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spk08: Thank you for standing by. This is the conference operator. Welcome to the Westwater Resources, Inc. Full Year 2021 Results and Business Update conference 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 Chris Jones, President and CEO. Please go ahead.
spk04: Thanks, Ariel, and thanks, everyone, for participating with us today on our 2021 results call. With me here today are Terrence Kryan, our Chairman of the Board, Chad Potter, President and CEO-elect, and Jeff Vigil, our Vice President of Finance and our Chief Financial Officer. Just a quick cautionary message. We will be talking about some forward-looking statements. We caution you to read the statement and cautionary statement on page two of the presentation. With that, I'd like to turn it over to Terrence Kryan, our Chairman.
spk02: Thank you, Chris. Good morning, everyone, and I promise to be brief. After nine years of distinguished service, and after positioning the Coosa Graphite project for success, Chris Jones will retire at the end of February. I'm sure each of you joined me in wishing Chris a happy and healthy retirement. As part of a thoughtful and planned succession strategy, beginning last summer, the Board has now elected Chad Potter as the company's new president and CEO. He will continue to be based in Alabama to oversee the completion of the construction activities at the Kooza Graphite Project, in addition to his expanded role as CEO. The Westwater Board also announced that I will become the company's executive chairman. I will work with Mr. Potter to ensure a smooth transition and to help advance our business and financial interests. Chris, back to you.
spk04: Thanks, Terrence, and thanks for those kind words. On to slide four. We continue to ensure the safety of our employees and ensure the health and safety of our employees in the communities where we work. We continue to ensure that our employees are permitted and encouraged to take time off due to illness or the illness of those around them without penalty. Turning to slide five, we continue to advance our battery graphite product development schedule. We completed the definitive feasibility study for our graphite processing facility and approved the construction of phase one during the year. We secured the site for our intended processing plant near Kellyton, Alabama, together with financial incentives from the state, county, and industrial development boards. Further, we have purchased two buildings adjacent to our Kellyton site, totaling about 90,000 square feet, to accelerate our construction schedule. And importantly, construction of the processing facility began on December 1, 2021. We continue to work to ensure adequate financial liquidity to support our key operations and business activities, and we have a cash balance of $115 million as of December 31st. And with that, I'd like to turn it over to Jeff Vigil, our CFO.
spk06: Thank you, Chris. Good morning, everyone. First, let's take a look at our capital slide position on slide number six. Our closing share price on Friday, February 11th, was $1.93. And with approximately 35 million shares outstanding, our market capitalization stands at approximately 68 million. Our average daily trading volume over the past three months was approximately 800,000 shares per day. Our share price began 2021 at $4.93 and ended 2021 at $2.15. We believe investors have taken a more cautious approach to Westwater as we embark on the construction of our graphite processing facility in Alabama and the large capital expenditures associated therewith. At December 31, 2021, the company's cash balances were approximately $115 million, as Chris noted. The company had a working capital balance of approximately $110 million. During 2021, the company utilized its ATM facility with Cantor Fitzgerald and its equity line with Lincoln Park Capital to raise approximately $84 million from stock sales. The company generated proceeds of approximately $3.6 million in the fourth quarter from the sale of Encore Energy shares, which we received from the sale of our uranium business at the end of 2020. The two financing facilities provide the company an opportunity to raise cash at a low cost of capital and will continue to be utilized to support the company's business plan in 2022. The company is actively pursuing financing strategies for the construction Phase one and phase two of the commercial processing plant that include project debt. Off take agreements and equity. Turning to slide seven, we provide a financial summary for the fiscal year ended December 31. Net cash used in all operating activities was 16.9 million for the year ended December 31. as compared with $15.2 million for the same period in 2020. The $1.7 million increase in cash used was primarily due to increased graphite product development, exploration, general administrative and arbitration costs. Product development costs were primarily related to the definitive feasibility study, which began in February 2021. and was completed in October 2021, and our product development program that continued to the end of 2021. The increase in general administrative expenses was due primarily to increased sales and marketing costs, higher stock compensation expense, as well as higher public company expenses. These increases were offset partially by the elimination of $1.7 million in cost attributable to Westwater's uranium business, which was again sold in the fourth quarter of 2020. Westwater also incurred exploration expenses of $1.1 million in 2021 for the purpose of investigating the extent of graphite and vanadium mineral concentrations at the Coosa deposit. Westwater anticipates completing its exploration program during the first quarter of 2022. Following the completion of this exploration program, we intend to complete a technical report related to the mineral concentrations discovered. Net loss from continuing operations was $16.1 million for the year, or 49 cents per share, as compared with a net loss in 2020 of $13.9 million, or $1.58 per share. The $2.2 million increase was largely due to increases in product development exploration expenses, and general administration costs. With that, I'm pleased to turn over our presentation to Chad Potter.
spk03: Thank you, Jeff. Westwater core values are based on continuous improvement in safety, safety of each other, our environment, our assets, communities where we work, and our reputation. Second, cost management. Effective and efficient use of our shareholders' assets. Focus on first quartile cost performance. Third, integrity. The highest level of performance every day in improving our processes and conservative promises well kept. Slide nine. In executing our business plan, we completed our feasibility study. Construction of phase one was approved by the board. Construction began on December 1st, 2021. We're on schedule for completion of construction at Q2 of 2023. Samples are in potential customers' hands and our first LOI for product sale is in place. Slide 10. On June 22nd, the community leaders from the state of Alabama, Coosa County, Alexander City and the Lake Martin Industrial Development Board celebrated the unveiling of the project with Westwater and Alabama Graphite products management team. Slide 11. This is the Kelton project site. At the bottom building B is where our warehouse facility is going to be. Building A in the top left-hand corner, that is our administration building. And north of Building B is the skeleton site footprint where the processing facility is going to be located. Slide 12. The project key attributes comprises of proprietary technology, cost advantage, and sustainability for the environment of the sustainable processes. On to slide 13. Battery markets are growing. Graphite is a critical component of those markets. Foreign markets, transportation, 23% growth rate expected over the next 10 years, predominantly in the lithium ion batteries. And the US government and automakers announced a goal of 50% of all autos sold will be electrical electric vehicles by 2050, and energy storage systems, 11% growth rate expected over the next 10 years, enabling technology for wind and solar power, consumer electronics, a 3% compound annual growth rate with well-established value chain, and in specialties, defense, aerospace, military, and medical, major players in North America. Slide 14. Why does graphite matter? Graphite's a critical component of all types of batteries, including lead acid, alkaline power cells, and non-rechargeable lithium cells. CSPG is a critical component of lithium ion batteries. The U.S. government has defined graphite as a critical to the nation's security and prosperity, and presidential executive orders ask U.S. government agencies to act with equity. Slide 15. Coosa Graphite Project is a near-term source of domestic U.S. battery graphite. Samples are under evaluation at potential customers. Westwater's graphite will be produced in the United States using environmental sustainable processes. Westwater's graphite products serve important battery markets, and Westwater's vanadium discovery at Coosa could contribute revenue revenues and exploration is underway. Slide number 16. Westwater has developed a new technology for graphite purification. We have filed patent applications with the U.S. Patent and Trademark Office for this technology. Our purification methodology has more sustainable footprint than those currently used in China where environmentally damaging and expensive to manage hydrofluoric acid is being used. Our process consists of three process steps, including caustic roasting of the graphite concentration, concentrate sample, acid leaching of the roasted sample, and thermal treatment of the sample. Slide 17. Our project plan, which was led by Samuel Engineering, is complete. Phase one construction has begun and is expected to be completed by Q2 2023. Expected CSPG production increased from previous plans to 3,700 metric tons per year. The governor of the state of Alabama has supported the project. Exploration drilling has begun to further define the Coosa graphite deposit. Geologic models is expected in 2022. Westwater expects to begin mining at the Coosa graphite deposit in Alabama beginning in 2028. Our team going forward is made up of tenured leaders. As you spoke earlier, Mr. Terrance Kryan is joining as our executive chairman. I'm taking over as the CEO. Jeff Vigil. Mr. Stephen Case is our CAO. Dane McCoy is our VP of operations, will be at our Alabama facility. Javatt Err, VP of technical services. Mr. John Lawrence as our general counsel, Mr. Jay Wago as our VP of marketing and sales. Experience matters. Energy, minerals exploration and development requires discipline and diligent capital stewardship. We have restructured and recapitalized the company, positioning Westwater as a green energy materials company with a laser focus on battery-grade graphite products. Experience management team will demonstrate a history in finance and green energy development from concept to production. So why Westwater as an investment? We have battery-grade graphite development business with a strong upside potential. Graphite has been designated a critical mineral by the U.S. government. We have a proven management team with experience in energy mineral development and financial management. We anticipated catalysts for 2022. We have construction milestones achievements, Coosa graphite deposit exploration and geological model results, and we'll have updates on customer testing and interest to share with the team. With that said, we'd like to open up the floor for any questions.
spk08: Thank you. 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 are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. To join the question queue, please press star then 1 now. Our first question comes from Deborah Ficus of Crystal Equity Research. Please go ahead.
spk01: Thank you. Good morning. And before I begin, I appreciate you taking my questions. But before I begin, let me offer congratulations all around the table to each of you and your new positions. I wish you good fortune in all. I think first I'd like to focus on the processing plant project that's currently underway. I wondered if maybe you could return a little bit to the budget. make some comments about what kind of contingencies may have been built into the budget, in particular for inflation if the Federal Reserve is not able to get inflation back under control. Do you think you have sufficient contingency built into the construction budget to accommodate that?
spk04: Deborah, thanks for those kind words for the team. Secondly, with regard to the project budget and contingency, we built in a 15% contingency on the budget. That should be sufficient to accommodate not just the unknowns in the detailed design, of course, but inflationary pressures on certain pieces of equipment and processes as we put them together. Also inside that budget are contingencies in a schedule for getting this processing facility built on time and within budget.
spk01: Okay, thank you. And then just continuing on talking about the project, apparently you're anticipating completing the first phase by the middle of 2023. But how long does it take if you go ahead at that point with Phase 2? What's its completion timeline? Let's say, does it make a difference when you start it, or are there seasonal factors? What would you say would be the time at which we might see Phase 2 completed?
spk04: Our current estimate, subject to some revision, of course, is for completion in 2025. What we intend to do through the construction of phase one is to document all those pieces and parts we learn as a result of construction and initial operations, and then to integrate them into the feasibility study for phase two so that we can improve on any processes we put in place and in a timely fashion for operations in 25. Okay, good.
spk01: Thank you. And of course, in November, we were all pleased to see that you had signed a letter of intent with a customer for Ultra CSPG. The product, I guess the range is between 125 to 250 metric tons. And of course, I'm sure that that contract is contingent on a number of things that your company has to perform on. It would seem that you're making some progress there. There are apparently some contingencies against which the counterparty is also hedging, if you will. They have a pilot plant or a full-scale plant that they are constructing. Did I read that correctly in the Daniel report? Perhaps you could elaborate a little bit.
spk04: Deborah, you're quite right. There are mutual contingencies on both sides of the commitment. And in the business we're in, it is difficult for us to not only name our potential customers, but to describe these documents at this stage in a lot more detail. As you well know, once it becomes material to our business, then we will be required to put in more detailed disclosures. From a Westwater standpoint, it's really exciting for us to sign letters of intent at this stage of our development and put to rest any concerns, certainly on the part of our counterparties, that we'll be able to supply that stuff.
spk01: Understood. And if I could just squeeze in a follow-up question on that. Do you have reasonable visibility into... what the counterparty is up to. I mean, they can get on this call and they can listen to hear about your progress. What means, if any, do you have of observing whether or not they're making progress toward their responsibilities as well or those things that they've listed as a contingency? Let's put it that way.
spk04: We have pretty good clarity into certainly their development. We executed a non-disclosure agreement, as you might already suspect, with them so that we maintain an understanding of their business and their progress at the same time they maintain an understanding of ours.
spk01: Okay, great. Thank you.
spk04: Thank you, Deborah.
spk08: Once again, if you have a question, please press star, then 1. Our next question comes from Gil Good of Western International. Please go ahead.
spk07: Good morning, and thanks for taking my call. You mentioned before that graphite is used in all different types of batteries. I just wonder about the new solid-state batteries that are under development, how graphite is used there, and if there's any change in the chemical formulation in the process of supplying them with graphite.
spk04: With regard to solid-state batteries in general, we regard them as a product that has years of development yet to be executed. We understand that their current construction and current configurations do use graphite. But as you might expect, as they develop, the particular chemistries of solid state batteries and their reliabilities and their future uses are yet to be defined. So I think where I'd want to leave you is that we're confident that battery technologies for the last 120 years and for the next you know, the next decades will be consumers of graphite, and we're here to supply those.
spk07: Okay. Okay. Thank you.
spk08: Our next question comes from Michael Porter of Porter, LeVay, and Rose. Please go ahead.
spk05: Good morning. I'd like to address this question to Chad. Chad, Westwater has received the NPDES permits, when will the site grading begin? Can you also explain what that means to everybody, how long it will take, and how soon after this completion will construction begin?
spk03: Thanks for the question, Mike. Site work could not begin until the NPDES permit was received. The permit was issued at the end of January, and the company is evaluating several contractors to perform the work. After the contract is issued, site work is expected to begin in early March. Site grading is the process of preparing the surface for the roads and building foundations. We're in the midst of finalizing those plans for the first phase of earthwork and the process of selecting contractors for the work. We're expecting the process to be about two to three month process and we expect civil and structural work to begin immediately after that's completed.
spk05: Thank you. One last question, Chad. Do you have any supply chain issues with what's going on worldwide?
spk03: Great question. Based on discussion over the past few months with our engineering and procurement contractors and general contractors and vendors. At this moment, we don't really see an impact on the construction of the KUSA graphite facility due to widely known issues with the nation and international supply chains. Nevertheless, we've made best efforts to really take this into account with our planning processes. We've made efforts to secure equipment and materials that could have affected our supply chain. In addition, we've already ordered a significant amount of our longest lead time items. We've developed schedules for when we expect to need this specific equipment and materials so we could get these items early and currently maintaining that schedule. However, given how dynamic and volatile both national and international supply chain issues have been, we're monitoring those issues closely and staying on top of it any issues that may arise. Great questions, Mike. Thank you.
spk05: Thank you.
spk08: This concludes the question and answer session. I would like to turn the conference back over to Chris Jones for any closing remarks.
spk04: Thanks, Ariel. It has been my pleasure to lead this team over these last nine years. I'm proud of their work, and I wish them all the success in the world. I'll leave the Westwater team in the capable hands of Chad and Terrence. With that, thanks for spending a part of your day with us. Have a great day.
spk08: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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