Q1 2026 5E Advanced Materials Inc Earnings Call
Speaker #1: Ooh. Good day and welcome to
Speaker #2: The 5E Advanced Materials earnings conference call will begin shortly. All participants are currently in a listen-only mode. After the prepared remarks, we will open the call for a question-and-answer session.
Speaker #2: Please note that today's call is being recorded. Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially.
Speaker #2: For more information on these risks, please refer to the company's filings with the Securities and Exchange Commission. 5E Advanced Materials undertakes no obligation to update or revise any forward-looking would like to turn the call over statements.
Speaker #2: to Paul Weibel, Chief Executive Officer of 5E Advanced Material. Paul, please go ahead.
Speaker #2: to Paul Weibel, Chief Executive Officer of 5E Advanced Material. Paul, please go At this time, I
Speaker #3: Thank you and good afternoon, everyone. And thank you for joining us today. Fiscal 2026 is shaping up to be a pivotal year for 5E.
Speaker #3: A year defined by momentum, achievement, and meaningful progress toward establishing ourselves as a leading U.S. foreign producer. We've reached what is a moment of significance in both the domestic foreign market and the evolution of supportive U.S. policy.
Speaker #3: A year defined by momentum, achievement, and meaningful progress toward establishing ourselves as a leading U.S. foreign producer. We've reached what is, for moment in both domestic foreign market and the evolution of supportive U.S.
Speaker #3: Boron, the fifth element on the periodic table, is now officially recognized as a U.S. critical mineral. On November 7th, the U.S. Geological Survey and the Department of the us, the most significant the final 2025 critical minerals list.
Speaker #3: That recognition is a major validation of our strategy, confirming what we've long advocated: that boron is a cornerstone of America's energy policy, national Interior formally added boron to essential to glass, sectors while also being defense, and high-technology agriculture.
Speaker #3: There is a clear necessity to secure and maintain a reliable domestic foreign supply chain and for the U.S. to remain an important global exporter of high-quality leader in the effort to with this designation, we believe ceramics, and access to federal funding and financing as well as strategic partnerships that will accelerate the development path for 4KD.
Speaker #3: 5E is a proud the importance of 4KD's positioning as the leading advantages that include expanded U.S. it brings meaningful economic advance stage boron project in the expands our eligibility for federal funding programs including USXM, the Department of Energy's Loan Programs Office, the Department of Wars Office of Strategic Capital, and the International Development Finance continued customer validation, with full-scale product testing Corporation.
Speaker #3: Before I dive deeper into what this means for borates. strength in the borates market. 5E, let me summarize the And quarter's key highlights. First and foremost is that boron maintain the United States' position of was added to the U.S.
Speaker #3: 1 specialty glass manufacturers. Four, progress on feed engineering, supported by our application to the XM Engineering Multiplier Three, Program for a $10 million loan facility.
Speaker #3: And finally, we remain on track towards final investment decision in 2026. These achievements build directly on what we discussed during our year-end 2025 call.
Speaker #3: Our foundation is strong, our milestones are stacking, and we're steadily moving towards construction readiness. Before turning to the broader borates market because understanding that context helps highlight the our progress, I want to briefly address opportunity 5E is stepping into.
Speaker #3: Legacy producers continue to face rising operating costs, decreasing grades, and depleting reserves that have created a market opportunity for 5E, a new generation boron company to be built on innovation, operating efficiency, and long-term resilience.
Speaker #3: Market research, insight, and customer discussions highlight a clear tightening of supply and demand in the borates market, with an expectation of demand outpacing supply.
Speaker #3: Demand for borate materials continues to accelerate across EVs, wind, nuclear energy, semiconductors, defense applications, ceramics, and specialty glass, exactly where boron's thermal, optical, density, and hardness properties are essential.
Speaker #3: 5E is uniquely positioned to step in and fill the market deficit with a project that has logistical advantages and a flow sheet and process that is modern, low-cost, and high-value, underpinned by resilient domestic boron supply that supports both commercial and national priorities.
Speaker #3: Market participants are increasingly viewing 5E as a strategic partner for the future. When combined with the U.S. critical minerals designation, these market dynamics further strengthen 5E's position and reinforce 4KD's importance to the U.S.
Speaker #3: supply chain security. As the only pure-play U.S. advanced stage domestic boron asset, 4KD now qualifies for several federal funding and grant programs designed to rebuild American mineral supply chains.
Speaker #3: These include the U.S. Export-Import Bank, where 5E already holds a $285 million letter of interest under the Make More in America initiative, a program specifically created to support the U.S.
Speaker #3: Manufacturing exports, infrastructure, and supply chains. XM's engineering multiplier program, where we have applied for a $10 million loan that has the possibility to finance a significant portion of our feed activities on a non-dilutive basis.
Speaker #3: The Office of Strategic Capital and the U.S. Development Finance Corporation, where executive order 14241 defines a mineral largely with reference to the USGS list.
Speaker #3: The executive order delegates the defense production act lending and investment authorities to the Secretary of War, and the CEO of the DFC and requires the establishment of certain mineral funding mechanisms, including the Department of War, Office of Strategic Capital.
Speaker #3: The one big beautiful bill act of 2025 authorized $5 billion for investments in critical mineral supply chains, sorry, $5 billion, for investments in critical mineral supply chains made pursuant to the Industrial Base Fund and up to $100 billion in principal amounts of direct loans and guaranteed loans for critical minerals and relative industries and projects.
Speaker #3: The Department of Energy's loan program office where, in addition to Title 17, the innovative energy and innovative supply chain prongs are enhanced by this designation given the explicit reference to the statutory reference of critical minerals being the USGS list.
Speaker #3: 5E is ideally positioned to benefit as a shovel-ready advanced stage project aligned with national priorities. Access to these programs has the potential to strengthen our balance sheet, reduce equity dilution, and accelerate execution.
Speaker #3: That's a direct result of the federal government recognizing what we built and our strategic domestic resources and reserves ready to move into production. Operationally, our team continues to execute with precision, maintaining strong alignment with our milestones and reinforcing the quality of our technical and commercial foundation.
Speaker #3: As we discussed last quarter, our pre-seasonability study confirmed strong project economics, a 39 and a half year mine life, a 19.2% pre-tax IRR, and a pre-tax MTV of $725 million, for only phase one of the 4KD project.
Speaker #3: Those fundamentals continue to anchor our forward plan. We've now successfully qualified our high purity boric acid with multiple customers across sectors including specialty glass, fiberglass, ceramics, agriculture, defense, and advanced materials.
Speaker #3: Most notably, we have advanced to full-scale testing and furnace trials with a tier one specialty glass manufacturer. Following the successful shipment of 20 tons of boric acid from the port of Los Angeles to Taiwan, I can confirm that as of last week, the shipment had arrived in Taiwan and will be deployed in a live testing environment in the near term.
Speaker #3: Additionally, we supplied an additional 1,000 pounds of boric acid to a domestic boron carbide manufacturer. Trying not currently controls much of the boron carbide supply chain and we're excited to do our part in reassuring domestic boron carbide production as it is critical to our national defense.
Speaker #3: On the back of the 20-ton shipment, we're also preparing additional product shipments for other LCD glass producers reinforced forcing both the scalability and reliability of our operation.
Speaker #3: Each one of these milestones builds customer trust and advances us towards long-term off-take agreements, a key bridge between development and commercial operations. Looking at the market opportunity, the critical minerals designation aligns perfectly with broader U.S.
Speaker #3: industrial policy. Boron is essential to technologies that support advanced manufacturing and enable the energy policy objectives. Everything from permanent magnets to semiconductors to EVs, wind turbines, and defense armor systems to advanced glass and composites, which 5E positions as a strategic enabler within multiple national frameworks.
Speaker #3: From a development standpoint, our trajectory remains clear. We are nearing completion of feed-ready engineering deliverables advancing strategic financing discussions and negotiating off-take terms. Each step brings us closer to our goal of a 2026 final investment decision.
Speaker #3: As we move through these milestones, our goal remains consistent with what I outlined in our previous call. To progress methodically, de-risk every stage, and build a capital structure that supports long-term value creation.
Speaker #3: The remainder of fiscal year 2026 will be focused on three primary priorities. One, securing non-dilutive U.S. capital support through XM, OSC, DFC, and DOE programs.
Speaker #3: While skeptics may have heard this previously from 5E, the recent designation is a major catalyst and milestone to having a much broader and in-depth discussion on financing our project and providing access to larger pools of capital.
Speaker #3: Two, advancing customer agreements in commercial off-take contracts where we expect a more detailed negotiation to commence before year-end. And three, executing a rigorous and diligently planned feed and pre-FID workstreams to ensure we are construction-ready in 2026.
Speaker #3: Additionally, we have commenced the workstream to upgrade our mineral resource statement on the back of securing and recording the remaining federal load claims for the rest of the Colemanite mineralization of the deposit.
Speaker #3: Further, we have begun steps to build a portfolio of intellectual property on our proprietary mining techniques and processing solutions. These steps position 5E to cement our mineral tenure for the long term, become the premier ISL borate producer in the United States, and transition confidently into construction and ultimately commercial production, delivering long-term value for our shareholders and strengthening America's domestic mineral independence.
Speaker #3: In closing, this quarter truly represents an inflection point, one that underscores our growing momentum, validates our strategy, and sets the stage for sustained growth and value creation.
Speaker #3: The federal recognition of boron as a critical mineral validates years of technical work, market engagement, and policy advocacy. It affirms that what we're building at 4KD matters, not just commercially, but strategically.
Speaker #3: As I said on our last call, this is a story of proof, not potential. And now, with federal alignment and growing customer attraction, we're proving that 5E is positioned to become America's trusted borate supplier of advanced materials.
Speaker #3: Thank you to our employees, partners, and shareholders for your continued commitment. We're building something rare and a foundation for America's energy and advanced materials future.
Speaker #3: With that, we'll open up the call to any
Speaker #3: questions. Thank you,
Speaker #2: Paul. We will now begin the question and answer session. To ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two.
Speaker #2: We ask that you please limit yourself to one question and one follow-up, and then return to the queue if you have additional questions. Please wait a moment whilst we poll for questions.
Speaker #2: Thank you. Our first question is coming from Tate Sullivan of the Maxim Group. Tate, your line is live.
Speaker #3: Thank you, and Paul, congratulations on having boron be on the critical mineral list and you highlighted the potential in your last call and how you were part of that process.
Speaker #3: So congratulations. Is part of being on that list, is there any word from or previous comments from the defense logistics agency that boron that there may be a government stockpile of boron going forward or any boron derivatives?
Speaker #4: I I think the trend has been to, in the past, stockpile carbide on the USGS commodity summary. There was a pretty large award, maybe about a year, year and a half ago, to a company through DPA for domestic production of boron carbide.
Speaker #4: Obviously, that's a supply chain that's dominated by China. That customer has reached out to a couple of the other borate producers, kind of our understanding's been a bit ignored.
Speaker #4: And so we've partnered with them went through the initial qualification process with smaller samples and now they are piloting production looking to move to its full scale.
Speaker #4: And that was the thousand pounds is part of that pilot process. And I think, listen, there's to get back to your question, I think the stockpiling of carbide has occurred in the past.
Speaker #4: Not sure if there's stockpiling right now, especially given what is happening on the midstream with that producer. But I think the plans to ultimately get off of China and domesticate that supply chain.
Speaker #3: Good. Thank you. And then separately in the 10Q, I saw some language about the horizontal wells to horizontal wells that you're drilling. Is that for resource expansion and definition work?
Speaker #3: Is that for flow testing and have you started flow testing, if that is part of the
Speaker #3: process? No, this is actually
Speaker #4: validating the commercial design. So we drilled in July and into early August two horizontal laterals. So we had four injection recovery wells. And about maybe each of those wells were going down to about 1,500 feet total depth vertically.
Speaker #4: And we have had about 1080 feet below ground. We've sidetracked off those two wells with 1,500-foot laterals. We got a minor modification from EPA to get permission to do that.
Speaker #4: Our commercial mine plan contemplates 4,000-foot laterals. So we're kind of if you think about scaling and proof of concept. And so we've run about six or seven cycles on those wells.
Speaker #4: And the results have been really good. One of the things that as we're coming up on two years of operating the small-scale facility here in January, and one of the things we saw with the vertical wells is you'd have head grades that would be consistently at 5%, and then they'd jump to 7, 8%, and then back down to 3%.
Speaker #4: And you had a bit of variance. And from a geology perspective, our deposit was a lake millions of years ago. And it evaporated, and it's pretty homogeneous.
Speaker #4: It's about the mineralized zone is 13 to 1,500 feet. Underground, and that gives us the ability to take a horizontal well and run kind of for a couple thousand feet through high-grade coal minite zones.
Speaker #4: So, what has happened now, as we've tested these wells, all samples—like from a head grade and boron percentage and solution—the variance has gone away.
Speaker #4: And there's a much higher rate of efficiency from a mining process in that we're consistent. And as you think about your design going into feed engineering, the basis you're going to give your EPC contractor, we now have a really high degree of confidence on what that bell curve looks like from a boron in solution percentage as well as a metal impurities and our calcium to boron ratio.
Speaker #4: So it really gives us a much better position to have a successful feed program and ultimately design a plant at commercial scale that's going to.
Speaker #4: work. Thank
Speaker #2: Thank you. you very much. Our next question's coming from Heiko Ile of HC Wainwright. Heiko, your line is live.
Speaker #5: Hi, Paul. It's Case. Heiko's on the plane right now, listening to the webcast. Thank you for taking our...
Speaker #5: question. No problem.
Speaker #4: Good to chat, Case. How are you?
Speaker #5: Doing great. Thanks for asking. Earlier on the call, you discussed several government programs that supported boron. Could you give us some color on maybe the percentage or in dollar terms that you think we could see from such programs?
Speaker #5: It seems pretty pertinent, given that the long-term demand drivers are pretty.
Speaker #5: obvious. Yeah.
Speaker #4: Great question. Listen, I think now that you have this critical minerals designation, it really opens up all aspects of the capital structure from the loans to, well, you saw what happened with MB where they came in and now they're a 10% shareholder.
Speaker #4: And they didn't prefer. So I think I would get asked previously, at different conferences, and as we're talking to investors, is that a possibility?
Speaker #4: And my kind of first response was, listen, we need to get the government to acknowledge boron's a critical mineral. So now that we've done that, I think we can really have a much more in-depth discussion on, hey, what's the right loan we want to go after?
Speaker #4: We have the LOI with XM. But now you can kind of run parallel processes. As you go get the debt, and obviously, the debt helps gear IRRs.
Speaker #4: So you can optimize your cash flows through the loans, but then you can have the conversation about, hey, what does the balance of the equity look like?
Speaker #4: And could you have a conversation with OSC on potentially providing some of that capital? And so now on the back of that, I would say we have a $435 million capital estimate.
Speaker #4: That's the sky's the limit. In the interim, there's had a call today on we are a member of Cornerstone Consortium. What we're doing on the well field side is both innovative and, to a certain extent, we're proving that the horizontal we know the vertical wells work.
Speaker #4: We're proving that horizontal wells are actually a better design, and the results are already speaking for themselves. But hey, can we go get smaller grants now through Cornerstone on the mining side?
Speaker #4: And I think on the back of some of these executive orders, that kind of came out earlier in the year. Now you're getting through CRs have been passed.
Speaker #4: You can see people returning to their desks. You can actually go have those conversations.
Speaker #5: Absolutely. Thank you. One more question. You mentioned some of the fluctuating head grades on the call. From a geological point of view, what exactly is this based on, and how does it impact your internal model?
Speaker #5: You mentioned having more clarity on the bell curve to see what's going on.
Speaker #4: Great, great technical question there. So when we say 'head grade,' we're talking about what's the boron percentage by weight in solution that's coming and being extracted from underground to the surface.
Speaker #4: And so, when we start an injection recovery cycle to go mine the boron, we're starting, per our permit, with 95% water and 5% hydrochloric acid.
Speaker #4: And just HCL, it's no different than the muriatic acid I put in my swimming pools as a conditioner. But that with the water and increases in temperature, creates the ability to leach the coal minite.
Speaker #4: And so, when we inject, we let that then sit underground. What happens in that 24 to 48-hour time period is that HCl reacts with the coal minite and dissolves the minerals.
Speaker #4: And so, when we come up above ground, what ends up happening is we catch multiple samples of solution. We send them to our lab on-site, and we run an ICP analysis on that.
Speaker #4: And what happens is you can see what's your HCL concentration in that solution. And so when you before you injected, you started at 5%, and when we test in the lab, it's about 0.25 to 0.5% HCL.
Speaker #4: So that HCL has now been reacted and replaced with dissolved boron in solution. And because boron's super soluble, i.e., with temperature, the more you can dissolve, the better head grade you can get.
Speaker #4: We you can super saturate and outperform on the mining side. And so our base case assumes 9 to 10% head grade. We've proven the solubility curve out on the low end.
Speaker #4: And ultimately, what we're focusing here on the next month and a half, two months is really vetting that out on the commercial design. So economics for the that's in the PFS remain intact.
Speaker #4: And I think we've had some really initial good results, where we've gotten right around that 7% head grade. However, we're limited today on the temperature we can actually inject at the small-scale facility.
Speaker #4: And so one of the items, and this is kind of a teasing out the next call is we have downhole heaters on order. They're used in oil and gas, and every day they can get up to actually 300 degrees C.
Speaker #4: That's not the temperature we need to mine at. We're going to kind of hang it right around 100 to 60 to 180 degrees F.
Speaker #1: Okay. Just a reminder that if there are any further questions, you can still join the queue by pressing star one on your phone keypad now.
Speaker #1: Our next question is coming from Demetri Silverstein of Water Tower Research. Demetri, your line is
Speaker #1: live.
Speaker #6: Good afternoon, and thank you
Speaker #6: Thank you for taking my call. I have a quick question. You mentioned that one of your goals for 2026 is to secure offtake contracts, and that you are currently working to have your products trialed.
Speaker #6: Is there in your mind a sort of percentage of your annual production that you would like to have under offtake agreements and long-term contracts?
Speaker #6: At what level? In other words, would you feel comfortable deploying capital? And how do you see maybe a steady state business operating between offtake agreements and selling on a spot market?
Speaker #4: Great question, Demetri. Glad to have you on the line. Yeah, I think the first kind of group we proposed to, they were we pitched about 20% of our productions, so about 24,000 metric tons.
Speaker #4: There are two or three other customers in queue. I think what we'd like to get to is a bankable portfolio that consists of about 70% of our production under offtake agreement, maybe 75%.
Speaker #4: And then you want to take advantage of the spot market. And specifically, distribution because they are not bankable customers, but they ultimately do provide a higher price in the spot market.
Speaker #4: That's how you can see there's boron being used in 300-plus applications, and the way you can kind of scale is ultimately through those distribution channels where you have smaller participants buying it, but they're buying at much higher prices.
Speaker #4: And so from as we're thinking about that offtake portfolio, target 70% of the 130,000 tons under contract. And then you keep another 25 to 30% for the spot market.
Speaker #6: Understood. That's very helpful. Thank you. And then just a point of clarification. When you talk about making the final decision by the end of 2026 or discussing offtake contracts by the end of '26, do you mean your fiscal year or the calendar year?
Speaker #4: Great Great question. So that was a reference to calendar year
Speaker #4: 2026. Calendar.
Speaker #6: That's what I thought. Okay. Thank you very much.
Speaker #4: No
Speaker #4: No problem. Thank
Speaker #1: Thank you very much. Well, there are no further questions at this time. I will now turn the call back over to Paul for any closing remarks.
Speaker #1: remarks. Thank
Speaker #6: you, everyone, for your time, interest, and dialing in today. For our Q1 2026 call, we have a tremendous opportunity in front of us to become the newest borate producer in the world.
Speaker #6: We have a proven asset and a strategy to modularly expand the asset over the next several years. We're looking forward to sharing this journey with all of you in the coming quarters, and thank you for dialing in.
Speaker #6: Have a great day.