Q2 2020 Westwater Resources Inc Earnings Call

[music]. Thank you for standing by this is the conference operator, welcome to the West water resources Inc. second quarter 2020 result.

And business update conference call.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to <unk> question.

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I would now like to turn the conference over to Christopher Jones, President and CEO. Please go ahead Sir.

Thanks, scaling and welcome to the Q2.

Talks meeting for West water resource, that's Chris Jones, I'm, the Chief Executive Officer, and with me here on the line or Jeff Jones, Our Chief Financial Officer, and Dan Mcquaig, Our Vice President of operations.

On page two of our presentation, we have our cautionary statement I encourage listeners to read them at their leisure, we won't be talking about some and I'm discussing some forward looking information.

Through the presentation today.

On the page three I watched waters or green energy materials developer, we are developing a battery ready graphite that's not in Alabama, which is scheduled for production in 2022, and now with an ATM discovery and I'll be talking about that later our presentation.

We're exploring for lithium in Nevada, and you touched on two highly prospective properties.

And we retain leverage.

To a rising uranium price the to license processing plants in Texas, and almost 200000 acres and all right and development properties.

Texas, New Mexico.

On the page four.

Ensuring the safety of our employees is our prime directive here and to ensure the health and safety up these employees on the communities, where we work we've eliminated unnecessary travel we've instituted health protocols for working together and instituted remote working arrangements for our employees based on C.D.C. state guidelines for co.

19.

Compliance.

We have ensured that our employees are permitted and encouraged to take time off due to illness or the unless if those around them without penalty.

And reclamation activities are in South, Texas are continuing using protocols designed to ensure the safety of our employees there.

On page five.

We continue to work with our business partners to maintain our advanced battery graphite product development schedule North Midland to plant. Our technical consultant continues to provide results that will shape, our pilot plant operations at our scheduled for Q4 of 2020.

We continue to work to ensure adequate financial liquidity to support our key operations and business activities are using a stock purchase agreement Lincoln Park, Apple a controlled equity offering sale agreement with Cantor Fitzgerald, and we were able to secure a federal P.P.P. long for are you are ice subsidiaries in Texas.

And last water has prevailed in a key decision its case for compensation from the Republicans Turkey.

Next I'd try general.

Turning down turkeys request to bifurcate the case and really that was a turn down of a delaying tactics and westwater remembering remembering westwater is requesting 36 and a half million dollars plus fees for the ticking up its licenses in Turkey.

With that I'd like to turn it over to Jeff Jeff.

Hi, good morning, everyone Hey, congrats.

Let's look at our capital position on slide six.

Our closing share price yesterday was $2.39.

With approximately 7.69 shares outstanding our market capitalization stands at 18.2 million.

At the start of the second quarter 2020 share price was 98 cents.

The ended the quarter our share price it increased to $2.65.

We welcome the more positive outlook in the capital markets.

Since my recovery in the Dow Jones industrial averages nearly 4000 points during the second quarter.

Certainly the enactment of the carriers Act at the end of March Here's the have added stability to the capital markets.

In particular, the payroll protection program appears to have been beneficial that many small companies.

Moving west water resources.

After evaluating and determining that Debbie Debbie ours subsidiary you are I Inc. was eligible and qualified for a P.P.P. long.

I'm the applied for and received the PPP loan.

Mm $331000 on May four.

This is loud you are right to put back to work employees, who had been furloughed.

In March.

Due to the unmet and certain economic conditions that existed at the time.

Over the course of the following an eight week.

You are I used 100% of loan proceeds for qualified labor and benefits expenses.

We believe we have met the criteria for 100% forgiveness of alone.

And well prepared and file the forgiveness application during the third quarter.

Third our forgiveness application be approved by the small business administration as we expect.

We will treat the forgiveness of the game from extinguishment of debt.

By the uncertain economic conditions and tumultuous kept the markets we face Q on.

In Q2, we were able to maintain adequate liquidity.

Keep our graphite business moving forward into resumed reclamation activities.

At our South Texas operations.

Moving to slide seven we provide a natural summary for the second quarter 2020.

Net cash used in operating activities was 2.6 million for the quarter ended June 30 2020.

It's compared with 1.69 for the same period and 29 opinion.

The increase in cash use during the current quarter was primarily due to a reduction of trade payables and accrued liabilities.

[laughter].

For the quarter ended June 30, 2020 mineral property expenses decreased by approximately 230000 as compared with the corresponding period and 29 team.

This decrease was primarily due to the timing of a mineral lease payment for one of our uranium properties in new Mexico.

The current year that leaseholder agreed to monthly payments well in 2019 that lease rental was paid in one payment in the second quarter of the year.

At June 30, 2020, we had five monthly payments remain.

Yeah.

General administrative expenses for the three months ended June 30, 2020 were comparable to the corresponding period in 2019.

Our consolidated net loss for the three months ended June 30, 2020 was 2.5 million or 43 cents per share as compared with the consolidated net loss of 2.8 million or $1.81 per share for the same period and 29 team.

The 300000 dollar decrease in our consolidated net loss from the respective prior period was due to a decrease in mineral property expenses.

And arbitration expenses.

Which was then offset by a decrease in interest income as a result to sell air might note in the third quarter 2019.

[noise] 30, 2020, the company's cash balances were approximately 2.3 million.

The company had a working capital deficit balance of 1 million.

The cash balance at July 31 stands at 2.9 million.

We are grateful to our shareholders for proving our proposal we enter into a new financing facility with Lincoln Park capital at the annual shareholders meeting.

We have on April 28.

Google Love The Lincoln Park agreement.

With our other finance and bank financing facility with Cantor Fitzgerald has allowed us to maintain funding levels to support our current business plan.

Putting the graphite processing power plant planned for operation late in the fourth quarter.

However, should the pandemic surge in the coming months and negative negatively impact the kept the markets once again.

We will carefully review, our resource allocation priorities and take the necessary axis sustain our company for the long term.

And with that I'll turn it back to you Chris.

Thanks, Jeff.

On the slide eight.

We're going to talk about Arcos graphite project really the crown jewel in age Westwater universe.

On slide nine.

Batteries on their role in clean energy.

Israeli what the topic of this slide yes and.

Batteries are really driven at this point battery growth is driven at this point by the transportation.

Global electric vehicles are expected to grow at about a 23% growth rate over the next several years.

Think of however.

Ah electric vehicle a car that's coming down the road you might see a tough slog I see 800 pounds batteries and 200 pounds the graph I want to goes.

And transportation sector accounts for 23% of greenhouse gas emissions accelerating demand for these low emission alternatives.

It's not the only place where we see growth in that in the battery business in the energy storage business Red batteries peaks peak shaving batteries peak demand management batteries are expected girl also at 11% growth and graph IR graphite products goes into those batteries as well and of course consumer electronics like the laptop.

You may have on your yesterday or on that you've been using this morning represents a big solid and still growing market and about 3% growth right.

Graphite the component of all these batteries.

That includes the lead acid batteries, the largest battery market in the world.

On power cells, we need to be thinking about out on power cells being 10 billion would it be units a year or nurses grama graphite every one of them.

And of course, non rechargeable analyst and.

Great Chargeable lithium ion batteries, we make products for all three of these battery types and the United States government has to find graphite as critical to the nation security and prosperity.

On slide 11.

Because the price KUSA graphite project is the only near term source domestic U.S. natural graphite.

Plant design work is underway right now.

Customer qualification is underway right.

Right now as well and we've had a recent one ton order.

Now on power sell hearing United.

Here in the United States.

Just waters graphite will be produced using environmentally sustainable processes right here in the U.S. presently not targeted for Alabama.

Westwater graphite products serve all battery markets.

In our vanadium discovery of crews that can be an enhancement projects already great economics.

Slide 12.

The three products, we are making right now and we'll be making at the pilot scale level by the end of this year, our ultra P.M.T. This purified micronized graphite and this is a conductivity enhancer for all types of batteries the largest market again, just let asset.

Altered X T. G is RG laminated laminated expanded graphite. This is the development product right now and we will be making we have been making that in the lab and we won't be making larger samples that throughout this year.

Get markets, our lithium ion, let let assets and outlet ourselves once again.

And ultra C.S.P.G. coated spherical purified graphite.

The material that makes the lithium ion battery work and once again it is 25%.

Mineral constituents.

Hi on battery.

On slide 13.

Some of our flow chart of how we intend to make that at the manufacturing level, we take 95%.

Graphite concentrate we purify it.

And we make it into these three products using some proprietary and some public domain processes, but all of which minimize their environmental footprint.

And our compliant with all U.S. regulations.

Right.

Something that the Chinese and other manufacturers may not be able to client.

Slide 14.

Project plan once again the pilot plant.

<unk>.

Being designed as we speak right now for production at the end of this year.

We expect to make 12, and a half tons of material in various sizes and qualities for further work in customer development.

It also informs our feasibility study, which is expected to be complete at the middle of 2021, enabling us to construct the plant.

During the period mid 21.

To the end of 2022.

Full production is expected in year 2023.

In a little bit counter intuitive fashion, we're going to start mining our own graphite and 2028 and the reason for this is mining permitting 10, <unk> timelines can be longer than manufacturing facility timelines.

We can build the manufacturing facility and started up on purchased feedstock for which we already have a long term.

Relationship and contract.

On slide 15.

Project Capex is presently estimated 54 and a half million dollars, then, let's two and a half million dollars this year or a pilot plant.

And 32.9, a $19.5 million and 21 and 22, respectively.

Our first full year once again, a positive cash flows 2023, and a pre tax NPV on our property.

Discounted at 8% is estimated at $481 million.

The internal rate of return on that is 41%.

And vanadium development can enhance these economics, there's no downside whatsoever.

We are considering equity project level debt and joint venture structures for financing this operation.

[noise] onto our lithium portfolio on 28 to 16.

Turning now to page 17, we have two projects Columbus basin in Nevada, which is around 14000 acres.

Brian prospect.

Phase one drilling has been complete and we own the water rights at that property. It is about 45 minutes west and a little South China part about it.

South Africa, which is on the state line between Nevada in Utah.

Our Wendover is about 13000 anchors, we have sample results ranging up to about 100 parts per million lithium from shallow aquifers and again, we own the water rights for these properties.

On page 18, let's talk a little bit about our uranium portfolio.

A 19.

The U.S. fuels nuclear.

The U.S. nuclear fuel working group report.

Has recommended that we built the national stockpile of uranium and the President's budget proposal has $150 million per year for 10 years to do just that that has a budget request subject to action of course by the by the house in the Senate.

But it acts to level, the playing field and secure nuclear power.

For the United States remembering that the United States is dependent upon 20% of its electrical supply from nuclear facilities around the country. We're the largest nuclear power producer in the model.

On slide 20, we're going to talk a little bit about the 90 now.

[music].

A year or so ago, we are on the site and we discovered an ATM occurring with our graphite deposits.

Alabama.

We sent some 2000 samples to the lab unconfirmed widespread presence of vanadium yen grades the apparent that look interesting to us about 1.15%.

These could represent an economic enhancements to our our facility once we start mining and well need to do a little exploration and evaluation to see how widespread and then what direction and quality that Canadian is and what the metallurgy is southern we know how to produce it from the processing.

Graphite concentrate if profitable we can enter the steel markets without material as a commodity.

And again.

The vanadium can enhance cruises economics.

On slide 22.

The list of tenured leaders in energy minerals development.

Yeah.

This is something that you have seen before with the exception of.

In addition of J way go to our staff on July Onest Jay comes to us.

Spa and marketing from Georgia State.

And he has more than 20 years of experience marketing to the lithium ion and electric vehicle markets in the U.S. in Asia.

This valuable addition to our staff now put sales front and center. So that we can begin actively marketing our materials with knowledge base that Jay already brings to US and of course, you know leaders like Jeff Mitchell with more than 40 years of experience in the mining and manufacturing spaces Dane who is also on the phone.

Graduate of Colorado School, a mines he came to us in 2004, and he's heading up our graphite business.

You bet or our VP Tech has relocated to the United States and then yes in the Denver office with US and he is running all of the technical aspects of our graphite business to book and of course, John Lawrence with more than 30 years of experience in law in licensing across the nuclear fuel side.

Okay and securities.

On slide 23 experience matters.

Energy minerals exploration and development as a process that requires discipline and diligent capital stewardship.

We've restructured and recapitalize this company over the past several years repositioning waste water is diversified energy materials company.

We haven't place an experienced management team with the demonstrated history is developing businesses from concept to production.

We have executed a proactive M&A program.

Selling noncore uranium properties to redeploy capital and cost effectively expand resource base into green energy materials.

Slide 24.

We benefited from strong fundamental market drivers in all of our portfolio materials leveraged to the battery sector because of graphite project in Alabama.

Leveraged to rising uranium price on the.

Largest uranium mineralization basis in the United States and to licensed uranium processing facilities in Texas.

Pending U.S. government recommendations on uranium purchases provide upside for us producers and developers.

And a new vanadium discovery of KUSA hasn't potential to provide entry into steel markets and enhance the economics of our KUSA project.

On slide 25.

We have a strong asset portfolio with upside potential.

We are a proven management team with experience in energy minerals development and financial management.

And you should expect catalyst in the remainder of 2020 and 2021 as we develop this graphite business.

Through the pilot plant onto the feasibility study and the fan on into development and production.

And with that I'd like to thank you for your attention today and open up the lines for questions.

Thank you.

Now begin the question and answer session to join the question can you give me press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.

If you're using the speakerphone, please pick up the handset before addressing any key.

To withdraw your question. Please press Star then too.

Paul it's for a moment escalates join the queue.

Our first question is from Deborah stake it, but crystal equity research Deborah.

Okay.

Thank you. Thank you for taking my question I actually have a couple and I want him to direct one question initially to Jeff Mitchell.

In regard to the cash usage during the during the quarter. It seemed like a clicked up just a little bit in this quarter understandable I wondered if you could perhaps give us a little bit of insight into how much of that spending in the quarter.

Related to the to the.

To the <unk>, the chronic virus, a pandemic again, and whether or not theres any cash usage, there that might not be repeated in subsequent quarters and then maybe if you could just give us a little bit of guide.

On on the coming quarters, do you expect cash usage to increase or decrease.

For that.

Good question, Debra and the during the second quarter I could say that we were not really impacted by that.

From the spending standpoint by that could get 19.

Pandemic.

And that the Oh, the primary reason for that the higher uses of cash as I as I mentioned in my and my presentation was due to pay down of the trade accounts payable on include liabilities that have dealt that passes.

So the or so when you looked at quarter over a year over year quarter basis if.

There was quite a reduction but again the answered your direct question about the krona virus.

Impact or spin and now it doesn't that weve kept that pretty much the same level otherwise.

Hi, This is Andy as he.

Indicated by the Junaid spending as well as the mineral property extend the and looking forward for.

For the quarters.

We will see some.

Ramp up in and.

Hi, its related product development as we as we discussed.

And that but I that or is there a general administrative extending and our other mineral property expense levels, we do not expect.

Pick them to be fairly consistent with this quarter.

We just completed.

Okay. Thank you and then I wanted to move on and and touch on something that was mentioned in your opening remarks, Chris in regard to though the test of the safety as Gi.

Product, a and I think in your announcement you mentioned previously that Theres been.

Some testing done on that Cps D.

I see as P.G. product and and comparing it to some other.

Graphite materials and I Wonder if you, perhaps could give us a little bit more detail on who might have conducted those tests did you commission them yourselves.

And then you know if you've ever could give us some hands as to how they went about selecting the other graphite material to use as a comparison I'm just kind of like to get a little bit more granularity on.

No pun intended on the graphite stuff.

You bet and if it's okay I'll take them in reverse order the way we selected our competition is frankly, we had data sheets available.

Summer proprietary summer public domain, and and publicly available and that's how we select our competitors.

With regard to who did the testing are a we've we've been working with Polaris labs for most of a year now on our testing regime for all of our products.

There are located in Seattle, and they represent our our in house out a house lab, if you will.

We pay the bills and they do the testing and report results. We do not influenced results of course, so it gives us a.

A first class third party, a two to evaluate our performance.

With regard to the testing of C.S.P.G. itself.

Uh huh.

Due to kinds of testing if you're well first of all your yes, and it's an 11 get a code. It so that it can act like a battery material in the same way that Oh, the lithium ion battery actually uses it and then you do initial charge acceptance and decline curves to just to ensure that the the that Dennis electric.

Reactive and electric.

Tactically receptive.

And then over the course of about four months you do a upwards of several hundred charge and discharge cycles to evaluate what its performance can be our long run. So now what you saw in our release his initial results and walk you will see later.

Our are going to be longer term results. So that we can understand.

Electrical properties of this particular product and how they applied on lithium ion batteries just does that answer your three part question adequately yes. It does thank you. Thank you very much for just kind of outlining what was what I was involved in that test. You also mentioned that in your description of the process for making your various graphite materials that.

Some of the elements of the processes is standard and then other elements are proprietary and I Wonder if you could just remind US again, you know for those elements of your up your graphite material production or processing that's proprietary.

Is there potential for having it patented.

Is that important for your business to be able to put to protect your your various a process easier know how from the competition.

Let me answer the question this way.

For any process that is.

Clearly better.

Then what we see out there in the neighborhood and something that Weve develop you bet. There are some value to our company to a debt to patent that are protected and in some way so.

<unk> four in the process of continuously evaluate evaluating whether or not that's appropriate for what we want to do right now and <unk>.

I think that once we would register IP, you know that wouldnt be something we'd want to talk about it at some point.

And in the overall process of development.

Okay very good. Thank you Ed and regard my last question is in regard to the pilot plant and I appreciate that you're working on that a that Ah that you've been able to continue working on it.

Over the last several months, while there's been so much disruption in businesses. It's a in excellent free if I just wondered I'm ready to start working on and I'm ready to start putting it up and I wondered what are those first steps to <unk> to begin working on the pilot plant what are the what are the the things that you have to do for.

First for example, what would be the longest what are the steps that have the longest lead time and maybe you could just describe what they arent and what needs to be daunting to get that pilot plant up and running.

The longest single step in developing a pilot plant is the design.

And we have band and are working on them right now.

And then the unique nature in there you know the multiple processes, we're using for these different products.

And then becomes something we have to schedule between different locations. So the pilot plant.

Well it potentially purify at one location.

Makes a SPG at another location and make P.M. G. At some combination of the locations, but for instance, so we're working with several different vendors to coordinate these activities. So that we can have one coherent.

And and easy to manage process for running this pilot plants and then at all runs basically over the course of them up and a half ourselves.

Towards the end of this year.

If I could just ask a follow up that you're you're saying you're working with different vendors are you, suggesting that you would have work it real processing work done by different entities are you just talking about the design and construction.

Element of the pilot plant.

The design and construction and coordination.

It's not necessarily with multiple vendors.

Hey for perhaps on my too, but the individual processes.

Today, we're basically high grading processes from from different vendors people that are really good at us a particular aspect. If you will have the pilot plant. So.

This work is being done brilliant play by and large by our team working with.

Orphan rounds of plan and I'm Burke, Germany.

Okay, and if you had to if you were pushed into the corner.

And asked to give you say Oh percentage what would you say is the percentage of the design work. That's that's been completed.

I don't think I'd get pushed into that corner Deborah [laughter] I appreciate the question Nonetheless.

[laughter]. Thank you very much for your answers it it's helpful.

Thank you ever I appreciate it.

And next question is from Howard brands with Wellington Shields, how it well. It's your line is open.

Thank you, Chris and I want to congratulate you on your team.

I'm going to follow as a company for years. This is the best quarter, you've had in years and the best balance sheet you've had in years. So just as a topic of congratulations that's all I have.

Well, thank you for that Howard and I'll pass that along to the team.

You know faced with a challenge of working remotely and then not remotely.

And the financial markets being a little nuts.

Certainly as the first part of the year.

Hi, I.

I agree this has been a great quarter, but it's really been due to the.

The hard work on the part of this team.

And and those folks we represent so thanks.

Yes, very welcome congratulations that's all I asked.

Well I haven't seen anyone has a question you Me Press Star then one to join the question Q.

Okay.

There appear to be no further questions.

This concludes today's question and answer session I'd like to turn the conference back over to Christopher Jones for any closing remarks.

Thanks, again, guys lean and and and thanks, all of you for listening to the call and participating in the Q and a.

We're really proud of the team we're really proud of the results.

That we have been able to produce this quarter and we wish you all a safe healthy unhappy thank you very much.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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