5E Advanced Materials(US:FEAM)2024-09-09 20:30Mining Operations - The company commenced mining operations on January 1, 2024, achieving first production of boric acid and accumulating over 50,000 gallons of Pregnant Leach Solution (PLS) with an average head grade of 5.5% during the first three months[199][200]. - The Small-Scale Facility (SSF) is designed to produce up to 2,000 short tons of boric acid annually, with plans to scale up to a run rate of 9,000 short tons with additional capital investment[200][201]. - The company is targeting to deliver up to 100 tons of boric acid to potential customers for testing during fall 2024, with ongoing customer qualification programs involving leading global companies[200]. - The average head grade of boron has consistently ranged between 5.5% and 6.0%, outperforming the historical estimate of 3.7%[201]. - The company anticipates achieving a head grade of 7.0% or higher through process optimization, which would reduce operating costs[201]. - The company is assessing the feasibility of producing value-added byproducts such as magnesium hydroxide, which could further reduce operating costs[201]. Financial Performance - Total costs and expenses for the year ended June 30, 2024, were $35.86 million, a decrease of $847,000 or 2% compared to the previous year[222]. - The company reported a net loss of $62.01 million for the year ended June 30, 2024, an increase in loss of $31.39 million or 102% compared to the prior year[222]. - Project expenses decreased by $3.36 million or 34% year-over-year, primarily due to reduced costs in plug and abandonment programs and engineering reports[224]. - General and administrative expenses decreased by $1.4 million or 5%, mainly due to lower share-based compensation and marketing costs[225]. - Research and development expenses dropped by $217,000 or 83% year-over-year, attributed to the completion of engagements with research institutions[226]. - The loss on extinguishment of debt for the year was $20.95 million, resulting from modifications to the terms of the Original Notes[231]. - The company anticipates needing additional financing to maintain a cash balance above the $7.5 million minimum cash covenant[219]. - As of June 30, 2024, the company had cash and cash equivalents of $4.9 million, down from $20.3 million as of June 30, 2023, resulting in a working capital deficit of $2.9 million compared to a surplus of $13.3 million[238]. - For the year ended June 30, 2024, net cash used in operating activities was $26.9 million, a decrease of $3.8 million or 12% compared to the previous year[242]. - Cash flows used for investing activities decreased by $32.1 million or 82% to $7.2 million for the year ended June 30, 2024, due to reduced construction activities as the SSF approached final commissioning[243]. - Cash flows provided by financing activities for the year ended June 30, 2024, included $15.8 million from a private placement of Common Stock and $5.5 million from the issuance of June 2024 Notes[244]. - Interest expense for the year ended June 30, 2024, decreased by $655 thousand or 10% compared to the previous year, primarily due to the write-off of unamortized debt discount and increased capitalization of interest[234][235]. - Other expenses decreased by $6 thousand or 40% for the year ended June 30, 2024, primarily due to reduced foreign currency transaction losses[236]. Capital Structure and Financing - On January 18, 2024, the company issued 5,365,854 shares of Common Stock to Ascend and 5,365,854 shares to 5ECAP at a price of $1.025 per share as part of its Out-of-Court Restructuring[206]. - The company issued new senior secured convertible notes in an aggregate principal amount of $6.0 million on June 11, 2024, with a conversion rate of 650.4065 shares of Common Stock per $1,000 principal amount[209][210]. - The conversion rate for the June 2024 Notes was adjusted from 650.4065 shares to 692.7990 shares per $1,000 principal amount due to a Degressive Issuance, resulting in a total of up to 6,252,366 shares convertible[212]. - The company raised approximately $4.0 million in gross proceeds from the August 2024 Offering, which included 5,333,333 shares of Common Stock and associated warrants[218]. - The company entered into an equity distribution agreement allowing for the sale of up to $15.0 million of Common Stock, but did not sell any shares during the year ended June 30, 2024[248][249]. Accounting and Valuation - The company has recorded a full valuation allowance against its net deferred tax asset, resulting in no income tax expense for the years ended June 30, 2024, and 2023[237]. - The company applies significant estimates and assumptions in preparing financial statements, including useful lives and valuation of properties, plant, and equipment[251]. - Asset retirement obligations are estimated based on internal and external information, with costs inflated and discounted for future expenditures, impacting future results and liquidity[252]. - Derivative instruments are recorded at fair value, with changes recognized in earnings; subjective assumptions in valuation can lead to materially different results[253]. - Properties, plant, and equipment are recorded at historical cost, with depreciation based on estimated useful lives, which are reviewed annually[254]. - Share-based compensation is recognized based on fair value at grant date, with expenses recognized over the vesting period, utilizing the Black-Scholes model for stock options[255]. - New accounting pronouncements and requirements are discussed in the financial statements, impacting the company's accounting policies[256]. Future Plans and Agreements - The company selected Fluor Corporation as its EPC services provider for the FEL-2 engineering program, which is expected to be completed in early 2025[202]. - The company plans to progress FEL-2 and FEL-3 engineering, optimize well-field design, and pursue infrastructure capital expenditures over the next 12 months, requiring additional capital[245]. - The company submitted a proposal to the U.S. Department of Energy for a grant aimed at enhancing lithium extraction, which could improve project economics[220]. - The company has a minimum cash covenant of $7.5 million under the Amended and Restated Note Purchase Agreement, and failure to meet this could lead to an event of default[247].