning issues and where we were at you know third campaign. is we were in a much more controlled, stable operating state. So I think it's gonna happen very soon and we very much look forward to announcing on that success. Now, what does it really mean? The 100 hours itself is not a magic number in itself. The long-term objective is for large-scale commercial plants to run for many months, if not years continuously and demonstrating continuous, stable, reliable operations, that 100 hours at the demonstration level is the first step there. We also need to be mindful that the demonstration plant is not designed for commercial reliability, but we will expect grips on ancillary equipment. The size of the plant makes it difficult to design for commercial reliability. We also want to move fast and be prudent with our spending. Tim Broyd, So that there are reasons why we might achieve much less than the many months in the demonstration plan for that gives us the data to substantiate our ability to do many months continuously in a large scale commercial plan.

Thanks TIM, the next question comes from Katrina G hi are there any plants plants to use bio gas, if not, why not.

Yes, Katrina, we are using biogas currently at the CDP. In fact, that was one of the reasons why we attracted ARENA funding. I think there was another question that came through as well on biogas facilities. So we've got actually process at the CDP where we can plug into wastewater treatment facilities. We've got the pretreatment, we've got the facility and the design set up for that. So I think it's an easy hop into that sector. So it is part of the commercialisation strategy that we're exploring. Where are there wastewater treatment plants where we can plug in our technology? It's not as, I guess, a bigger market as some of the industrial markets that we've spoken about, but absolutely the fact that we are using biogas, we've proven that we can take the dirtiest of gases in biogas and clean it up to the cleanest of and fuel cell grade hydrogen, I think is a big feather in our cap and puts us in a very strong position to support biogas facilities and wastewater treatment facilities around the world.

The next question comes from Lance H. We have over 300 water treatment plants here in Australia. Should we not be constructing Hazers hydrogen and graphite plants wherever possible to give Australia the edge on the rest of the world?

Absolutely. I think we just talked to that a little bit, Krista. So I think we're in a good position to do that. I would like to see a lot more of our activity in Australia, to be fair. There's not a massive hydrogen market here relative to the rest of the world. That said, we've still got some interested parties. We do see a window to work with some big players here in the ammonia sector, as well as partly in the steel sector. And we'll continue to keep those dialogues live as we work through the global portfolio.

Next is from Robert K. Has Hazer conducted a business threat assessment for gold hydrogen? Can Hazer be competitive with gold hydrogen?

Gold hydrogen, for those less familiar with what gold hydrogen is, thanks for the question. It is effectively drilling for hydrogen resources under the ground. I've been in the energy sector 30 years i'm not aware of any large pure hydrogen deposits today that's not to say there aren't any um but uh i think with any drilling activity in any resource um exploration activity there's always going to be exploration risk that's the first thing exploration wells don't necessarily carry very high probability success if you are lucky enough to find the resource and develop it which is normally on pretty long development timelines there is the issue of location. You would be, I hope, extremely lucky to find a large resource of hydrogen where the customer needs it. So there will be that transportation requirement if a resource is discovered and developed. So I can't envisage it to be on the low end of the cost curve. So I think it'll be, from a threat perspective, not necessarily on our immediate radar. I think there's other things that we'd be probably more worried about than gold hydrogen, but good luck to those that are out there exploring for it. It's a little bit of a roll of the dice, but some can be lucky.

Our next question is from Adam M. regarding Fortis VC project. When do you expect to announce the final investment decision and is it contingent upon running the CDP successfully for 100 hours?

Second bit, first, yes, a little bit. Of course, having the CDP operating, as Tim referred to, is an important aspect for Fortis. I was actually in Canada recently visiting the CEO and some of the senior leaders of Fortis. really committed to the project, excited about what we bring to their portfolio in terms of decarbonisation. Look, we're driving towards an investment decision. It is the first project, so it's always going to carry a lot of focus in terms of getting there. I think the elements and the main components of a development decision are really coming together. The feed study, as you will have seen in our quarterly report, the initial phase of that is completed. The site selection is ongoing in Vancouver. Once that is assessed this year, then I think we'll integrate the feed work and then we will have all of the dimensions and components for a development decision. We're targeting something as soon as we can. As early as this year would be an absolute target for us. So that's the current focus for both Fortis and ourselves at the moment.

We've had a number of graphite questions come in. What are some of the promising commodity scale, lower value applications for the graphite co-product who owns the hydrogen and graphite that's produced in the licensing model?

Tim, why don't you talk a little bit to graphite markets, kind of all of the work that we're doing at the moment?

Yeah, thanks Glenn. So in terms of potential applications, we see potential large scale commodity type applications in Steve Grafton, Steel industry blending into concrete and blending into ash asphalt so we've got a range of early phase testing so we've only just started up the CDP. Steve Grafton, And so the testing is on historical pilot plant graphite material, there is a lot of interest from the steel industry and we'd expect incremental emissions reductions in a in a range of. uh applications within steel i think we've got dialogue with over 10 steel makers at present on that and then we also see other uh probably a bit longer term applications so potential water purification pfas removal um and even we've got some testing data on application in batteries, which is probably more of a long-term objective, but we see many opportunities over a range of market sizes and price points. In general, we're optimistic and we're really excited to get the largest scale graphite production volumes to progress the next round of testing through the next phase and secure those outlet opportunities.

Yep. And I think thanks Tim. And I think just, I've just spotted a few questions in terms of the CDP, but we're aiming also, it's not designed for this, but we're aiming to also monetize the graphite coming out of the CDP. It's not a huge volume, but we've had a lot of interest in testing and a lot of interest in large volumes. Again, it's a commodity that is out there that we think has got significant value. That's just due to the feedback in the market from Mitsui and all the dialogue we've got going into the extent that we can monetize what's coming out of the CDP. In particular, the graphite will do it. So we're actively exploring that. And as Tim said, we're testing along the way. So there's a lot going on at the CDP as a demonstration plan and trying to monetize some of that commodity coming out of it.

I do note the time at the moment. Glenn, would you be happy to answer a final question here?

Yeah, sure.

From Robert S., what are the biggest delays, barriers, roadblocks Hazer is facing? And is the licensing becoming clearer looking over the next 10 years?

Very good. Look, I think that's a really good place to finish. Look, we've spent 15 years on this technology journey. You've heard me refer to that many times. Concept, idea to a commercial business in 15 years is a big journey to be on. It's $105 million of CapEx or capital invested into this platform, successfully scaled up five times. That's our commercialization story. What's our biggest risk? Frankly, from my perspective, As Tim referred to, we've de-risked a lot of the technology. We're coming into this now with confidence. This technology can deliver a competitive, low-cost hydrogen, clean hydrogen solution for customers. We know that because we're getting the demand for it and we're still building. So we're running as hard as we can from a technology perspective to meet the demand. And that is what excites, I think, most of us, as well as hopefully a lot of our shareholders. Commercialization is always the more difficult bit. Taking it from a science project to a business into a commercial business is the biggest step. We've got three foundation projects. One of those in particular is advancing at pace from a commercial perspective. The first is always the hardest for those that have been around technology ventures. But we're working our way through it. We've got a very supportive team. partnership there with Fortis BC and we expect to and we hope to be able to deliver some visibility on commerciality this year. Behind that we've got a whole bunch of other prospective customers. I can't tell you today whether Japan or France is going to be the next because we've got others that are coming but They have been very supportive of what we're doing, and I hope that we can convert some more of those and others into the commercialisation phase this year. Biggest risk, pace, in my opinion. We've got to keep running hard. The market is there. The stars are aligning in terms of the ability to disrupt this market. There are competitors. We are at the front of the pack, and we've just got to keep pace. So that's, from my perspective, our biggest risk. And, you know, we're excited and we thank shareholders for all the support that you've given us over our journey. And we look forward to continuing to unlock value for everyone that's supported us.

Thank you, Glenn. This concludes today's investor webinar. This has been recorded and it will be posted to the Hazer website. For the questions that unfortunately weren't able to be answered today, we'll be following up where possible or incorporating them into future public releases. Thank you again. Thank you. Thank you. Bye. Bye.