Delay in Milestone 2 Delivery Puts TBS Contract at Risk of Termination

Milestone 2 Delivery Advances Commercialisation Pathway

Papyrus Australia Ltd (ASX:PPY) has taken a significant operational step by delivering 200 biodegradable Collar Keeper product samples to TBS Mining Solutions, meeting the requirements of Milestone 2 under their manufacturing and supply agreement. Although the samples arrived after the original 31 March 2026 target, they were delivered before the contract’s 29 June cure period deadline, allowing the project to stay on track.

The samples, produced from virgin agricultural waste pulp using Papyrus’ proprietary technology, were converted into paperboard on jumbo rolls through third-party commercial-scale manufacturing partners. This marks the first time Papyrus’ pulp has been transformed into paperboard at such a scale for customer qualification, signalling progress beyond lab-scale development toward commercial supply.

Meeting Milestone 2 unlocks the next phase where TBS can begin formal product testing and larger-scale field trials ahead of product acceptance, known as Milestone 3. This testing phase is critical for validating the product’s performance and suitability for TBS’s patented Collar Keeper® application.

Milestone 3 Testing Faces Delay but Remains On Schedule

While Milestone 3 was not met by its 30 April 2026 target, Papyrus expects to satisfy this milestone by 29 July 2026, still within the contract’s 90-day cure period. The outcome depends on TBS’s testing and acceptance process, which remains ongoing. Failure to achieve Milestone 3 within this window could expose Papyrus to contract termination risk.

Revenue recognition under the TBS contract remains contingent on achieving Milestone 3 and subsequent milestones, so the timing and result of this testing phase will be closely watched by investors assessing Papyrus’ commercialisation progress.

Strategic Importance of the TBS Contract

The TBS contract, valued at approximately $4.2 million over 3.5 years, has been a cornerstone of Papyrus’ transition from technology development to commercialisation. The delivery of product samples follows the company’s recent efforts to scale manufacturing, including commissioning its Adelaide Rapid Prototyping & R&D Facility and securing funding through placements and convertible notes to support commercialisation activities.

These milestones build on Papyrus’ earlier announcements detailing the contract execution and initial board production phase, reflecting measured but steady progress toward full-scale supply of sustainable alternatives to traditional mining consumables. The contract also connects Papyrus with TBS Mining Solutions, a subsidiary of ASX-listed Aquirian Limited (ASX:AQN), which specialises in innovative mining equipment and patented products.

Despite the slight delays, the company’s Chair emphasised the significance of meeting Milestone 2, highlighting the scalability of Papyrus’ manufacturing pathway and the validation of its ability to meet customer specifications. This operational milestone is a tangible demonstration of the company’s technology moving closer to commercial reality.

Investors following Papyrus’ commercialisation journey will recall the company recently raised $175,000 through a placement and convertible notes to fund these very activities, underscoring the financial and strategic coordination behind these milestones. The delivery of product samples and the ongoing testing phase are critical steps in converting that investment into revenue-generating production $175K Placement and Convertible Notes and commercial contracts.

Moreover, the milestone delivery aligns with the commissioning of Papyrus’ Adelaide Rapid Prototyping & R&D Facility, which has been instrumental in validating the pulp technology and scaling production processes. This facility underpins the company’s ability to produce samples at commercial scale and supports ongoing product development efforts Advances Commercial Scale-Up.