Q4 2021 Westwater Resources Inc Earnings Call

Thank you for standing by this is the conference operator, welcome to the Westwater Resources, Inc. Full year 2021 results 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'll be an opportunity to ask questions to join the question.

Thank you you May press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star Zero I would now like to turn the conference over to Chris Jones, President and CEO . Please go ahead.

Thanks, Ariel and thanks, everyone for participating with US today on our 2021 results call with me here today are Terence cryan.

Our chairman of the board.

Chad butter, president and CEO elect and Jeff Vigil, our vice President of Finance and our Chief Financial Officer.

Just a quick cautionary message, we will be talking about some.

Forward looking statements, we caution you to read the statement and cautionary statement on page two of the presentation with that I'd like to turn it over to Terence Cryan our chairman.

Thank you, Chris Good morning, everyone and I promise to be brief.

After nine years of distinguished service and after positioning the Coosa graphite project for success.

Chris Jones will retire at the end of February .

I'm sure each of you join me in wishing Chris.

A happy and healthy retirement.

As part of a thoughtful and planned succession strategy beginning last summer.

The board has now elected Chad Potter as the Companys, new President and CEO .

He will continue to be based in Alabama.

Oversee the completion of the construction activities at the Coosa Graphite project. In addition to his expanded role as CEO .

The Westwater Board also announced that I will become the company's executive chairman.

I work with Mr. Potter.

To ensure a smooth transition and to help advance our business and financial interests.

Chris back to you. Thanks.

Thanks, Terrence and thanks for those kind words.

On to slide four.

We continue to ensure the safety of our employees.

And ensure the health and safety of our employees and the communities, where we work we continue to ensure that our employees are permitted and encouraged to take time off due to illness or the illness of those around them without penalty.

Turning to slide five.

We continue to advance our battery graphite product development schedule.

We completed the definitive feasibility study for our graphite processing facility and approved the construction of phase one during the year we.

We secured the site for our intended processing plant near Kelly, Alabama, together with financial incentives from the state County, and industrial development boards.

Further we have purchased two buildings adjacent to our Kelly 10 sites totaling about 90000 square feet to accelerate our construction schedule.

And importantly, construction of the processing facility began on December one 2021.

We continue to work to ensure adequate financial liquidity to support our key operations and business activities.

And we have a cash balance of $115 million as of December 31, 2021 .

With that I'd like to turn it over to Jeff Vigil, our CFO .

Thank you Chris Good morning, everyone first let's take a look at our capital slide position.

Slide number six.

Closing share price on Friday February 11th was $1.93 and.

And with approximately 35 million shares outstanding.

Our market capitalization stands at approximately $68 million.

Our average daily trading volume over the past three months was approximately 800000 shares per day.

Our share price began 2021 and $4 93.

And ended 2021 at $2.15.

We believe investors have taken a more cautious approach to westwater as we embark on this destruction of our graphite processing facility in Alabama, the large capital expenditures associated therewith.

At December 31, 2021, the company's cash balances were approximately $115 million as Chris noted.

And we had a working capital balance of approximately $110 million.

During 2021, the company utilize its ATM facility with Cantor Fitzgerald and his equity line with Lincoln Park capital to raise approximately $84 million from stock sales.

In addition, the company generated proceeds of approximately $3 6 million in the fourth quarter from the sale of Oncor energy shares, which we received from the sale of our uranium business at the end of 2020.

Yes.

The two financing facilities provide the company an opportunity to raise cash at a low cost of capital and we will continue to be utilized to support the company's business plan in 2022.

Company is actively pursuing financing strategies for the construction of phase one and phase two of the commercial processing plant that.

That include project debt.

Off take agreements and equity.

Turning to slide seven we provide a financial summary for that for fiscal year ended December 31.

2021.

Net cash used in operating activities was $16 9 million for the year ended December 31.

Paired with $15 2 million for the same period in 2020.

The $1 7 million increase in cash used was primarily due to increased graphite product development exploration general administrative and arbitration costs.

Product development costs were primarily related to the definitive feasibility study.

Which began in February 2021, and was completed in October 2021.

And our product development program that continued through the end of 2021.

The increase in general and administrative expenses was due primarily to increased sales and marketing cost.

Higher stock compensation expense as well as higher public company expenses.

These increases were offset partially by the elimination of $1 7 million in costs attributable to the two westwater is uranium business, which was again solid in the fourth quarter of 2020.

Westwater also incurred extra exploration expenses of $1 1 million in 2021.

For the purpose of investigating the extend of graphite and vanadium mineral concentrations thats coos of the passive.

Yes.

Westwater chip anticipates completing its exploration program during the first quarter 2022.

Following the completion of this exploration program, we intend to complete the technical report related to the mineral concentrations discovered.

Net loss from continuing operations was $16 $1 million for the year.

<unk> 49 per share as compared with a net loss in 2000, 20-F, $13 9 million or $1 58 per share.

The $2 2 million increase was largely due to increases in product development.

Exploration expenses and General administration.

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With that I'm pleased to turn over our presentation to Chad Potter.

Thank you Jeff.

Westwater core values are based on continuous improvement in safety.

50 of each other.

Our environment our assets.

Munis, where we work and our reputation.

Second cost management.

<unk> and efficient use of our shareholders' assets.

Focus on first quartile cost performance.

Third integrity, the highest level of performance every day and.

And improving our processes.

<unk> promises well kept.

Slide nine.

In executing our business plan.

We completed our feasibility study.

Construction of Phase one was approved by the board.

Construction began on December one 2021.

We're on schedule for completion of construction in Q2 of 2023.

Samples are and potential customers' hands in our first LOI for product sale is in place.

Slide 10.

Yeah.

On June 22nd community leaders in the state of Alabama Coosa County.

Alexander City and Lake Martin Industrial developed board celebrated the unveiling of the project with Westwater and Alabama graphite products management team.

Slide 11.

This is the Kelsen project site.

At the bottom building b.

Is where our warehouse facility is going to be.

Building a in the top left hand corner.

Our administration building.

In north of building B.

The telecom site footprint, where the processing facility is going to be located.

Slide 12.

The project key attributes is comprises of proprietary technology.

Cost advantage and sustainability for the environment would be sustainable.

Processes.

On to slide 13.

Battery markets are growing graphite is a critical component of those markets.

Foreign markets transportation.

The 23% growth rate expected over the next 10 years predominantly in the lithium ion batteries.

In the U S government and Automakers' announced a goal of 50% of all auto sold will be electrical electric vehicles by 2050.

And energy storage systems, 11% growth rate expect over the next 10 years.

Enabling technology for wind and solar power.

Consumer electronics, 3% compound annual growth rate with well established value change.

Value chain.

And then specialty defense aerospace military and medical major players in North America.

Slide 14.

Why does graphite matter.

It's a critical component of all types of batteries, including lead acid.

Alkaline power cells in non rechargeable lithium cells.

The SPG as a critical component of lithium ion batteries.

The U S. Government has defined graphite is critical to the nation's security and prosperity and presidential executive orders ask U S government agencies to act with upgrades.

Slide 15.

Coosa Graphite project is a near term source of domestic U S battery graphite.

Samples are under evaluation and potential customers.

Westwater as graphite will be produced in the United States using environmental state scalable processes.

Westwater as graphite products serve important battery markets.

And Westwater vanadium discovery at Coosa could contribute.

Revenues in exploration is underway.

Slide number 16.

Westwater has developed a new technology for graphite purification, we have filed patent applications with the U S patent and trademark office for this technology.

Our purification methodology has more sustainable footprint than those currently used in China, where environmentally damaging and expensive to manage hydrofluoric acid is being used.

Our process consists of three process steps, including cost of grossing the graphite concentration concentrate sample acid leaching of erosive sample and thorough treated.

Thermal treatment of the sample.

Slide 17.

Our project plan, which was led by Samuel Engineering is complete.

As one construction is.

Begun and is expected to be completed by Q2 2023.

Expected C C. SPG production increased from previous plans to 3700 metric tons per year.

Governor of the state of Alabama has supported the project.

Exploration drilling has begun to further define the coosa graphite deposit and geologic geologic models is expected in 2022.

Westwater expects to begin mining at the Coosa graphite deposit in Alabama, beginning in 2028.

Okay.

Our team going forward.

Is made up of tenured leaders.

As you saw.

Spoke earlier, Mr. Terence Cryan, joining as our executive chairman.

I'm, taking over as the CEO .

Jeff Vigil.

Mr. Stephen cases, our CIO.

Dain Mccoig, our VP of operations will be at our Alabama facility.

You bought <unk> VP of technical services, Mr. John Lawrence as our General Counsel, Mr. Jay <unk>, as our VP of marketing and sales.

Variance matters.

Energy minerals exploration and development requires discipline and diligent capital stewardship.

We have restructured a recapitalized the company positioning westwater as a green energy materials company, the labor laser focus on battery grade graphite products.

<unk> management team with a demonstrated history in finance and Green energy developments from concept to production.

So why westwater as an investment.

We are battery grade graphite development business with strong upside potential.

Gratified has been designated a critical minerals by the U S government.

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

We anticipate anticipated catalyst for 2022.

We have construction milestones achievements coosa graphite deposit exploration and geological model results.

And we'll have updates on customer testing and interest to share with the team.

With that said.

We'd like to open up the floor for any questions.

Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.

You will hear a tone acknowledging your request if you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two to join the question queue. Please press Star then one now.

Our first question comes from Debra <unk> of Crystal equity Research. Please go ahead.

Yes.

Thank you good morning, and before I begin I appreciate you taking my questions, but before I begin let me offer congratulations all around the table to to each of you in your new position I wish you good fortune at all.

Yeah.

I think first I'd like to focus on that.

The processing plant project that is currently underway.

I Wonder if maybe you could return a little bit to the budget.

Make some comments about what kind of contingencies may have been built into the budget.

In particular for inflation, if the federal reserve is not able to get inflation back under control do you think you have sufficient contingency built into the construction budget to accommodate that.

Debra Thanks for those kind words for the team.

Scott.

Secondly, with regard to the project budget and and.

<unk>, we built in a 15% contingency on the budget.

That should be sufficient to accommodate not just the unknowns in the detailed design of course, but.

But inflationary pressures on certain pieces of equipment and processes. So sweet.

As we put them together.

Also inside that budget, our contingencies in our in our schedule for getting this thing.

This processing facility built on time and within budget.

Yeah.

Okay. Thank you and then just.

And I'm talking about the project.

The.

Apparently you're anticipating completing the first phase by the middle of 2023.

But how long does it take if you go ahead at that point with phase two what's its completion timeline, let's say does it make a difference when you started or are there seasonal factors what would you say would be the time at which we might see phase two completed.

Our current estimate is subject to some revision of courses for completion in 2025, OEM intend to do through the construction of phase one is to document all those pieces and parts. We learn as a result of construction and initial operations.

And then to integrate them into the feasibility study.

For phase two so that.

We can improve.

On on any processes, we put in place.

And in a timely fashion for operations and 25.

Okay. Good. Thank you and of course in November we were all pleased to see that you had signed a letter of intent with a customer for ultra C. S. P. G that.

The product.

Yes. The range is between 125 to 250 metric tons.

And of course I'm sure that that contract is contingent on a number of things that your company has to perform on it would seem that you are making some progress there but.

There are apparently some contingencies against which the counterparty is is also.

Hedging if you will.

They are a pilot plant or a full scale plant that they are constructing did I read that correctly in the <unk>.

The annual report, perhaps you could elaborate a little bit.

Hi, Deborah you are quite right there are mutual contingencies on both sides of the commitment.

And.

And the business we're in it is difficult of.

For us to not only name our potential customers, but to describe these documents at this stage in.

In a lot more detail.

As you well know once it becomes material to our business then we will be required to put in more for more.

Tailed disclosures.

But yes.

From a westwater standpoint.

It's really exciting for us to sign letters of intent at this stage of our development.

And put to rest any concerns are certainly on the part of.

Our counterparties that we will be able to.

Supply that stuff.

Understood and if I could just squeeze in a follow up question on that.

You have.

Reasonable visibility into what the counterparty is up too I mean they.

They can get on this call and they can listen to hear about your progress.

What means if any do you have of observing whether or not there.

Making progress toward <unk>.

Their responsibilities as well or are those things that they've listed as a contingency let's put it that way.

We have pretty good clarity into certainly their development, we executed a nondisclosure agreement as you might already suspect with them so that.

We maintain an understanding of their business and their progress at the same time, they maintain an understanding of ours.

Okay, great. Thank you.

Thank you Debra.

Once again, if you have a question. Please press Star then one on.

Our next question comes from Gil Good of Western International. Please go ahead.

Oh, good morning, and thanks for taking my call.

You mentioned before that the graphite is used in all different types of batteries I just wonder about the new solid state batteries that are under development.

How graphite is used there and and if there's any change in the chemical formulation are.

In the process of supplying them with graphite.

With regard to solid state batteries in general.

We regard them as.

That's a product that has years of development yet.

You have to be executed.

And.

We understand that their current construction in current configurations do use graphite.

But as you might expect as they develop.

The particular chemistries of solid state batteries.

And their reliability and their future uses are yet to be defined so.

I think where I'd want to leave you is that we're confident.

That battery technologies for the last 120 years and for the next you.

You know the next decades will be consumers of graphite and we're here to supply those.

Okay. Okay. Thank you.

Yeah.

Our next question comes from Michael Porter of Porter, Levay and Rose. Please go ahead.

Good morning.

I'd like to address this question Chad.

Ted Westwater has received the N.

N P D E S permits.

When will this site grading begin can you also explain what that means for everybody how long it will take and how soon after this.

Our completion well construction began.

Okay.

Hi, Thanks, Thanks for the question Mike.

Site work could not begin until the N Pds permit was received.

The permit was issued at the end of January and the company is evaluating several contractors to perform the work. After the contract has issued site work is expected to begin in early March.

Site grading the process of preparing the surface for the roads and building foundations.

We're in the midst of finalizing those plans for the first phase of first work in the process of selecting contractors for the work.

We're expecting the process to be about two to three months process, and we expect civil and structural work to begin.

Immediately after that's completed.

Thank you one last question Chad.

Do you have any supply chain issues with what's going on worldwide.

Great question.

But based on discussion over the past few months with our engineering and.

Procurement contractors and general contractors and vendors.

At this moment, we don't really see an impact on the construction of the <unk>.

Brazil, the Coosa graphite facility due to widely known issues with the nation and international supply chains.

Nevertheless, we've made Beth best efforts to.

Really take this into account with our planning processes.

We've made efforts to secure equipment and materials that could potentially affected.

That could have affected our supply chain.

In addition, we've already ordered a significant amount of our longest lead time items.

We've developed schedules for when we expect to need the specific equipment and materials. So we could get these items early in currently maintaining that schedule. However, given our dynamic and volatile both national and international supply chain issues have been we're mining those issues closely and staying on top of it any issues that may arise.

Great questions, Mike. Thank you.

Thank you.

Okay.

This concludes the question and answer session I would like to turn the conference back over to Chris Jones for any closing remarks.

Thanks Ariel.

It has been my pleasure to lead this team over these last nine years I'm proud of their work.

And I wish them all the success in the World I will leave the Westwater team in the capable hands of Chad and Terence.

Yeah.

With that.

Thanks for spending part of your day with Us have a great day.

Yeah.

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

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