Hazer Group (HZR) has suffered delays around the construction and cold commissioning of its Commercial Demonstration project in Western Australia.

The hold-up was caused by a critical failure in the high-temperature heat exchanger, which was due for completion this month.

The heat exchanger is required for the second phase of the project, thereby delaying the production of hydrogen and graphite to sometime next year.

The company said it would investigate remedies and insurances to mitigate the impacts of the setback.

Hazer CEO Geoff Ward said work would continue as the company looked into the incident.

“It is very disappointing that we have suffered this failure of the high-temperature heat exchanger during manufacturing, and this matter will be investigated thoroughly,” Mr Ward said.

“We will continue to progress our planned cold-operations testing phase and the completion of the fabrication of the hot-wall reactor while we work through the investigation of this incident and advise shareholders of any changes in our future plans as soon as practical.”

Hazer said it would work on the cold operations testing phase over the next three to six months before transitioning to hot operating mode when possible.

Shares in the company last traded at 84 cents on July 20.