Lightbridge Corp (LTBR) 2009 Q4 法說會逐字稿

Good morning. And welcome to the Lightbridge fourth quarter and year end 2009 earnings conference. My name is Carmen and I will be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

I will now turn the call over to Linda Byus, the head of Investor Relations. Ma'am, you may begin.

Thank you, Carmen. Good morning, ladies and gentlemen and welcome to the Lightbridge Corporation 2009 year end and fourth quarter earnings conference call. The earnings press release and 2009 10-K filing can be found under the Investor Relations heading on the Lightbridge website at Ltbridge.com. Seth Grae, President and Chief Executive Officer, will lead the call today. In addition, Jim Guerra, COO and Andrey Mushakov, Executive Vice President, International Nuclear Operations are available to answer any questions you may have.

Before Seth begins, let me remind you this conference call may contain forward-looking statements concerning our business, which are intended to be covered by the Safe Harbor for forward-looking statements under the Private Securities Litigation Reform Act. Actual results may differ materially from the forward-looking statements depending on a number of risks, uncertainties, and various other factors beyond the Company's control. All forward-looking statements are expressly qualified in their entirety by the cautionary statements and risk factors detailed in the Company's filings with the SEC, and we undertake no duty to revise or update any forward-looking statements, except as required by applicable law.

With that, I will turn the call to Seth Grae, Chief Executive Officer of Lightbridge Corporation.

Thank you, Linda. Good morning everyone and thank you for joining us today for our 2009 year end results conference call. Details of our fourth quarter and full year financial results are provided in our recently filed 10-K and press release. I'll provide a brief overview of our financial results and then provide an update on our new developments and activities.

This is a busy and exciting time for our Company. Revenue for 2009 for the full year was $10.5 million, compared to $22.2 million for the full year 2008 which resulted in an operating loss of $7.2 million in 2009, compared to an operating loss of $3 million in 2008. Results for the fourth quarter showed the same trend with revenue of $2.1 million in 2009, down from $7.4 million in the same period in 2008. The operating loss for the three months ended December 31st, 2009 was $2 million, as compared to $2.4 million in the comparable period one year ago. The operating revenues are derived primarily from the Company's consulting and strategic advisory services for foreign governments, planning to create or expand electricity generation capabilities using nuclear power plants. In both 2008 and 2009, revenues were generated from the five-year consulting contracts in place with the United Arab Emirates, the UAE, with two separate entities, including the Emirates Nuclear Energy Corporation, or ENEC, and the Federal Authority for Nuclear Regulation or FANR. Under the contracts, year to year variations in revenue are the direct result of the timing of when new projects in these entities are received.

Our financial results were down in 2009 compared to 2008, but the numbers do not begin to tell the Lightbridge story. Our Company was founded and has been built on the promise of our nuclear fuel technology. The advisory services business which today is the primary revenue driver grew out of the talents of our people and our core nuclear fuel design business. Starting in 2008, we took advantage of the opportunity to leverage and utilize the depth of our team's technological and nuclear industry expertise to create a consulting services business with a global presence. This led to our securing the five-year agreements in the UAE and has resulted in a substantial revenue stream for the Company and created further advisory opportunities worldwide. A tangible benefit of the revenue contribution of our nuclear advisory business is that there has been to date no need to go to the capital markets to fund research and development costs. We've been able to fund our own development costs since we first became publicly traded in 2006. There are intangible benefits of our advisory services as well. As a Company, we are in a position to help shape nuclear policy and approaches both domestically and internationally. Through our advisory services work we establish contacts and build relationships in the international nuclear community. We believe these relationships will help enable us to optimize the future value of our fuel technology. The reported revenue from advisory services does not accurately reflect the value of the business to Lightbridge.

In our press release for this conference call, we noted some technical and strategic accomplishments in 2009. I would like to highlight a few of these accomplishments. Our fuel development continued to move forward with the completion of a preliminary analysis for VVER-1000 fuel assembly designed for an 18 month fuel cycle. Additionally, we reached a strategic agreement with SOSNY, the Company's prime contractor in Russia, to manage the research and development activities related to the lead test assembly program for the Russian designed VVER-1000 reactors. We positioned Lightbridge for increased capital market visibility and growth with the lifting of the Company's common shares on the NASDAQ Capital Market, and completion of a 1-for-30 reverse stock split. Additionally we filed an S-3 shelf registration statement with the SEC to provide further capital raising flexibility.

Last week we were notified that Lightbridge would be added to the World Nuclear Association's Nuclear Energy Index, effective March 21st, 2010. The WNA Nuclear Energy Index is a capitalization weighted float adjusted index of the most prominent nuclear energy stocks in the world. A new rule change has allowed inclusion of companies whose companies -- whose business -- might have also had a material impact on the overall development of the industry. We received an unqualified opinion on the Company's Sarbanes-Oxley compliance for internal controls over financial reporting. Companies our size are required to have management certify Sarbanes-Oxley compliance. Larger companies are also required to have their auditors certify their compliance. Smaller companies like Lightbridge are not required to have the auditor certification until a year from now but we decided to seek, and Lightbridge received, that certification from our auditor now. While Sarbanes-Oxley compliance is important from a financial transparency and credibility standpoint, there is also a strategic significance. In discussions with potential major corporate partners, that themselves need to be fully Sarbanes-Oxley compliant, Lightbridge's full compliance makes Lightbridge a more attractive business partner.

Now that I've covered events of 2009, let's look to the future. Based on current industry developments and events, 2010 could be a break-out year for Lightbridge. The Obama administration has indicated support for nuclear energy plans, including loan guarantees for the building of two new nuclear power reactors in the United States. The administration has recognized recognized nuclear power as part of the transition away from fossil fuels. The administration has also specifically included thorium based fuels in the Department of Energy's fiscal year 2011 budget request to Congress. The March 3rd introduction of the Reid-Hatch legislation in Washington is a key development for Lightbridge and further underscores the recognized benefits of thorium based fuel and the critical role new fuel technologies will have in the next generation nuclear developments, both here in the US and around the world. These events have increased the public awareness of the benefits of nuclear power generation in general and thorium based fuels specifically. With the back draft of current events, I would like to share our plans with you.

In 2010, we plan to address what we believe will be the last significant technical risk until testing and demonstration of fuel bundles and reactors with the fabrication of full length, 3-meter metal seed routes. This year we expect to expand our fuel development work and revenue with AREVA. In our consulting and advisory services business, we expect to secure additional work in other regions of the world, and we have been in active discussions for our services and capabilities with governmental and foreign entities in multiple countries. Over the last two months I and other members of top management have personally been in discussions in six countries and I am in one of them now. We continue in discussions with nuclear fuel users and manufacturers, to establish a supply chain for our thorium based fuel through strategic alliances. We are in discussions in the United States with potential partners in contracts after the Reid-Hatch bill becomes law. We continue to meet with potential investors, universities and industry groups to educate them about the potential of thorium fuel in general and Lightbridge in particular.

Over the last month, I've been traveling to meet with prospective customers, investors and industry thought leaders. The event calendar on the Lightbridge website includes many of the events where I and others from the Company have been speaking. And the Company has also attracted additional media attention. Nuclear power is on the radar as an answer to the challenge of providing safe, clean, cost effective energy. But the old method of nuclear generation still has inherent risks with its waste. We believe Lightbridge's fuel technology addresses those risks. Lightbridge is positioned to lead the way and make nuclear power a cleaner and safer form of generating electricity in the future. We appreciate your support and look forward to speaking with you again on our 2010 first quarter call. Tentatively, we are planning to hold the annual stockholders meeting on April 30th in Washington. We will now open up the call to questions. Carmen, please go ahead.

(Operator Instructions) And you have a question from the line of [Sean Mulhearn].

Hey, Seth, how are you?

Fine. Hello, Sean.

Real quick, Seth. As relates to the thorium Hatch -- thorium energy bill, specifically, the bill focuses on solid fuel reactors using solid fuel oxides rather than liquid fluoride thorium fuel as in liquid reactors. Where do you see an ideal world if this comes to pass, this bill, where do you see thorium Lightbridge benefiting the most and in what capacity, what monies directed towards specific things that would benefit Lightbridge in this arena?

This bill will benefit Lightbridge tremendously, Sean. It will establish an office in the United States Nuclear Regulatory Commission for the licensing of thorium fuels, which could expedite the use of the fuel in the United States. Also, the NRC is viewed as something of a gold standard around the world in other nuclear regulatory bodies, like our FDA is in the drug area -- and NRC licensing helps with licensing and use in other countries too, that look to be NRC for leadership.

Also, the bill will provide for establishing an office in the Department of Energy to support the development and deployment of thorium fuels both domestically and in other countries, and it will provide $250 million over five years to support those ends. We expect that universities, national labs -- will participate in contract with Lightbridge to benefit from that funding and that this will lead to deployment for demonstration and licensing purposes in the United States, which is crucial to us to have commercial deployment in commercial reactors.

As you said, this bill is for light water reactors, it's for exactly the types of reactors that Lightbridge fuels. You'll see that senators Hatch and Reid asked me for a quote in their press release on this bill. And Lightbridge meets exactly what this bill is seeking to do.

Next question, please. Go ahead, Sean, you had one follow-up?

As a follow-up to that, when do you -- when is the timing of this, from your best estimate? I know you can't predict these things, obviously, but when would you like to see this come to the floor and for passage in Congress?

This year, we expect that the bill will become law this year, signed by the President. There will be some bills that will get through, there will be some bills that get delayed in this election year. I expect that this bill will get through. It might end up being attached to another larger bill in the energy area, but the fiscal year for the government will start on October 1st, and we expect this bill to be law by September 30th. Now, we don't control the Senate's schedule, but that's the schedule we're on and we do expect to meet it.

Your next question is from the line of [Vincent Cerrone].

Hello, Seth, how are you today?

Fine, hello, how are you?

As far as your long-term plan, there's going to have to be a facility to produce these rods, one or more. Have there been any drawings or anything done on that type of facility or any thought into if it will be more than one?

Well, we do produce fuel rods already for testing that we've done with our partners in Russia, particularly at the [electro stall] fuel fabrication plant which is outside Moscow and it's one of the largest nuclear fuel manufacturing plants in the world. We're also working closely with AREVA which is one of the largest nuclear fuel producers in the world that has nuclear fuel fabrication facilities in many countries, including in the United States.

There are two types of rods in our fuel, Vincent. One is what we call the blanket which has pellets inside tubes and those pellets are made of thorium with some uranium and those are made on the exact existing types of fuel manufacturing facilities. So you don't need to build new facilities to make those rods and in fact we've made those rods with those pellets in them for test purposes in electro stall in Russia with our Russian partners.

The second type of rods we have what are called seed rods are made of extruded metal in one solid metal rod and those are also made in existing facilities in Russia and there could be facilities like that elsewhere and there are other facilities in the world that do make metal rods for reactors, particularly for ships powered by nuclear power. So we're not expecting to need any new significant facilities. We're expecting that the product will be made in existing facilities that produce fuel for nuclear reactors and our motto will be licensing the technology for them to sell to existing reactors, not building plants and making it ourselves.

That said, is there any part of the logistics to getting these produced that is not currently available or in place?

The metal fuel rods that we've been making in Russia are one meter long. And as I said in my introduction today, that other than in demonstration of full bundles of fuels called fuel assemblies in a reactor, the last significant technical issue that we're facing is producing these three-meters long, which is the length of full sized commercial fuel in a reactor. And we plan to do that this year in the second half of the year.

So the answer to your question is manufacturing and testing of these full length metal seed rods, the existing facilities have been doing it for one meter, we now need to do it for three meters. We're pretty confident but that will happen in the second half of this year. We'll be reporting the results to you.

Your next question is from the line of [John Tracy].

Hello, Seth, how you doing today?

Fine. Hello, John.

Great. Sorry I missed you in Boston this past week. Just a question on the future client business. Looking at the revenue trends, I think most of us understand what the trends -- what influenced the trends last year so looking forward to future revenues, especially any outsiders looking in as new investors -- and just curious the new entities that are coming up, two questions. These clients, is the nature of these potential future clients going to be similar to the UAE where it might be long-term type relationships that we're helping them out as they gain experience and put their regulatory structure together. That's the first question.

And then the second question -- any idea -- I know you can't give us a lot of insight but do you have any time frames when we might start learning the next contracts and future consulting business?

We used to say that the nuclear Renaissance is a term we've been hearing a lot and that it's happening, just not necessarily where people thought it would -- the nuclear Renaissance is happening in the Middle East and other regions of the world, not where nuclear power has traditionally had its greatest growth. I think now I could add a new phrase to that.

I think we're seeing something of a nuclear baby boom where the companies that are benefiting from this nuclear Renaissance are not the usual major companies either but also include companies, for example, South Korean companies with their first major international deployments ever that have never deployed nuclear outside South Korea. Lightbridge advising the government of the UAE and now with other major opportunities. And I think this trend will continue. I'm very confident we're going to see new clients this year, that that will include governments like what we've done in the UAE, perhaps some of the tasks a bit different -- and like in the UAE start with shorter term tasks and build toward a long-term relationship and long-term contracts and I'm confident we will succeed in that. I also think that these new clients might include some major corporations that we might be doing some work with.

In terms of time frames, we're certainly looking to finalize and announce some of this in the first half of this year. And maybe well prior to the prior to the end of the first half of the year so we're very confident in this area and our work has been very well received and I think this is part of what has led to our inclusion in the WNA index and some of the other attention our Company has been getting and it's certainly been noticed in some governments and corporations that have been contacting us on the consulting services and also on the technology and the prospects for using our technology. So thank you for that question, John.

Thank you. Just a comment for the follow-up. We can see a big difference with the exposure that we're getting very recently so that's great. Good work.

Okay. Thank you.

(Operator Instructions) And your first question will come from the line of [Terry Blake].

Hi, Seth. Good morning, how you doing?

Good morning. How are you?

My question is there's been a lot -- especially on the forefront of the media lately, especially since you're talking about the revolution -- about nuclear power. What's the Company doing to really get the word thorium out there? Presuming everything works the way we're hoping it works, in every media publication out there, CNN had a couple guys on two weeks ago where they were doing pros and cons of the nuclear industry and why we should build more plants and why we should not. And every question that was asked that could have been addressed by thorium power was not even brought up as to how these objectives could be overcome to get more people on-board to I guess be proponents of nuclear power.

And in that, Lightbridge isn't brought up anywhere. Is anything being done with the [P&R] Company? Are you guys doing any dog and pony shows? Why is this not getting out on the forefront of the media? If not the Company Lightbridge, at least thorium power?

We have been doing more. If you look in the media portion of our website you'll see a recent nationwide live interview on FOX, on FOX Business Channel. There has been coverage in the media, including in other countries that are relevant to us and we are stepping that up as John Tracy had said.

I'll add that we are also sometimes a confidential source for some news articles would call us for angles on their stories that don't necessarily cover us but cover our issues. But this is an important issue to us. We are reaching out more to the media, doing more speaking at many types of conferences -- not just investor conferences, but also major nuclear engineering conferences, major energy conferences -- and we are seeing an increase in media interest and we expect to have more.

Understand all that. I just don't get why the word thorium is not being brought out more and more in the public.

Let me put it this way. In a sense, it's not about thorium. It's about how to handle nuclear in the most optimal way -- in a way that has waste that cannot be weaponized, in a way that has less waste, less toxic waste. Thorium is an ingredient that we use in our technology. There are, as Sean Mulhearn mentioned, other concepts for whole new reactor designs that use thorium in their fuel that are dramatically different from what we're doing which is a new fuel to the existing reactors -- a new fuel from the reactors that we have built -- where you don't have to design or license a whole new kind of reactor.

And many of these other thorium ideas don't have the benefits that Lightbridge's technology has. So we're making this more about our technology, and the benefits of the technology which are not necessarily shared by all the other approaches of using thorium. But you're right, we do need to get the word out there more about our Company and we are prioritizing doing that.

Your next question is from the line of [Bob McGann].

Hi, Seth.

Hello.

I just wanted to ask a question about the cash burn rate and the possible need to exercise self-registration -- or the shelf registration this year. Just looking at the cash flow statement in the press release this morning, it looked like there was about $3 million at 12/31 and I just keep on looking at the burn rate and wondering what your strategy is for the year and whether or not that shelf registration is on the plate.

Well, not at this time. The cash burn rate is about $1 million a month and that's supplemented by revenue that's about breakeven. And sometimes more than that. Including the margins. So overall, we're running at about breakeven.

We will need to raise more funding in the future -- before year end to stay on track on the fuel technology development and deployment schedule that we're on. And we plan to do that and we expect to do that through financing a strategic transaction with a major player in the industry or government or a combination. If we do need to enter the markets using the shelf registration, we would want to do that when the timing is right. But that's not now. And I do think it's more likely than not that the funding we need for the future, for the technology development above what we're spending now, will come from a strategic relationship.

Fair enough. Thank you for the answer.

Thank you.

Your next question is from the line of [David Grunwald].

Good morning, Seth.

Good morning.

I wanted to congratulate you on your appointment to CINTAC and specifically I'd like to ask you to expand on that appointment and specifically how that will benefit the Company and how Lightbridge could maybe use that to -- as a leverage into markets.

Right. The first meeting at the commerce department will be held next week and I'll be there at the meeting in Washington. The United States Secretary of Commerce, Gary Locke, is chairing what I understand is a cabinet level committee for President Obama on increasing the competitiveness of US industry abroad and within that one of the industries that they're looking to expand is nuclear power. And Secretary Locke has formed the Civil Nuclear Trade Advisory Committee or CINTAC to advise him on what the administration's policies and actions should be to increase the competitiveness of the nuclear power industry domestically and globally. And he's appointed me to be a member of that committee, particularly as relates to the thorium based sector of the nuclear market to grow the use of nuclear and US Company exports to other countries.

So I think that any type of contact like this with the administration is positive for our Company. What this committee is working on goes directly to helping to formulate United States policy and actions in the nuclear power area and the secretary is particularly interested in hearing from me as relates to thorium fuel. So I think that's positive for us. It's also important as we're seeing the Reid-Hatch legislation that we have support from both branches of government -- that we have the legislature, the Congress, seeking to fund and promote the development and deployment of thorium fuels and the administration as manifest by its budget request for 2011, specifically mentioning Thorium based fuels by the secretary's appointment of me to CINTAC and others from our Company who have become involved in the administration as well.

But I think this will all be helpful. Obviously, my work on the committee will be what is generally good for the United States and what is generally good for the industry. But I was asked to join specifically for my thorium fuel knowledge.

Excellent. Thank you.

Thank you.

You have another question from the line of Sean Mulhearn.

Okay.

Hi, Seth. Sean again. Real quickly, the recent news that I just heard regarding India -- where Russia was going to provide supposedly 16 new nuclear reactors, I assume they're going to be VVERs. I also assume that that has potential for thorium based fuel reactors as well. Where, if anything, is that discussion or is that part of the future plans of Lightbridge?

That is for VVER reactors, the type of light water reactors we've been developing and testing our fuel for in Russia. And we are staying rather close to entities in India and exploring possibilities there. There's also been the news recently that in the legislature in India in the last couple days, they've delayed introducing the legislation on nuclear liability that would allow US companies to deploy reactors in India, and that has led GE Hitachi for example to delay their plans in India.

So my read is that companies that are owned by governments that are willing to take on liability like the Russian government and governments of some other companies are going ahead in India. And rather aggressively. And that companies that do not have the full backing of their government for liability purposes, like US companies, need to wait for that legislation to be enacted in India because they can't take the liability.

That being said, there's a lot that Lightbridge does because we do not deploy reactors that we potentially could do in India, including with partners from other countries. And we are in some discussions with partners in other countries that could be applicable in India.

Thanks, Seth.

Thanks, Sean.

There are no other questions at this time, sir.

Well, thank you, everybody, for your continued support for the Company. These were very insightful questions today and I appreciate them.

We look forward to talking to you again in early to mid-November for our next earnings call and seeing many of you at our annual shareholders meetings which again we're tentatively scheduled for April 30th in Washington. And, feel free to reach out to Linda Byus, our head of Investor Relations. You can always reach IR@Ltbridge.com if you have any further questions. We thank you again. Good bye.

Thank you for participating in today's conference call. You may now disconnect.