• 5E Advanced Materials Releases Technical Report Summary and Reports Third Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 11 May 2023 06:00:01   America/Chicago

    HIGHLIGHTS

    • Update to initial assessment Technical Report Summary:
      • Phased approach to scale production focused on achieving profitability and generating cash flow
      • New resource estimate reduces cut-off grade to 2% B2O3 (Boric Acid)
      • Measured, Indicated and Inferred Resource with 13.97 million short tons boric acid and 0.31 million short tons of Lithium Carbonate (LCE)
    • Technical Report Summary estimated Project Economics:
      • US$101.2 million EBITDA and 62.1% EBITDA margin in FY 2027
      • Post-tax NPV8 of US$2.4 billion and IRR of 22.6%
      • Phase 1 Capital Estimate US$288 million before contingency and owner’s cost
    • Phase 1 targets production of 90,000 short tons of boric acid and 1,100 short tons of lithium carbonate with a targeted go-live date of the second calendar quarter of 2026
    • Construction of the Small-Scale Facility substantially complete with operation pending authorization from EPA
    • Continued track record of zero lost time incidents with over 175,000-man hours recorded
    • Appointment of new CEO, Ms. Susan Seilheimer Brennan

    HOUSTON, May 11, 2023 (GLOBE NEWSWIRE) -- 5E Advanced Materials, Inc. (Nasdaq: FEAM) (ASX: 5EA) (“5E” or the “Company”), a boron and lithium company with U.S. government Critical Infrastructure designation for its 5E Boron Americas (Fort Cady) Complex ("Project"), is pleased to announced it has updated its Technical Report Summary for the Project and released its financial results for the quarter ended March 31, 2023.

    BUSINESS UPDATE

    Technical Report Update and Larger Scale Facility

    During the quarter, the 5E team spent significant time updating the Company’s initial assessment Technical Report Summary, which has been filed with the Securities and Exchange Commission ("SEC") and prepared in accordance with the SEC S-K Regulations (Title 17, Part 229, Items 601 and 1300 until 1305). A dedicated internal and external team pooled their professional and technical expertise to publish a report that the Company believes highlights a world-class resource, management's firm understanding and direction for the business, and a phased approach to scale production, which can position the company to achieve profitability, generate cash flow, and reduce risk. The updated initial assessment includes a revised mineral resource estimate for boric acid and lithium carbonate, estimates for capital costs and operating expenses, and a bottoms-up economic analysis based on a phased approach to scaling production. The financial model for the economic analysis includes preliminary market studies and independent pricing forecasts for boric acid and lithium carbonate. As part of the updated technical report, the Company engaged two external EPC firms to assist management with the capital cost estimate, which the Company expects to use as the basis to stage a formal process to request proposals for detail design of the large-scale facility.

    The updated Technical Report Summary outlines three phases for the larger-scale facility:

    • Phase 1 targets production of 90,000 short tons of boric acid and 1,100 short tons of lithium carbonate with a targeted go-live date of the second calendar quarter of 2026.
    • Phase 2 and Phase 3 targets incremental production increases of 180,000 short tons of boric acid and 2,200 short tons of lithium carbonate in each phase with a targeted go live date in the fourth calendar quarter of 2028 (Phase 2) and second calendar quarter of 2031 (Phase 3).
    • Full operation includes targeting production of 450,000 short tons of boric acid and 5,500 short tons of lithium carbonate per annum.

    The initial capital cost estimate outlined in the technical report for Phase 1 is $288 million before contingency and owner's costs. With the owner’s cost and a 25% contingency, Phase 1 capital is estimated at $373 million. First year full-production cash costs are targeted at $686 per short ton and the table below includes targeted financial metrics for each phase's first full-year of operation:

      FY 2027 (Phase 1)  FY 2030 (Phase 2)  FY 2032 (Phase 3) 
      ($ in millions) 
    Revenue - US$ $162.9  $575.1  $1,069.3 
    Operating margin - US$  64.4   264.3   431.4 
    EBITDA - US$  101.2   360.9   621.9 
    EBITDA margin - %  62.10%  62.80%  58.20%
                 

    Market Study Results

    The Company commissioned an independent third-party research firm to perform a boron market study and forward pricing forecast. The market study indicates that overall demand for boric acid is expected to increase at a CAGR of 5.4% from 2022 through 2031 while capacity increases for the same period are projected at a 5.1% CAGR. Given that the market is already nearly balanced and existing suppliers have not demonstrated an ability to immediately ramp up capacity, a systematic market deficit is expected through the next decade, driving prices higher as projected in Figure 1 below. Figure 2 below outlines the supply and demand deficit.

    Figure 1: Boric Acid Pricing per Kline and Company, Inc.

    Boric Acid Pricing per Kline and Company, Inc.

    Figure 2: Projected market capacity versus demand, in thousands of tonnes per Kline and Company, Inc.

    Projected market capacity versus demand, in thousands of tonnes per Kline and Company, Inc.

    As the world focuses on decarbonization, food security and security of strategic and critical minerals, the forecasted pull-side demand for boron enabling future-facing applications is expected to pressure boric acid pricing higher. Further reinforcing the market study and pricing forecast is the lack of near-term supply. As 80% of the market is controlled by two producers, 5E is one of the only permitted boron resources with a proven commercially viable mineralization (calcium-based) that is likely to add meaningful supply in the next five to seven years.

    Small-Scale Facility

    During the quarter ended March 31, 2023, the Company substantially completed construction of the Small-Scale Facility and progressed commissioning activities. Initial production of boric acid will commence upon final clearance from the U.S. Environmental Protection Agency (EPA) under the Company’s Underground Injection Control Permit as well as successful completion of commissioning activities. Key required reports and documentation were submitted to the EPA for their approval in 2022 and the Company believes it is in full compliance with the terms of the permit. Upon final review of required documentation by the EPA, the Company expects to receive authorization to commence mining operations. Data gathered from the construction and future operation of the Small-Scale Facility will be used to optimize and improve accuracy of capital and operating estimates for the larger-scale operations, provide customer samples for qualification and future off-take agreements, and offset future operating expenses.

    CEO Appointment

    During the quarter, the Company announced the appointment of Ms. Susan Seilheimer Brennan as its new Chief Executive Officer. Ms. Brennan started on April 24, 2023, and has an extensive global leadership background, particularly in the battery technology and electric vehicle industries. During Ms. Brennan's first two weeks, she has implemented general, administrative and fixed cost cutting measures and will relocate the Company's headquarters to California in an effort to focus on production of boric acid and lithium carbonate.

    Third Quarter 2023 Results:

    As of quarter-end, the Company maintained a cash balance of $36.2 million. Construction in progress was $61.5 million, compared to $46.9 million in the prior fiscal quarter ended December 31, 2022, as the Company neared mechanical completion of the Small-Scale Facility.


    5E ADVANCED MATERIALS, INC.
    CONDENSED CONSOLIDATED BALANCE SHEET
    (Unaudited)
    (In thousands, except share data)

    5E ADVANCED MATERIALS, INC.
     
      March 31,  June 30, 
      2023  2022 
    ASSETS      
    Current assets:      
    Cash and cash equivalents $36,170  $31,057 
    Prepaid expenses and other current assets  1,892   1,506 
    Total current assets  38,062   32,563 
    Mineral rights and properties, net  7,612   8,364 
    Construction in progress  61,533   25,625 
    Properties, plant and equipment, net  3,084   2,871 
    Reclamation bond deposit  1,086   1,086 
    Right of use asset  247   371 
    Other assets  6   6 
    Total assets $111,630  $70,886 
           
    LIABILITIES AND STOCKHOLDERS’ EQUITY      
    Current liabilities:      
    Accounts payable and accrued liabilities $11,314  $7,212 
    Lease liabilities, current  158   164 
    Total current liabilities  11,472   7,376 
    Long-term debt, net  36,228   148 
    Lease liabilities  94   211 
    Accrued reclamation liabilities  676   489 
    Total liabilities  48,470   8,224 
           
    Commitments and contingencies (Note 12)      
           
    Stockholders’ Equity:      
    Common stock, $0.01 par value; 180,000 shares authorized; 44,149 and
    43,305 shares outstanding March 31 and June 30, respectively
      441   433 
    Additional paid-in capital  190,455   169,593 
    Retained earnings (accumulated deficit)  (127,736)  (107,364)
    Total stockholders’ equity  63,160   62,662 
    Total liabilities and stockholders’ equity $111,630  $70,886 
             


    CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
    (Unaudited)
    (In thousands, except per share amounts)
     
     Three months ended March 31,  Nine Months Ended March 31, 
     2023  2022  2023  2022 
    Operating expenses:           
    Project expenses$1,268  $2,039  $8,267  $9,816 
    General and administrative 6,004   30,832   18,591   44,497 
    Research and development 45   88   123   88 
    Impairment 908      908    
    Depreciation and amortization expense 53   36   132   76 
    Total operating expenses 8,278   32,995   28,021   54,477 
    Income (loss) from operations (8,278)  (32,995)  (28,021)  (54,477)
                
    Non-operating income (expense):           
    Other income 13   29   49   39 
    Interest income 388   1   914   2 
    Derivative gain (loss)       11,743    
    Interest expense (2,237)  (1)  (5,043)  (2)
    Other income (expense) (1)  (3)  (14)  961 
    Total non-operating income (expense) (1,837)  26   7,649   1,000 
                
    Income (loss) before income taxes (10,115)  (32,969)  (20,372)  (53,477)
                
    Income tax provision (benefit)           
    Net income (loss)$(10,115) $(32,969) $(20,372) $(53,477)
                
    Net income (loss) per common share — basic and diluted$(0.23) $(0.79) $(0.47) $(1.33)
    Weighted average common shares outstanding — basic and diluted 44,104   41,895   43,737   40,148 
                
    Comprehensive income (loss):           
    Net income (loss)$(10,115) $(32,969) $(20,372) $(53,477)
    Reporting currency translation gain (loss)    (339)     (1,169)
    Comprehensive income (loss)$(10,115) $(33,308) $(20,372) $(54,646)
                    


    5E ADVANCED MATERIALS, INC.
    CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
    (Unaudited)
    (In thousands)
     
     For the nine months ended March 31, 
     2023  2022 
       
    Cash Flows From Operating Activities:     
    Net income (loss)$(20,372) $(53,477)
    Adjustments to reconcile net income (loss) to net cash used by operating activities:     
    Depreciation and amortization 132   76 
    Share based compensation 4,251   4,428 
    Common stock issued for consulting fees    27,172 
    Unrealized (gain) loss on convertible note derivative instrument (11,743)   
    Impairment 908    
    Accretion of reclamation liability 20   6 
    Amortization of debt issuance costs and discount — convertible note 3,454    
    Amortization of right of use asset 124    
    Interest earned on reclamation bond    (1)
    Net foreign exchange (gain) loss    (965)
    Change in:     
    Prepaid expenses and other current assets (386)  (3,050)
    Accounts payable and accrued liabilities (514)  2,421 
    Net cash used in operating activities (24,126)  (23,390)
    Cash Flows From Investing Activities:     
    Construction in progress (29,705)  (3,301)
    Mineral rights and properties additions    (87)
    Properties, plant and equipment additions (333)  (1,222)
    Net cash used in investing activities (30,038)  (4,610)
    Cash Flows From Financing Activities:     
    Proceeds from issuance of convertible note 55,840    
    Payments on note payable (29)  (104)
    Proceeds from issuance of common stock    26,309 
    Share offering costs    (797)
    Proceeds from exercise of stock options 3,466   3,124 
    Net cash provided by financing activities 59,277   28,532 
    Net increase (decrease) in cash and cash equivalents 5,113   532 
    Effect of exchange rate fluctuation on cash    (203)
    Cash and cash equivalents at beginning of period 31,057   40,811 
    Cash and cash equivalents at end of period$36,170  $41,140 
          
    Supplemental Disclosure of Cash Flow Information:     
    Cash paid for interest$5  $ 
          
    Noncash Investing and Financing Activities:     
    Accounts payable and accrued liabilities change related to construction in progress$6,203  $2,022 
    Interest paid through issuance of additional convertible notes 1,710    
    Equipment acquired with notes payable    227 
    Recognition of operating lease liability and right of use asset    137 
    Increase (decrease) in asset retirement costs 167    
            

    About 5E Advanced Materials, Inc.

    5E Advanced Materials, Inc. (Nasdaq: FEAM) (ASX: 5EA) is focused on becoming a vertically integrated global leader and supplier of boron specialty and advanced materials, complemented by lithium co-product production. The Company’s mission is to become a supplier of these critical materials to industries addressing global decarbonization, food and domestic security. Boron and lithium products will target applications in the fields of electric transportation, clean energy infrastructure, such as solar and wind power, fertilizers, and domestic security. The business strategy and objectives are to develop capabilities ranging from upstream extraction and product sales of boric acid, lithium carbonate and potentially other co-products, to downstream boron advanced material processing and development. The business is based on our large domestic boron and lithium resource, which is located in Southern California and designated as Critical Infrastructure by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency.

    Forward Looking Statements and Disclosures

    This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements other than statements of historical fact included in this press release regarding our business strategy, plans, goal, and objectives are forward-looking statements. When used in this press release, the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “budget,” “target,” “aim,” “strategy,” “estimate,” “plan,” “guidance,” “outlook,” “intent,” “may,” “should,” “could,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on 5E’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the extraction of the critical materials we intend to produce and advanced materials production and development. These risks include, but are not limited to: our limited operating history in the borates and lithium industries and no revenue from our proposed extraction operations at our properties; our need for substantial additional financing to execute our business plan and our ability to access capital and the financial markets; our status as an exploration stage company dependent on a single project with no known Regulation S-K 1300 mineral reserves and the inherent uncertainty in estimates of mineral resources; our lack of history in mineral production and the significant risks associated with achieving our business strategies, including our downstream processing ambitions; our incurrence of significant net operating losses to date and plans to incur continued losses for the foreseeable future; risks and uncertainties relating to the development of the Fort Cady project, including our ability to timely and successfully complete our Small-Scale Facility; our ability to obtain, maintain and renew required governmental permits for our development activities, including satisfying all mandated conditions to any such permits; and other risks. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. No representation or warranty (express or implied) is made as to, and no reliance should be place on, any information, including projections, estimates, targets, and opinions contained herein, and no liability whatsoever is accepted as to any errors, omissions, or misstatements contained herein. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as to the date of this press release.

    For additional information regarding these various factors, you should carefully review the risk factors and other disclosures in the Company’s Form 10-K filed on September 28, 2022. Additional risks are also disclosed by 5E in its filings with the U.S. Securities and Exchange Commission, throughout the year, including its Form 10-K, Form 10-Qs and Form 8-Ks, as well as in its filings under the Australian Securities Exchange. Any forward-looking statements are given only as of the date hereof. Except as required by law, 5E expressly disclaims any obligation to update or revise any such forward-looking statements. Additionally, 5E undertakes no obligation to comment on third party analyses or statements regarding 5E’s actual or expected financial or operating results or its securities.

    For further information contact:

    J.T. Starzecki
    Chief Marketing Officer
    jstarzecki@5eadvancedmaterials.com
    Ph: +1 (612) 719-5076
    Chris Sullivan
    Media
    chris@craftandcapital.com
    Ph: +1 (917) 902-0617
      

    Photos accompanying this announcement are available at: 
    https://www.globenewswire.com/NewsRoom/AttachmentNg/8bbe698c-4fb4-4636-ba09-9b71be0c8144

    https://www.globenewswire.com/NewsRoom/AttachmentNg/ce1d286e-4304-44fe-a077-8442b5fcca1a



    Primary Logo

    Figure 1

    Boric Acid Pricing per Kline and Company, Inc.
    Figure 2

    Projected market capacity versus demand, in thousands of tonnes per Kline and Company, Inc.
Share on,