Announcement PDF ASX Announcement 27 APRIL 2022 MARCH 2022 – QUARTERLY REPORT Highlights PARKWAY PROCESS SOLUTIONS (PPS) § § Business Development § Continued success in securing new business from a diverse range of companies, for the provision of industrial water treatment related products, services, and solutions. § ISO certification is assisting Parkway achieve approved vendor status with key clients. Product Development § § Finalised the design and commenced fabrication of a high-performance, integrated water treatment system based on a rapidly deployable modular design. Group Sales of approximately $1.1 million, with cash receipts of $1.0 million, underpinned by a rapidly growing project backlog with high likelihood of revenue conversion in the near term. PARKWAY PROCESS TECHNOLOGIES (PPT) § Continued progress in leveraging proprietary process technology platform to support existing & emerging business development initiatives. Expanded strategic relationship with Worley. § Core Technologies § Ongoing technoeconomic evaluations supporting aMES® commercialisation. § In April 2022, awarded material contract for feasibility study based on iBC® technology. § Construction of new scaled-up iBC® pilot plant on-track for completion in May 2022. § Third-Party Technologies: developing piloting capabilities for several innovative technologies. § Commercialisation Activities: include ongoing technoeconomic evaluations to demonstrate the substantial operational, financial and sustainability advantages of the technology portfolio. PARKWAY VENTURES (PV) § The KLPP-Joint Venture ownership advancing towards finalisation of 40% working interest. CORPORATE § Strong balance sheet with $4.5 million in cash reserves as at 31 March 2022. § Cash balance excludes grant funds, R&D tax incentive rebate for FY21 and other receivables. Parkway Corporate Limited (“Parkway” or the “Company”) (ASX: PWN) is pleased to report its activities for the quarter ending 31 March 2022. This report is presented by operating division (strategic busines unit), as follows: § Parkway Process Solutions (PPS) § Parkway Process Technologies (PPT) § Parkway Ventures (PV) § Corporate (Parkway group) PARKWAY PROCESS SOLUTIONS (PPS) Parkway Process Solutions (Parkway Process Solutions Pty Ltd, PPS) is a wholly owned subsidiary and the main operating division of the Company. Business & Corporate Development Growth of PPS Parkway continues to strategically expand the operations of PPS, by pursuing a range of commercial opportunities relating to industrial water treatment, predominantly in Australia. In addition to generating growing revenues through the provision of conventional water treatment solutions, PPS is increasingly supporting the commercialisation of the Company’s next-generation technology portfolio, including the delivery of highly differentiated integrated water treatment and industrial process solutions. Business Development During the reporting period, PPS continued to successfully secure new business from a range of companies, for the provision of industrial water treatment related products, services, and solutions. PPS continued to progress the development of a range of modular water treatment plants (see below), which are successfully supporting various ongoing business development related efforts. PPS has recently achieved first orders from a range of new customers, involving the provision of new products and services, including the sale of several small, pre-packaged water treatment systems, which represent additional international sales, by PPS. The early-stage preliminary engineering study for a previously disclosed wastewater treatment plant was completed during the reporting period, with the client soliciting a further proposal from PPS to advance the project through the project evaluation process (refer to Activities Subsequent to Reporting Period). Additional business development opportunities including collaborations with several previously foreshadowed companies, continues to progress positively, with several collaborative arrangements agreed with various parties. The Parkway Integrated Management System (further details provided in the Corporate – Parkway Integrated Management System, section of this report) was independently certified during the reporting period and continues to support the establishment of PPS as a qualified vendor and assist in a range of business development related initiatives. With growing inhouse engineering and technical services capabilities, an innovative product and services offering and operations in Perth, Melbourne and Darwin, PPS is increasingly well placed to secure larger industrial water treatment related opportunities moving forward. By way of illustration, PPS was recently approached by a global mining company to provide a proposal to supply and maintain water related process equipment for a major mine, with an indicative contract value greater than $5 million over 3 years. PPS is increasingly fielding similarly large and complex enquiries, which highlight the growing recognition of the capabilities of PPS, despite very limited marketing efforts to date. Subsequent to the reporting period (refer to Activities Subsequent to www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 2 Reporting Period), another global mining company awarded PPS a contract to design, build and supply a water treatment plant to treat mine pit water for a significant operating mine. Despite a range of welldocumented supply chain and Covid-19 related impacts, PPS expects to complete this project during the current quarter, highlighting the operational capabilities rapidly being developed by the Company. Based on the effective and successful engagement with the client, the Company expects there is a high likelihood, that a subsequent water treatment plant project, will also be awarded by the same client to PPS, later in the year. PPS continues to field additional unsolicited enquiries from a range of prospective clients requiring sophisticated industrial process expertise, particularly in the field of processing hypersaline brines. For instance, during the quarter, PPS was engaged by a sulphate of potash (SOP) project developer, seeking process expertise in developing and evaluating more efficient SOP processing routes. Product Development Parkway previously advised that it had identified significant opportunities for relatively small, rapidly deployable, integrated water treatment plants based on a modular and reconfigurable design platform. Parkway continues to progress the design of a range of these modular water treatment systems, and has taken delivery of most components, including long-lead items, which will also become stocked items for PPS. Parkway continues to receive very favourable feedback regarding the advantages of the modular systems, including the pre-sale PPS design capabilities, and the post-sale support (service and consumables), which is becoming increasingly important, given the significant supply chain challenges being experienced, globally. Importantly, the growing inhouse product development capabilities, is also assisting PPS in designing, and eventually building and delivering modular water treatment (and related process) plants, incorporating technologies being commercialised by Parkway Process Technologies. Based on the encouraging market feedback, including in relation to several projects that have advanced during and subsequent to the reporting period, Parkway has recently developed a strategy to further expand its capacity to design and build a range of modular integrated water treatment systems. Corporate Development PPS continues to successfully secure access, including distributorships to high-value and specialty industrial water treatment related products, from a range of leading global OEMs with additional negotiations ongoing. Whilst these products represent attractive business opportunities (for either resale or as part of a value-added conventional water treatment solution), in many instances, these products also support the development and provision of more innovative solutions incorporating PPT technologies. Quarterly Sales As a result of ordinary operations, PPS generated group sales of approximately $1.1 million, with cash receipts of $1.0 million, underpinned by a rapidly growing project backlog with high likelihood of revenue conversion in the near term. Given the increasing levels of business development activities described above, the ramp-up period associated with onboarding new projects and typical procurement cycles, there is a timing impact on working capital, where cash receipts generally lag the corresponding sales and project activities during the relevant period. Given the significant progress and corresponding investments in PPS to date, including the growing project backlog, the Company remains optimistic about building a sustainable and rapidly growing revenue base moving forward. PARKWAY PROCESS TECHNOLOGIES (PPT) Parkway Process Technologies (Parkway Process Technologies Pty Ltd, PPT) continued to make progress in leveraging its proprietary (core) process technology platform to support existing and www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 3 emerging business development initiatives. PPT also continues to make progress with a range of thirdparty process technologies, that enable Parkway to provide a broader range of synergistic industrial process technologies. Many of the developments outlined in the Parkway Process Solutions (PPS) – Business Development and Corporate Development sections, are being pursued, as they also support the ongoing commercialisation of the PPT technology portfolio. Expansion of Global Strategic Cooperation Agreement with Worley On 10 February 2022, the Company advised that it had entered into an amendment agreement with Worley to extend the term of the existing cooperation agreement from three years to five years. In addition, the scope of the original Global Strategic Cooperation Agreement was expanded to incorporate the iBC® technology, to further assist with the commercialisation of this promising technology. Core Technologies – iBC® The iBC® technology involves the pre-treatment of complex brines, particularly from the energy, mining and other industrial sectors, to enable further downstream processing, to reduce wastewater volumes and potentially recover a range of valuable chemical products. The Company is exploring large-scale and high-value potential applications of the iBC® technology with a range of industrial companies. Ongoing testwork continues to provide encouragement that in addition to achieving significant wastewater volume reductions, the application of the iBC® technology is likely to be able to achieve a highly desirable zero-liquid discharge (ZLD) solution for certain applications. In addition to the advantages of a ZLD approach, recent testwork continues to support the business case that an iBC® based processing route, also has the potential to create a valuable revenue stream, through the sale of industrial chemicals. New iBC® Pilot Plant Given the highly encouraging results from testwork performed to date, as well as positive industry feedback, the Company recently finalised the design for a scaled-up iBC® pilot plant and has recently commenced construction of a New iBC® Pilot Plant, which is scheduled for mechanical completion in May 2022. The New iBC® Pilot Plant will assist the Company perform larger scale testwork and produce product samples, for industry evaluation. The New iBC® Pilot Plant will also support a range of ongoing commercial discussions with a range of key stakeholders, including prospective clients and partners. Subsequent to the reporting period (refer to Activities Subsequent to Reporting Period), the Company was awarded a feasibility study contract by QGC (a Shell Group company), which will incorporate process piloting, including with the New iBC® Pilot. Core Technologies – aMES® The aMES® technology enables the processing of concentrated industrial process and wastewater streams including brine solutions, to recover a range of valuable compounds, reagents, and fresh water. In late 2020, the Company finalised the Karinga Lakes Potash Project – Pre-feasibility Study (KLPPPFS), which assisted the Company to demonstrate the significant advantages of the aMES® technology in a sulphate of potash (SOP) related application. In conjunction with the PFS, a new state-of-the-art aMES® pilot plant was commissioned, providing the Company with an important process demonstration, optimisation and validation capability, an essential requirement for successful commercialisation of the aMES® technology. The performance data generated by the aMES® pilot plant, is providing important information that will impact the engineering design of a commercial-scale modularised aMES® plant. During the reporting period, the Company continued to perform a range of technoeconomic evaluations as well as engage www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 4 in discussions with several parties, to further advance a range of prospective commercial arrangements. Core Technologies – Other By leveraging the process engineering capabilities of the Company, PPT has been able to develop innovative applications for a range of water treatment processes, to achieve improvements in the processing and treatment of challenging industrial wastewater streams. In addition, the Company continues to develop new technologies as well as identify additional applications for its portfolio of proprietary process technologies, to solve high-value problems facing industry. Third-Party Technologies – Various As part of efforts to further expand the coverage of Parkway’s cutting-edge technology portfolio, the Company is continually evaluating a range of prospective technology platforms. The most attractive technology platforms are those that not only provide substantial efficiency, financial and sustainability related advantages over conventional processes, but are also highly complementary with Parkway’s existing technologies. The Company recently disclosed that it had entered into a strategic partnership agreement with a leading European membrane technology company. The innovative membrane-based technology provides Parkway with a highly effective and selective pre-concentration technology, which enables more dilute feedstocks including brine and/or wastewater to be concentrated, before treatment with Parkway’s aMES® process technology platform. Parkway has recently developed a small scale inhouse testing capability, to enable bench scale testing, including with a compact pilot plant incorporating the innovative membrane-based technology. The Company has also recently developed capabilities in relation to an advanced oxidation technology, which is expected to provide a more efficient, cost-effective and sustainable (chemical free) wastewater treatment process, to deal with a range of problematic, particularly biological parameters. During the reporting period, the Company procured a range of process equipment, to support the development of an inhouse pilot plant, expected to be operational in the current quarter. The Company has already received interest from several existing and prospective customers to evaluate the effectiveness of the advanced oxidation technology in a number of applications. Encouragingly, the Company continues to make strong progress in building a portfolio of technologies, capable of providing a highly integrated process solution, for a range of wastewater and process streams traditionally considered difficult to treat. As part of PPS’s growing modular product development capabilities, the Company continues to invest in developing capabilities to build modular systems based on commercial scale equipment, including incorporation of a range of technologies, such as the innovative membrane-based technology as well as the advanced oxidation technology. Commercialisation Activities Parkway continues to perform a range of evaluations to demonstrate the substantial operational, financial and sustainability advantages of the technology portfolio, incorporating both the core and thirdparty technologies. PARKWAY VENTURES (PV) Parkway Ventures (Parkway Ventures Pty Ltd, PV) holds all resource project and royalty related interests owned by the Company. Karinga Lakes Potash Project (KLPP, 15% interest, earning 40%) Parkway currently holds an equity interest in the Karinga Lakes Potash Project (KLPP), through Parkway Ventures. As a result of a recently finalised tenement rationalisation process, during the www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 5 quarter, no substantive mining exploration activities occurred in relation to this project. The KLPP is a joint venture between Verdant Minerals Pty Ltd and Consolidated Potash Corporation Pty Ltd (a wholly owned subsidiary of the Company), which is administered through Territory Potash Pty Ltd (JV Operator). On 05 Nov 2020, the Company announced completion of the KLPP-PFS, a pre-feasibility study based on the strategic application of the aMES® technology. The Company notes the recent strength in commodity markets, is supporting elevated fertiliser prices, with the primary target product from the KLPP, sulphate of potash (SOP), trading significantly higher than the prices assumed by the Company in the KLPP-PFS. Following finalisation of joint venture accounting processes that are nearing completion, the Company anticipates satisfying the earn-in requirements to have acquired a 40% working interest in the project. As at 31 March 2022, exploration tenure for the KLPP project area was held in the three newly granted exploration licences, details of which are outlined in the Tenement Interests section of this Quarterly Report, outlined below. Mineral Resources The Mineral Resource Estimate underpinning the KLPP-PFS is summarised below. Lake Mineralisation Contained in Drainable Porosity Indicated Mineral Resource contained in Total Porosity that meets reasonable prospects of economic extraction Potassium Tonnage Potassium Tonnage Potassium Tonnage (kt) (kt) (kT) 580 430 Production Lakes included in the mine plan (x8) Sub Total 300 Remaining Lakes (x16) Sub total 220 430 Totals 520 1000 430 The Mineral Resource estimate underpinning the production targets in this announcement were prepared by a competent person in accordance with the requirements of the JORC Code 2012. COMPETENT PERSONS STATEMENT Parkway reported the Mineral Resource estimate for the Karinga Lakes Potash Project in accordance with Listing Rule 5.8 in its ASX announcement dated 5 November 2020. Parkway confirms that it is not aware of any new information or data that materially affects the information included in the announcement of 5 November 2020 and that all material assumptions and technical parameters underpinning the estimates in the announcement of 5 November 2020 continue to apply and have not materially changed. Other Resource Projects During the quarter, the Company continued to consider potential involvement in a number of additional resource projects, whereby the Company may contribute its proprietary process technologies, in exchange for the Company receiving agreed equity interests and/or royalties in the respective project/s. In the event the Company is successful in adopting this strategy, the Company intends to leverage its www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 6 technology portfolio to gain economic exposure to additional resources project/s (including, amongst others, lithium brine projects), without necessarily incurring material balance sheet exposure. For the avoidance of doubt, this technology commercialisation strategy is similar and consistent with the previously disclosed innovative business model, being pursued by the Company. CORPORATE Parkway Integrated Management System (PIMS) The Company is committed to achieving high quality environmental, social & governance (ESG) outcomes, including achieving and maintaining high levels of compliance. As part of the Company’s commitment to industry best practices and continuous improvement, the Company has recently developed an Integrated Management System, to facilitate the certification and ongoing compliance in relation to: § ISO9001:2015, Quality Management System; § ISO14001:2015, Environmental Management System; and § ISO 45001:2018, Occupational Health & Safety Management System. Based on an independent audit and site evaluation performed in January 2022, on 04 February 2022, the Company announced that it had achieved certifications for all the relevant standards. Funding During the quarter, the Company experienced moderate cash outflows ($0.4 million), largely as a result of ongoing investment in the technology portfolio, expanding the operations of Parkway Process Solutions, as well as funding work in progress, including the associated build-up of significant inventory. Notwithstanding the ongoing investment in a range of strategic initiatives including the expansion of operations, as at 31 March 2022, the Company held cash reserves of $4.5 million, excluding i) grant funds, ii) R&D rebate, and iii) other receivables. The strong cash position means the Company is well funded to execute the CY2022 business plan, including the continued roll-out of PPS, to the point where it is anticipated to make an increasingly significant revenue contribution to the group. Grant Funds The Company has a strong track-record in securing a range of grants, including from the Australian Research Council (ARC), to support innovative research and development (R&D) and associated commercialisation related activities. The Company has recently been invited to participate in several research grant schemes designed to fund innovative research, which the Company intends to pursue, where research interests align, and commercial arrangements are consistent with the Company’s requirements. During the reporting period, the Company was offered, and agreed in-principle, to participate in an ARC supported research hub focused on the circular economy. The project budget for activities to be directed by the Company, is in the order of $0.6 million (excluding in-kind contributions) to be invested into various research activities over a period of 4 years, where the Company will make an annual contribution in the order of $60,000 for the duration of the project. The balance of project funding will be provided by the ARC and Victoria University, leveraging Parkway’s contribution to provide a larger project budget. A proportion of the R&D activities performed at Victoria University in collaboration with the Company, including the construction, testing and operation of state-of-the-art aMES® and iBC® pilot plants, is funded by previously awarded grant funding. The Company is also in the process of establishing a small inhouse piloting capability which will provide further operational advantages. The Company acknowledges the financial support of the Australian Government. www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 7 R&D Rebate As a result of research and development activities performed and/or funded by the Company during FY21, the Company anticipates receiving an Australian Government research and development tax incentive (R&DTI) payment in the order of $0.25 million for eligible activities, in May 2022. The Company continued to fund eligible activities during the reporting period, and expects to receive an additional R&DTI payment for these activities, as part of an application covering FY22, at a later date. Other Receivables The Company has a growing receivables profile made up predominantly of trade receivables generated through ordinary operations, where the commercial terms result in a delay in receiving certain payments for works already performed and/or in progress. In addition, as a result of certain post-acquisition related accounting adjustments, the Company also expects to receive a credit adjustment from a vendor. As a result, the Company has accumulated net receivables in the order of $0.5 million, which it expects to be able to realise in the near term. Cash on Hand As at 31 March 2022, the company held $4.5 million in cash reserves. As outlined above, it should be noted that the reported cash balance excludes, i) undrawn grant funds, ii) the anticipated R&D rebate, and iii) other receivables. COVID-19 Impacts The Company continued to experience a range of disruptions during the quarter, including significant delays in the transportation of products and restrictions impacting the movement of staff to support various project and business development related activities. The delay in the transportation of key products and parts, is an industry wide phenomenon, and has significantly delayed the completion of several awarded works, and the corresponding recognition of revenues during the period. Investor Relations The Parkway group managing director & CEO, Bahay Ozcakmak, is scheduled to provide a number of interviews, to provide an operational update as well as provide an outlook on near-term activities. Other Items During the quarter, no exploration and evaluation related expenditures were incurred in relation to the Karinga Lakes Potash Project (following the recent resolution of the Native Title Objection), pending finalisation of joint venture accounts, which the Company anticipates will satisfy the earn-in requirements to have acquired a 40% working interest in the project. During the same period, $0.55 million was incurred in relation to staff costs, $0.33 million in administration and corporate costs, and $0.50 million for cost of goods sold and additional inventory. As the Company entered into additional commercial arrangements, the net inventory available for sale during the quarter increased further to approximately $1.70 million. Additional details are provided in the attached Appendix 5B. Payments to Related Parties As outlined in the attached Appendix 5B (section 6.1), during the quarter approximately $0.15 million in payments were made to related parties and their associates for director salaries, consultancy fees, superannuation, and other related costs. www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 8 Tenement Interests As at 31 March 2022 the Company held an interest in the following Mineral Exploration Licences (ELs) held through the KLPP-JV: Australian Projects – Karinga Lakes Potash Project Tenement ID EL32249 EL32250 EL32251 Location Karinga Lakes Karinga Lakes Karinga Lakes State NT NT NT Interest 15% 15% 15% Activities Subsequent to Reporting Period Water Treatment Plant Contract The Company has recently been awarded a project to design, build and supply an integrated water treatment plant and related infrastructure for a major global mining company. The water treatment plant will use mine pit water as the feedwater. The design of the water treatment plant is approaching completion with procurement well underway. The primary scope to be delivered by the Company, including the supply of the integrated water treatment plant, is anticipated to be finalised in the current quarter. The parties have also been exploring the scope for a second containerised water treatment plant, which the Company expects to be awarded, later this year. Wastewater Treatment Plant Contract In January 2022, the Company was awarded a contract to perform an early-stage preliminary engineering study to assist a government entity assess options for treating a problematic wastewater source through potential onsite treatment. Following successful completion of the project scope during the quarter, the Company has been awarded a contract to perform a process piloting program, as well as engage with the EPA, in relation to the potential for an on-site demonstration, which may lead to a commercial deployment. Feasibility Study Contract Awarded by QGC On 7 April 2022, the Company announced it had been awarded a material contract, a feasibility study, by QGC Pty Limited, a Shell Group company. The material contract is based on Parkway performing a range of evaluations and assessing the feasibility of treating waste brine derived from QGC’s coal seam gas water treatment plants, using Parkway’s iBC® technology. Subsequent to the contract award, the Company has recently received a purchase order from QGC for the contracted amount of approximately $0.56 million (exclusive of GST). The Company has commenced a range of activities in relation to the feasibility study related work program, and has additionally identified a potential offtake party that could conceivably procure the entire forecast production of the primary product (sodium hydroxide) from a potential wastewater treatment plant incorporating the iBC® technology. Whilst initial discussions are highly encouraging as they potentially provide a practical path-to-market for the primary recovered product, as discussions are preliminary in nature, these will be explored further during the feasibility study process, during the course of the year. Immediately prior to announcing the feasibility study award, the Company provided an updated market assessment, indicating that the potential market opportunity for the iBC® technology was in the order of www.parkway-corp.com MARCH 2022 | QUARTERLY REPORT | 9 $307 million/yr, or up to $9.2 billion1 over the life of existing CSG projects operating in Queensland, Australia. Further details regarding the potential market opportunity for the iBC® technology are outlined in the 07 April 2022 announcement. Major Chemical Complex Feasibility Study The Company has been collaborating with an EPC company that has been in discussions with a national govern