In their Third Quarter 2023 Conference Call, PureCycle Technologies provided an operational update, detailing the challenges they faced and the progress made. Despite the hurdles, the company has made significant strides in improving the reliability of utilities and solvent operations and has successfully processed a considerable amount of feedstock. To address issues with adsorbent bed leaks, the company plans to install an automated screen changer during a two-week shutdown. Despite the challenges, PureCycle remains confident that their technology works and is committed to delivering strong production.
Key takeaways from the call include:
- PureCycle has processed 410,000 pounds of feedstock and produced on-spec product for various blends, demonstrating the effectiveness of their technology.
- The company is dealing with production rate limitations due to adsorbent bed leaks. An automated screen changer, scheduled for installation during a planned two-week shutdown, is expected to significantly improve operations.
- PureCycle has made significant improvements in reducing plant utility usage, reflecting positively on the overall business economics.
- Despite facing issues in the pelletizing process, particularly due to leaking adsorbent beads, the company has developed two prototypes and is hopeful that an automated screen changer will improve the process and production.
- The company addressed a recent short report, stating that while it may contain some elements of truth, overall, it is inaccurate and not worth much attention.
- PureCycle is confident in the seal design of the Scheibel column and their ability to maintain temperature and pressure in the process.
- The company plans to use a blend of agglomerate and post-consumer recycle (PCR) to achieve 100% PCR production after the planned outage.
- PureCycle expects the plant to run continuously at high rates in December, following the planned outage.
- The company acknowledged disappointing Q3 performance but expressed confidence in their ability to deliver volumes as defined in the agreement in December.
During the call, Dustin Olson, a representative from the company, mentioned that they had achieved high production rates across the plant, reaching approximately 77% on the feed extruder and 110% on the final product extruder. The upcoming outage, expected to cost less than $2 million, will address various issues, with a focus on getting the screen changer up and running to eliminate problems with beads.
In terms of financials, the company expects a quarterly burn of $10 million, excluding operations in Ironton and corporate allocation. Despite the challenges, PureCycle (NASDAQ:PCT) expressed optimism about completing the screen changer in November and meeting their production goals in December. They also discussed the potential impact of carbon market regulations and the possibility of an Antwerp facility following Ironton. The company remains committed to resolving these issues and communicating their successes.
InvestingPro Insights
While PureCycle Technologies is making strides to improve operational efficiency, InvestingPro data suggests caution for potential investors. The company is rapidly burning through cash, which is a concern highlighted in the InvestingPro Tips. The stock has also taken a significant hit over the last week, month, and even six months, indicating a downward trend. Furthermore, PureCycle has not been profitable over the last twelve months, a fact that might deter potential investors.
InvestingPro also points out that the company suffers from weak gross profit margins, which could be a result of the operational challenges they have been facing. The stock price movements are quite volatile, reflecting the uncertainty surrounding the company's future. The valuation implies a poor free cash flow yield, which is another red flag for potential investors.
In light of these InvestingPro Tips, it's clear that while PureCycle Technologies is working hard to overcome its operational challenges, investors should exercise caution. For more comprehensive analysis and additional tips, consider exploring InvestingPro's resources. They offer a wealth of information, including over a dozen additional tips for PureCycle Technologies alone.
Full transcript - PCT Q3 2023:
Operator: Good day, and thank you for standing by. Welcome to the PureCycle Technologies' Third Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Charlie Place, Director of Investor Relations. Charlie, please go ahead.
Charles Place: Thank you, Stacy. Welcome to PureCycle Technologies' Third Quarter 2023 Corporate Update Conference Call. I'm Charlie Place, Director of Investor Relations for PureCycle and joining me on the call today are Dustin Olson, our Chief Executive Officer; and Larry Somma, our Chief Financial Officer. This morning, we will be highlighting our corporate developments for the third quarter and subsequent to quarter end. The presentation we will be going through on this call will also be found under the Investors tab of our website at www.purecycle.com. Many of the statements made today will be forward-looking and are based on management's beliefs and assumptions and information currently available to management at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in our Safe Harbor provisions for forward-looking statements that can be found at the end of our third quarter 2023 corporate update press release and in our quarterly report on Form 10-Q as well as on other reports on file with the SEC that provides further detail about the risks related to our business. Additionally, please note that the company's actual results may differ materially from those anticipated and except as required by law, we undertake no obligation to update any forward-looking statement. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties including, among others, changes in connection with quarter end and year-end adjustments. Any variation between the PureCycle's actual results and the preliminary financial data set forth herein may be material. You are welcome to follow along with our slide deck or if joining us by phone, you can access it at any time on purecycle.com. We are excited to share updates from the previous quarter with you. I will now turn over -- turn it over to Dustin Olson, PureCycle's Chief Executive Officer. Dustin?
Dustin Olson: Thank you, Charlie. Thank you for joining the call. We are excited to share an important update with you today. Our focus today will primarily be on Ironton operations. While Q3 was a challenging quarter for Ironton, I'm proud of the tangible operational progress we are making. We have adapted and overcome numerous start challenges thrown our way and continue to push this project forward. One notable area of progress has been in our utilities and solvent operations, which are core to reliability. You can't run without electricity and steam, and you can't run without proper control on solvent circulation. Over the past 4 months, we've made good progress, improving the reliability of both operations, and we believe this will continue to improve. Despite the numerous mechanical headaches, which we will discuss, we have successfully been able to process 410,000 pounds of feedstock to the purification system. While this level is not what we had originally expected, this number does validate that our technology can recycle large amounts of feedstock and remove contaminants. This number could have been dramatically higher if we had not constrained our ability to pelletize, which I will discuss shortly. We are continuing to learn and evolve our process IP, and we're confident that we can control and manage the system. While overall production rates were limited in Q3, we have shown the ability to run high levels of rate across our 3 operational steps: PreP, feed extrusion and product extrusion. Once utilities and solvents were working reliably, we then push feed rate. During these operational windows, we were able to show the following key operational rates: 14,000 pounds per hour of PreP feed rate, which is approximately 97% of nameplate; 9.400 pounds per hour of feed extruder flow rates, which is 77% of nameplate, note, this was achieved with only 1 extruder, we have to and we intend to run both extruders at the same time; and 13.4000 pounds per hour or 109% of nameplate flow rates across the final product extruder. These are good indicators of the system's ability to run nameplate rates, once we get our uptimes improved, we expect to see exponential increases in production rates. We've also continued to expand the range of feedstocks we can utilize. We've run 4 different types of post-industrial recycled material or PIR, at different melt flow rates, 5, 10, 15, and 20 and also pushed both PCT PreP Agglomerate, which is raffia and super sacks and flake produced from post-consumer recycle waste. In addition to showing progress on rate, we've successfully produced on-spec product for our PIR and for various PIR PCR blends. We continue to test various mixtures of feedstocks in conjunction with product quality, so that we can predictably produce reliable offtake for our customers. Getting product to spec was recently verified by our first production shipments to Formerra last week and to Milliken this week. These shipments are a key initial step in enabling our customers to drive towards their sustainability goals. One area of nice upside in the quarter was around the development of our plant utility usage or variable cost. We've closely monitored the electricity and natural gas consumption across the facility during all operations, and it is very apparent that the actual electricity usage is significantly lower than the original preconstruction estimate. While this is still early in our learnings, we are encouraged by the potential here. This continues to support the overall business economics of our facility. Additionally, low current feedstock pricing, competitive variable price, variable cost, and a differentiated product pricing give support for a strong business model. Clearly, the start-up in Ironton has not been without challenges. Honestly, as I think back over the last 12 months and remember all of the challenges that our team has faced, it gives me great pride despite the frustrations. I'm so proud of the technical and operational resiliency of our team. The unexpected design, installation, or operational setbacks that we faced have been hard, often poorly timed, and very technically challenging, yet our team persevered. Look, I know it's incredibly difficult for the outside world to see inside of our bubble. And with new technology, the issues often take more time than expected. We recognize that it can be very frustrating for our stakeholders while we troubleshoot through these operational issues. Please understand that the entire PureCycle team is committed to resolving these issues and communicating our successes. But note, it's important for our team to have a clear understanding, resolution, and path forward before communicating to the external market. One area that has limited our production efforts the most has been associated with the adsorbent bed leaks, which resulted in bead contamination. I will discuss this more in the next few slides, but it has stalled our ability to achieve any meaningful production progress. We worked through several different potential short-term solutions, but in the end, they just didn't work well enough. Therefore, we are now installing an automated screen changer over the next 2 weeks, which we believe will significantly change the trajectory of our operations. The screen changer is a commonly used piece of equipment, which will enable us to automate the removal of beads and run the pelletizer continuously. Few days ago, we started to deinventory the unit in preparation for a shutdown that is expected to last for 2 weeks. This outage is instrumental for our ability to achieve high rates. It not only allows us to install an automatic screen changer, but we plan to have -- we plan to also take advantage of the outage to implement a number of improvement projects to fix less invasive but equally frustrating operational headaches. In the end, it is our responsibility to make products and to make profits for our shareholders. And for that, I'm fully committed. After the outage is completed, we will restart the production at 50% rates. We will work our rates toward higher levels with the express goal to make 4.45 million pounds in December. We have a well-planned feed and production strategy for that activity. We have seen this progress -- process work and work well, and we are excited to implement the changes discussed. The key message to shareholders coming out of this update should be that our technology works. We are recycling feed, we are removing contaminants, and we are getting on spec product to the system. While beads have been a hindrance to production rates, with this 2-week outage, we believe that we are better positioned to deliver strong production. Startups are hard. This was never expected to be easy, but we are building more operational momentum. We are also really excited about our product quality. We had good early indication of success that we discussed in prior calls. We show the side-by-side appearances of the pellets in prior presentations, we are now making on-spec product. Odor, color, both look good across the PIR and PIR PCR mix feedstocks. Also note that we completed commercial shipments of our on-spec material to both Formerra and Milliken. We're thankful for their continued partnership and excited about the applications they will develop with this material. If you take a close look at the picture on the bottom left, you can see what the PureCycle process is removing from our feedstocks. This is our co-product #1. It represents the contaminants that were present in the feedstocks. It smells just as bad as it looks, but we continue to receive numerous market inquiries for this product in construction, roofing, and other base petrochemical applications. The left picture shows it freely flowing and the right picture shows it's solidified after cool. I believe there is no greater example of our technology working than seeing contaminants of this quality being removed from our feedstock. They say it is unexpected that surprises and challenges you. That is certainly the case with this plant. I've worked in polymers for years, and I have rarely encountered pelletization problems. They just work. You don't have to focus on them, you just turn them on, and they run. As we turned our focus to the production of pellets in August, we knew that clearing construction debris to the extrusion system would be a normal part of the process, and we knew that it could plug the die plate and limit pelletization. So while the initial pelletization run showed limited success, this was thought to be a function of the continued construction debris and not viewed as abnormal. However, as time passed and uptime on the pelletizer did not show meaningful progress, we thought that the same process tweaks to operational conditions were needed to keep the pelletizer running consistently. But as the problem persisted, we knew we had to go deeper. We have 2 operational meetings every day, 7 days a week in Ironton ever since January 2. And I remember 1 day in early September, all of us staring at the situation and saying, there has got to be something else happening. It just shouldn't be this hard. Pelletizing is supposed to be the easy part, one of the most mature parts of our process. After a deep dive troubleshooting effort, we found the core problem was leaking adsorbent beads. The root cause was a faulty well procedure across our adsorber beds. Once we identified the problem, we actively worked to repair the beds, but it was after the beads have already contaminated the downstream system. We thought the problem would have been short-lived. We thought we could purge the system to remove the beads. But every time we change feed melt flow index or feed rate, it seemed like the beads came back. We tried to make [indiscernible] several short-term inventions. All of these ideas were abnormal, but we kept trying. The first prototype ended up working the best, but at limited feed rates to approximately 2 hours per day. The second prototype was invented to give more life, but it just didn't work as expected. The purging bin was a good solution and allowed us to purge more volume, it worked really well. It improved a lot of long-term issues, but the beads just didn't go away very quickly. It's hard to express the level of frustration with being able to run this complex system and be limited by the final least complicated step in the entire process. In parallel to all of this, we worked very hard to find and expedite an automated screen changer, because of a few inventive engineers and a really good partnership with [indiscernible], we are able to find, engineer and prepare this project for November. We believe this is the key to unlocking the process and driving production. Most importantly, the screen changer is on site, the engineering is complete, and the project is scheduled to finish on November 22. We've overcome a lot. And Slide 9 shows a short list of some of the challenges that we've overcome or that we intend to address during the outage. There are a couple of key takeaways here. We solved a lot of operational start-up issues. Every single green check mark represents hours, days, and weeks of work and smart troubleshooting by our team, but we persevere. We found good permanent solutions, and now we don't think about these elements anymore. Secondly, we have operated the vast majority of plant functions with the new items being added to the list has declined significantly. While it is inevitable that things will pop up, we do not expect there to be any long-lead issues with the plant at this stage. Lastly, we are about to fix a lot of nagging headaches. The more challenges that we remove, the better the operations will be. I really spent quite some time thinking about our progress. New technology is just hard. There are no shortcuts. The only way to solve -- the only way we are going to solve and drive better outcomes for the planet, is with the hard work, dedication, and grit of our team. The drive and determination of our team inspires me, and I believe will ultimately drive our long-term success. While the most critical work during this outage will be the screen changer, every single project completed during this outage will improve the plant's operability and reliability. As I take a step back and I look at the bigger items that have impacted us this year, it falls into 3 key buckets: Delayed project closure 5 to 6 months, seal leaks, 3 to 4 months, and screen leaks 3 months. I don't want this update to turn into a detailed tech talk, but I think it's important to note some of the critical improvements that we've already made. We've endured multiple seal failures across 3 key seal systems and each of them required a root-cause failure analysis to find a solution improve for the future. There's one thing to remember about seals. Once you find the right solution, they run for years. Every time we have a failure, we make significant improvements. Some of them were missed during the original design. Some of the problems were a result of external factors, the power outage was one good example. In all cases, we learned we fixed, and we improved. Our mixer seal was replaced 2 months ago and has run without hiccup since. Our Scheibel bottom pump has run well since the last upgrade, and we expect to Scheibel mixer seal to run well after the outage. Everyone always asks me, are we getting better? Yes. I emphatically say, yes. This slide shows the basic progression from where we were to where we are now. What used to take weeks now takes days, what used to take days, now takes minutes. What used to take 3 people now takes one. And what used to take third-party support is now done better by our team. I can tell you with absolute confidence that we are getting better every day. Old problems are fading, and we are solving the new problems as they come. The number of new problems popping up is greatly reduced, and we expect it to continue to drop. Everyone in our company and our core partners are committed to making this work. As we learned more about Ironton and gather more operational detail, and continue to build our Antwerp facility. I would like to highlight 2 key components to our life cycle analysis. First, given the reduction of utility usage indicated by the initial Ironton operations, we are showing approximately a 10% improvement to all LCAs across both Ironton and Antwerp. This is an early estimate, and we'll continue to monitor the performance and report back to the market. Secondly, note the difference between Antwerp and Ironton. We are so excited to be part of the next-gen district in Antwerp. We already feel like part of the family and community in Belgium. But more importantly, we're excited about our plan, placing our facility in the next-gen district provides for a very carbon favorable energy footprint. We will be using electricity from windmills, and we will use steam created from bio hydrogen produced by a neighbor. When you combine the location advantages with the improvements that we see in Ironton, the facility in Antwerp will provide great product at a very low carbon footprint. At this point, I would like to shift the presentation to Larry Somma, our CFO.
Lawrence Somma: Thank you, Dustin. As noted, our focus has been on Ironton during the third quarter, but we had 2 important financial matters to highlight since our last call. While we have not executed our revised bondholder agreement, we have an agreement in principle in place. We are very close and expect this to be finalized this week. I will comment on the high-level terms in a minute. It was just over 2 months ago now, but I'd be remiss not to highlight our third quarter capital raise. Our 7.25% green convertible bonds were successful on all accounts. It was multiple times oversubscribed, upsized by $50 million, including the greenshoe and the 7.25% coupon was priced at the low end of the marketed range. More importantly, the proceeds replenished much needed cash on our balance sheet that will be used to fund some of the equity requirements of our growth initiatives. Moving on to the next slide. The most important outcome of the agreement is that PureCycle will receive a 3-month extension for each required milestone date. And while we will deposit an incremental $50 million to the Trustee account, PCT will also receive an additional 3 months to cure any potential missed milestone before an event of default would be triggered. PureCycle is also able to sweep the interest income that will accumulate on the $150 million of cash collateral in the Trustee and Liquidity Reserve accounts. Turning to the next slide. We show the impact of the convertible notes, which raised $218.5 million in net proceeds. In the quarter, we were able to continue the financing plans for some of our PreP sortation equipment, which yielded another $2.5 million of proceeds. Our objective remains the same, and that is to provide sufficient capital to advance our strategic initiatives while allowing ourselves the time needed to execute a capital-efficient project financing plan for Augusta. We ended the quarter with just over $211 million in unrestricted liquidity. Uses of the cash included continued purchases of PreP equipment and funding our Augusta project. Our corporate and preoperational employee cash used was $7.7 million during the quarter, which includes some stock compensation taxes, which were paid. We used $23 million of cash during the quarter for ongoing corporate and Ironton operations. This covers expenses like legal and professional services, repairs and maintenance, utilities, feedstock, finance expenses, property leases, storage, and various other things. Finally, with the execution of the second limited waiver, we will be required to transfer an additional $50 million from the unrestricted funds into restricted funds. As a reminder, we also have $150 million undrawn revolving line of credit available to us. With this, I'm going to return the call to Dustin for his concluding remarks.
Dustin Olson: Yes. Thank you, Larry. Look, at this point, I think we'd like to open the field for questions.
Operator: [Operator Instructions] Our first question comes from Noah Kaye with Oppenheimer & Company.
Jason Vernoff: Hello, this is Jason Vernoff on for Noah Kaye. So a few questions regarding Ironton feedstock and yield. First, on the 409,000 pounds of feedstock run through the plant. You mentioned a number of different feedstocks, but at a high level, what was the mix of Virgin versus recycled materials in what has been put through the plant? And second, what is the yield of finished products you would have seen on the 409 pounds, were it not for the pelletization bottleneck? Also when you reset operations at Ironton, what mix of feedstocks does the company plan to use over the remainder of the year? And what finished product yield are you expecting at 50% capacity?
Dustin Olson: All right. So those are several questions there. Yes. So as we started the operations in Ironton, we initially started with the Virgin feedstock, but quickly transitioned to PIR. The majority of the production run through the system has been PIR, but most recently, over the last couple of weeks, we've injected several batches of post-consumer recycle into the plant as well. From a yield perspective, we have seen really good yields across the plant. Let me go through a couple of the numbers. We have pelletized over 100,000 pellets. Now if you recall, through the several presentations that we provided, and we showed an increasing product quality across those pelletization steps. The majority of the early pelletization steps were recycled back around to improve the quality because we still have the construction debris contaminating the pellet. Okay. The other portion of the mass balance to keep track of is with respect to purge versus fees. Now the feedstock that we referenced in this presentation, we went through the entire process. Every step of the purification process was executed to make the final product at the end. But right before the pelletizer, we purged some material out in an in an attempt to remove the beads from the system. So the vast majority of the difference between 410,000 pound feed and 110,000 pounds of pellets was purged material and attempt to remove beads. There are 2 more questions as you asked. Could you ask the last 2 questions one more time? I think one question was what do we intend to the process coming out of the outage? Coming out of the outage, we have prepped a lot of feed, okay? The PreP operations are running pretty well. We've stacked a lot of inventory, both on-site and off-site, and we intend that the production post outage should be effectively 100% PCR. We will use a blend of both agglomerate which was made on site in our PreP as well as a PCR, which is flake coming from post-consumer recycle. You have to be -- we have a pretty flexible plant. We have the ability to also bring external feeds in. And given the market conditions, whether they're up or down or distressed feedstocks, we will likely also purchase external feedstocks to bring in and supplement the operational plant in December.
Jason Vernoff: Got it. And as a follow-up question. So many of the operating challenges you identified are related to seal design or adequacy. Can you discuss what gives you comfort that the seal issues are permanently solvable and that there is nothing fundamental related to operating pressure and temperature or other core processed parameters requiring a redesign?
Dustin Olson: Yes. So the question, I think, is primarily around the Scheibel column seal. Yes, we feel very good about the Scheibel column seal. This is an early design problem that we found upon startup, and we've basically implemented a very similar solution to what we have on a couple of other mixtures in the process. With respect to the temperature and pressure and running the facility, I mean, the solvent circulation that I referenced multiple times in the presentation is a key indicator of our ability to maintain and control this process. Quite frankly, we are very good at maintaining temperature and pressure across this operation, and that's evidenced by the 97% uptime that we mentioned in the slides. With respect to the candle filter in particular, there's actually no seal, there's no mechanical or mixing the seal on a candle filter. And so I'm not sure where that question comes from. But the process from feed all the way to pelletization is running very well.
Operator: Our next question comes from Hassan Ahmed of Alembic Global Advisors.
Hassan Ahmed: Look, a recent short report came out, presumably from a nonchemical engineer, 20-something-year-old kid, questioning a variety of things. And I'd love for you guys to sort of address those things. First and foremost was the recycling technology. The gentleman called it, a bunch of butane that, that's what your solvent is, right? Coming from a chemical engineering background, I'd like to think there's much more to that. So let's start with that. Can you just talk to us about the technology yet again? I mean is it a "bunch of butane"?
Dustin Olson: Well, let's talk about the report just very briefly because I just don't think it merits a lot of time. In all reports like this, there are some threads of truth and then also some things that are just inaccurate. It is true that we have an ongoing litigation with [indiscernible]. And there are a lot of comments in there about the concerns that we had with respect to the engineering, material handling, overall operation of that project. And for the most part, that is our opinion of the situation with that litigation. However, I will say that our team did a really good job of coming in and assisting to close the project. But beyond that, I mean, I don't know where the information came from, quite frankly. I mean the candle filters don't have a mechanical seal. The feedstock was run through every unit operation through the process. It's not like we put pellets and the final product [indiscernible] made it. The thermal imaging showing 50 degrees, quite frankly, shows great insulation, not a down process unit. And from a safety perspective, look every operation plan will have safety concerns. But safety is our primary focus, it's our first and everyday intent to operate in a safe manner. And quite frankly, one of the reasons that we've had some schedule slippage is because we chose to do things slower and more safely. With respect to the comments on butane Hassan, I'm really not going to get into the details of our solvent, okay? What I will say is that the solvent is critical to the operations of the plant. The operating conditions at a super critical temperature and pressure are incredibly important to the success of our operation. And we see really good performance out of the solvent to the polymer mixtures as well as the solvent extraction to remove contaminants. I come back, Hassan, when I think about the tech, I take a step back and look at the tech and say, all right, how are we doing there? Okay. First of all, there's an enormous amount of mechanical headaches that we've had to deal with. And some of this is endemic to just a normal startup even more so a first-generation technology. But some of those problems that we had from the beginning that we had to solve, but we've been moving through that. But when I look at the technology as a whole, we are mixing solvent with polymer very well. We are extracting containments out of the polymer in our extraction pump very well. We are phase-changing the polymer to where it can be filtered and purified in the adsorber bed very well. And we get to the very last part of the process where we have to remove the solvent from the polymer, and that's going very well. The only step in this process that has not worked as expected has been pelletization. And as you know, or as you may know, pelletization is normally very easy. But the small leak that we had in the adsorber bed has really created a headache that was first elusive. And then second, was difficult to solve for some time.
Hassan Ahmed: Fair enough. And sorry to sort of harp on this, but another claim that was made was on the environmental impact, right? And the claim that was made was that, look, I mean, the environmental impact is similar, maybe even worse than producing virgin polypropylene. So could you potentially address that as well?
Dustin Olson: Yes. Look, I mean, I think we have a lot of third-party reports and a lot of the data that I would say just the opposite. We've done multiple life cycle analyses to show what our actual carbon footprint is on our product relative to virgin polypropylene production, both of those independently complemented one another and show that we have a significant reduction in carbon usage in our product versus others. That's our second. When it comes to the environmental footprint around the site, we have a solvent purification system that recycles solvent and reuses the solvent over and over and over. And so the environmental impact from our site with our site in Ironton, is very strong. Lastly, I'd like to re-highlight some of the items that we've been able to find in the early operations of Ironton. Look, I mean, we did our best to estimate the utility usage that will be required to run this plant. And we were naturally conservative. But as we've actually been able to run the plants at various conditions and patch together what the real energy utilization will be across the facility, it is much lower than expected. And so I think that, that will just create additional momentum behind our operation to show the positive environmental impacts of our process. And remember Hassan, and I think this gets back to really the question that Jason asked on yield. I mean, this is a plastic to plastic recycling process. We do not destroy the plastic. We do not use catalysts or solvent consumption. We just wash the molecule. And so long as you can wash the molecule effectively and remove the contaminants from the process, this plastic to plastic fully circular solution is going to be very well received in the market.
Operator: Our next question comes from Eric Stine with Craig Hallum.
Eric Stine: I'll actually stick to 2 questions here. Maybe just starting with the bondholder agreement, I'm just curious if the 2-week outage was contemplated in that and confidence that, that does not derail that process?
Lawrence Somma: Yes. Look, I mean, when we were negotiating these items with the bondholders and working out different solutions, we expected to need an outage at some point. We weren't entirely sure when it would happen, but we were able to pull the plan together and executed in November, which will set us up very nicely from Thanksgiving forward to achieve the milestones. We're very excited to be able to run this plant without being contamination because all areas show that we're going to be able to run it continuously at pretty high rates when we do so. And I mean that's our goal for December. Our goal in December is to get the plant running continuously at higher rates and achieve the 4.45 million pound milestone that was set aside in the original agreement.
Eric Stine: Understood. That's helpful. And then maybe all the update steps you've taken here, as you take those learnings to other plants, Augusta and beyond, just curious what that does to CapEx. I mean, is that something that actually takes that number down given some of the new things or pieces of equipment that you have to incorporate or how should we think about that?
Lawrence Somma: Yes. Look, I think that everything that we have learned in Ironton will be applied to every future plans, okay? We have a tremendous amount of operational learnings where we know how the equipment should operate, which will allow us to startup faster. We have a tremendous amount of earnings on the behavior of the polymer through the plant, which will allow us to very likely reduce some key unit operations from the facility, which should provide some additional CapEx reductions. And I think that as we grow and learn and run feedstock to the plant, I think that we're going to see opportunities to either increase rates with relatively small changes or no changes or as I said before, cut CapEx significantly from the plant.
Operator: Our next question comes from Gerry Sweeney with ROTH Capital.
Gerard Sweeney: Two questions, I think, pretty straightforward. I just wanted to maybe just circle back into produced products. It sounds like you do have a very good comfort with the consistency and predictability of the pellets coming out based on different inputs. What I'm really trying to say is different materials going in different ratios, you have a comfort that you can predict it and manage the outflows at the levels, melt flows that you desire?
Dustin Olson: Yes, we believe so, Gerry. I mean, we've brought a lot of different feeds. The different melt flow rate is a critical test for us to validate different equipment capacities. As you can imagine, extruders run very differently at 5 and then 5 then they do it at 20. But in addition to that, we've seen the product move through the system, and we continue to see good product quality on the back end. So we feel comfortable with our ability to make the product that we intend to make as well as good quality of the pelletizer.
Gerard Sweeney: Great. And then secondarily, I'm not sure if you want to answer this question on the call, but I'm going to throw it out there. Obviously, there's been some issues. I know about dumb lights in the construction. Well, everybody is always fighting at the end. But when it comes to some issues maybe around the Scheibel tower I believe there was some holdback of payments to Koch Modular until it hits certain production levels. Are they -- is that still in plate? Or is -- or do some of these issues and redesign sort of help you out per se on some of those remaining payments?
Dustin Olson: Well, let me first start with the relationship and collaboration that we have with Koch Modular. The Koch Modular has been a strong partner for a long time, and they continue to be. They have people at the site supporting us ongoing, and they've been instrumental in helping us solve through a lot of these settings. With respect to the contractual details -- for sure, there's going to be implications to the overall final analysis of the performance measure and the performance payments. The work that we're doing around the plant now may have in some instances and impact on that overall scheme. But I think that both companies are committed to solving the problem, achieving the goals, reaching the performance milestone, and then working through the closure of the contract.
Operator: Our next question comes from Thomas Boyes of TD Cowen.
Thomas Boyes: Maybe just to kind of come more directly, actually the bead issues, what kind of run rate is the facility capable or is the facility capable of achieving prior to even having the take down? Is it in excess of kind of that 50% run rate that you're looking for by the end of the year? And then I appreciate the punch list on Slide 9. Does that kind of encompass all the things that need to occur to kind of get to 100% run rate? I'm just trying to kind of assess the relative risk between going from 50 to 100 over the next couple of months.
Dustin Olson: Yes. Look, Thomas. Look, we've actually been able to achieve pretty high rates across the plant. I mean like I mentioned on the feed extruder, we've touched 9,500 pounds per hour and 12,200 pounds per hour is effectively max rate. So that's approximately 77%. If you look at the final product extruder, absent of the beads, we've already been able to touch 110%, okay? When you look at the volume through the system and what we've been able to achieve as the polymers move through the system, we feel very confident in our ability to hit very high rates across the plant above the 50% mark. So yes, will we -- what does the December entail? We're going to start at 50%, and we're going to ramp up to 100%, maybe beyond and see where we land. With respect to the list of items, outages like this are very challenging to plan and to organize, but our team for the last several weeks has been very focused on this, and all of the items that we show that have a, let's say, a turnaround icon next to it are the items that we will complete during the outage, okay? So -- and to varying levels of importance, I mean, obviously, the most important thing in this plant is to get the screen changer up and running, so we don't have the headache of the beads. You can imagine, running for 2 hours a day, getting everything up and going and then having to shut down 2 hours later, it's just not an effective way to run the plant. And when we have the screen changer, that problem goes away immediately and completely, okay? The other items that are listed in that list are a lot of other, I would call it, nuanced headaches. The more things that you can make easy for an operator to deal with or, let's say, benign and something you don't have to worry about, the better the reliability will be. And a lot of those items have been things that haven't worked perfect, but they worked okay, and we're going to be able to knock those out and make the operation much, much smoother.
Thomas Boyes: Excellent. No, I really appreciate the color there. And then maybe just as a quick follow-up or a separate topic. Would just be some updating around the financing process for Augusta. Is the goal to still have project debt for that facility sometime exiting the year? Or do you think that's more of an early 2024 event?
Dustin Olson: Yes. Thomas, it's our goal. It's no secret the market is challenging. But the most important component to any financing for Augusta is going to be consistent operations in Ironton. So when we come out of the outage, that's going to help for us to start running consistently. And as soon as we do that, we'll be engaged. We've got a process. We've got a data room. We've been in many, many discussions. So a lot of the hard work is done, but it's dependent on Ironton consistently operating. So to answer your question, it's more likely that it will be a 2024 event.
Operator: Our next question comes from Jeffrey Campbell of Seaport Research Partners.
Jeffrey Campbell: Can you expand on the change from third-party PreP, who's responsible for the PreP now? And does this have any meaningful effect on anything, capital cost, system performance, operational costs?
Dustin Olson: Yes, that's a good question. No, no. What I'm trying to say with that comment is that as you initially commissioned the equipment across the plant, we were engaged with the equipment vendors on site to help us run the equipment, learn the equipment, and tune the equipment. We've now taken over that process, and we do it on our own. And that's really across extrusion, across PreP, across utilities. The process is you get help initially and then you start to do it on your own. And where we are now is doing it on our own. And quite frankly, that once you take over control of an operation, you find ways to optimize and to make it even better. And that's what we're seeing in PreP.
Jeffrey Campbell: With regard to -- if we kind of take a very high view of everything we've discussed today, it sounds like the current ramp-up has resulted in a variety of adjustments to the system from the PreP operation you just mentioned to the final product. When all of this is completed and it's doing everything that you wanted to do, do you believe these learn -- what kind of effect do you believe these learnings will have on build time and the cost of the next system that you construct?
Dustin Olson: I don't think it will have an enormous impact on build time, okay? I think the construction timeline is set generally by other factors. I do think it will have a tremendous impact on the overall final design and small improvements will make to future projects. And I know that when we start up these facilities, we will start up these facilities with our eyes wide open. And with much more clarity with how the operation will be able to run, okay. Let's remember, this is the first time that this process has ever been run at scale. And so virtually every single unit operation is new, and it is being done for the first time. And in the future, we will have the experience from Ironton to directly lay into the operational startup and commissioning phases, which will be a significant reduction in time to get to full operation.
Jeffrey Campbell: Right. So because I really couldn't get to cash flow faster. If I could ask a little bit?
Dustin Olson: Yes. So maybe to answer that question more directly, I think the construction phase of the project will not be impacted too much by the learnings that we received. But I certainly believe that the commissioning and startup phase will happen much faster in the future.
Jeffrey Campbell: Okay. Great. That's a good way to put it. If I could ask one last one on Slide 12, I found it interesting that the DNV report on Antwerp was included in the analysis and particularly bearing in mind the carbon market, is there any chance that an Antwerp facility might proceed Augusta as the next facility after Ironton?
Lawrence Somma: Yes. Look, I don't want to speak to the report too much or how they got the information. It's obviously not something that we were disclosing publicly or putting in the market. But with respect to the carbon aspect of the market, this is more of a regulatory and legislation discussion that I'm certain will come forward over the next years, decades because everybody will be concerned about carbon reduction and different regulatory environments, different countries, they will implement solutions that they believe work best to drive carbon down. And whether it's a credit system or some sort of incentive mechanism, we don't know yet. But what we're confident in is that we will continue to focus on driving efficiency in our plants to drive energy utilization down in our plant and therefore, also carbon footprint. It serves us very well on variable cost, and it also serves us very well in terms of our carbon footprint. And if in the future, regulatory bodies, implement systems whereby credits are generated, we'll be in the best position to reach those benefits. So I look at that as a potential upside in the future that's not well defined at this moment. But definitely a potential upside.
Operator: This question comes from Brian Butler of Stifel.
Brian Butler: Great. Just the first one. When you look at kind of the ramp-up to the shutdown, could you talk maybe a little bit more detail on maybe the frequency of operating incidents as you are approaching the shutdown? And when you think of the screen that you're adding, is there a plan B if that doesn't work out? I mean it sounds like you have a lot of confidence in it, but I just give this another option.
Dustin Olson: Well, let me first say that screen changers are very normal, okay? These are -- this is not like a novel technology. This is used everywhere in the market. And nearly every plant in the world has screen changes on them. In fact, in Ironton on our feed extruders and also on our additive extruders, we have screen changes, and they work really well, and they removed a lot of contaminants. We're very confident in our ability to remove the beads. And we're also very confident that the beads will eventually go away. We are working a couple of other parallel paths. We are upgrading the internals of the adsorber column to minimize the potential leakage of beads out. And we're also looking at the downstream filters from those adsorber, so we can ensure that the beads don't get through. The issue was on startup, we had a gross leak of beads in the system, and it was thousands and thousands of beads that got in, but it only takes a few beads to really cause a problem. And that headache just never went away. So we feel really good about the screen changer problem, the screen changer solving this problem, getting us to continuous rates.
Brian Butler: Okay. And then on the financial side, can you talk about what's currently the monthly cash burn? And maybe also give a little color on the cost associated with the shutdown, how much incremental does that add?
Lawrence Somma: I'll take the cost first of the shutdown. The cost of the shutdown is the screen changer itself is a $0.5 million to $1 million expense that we have to incur, okay? But the rest of the shutdown is very limited in cost because it's mostly labor. It's mostly metal works. And so from an equipment perspective or materials perspective, it's pretty low. I think the total outage for this will be under $2 million.
Dustin Olson: And to address your other question. So Brian, the way we think about burn is total company and then total company, excluding operations in Ironton and corporate allocation. So I'm going to talk about the latter because that's most relevant. Up until this point, we've absorbed all the cost of Ironton at [indiscernible]. But as soon as we're operating and bringing in revenue, which is very close, we will be able to allocate the cost of Ironton and a corporate allocation associated with that. When you net that out, our corporate burn would be about $10 million per quarter. So that's what I would say we will track out excluding all of Ironton and your corporate allocation. And we do have a requirement to post a Ironton budget submission by December 15. So we'll be doing that, and there'll be more information in the market when that happens.
Operator: At this time, I am showing no further questions. I'd like to hand it back over to Dustin Olson for closing remarks.
Dustin Olson: Yes. Thank you very much for your time today and also with your patience as we work through the Ironton startup. We know that Q3 wasn't where we wanted to be. And quite frankly, we are very disappointed with the beads and the situation we are in. But I think it's important to stay focused on where we're going, okay? It seems like every quarter we issue something bigger and more exciting. I think that in December, we will be 100% focused on delivering the volumes as defined in the agreement. We know that the screen changer is the critical piece of equipment that we need to get this plant up and running successfully. And we have a plan to complete that in November. We have the right team, we have the right experience now, and we have the assets that are under our control to do what we need to do, and we look forward to showing that to the market in December. Thank you for your time. Thank you for joining the PureCycle team and helping us to create a pure planet.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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