PureCycle Technologies, Inc. (PCT) Q1 2023 Earnings Call Transcript
Good day and thank you for standing by. Welcome to the PureCycle Technologies First Quarter 2023 Corporate Update. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker, Charlie Place, Director of Investor Relations. Please go ahead.
Thank you, Therese. Welcome to PureCycle Technologies first 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 afternoon, we will be highlighting our corporate developments for the first quarter and subsequent to quarter end.
The presentation will be going through on this call will also be found under the Investor 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 first quarter 2023 corporate update press release and in our quarterly report on Form 10-Q filed this morning as well as in our 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 statements. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties included, 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 are welcome to follow on 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 it over to Dustin Olson, PureCycle’s Chief Executive Officer.
Thank you for joining us today for our first quarter 2023 corporate update conference call. We appreciate your support and look forward to discussing our recent developments. Our flagship state-of-the-art purification facility in Ironton is certified mechanically complete and has completed the pre-startup safety management documentation required for solvent deliveries, which we started yesterday.
We have the initial solvent charge delivery schedule over the next five days and then expect to circulate solvent early next week. All of our core operations have been commissioned and are ready for start-up. We are on track to begin commercial pellet production using the first post-industrial recycle and then post-consumer recycled feed in the second quarter. We still expect to be able to complete our start-up time line in order to meet the milestones as outlined in the recent bondholder agreement.
Our goal is to produce between 45 million pounds and 75 million pounds of ultra pure recycled resin in 2023.We have continued to advance pre-construction activities for our Augusta project since our last call. Importantly, we are working toward a agreement with the AEDA for a plan to begin development activities. Additionally, preparation for module construction is in progress and equipment is beginning to arrive at Gulfspan’s facilities in Beaumont, Texas. Our international projects are making progress. Our European team has initiated pre-construction engineering work for the permitting process at our site at the Port of Antwerp.
Our joint venture with SK Geocentric continues to advance the collaborative engineering process for a multiline purification facility in South Korea. And we continue to make progress with detailed joint venture discussions and site selection efforts with Mitsui in Japan. Our joint venture team has started the feasibility study process on two locations that have the capacity for the development of two to four purification lines. We are frequently approached and also actively seek out opportunities to amplify what PureCycle’s technology means to the global polypropylene recycling marketplace. As you can imagine, our primary focus has been on commercializing our first plant in Ironton. This is, quite frankly, where all employees have been spending most of their time.
Having said that, we are beginning to spread our message globally through several recent events. I was invited to Davos to present on a Procter & Gamble panel, which highlighted PureCycle’s technology. Several of our team members are active in national industry associations such as the Plastics Industry Association, the Institute of Scrap Recycling Industries and the Association of Plastic Recyclers, where we are often provided speakership opportunities. And recently, PureCycle representatives traveled to Washington, D.C. to participate in Domestic Plastic Recycling Tabletop discussions as well as the U.S.-Korea Sustainability Summit discussions. While there, we also met with numerous members of Congress and other senior policy officials.
We expect this participation to increase over the coming years as critical legislation is crafted to govern this emerging industry. We’re proud to have secured an additional $62 million of non-dilutive debt financing and are working several other equipment financing packages that we intend to close in the next few months. The AEDA has received our financing plan for one line in Augusta, and we are working on closing the land bonds by June 30, 2023.Turning to Slide 4. This project has been a testament to grit, determination and a desire to finish. As you can imagine, there are a number of minor equipment issues when starting up the facility and our team has been managing through all of those challenges. This is normal.
They are teething challenges for all new technologies. We’ve spoken several times about needing to work through the early start of headaches, and this is what we’re doing. While we have encountered some delays over the last two months, we’re now excited to move forward with startup. I can tell you personally that the plant just feels different now. There’s a new energy building within our team, and we are ready to run this facility. OurPureCycle team and field contractors who have worked on this project have willed this facility to mechanical completion.
And I’m very proud to say position the facility to receive solvent deliveries, three arrived on Monday. We are currently in the following position: completed key pre-startup and safety requirements, utility plant is operational and in service, PrEP is operational and in service, flare systems are operational and in service, extruders are commissioned and ready for start-up. As a result of all of this, solvent is being delivered to the site. The next step is to make every effort to ensure safe and smooth start-up that’s focus on long-term operational success. We are not going to rush into the next steps. I hope you’ve had an opportunity to watch some of the videos that we posted on to our website, on the social media and in the YouTube that showcase our PrEP, purification and born-digital operations.
We intend to continue showcasing our company with these videos all the way through initial pellet production. Turning to the next slide, I will walk through the next steps of Ironton’s startup process. This is an updated slide from last quarter’s call that shows our progress in achieving the operational milestones for the certification of the Ironton project. This is what we call our path to pellets. We closed the first bond milestone by achieving certification that Ironton is mechanically complete by June 30, 2023. PureCycle formally received third-party engineering certification just a few days later on April 28th with agreement that the plant was mechanically complete on the 24th of April. We’re currently in the in-between stage and between mechanical completion and first pellets.
During the last call, I underestimated the time it would take the transition of first pellets. Instead of dual tracking activities like we originally planned, we purposefully slowed down our process for solvent introduction in order to more effectively facilitate a path to mechanical completion. This ultimately slowed down our initial forward progress, but also helped us to build a better and long-term foundation for steady operations. Given this is our first facility, we took extra time preparing the plant through a process called PSSR, or pre-startup and safety review. This involves final operations checks, safety walk downs, final equipment commissionings. During this process, we spent a significant amount of time testing instrumentation, working valves to ensure we are ready to operate.
This is all now complete. Yesterday, we cleared another major hurdle and accepted solvent to the site for the first time. This is a big step and paves the way for commercial operations. The next two weeks will involve the testing of solvent circulation systems, commissioning of the remaining equipment, primarily our filter media systems, while the solvent is circulating, and then we will introduce feed. Once feed is introduced, we will set levels, and then we will make our first pellets. We will notify the market of our success and start ramping up production rates from there.
We remain committed to achieving these milestones in the time frames I’ve just described, given where we are today in ramping up the Ironton operations. Moving to Slide 6. I want to spend a few minutes to highlight the operational progress that we’ve made on executing the next phase of our growth strategy. In Augusta, our engineering teams have completed approximately 90% of the ISBL design and have begun work on the OSBL design. Gulfspan, our contracting partner, has started module preparation for the Augusta construction project at its site in Beaumont, Texas. We continue to make progress on our international projects.
We have initiated engineering work at the Port of Antwerp in Belgium to support the permitting process. This activity will set this facility’s critical path.Our joint venture engineering team in South Korea has advanced plant designs in accordance with the schedule and priorities identified in the JVA with SK Geocentric. Our core focus right now is to ensure that the final design measures seamlessly with the feedstock available to the site. And finally, our JVA discussions with Mitsui have progressed as anticipated, and we started feasibility studies on two preferred locations. All of this at PureCycle are fully committed to the Company’s mission of providing a new solution to global plastic waste.
Ironton is critically important today, but it’s just the beginning of what PureCycle will become.I will now turn it over to our CFO, Larry Somma, for the financial update. Larry?
Thank you, Dustin, and please turn to Slide 7. We ended the quarter with just under $264 million in total available liquidity, a decrease of $62.2 million from the prior quarter. As stipulated in the bondholder agreement we executed in March, we transferred $87.5 million from unrestricted cash to restricted cash or a net of roughly $74 million once PCT was reimbursed for the remaining original bond requisition. Our corporate and pre-operational employee expenses were $6.6 million during the first quarter, which was a slight decrease from the prior quarter despite additional taxes paid on employee stock vesting. We used $7.6 million of cash during the quarter for normal corporate operations, such as insurance, professional fees and various other expenses.
Additionally, we continue to make investments in our Ironton, Augusta and PreP facilities, the majority of which came from unrestricted assets. As a consequence and in conjunction with the payments that we made to the bondholders, cash and debt securities available for sale decreased from December 31st by $124.1 million. One positive note is that we were able to execute a $25 million surety bond, which is relevant for our Augusta restricted escrow construction account. Our agreement with one of the multiple vendors supplying long lead items for the Augusta purification modules requires us to fund the escrow account with funds to address future costs and the risk of payment to their sub-suppliers. Closing the surety bond allows PCT to recoup some of the cash that had previously been in the restricted escrow construction account. Subsequently, we were able to progress the Augusta project during the quarter with $15 million of payments from the restricted construction escrow, $5 million of which was returned to our unrestricted cash balance. Now let me comment on our budget for completing the Ironton project.
As noted in our 10-Q filing this morning, PureCycle anticipated as of March 31, that the remaining investments in 2023 to complete the Ironton facility could range from $26 million to $51 million. This range is dependent upon various contract contingencies and their ultimate resolution. The most important point is that we have already spent or forecasted the need for a total of $51 million, which means that any positive resolution of contract contingencies will be favorable to our future cash forecast. Please turn to Slide 8. Before I discuss the points on the slide, let me provide some details on the financing events that were completed since our call in March. We are pleased to continue executing on our financing plans with $62 million raised from non-dilutive sources.
Our ability to execute additional agreements and term sheets, some of which I will discuss in a minute, enabled us to present a plan of financing to the AEDA related to the completion of at least one purification line in Augusta. In addition to the plan that we sent them, we informed them of more than $50 million of completed spend on the second purification line. The information sent now has us ready to focus on closing the financial bonds, which will grant tax incentives for PCT to build and operate in Augusta. We are working diligently to close this land transaction by June 30th, so that we can begin to prepare the land and ready it for the required OSBL work. Now I will discuss our cash and capital raise strategy. In past calls, we highlighted our focus on managing our cash uses against available sources.
So this slide is intended to summarize our goals, present the opportunity and depict what has been achieved so far. Our goals are simple: manage the corporate cash burn rate until Ironton is operational. Pursue capital that provides financial flexibility and optionality while being mindful of our long-term capital structure. And pursue and execute cost-effective longer-term project financing transactions for our growth projects once technology risk is removed with Ironton operating.Near-term financing opportunities have been focused on equipment financing, shareholder loans and capital outsourcing of non-core operations referred to as DBOOM, which is the acronym for design, build, own, operate and maintain. A few relevant examples are the Augusta central utility plant and the Augusta PreP building, which will house, sort and wash lines.
We estimate that we have approximately $125 million of Augusta PreP equipment, sale leaseback and capital outsourcing opportunities, excluding the central utility plan. Since our last update, we closed on a [$24 million] sale-leaseback transaction with CSC Leasing, which is secured by the Augusta PreP wash equipment. It’s a 36-month lease with a 7% interest rate and flexible end of lease terms. We also secured a $40 million term loan with an entity controlled by Dan Gibson, the Chief Investment Officer of Sylebra Capital, PCT’s largest shareholder. The loan matures on December 31, 2025, bears interest at a floating rate of SOFR + 7.5%. We are also actively working to close additional sale-leaseback transactions of Augusta PreP equipment.
We have received proposals and are evaluating next steps. Now let’s turn to Slide 9 for a summary of our first quarter achievements. We continue to execute on both near- and long-term goals. As we noted, Ironton is mechanically complete and certified by the independent construction engineer. Ironton has completed pre-startup process safety management and solvent is on site and is prepping for circulation. We secured $62 million of additional non-dilutive capital raises, that’s the $22 million sale-leaseback I referenced and the $40 million term loan that will keep our Augusta project moving forward, and we’re evaluating other additional proposals that we’ve received.We’re working to close on the land for the Augusta project by June 30th now that we’ve submitted a plan to the AEDA.
We’re preparing Augusta modules for construction in Beaumont, Texas. We’ve initiated engineering work at the Port of Antwerp, which will set the construction time line for our Belgium project. And we were voted One of the Best Places to Work by Plastic News for the second year in a row. We look forward to updating the market with respect to upcoming milestones achieved in completing the start-up process of our flagship Ironton facility and, of course, the Augusta financing process as soon as we are able. Thank you to everyone for joining us on the call today. At this time, we would like to open up the call to questions.
[Operator Instructions] Our first question comes from Eric Stine of Craig-Hallum.
It’s Aaron Spychalla on for Eric. First for me, can you — Dustin, you kind of talked about 45 million pounds to 75 million pounds out of Ironton in 2023. Can you just talk a little bit about some of the factors that that get you from the low end to the high end as you think about that?
It really just depends on how quickly we ramp the facility. As we get through the next week or 2, we start circulating solvents and then introduced first feed to the plant. We’re going to have a pretty good idea of how the plant operates, and this is going to sound silly, but we’re going to listen to the plant. The plant will tell us kind of where the pinch points are, how well it’s operating and how quickly we’re going to be able to ramp rate. So we have the estimate in our current forecast of kind of a linear ramp rate over the first six months to nine months.
But if all is going well, and we feel good about raising rates, then we’ll do that earlier.
Okay. Good. And then maybe just at a high level, can you just kind of talk about some of the lessons learned from Ironton as you look to expand into Europe and Asia? Anything on kind of customers, feedstock, et cetera?
Yes. That’s a great question, Aaron. So I’m going to break this down into — on the project side first and then maybe discuss the commercial side. On the project side, early decisions around this project, and these are circa four years ago, okay, three, four years ago. There are a lot of unknowns in the recycling market.
And there are also a lot of assumptions that we needed to make when building this facility. And so some of the early design decisions around what type of feed we would get and how we would operate, they were built more robust than they need to be, okay? And so when I look at — when I helicopter up a little bit and I see how this plant will operate, I see a lot of potential extra capacity in areas and maybe overengineered in some areas. And that was done on purpose. I mean, we had an expectation that we were going to build this to anticipate anything possible out there. So as we begin to operate this facility, we see how it really operates.
I think we’ll have an opportunity to descope in the future just based on that. From an execution perspective, look, a couple of big things. One, it’s — the more that we modularize, the better, okay? Everything that we built in Beaumont on the modular design basis, when we brought it to the site, it fit perfectly. And everything was just really, really, really efficiently done.
Some of the off module work that we did, this was less efficient. It’s more costly to build it in the field than it was in Beaumont. And also there were just some misses on the execution side. So I would say, going forward, we’re going to work hard to modularize more in the future.The other thing, and this is maybe more general. It’s one thing — we have all the 3D models.
We walked through it virtually to see where things were to see how that would look and fit together. But until you actually see it coming together in the field, there are some obvious things that jump out at you that you would do different. These aren’t game changing type items, but it certainly identifies lots of areas for construction efficiency that we’ll be able to shore up. Like why did we put this valve there? Why did we put that pipe there?
It’s all going to work fine. But some of the decisions around that were — they’ll be improved for future plans. And I can tell you that we have a long list of lessons learned that we’re collecting, and we’re actively incorporating those into Augusta.
Right. Right. That sounds good. Thanks for the color and best of luck to scale up.
Yes. Thanks a lot, Aaron.
Our next question comes from Hassan Ahmed from Alembic Global Advisors.
Being a pre-revenue company, I guess, most of our analysts are valuing you guys obviously using a DCF approach. Now historically, in the early days, you guys would provide us with a best guesstimate of where you thought tonnage or poundage would be at your cycle, call it, by the end of the decade. And I know you guys are sort of actively involved in a variety of expansion trends, be they what’s happening in Ironton or Augusta and now obviously, more projects out in Europe as well as Asia. So I mean, any thoughts with regards to where that number could be in terms of pounds under production by the end of the decade? Do you guys intend to sort of update one of those sort of older slides that you used to have?
Yes. Thank you, Hassan. Yes, that’s a good question. I think that we’ve been so focused on Ironton right now that we haven’t given as much detailed focus on the growth plan per se as we want to get through the Ironton [project], test the technology and find out where the real capacity is on the plant because we think there’s good potential for incremental capacity at Ironton alone.With respect to the growth plans, I think we’ve been pretty straightforward on our overall plans. The time line with, which we will attack those will be different in each region.
But one area that I think that you can get a good sense from is the kind of the availability on each property. For instance, Augusta is big enough to hold eight lines. Belgium is big enough to hold four lines. SK is one and Japan is two to four. And I think that, that simple math across 130 million pounds per line gets you in the ballpark.
The question will be how quickly can we get to those capacity numbers. And I’m going to reserve that for a future call as we put a tighter pen to paper, and we see how the startup goes.
That’s actually super helpful. Now as a follow-up, two parts to the question. One, just on the pricing strategy side. I mean, historically, you guys would talk about maybe $1 a pound, then you took that number up to $1.26. So how should we be thinking from a modeling perspective about pricing?
And are you using it off of sort of market pricing and then a premium? So one good part on the pricing strategy. And then a second part of the question, just on what you guys are seeing with regards to feedstock availability as well?
Yes. Yes, thank you for that. So on the pricing strategy side, we have built in nice flexibility in our off-take agreements to where we have a min and a max at our option, and that gives us the ability to show and to secure a sold-out plant at the pricing in our structural contracts. But it also gives us an opportunity to pull back and sell more on spot as we see fit. The reality is that we definitely show a strong premium to virgin.
And to the level, I would say, in the — similar to the numbers that you’ve seen, and that very much depends on the overall virgin polypropylene price, okay? As virgin price goes up and down, the delta to virgin will probably grow and shrink a bit. But what we are planning to do is as we generate scale production at Ironton, we will be moving a lot of products around the globe into customers’ hands, so they can do trialing, application development and testing. And that will really set the appetite for the products and the potential for spot pricing. And ultimately, that will drive whether or not we go to min’s or max’s on the contracts. With respect to feedstock, we feel pretty good about feedstock. Again, our technology is — it’s fundamentally different.
It’s a molecular wash, okay? So it doesn’t really matter what form the feedstock comes in. We can manage it similarly across all the different forms. And so what we see in the market is a pretty nice ability to purchase feedstock differentially to other people, okay? We have active discussions really around the world right now with different feedstock suppliers.
And we believe that they are excited about us coming online because it gives them another outlet and a less onerous outlet because we can take more contaminants than others can. But also, they see it as an opportunity for them to grow their market on feedstock as well. The reality is that most feedstock aggregators or suppliers, they aren’t working as hard on polypropylene as they are on other products because there’s a limited — a limited offtake potential for them. And so as PureCycle’s technology changes that and truly creates a circular product of high-quality polypropylene, where we put our product anywhere, it’s actually going to draw more feedstock into the market. We’re excited to partner with people to grow together over the years. And our projects, our global projects around the world, it’s really giving us the opportunity to see feed in lots of different countries. And so from a feedstock perspective, we — the short story is we don’t see a problem fulfilling our obligations for Ironton for sure and really any of the plants that we’ve been talking about.
Our next question comes from Michael Hoffman with Stifel.
Two questions around money. What is the agreed amount now that you have with the AEDA for the line 1? And how much do you have in hand? And therefore, what’s left?
So I’ll take this, and then I’ll pass it to Larry. The line one expected CapEx is around $400 million. And we have sufficient sources to satisfy that demand. Now remember, the $400 million can be offset through various financial mechanisms through the DBOOM, and we have several different opportunities for DBOOM that are substantial and they can significantly reduce that number. I will pass the question to Larry to answer as well.
Yes. So Michael, we’ve talked about this. Dustin is right, around $400 million is correct. Remember, the first line at any site with multiple lines will be the most expensive because of infrastructure. So you can expect lines two and beyond to be less than $400 million, significantly probably.
But as we alluded to, we wrote a formal letter to the AEDA presenting a plan of financing for one line, and we showed them either cash spent or committed funds for in excess of the $400 million. We were closer to $500 million of what we presented, and we also showed them the details behind the $50 million that we’ve also already spent on line 2. So we are in a good position there. And as we’ve indicated, we’re working diligently to try to close the land by June 30th, so we can begin surface work on the land there.
Okay. I still have my second question, but I mean, I guess, I’m just going to be sort of [rigid] about this. What are the details? How much do you have left to raise to get to that — the minimum of $400 million? Truly raised as opposed to…
None. So it is completely done. So AEDA would — if we were to call them would say you’re done.
Well, there’s a process to go through with the AEDA. They’re in the review process right now. And then ultimately, they’ll take it their Board for final approval. But yes, we are working with them on the details so that we can close by the end of June.
Okay. That’s what I wanted to hear. And then what is going to be the final spend on Ironton versus what we were shown in March?
The numbers have not appreciably changed from what you saw in March.
So a little bit higher, but not meaningful.
It’s a little bit higher, a little bit of creep, but really it’s on par.
Yes. Michael, I’d say quickly, I referenced that as of March 31, we had the range of $25 million to $51 million left to spend. Remember, that was as of March 31. As of today, we’ve exhausted all the money in the construction fund. So the rest will be funded in cash on our balance sheet.
The number left to spend, assuming no recovery of contingencies is in the neighborhood of about $25 million. And remember, half of that is payment upon complete performance completion to our partner subcontractors. So the majority of the funds have now been exhausted.
Our next question will be from Noah Kaye with Oppenheimer.
So Dustin, this has been a huge push to reach mechanical completion and congratulations on that. My question to you is, one, how is the team doing? And two, as you’re standing up operations, what kind of capacity have you put in place to do troubleshooting along the way? I think the steps you laid out for the next several weeks and months makes sense. Just talk to us about what is that capacity to do rapid response, troubleshooting, how much of that is internal, how much of that is with partners?
So how is the team? I can tell you that the plant just feels different today, Noah. When you walk around the facility, there is a buzz literally because you hear some equipment running, but also simply because everybody is so excited to get going. It’s interesting to watch the plant because you see it transition from a whole bunch of contractors building the facility to a whole bunch of operators learning to run the facility. And so we slipped a bit over the last couple of months with the mechanical completion date.
But what we gained is a bunch of experience on the operations side. And people are all over the plant. They know the lineups, they understand the facility better today than they ever have, and they are growing confidence every day and their ability to run the facility. So I’m extremely optimistic about our team. I think we have a really good team growing.
And I think we’ve done a really good job of building the right training packages, the right operational readiness tasks to get going. With respect to the — how much buffer have we built into the facility? This project has always been chasing critical path. And so we’ve probably always been on the optimistic side of when we thought the plant would finish. We’ve always been chasing the critical path so we could pull the time in. And quite frankly, when you look at our ability to close this project relative to other industry standards, we still look pretty good.
Most projects are 12 months behind during the COVID time, and we came in about six months behind. So I feel good about that. The capacity — this is the 45 million pounds to 75 million pounds, okay? I mean, there are a couple of unknown factors. We could still on start-up have some infant mortality items that we have to push through.
We’ve had a few that we’ve already dealt with. And so we could have more. But we also could have some upside to our numbers. I really believe that we are well positioned to run this facility. Our team is ready, they’re eager. And I think that we have more capacity in the plant than what we have on paper.
And so once we start running it, we’ll see. So is there a lot of float in the schedule that I show on the slide? No, not really. This is where we are right now. This is what we think right now, things could happen to delay us.
This is just life. But I also feel like we can catch up and surpass or exceed our expectations of overall production for the year, which is the ultimate indicator for performance.
Yes. And to put a finer point on that and this isn’t a comment on whether it’s better to have internal or outside help running and setting up these operations. We’d just like to better understand is the team that’s in place for PureCycle to run the operations. I mean, is this pretty much all internal folks now? I mean, did the contractors kind of hand over the keys?
Is there an ongoing help to debottleneck? Go ahead.
Yes. That was the last part of your question that I skipped. That’s a good follow-up. So we have repurposed just about every engineer that we have hired for the Augusta project to support Ironton. So we have staffed up internally to refocus on — to really drive focus on Ironton.
Almost all of the contractors are out of the facility. I think last time we talked, we had, I don’t know, 80 to 100 contractors left on site, and we’re down — we’re talking about two for this contractor, five this contractor. So we’re down to very, very low levels now. And quite frankly, they’re holding over for start-up support. So we maintained some of the construction crew to help us with infant mortality items or tuning items.
And we have, let’s say, refocused all of our staff inside PureCycle to support the Ironton startup.In addition to that, our core partners like KMPS, they’ve been a core partner in the technology development. They have all hands on deck right now also. So they’re there, and they’re really smart engineering staff that’s ready to roll their sleeves up and help. They’ve already done a lot. And we also have JV partners like SK that have also offered support.
And so I know I have a phone that I can call to get support quickly if needed, okay? And they offer that every time I talk to them. So, a, I feel good about our own team because we’ve learned a lot, and we are the experts, so we know the most about the technology, but I also feel very good about our partners in the industry to get help if needed along the way.
And our next question is from Thomas Boyes with TD Cowen.
First, I just wanted to kind of follow up on the feedstock question from earlier, just given that facility is now so close to its ramp-up period. A couple of quarters ago, there was just some issue with suppliers that just couldn’t make good on the agreements and had to be replaced. And have you gone back to your feedstock supplier base at Ironton just to confirm availability as you get towards that 45 million pounds to 75 million pounds that you’re potentially targeting?
100%, yes. And also all of the feedstock suppliers that we have engaged for Augusta as well as feedstock suppliers that we’ve engaged around the world, we have continued to deepen the relationship with them, so they’re on the ready to supply as well. The reality is that as we begin to operate more polypropylene will come and also our suppliers will be willing to sell us more and more over time. They want to know that we’re going to take reliably. They want to know that we’re going to pay reliably.
And so we are all kind of waiting for the start of this facility, and then it will go. But really, the work that we have done on Augusta and also with our JVs is really helping to, let’s say, build a safety net around Ironton that’s really strong and wide. And so even if we had other suppliers that couldn’t deliver, we have a well of people that we can call on to fill the gap. And so we are very excited about this.
Can you remind me of how much feedstock you already have on site at Ironton in advance of startup? I know you’ve given a number, I think maybe a quarter or two ago?
I don’t know the exact numbers today. It’s on the order of [2 million to 3 million] of processed flake and agglomerate and on the order of another [2 million] or so of feedstock, I believe, that’s unprocessed right now. We’ve been running the PreP facility for quite a while. And quite frankly, we’ve been working through growing pains there and learning how to operate it better and better every day. But as an example, one of our silos is completely full, and we’ve been bagging out for the last month.
We have a bunch of blue super sacks, setting all over the property, which has got feedstock for purification ready to go. So I think it’s on the order of, let’s say, processed and unprocessed feed on the order of 4 million to 5 million pounds.
That’s helpful. And then maybe just as my follow-up real quick a housekeeping one. We’re not in housekeeping, but just maybe some clarity on the $125 million that you identified related to Augusta pre-PreP, was that exclusive of the $22 million that you already raised or inclusive of that amount?
Larry, do you want to…?
Yes. Yes, that’s — the $22 million is part of the $125 million opportunity.
And our next question comes from Gerry Sweeney of ROTH MKM.
Just really just one question for me — for you, actually, and it revolves around the project financing opportunity. I mean, we all know that you’re looking at getting Ironton up and running, so derisking it. So that becomes more of an opportunity or you get better access to capital. But what level of capacity utilization does Ironton really have to be at to sort of really cross the derisking line that really opens up the capital access?
Yes, I think that’s a good question. I think this is really a question for investors that are willing to invest in us. But from what we have heard, it varies by the investor. But there’s a substantial, let’s say, amount of technical risk that’s taken off the table, the moment we make, let’s say, first pellets, okay? And then there will be, let’s say, project economic risk taken off the table once we show that we can run at rates.
I think from a reliability perspective, there’s always going to be a question of how reliable can this facility run, and we’ll have to answer that over time. But I don’t — that’s as critical as getting to first pellets and then getting to the Leidos test at 100%. I think once we hit those two items, I think the hurdles are crossed.
Got it. And the Leidos test is running Ironton at five consecutive days. Is that correct?
Yes. That’s basically right, Gerry. It’s a 5-day test at 100%. And we haven’t scheduled that yet. This is another situation where we are going to listen to the plants and decide when…
Go ahead. Sorry. I didn’t mean [indiscernible]. And pardon me, I’m not an engineer, but I’m assuming five days, that’s 24 hours a day, seven days a week.
I’m going to get that question. So I just want to ask, but that’s what I see.
Yes. This facility is designed to run 24/7, 365, and we will have periodic outages. But for the 5-day tests, for sure, it’s going to be a 24/7 operation.
I would now like to turn it back to Dustin Olson for closing remarks.
Yes. Okay. So thank you very much for joining the call today. We thank you for your continued support. It’s a big step that we crossed actually yesterday when we took the plant to mechanical completion and solvent — ready for solvent.
Getting to ready for solvent is a really big deal. And now we’re truly in full operations mode and just running the plant to the paces until we get the first pellets. We feel like Ironton is now truly operational. We’re optimistic about our growth plan. We can’t wait to show the world what we can do, and we are excited to start making pellets and start delivering them to all of our customers around the world.
Thank you so much for your patience and your time and your continued support. Look forward to talking to you again soon.
Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.