5E Advanced Materials(FEAM) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - The company ended the quarter with a cash balance of $20.3 million as of June 30, 2023 [34] - Phase 1 development has an estimated capital requirement of roughly $389 million, with $37 million needed in the first year [32] - The 90,000 short tons of boric acid production and 1,100 short tons of lithium carbonate are expected to generate over $101 million of EBITDA annually, with EBITDA margins of over 62% [33] Business Line Data and Key Metrics - The Small Scale Boron Facility (SSBF) is nearing completion and is expected to produce 2,000 tons of boric acid initially, with plans to scale up production [72] - The company plans to produce 450,000 short tons of boric acid and 5,500 short tons of lithium carbonate when fully operational [26] - The SSBF is divided into five sections: Wellfield, Utilities, PLS, Boric Acid, and Gypsum, with the Wellfield, Utilities, and PLS ready to operate [46] Market Data and Key Metrics - The global boron market is expected to grow significantly, with 1.6 million tons of new demand anticipated over the next several years [56] - Approximately 65% of global boron supply is controlled by a Turkish government-owned entity, creating an opportunity for the company to become a primary domestic U.S. supplier [56] - The company is positioned to address the widening gap between boric acid supply and demand, with no significant new projects expected to come online soon [57] Company Strategy and Industry Competition - The company is focused on advancing the 5E Boron Americas project, which is the only permitted boron deposit with a commercially viable resource expected to come online in the next five to seven years [29] - The company is pursuing a phased execution strategy over three modules, allowing for scalable production in a modular and de-risked manner [30] - The company is engaging with government agencies, including the Department of Defense and the Department of Energy, to secure funding and partnerships [52][64] Management Commentary on Operating Environment and Future Outlook - The company is awaiting final clearance from the EPA to begin operations, with step rate testing being the last remaining condition for the injection approval process [41] - The company is actively engaging in conversations to pursue additional capital from investment partners and other funding sources [50] - The company expects to receive authorization to inject acid, which will allow them to commence mining and begin producing boric acid, lithium carbonate, and gypsum [47] Other Important Information - The company has a 31-year mine life and future exploration targets to expand production [30] - The company has taken steps to reduce overhead costs, with a goal of maintaining a G&A burn rate of about $1.5 million per month [109] - The company has a number of commercial LOIs in place and is in ongoing discussions with potential offtake customers [62] Q&A Session Summary Question: Pricing assumptions and market deficit timing [81] - The company expects first full-year production pricing to be around $1,700 per ton, with prices expected to ramp up due to supply deficits [99] - The market is already in a deficit position, with supply being fully spoken for in recent quarters [3] Question: SSBF output allocation and product qualification timeline [84] - Initial SSBF output will be used for product qualification, with full commercial qualification expected to take three to six months [73] - Once qualified, the company plans to sell product into the spot market and potentially service offtake customers early [72] Question: Government financing timing and potential funding [119] - The Department of Defense (DOD) funding process is quicker, with potential funding being written into an appropriations bill [91] - The Department of Energy's Loan Programs Office (LPO) process is more detailed and could take around 12 months or longer, but offers significant capital [92] Question: Customer discussions and supply diversification [102] - Customers are increasingly looking to diversify their supply base due to product quality issues and the risk of relying on a single supplier [102] - The company is exploring opportunities to sell ahead and secure prepayments from customers [103] Question: EPA permit clarification [104] - The company has a permit in place but needs to meet certain conditions, including step rate testing, before receiving full authorization to inject acid [105] Question: SSBF CapEx details [111] - The incremental $5 million in CapEx for the SSBF will go towards finalizing piping, electrical work, and leased equipment for the boric acid and gypsum sections [95] Question: SSBF production allocation [97] - A portion of the initial 9,000 short tons of boric acid production will be used for quality testing, with the remainder available for sales once qualification is complete [113]