Q1 2023 Westwater Resources Inc Earnings Call

Speaker 3: The te de.

Speaker 4: After the presentation, there will be an opportunity to ask questions.

Speaker 5: To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Frank Bakker, President and CEO . Please go ahead.

Speaker 6: Thank you moderator and thanks to those attending our first quarter 2023 business update and assaults call. With me today is Terrence Cryan, our Executive Chairman of the Board and Steve Gates, our Chief Financial Officer.

Speaker 7: During this presentation, the forward-looking statements we make are based on management's judgment including, but not limited to, future graphite demands and price forecasts, schedule and cost projections, and economic expectations related to the Callington Graphite Plan.

Speaker 8: the GUSA graphite deposit, and capital raising activities, including the estimated timing of those activities.

Speaker 9: These and other similar statements are subject to certain risks and uncertainties of which the description can be found on slide 2 within this presentation and in our 10K for 2022 and our other SSC filings.

Speaker 10: Please read our cautionary statement and realize that actual results may differ materially from what is discussed today. Please read our cautionary statement and realize that actual results may differ materially from what is discussed today.

Speaker 11: We remain focused on becoming the first US-based vertically integrated anode graphite supplier.

Speaker 12: Also, we continue to believe that the location of our Callington plant in East Central Alabama places our operations in the heart of the growing US EV battery market.

Speaker 13: When completed, the Calatin Graphite Processing Plant will provide anode material necessary to support the energy transition. Recently, the EPA announced new emission targets, which is expected to increase critical material demand for electric vehicles by 78%.

Speaker 14: over the next nine years according to the benchmark mineral intelligence.

Speaker 15: As we have mentioned previously, graphite is considered a critical mineral by the US government.

Speaker 16: and when produced in the US it helps battery and EV manufacturers meet the domestic content requirements contained in the Inflation Reduction Act. The IRA has been an important catalyst to our engagement with potential customers because of this domestic content requirement.

Speaker 17: Slide four. Last week we announced a joint development agreement with SKON.

Speaker 18: It was the follow-on announcement we referred to during our 2020 year end update call. Tescayon is a Tier 1 global battery manufacturer that currently operates two EV battery plants in Georgia and is building three additional EV battery plants in the US.

Speaker 19: Humbert's Blue Oval Joint Venture Report.

Speaker 20: Additionally, SQM has announced plans to build a $5 billion EV battery manufacturing facility in Georgia with Hyundai.

Speaker 21: We are extremely excited to work with a significant Tier 1 battery manufacturer like SKION.

Speaker 22: Under the JDA we will work with SQON and work has already begun to ensure that the CSPG produced at our Callington plant will be used as a high performance anode material for their batteries.

Speaker 23: Subject to those efforts and terms and conditions yet to be negotiated in a future agreement, the JDA allows for the sale of potentially all handled material from our Callington plant for those batteries.

Speaker 24: Interest from potential customers remains strong and samples continue to be requested and produced and not only for those customers for which we have an LOI or JDA in place, but other interested battery manufacturers as well.

Speaker 25: Turning to slide 5 for the construction update.

Speaker 26: We have been under construction for phase 1 of our calendar plan for over a year.

Speaker 27: Since the beginning of construction, we have had zero reportable safety incidents by our contractors and wastewater teammates.

Speaker 28: This is a significant accomplishment. Safety is and will continue to be our number one core value, as well as the protection of the environment where we live and operate.

Speaker 29: As of the date of this call, we have completed the construction of five primary processing buildings, and those buildings are ready for equipment installation. Long-lead equipment continues to arrive at site. To date, we have begun receiving equipment related to our patent pending purification process.

Speaker 30: the shaping and milling process, and expect to receive additional equipment in the coming months.

Speaker 31: Subject to receipt of additional equipment.

Speaker 32: and closing on additional financing.

We plan to begin installation of equipment later this year and are still targeting to have phase 1.

of the Callington plant ready to produce at the optimized annual run rate of 7500 metric tons of CSPG per year in the second half of 2024.

Slide 6. Our site at Calenden has significant expansion potential. Approximately 70 acres allows for a Phase II expansion on the current footprint. The estimated capital cost for Phase II at a pre-feasibility level is 465 million dollars.

The CSPG 2 expansion is expected to produce 40,500 metric tons per year of CSPG.

Currently, there are approximately 15 battery manufacturing plants either under construction or planned to be built in the United States.

All these battery plants want graphite that meets the domestic content requirements of the IRA.

and Westwater plants to be a significant part of the graphite supply solution for these plants.

Turning to slide seven.

We also hold mineral rights to approximately 42,000 acres across the Alabama Kraflight belt. Once in operations, the Kalantin Kraflight processing plant and the Kooza Dept. represents the first fully vertically integrated domestic battery-grade Kraflight company in the U.S.

We believe this will provide significant competitive advantages given the domestic content requirements in the IRA previously mentioned. In April 2022, we completed our exploration drilling program and completed our geological model and published a technical report in the fourth quarter.

which identified about 3.8 million short-hands of graphite, enough to supply the estimated feedstock requirements for the Callatin graphite processing plant for over 35 years. It's worth noting that the technical report was completed based on drilling approximately 10% of the approximate.

40,000 acres to which we hold men on our rights.

I am extremely proud of the Westwater's team. Our contractors, the dedication and hard work of all involved to make Westwater resources successful.

Now I would like to turn it over to our Chief Financial Officer, Mr. Steve Gates.

I would like to turn it over to our Chief Financial Officer, Mr. Steve Gates. Thank you, Frank, and good morning, everyone.

Slide 8. Westwater finished the quarter with a cash balance of approximately $40 million and no debt.

We are progressing through the process required to be in a position to close a private debt transaction for $150 million.

and plan to update investors upon executing a definitive transaction.

Turning to the financial summary on slide 9. Detailed discussion of these items is included in our recently filed Form 10Q as well as our first quarter press release.

Net cash used in all operating activities for the first quarter increased by approximately 260,000, primarily due to the purchase of feedstock inventory. This increase was partially offset by higher interest income earned of approximately 600,000.

and a decrease in prepaids and other assets during the quarter. Cash views and investing activities for the first quarter.

totaled approximately $34 million and was related to the ongoing construction of Phase 1 of the Kellyton plant.

approximately $21 million of the current quarter cash spend related to Q4 construction activity that was included in our working capital liabilities as of December 31, 2022.

Since beginning construction, cash expenditures related to phase one construction total approximately 90 million. And we estimate approximately 180 million of phase one cash spend remaining. As of March 31, 2023, our current liabilities include approximately 13 million.

of Phase 1 construction-related liabilities. Product development costs for the first quarter increased by approximately 260,000 compared to Q1 of last year. The increase relates to additional sample production for customers during the first quarter.

We expect to continue to incur product development costs related to customer sample production during the remainder of 2023 as we work to put additional LOIs and customer contracts in place. We believe continuing to work through the qualification process with customers.

is important to maintain early market mover advantages and reaching our goal of having Phase I volumes under contract prior to the Kellyton plant commencing operations.

Lastly, net loss for the first quarter was approximately 2.4 million or 5 cents per share compared to a net loss of 2.8 million or 8 cents per share in Q1 of 2022. The 400,000 reduction in net loss was due primarily to higher interest income earned on our cash balances. Thank you.

and lower exploration costs, as well as lower arbitration costs related to the arbitration against the Republic of Turkey.

These reductions to net loss during the quarter were partially offset by higher G&A expenses primarily related to our executive management change announced in January of 2023 and the higher product development costs previously discussed. With that, I'll turn the call back to you operator for questions. Frank Ph. Nelson, 42 says it's a controversial zones of perceived income revenues, obviously oily-smellow parties not making that plan desperately dishes over and over another year will be remisional.

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'll hear a tone acknowledging your request. If you are using a speaker phone please pick up your handset before pressing any keys.

To withdraw your question, please press star then two. To join the question, Q, please press star then one now. Our first question comes from Michael Pierce of Game Law firm. Please go ahead. Hi, I am calling to ask.

You're saying you have 182 million yet to spend close to 40 million cash on hand. If the debt financing is finalized, how much more funding will the company need in order to operate the business until it can become profitable on an ongoing basis?

Thanks, Michael. Good talking to you. I think the way to think about this is there's a lot of moving factors. We're pleased with where we are on progressing towards closing a debt transaction and continue to move that forward. Obviously we do have some corporate capital needs, but I think...

to be able to close $150 million fully funds phase one construction. And you'll see us when that's closed continue to monitor our treasury, keep costs low and manage that to try to avoid needing a significant amount of additional raises beyond the 150 for normal operating costs.

As fellow shareholders, management definitely understands the concern for delusion and significant delusion. And that's why we continue to focus on this debt transaction. And is the debt transaction still on track to potentially close this quarter? That's our goal. That's what we're working towards. It takes two parties. There's a long process that...

keep some flexibility open as we still have other interested parties that are interested in the project that we don't want to necessarily eliminate because we're still wanting to find the best deal available for Westwater and its shareholders. But we are pleased with where we are in the process of working through.

that debt finance raise. Okay, thank you very much. Our next question comes from Demetri Silverstein of Water Tower Research. Please go ahead.

Good morning gentlemen, thank you for taking my call. Couple of questions, first of all on the SKON deal, when you talk about the development agreement leading potentially to a supply agreement and you were talking about SKON potentially taking all of the CSPG production, was that referring to phase one or phase one and phase two together?

Thank you Dimitri for the question. That's referring to phase one and potentially also phase two later on. But for this moment it's related to phase one.

Okay, got it. All right. And then speaking of that, you talked about getting to the full 7500 on CSPG production by the second, or sometime in the second half of 2024. You know, originally you were looking to finish phase one construction by the end of 23 and start getting into production at the beginning of 2024. Is that still the plan? And you were just talking about ramping up to full 7500?

Patrick Tom, annual run rate in the second half of the year, or do you expect to start ramping up the plant in the second half of the year?

the production footprint, if you will, or ambition quite significantly on the last quarter's call.

I'm just trying to see if the timing of the completion of the plan has moved at all because you're putting in either extra lines or rearranging your flow sheet to be able to produce twice as much as you originally intended under Phase 1.

Yes, so we'll be.

starting some commissioning in the first half of 2024, and then continue commissioning, and then start up, and then reach full production in the second half of 2024. And that's in line with what we communicated on the last call.

that our target is to produce 7500 metric tons CSPD per year to be at that run rate in the second half of 2024.

Okay, that's what I was getting at. Okay, perfect. Thank you very much.

OK, perfect. Thank you very much. Thank you.

This concludes the question and answer session. I would like to turn the conference back over to Frank Bacher for any closing remarks. Yeah, I want to thank you for your interest in our company and I look forward to speaking to you again on our next call. Thank you.

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

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