5E Advanced Materials Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 30, 2023

There are 10 speakers on the call.

Operator

Greetings, and welcome to the 5E Advanced Materials Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Davis Snyder, Investor Relations.

Operator

Thank you, Davis. You may begin.

Speaker 1

Good afternoon. Thank you for joining us today for the 5E Advanced Materials fiscal 4th quarter year end 2023 earnings conference call. During this call, management will be referencing our earnings press release and a webcast presentation that can be found in the Investor Relations section of our website. If anyone needs a copy of the press release or the supplemental presentation, you may contact Alpha IR Group at f e a m at alphadir.com. Please turn to Slide 2 of the presentation, where we presented our legal disclaimers.

Speaker 1

I want to remind everyone that remarks made on today's conference call will contain forward looking statements, including our expectation of future results, Costs, production, capacity, market dynamics, liquidity, cash spending and other items. Our actual results may differ materially and adversely from those projected or discussed in these forward looking statements. Additional information concerning factors that could cause the results to differ materially and adversely from these forward looking statements are contained in our press release that went out earlier today as well as the disclosures in our public filings with the SEC. The company is under no obligation to update these forward looking statements. Today's call may also include a discussion of non GAAP financial measures As that term is defined in Regulation G, non GAAP financial measures should not be considered in isolation from or as a substitute This afternoon's conference call is hosted by Bivy's Chief Executive Officer, Susan Brennan Chief Financial Officer, Paul Wyval Chief Marketing Officer, JT Starzzecki and VP of Operations, Chris Knight.

Speaker 1

Management will first lead off the call by making some prepared comments, after which we will open up the call to your questions. Now please turn to Slide 3 of the PowerPoint, and I'll turn the call over to Susan Brennan. Susan?

Speaker 2

Thank you, Davis, and thank you, everyone, for joining us today. We recently closed the books on our 2023 fiscal year. We made significant progress against our goals last year and remain intently focused on advancing the corporate in commercial operations of our 5E Auron Americas project. As we look to fiscal year 2024, We felt it was important to create a regular cadence of communication for our investors around the globe. And thus, this is our inaugural quarterly earnings call.

Speaker 2

Today, we are going to discuss where we are along our project development timeline, We'll update you on our guidepost and reintroduce the long term opportunity for those of you that are new to 5E and or considering I took over as CEO in late April of this year. I've spent the majority of my 30 year career working within leadership positions of global organizations in the materials, cleantech and automotive industries. This includes most recent CEO positions in battery and EV technology at Romeo Power, which we sold to Nikola Motors last year. And previously, I was the COO of Bloom Energy for 8 years, A leader in fuel cell technology. Prior to that, I held multiple operational roles at Ford and Nissan And was a research assistant doing chemical process development at Herx Selenys early in my career.

Speaker 2

As you can see, I understand our end market. I am proficient at running an early stage company and I know how to build a global organization. Over my 1st few months, I've had the opportunity to meet with key personnel, our skilled operators and staff, And align our team together under common goals. I can say with confidence that we are on a well planned path to success, and we are doing the work to position our company to create meaningful value for our shareholders and stakeholders both Over the next year and into the future. A common question I have received in the 1st months of my tenure has been, What brought me here to lead the company?

Speaker 2

5E is an inherently unique project, representing a pure play opportunity in boric acid as well as lithium carbonate in an environmentally responsible way. Aggregate demand for boric acid carries meaningful tailwinds over both the near and long term, given that it sits at the nexus a number of developing industries that will play a meaningful role in the global energy transition. Many of you have been following us for some time now, and I'd like to update you on our immediate focus areas. As you know, our plans have been temporarily delayed by 2 near term issues. Number 1, release of the final conditions under our EPA permit and number 2, a contract with the company that was leading the construction efforts of the company's small scale boron facility SSBF In Newberry Springs, California.

Speaker 2

First, the process with the EPA is ongoing, and we will continue to work with them to get to the finish line. Per the EPA permit conditions, We have installed 4 up gradient and 5 down gradient water monitoring wells for the initial mining block And 4 injection recovery wells. Additionally, we were required to plug and abandon All unused existing open historic wells located within the permit area of review boundary. This was completed, and all required reports, including the well completion reports, were submitted to the EPA in October of 2022. We received a response for those reports in May 2023.

Speaker 2

The May 2023 EPA response letter included a few questions regarding temperature logging of the injection recovery wells, Plugging and abandoning of the historic wells and the legacy Duval boreholes And their potential impact to underlying groundwater. In June 2023, we submitted our response letter to the EPA's letter, and we believe it has addressed all of their comments. Analytical information was used to develop the permit Required alert level report, which establishes alert levels for each water monitoring well. This report was submitted to EPA in October 2022 as supporting documentation for the authorization to inject process. Upon completion and review of the reference submittals, we expect to receive authorization to inject water, which is our step rate testing.

Speaker 2

We believe the step rate testing is the last remaining condition of the permit required To complete the injection approval process. This testing will verify the porosity of the ore body and the formation fraction pressure. After completing step rate testing, we expect to receive authorization to inject acid, which allows us to commence mining. So today, we remain focused on business fundamentals, and we are executing against work streams that are within our control. For example, we've taken on some of the final plant commissioning activities ourselves that the 3rd party contractor did not complete.

Speaker 2

We've also in sourced our optimization work and controlled our hiring and overall spend, Which is helping us to judiciously control our costs and preserve our cash. Paul will talk more about this in a few minutes, But I am very proud of how this team has come together to prioritize capital and reduce expenses. Lastly, we are preparing for our future through numerous commercial, capital and other strategic activities. To do that, I'd like to recognize that we have both legacy investors on the call, new investors and prospective ones as well. So let's take a step back and review our overall investment thesis and the exciting opportunity that we have in front of us.

Speaker 2

I think the best place to start is with the updated pictures of our integrated small scale boron facility, which we've shown you on Slide 4. As you can see, this is a real facility that is nearing completion and an asset That's produced in the past. Throughout the 1980s, 3 different pilot test programs demonstrated That the deposit can be leached. During these programs, a few 100 tons of boric acid was produced. Bench tests conducted in 2017 have demonstrated lithium chloride can be extracted.

Speaker 2

The 5E Boron Americas project represents the single most significant near term growth project in the U. S. For the production of boric acid and lithium carbonate. The results of our recent SK1300 technical report summary Earlier this year proved that we are in possession of a rare resource of boron and lithium, and we have the ability to produce, Develop and monetize the resource through a large commercial scale operation. Furthermore, we have proven the merit and ability To deploy cutting edge technology to support our operation, most notably in situ mining or leaching, which does not lead to surface disturbance like open pit mining.

Speaker 2

Slide 5 reinforces our 1st mover advantage in the U. S. While we await clearance from the EPA that will effectively allow us to launch operations, we already have all the necessary permitting in place. As many of you know, obtaining these permits is no small task and possession of which is not to be overlooked Or underestimated. On top of having the necessary permitting in hand, the 5E Bora in America's project is also unique Relative to competitor projects and that we actually have already constructed our plant With a mineral deposit that has been historically operated, we are extremely well positioned to bring our vision to fruition In the near term, we have a foundation of a great business in place and a huge opportunity in front of us.

Speaker 2

We also have a phased execution strategy over 3 modules that will help us deliver Up to 450,000 short tons of boric acid and 55 100 short tons of lithium carbonate when complete. Paul is going to talk you through that plan now and provide a few other updates. Paul?

Speaker 3

Thank you, Susan. I'm going to spend a few moments talking about where our 5E Boron Americas project at Fort Katy stands today And the progress we have made bringing the vision to reality. Then I will spend some time speaking to the expected capital scope of the project across its modular, multi phased approach. And finally, I'll provide details of the capital solution strategy We are deploying in order to bring in the capital needed to adequately fund our project to scale and grow our production. Please turn to Slide 6.

Speaker 3

As Susan highlighted, the construction of our small scale boron facility At the 5B Boron Americas Complex has been able to overcome the short term construction challenges left by the previous contractor, And we've put the facility in a position to be ready at the time we receive the EPA's authorization to inject. We recently brought on a new construction contractor to conduct last mile construction activities and remediate any identified deficiencies in workmanship. We are incredibly proud of our local team as we took on a number of smaller tasks ourselves to save additional costs. The important takeaway here is that even with adversity, we are on a path to complete the necessary construction work that will allow us to turn on the plant upon receiving the necessary clearance from the EPA. Our current budget forecasts an incremental $5,000,000 on the small scale facility with final mechanical completion slated for mid October.

Speaker 3

The small scale facility can be broken out into 5 sections: Wellfield Utilities, PLS, boric acid and gypsum. The well field utilities and PLS are ready to operate. Historical data suggests the well field will take 30 to 60 days to condition wells. Once we receive EPA authorization to inject, we will immediately begin conditioning the well field with acid. Once we have accumulated enough PLS, We'll operate the back end of the plant, which are the sections that produce boric acid and gypsum.

Speaker 3

Assuming authorization to inject and given the historical time indicated that That it will take to condition the well field, we will be well positioned to produce boric acid, lithium carbonate and gypsum. As Susan pointed out, we have all necessary permits in place and our project remains the only one in our to have initiated the construction phase. In fact, we possess the only permitted boron deposit with a commercially viable resource that we believe will be coming online at any time in the next 5 to 7 years. Our progress to date further The complex itself has transformed From land and a vacant mineral deposit to what will soon be the 1st commercial scale boric acid producer in decades. We have spent more than 2 years and completed 100 of 1000 of work hours without any 5e lost time injuries.

Speaker 3

We are taking the 5E BORE in America site from a project to a functioning business. In May of this year, We reached a significant milestone in our project development timeline by updating our technical report summary. The results This report also included a detailed economic analysis supported by a multi phased approach to scale production at the commercial facility. To inform our capital estimates, we engaged 2 well known EPC firms. The technical report summary sets a timeline and metrics that we plan to deliver against and the project economics Most very attractive return goals and IRRs based on the resource and plan.

Speaker 3

The report outlines a phased approach. This approach provides the company with the ability to scale production in a modular and derisk manner. In total, the report demonstrates a multi generational asset with a 31 year mine life And future exploration target to expand that will support significant boric acid and lithium production. As you can see on Slide 6, our staged multi phase business model has modular optionality. We have a realistic execution plan with an approach that allows us to make economic decisions and optimize our timeline, schedule, Cost structure and capital deployment.

Speaker 3

As we believe we are on the cusp of being able to operate the small scale facility, Combined with our inherently conservative risk nature, we'll keep the bulk of this conversation to financing Phase 1 of the commercial project. Under our current Phase 1 plan, We will be targeting production of 90,000 short tons of boric acid and 1100 short tons of lithium carbonate. Phase 1 development has an estimated capital requirement of roughly $389,000,000 all in. Again, these costs are spread out over a planned 3 year time span. Furthermore, of that 389,000,000 Our anticipated needs for the 1st year in Phase 1 are just over $37,000,000 a far lower amount relative to the overall capital scope Cited in our report.

Speaker 3

Additionally, we plan to further refine the report upon completion of FEL2 Engineering, which is slated to commence in February, assuming we receive the final clearance from the EPA in the short term. The initial $37,000,000 includes development activities such as expanding infrastructure, optimizing cost data for FEL2 engineering after operation of the Small scale facility, expansion of our water supply wells and initial down payments of long lead item equipment once we refresh the technical report summary. Economically, the technical report summary discloses that the 90,000 short tons of boric acid production And 1100 short tons of lithium carbonate are expected to generate over $101,000,000 of EBITDA on an annual basis. These projected results imply very attractive returns on a stand alone basis with EBITDA margins of over 62%. In short, we believe our production activities will be highly profitable and we'll be able to partially self fund future expansions.

Speaker 3

Please turn to Slide 7 for an update on our cash position and cost plans. We ended the quarter with a cash balance of $20,300,000 As of June 30, 2023, as Susan noted, we have taken actions that have meaningfully reduced our cash burn in the 4th quarter of the closed fiscal year and have continued in the Q1 of the new fiscal year. As we await clearing the final condition from the EPA, we continue to actively engage in conversations to pursue additional capital with our investment partners and other potential funding sources. This is summarized on Slide 8, where you'll find an illustrative capital structure model the Fund Phase 1 of our project development. We will look to use a blended composition of capital sources that are optimized from a size and a cost perspective.

Speaker 3

This blended composition spans across equity investment, debt capital And non dilutive equity as seen through mineral rights, royalty schemes and prepayments. Based on our strategy, we are pursuing multiple buckets of capital. Our capital plan includes tapping traditional equity capital markets, And we have conservatively bucketed around 25% for equity financing for Phase 1. We anticipate pairing any equity financing with non dilutive financing such as mineral royalties and customer prepayments. Utilizing a royalty is particularly attractive in that it is inherently non dilutive and allows for funding risk to be transferred to the capital provider itself under the commencement of commercial production.

Speaker 3

In terms of customer led funding solutions, we believe that the overall value proposition is strong enough For those that see our boric acid and lithium carbonate production as material and important to their own strategic business needs. This would allow 5E to capture value upfront and utilize a prepayment of funds for last construction activities in exchange for either prepay for volume or investment upfront to secure allocations of our production volume. The remaining bucket includes debt capital from government agencies and or project finance, And our preference is to pursue loans through government agencies, which J. T. Will discuss in further detail.

Speaker 3

With a potential model of 50% government and or project finance, 25% equity and 25% non dilutive options, This model would deliver highly attractive returns for all of our stakeholders. With that, I'll now pass the call to JT Starzecchi, our Chief Marketing Officer, To highlight a few recent developments, JT?

Speaker 4

Thank you, Paul. Please turn to Slide 9. Over the next few minutes, I'd like to talk about our cohesive strategy that encompasses commercial customers, the loans program office of the U. S. Government, The Department of Defense's BPA Title III initiative and our capital markets program to drive us towards a successful outcome Funding the commercial construction of the 5E Boron Americas complex.

Speaker 4

The first part of our strategy looks at how we are approaching our commercial opportunity and market developments. As we bring our small scale boron facility online, we will be in a position to engage in a deeper level of conversations with potential Optane customers. Product validation is the key component to any commercial relationship we build And having boric acid directly from our ore body developed to a tight set of technical specifications sets us on an equal playing field with our competitors. It also allows us to begin offtake contract discussions from a position of strength rather than just a theoretical position of future product. It brings us to the here and now as the newest domestic producer of boric acid.

Speaker 4

As Susan mentioned earlier, We have a number of commercial LOIs in place, which have set a foundation and continue to have conversations with multiple potential partners Focused on advancing our long term material strategy. Our government affairs strategy supported by our partners in Washington DC Just focused on developing and expanding opportunities for 5E to partner with agencies on key defense and clean energy funding programs, namely the Departments of Defense, Interior and Energy. Through recent engagements With agency leadership, including 5E site visit for over a dozen senior DoD and DOE staff, we have identified Priority areas for advocacy and for partnership with the federal government. Given that the Department of Defense categorizes Boron as a strategic and critical material to the defense industrial base, we believe there is significant potential to partner with the DoD securing a new domestic boron supply chain. While we are always beholden to timelines and due diligence processes, We do feel excited about the possibilities that exist with the Department of Defense in the near term to reduce our defense industrial basis dependence on foreign suppliers.

Speaker 4

That brings us to the Department of Energy and its Loans Program Office or LPO. The LPO essentially has 3 phases: Pre application, technical eligibility and project readiness. Each one of these phases has a varying degree of due diligence And evaluation of meeting strict criteria. As an organization, we have a very clear understanding of each of the three phases and plan to move through this process. We feel strongly that our base case for eligibility fits the necessary criteria and are strategically working and meeting with stakeholders to discuss our project, Develop white papers and begin our application.

Speaker 4

Next, let's review today's market for boron and boron derivatives As well as how we expect that market to expand rapidly. Please turn to Slide 10. As you can see from the chart on the left, traditional boron markets have been robust with established opportunities in various types of glass, micronutrients and advanced ceramics. There are also developing opportunities in permanent magnets, wind and solar technologies. However, with an expanding global focus on sustainable solutions, we believe the market for Boron is going to accelerate even further.

Speaker 4

All told, and per the International Energy Agency report, this is expected to create at least 1,600,000 tons of new demand over the next several years. Today, approximately 65% of the global supply is controlled by a Turkish government owned entity. Given the U. S. Government's focus of onshoring critical infrastructure and materials, you can see the enormous opportunity we have to be one of the primary domestic U.

Speaker 4

S. Slide 11 brings this opportunity into even greater context. From a macro view, The gap between existing boric acid supply and the demand for product continues to widen on a quarter by quarter basis. That supply and demand imbalance is further illustrated over the next 5 years in the chart on the right. With no new significant projects outside of 5E Set to come online anytime soon, this ecosystem will continue to be strained for decades to come.

Speaker 4

In conjunction with our boric acid production, We will also be able to showcase to the market our DLE technology and bring lithium carbonate to customers for validation and commercial discussions. Given the parabolic rise of the price of lithium over the past few years, this becomes a very meaningful revenue stream for our organization. As a company, we are fortunate to be bringing to the market 2 key strategic materials needed in various applications in the battery technology, defense, Energy and Food Security Sectors. With so many applications for Boron existing today, we see the path forward to advance our commercial agenda by capitalizing on the need for more decarbonization technologies. As we shift and look to the EV space, Boric acid demand growth is anticipated to accelerate as these vehicles require touch screens, fiberglass for the body is desperately needed as an additional domestic source of critical mineral.

Speaker 4

As I just noted, boron is also critical to permanent magnets, which are used in a wide range of applications, but most notably in wind turbines and electric vehicles. Neodymium Permanent magnets, which are the most commonly used and produced magnets in today's clean energy space, are composed of rare earths elements and ferroboron. In addition to clean energy applications, permanent magnets are also critical to the U. S. Defense industrial base.

Speaker 4

The fiscal year 2021 fiscal year 2023 National Defense Authorization Acts, an annually passed National Defense Bill, Included magnet sourcing requirements for the Department of Defense. In the fiscal year 2021 bill, DoD is prohibited from Last year, Congress built off of this prohibition and established a new requirement that DoD contractors disclose the province And detailed supply chains of materials in permanent magnets understood to include the requirements to disclose where boron in a magnet Procured by the DoD is mined, refined and manufactured into the magnet. These rules demonstrate an increasing concern for permanent magnet supply chains and for ferroboron supply chains from Congress and the Defense Department. This, however, is just one example of Boron's use in the defense related products. Boron is an input into items like advanced ceramics used in the aerospace sector as well as boron carbide into products like body and tank armor.

Speaker 4

As we position our supply into servicing these market opportunities, it leads us to a perfect segue into our government affairs program and the funding opportunities attached to it. So as you can see, the market for boron and boron advanced derivatives is varied today and is expected to grow at an accelerated pace in years to come. Something I haven't touched on yet are the vast application for boron derivatives to be used in defense related products. Boron is an input into items like advanced ceramics used in the aerospace sector, boron carbide into products like body and tank armor, all the way through to fuel and rocket propulsion technologies. With that, I'll turn it back to Susan for a few closing remarks.

Speaker 2

Thank you for taking the time to listen to the earnings call. Slide 12 repeats a project milestone chart We shared with you when we released our technical report that includes both the SSBF and the engineering design for Phase 1 commercial I'd like to break that down a little farther into review of Phase 1 commercial plant details on Slide 13. This includes producing boric acid and lithium carbonate, progressing commercial negotiations once boric acid and lithium carbonate are in production and product is qualified. Progressing the first phase of commercial engineering design and bolstering our technical team, enabling the next phase of commercial funding. Let's close our prepared remarks with a quick review of our core investment appeals on Slide 14.

Speaker 2

First, we possess a unique and rare resource providing exposure to the critical minerals, boron and lithium. These materials will play an important role in the U. S. Reshoring, decarbonization And the domestic production required for the clean energy economy. The 5E Boron Americas Project already boasts a fully constructed plant over a historically operated mineral deposit and has been designated as critical infrastructure by the U.

Speaker 2

S. Government. The initial facility is built for near term and long term production capability. Further, our multi staged execution model provides us with valuable optionality throughout the project lifecycle, allowing us to optimize our decision making as we advance along our timeline. And finally, 5E is poised to be a significant global business with annual expected EBITDA of $682,000,000 once full production capacity is reached.

Speaker 2

As always, I'd like to thank the entire team at 5E Advanced Materials for their hard work and contributions as we seek to build long term value for our shareholders. With that, we will open up the call to your questions. Operator?

Operator

Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Our first question comes from Matt Summerville with D.

Operator

A. Davidson. Please proceed with your question.

Speaker 5

Thanks. Couple of questions. First, can you maybe just remind us what pricing assumptions you're using That would be inherent in the EBITDA projections you set forth by stage. And then can you talk about When the market is expected to enter a firm and somewhat permanent for at least the time being deficit position with respect to boric acid? And then I have a follow-up.

Speaker 5

Thank you.

Speaker 2

Okay. Thank you, Matt. I will Paul, you want to take that question and JT, you can talk about the market.

Speaker 3

Yes, thanks. So

Speaker 6

1st full year

Speaker 3

Production pricing is about $1700 per tonne and We see it ramping up from there driven by that supply deficit. And then JT, do you want to get into Yes.

Speaker 4

The deficit? Yes. Thanks for contributing, Matt. Really appreciate it. So from a market deficit perspective, Really, we saw in Q3 Q4 of last year, all the supply that was being provided into the market was spoken for.

Speaker 4

We saw that same trend in quarter 1 and quarter 2. So as we're bringing on more and more technologies, we're at that tipping point today. So It's only going to take a small uptick in demand to have production or capacity being outpaced by the demand. So We're pretty much at that precipice right now.

Speaker 5

Got it. Appreciate that. And then just as a follow-up, Can you maybe talk about what informs your decision whether to sell SSBF output to potential customers versus Utilize that output to start to pursue your advanced material strategy?

Speaker 4

Yes, absolutely, Matt. So let's talk about just the output in general. So as we've publicly stated, we've talked about The 2,000 tons that the SSBF will be producing initially, we have also publicly talked about increasing that production To be a bit more at scale, and that's going to allow us a couple of different opportunities is number 1, the initial product coming Out of the plant, we'll go for product qualification to firm up all of our discussions around offtake, tonnage and pricing. So that's the initial product that will go out. As Chris and his team start to scale up production and we increase run rate, We'll be able to then take that product and sell it into the spot market and then potentially even early service some of the offtake customers.

Speaker 4

So that is that's our intention is to take the product, get through qualification with our identified customer base and then move the other product into the market as a sellable

Speaker 5

Just as a quick follow-up to that, if you look at kind of The the timeline, if you will, how long does it take from the time you're getting good stuff out of the tail end of the operation To get product qualified, how long does it take to drive production of the SSBF higher such that you're beginning to sell into the spot market?

Speaker 2

Yes, Matt, I'll have Chris take that.

Speaker 6

Yes. Thanks, Matt. So we're anticipating probably needing about 60 days to get the Up and running. We know that we've got some particular challenges as all startups We'll face those. We'll need to get those addressed.

Speaker 6

We have already engaged several critical Customers of ours, those that we have LOIs with and we've talked to them, they're expecting their Time horizon for qualification to be anywhere between 3 to 6 months, and that's for full commercial qualification. At that point then, we'll be able to start placing product into the market and really working out those supply chains.

Speaker 5

Understood. Thank you, guys.

Speaker 2

Thanks, Matt. Yes. Thank you.

Operator

Thank you. Our next question comes from Ben Kallo with Baird. Please proceed with your question.

Speaker 7

Hey, thank you all for taking my question and thanks for the conference call. Maybe first, It sounds like there's demand and one of the things that from Turkey being the biggest producer, just How have you seen any kind of changes in your discussions with customers change? Just so I imagine people understand The deficit is coming as you kind of walk that through, but just how does that change customers' Discussions with you.

Speaker 2

Yes, Jake, do you want to take that and also talk maybe about the government implications too?

Speaker 4

Yes, definitely. Good to talk to you, Ben. Thanks again for joining. From a customer sort of evolution perspective, what we are seeing is very clear signs of Customers that we're in discussions with wanting to diversify their supply base. So there are some, What we'll call product quality issues just from a transportation, a taking perspective, depending on where the product comes from around the globe.

Speaker 4

But one of the clear signs that anybody that we've engaged in conversations with, and it is very ongoing dialogue, is their need to diversify, To not be tied into 1 supplier or even 2 suppliers, just given the inherent risk of both product availability and from a pricing perspective. So I would say that's the single most definitive characteristic that we've seen in these commercial discussions so far this year.

Speaker 7

And Susan, thank you, Christie. When I look at this cash position management, like the multi pronged figure, and Susan, you'll be that Romeo, you saw all the people doing deposits for sales when they're very short. Is there a way to like structure something like that with a partner where they help with the capital?

Speaker 2

Yes. No. And That's an excellent point. As we've talked about the deficit, I guess the clear answer is yes. And the opportunity to sell ahead similar to the sell dynamic is definitely something that we're exploring.

Speaker 2

Okay.

Speaker 7

And then just finally, you say you had said you had all the necessary permits, but then I think you, Susan, you said that you do some kind of EPA Sign off for the injection wells. Could you just clarify that for me? And thank you guys very much.

Speaker 2

Yes. So and thank you for asking that question because we get it off and I want to make sure we're really clear. There is a permit in place. That permit has conditions. And because this is an ore body that has been, as we said, had work done in the past.

Speaker 2

We are those condition includes work we've done as well as closing out Work from the past. So we need to meet the conditions from the EPA. And once we've given them the data and the assurances, Then we'll be able to move forward. So it's not the permit we're working on. It's really releasing the conditions on that permit.

Speaker 7

Okay. Thanks.

Speaker 2

Thank you for the question.

Operator

Thank you. Our next question comes from Matthew Key With B. Riley, please proceed with your question.

Speaker 8

Hi. Thank you for taking my questions. I was wondering if you could maybe just Go into some greater detail on the potential timing of the government finance and route and assuming everything is successful there, could you maybe just share on some How much you could potentially receive from the DPA Title III program especially? Yes.

Speaker 2

JT, do you want to take that one?

Speaker 4

Sure. Good to talk to you, Matt. Thanks for joining the call. So I think it's probably best if I sort of break it down into 2 buckets. And as you rightfully hit on, There are really it's the there's the DPA Title III Act, which sits under the Department of Defense.

Speaker 4

So let me start with that. Really the key mechanism there is an attachment to various components that go into either military technology or supply chains that go into the production The application for funding initiatives is a little bit more straightforward with the DoD. You essentially develop a white paper and you go through a series of discussions with the Department of Defense directly. And then as you've made your case, you put in your request for funds and that gets written into an appropriations bill. So that appropriations bill is being negotiated now for next year and is done on an annual basis.

Speaker 4

So we see the DPA Title III And the DoD as what we would call more of a near term path to funding. Then when you get into the Department of Energy under their loan program office, There's a multi step approach, that I mentioned in my opening remarks that that has kind of 3 phases. And as you move through the phases, You've got different levels of due diligence that you go through, right, talking about the project itself, the detailed engineering, the construction schedule. And so that project or that program takes a little bit more time. You'll see in published reports from the DOE, the average time is about 12 months To get something done and in all likelihood that might extend a little bit longer.

Speaker 4

That being said, the pool of capital available under that program is Significant. So when we look at how we're going to break down the capital structure, I would say that the Department of Defense is quicker to funding, But the large portion of the funding will most likely come under the loans programs office.

Speaker 8

Got it. That's really helpful color, JT. I appreciate that. And I guess just one more for me. You mentioned during your prepared remarks that you've taken some steps to kind of reduce overhead costs.

Speaker 8

What's a good assumption we should be thinking of kind of for Cash burn per quarter as we look to fiscal year 2024, obviously not including the $37,000,000 in CapEx spending that's obviously estimated?

Speaker 2

Yes. Let me start and then, Paul, if you want to tag in at the end. So I just want to reframe. When I came in back in May, We narrowed the scope of the company and we are still an advanced material company, but I call it the order of operations. We Narrowed down to spending today only on things that will get boric acid out of the ground.

Speaker 2

And as we move forward, once we start getting boric acid, we actually will have to go up in some of our spend because then we need to buy some of the materials that we are not buying today. So this is a grade in. It was kind of a if you looked at the graph, we went from a level to a lower level. We're going to hold at that lower level. And then as we have aligned the work that Chris and his team are doing in operations To what we believe the EPA timing is, so that everything comes together at once and then we start and then we ramp up.

Speaker 2

So, Paul, if you want to give any more Yes. Thanks for that.

Speaker 3

I appreciate the question. And just reiterating what Susan said, once she came in, Leadership got together and really just identified, okay, what are the must haves and what can go. And we meaningfully have reduced our administrative burn down over the last 2 months and We'll keep that pace moving forward. I think internally, our goal is just from like a Your G and A is about 1.5 a month. And but then as we get clarity on permit, we can toggle And have that ability to go up and down.

Speaker 8

Got it. That's super helpful. That's it for me. I really appreciate the time and best of luck moving forward.

Speaker 2

Thank you. Thanks.

Operator

Thank you. Our next question comes from Tate Sullivan with Maxim Group. Please proceed with your question.

Speaker 9

Hi. Thank you. Hi. Good day. And I think you mentioned an incremental $5,000,000 of CapEx on the SSPF.

Speaker 9

Can you talk What that spending will go to a little detail on that?

Speaker 2

Yes. Let me we'll turn that over to you, Chris. Thank you, Tate, for the question.

Speaker 6

Sure. Yes. Thanks, Tate. So what we've got, Tate, we have right now, we talked about the 5 different areas. We are mechanically complete and commissioned in PLS and in our utility areas.

Speaker 6

We are wrapping up on the well field. We just basically, we disassembled that in preparation for The cost is going into just finalizing the piping and the electrical work needed in the boric acid and the gypsum areas And some ongoing spend, cranes, welding machines, some leased equipment that we're using

Speaker 9

Should we take into consideration an ongoing dispute with Matrix in terms of an outstanding payable or anything other such?

Speaker 2

Yes. And I yes, we're not going to answer any questions. This is active litigation, so we're not at liberty to answer any questions at this time on that topic.

Speaker 9

Understood. And then on the SSPF production and You addressed it earlier, the 9,000 targeted short tons of boric acid production. Is there a rough portion of that already spoken to in terms of Quality testing and for potential offtake.

Speaker 6

Yes. So we have Some amount will go, for qualifications. And several of our potential customers, They have multiple sites. Each site is going to require commercial quantities, full shipments of material to run through their plant. But that's not going to be a significant amount really from an overall testing perspective.

Speaker 6

So once we get those that material tested And we continue on that production. Once that gets cleared, we should have volume then available for sales.

Speaker 9

Okay. Thank you all.

Speaker 2

Thank you for the question, Tate.

Operator

Thank you.

Speaker 2

Thank you.

Operator

Sorry, there are no further questions at this time. I'd like to turn the floor back over to Susan for closing comments.

Speaker 2

Thank you everyone for your time and interest in 5e Advanced Materials Inc. We have a tremendous opportunity in front of us to Become the newest boric acid and lithium producers in the world. We have the culture, execution and leadership with our go forward team On the ground and executing daily, we have a proven asset and a strategy to modularly expand the asset over the next several years. We're looking forward to sharing this journey with all of you.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
5E Advanced Materials Q4 2023
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