Q2 2021 Westwater Resources Inc Earnings Call
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Be advised that your information will be treated in accordance with the Canadian personal information Protection Act.
Okay.
Yes.
How concerned are how can I help you.
I would like to give her westwater resources.
Thank you Matt take your name.
David Brown from Iowa.
Thank you all genuine on June 32021.
These cash balances were approximately $119 million.
The company had working capital balance of $117 million.
Again with these cash resources, we will be.
We will use to fund the ongoing operations fund development of our graphics business plan.
And again allows a substantial investment in our commercial processing facility.
With that I'll turn it back to you Chris.
Thanks, Jeff.
And on Slide seven a reminder, about westwater as core values.
First of all safety.
And that's with each other our environment our assets the communities, where we work.
And our reputation.
Secondly, cost and cost management.
<unk> inefficient use of our shareholders' assets.
Focus on first quartile cost performance.
And third integrity.
The highest level of performance every day.
Improving our processes.
And then importantly conservative promises welcome.
Yeah.
On slide slide eight it's all about executing our business plan.
Our feasibility study inputs, primarily from the pilot plant provided all kinds of key inputs for this GFS.
Study results are on time for Q3 delivery.
We produced more than 13000 kilograms of products.
For testing by Westwater, and professor and prospective customers.
And samples are in prospective customers hands as we speak.
Yes.
On slide nine.
We selected a site near Kelly to in Alabama for a processing plant.
And on June 22nd community leaders from the state of Alabama, including Governor <unk>, IV and Secretary of Commerce, Craig can field.
Coosa County.
Alexander City.
The Lake Martin Industrial development Board celebrated the unveiling of our project sites.
With the Westwater and Alabama graphite projects team, there's a photo of many of those participants there at the site, where we intend to build this facility.
Yeah.
On slide 10 and.
In area a picture of that site includes in the Red circled area, where we plan on building the majority of the plant.
To be.
As it comes out of its design process again as a result of the definitive feasibility study.
It's included.
30.
Animals or minutes from our Coosa graphite deposit really on the other end of the county.
These government agencies, including the county, the municipality and state offered more than $34 million in incentives for us to site the facility there.
We entered into a public private partnership with the city of Alexander City.
In order to upgrade and extend their wastewater lines. So that we can so.
So that we can put our wastewater directly into their waste treatment facility.
$400000 of cash.
Was for that public private partnership and we added $100000 worth of prepaid treatment fixed.
<unk> expense in order to facilitate this partnership.
Yeah.
Note that we leased the site for up to 10 years with an option to purchase.
On a dollar a year.
Or thereabouts and essentially got the land for free and once again with all of these incentives.
It is a terrific business opportunity for Westwater.
Great business opportunity for the citizens of Coos County, Alabama.
On slide 11.
Our Coosa graphite project key attributes include a proprietary technology for purification.
It's a high purity conversion process that resulted in a 90, 995% carbon product it.
It is simple.
It is robust.
And a cost advantage our products do not go underwater.
They can be delivered to sites right here in the United States and if needed shipped over to Europe and Asia.
Yeah.
And our vanadium discovery, a couple of years ago on our project site and Western Kudos Italian.
The deposit is potentially improves project economics.
And we utilize a sustainable process and environmentally sustainable process, where we manage the inputs and outputs and our graphite can save over 200000 tons of years C. O two emissions when used in electric vehicles.
Okay.
On slide 12, a little bit about battery markets.
Transportation is clearly the largest growth market for our products at a 23% growth rate expected over the next 10 years.
It's predominantly lithium ion batteries when you think of the battery in two parts. There's a man on the cathode there is about 25% of the material in a lithium ion battery that is scrapping.
On the anode side.
And here over the last week or so the U S government and domestic automakers have announced a goal that over 50% of all auto sold here in the United States will be electric vehicles by not 2050 as it says here in 2013 to 17.
<unk> fold increase in the amount of cars.
Salt as electric vehicles, and the commensurate 17 fold increase in the demand for graphics. This is a very exciting development for our business.
In other areas.
A battery growth, 11% growth rates expected in an energy storage system think of these as grid storage systems.
And these are the enabling technologies for wind and solar power.
Consumer electronics are large and mature market for lithium ion batteries are 3% annual growth rate.
Another specialty battery markets from defense and other military and government applications.
Yeah.
On slide 13.
Graphite is a critical component of all types of batteries, including running acid alkaline power ourselves in non rechargeable lithium ion cells.
Lithium cells I'm sorry.
The Covid purified spherical graphite is a critical component in lithium ion batteries for the real big growth story is for our products.
In the United States Government has defined graphite is critical to the lease some security and prosperity and presidential executive orders over the last two administrations as U S government agencies to act with Alacrity.
And again.
This week's announcement of it.
Drive by the United States government and domestic automakers.
To drive sales of these fees up from 3% of current automobiles on the market to 50%.
Is great for our business.
This puts our CSP G product front and center as a critical material.
In future source supply.
Okay.
On slide 14.
The Coosa graphite project as a near term source of domestic U S battery grade graphite.
Samples are being sent to potential customers.
Westwater scrap will be produced using environmentally sustainable processes right here in the United States, where we have a robust regulatory environment for helping us to manage that process.
In westwater scrap by products serve important battery markets.
And again, our vanadium discovery at Coosa could contribute revenues in exploration is currently underway.
Okay.
On slide 15.
We've developed a new technology for graphite purification, and we filed a provisional patent application with the U S patent and trademark office for this technology.
Our methodology is a more sustainable footprint than those currently used in China, we're environmentally damaging damaging and expensive to manage hydrofluoric acid and juniors.
And it yields Griffith carbon grade of more than 90, 995%.
The process allows for flexible feedstock with consistent overall performance.
Our process can see it consists of three basic process steps, including one the cost of grossing up the graphite concentrate sample acid leaching of background roasted sample.
Little finish of that sample to remove the remaining maturities.
On slide 16.
Westwater feasibility study led by Samuel Engineering is underway for expected completion in Q3.
Exploration drilling has begun and continues not only for vanadium, but also to further define the graphite contents of the coosa graphite deposit.
Full scale production as expected from purchase feedstock producing battery grade graphite and.
In Westwater expects to begin mining the coosa graphite coupon in Alabama.
Beginning in about 2028.
Okay.
On slide 17.
A bit of a graphic that to support the verbiage in the previous slide commercial production starting in 2023.
<unk> based feedstock in 2028, and our purchased graphite in order to get this plant up and running quicker.
In the meantime.
Purchased from a non Chinese reference source.
Okay.
On slide 18.
Our team continues to grow.
With tenured leidy leaders in energy minerals development previously we've announced the addition of Chad Potter as our Chief operating officer and he is based in Alabama.
In order to grow that business, Steve case here on a phone call with US today is our chief accounting officer.
As the team grows so does our experience based.
In project execution and battery materials with over two centuries of experienced currently contained on this executive team.
On slide 19 experience matters energy minerals exploration and development requires discipline.
And diligent capital stewardship.
We've restructured and recapitalize this company positioning westwater as a green energy materials company with a laser focus on battery grade graphite products.
Experienced management team with a demonstrated history of finance with Green energy development from concept to production.
Apes This particular development.
Turning to slide 20.
Why westwater as an investment we.
We have a battery grade graphite development business with strong upside potential.
Graphite has been designated a critical minerals by the United States government and again recent tailwind.
In terms of announcements from the United States Government income and Carmakers, Inc.
The increase interest in our products and we have a proven management team with experience in energy minerals development and financial management.
And looking forward into 2021.
You should expect for the results on the Coosa exploration project.
You should expect to see results from our definitive feasibility study.
And you should see Coosa graphite project development milestones as we achieve them like those that we've already achieved in terms of site selection.
State and local support for our project.
And with that I.
I'd like to turn it over to questions I'm curious.
Thank you.
We will now begin the question answer session.
Joining the question queue you May Press Star then one on your telephone keypad.
<unk> atone acknowledging your request.
You are using a speakerphone please pick up your handset before pressing any Keith.
To withdraw your question. Please press Star then two.
We will pause for a moment of callers join the queue.
The first question comes from Debra <unk> with Crystal equity research.
Please go ahead.
Well. Thank you very much and thank you for taking my questions and congratulations on having.
Achieved a site selection.
I imagine that the good folks in Alabama are quite pleased to see that sign go up.
Apprise them that they were prepared to give you a welcoming gift $36 million is a nice welcome gift. Maybe this is a question for Jeff.
Jeff in regard to how those tax credits and incentives are are going to show up or they are any of them cash incentives or is this more or less a matter of reducing future expenses like reducing our future tax bill or or something like that maybe you could give us a little.
More color on how those will work.
I'd be happy to do that David that's a great question.
The majority of the incentives we received our future benefits a reduction in cost if you want to say not not a cash payment.
And.
Three different buckets, one bucket is reduction in the sales tax during the construction phase.
The second bucket is a reduction of property taxes for non educational.
Hum.
For a 10 year period.
And then the last of the state of Alabama, and the investment tax credit a fairly substantial amount.
Over the course of the project.
The operations of the business.
It's a state credit so obviously it will come into play.
The time that the company generates taxable income at the state level.
That's the nature of the incentives.
Excellent. Thank you and then just another question about the site itself. It was very good to see that that picture in the area of view does the site itself are there in that industrial development area.
Any particular implications for the environmental permitting that you required is it a positive or negative.
Are you be required to install any kind of special or private access roads or can you use the access roads that are there.
A good question Deborah.
And kind of reverse order.
The roads that are there we can feel free to use.
And also remember that there is land that is across the.
<unk> Creek.
Towards the top of the page in that Red circle that Rick.
Requires.
Rich basically to be built that is being built by the industrial award with some states or so.
So the short version is Rosa that exist in the roads to be our free for our for our use.
The site itself has developed as an industrial park.
And as such has no special permitting requirements, but remember that we will still be required by the state.
Other agencies to make sure that our air and water are properly managed soda.
We can provide that sustainably.
Footprint.
For the development of that site, but.
Uh huh.
Remember that permitting an industrial facility in an industrial park as far are different and frankly far easier.
And permitting of mine.
We are in the process.
Getting acquainted with and getting involved with.
Alabama Department of Environmental management.
Jim.
To begin that process is just as soon as we know precisely what goes out with them.
Yeah.
Excellent. Thank you.
Of course, we've heard quite a bit for me already about the pilot project and the various.
The products that you were able to produce.
You had mentioned in the past I think of it as again repeated in your quarter report that.
They've been sent for.
Testing the final product. So you can tell how they perform and also that the the precursor for the really especially fancy aw materials. The C. P. S G.
That has been sent for coding and I wondered if you could maybe give us a little bit of an update on how that testing has proceeded and is there anything new that.
You can tell us about today and also whether or not we'll we'll read about that testing when you get your final feasibility study published here in the next two or three months.
You bet you are worried about it we're pretty excited about it coding is underway right now.
The product.
I can't remember the rate at which we are coding right now, but it certainly.
Beyond bench level pilot scale level coding processes. So no results yet to come on that particular debt.
With regard to samples out for test both in our independent lab and at several customers potential customers.
Right now the other Arab examining and looking at this material, it's a very exciting time that way.
All of that testing.
With regard to potential customers takes place under Nondisclosure agreements, which really benefit our customers and us and a lot of different ways. So specifics.
Wish we could but can't really discuss.
But we're very excited about the.
The progress we've made over these three months six months and in developing these products.
Does that answer your question.
Yes, it does now or any of the tests that youre contemplating of that sort that are they there.
We've commissioned them yourselves and you could disclose the results.
Good question and yes.
That's sort of testing once it comes back from our independent lab that'll be part of our package.
We developed for introducing our products to new customers.
There's no reason to keep that a secret.
A large part.
Okay, and then I'll make one last question. This is in regard to uranium I know you're not then they ran in business anymore. We have one final.
Piece of business and that is in regard to the the the dispute with the government of the Republic of Turkey. You mentioned in your opening remarks that you have a mid September date.
Date to to move forward with your work with.
Your arbitration against the Republic, Turkey do you have a date certain or is that mid September time simply a goal set down by the arbitration panel.
We have a date certain for testimony so we will be in Washington.
Giving our testimony and receiving theres the week of the 13th.
And the way the calendar works.
And by the way that calendar works is testimony.
He has done on Friday that week.
And then.
From there the.
Arbitration panel deliveries for you know for upwards of a year.
And Oh, theres potential for some back and forth on clarification or whatever else, but the year is really pretty standard in their deliberative process for rendering a decision.
Alright, very good thank you.
Yeah.
Thank you Devon.
The next question comes from Dan Murchison with Lake Mitchell Homeowners Association.
Please go ahead.
Yes, Hello, and thank you for the invite.
My question is a local funding for Mitchell area.
Your water withdrawal for washing.
And tell us exactly where that income Truman if.
If I understand it correctly that your discharge who's going through the Alexander plenty out there before it goes back and there's water go back Candlelight Martin or does it come in to like Mitchell or where your discharges.
And.
What about tree removal can you kind of go through that and tell us if any of your tree removal is in the forever while land.
Area there.
You bet and thank you for your question and interest.
And again in reverse order none of the tree removal we intend.
On any level.
There's going to be in the forever Wild love.
For a while to area.
As it applies to our our site development for the processing facility in your account.
With regard to our intake discharge water. Your questions are good the city of Alexander City.
Is providing both our freshwater.
And ER and our discharge and my understanding of the.
The water treatment plant and Alexander city as charges into like Martin.
If that answers the three questions or not.
Do you have any other.
Is that does that your discharge going back into the.
Like Martin our orders you discharge go.
Our discharge goes to the Lake Barton water treatment plant.
Which I believe discharges insulate Martin.
Okay.
You have a set time that you could just estimate your.
Ah you're factoring operation will be operational.
Yeah.
Our schedule indicates the construction starts before the end of this year and the operation start in 2023.
Those are important pieces and parts of the definitive feasibility study that we are doing right now and as expected for completion here in quarter three so I'd have to answer that with more to come.
Okay.
The tree removal for the mining operation.
What is your reclamation reclamation program just roughly consistent.
We haven't yet designed to mine and.
And we will be doing so over these next six years.
And in doing so there will be points of process, along the way where public comment will be invited and in our documents will be produced so I'd ask you to.
To give us that time to properly prepare the design.
For the mineral operations, yet to go and for now we are firmly and.
And laser beam focused in fact on building this processing facility.
Okay.
Thank you very much for me to answer your questions and good luck with your operation.
Certainly.
Thank you for asking them we appreciate it.
The next question comes from Gerard NATO with NATO investments.
Please go ahead.
Gerard Your line is now open.
Right.
The next question comes from Barbara <unk> with Hartgrove engineering.
Please go ahead.
Yes, Thank you and what an exciting project for Alabama write their own beautiful like Martin.
My question is more geared toward the project execution.
Our growth engineers and constructors, if a large ABC.
Company headquartered in mobile, Alabama with offices throughout the state.
And my question is how.
How do you what is your plan proceeding a cohort in the education space with the receipt at the conceptual engineering do here this quarter.
As it applies to DCM.
What we expect to have in our hands during this quarter is.
All of the parameters and inputs outputs and information we need to go ahead and evaluate the economics of the project.
So more to come there followed by detailed engineering as we go along.
As it does it applies to many PCM, we would expect to have a request for proposals going out here in the next couple of months.
For for your.
Hum.
Really quick accurate evaluation as we go forward, so pretty exciting time for <unk> for us.
On our end as.
As we go as we finish up the the.
Basic engineering in those projects, so I'd say from I'd say hang tight.
Okay Mike.
Another quick question.
Do you have a strategy for involvement of Alabama company.
I think that going forward.
The answer is absolutely and positively we are excited about doing business in Alabama, we are excited about the capabilities.
Not just the state and in.
And municipal agencies have that across the board in industrial activity.
And.
To that end, where we can.
And should we will be partnering with.
With local Alabama.
And other companies.
Very good thank you very much.
Thank you.
This concludes the question and answer session.
I would like to turn the conference back over to Chris Jones for any closing remarks.
Thank you Sherry.
Thank you all for your questions today.
We really appreciate your interest in our project.
And the interest in our business.
And thanks to everyone for taking your time and attention with us today we.
We wish you all a safe and great day.
Again.
This concludes today's conference call you may disconnect your lines.
Thank you for participating and have a pleasant day.
Yeah.
Yes.
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