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spk01: Thank you for standing by. This is the conference operator. Welcome to the West Florida Resources, Inc. 2023 year-end business update and investor call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. 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 zero. I would now like to turn the conference over to Frank Bakker, President and CEO. Please go ahead, sir.
spk00: Thank you, moderator, and thanks to those attending our 2023 year-end business update and results call. With me today is Terence Kryan, our Executive Chairman of the Board, and Steve Gates, our Chief Financial Officer. During this presentation, the forward-looking statements we make are based on management's judgments, including, but not limited to, future graphite demand and price forecasts, schedule and cost projections, and economic expectations related to the Calentan graphite plant, the GUSA graphite deposit, and capital raising activities, including the estimated timing of those activities. These and other similar statements are subject to certain risks and uncertainties of which a description can be found on slide 2 within this presentation and in our 10-K for 2023 and our other SEC filings. Please read our cautionary statement and realize that actual results may differ materially from what is discussed today. Moving to slide 3. Westwater is an energy technology company focused on producing advanced natural graphite materials in the United States using our proprietary technology, including our patent-pending purification process. Turning to slide four. Westwater has two primary projects, both located in the state of Alabama. Our Calentan graphite plant will process flake graphite into coated spherical purified graphite, or CSPG, utilized in lithium ion batteries from consumer electronics to electric vehicles and other battery applications. Our second project is the GUSA Creve deposit, located approximately 30 miles from the Kelton plant. We believe the close proximity of our two projects, located in the Baring EV belt in the southeastern region of the U.S., positions Westwater to become the first vertical producer of CSPG that is 100% based in the U.S. Moving to slide five. We reached several significant milestones within the past 12 months, including signing our first multi-year off-take agreement with SK Yon, a Tier 1 lithium-ion battery manufacturer. Responding to demand signals from customers, we completed our full debottlenecking study and now anticipate CHPG production of 12,500 metric ton per annum in Phase 1 at the Calentum plant. This is a 67% increase from the planned phase 1 CHPG production announced in March of 2023. And we are able to accomplish this increase in plant production within the 271 million capital budget. Based on customer demand signals and anticipated favorable project economics, we have started our feasibility study on phase 2 of the Calentum plant. and expect to increase the combined production to 50,000 metric ton per annum of CSPG. We will provide an update once we complete the feasibility study. A qualified mine engineering firm completed an initial economic analysis for the GUSA deposit. The analysis shows an anticipated pre-tax NPV of approximately $229 million and an estimated pre-tax IRR of 26.7%. We remain focused on becoming the first U.S.-based, U.S.-domiciled, vertically integrated natural graphite anode supplier and believe the fundamentals of our business remain strong. Turning to slide 6. Graphite is an essential mineral to batteries, especially the lithium-ion battery used in electric vehicles and clean energy storage systems. Graphite in a lithium-ion battery accounts for approximately 50% of the critical minerals by weight. A typical electric vehicle has around 175 to 210 pounds of graphite. The US doesn't have an established domestic supply chain for battery-grade graphite products and is predominantly reliant on imports from China. Recent Chinese export controls on graphite again highlight the critical need for domestic battery-grade graphite production in the US. With our two primary projects, the Calenton plant and the Cusa deposit, we believe Westwater Resources is well positioned to provide local and IRA-compliant supply to battery plants in the U.S. with early market mover advantages. Moving to slide 7. The projected demand growth for lithium-ion batteries, government support for the energy transition, and the dominance of the graphite anode market by China has led the US government to designate graphite as a critical mineral. We believe the recent Chinese export restrictions and additional requirements for graphite exports that began on December 1, 2023 served as another wake-up call for the entire battery supply chain, relying on critical minerals from China. Approximately 90% of today's battery and oak materials come from China. We believe these new restrictions highlight the critical need to establish a reliable graphite supply chain in the US. In addition, on December 1st, the US Department of Energy released proposed guidance on what constitutes a foreign entity of concern within the bipartisan infrastructure law and the Inflation Reduction Act. Under this guidance, starting in 2025, an electric vehicle is disqualified from receiving the $7,500 clean vehicle tax credit if the EV battery contains any critical mineral extracted, processed, or recycled by a foreign entity of concern, including graphite. The proposed guidance identified China as a foreign entity of concern, and we believe this is a positive step for the U.S. graphite market. And Westwater is committed to be part of the domestic solution to provide domestically sourced IRA-compliant graphite and oak material. And now, I would like to turn the call over to our Chief Financial Officer, Steve Gates, to discuss the current graphite market. Steve?
spk04: Thanks, Frank. Turning to slide eight, while current adoption rates of EVs and EV demand has been lower than original forecast by auto manufacturers and others, Many still see EVs as a growth sector within automotives and expect EV adoption rates to grow. As a result, we continue to expect that global demand for graphite anode material will strengthen, resulting in a growing supply imbalance for the foreseeable future. Given the government regulations in the U.S. and around the world, Benchmark is forecasting electric vehicles to play a major role in driving the demand for graphite anode material. Moving to slide nine. Many battery cell manufacturers utilize a blend of synthetic and natural graphite. Over the past couple of years, the blend has been around 60% synthetic and 40% natural. However, we are seeing a desire by cell manufacturers to increase the use of natural graphite to take advantage of its energy density properties, its lower cost, and its lower impact on the environment. Synthetic graphite is primarily produced from petroleum or coal needle coke. and requires extreme temperatures to produce. According to Benchmark Minerals, natural graphite anode demand will outpace supply at higher rates than other anode materials, resulting in a supply imbalance for natural graphite as early as next year. Benchmark expects the use of natural graphite to grow to 35 percent of total anode materials by 2035, which represents a 40 percent expected increase compared to 2023. Turning to slide 10. Slide 10 shows the forecasted global supply imbalance just related to natural graphite anode supply. The global demand for natural graphite anode material is expected to grow to approximately 1.2 million metric tons in 2030 and to more than 2 million metric tons per year by 2035. The question is, with the new Chinese export restrictions on graphite and the IRA and the FEOC guidance, where are cell manufacturers and EV automakers going to get IRA compliant graphite anode material or CSPG? Based on our recent conversations with customers, they're concerned with sourcing non-FEOC and IRA compliant CSPG for their US battery manufacturing plants. Westwater has been at the forefront end of this market dynamic for a number of years. We believe the progress we've made in developing our product, producing samples, customer engagement, the construction progress on phase one, and signing our first multi-year offtake agreement gives Westwater a competitive early market advantage over new entrants into the natural graphite anode market. And this is why customer engagement remains strong, which we will touch on later in the presentation. Turning to slide 11. Flake graphite and CSPG prices decreased in 2023. But the value created in processing flake into CSPG remains strong and is forecasted to remain strong by third-party sources like benchmark minerals. This was one of the reasons that we took a slightly different approach than other companies by developing our Kellyton graphite processing plant first and planning to develop our KUSA graphite deposit second. And now I'd like to turn the call back to our CEO, Frank Bacher, for a business update. Frank?
spk00: Thank you, Steve. Moving to slide 12. As stated in my opening remarks, Westwater announced recently that it has signed its first multi-year off-take agreement with SK Yon, with volumes ramping up to 10,000 metric tons per year in the final year of the agreement. The agreement allows for sales to be accelerated or extend the agreement by mutual agreement. This agreement is the result of strong collaboration in 2023 between Westwater and SK pursuant to the JDA signed in March 2023. I want to acknowledge the sales and technical team of Westwater for their hard work in achieving this significant milestone. To our knowledge, this is the first offtake for natural graphite anode material executed by a 100% U.S.-based company with a Tier 1 battery manufacturer. Turning now to slide 13 for the construction update. We have been under construction for phase one of our Calentan plant for over two years. And since the beginning of construction, we have had an excellent safety record by our contractors and Westwater teammates. 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. As mentioned earlier, we have continued our debottlenecking study and now expect Phase 1 CHPG production of 12,500 metric tons per year. This represents a 67% increase in planned CHPG output to the 7,500 metric tons announced last March. And we expect to add this additional production while staying within the $271 million budget previously communicated. During 2023, we advance construction. completing five of the six primary Phase 1 buildings, received additional long-lead equipment items, and began installing shaping and milling equipment, a picture of which is included on the slide. The progress we have made in construction was significant in helping secure our first off-take agreement, as we are not starting from ground zero, and the multiple customers who have toured our site provided positive feedback on our progress. Once we have secured our depth financing, we plan to provide an updated estimate for completion of phase one of the Calenton plant. Moving to slide 14. The Calenton site has significant expansion potential. The approximately 70 acres allows for the phase two expansion on the current footprint. As a result of our development tracking study, we now plan to produce a total of 50,000 metric tons per year of CSPG when phase two is completed. We have started the feasibility study for Phase 2 and will provide an update upon completion. Based on the forecasted graphite demand supply imbalance discussed previously and the need for IRA-compliant material, certain customers have shown an interest in Phase 2 volumes. Currently, there are approximately 15 battery manufacturing plants, either under construction or planned to be within a one-day delivery of the Kelington plant. We expect that all these battery plants will want IRA compliant graphite and a local supply. Turning to slide 15. We hold mineral rights at our GUSA deposit to approximately 40,000 acres across the Alabama graphite belt. Once in operations, the Calentan Graphite Processing Plant and the GUSA deposit represents the first fully integrated domestic battery grade graphite company in the U.S. We believe this will provide significant competitive advantages given the domestic content requirements in the IRA previously mentioned. Moving to slide 16. In December, we shared with investors the results of our initial assessment. The results of that analysis indicate that a CUSA deposit has an estimated pre-tax cash flow of $714 million, an anticipated pre-tax NPV of approximately 229 million, an estimated pre-tax IRR of 26.7%, and an estimated mine life of over 20 years. It's worth noting that the analysis doesn't include data from all the holes drilled to date, but was completed based on 205 drill holes, totaling a little over 30,000 feet. Data from the remaining drill holes is positive, and more drilling is needed in those areas prior to including these in the overall mineral resource estimate of GUSA. Switching to slide 17, the initial mine plan for the GUSA deposit anticipates using conventional small-scale open pit mining methods with several shallow pits less than 100 feet deep, utilizing small conventional loading and hauling equipment. The PEA assumes that at full-scale production, the mining rate will be approximately 3.3 million short-tons per year, resulting in an initial estimated mine life of 22 years. We believe there is opportunity to increase this estimated mine life with additional drilling. We continue to believe the KUSA deposit is a highly valuable asset with attractive economics, and we have started the process seeking strategic investment to advance KUSA. which could include strategic investors or partners. Before turning the call back to our Chief Financial Officer, I want to reiterate that the graphite anode market in the U.S. is in its early stages and believe the 2023 business results of the entire Westwater team were a significant achievement as we look to maintain our earlier market mover advantages of this dynamic market. Now I would like to turn The call back to our Chief Financial Officer, Steve Gates. Steve?
spk04: Thank you, Frank. Moving to slide 18. As mentioned, since beginning construction, we have incurred total costs of approximately $119 million related to Phase 1 construction, and we estimate approximately $152 million of costs remaining. That is inclusive of our contingency. Westwater finished the year with a cash balance of approximately 10.9 million and no debt. The construction progress has not only been positively received by customers, but also by interested lenders. And we believe given the amount of capital already deployed, completing the funding for phase one with a debt transaction is appropriate and in the best interest of our shareholders. Given the early stage of the graphite anode market outside of China, we have been bringing interested lenders up to speed on the market, our technology, our development plan and customer engagement, which has taken longer than expected when compared to an established mature domestic energy sector. We are still engaged with multiple lenders to finalize a debt transaction to fund the balance of the remaining phase one costs. And note that securing our first offtake agreement is a significant step in finalizing a debt transaction. Each of the interested lenders have different debt terms and credit approval processes. And therefore we believe getting additional offtake agreements will only help in securing a debt financing. Additionally, we are seeking strategic investment, as Frank mentioned, for the advancement of the CUSA deposit. This could also be an additional source of potential liquidity. Turning to the financial summary on slide 19. Detailed discussion of these items is included in our recently filed Form 10-K, as well as our full year 2023 press release. Net cash used in all operating activities for 2023 decreased by approximately 1.7 million compared to the prior year. This decrease is primarily due to the cash received in the fourth quarter of 3.1 million related to our settlement of the arbitration against the Republic of Turkey and higher interest income year over year of approximately 300,000. These cash inflows were partially offset by higher product development costs during 2023. Cash used in investing activities during 2023 totaled approximately $58 million and related to the construction of phase one of the Kellyton plant. Product development costs for 2023 increased by approximately $1.8 million compared to 2022. And this increase relates to additional samples being produced, product optimization for customers, as well as work performed pursuant to the joint development agreement with SK On. General and administrative expenses for 2023 decreased slightly by approximately $100,000 compared to last year. This was due primarily to a reduction in personnel costs related to less hiring and relocation expenses in 2023 and stock award forfeitures, which reduced our stock-based compensation expense. These reductions in G&A costs were partially offset by costs associated with the Q1 2023 executive management change previously announced. Lastly, net loss for 2023 was approximately 7.8 million or 15 cents per share compared to a net loss of 11.1 million or 25 cents per share in 2022. The decrease in net loss was primarily related to a gain recorded of 3.1 million related to the cash proceeds received in the fourth quarter in connection with Westwater settlement of its arbitration against the Republic of Turkey as previously mentioned. In the fourth quarter of 2023, Westwater completed an unclaimed property review by a state authority and as a result reversed previously estimated accruals related to the company's former uranium business. These items were partially offset by the higher product development costs during 2023 as previously discussed. Before turning the call over for questions, I want to again highlight several 2023 accomplishments that we believe created value for Westwater and its shareholders. During the 2022 year-end update call in March of 2023, we previously announced an estimated free tax NPV of $417 million for Phase 1 at 7,500 metric tons of annual production. Due to work performed in the second half of 2023 and the first part of 2024, we now expect Phase 1 CSBG production to be 12,500 metric tons per annum. That's an increase of 67% compared to what we announced a year ago, which we believe more than offsets the softening graphite prices that occurred during the year. Further, we completed the initial economic analysis for Coosa indicating a pre-tax NPV of $229 million. We believe these milestones, along with signing our first multi-year offtake agreement, are positive steps to creating value for Westwater shareholders. and capitalizing on our position as an early market mover in the domestic graphite anode space.
spk02: With that, I'll turn the call back to you, operator, for questions. Thank you. Thank you.
spk01: We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Steve Kruger with Foresight Investing. Please go ahead.
spk03: Good morning, guys. Thanks for taking my question. Back in the fall of 2022, you indicated that you plan to start investing phase one building and equipment in place and start commissioning the plant at the start of Q2 of 2023. We're now a year past that, and you still haven't secured the financing, the debt financing that you're trying to get to complete the construction. And in the meantime, you've made a whole string of positive announcements, each of which one would think would put you significantly closer to clearing whatever hurdle the lenders have in order to close a deal for financing with you. And I'm just wondering at this point, how far are you, you know, how far away are you at this point from meeting the requirements of lenders to secure the additional 170 so million that you need to finish phase one?
spk04: Hi, Steve. Thanks for the question. This is Steve. Yeah, I think every step, as you mentioned, that we've done, securing our offtake, advancing the project, has gotten us a step closer and have been significant milestones for us. As I mentioned in my remarks, the project debt financing that we're talking to, and since graphite is really dominated by China, a lot of the banks and the lenders are really trying to get up to speed, and they're used to things working similar you know in a mature energy market think you know copper other metals lng oil and gas and so a lot of it has been some pretty substantive education of our part to the lenders to get through that i think the off-take agreement is a huge step we have multiple term sheets on the table we have not gone exclusive with the lender yet we would like to in the near term But a lot of that, we've tried to maintain some flexibility with trying to get the best pricing and the best pricing terms we can for Westwater. So stay tuned. We continue to work forward and keep pressing on towards getting a debt financing in place.
spk03: Okay.
spk02: Thanks for the insight. Once again, if you have a question, please press star, then 1.
spk01: Since there are no more questions, this concludes the question and answer session. I would like to turn the conference back over to Frank Bacher for any closing remarks. Please go ahead.
spk00: Thank you, operator. I want to thank you all for the interest in our company and look forward to speaking to you again on our next call. Thank you.
spk01: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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