管理層發言
Good day, and thank you for standing by. Welcome to the PureCycle Technologies Third Quarter 2024 Corporate Update Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Christian Bruey, Director of Communications. Please go ahead.
Thank you, Kevin. Welcome to PureCycle Technologies Third Quarter 2024 Corporate Update Conference Call. I'm Christian Bruey, Director of Communications for PureCycle, and joining me on the call today are Dustin Olson, our Chief Executive Officer; and Jaime Vasquez, our Chief Financial Officer. This morning, we will be highlighting our corporate developments for the third quarter of 2024. The presentation we'll be going through on this call can also be found on the Investor tab at our website at 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. The 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 and forward-looking statements that can be found at the end of our third quarter 2024 corporate update press release that was filed this morning as well as in other reports on file with the SEC that provide 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 statements. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties including among other things changes in connection with quarter end and year-end adjustments. Any variation between PureCycle's actual results and the preliminary financial data set forth herein may be material. You're welcome to follow along with our slide deck or if joining us by phone, you can access at any time at purecycle.com. We're excited to share updates from the previous quarter with you. I'll now turn it over to Dustin Olson, PureCycle's Chief Executive Officer.
Thank you, Christian. This has been an exciting and productive quarter for PureCycle as we made significant progress across several areas. Momentum is building, and I'm proud of the team’s unwavering commitment to our mission of transforming plastic waste and promoting a pure planet. There remains a tremendous demand in the market for sustainable solutions, and PureCycle is at the forefront with our advanced purification technology. In the third quarter, we achieved three key production milestones at our Ironton facility. We set these specific goals to demonstrate various aspects of our production progress and are satisfied with our execution. Production from Ironton operates on the principle that feed rate multiplied by production hours equals output. These milestones were selected to illustrate our progress in both rate and uptime, yielding promising outcomes on both fronts. While we are pleased with this quarter's achievements, we will continue to focus on enhancing our production rates, reliability, and quality.
Our confidence in reaching our nameplate capacity targets over time is growing. In addition to the milestones, we made tangible headway in feedstock production, operations, commercial, and financial areas. During operations, we saw several successful results in Q3, with significant advancements in CP2 removal, the launch of Denver PA's PreP facility, and the ramp-up of compounding operations. Our success with CP2 removal has allowed us to handle more challenging feedstocks with higher CP2 levels and entirely PCR content. We are excited about Ironton's production performance and are now shifting our focus to scaling the commercial side of our business. With stable production and improved quality output, we are making strides in our commercial initiatives. Our compounding strategy is operational and has been producing around $400,000 worth of sellable product weekly over the past month, offering customers enhanced product options.
Customers are actively testing both compounded and PureCycle standalone pellets with great success. We are also in the process of developing products for film, fiber, and injection molding applications. Film and fiber remain underserved, presenting us with a significant opportunity to fill a crucial supply gap. We are pursuing commercial opportunities in both direct and compounded products, with ongoing trials at a growing number of major companies. Developing projects takes time to achieve the right product qualities and establish trust between supplier and customer. With our current plant performance, we are uncovering a growing pipeline of opportunities that will lead to financial success. Our team has also made significant strides in capital raising, with proceeds from the Ironton revenue bonds and a capital raise in September. Together, these efforts have generated over $105 million in net proceeds to support ongoing operations and growth initiatives.
As we have successfully increased production at Ironton, we are now looking to secure financing for additional capacity in Augusta and Antwerp. As anticipated, the third quarter marked our strongest production quarter to date, surpassing the cumulative production we had achieved so far. Quarter-over-quarter production grew by more than 200%, and we built inventories across film, fiber, and injection-molded products, despite significant time spent commissioning CP2 removal system upgrades. Previously, CP2 had been our main constraint regarding both rates and quality. Since upgrading that operation, both have improved, and we do not expect this to be a constraint moving forward. The plant upgrades during the outage have continued to deliver benefits for both rate and reliability. We have observed our current operations running steadily with extended periods of continuous production. We have made solid advancements in our production reliability, particularly concerning critical seal systems and CP2 removal.
Our team is committed to enhancing plant reliability and is effectively meeting their objectives with good pace and momentum. We are not finished ramping up Ironton production. We plan to build upon the milestones achieved in Q3, and we know what needs to be done to gradually increase production levels. We continue to learn and actively pursue these improvements. Our new production capabilities at Ironton give us the confidence to scale production to meet growing customer demand. We currently hold inventory of both compounded and finished products and feel confident in our ability to meet increased demand. The pellets shown are recycled CP2, which I am proud of. Many individuals from various disciplines collaborated to devise a unique solution for CP2 removal and subsequently rebuilt it. By enhancing this system, we also improved our capacity to eliminate contaminants from the final product, significantly enhancing product quality.
The team has steadily improved our removal capacity, which should no longer be restricted by a CP2 removal constraint. This also provides an opportunity to create added value in the CP2 stream. Currently, we are removing this material at rates of up to 15,000 pounds per day, palletizing the final product and marketing it to multiple companies as a sellable recycled material. This represents a remarkable example of innovation. We transformed a waste stream originally destined for landfills into a product that customers value. This not only benefits our economics but also enhances our team's pride in the circularity we are establishing. We view this as a valuable addition to our product portfolio. Our feedstock operations achieved another milestone in Q3 with the startup of our Denver, Pennsylvania plastic sorting facility. Plastic is a crucial component in our feedstock business, and we are pleased with the ongoing development.
Our Denver sorting facility was designed for high product efficiency and equipment reliability while being operated at low cost. The nameplate capacity is approximately 22,000 pounds per hour and is intended to support both Ironton and Augusta operations. This facility will upgrade low-quality Number 5 bales to levels acceptable for Ironton and help purify PET, HDPE, and aluminum streams for recyclers. With this facility, we aim to source more feed, integrate more feed into the market, reduce feedstock costs, and enhance stability in Ironton operations. While it is still early, we have already achieved nameplate capacity at the facility, establishing it as a foundational asset for our long-term success. We have also broadened our feedstock flexibility. We can now procure low-cost Number 3 to Number 7 bales, as well as low-quality Number 5 bales, upgrade these through sorting, and then send a high percentage of PP bales to Ironton for purification.
Currently, we are sourcing feed from MRFs, sorting it in Denver, washing and grinding the bales at Ironton PreP, and purifying it at our facility. We have also maintained our off-site flake sorting operations with reliable performance at 1,000 pounds per hour, and we are on track to install an additional flake sorting operation at Ironton. The net result of all these efforts is enhanced feedstock flexibility and efficiency. This enables us to source cheaper feedstock and improves plant yield by avoiding processing non-PP streams through purification. Our PP concentration has increased from less than 85% to 92% and is now at 95%, with expectations to reach 97% in Q4 after the final Ironton flake sorter is operational. This improved PP concentration enhances Ironton's production yield while also making our plant more efficient and reliable, enabling higher rates. Integrating these various feed capabilities is a significant achievement for our team.
Examining the successful production outcomes at Ironton, several other key elements are worth mentioning. Production improvements across the plant have occurred while simultaneously moving into more challenging feedstocks and enhancing final product quality. Without the ability to process more prevalent feedstock, Ironton's production would have faced limitations or endured higher feed input costs. The plant has demonstrated the capacity to handle prevalent curbside PCR with high CP2 levels and shown increased recovery. The mix of PIR and PCR, along with varying CP2 content, will influence feedstock pricing and final product pricing. Our improved product quality at Ironton helps foster commercial adoption and opens up more applications for our product. Progress on feedstock costs and off-take value is expected to build confidence in strong margins and the favorable economics of our business.
Initial commercial feedback from the market has been very positive and increases our confidence in achieving the financial margin targets we previously outlined. Our unit economics for Ironton and our products remain robust and should provide a solid foundation for future plant developments and capacity growth. Our compounding initiatives are adding further advantages to our business. The compounding strategy was implemented to allow PureCycle to better align our products with specific customer applications. It enhances our service options, enabling quicker qualification, and we are witnessing early successes. Customers are enthusiastic about the products we are producing. Additionally, compounding offers us the chance to gradually increase our volumes with PIR, PCR, and virgin complements while improving overall profitability. We can present these compounds to the market with lower price premiums compared to virgin alternatives, while also allowing for better overall economics due to significantly higher volumes for a largely fixed-cost business.
This benefits both PureCycle and our customers and should yield better profits overall. It remains uncertain how much of our volume will ultimately be compounded, but in any case, the compounding mix should enhance our overall profit margins. Following the success of Ironton operations in Q3 and the consistent production of RPP, we have shifted our focus to commercial efforts. The product on display is a 50-50 blend of PureCycle and PCR material that has transitioned from 12 MFI to 35 MFI to cater to the fiber market. It is a unique, high-quality product in the market. Its color is appealing, the contaminant level is very low, and it performs similarly to virgin materials in customer facility trials. Our compounding strategy has allowed us to build a product portfolio for a broader market. We are not only creating variable blends of recycled content but also modifying product characteristics since each application has its own needs.
We can now formulate blends for general categories while also crafting specific recipes for customers when necessary, simplifying and enhancing the efficiency of their operations and facilitating easier adoption. We have built 2.5 million pounds of compounded product inventory with various blends in preparation for our commercial testing, alleviating early commercial challenges concerning dependable supply and consistent quality. The PureCycle stage is set. Our technology is producing high-quality products in large volumes, and our commercial strategy is taking shape. We are well positioned to capitalize on this promising landscape. Regardless of how one views the overall market opportunity before us, it is undeniably immense. Global PP demand exceeds 187 billion pounds and is projected to grow at 3% to 4% annually. The demand for recycled products continues to rise, driven by brand commitments.
The supply gap is substantial due to a lack of quality products available, and PureCycle is testing products across three key underserved segments. We believe our offerings can meet customer needs in around 85% of the current market. Not only does the market appear attractive today, but projections indicate that future years will be even more favorable. It is anticipated that the demand for recycled material will increase to approximately 60 billion pounds by 2030. We firmly believe that PureCycle is best positioned to emerge as the primary supplier of high-quality material throughout this vast market. With Ironton now better positioned, we have been intensifying our commercial efforts. Trials have commenced across various companies, industries, and applications. This process has been encouraging, as market feedback on our products has consistently been positive. Our products are delivering high-quality outcomes that help enable customers to achieve their sustainability objectives.
Trials are showing performance similar to virgin materials and have the potential to address large portions of the overall PP market. We are eager to begin new trials while also progressing with our existing pipeline of potential customers. As customer orders arrive, we plan to scale up to meet that demand. As we continue our commercialization journey, we want to provide investors with insights and context regarding our commercial timelines. Given the unique nature of our offerings, many investors may not be familiar with the project commercialization process. We are focusing on four key initial categories for sales: fiber, film, injection molding, and automotive. Each category will serve as a crucial proof point for future sales at Ironton and other facilities. For fiber, we are making good progress. This application presents operational challenges with numerous adjustments needed to refine the process, both in compounding recipes and customer fiber operational variables.
We believe we have found the right recipe and are currently actively testing our material with five different fiber producers, ranging from large companies to niche players, exploring a wide assortment of yarn types for various applications. We are very optimistic in this area. It's worth noting that fiber operations can be particularly challenging, even with virgin materials, so achieving success using recycled streams is a significant accomplishment. Initial progress has been promising, and we are confident that this will be a substantial category for us moving forward. As for injection molding, we are thrilled to be collaborating with Procter & Gamble to develop several compounding solutions across different brand categories. This commercialization process at P&G is expected to take time, but early feedback has been positive. Procter & Gamble has been a steadfast supporter of our efforts, and we are excited to deliver the first tangible products to their brand teams.
Automotive poses a potentially vast category for PureCycle. Each vehicle typically contains over 300 pounds of plastic, a number that has risen as OEMs replace steel to reduce weight and improve fuel efficiency. Polypropylene is generally the preferred plastic due to its lightweight properties. Historically, addressing the automotive sector with traditional recycled materials has been challenging due to strict quality requirements and technical applications. A minor flaw in an automotive plastic component can lead to paint adhesion problems, odor issues, or yield losses. Introducing alternative recycled materials on a large scale has proven difficult due to contamination levels in these products. We have been working with a global automotive manufacturer to obtain approval for our products in several key applications. This customer approval process is progressing well, and we hope to secure final approval in Q4.
If all goes according to plan, we anticipate orders to commence in Q1 of '25. Our work in film has just begun. While the trial process will follow a similar timeline to fiber, early results are encouraging. We have not yet commercially trialed our product, but we have successfully converted our product into film at lab scale. This is significant, as we partnered with a major food and beverage brand to process their wrappers, such as metallized film and multilayered film, at our Durham R&D facility. We purified the material and then converted it into film on-site and in their presence. This serves as a compelling proof point for our partners seeking to bridge the challenging recycled gap in film. Throughout all these applications, we are also recognizing emerging synergies. For instance, one customer is interested in using our product for mop head applications, which involve an injection-molded plastic base combined with fibers.
One customer, multiple applications—PureCycle can meet both needs. Another automotive customer discussion involved replacing the carpet in vehicles with RPP fiber, during which we also highlighted our ability to produce bumpers, dashboards, and other products. One customer, diverse applications—PureCycle can cater to all. Our strategy is to prove that our product can successfully perform across multiple segments. We have seen early successes in fiber and injection molding and are in the early stages of working with film. As we secure approvals, we expect to expand our customer base, grow our offering potential, provide more comprehensive service, and establish a robust commercial foundation for future endeavors. We anticipate revenue to start materializing in Q4 and to ramp up into 2025. This confidence stems from the increasing pipeline of customers, successful trials, and favorable market feedback.
While precise timing may carry some uncertainty, the trajectory and inflection of our financial outlook is clear. The future is bright, and we are motivated and excited. Some of the largest companies globally are recognizing that a new supply has emerged to address their sustainability needs, and they are enthusiastically turning to PureCycle.
Thank you, Dustin. I'll touch on our liquidity. As Dustin mentioned, we raised $90 million on September 13 by entering into subscription agreements with certain investors where we saw the combination of preferred stock, common stock, and warrants. This was in addition to the $18 million in proceeds from the revenue bond sales earlier in the quarter. These transactions boosted our quarter-end unrestricted and restricted cash balance to almost $94 million. Also, as a reminder, we hold about $118 million of our revenue bonds that we plan to sell over the next several months that should further support our liquidity needs in 2025. In early October, we did make a $36 million payment into an escrow account related to the Augusta purification project. Over the next several quarters, we have about $11 million of commitments for the Augusta project, mostly for long lead equipment and pre-construction work. We plan to further the activity in Augusta in 2025 and also plan to secure financing for that project. Lastly, operating cash expenses totaled $23.5 million for the third quarter. This was a decline from nearly $35 million in the previous quarter and down about $4 million from the first quarter of the fiscal year. I will now turn the call back to Kevin to open the call for questions.
分析師問答
Thank you. Our first question comes from Hassan Ahmed with Alembic Global Advisors. Your line is open.
Good morning, Dustin. Good progress being made. Happy to see that you guys hit all three main production milestones towards the end of Q3. Just on the near-term side of it, how are those milestones looking in the early part of Q4? Are you continuing to hit those milestones, exceed them? Where do we stand there?
Yeah. Thanks for the question, Hassan. Every time we reach a new milestone, we map out the boundary conditions for that operation, and we learn how to operate at that place. So we have very high confidence in our ability to get back to those levels and operate at those levels on demand. I would say that as we progress into Q4, we've been running higher feedstock with higher levels of CP2. We continue to commission the CP2 to get all the kinks worked out so we can run at high levels, and we continue to ramp up production from there. I think the important thing here is that we have high confidence in our ability to reproduce those results and run the plant as we want. Our focus now is really on establishing a commercial lane and having Ironton operations match that commercial demand. So over the next few months, we'll run the rates that are required to meet the commercial demand. We'll continue to look for new boundary conditions so that when the demand is there in the latter half of Q4 and into 2025, the Ironton plant will ramp to meet that.
Very helpful, Dustin. And as a follow-up, I appreciate the slides 12 and 13 in particular. It seems that you guys are getting very good customer feedback and commercial sales seem to be imminent. If I read the slide correctly, it seems that as early as this fourth quarter, you should start seeing some commercial sales and those ramping up into 2025. So how should we be thinking about meaningful levels of revenue? Is 2025 the year? And can we discuss EBITDA as well?
Yeah. So we're not going to provide incremental, let's say, revenue projections for 2025. Look, I mean we're extremely excited about where we are with the customers. I mean we've had a lot of very successful trials. And as you can imagine, every trial is unique to the customer. Every customer has a specific application with specific customer or product requirements, and then they have to build the trust in PureCycle as they go through the trial process. So the trust comes in multiple ways. Like one, will PureCycle continue to operate at high levels at Ironton? We're getting a check mark there. Will the quality be sufficient for that application? We're getting a check mark there. And do you have the inventory and capabilities to meet the demand? We've been able to build inventory across the quarter as well. And so yeah, I think that while it's difficult to say when specific customers will give the full green light for POs and commercial transition, I think the signs are all there for solid and meaningful commercial progress, both in Q4 and ramping into 2025.
Perfect. And if I could just quickly squeeze one more in. Production is ramping up. Fair to say that the technology has been proven, right? But in light of the recent announcement about the termination of the joint venture with SK, with production ramping up, technology proven out and the like, I'd like to think that you guys are getting much more interest in other joint ventures as well. Can you give us any sense of what that pipeline looks like?
I think you're absolutely right. Since we began, there has been significant interest from various partners to expand our technology into different regions, and that remains true today. In fact, the excitement is increasing. Many of our partners have been instrumental in helping us resolve some technical issues, and they are eagerly awaiting the consistent operation of the Ironton facility. As we achieve success in Ironton, the interest in growth has definitely heightened, and we will continue to make positive progress. Regarding SK, I want to emphasize that they have been a valuable partner for us. They were an early investor and possess a highly skilled team that has assisted us as we navigated various technical challenges. One unique aspect of the SK project is that it aimed to integrate multiple technologies within a single location, which presented alignment challenges across the timelines of three independent technologies. Some potential synergies could not be realized due to these timing discrepancies. Nevertheless, SK remains a strong partner, and we are actively seeking new opportunities beyond South Korea. We believe that this story is merely delayed, not finished.
One moment for our next question. Our next question comes from Eric Stine with Craig-Hallum Capital Group. Your line is open.
Hi, everyone. Thanks for taking the questions.
Hey Eric, how are you doing?
Good morning. Well, thanks. So I just want to make sure I understand. It sounds like you've demonstrated that you can ramp to the milestones discussed and reached in the third quarter. But should I interpret your commentary that you're not necessarily producing at those levels now? I can appreciate the focus is on the commercial side, but that does beg the question: what is your confidence level that presumably the commercial interest is quite high— that you need to be above those levels that you've currently demonstrated? And what is the length of time or confidence in getting to full production levels since, obviously, the market opportunity is magnitudes larger than your current production capabilities?
Yeah. I mean, so I would say that we are pacing our production at Ironton with the commercial aspects of the business. So part of that is in building inventory in preparation for commercial. Part of that has been commissioning the CP2 to get all the kinks worked out, and we feel very good about both of those activities. Our operations team is very confident in their ability to ramp up as needed to meet the demand from the market. With respect to the confidence in our ability to move product into the market, it's very high. I think that we make several comments in here about the improved product quality at CP2 becoming under control, and that cannot be understated. We've seen a step change improvement in overall product quality over the course of the last 6 to 8 months, and that's directly related to CP2. Our ability to make CP1 and CP2 at volume is a good indication of our overall product quality. Our customers see that, they recognize its benefits over alternatives, and they're leaning into PureCycle as a solution for them.
Got it. And so then I know you talked about some of the commercial activity in the various products, very helpful there. I would assume these are near term, but they're also far enough out in terms of a couple of quarters that in your mind, that gives you the timing to, in fact, go from wherever you've demonstrated today, which is just under 50% of nameplate to actually get to those higher levels to meet this demand. Is that a fair way to think about them?
Yeah. I think that's really good, Eric. I mean I think there's a couple of aspects here. Once you've demonstrated that your product can work in a single customer application, the me-too adoption is very fast. So if you show that you can build fiber in one plant, then that means you can build fiber in all plants. If you show that you can build a bumper in one facility, it means that you can build bumpers across the board. These early customer trials and qualifications are really important. They are proof points in the industry. Once a customer does the hard work of getting it qualified, it's going to show as an example for others, and that's really where the commercial ramps quickly. So we're not concerned about that. There are also other avenues to move product into the market through non-project-related demand. There are distribution channels and other compounding channels that currently buy recycled material in the market, and we've been introducing our product to them as well. I think that there are several different avenues for us to move product into the market, both in terms of Q4 and also ramping significantly in 2025.
One moment for our next question. Our next question comes from Thomas Boyes with TD Cowen. Your line is open.
Appreciate you taking the questions. Maybe first, would like to get some insight into the automotive opportunity. I know it can take a long time to get designed into a vehicle, particularly with materials or new technologies. So I was kind of impressed, I guess, with the speed in which you're getting to commercial sales. Is that due to the fact that it's a compounded resin and maybe the customer feels more confident in the implementation? Or is there something else at play that we should be aware of?
Well, not all of our customer trials and customer development activities started recently. This one, in particular, has started many, many months ago. I think part of the progress that you're seeing now are seeds that were laid in the past. That’s some of the natural progression of things. But also some automotive applications do require a very long qualification period, but some do not. If you can demonstrate that your product is a liking kind replacement to the existing qualified material, then the adoption can be much faster. So as we demonstrate that our product performs more and more like virgin polypropylene, the quicker the adoption can happen in automotive.
Got it. That's helpful. And then nice to see, obviously, there's kind of the new sortation. Could you give us maybe a bit of insight on the cost per pound or maybe just diagram? Is the cost there offset by the improved yields of having the facilities? So it's kind of a net neutral or a positive? Any information there would be helpful.
Yeah. That's a great question. First of all, we're extremely excited about Denver. This is Denver, Pennsylvania, by the way, not Denver, Colorado. We'll eventually host people out there to show you the operation. We want to make sure you get the tickets to the right place. But it's a really good location. It's close to New York, New Jersey, Philly, Baltimore, D.C. The population density around that location is very, very high. The ability to pull material in is going to be quite good and growing over time. We've currently only got one shift of operations, but we definitely see that growing in 2025. We've already demonstrated the ability to run at nameplate capacity, which was just great. With respect to the overall economics of the plant, I think we're still mapping that out. We are definitely producing co-products from that facility that will offset some of the cost of the facility. We've definitely purchased an asset that is extremely efficient and, let's say, lower cost to operate, both in terms of electricity usage as well as manpower.
As we ramp both in Ironton and Augusta and then, therefore, also ramp the operations at Denver, I think that you're going to see pretty good economics at that facility. At the end of the day, a little bit about the neutrality of the cost for that depends on how much you value the polypropylene that's going through Ironton. One thing I can tell you is we have excess capacity at Denver today, and that facility has the ability to run high-quality Number 5 bales, low-quality Number 5 bales, Number 3 to Number 7 bales, and also Number 1 to Number 7 bales. We really have a nice opportunity to load that facility with cost-advantaged feedstocks so that we can gain more value off of the co-products.
That was very helpful. Maybe just one quick one, and then I'll jump back in the queue. Can you remind me how long it would take to kind of stand up Augusta if you were to get, say, financing sometime next year? Is it a six-quarter, two-year? What kind of timeline would that be to get that construction?
Yeah, that's a good question. Augusta is a bit different because we purchased a lot of the long lead equipment already, and it's ready to go. But I think a six to ten-quarter range is probably a good framework for modeling. I know that's a wide range, but there's a lot of variables in there that can control things. We expect we have opportunities to improve the schedule over time once we get into the granular details. But I think an average of two years plus a couple of quarters is probably a good framework for now.
Perfect. I’ll get back in queue. Thanks again.
One moment for our next question. Our next question comes from Andres Sheppard with Cantor Fitzgerald. Your line is open.
Hey, good morning, Dustin, good morning, Jaime. Congratulations on the quarter. Thanks for taking our questions.
Good morning.
Maybe just to take a step back. Just wanted to see if you could maybe give us an update on the current status of the production line in Ohio. And are you able to share maybe a loose timeline as to when you might expect to get the plant closer to full peak capacity? Thank you.
Yeah. Thanks for the question. I mean Ironton is in a great place. We had a lot of constraints ramping up this facility over the last six to nine months. The latest one has been around CP2 and the most prevalent for the last six months has been CP2. The solution that we put in place there has really unbridled the capacity at Ironton, and we feel really good about that. I think that in addition to the CP2 removal efficiencies, our ability to add Denver and flake sorting operations is also allowing us to bring a higher quality feed into the plant and allowing us to raise rates. We're really excited about our potential. There have been some areas that we've noticed that we need to continue to optimize to push rates above the 10,000 pounds per hour. We're doing that. But in the meantime — and 10,000 pounds an hour is roughly 80% to 85% capacity, I believe, maybe around that level. To push above that to get to nameplate, we have a pretty good line of sight on what we need to do that. But honestly, the focus right now is more about ramping the commercial. We have an asset at Ironton that we can control that will do what we ask it to do. So now it's about feeding the pipeline for sales so that we can then trail Ironton for the production.
Got it. That's helpful. I guess maybe just to follow up. Do you expect — I know it's a bit early, but do you see a scenario where you could get close to that 107 million pounds of UPR resin capacity through next year?
Yeah. Look, when we get to a ratable capacity at 107 million pounds per year, I don't have a timeline for that right now. We still got work to do to get there. Remember, every time that we push into a new boundary of the plant operations, we will find new constraints that we have to work through to get there. We'll do that through the course of 2025, and we'll see where the production lands. I'll just remind you, though, if there's one competency that we've built across our company over the last two years, it's grid resiliency and ability to solve problems. Every time that we have had a problem pop up in front of us for our operation, we've been able to solve it, push through, and move on. I see no difference next year as we push up into the higher level, closer to the nameplate capacity and then ultimately getting to the 107.
Got it. Very helpful. Thanks. And maybe just one more, if I could here. You mentioned earlier that the status of the Augusta facility, the timeline for that is roughly six to ten quarters, which is encouraging. I'm curious, how many lines of the up to eight potentially do you foresee starting with? Should we be modeling maybe closer to one or two lines from the beginning? Or any color there would be helpful. Thank you.
Yeah. I mean we're pretty consistent on this in the market that the Augusta project is a two-line operation. It's 260 million pounds per year of production. That's been the consistent message. We're not deviating from that at this time.
Wonderful. Thank you so much. Congratulations again on the quarter. We’ll pass it on.
Thank you.
One moment for our next question. Our next question comes from Brian Butler with Stifel. Your line is open.
Hi. Good morning. Thanks for taking the questions.
Hi, thanks Brian. Thanks for dialing in.
First, when you look at Slide 13, which is super helpful, when you look at the commercial sales kind of all ramped up into, call it, the third quarter of 2025, what level of production does Ironton need to be at to kind of meet that kind of run rate when you get to the third quarter of 2025?
It's challenging to provide a specific answer. The commercial ramp-up is still fluctuating. Each customer is following their own timeline for qualifications, making it hard to pin down a precise figure. However, I believe that with project-related sales and the potential to expand into distribution and compounding, we should be able to reach or exceed the 50% capacity mark for Ironton by mid-2025.
Okay. That's helpful. And on the economics, you talked about economics on the non-compounded are in line with previous expectations. Can you remind us of those expectations? Because if I go back to the Ironton budget from a year ago, I think you were somewhere around $0.56, $0.55 a pound on an EBITDA basis. Can you frame what the expectations on the non-compounded economics are?
Yeah. So we're pretty consistent with what we've said in the past. At the Ironton showcase, this question came up. The way we answered it was, in order to get to breakeven at the Ironton facility, we need between 40% and 50% utilization at the facility. To get to breakeven for the company, not including CapEx spend, it takes 80% to 90% rate at Ironton. We still hold to that. We've been doing a lot of modeling. The market is obviously moving around quite a lot, both with regulatory efforts giving us some uplift as well as the virgin market being a little bit down. So the numbers move around quite a bit, but we still believe that those numbers are still pretty solid.
Okay. And then on Augusta, we asked — I think you answered most of my questions. But what's the expected future capital requirement when you think of building out that first and second line? And how long does a third line take? I mean, is that going to be another six to ten quarters if you choose to do a third line?
Yeah. So with respect to the total CapEx for Augusta, this is also an area that's in pretty high discussion right now and in flux. We're really not in a position to give an updated number for Augusta CapEx. There's a lot of moving parts there. The inflation is one that is a negative impact on CapEx. But quite frankly, the things that we've learned at Ironton, the things that we know how to do in Ironton is a very good balance to that inflationary risk. So we're just not in a position to give a hard number right now. So I would go back to previous guidance. With respect to how long it will take to build the third line and the fourth line in Augusta, I think that it's not the same amount of time as what it takes to build the first two, okay? It's shorter. And the reason for that is we will be building a substantial amount of the infrastructure in that facility for lines one and two, and we will not need to rebuild that for lines three, four, and five. So it would be incrementally less time than the advice that I gave for Augusta.
All right. And then just one last one. It looks like the operating cash burn you had said was about $23 million in the third quarter. How should we think about that going into the fourth quarter? Is that the right level kind of third quarter to fourth quarter is about the same?
Yeah. The cash burn has come down. So I think we'll probably be in that $8 million range, maybe perhaps a little bit better than that. But there's a lot of maintenance activity that we had in prior quarters that is not reoccurring. I think we'll be at, hopefully, a level that we saw this past quarter.
Yeah. I think that's another important point, Brian. I mean, everything across the operation gets better with steady operations. The product quality becomes more steady. The repeatability of production becomes more steady. Even the product quality of coproduct 1 and coproduct 2 becomes more steady. As you run more steady, then the cost for the structure becomes more steady. You can imagine that as you're fighting reliability items, chasing challenges in the plant, there's a substantial cost associated with that. We expect that all of these things are going to get better as we continue to run more reliably.
One moment for our next question. Our next question comes from Gerry Sweeney with ROTH Capital. Your line is open.
Hey, good morning Jaime. Thanks for taking the call. I hate to do this one more question on utilization. However, it's from, I think, a completely different tact, and I think it's important. You mentioned that you have an asset that you can control. What I really want to ask was, are you able to run Ironton at a specific rate for an extended period of time? From my perspective, that seems to be more important than an exact pound amount because I think you can grow it from that level. I'm just curious if you could touch upon that.
Yes, Gerry, the answer is yes. We are in control of the Ironton operations, and we can adjust our output as needed. The key factor in this is the removal and control of CP2, along with a reduction in our feed. This gives us the ability to maintain and exceed those milestone rates, which is something we can manage effectively.
Got it. That was perfectly clear. I appreciate it. And then on compounding, obviously, there's been a lot of discussion on this. How much of an opportunity is there in terms of economics? Some of it sounded like there was just sort of a fixed cost absorption. I'm also curious as to if you're compounding it, which, I guess, PureCycle could potentially hire someone to do it versus someone on the outside doing it, meaning buying the product and doing it themselves. Would you be able to get a premium for mixing in virgin and compounding it? Or was this just a pure fixed cost absorption opportunity?
No. Let's break down compounding in two ways. First, compounding allows us to provide customers with exactly what they need, enabling us to ramp up commercially much faster, open more doors, and qualify more quickly, and we are already seeing some early successes. Customers are excited about our products. Second, compounding gives us the opportunity to incrementally increase our volume with PIR, PCR, and virgin complements, which enhances overall company profitability. We can offer these compounds at lower price premiums compared to virgin alternatives, while also achieving better overall economics due to significantly higher volumes in a largely fixed cost business. This scenario benefits both PureCycle and our customers, leading to improved overall profits for us. It’s uncertain how much of our volumes will ultimately be compounded, but in any event, the mix of compounding should positively impact our overall profit dollars.
Following the success of Ironton operations in Q3 and consistent production of RPP, we shifted our focus towards commercial efforts. The product that you see on the left is a 50-50 blend of PureCycle and PCR material. This broke from 12 MFI to 35 MFI to serve the fiber market. It is a very unique, high-quality product in the market. The color is good, the contaminant level is very low, and it runs similar to virgin in customer facility trials. Our compounding strategy has enabled us to build a portfolio of products for the broader market. Not only are we creating a variable blend of recycled content, we are also adjusting the product characteristics. Every application is a little different. We can now formulate blends for general categories while also creating specific recipes for customers when necessary. This makes their operations simpler and more efficient and also makes the adoption much easier for customers.
We've now built 2.5 million pounds of compounded product inventory with various blends in preparation for our commercial testing. This alleviates one of the early commercial challenges for new suppliers about their concern of reliable supply and consistent quality. The PureCycle stage is set. Our technology is creating high-quality product in large quantities. Our commercial strategy is taking shape. We are well-positioned to take advantage of this attractive landscape. No matter how you look at the overall market opportunity in front of us, it's absolutely massive. Global PP demand is over 187 billion pounds and continuing to grow at 3% to 4% per year. The demand for recycled product continues to be high and growing due to brand commitments. The supply gap continues to be very high due to a lack of quality product available, and PureCycle is testing products across three key underserved segments.
We believe our product can satisfy customer requirements in approximately 85% of the current market. Not only does the market look attractive today, based on industry projections, we believe future years will look even better. Based on the projections, the demand for recycled material is expected to grow to approximately 60 billion pounds by 2030. We believe that it is clear that PureCycle is best positioned to be the primary supplier of high-quality material through this enormous market. With Ironton now better positioned, we have been focusing on our commercial efforts. Trials have been kicked off across a number of companies, industries, and applications. This process has been very encouraging as market feedback on our products has been consistently positive. Our product is delivering a high-quality outcome that will help enable our customers to achieve their sustainability goals. The trials are showing it runs with virgin-like outcomes and will be able to address very large parts of the overall PP market.
We are excited to be opening up new trials as well as progressing our existing pipeline of potential customers. As customer orders arrive, we intend to ramp to meet that demand. As we have embarked on our commercialization, we want to give investors some color and some context around our commercial time frames. Given the unique nature of our product, most investors are probably not familiar with the process for project commercialization. We have focused on four key initial categories for sales: fiber, film, injection molding, and automotive. Each category will represent a key proof point for future sales in both Ironton as well as future facilities. For fiber, we are well on our way. The application is operationally tricky. There are numerous adjustments that need to be made to fine-tune the process, both in terms of compounding recipe as well as the customer fiber operational variables.
We believe we found the right recipe, and we are currently actively trialing our material with five different fiber producers, some are very big and some are more niche and testing a wide range of yarn types for different applications. We are very excited here. I remind you that fiber is an extremely difficult operation even for virgin material. So to find success with a recycled stream, it's just very good. Initial progress has been strong, and we are confident this will be a large category for us in the future. Injection Molding. We're very excited to now be partnering with Procter to develop several compounding solutions across a couple of different brand categories. This commercialization process at P&G is expected to take time when initial feedback has been encouraging. Procter & Gamble has been a steady supporter of us, and we are excited to deliver the first tangible product to their brand teams.
Automotive is a potentially enormous category for PureCycle. There are typically over 300 pounds of plastic installed on each vehicle. That number has grown as OEMs replace steel to lighten the weight in order to achieve better fuel efficiency. Polypropylene is typically the plastic of choice because it is the lightest of the traditional plastic options. Automotive has been historically challenging to address with traditional recycled materials as it is highly sensitive to quality, and also the applications are highly technical. A small imperfection on an automotive plastic part can create paint adhesion problems or odor issues or yield losses. To date, it's been very difficult to introduce other recycled supply to automotive at scale due to the contamination level inside of those products. We have been working with a global automotive company to gain approval for our products into several of their key applications.
The customer approval process is well on its way, and we hope to gain final approval in Q4. If this proceeds as planned, we expect orders to start in Q1 of '25. For film, we are just getting started. While the trial process will follow a similar timeline as fiber, the early results are promising. We have not trialed our product commercially yet, but we have converted our product into film at lab scale. This is a big deal. We have worked with a large food and beverage brand to take their wrappers, things like metallized film and multilayered film, into our Durham R&D facility, we purified it, and then we converted it into film all on site and all in front of them. It's a great proof point for our brands looking to close the elusive recycled gap in film. Across all of these applications, there's also an emerging synergy story developing. We worked with one customer who is interested in using our product in a mop head application.
This application had an injection-molded plastic base connected to a collection of fibers for the mop. One customer, two application types, PureCycle can serve both. We had another automotive customer discussion around replacing the carpet in the car with RPP fiber. During that discussion, we also mentioned our ability to produce bumpers, dashboards, and other products. One customer, multiple applications, PureCycle can supply all. Our strategy is to prove that our product can successfully run across multiple lanes. We found early success in fiber and injection molding and are in the early stages with film. As we gain approvals, we expect to broaden our customer base, grow our offering potential, serve the customer more completely, and build a strong commercial foundation for future projects. We expect revenue to begin to show up materially in Q4 and ramp into 2025. This confidence is being built by the growing pipeline of customers, strong success from trials, and feedback from the market.
While there is some uncertainty with exact timing, the direction and inflection of our financial prospect is clear. The future is bright, and we are energized and excited. Some of the largest companies in the world are recognizing a new supply has emerged to solve their sustainability needs, and they are leaning in enthusiastically to PureCycle. At this time, I would like to hand it over to Jaime for the financial presentation.
Thank you, Dustin. I'll touch on our liquidity on Slide. As Dustin mentioned, we raised $90 million on September 13 by entering into subscription agreements with certain investors where we saw the combination of preferred stock, common stock, and warrants. This was in addition to the $18 million in proceeds from the revenue bond sales earlier in the quarter. These transactions boosted our quarter-end unrestricted and restricted cash balance to almost $94 million. Also, as a reminder, we hold about $118 million of our revenue bonds that we plan to sell over the next several months that should further support our liquidity needs in 2025. In early October, we did make a $36 million payment into an escrow account related to the Augusta purification project. Over the next several quarters, we have about $11 million of commitments for the Augusta project, mostly for long-lead equipment and pre-construction work. We plan to further the activity in Augusta in 2025 and also plan to secure financing for that project. Lastly, operating cash expenses, which totaled $23.5 million for the third quarter. This was a decline from nearly $35 million in the previous quarter and down about $4 million from the first quarter of the fiscal year. I will now turn the call back to Kevin to open the call for questions.
Thank you. Our first question comes from Hassan Ahmed with Alembic Global Advisors. Your line is open.