WWR - AMEX

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. I would now like to turn the conference over to Chris Jones, President and CEO. Please go ahead.

Thanks, Ariel and thanks, everyone, for participating with us today on our 2021 results call. With me here today are Terence Cryan, 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 2 of the presentation. With that, I'd like to turn it over to Terence Cryan, our Chairman.

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 join 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 Coosa 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.

Thanks, Terence and thanks for those kind words. On to Slide 4; 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 5; 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 1 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 31, 2021. And with that, I'd like to turn it over to Jeff Vigil, our CFO.

Thank you, Chris. Good morning, everyone. First, let's take a look at our capital slide position on Slide number 6. Our closing share price on Friday, February 11, 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 restriction of our graphite processing facility in Alabama, the large capital expenditures associated therewith. At December 31, 2021, the company's cash balances were approximately $115 million, as Chris noted and we had a working capital balance of approximately $110 million. During 2021, the company utilized it's ATM facility with Cantor Fitzgerald and it's equity line with Lincoln Park Capital to raise approximately $84 million from stock sales. In addition, 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 of Phase 1 and Phase 2 of the commercial processing plant. That includes project debt, offtake agreements and equity. Turning to Slide 7; we provide a financial summary for the fiscal year ended December 31, 2021. 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 and 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 through the end of 2021. The increase in general and 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 costs attributable to the -- 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 extend of graphite and vanadium mineral concentrations at Coosa Deposit. Westwater anticipates completing it's exploration program during the first quarter of 2022. Following the completion of this exploration program, we intend to complete the technical report related to the mineral concentrations discovered. Net loss from continued operations was $16.1 million for the year or $0.49 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.

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 and improving our processes and conservative promises well kept. Slide 9; in executing our business plan, we completed our feasibility study. Construction of Phase 1 was approved by the Board. Construction began on December 1, 2021. We're on schedule for completion of construction in Q2 of 2023. Samples are in potential customers' hands and our first LOI for product sale is in place. Slide 10; on June 22, the community leaders in 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 Kellyton 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 Kellyton site footprint where the processing facility is going to be located. Slide 12; the project key attributes is -- comprises of proprietary technology, cost advantage and sustainability for the environment of the sustainable processes. On to Slide 13; battery markets are growing and graphite is a critical component of those markets. For markets, transportation, a 23% growth rate expected over the next 10 years, predominantly in the lithium ion batteries and the U.S. government and automakers announced a goal of 50% of all autos sold will be electrical -- electric vehicles by 2050. In 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 change -- value chain. And in specialties, defense, aerospace, military and medical -- major players in North America. Slide 14; why does graphite matter? Graphite is 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 alacrity. 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 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 treated -- and thermal treatment of the sample. Slide 17; our project plan which was led by Samuel Engineering is complete. Phase 1 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 and the government of the State of Alabama has supported the project. Exploration drilling has begun to further define the Coosa graphite deposit and 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. Terence Cryan, to join as our Executive Chairman; I'm taking over as the CEO; Jeff Vigil; Mr. Steven Cates is our CAO; Dain McCoig is our VP of Operations, will be at our Alabama facility; Cevat Er, 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. Experienced management team with a demonstrated 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 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.

Our first question comes from Debra Fiakas of Crystal Equity Research. Please go ahead.

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 position by -- I wish you good fortune and 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 and 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?

Debra, 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 thing -- this processing facility built on time and within budget.

Okay, thank you. And then, just continuing on talking about the project. The -- 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 it's completion time line? Let's say, does it make a difference when you started? Or are there seasonal factors? What would you say would be the time at which we might see Phase 2 completed?

Our current estimate, subject to some revision, of course, is for completion in 2025, what we intend to do through the construction of Phase 1 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 2 so that we can improve on any processes we put in place in a timely fashion for operations in '25.

Okay, good. 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. But 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 annual report? Perhaps you could elaborate a little bit.

Debra, 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. But 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.

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 I'm -- they can get on this call and they can listen to hear about your progress. What means -- or 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.

We have pretty good clarity into certainly their developments. We executed a nondisclosure 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.

Okay, great. Thank you.

Thank you, Debra.

Our next question comes from Gil Good of Western International. Please go ahead.

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.

With regard to solid-state batteries in general, we regard them as a product that has years of development yet to be executed. And 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 decades will be consumers of graphite and we're here to supply those.

Okay, thank you.

Our next question comes from Michael Porter of Porter, LeVay & Rose. Please go ahead.

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?

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.

One last question, Chad. Do you have any supply chain issues with what's going on worldwide?

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 Coosa 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 potentially affected -- 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 the 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 any issues that may arise. Great questions, Mike. Thank you.

Thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to Chris Jones for any closing remarks.

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 Terence. With that, thanks for spending a part of your day with us. Have a great day.