Westwater Resources - Earnings Call - Q1 2025

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the Westwater Resources, Inc First Quarter 2025 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.

Frank Bakker (President and CEO)

Thank you, Moderator, and thanks to George joining us on this afternoon's business update call. With me today is Terence Cryan, our Executive Chairman of the Board, and Steve Cates, our Chief Financial Officer. During this presentation, the forward-looking statements we made are based on management judgment, including, but not limited to, future graphite demand and price forecasts, schedule and cost projections, and economic expectations related to the Kellyton Graphite Plant, the Coosa 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 in our 10-K for 2024 and other SEC filings. Please review our cautionary statement available in our press release issued May 15, noting that actual results may differ materially from what's discussed today.

Our team started the year strong, with a focus on advancing and continuing to de-risk our projects. Most recently, we successfully commissioned the qualification line at the Kellyton Graphite Processing Plant, producing a CSPG sample of over 800 kg. The operation of the Kellyton qualification line is a critical milestone as we move to completing construction and commissioning of the plant. The line currently produces pre-production samples for our cell makers and OEM customers and is providing invaluable experience for the operating team ahead of reaching full operations. The qualification line is capable of processing approximately one metric ton of CSPG battery anode material each day and will inform operations of Kellyton's mainline, which is expected to produce 12,500 metric tons per year upon phase I completion. We envision the Kellyton facility reaching 50,000 metric tons per year of CSPG battery anode production upon completion of phases I and II.

We continue to estimate the total cost of phase I at $245 million, and to date, we have secured approximately 85% of the necessary equipment. While our capital estimates remain unchanged, the evolving tariff landscape may impact phase I costs, and we are closely monitoring developments. Due to phase I financing close this year, we anticipate commercial production at Kellyton to begin in 2026. Further, this morning, we announced the successful completion of the U.S. Patent and Trademark Office review of our patent application. This is another important milestone for our business plan. Customer interest in Westwater's ability to supply domestically produced battery anode materials to the North American market remains strong. That enthusiasm aligns with U.S. policy goals to ensure the sourcing and manufacturing of critical minerals, including graphite.

As companies diversify and restructure supply chains to include raw materials from the U.S., Canada, and Allied Nations, our Kellyton project is well positioned to meet those needs. 100% of phase I production capacity is already committed under existing offtake agreements, and we are seeing strong demand for phase II. We are currently in discussions with multiple customers interested in our phase II output of 37,500 metric tons per year. In parallel with our financing and project development efforts, we are actively engaging with customers, hosting site visits, and fulfilling sample material requests. Westwater is ideally positioned with domestic de-risk and high-quality projects supported by committed customers. We are making meaningful progress in helping meet the growing demand for sustainable and secure battery-grade anode materials in the U.S.

Our next critical milestone is the successful completion of phase I financing for Kellyton, which I will leave with our Chief Financial Officer, Steve Cates, to provide a detailed update. Steve, over to you.

Steve Cates (CFO)

Thank you, Frank. As announced in our most recent 10-Q and press release, work continues on the syndication of a secured debt facility that is intended to cover the remaining cost of phase I at Kellyton. Securing financing for this project is a strategic priority that reflects both the strength of our vision and the demand of the domestic market we serve. We received investment committee approval from the lead lender at the end of 2024, and it remains in hand. We originally planned to complete the syndication with a single offshore institutional investor. Following the inauguration, the announcement of tariffs, and the resulting market uncertainty, this offshore institutional investor unexpectedly removed itself from the syndication process. As a result, we have pivoted to a syndicate that includes multiple phase I lenders and are currently working through the due diligence process with those potential lenders to complete phase I financing.

Securing a stable feedstock supply for Kellyton remains a key factor in advancing our financing efforts. While recent protests at our current feedstock supplier have temporarily slowed the syndication process, the supplier is expected to resume operations in June. Longer term, Westwater remains committed to vertical integration through the development of the Coosa Deposit. However, the recent protests and suspension of operations at our supplier have underscored the importance of diversifying our near-term supply chain. To that end, we have evaluated several non-Chinese feedstock sources and are now at an advanced stage in securing a backup feedstock supply to ensure continuity and mitigate future risk. With a clear roadmap to commercialization, strong customer interest, and favorable policy tailwinds, we remain confident in our ability to secure financing for phase I of the Kellyton plant.

Financing is just one of several critical work streams underway as our team continues to advance key initiatives across the business. These include the successful completion and initial operation of the qualification line at Kellyton, active efforts to secure multiple feedstock sources for a stable graphite supply, ongoing advancement of the Coosa Deposit, and engagement with potential offtake partners for phase II of Kellyton. This concludes our prepared remarks. We appreciate your time today and your continued interest in Westwater. We remain focused on executing our strategy, delivering value to shareholders, and navigating the opportunities and challenges in the quarters ahead. As always, we're committed to transparency and operational discipline, and we look forward to updating you on the progress related to project advancement and financing of the next quarter. Operator, over to you.

Operator (participant)

Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then one 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. We will pause a moment as callers join the queue. The first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle (Analyst)

Hey there, thanks for taking my question. I assume you can hear me okay. I'm at an airport, so it's a little loud in the background.

Steve Cates (CFO)

Yeah, I can hear you well.

Heiko Ihle (Analyst)

Perfect. Okay. You were talking about first production earlier. You want to maybe provide a little bit of color of what components of entering production could go right, could go wrong, what maybe gives you the biggest headache. Obviously, geopolitically, the world's not exactly how it was 12 months ago. Maybe just provide some stepping stones of things for folks like me to focus on in regards to seeing you enter production, please.

Frank Bakker (President and CEO)

Yeah, that's a good question. Thank you for that. Related to production, I think a key milestone is that we have our qualification line up and running, and the qualification line is using the same equipment as we have for the main production line. We are running that line, and our operators are gaining experience, and that will be very helpful when we start commissioning and start up with the plant. I think this qualification line, that's really a game changer for us because, like I mentioned, it's literally the same equipment that we use.

Heiko Ihle (Analyst)

That makes sense. In regards to pricing, what are you seeing versus what you would have expected, maybe what was 12 months ago?

Steve Cates (CFO)

Heiko, is that in regards to anode material or construction costs and equipment?

Heiko Ihle (Analyst)

Construction costs and equipment.

Steve Cates (CFO)

I think what we're seeing is there is obviously a lot of back and forth on tariffs, and it's kind of an evolving landscape right now, but we have 85% of our equipment already purchased and on hand. Of that amount that we still have to order, roughly about half of that comes from outside the U.S. We really believe that we're fairly isolated right now from the tariffs. As we've been running our analysis of what it looks like tariffs are currently at, we're within our $245 million construction budget. We feel comfortable holding that guidance right now, and we'll continue to monitor it as it changes. Very, very pleased that we have 85% of our equipment on hand, and we're somewhat shielded from inflation, especially compared to other projects that are at a much earlier stage.

Heiko Ihle (Analyst)

That's a very fair answer. I'll get back in queue. I got to jump on my plane. Sorry for the background noise one more time. Take care.

Steve Cates (CFO)

Thanks.

Operator (participant)

The next question comes from Peter Gastreich with Water Tower Research. Please go ahead.

Peter Gastreich (Analyst)

Yes, hello. Thanks very much for the update and the presentation today. Just a quick question about the backup supply. You mentioned potential for the non-Chinese supplier. Are you able to provide any more color on that for overseas contract? Thank you.

Frank Bakker (President and CEO)

Yeah, so not additional because we are under NDA, so the status is, as we mentioned on the call. We're getting, yeah, very close to getting a backup supply agreement.

Peter Gastreich (Analyst)

Okay, thank you.

Frank Bakker (President and CEO)

You're welcome.

Operator (participant)

Once again, if you have a question, please press star then one. The next question comes from Randy Baron with Pinnacle Associates. Please go ahead.

Randy Baron (Analyst)

Hi guys, can you hear me?

Frank Bakker (President and CEO)

Yes.

Steve Cates (CFO)

Yes.

Randy Baron (Analyst)

Hi, I have two questions. One is about the loan and the timing. Obviously, it was disappointing that the anchor dropped out, but can you just give a little more color on where the new due diligence is in that process? Does this seem like it's something you hope to have done by kind of the first half of the year, or is it now pushed back to the fall? Just help us think a little bit more about kind of is it early stages or late stages just to get our hands around that. Secondarily, I don't think you mentioned the script, but you had a release out earlier about the U.S. Export-Import Bank. I'm just curious more in layman's terms what that letter said, how big an opportunity this could be, and are there any other opportunities like that that may also be coming out? Thanks so much.

Steve Cates (CFO)

Yeah. Thanks, Randy, for the question. First, regarding the loan, this process has obviously taken longer than any of us had originally imagined. The uncertainty in the market and kind of the unexpected turn and pivot we had to make was frustrating for us as well. I think the one benefit of having the lead lender through their investment committee approval is we have gotten a bank through their investment committee. We have a full diligence package. We've got loan documentation. We are getting these additional members in the syndicate up to speed pretty quickly. I like the syndicate that is in it right now. Some of the members, one of them specifically, has looked at other battery metal critical mineral manufacturing plants in different parts of the country and the world that this space is dominated by China.

They are very familiar with the challenges of starting up a new operation and onshoring something that has been dominated by China for so many years. I am really glad they are in the syndication and looking at it. As far as timing, they all have a little bit of a different process as far as they all have an investment committee. Some of them have multiple, and trying to sync them up and working through their various ones takes some time. I am highly confident in this team's ability to close financing, but given kind of the unexpected nature of what happened earlier in the year, I am not in a position right now to comment on a specific date of when I expect the loan to close, but we are working as fast as we can and pushing as hard as we can.

Regarding the EXIM letter of interest that we received, that's kind of the first stage of presenting some of our project, and I think we don't need EXIM right now to finish phase I financing. This could just be an additional source of funding for us to advance our business. It requires an application process. They tend to work a little bit longer than what you would see kind of in the private debt capital markets. This is just something else that we're exploring to potentially further our business, whether it's related to phase I, phase II, or the Coosa Graphite Deposit. More to come on that as it progresses, but there's some potential for some additional funding, and we're going to need more funding as we look to advance the rest of our business beyond phase I.

Randy Baron (Analyst)

How big should we think about that initial potential funding for the U.S. Export-Import Bank?

Steve Cates (CFO)

We need to work through them on sizing in their process. Our understanding is depending upon the quantum, there are different lengths of approval processes, different things like NEPA reviews and things like that. We are working with them to figure out what quantum makes sense versus the timing of some of our needs and what size might be appropriate. Until we get through that and they have to get through all of their diligence and the application process, which is a pretty heavy lift, once we get closer, we can update the market more, we will.

Randy Baron (Analyst)

Is it something that if that comes to pass and the debt doesn't, that it helps bridge what's needed? What's the shortfall? I guess said differently, what happens if you can't get the debt financing done? That's it for me. Thanks so much.

Steve Cates (CFO)

Gotcha. Right now, I'm happy with where we are with the syndication and the due diligence. The current parties that are looking at this and deep into due diligence, we get them across the finish line. Quite honestly, I think I'm probably oversubscribed at the moment. I feel confident in the debt, and that's going to be our number one focus right now. I think EXIM is a backstop and really more thinking about it for furthering the rest of our business outside of phase I.

Operator (participant)

This concludes the question and answer session. I would like to turn the conference back over to Terence Cryan for any closing remarks. Please go ahead.

Terence Cryan (Executive Chairman)

I'd like to thank all of our stakeholders for your continued support. Westwater is blessed with a high-performing team, and we continue to move our business forward each and every week. We have an enormous opportunity in front of us, and we plan to fully seize that opportunity for the benefit of all our stakeholders. Thanks for your interest in Westwater. We look forward to remaining in regular touch as we achieve critical milestones moving forward. Thanks and good day.

Operator (participant)

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.