Westwater Resources, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Westwater Resources, Inc. full year 2022 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 one 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.

Thank you, moderator, and thanks to those attending our 2022 year-end business update and results call. I'm excited to lead the company and to have this first earnings call since becoming the CEO of Westwater Resources. 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 judgments, including, but not limited to, future graphite demand and price forecasts, schedule and cost projections, and economic expectations related to the Callington Graphite Plant. the GUSA graphite deposit, and capital raising 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 2022 and our other SEC filings. Please read our cautionary statement and realize that actual results may differ materially from what's discussed today. Slide 3. Construction of phase one of our Calentan graphite processing plant has been ongoing for over a year. When completed, the Calentan graphite processing plant will provide anode material necessary to support the energy transition. Interest from potential customers is strong and samples continue to be requested. Recently, Westwater Resources entered into an agreement with an electric vehicle battery producer. Under the agreement, the two companies will work together to ensure that the CSPG expected to be produced at our Calentan plant can be used as a high-performance anode for their batteries. Subject to those efforts and terms and conditions yet to be negotiated in a future agreement, this agreement allows for the sale of potentially all anode material from our Calentan plant for those batteries. This is another significant step advancement in our graphite business and our engagement with potential customers, and we are anticipating making a joint announcement with our partner later this month. At that time, we expect to be in position to provide further details. We also hold mineral rights to approximately 42,000 acres across the Alabama Graphite Belt. Once in operations, The Calpton graphite processing plant and the GUSA deposit represents the first fully vertically integrated domestic battery-grade graphite company in the U.S. We believe this will provide significant competitive advantages given the passing of the Inflation Reduction Act in 2022 with its domestic content requirements for electric vehicle battery materials. Turning to slide 4. In response to growing demand and customer feedback to increase our plant production capacity, we are pleased to announce that we have completed an optimization study of the Gallatin Graphite Processing Plant, which we believe will significantly improve the economics of the project. As a result, we now expect to double our throughput capacity in Phase 1 to approximately 16,000 metric tons per annum. and more than doubling our estimated CSBG production to 7,500 metric tons per year. The higher throughput results in an expected increase in the estimated pre-tax NPV compared to the original DFS of over three times, to $470 million, and an increase in the estimated cumulative pre-tax cash flow to $1.9 billion. and an increase in the estimated pre-tax IRR of 65% to 24.7%. With the optimization, we now estimate the total cost of Phase 1 to be approximately $271 million. We expect to begin testing and commissioning of Phase 1 in late 2023, and first production to occur in the first half of 2024. subject to closing the additional funding to complete construction. Additionally, we expect to spend the additional capital necessary for the Phase 1 optimization in 2024 and are targeting completion of this optimization and increasing the throughput in the second half of 2024. Slide 5. We also have incorporated the optimization of Phase 2 at the pre-feasibility level. increasing the planned CSBG production to approximately 40,500 metric tons per year, nearly tripling the expected pre-tax NPV to $2.2 billion, and increasing the estimated cumulative pre-tax cash flow to $10.3 billion, and the estimated IRR to 36.3%. The total combined cost of Phase I and Phase II is currently estimated at at $736 million. We plan to begin a definitive feasibility study on the Phase 2 expansion in 2023 and will provide an update once completed. Turning to slide 6 for a construction progress update. Since the beginning of construction at our Calenton graphite project in late 2021, we have had zero recordable safety incidents by our contractors and Westward teammates. This is a significant accomplishment. 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. During 2022, we completed the earthwork, the building foundations and the majority of the underground utilities. Significant progress has been made on the buildings. Two of the major buildings are close to being finished. and the other three buildings will be completed in March-April of this year. Long lead equipment started to arrive at site and we will start putting the equipment in place in March of this year. Regarding our GUSA graphite deposit on slide 7. In April 2022 we completed our exploration drilling program and completed our geological model and published a technical report in the fourth quarter. which identified about 3.8 million short tons of graphite, enough to supply the estimated feedstock requirements for a Calenton graphite processing plant for over 35 years. It's worth noting that a technical report was completed based on drilling approximately 4,100 acres of the approximately 42,000 acres to which we hold mineral rights. We continue to expect the CUSA deposit to come online by the end of 2028, subject to its own definitive feasibility study, obtaining the requirement permits and financing. I am extremely proud of the Westwater team, our contractors, the dedication and hard work of all involved to make Westwater Resources successful. Now I would like to turn it over to our Chief Financial Officer, Mr. Steve Gates. Thank you, Frank, and good morning, everyone.

Slide 8. Westwater finished the year with a cash balance of $75.2 million and no debt. Our strong financial position has allowed us to continue to advance our graphite business, including the construction of Phase 1 of the Kellyton Graphite Processing Plant. Regarding financing, we are pleased to announce that we have assigned a non-binding, non-exclusive indicative term sheet for $150 million of private debt. which will cover the balance of the current estimated Phase 1 capital requirements. We are targeting to close on this transaction in the second quarter of this year. Since beginning construction, cash expenditures totaled approximately $55 million related to the Phase 1 construction, and we estimate approximately $260 million of cash spend remaining of the now estimated total cost of $271 million, which includes the Phase 1 optimization. Turning to the financial summary on slide 9, detailed discussion of these items is included in our recently filed Form 10-K, as well as our 2022 year-end press release. Net cash used in all operating activities for 2022 was approximately $13.2 million, as compared with $16.9 million for 2021. The $3.7 million decrease in cash used for our operations was primarily due to reduced product development expenses and lower costs related to our arbitration against the Republic of Turkey. Those decreases were offset partially by the gain recognized on the sale of equity securities in 2021 and the purchase of feedstock inventory in the fourth quarter ahead of beginning testing and commissioning later this year and to produce additional product samples for our customers. Cash used in investing activities for 2022 totaled $52.8 million, and was related to the ongoing construction of phase one of the Kellyton Graphite Processing Plant. As mentioned previously, product development cost decreased 4.8 million during the current year. In 2021, we incurred costs to complete our definitive feasibility study for phase one and our pilot program. We continue to operate our pilot program to provide additional samples of our battery grade products for shipment to and evaluation by potential customers. Lastly, net loss for 2022 was $11.1 million, or $0.25 per share, compared to a net loss of $16.1 million, or $0.49 per share, in 2021. The $5 million reduction in net loss was due primarily to lower product development and arbitration costs and higher interest income earned on our cash balances. These were partially offset by higher G&A expenses as we continued to build out our team. and the absence of the gain recognized in the fourth quarter of 2021 related to equity securities held by Westwater that we received in 2020 with the final sale of our former uranium business. With that, I'll turn the call back to you, operator, for questions. Thank you.