Lightbridge Corp (LTBR) 2010 Q2 法說會逐字稿

Good morning and welcome to the Lightbridge second-quarter earnings call. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. Please note, this event is being recorded.

I would now like to turn the conference over to Bob Cavosi. Please go ahead.

Thank you, operator. Good morning, ladies and gentlemen, and welcome to Lightbridge Corporation 2010 second-quarter earnings conference call. The second-quarter earnings press release 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 that 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. Thanks, Seth.

Well, thank you very much, Bob, and good morning, everybody. Thank you for joining us for our 2010 second-quarter results conference call.

We have had an interesting last few weeks, with the announcement of our breakthrough all-metal nuclear fuel development and our recent capital raise. I'm going to take a few minutes on this call this morning to talk about this important development in our nuclear fuel technology business and why we believe it is going to have a meaningful impact on the nuclear energy industry and where we go from here.

Andrey Mushakov is with me today to provide additional thoughts about the work that has been done to get us to this point and will help answer any questions that you may have after my remarks. I am first going to take a moment to provide a brief overview of our financial results as well as update you on other activities beyond our most recent technology announcement that will have a tangible impact on our business.

Revenue for the 2010 second quarter was $2 million, compared to $3.4 million for the comparable period a year ago. The operating loss for the three months ended June 30, 2010, increased to $2 million compared to $1.3 million for the second quarter of 2009.

These results were anticipated and reflect the year-to-year top- and bottom-line variation from our consulting services business. We expect these variations in consulting revenues to continue for the remainder of 2010.

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. Since 2008, revenues have been generated from the five-year consulting contract in place in the United Arab Emirates.

On June 23, we announced a significant development in our nuclear fuel technology business resulting from our research and development efforts over the last 10-plus years. We have developed a new fuel technology based on a proprietary all-metal fuel assembly design, with a tangible benefit being a significant reduction in both initial capital costs per megawatt and annual operating costs per kilowatt hour of nuclear power, making it more competitive with other forms of electricity generation while contributing to a significant reduction of CO2 emissions.

This is an important development for the industry and one that has already garnered substantive attention and interest. We expect that Lightbridge's all-metal fuel technology will be applied to currently operating and new light water reactors, as well as small modular reactors, with the same benefits as in larger commercial nuclear power plants. It is highly synergistic with fast reactor designs as well.

One of the key benefits of the Lightbridge designed all-metal fuel technology is a potential 30% increase in power output per reactor compared to reactors using standard off-site nuclear fuel. This could translate into additional revenue for a 1,600 megawatt electric light water reactor uprate 30% of additional revenue of about $265 million per year, or about $16 billion over the 60-year expected lifetime of such reactors.

This increased power output is expected to reduce operating costs on a per-kilowatt-hour basis and strengthen the economics of nuclear power versus other forms of power generation. In addition, currently operating light water reactors could also take advantage of this power uprate by switching to Lightbridge's all-metal fuel design.

The Lightbridge designed all-metal fuel will provide enhanced proliferation resistance and result in up to 23% less volume of used fuel per kilowatt hour of electricity generated, and is expected to have improved fuel operation compared to standard oxide fuel.

With that said, I think it is important to put this development in its proper context. This is something that has been in development since the late 1990s when we started experimenting with other fuel forms for the seed rods, including metallic alloys. Much of this work was performed in Russia, where there is tremendous experience with metal fuels, particularly for the reactors used to power icebreaker ships. We brought in experts from the United States with metal fuel experience, including top fuel specialists from major nuclear fuel vendors, as well as technical experts from national labs and universities.

As we were developing our proprietary metal fuel design, we found that it worked very well for what we wanted it to accomplish in the seed region of our seed and blanket thorium-based fuel assemblies. In our testing of this metal fuel technology, we found additional benefits as well.

We discovered from a safety and fuel performance perspective that many of the characteristics of our proprietary metal fuel design were superior to oxide fuels. This was a very interesting development for everyone at Lightbridge involved in this project.

Naturally, following that development we began investigating using metallic fuel as a standalone fuel, without the thorium blanket fuel. It is reasonable to make the case that our all-metal fuel will be the next-generation fuel technology, allowing for higher burnup and lower operating temperatures, which plays to the safety of the reactor as well, without the problems associated with oxide fuels that limit their lifespan and the energy value that can be extracted from them.

As it relates to where we proceed from here, here are four key points for the next 12 months. We will perform optimization studies and economic assessments for the all-metal fuel. Secondly, we will perform initial safety analysis for the all-metal fuel.

Thirdly, we will begin capsular radiation testing of 6-inch metallic fuel samples in the advanced test reactor at Idaho National Laboratory to demonstrate this fuel in this reactor in the United States. And, fourthly, hold an initial meeting with the US Nuclear Regulatory Commission staff for US commercial nuclear power plant use.

Here is a brief update on other recent Company and industry and legislative developments. We announced last week that we have entered into purchase agreements with institutional investors including Special Situations Funds to sell $13.7 million of common stock and warrants in a registered direct offering. This is the Company's first financing raise since the Company became publicly traded almost four years ago.

Under the terms of the offering, Lightbridge will sell a total of 2,069,992 newly issued shares of its common stock at $6.60 per share. In addition, warrants to purchase a total of 1,034,996 shares of common stock at an exercise price of $9 per share will be issued to the investors.

The warrants will be exercisable beginning on the sixth anniversary of the closing date of the offering, and will expire seven years from the date of issuance. The offering is expected to close on or about Wednesday, July 28, 2010, subject to the satisfaction of customary closing conditions.

The newly acquired capital will help fund the Company's continuing work on the nuclear fuel design business, as well as providing the necessary financial resources to keep moving forward with current technological and nuclear fuel development plans.

Legislative activity in the US and overseas will continue to play an important role for Lightbridge. The March 3 introduction of the Reid-Hatch legislation in the US Senate 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.

Securing additional key advisory roles in more countries seeking to develop nuclear power for the first time. As mentioned earlier we will continue to have ongoing discussion with potential governmental and other institutional partners and are expecting more developments this year.

New incremental work in the United Arab Emirates. Results from the fabrication of full commercial and 3-meter metal seed rods. The addition of nuclear consulting and fuel design technology talent to support our growth initiatives. Continued discussions with nuclear fuel users and manufacturers to establish a supply chain for our thorium-based fuel and all-metal fuel through strategic alliances.

And we appreciate your support and we look forward to speaking with you again on our third-quarter earnings call. We will be sure to update you on all important new developments in the interim. We will now open up the call to your question. Linnea, please go ahead.

(Operator Instructions) Paulenne Kirschenbaum, Chapin Associates.

Good morning from Canada. I have a question regarding the announcement that Babcock & Wilcox and Bechtel made approximately a week ago. Bechtel said in that in its history they had never invested in a technology company, but the opportunity in nuclear was just too good to pass by.

They did not make reference to the type of fuel technology that they were planning to use for this mPower project. Could you speak to the type of fuel that they are using? And do we have any ongoing or past relationship with Bechtel?

We do have some relationships at Bechtel and at Babcock & Wilcox. The mPower reactor is a smaller version of a standard pressurized water reactor, PWR light water reactor. It will use a scaled down version of a standard PWR fuel.

The thorium-based fuel that Lightbridge has been developing are for PWR reactors and can be adapted for use in this type of smaller PWR, and the same holds true for the metallic fuel.

We specifically have mentioned small modular reactors in some of our communications on metallic fuel because having a smaller reactor have the ability to generate greater power makes it even a superior design. So this small reactor design and something we are looking into with industry partners, particularly for pressurized water type reactors.

Thank you, Seth.

One second. Jim Guerra wanted to add something, too

Paulenne, this is Jim Guerra. Paulenne, the CEO of that organization is somebody I used to work with. We have had some what I will call very, very early preliminary conversations with them.

Because essentially that project is in the very -- it is just beginning, in the embryonic stages. So they were somewhat receptive, and we will follow up with them as time moves on.

Great. May I just add then -- I'm sorry, go ahead.

No, I was just saying from Bechtel's point -- I can't speak for Bechtel, but they are obviously looking for architecture, engineer and construction work on building new reactors; and Lightbridge's role could be on developing fuel designs.

It is too good. May I have just a follow-up? There was also an announcement on a division of Punj Lloyd, the Simon Carves division -- if I am pronouncing it correctly.

They were building a plant in Great Britain. I wonder if there was any connection to what we are doing.

Simon Carves was an existing UK-based corporation that was acquired by Punj Lloyd of India. We have been in and are in discussions with friends there.

The agreements between the US and India relating to nuclear cooperation have not been finalized, are not in force, particularly on the Indian side. And there are many possibilities that could follow once that is done; but we do have nothing at the moment there.

Thank you.

Thank you, Paulenne.

[Tom Turner], private investor.

Good morning, guys. How you doing?

Good morning. Fine, thank you.

Good. Hey, Seth, on the last conference call, you guys mentioned that no later than by the end of the second quarter, which obviously ended June 30, that there would be some news regarding a possible new client or new contracts. Correct me if I am wrong.

If that was the case and that did not happen, is that why you guys issued the additional 2 million shares, in order to fund upcoming operating expenses for the rest of the year?

No. First of all, we did start work on a second client in April and have not yet revealed the name. We are conducting economic and technical feasibility studies, and the siting studies for finding suitable sites to place a reactor. And once that feasibility is determined, if it's positive, we would expect that that program could go forward toward more of a more serious deployment mode in reactors.

We are in rather advanced stages of discussions elsewhere. And the exact timing of when countries will make announcements and decisions on their looks at nuclear power will be up to them. But we are quite confident about more this year.

There was no connection between that and the financial raise. I will tell you that since we started our consultant business in 2008, in these last two years we have taken in -- including this last reported quarter -- a total of $37.8 million in consulting revenue at a gross margin on that, a gross profit, of $16.9 million that we have not had to raise through equity or debt raise. In fact, we've never had debt in the history of the Company.

The $13.6 million that we are now raising through this equity raise is less than half of this money that we have brought in with the $16.9 million earnings we brought in from our own revenues. We have now gone about four years since we became publicly traded with this being our first financial raise of any type.

So, no, I don't think the timing of any announcements of any countries' intentions on nuclear and working with us had anything to do with the timing of this raise.

Well, do you think -- what is the outlook on the Reid-Hatch bill? I know you mentioned it earlier. But is there any, I guess, target date when this might come up? Because that is kind of the thing that is really going to maybe push this Company to the forefront of knowledge, I guess, if not in the United States but the world. Which is I guess really what we need in order to get the stock price back up to where we would like it to be. Correct?

Well, that is one of the drivers. There are many others as well.

I would say we're very confident about our work with the US government. In fact, the US government just on June 10 approved putting our fuel into the reactor in Idaho, are going into the reactor there. And that is something well known to Senators Reid and Hatch and others.

We are confident about this legislation, which could be as a standalone piece of legislation; it could be attached to other legislation. As you know, in the Senate right now predicting the exact timing of when anything will happen is dicey.

But there are basically two periods when things fall into. There is the period now, which is in a sense before the election; that will include the summer recess in that, that will happen in August. And then there is the potential of a likely lame duck session after the election and before the new Congress comes in, in January. So it would be one of those two periods when new legislation is passed.

In terms of energy legislation, it does look like things are happening in smaller bills now, not the bigger, grander bills with the climate change provisions etc., which I think plays well for the type of bill we're talking about. We don't have exact timing on it; but we are confident of it getting through this year, and we do meet directly with Senators Reid and Senator Hatch and others.

But I guess just to follow-up to that then, with the Reid-Hatch, what's -- is our PR company doing anything to try and push this thing further out in the media then, while we are waiting for that to happen?

I think the biggest problem our investors have is that we just don't see enough positive news hitting the media like you see with other companies. Whether it is really happening or not, is there something they could be doing to get the name thorium and Lightbridge out in the forefront?

Well, yes, and we have been working in that area. We are going to be stepping that up a bit and I think you will see more in that area.

We have had live nationwide TV interviews on some networks in the last few months, and some major newspapers and technical journals as well, and others. But we do separate our PR in a sense from our government relations.

We do work with government relations experts behind the scenes. That is much more quiet and what is not seen out in the forefront.

Okay, thank you.

[Paul Maines], private investor.

Good morning. In the conference call a year ago, you had indicated that Lightbridge would be releasing results of the testing from the Kirchhoff Institute in the last quarter of 2009. Is that information from the results from the testing anywhere closer to being released to the public, or is it being published?

Right, well, first of all there are two limits on releasing some of this information publicly. One is nuclear export controls in more than one country, including in Russia and dealing with governmental authorities.

And the other is intellectual property rights and making sure the patents are filed and were adequately protected before releasing anything publicly. We have had rather significant new patent filings recently and have received export clearances as well recently.

To give you a little more detail including on the public disclosure, let me turn this over to Andrey Mushakov, who runs this effort for the Company.

I just wanted to add that basically the work on the irradiated fuel samples is still ongoing. We've had several fuel samples irradiated in the test reactor in Russia over the past several years.

And once we complete all of the post-radiation examination work on all of the samples, and analyze the results, and get all the expert control clearances, at that point we will be in a position to publish the results.

I will say, Paul, that transparency is a very important value of the Company and getting these results out there. We did not get out there everything at the end of '09; but is partly based on this approvals process and the fact that we still have testing ongoing at this reactor in Russia.

But that process is going well -- so well that the United States government has approved already putting our fuel in the reactor here in this country starting early next year. But you will be seeing more of this released publicly including, I will mention, that in September at the World Nuclear Association's annual symposium we have been selected to present a major paper with the results there. And there will be one of the largest nuclear companies in the world co-writing and presenting that paper with us at the conference.

Okay. That's very interesting. Thank you.

Sean Mulhearn, private investor.

Good morning, Seth.

Good morning, Sean.

Quick question and I think people are a little confused by the recent events as far as metallic fuel are concerned. The question is -- how does this in many ways steal the thunder, or does it not, from the thorium seed and blanket fuel designs?

Specifically, is this -- the metallic fuel, is that the one being tested in Idaho National Laboratories or is it the seed and blanket thorium designs? And if the success of the metallic fuel becomes more apparent or more understood as being further tested, does that supplant the use or need for having the thorium fuel seed and blanket designs?

We have done nothing to slow down on the thorium seed and blanket design. We have added the metallic fuel. We are pursuing both.

The metallic fuel came out of the seed and blanket. And we use the term seed, in the thorium seed and blanket. The seed now in all of our thorium seed and blanket designs is the metallic fuel.

We also have the standalone metallic fuel. What it is being demonstrated and tested at the reactor in Idaho starting early next year is for both, for the metallic fuel and for the thorium seed and blanket.

I will say that the metallic fuel is the more recent development. And the power uprate that comes from it, that we have confirmed in these last few months, is something that has attracted significant industry attention. The fact that we have major nuclear fuel fabricators, major nuclear reactor vendors approaching us in these last few weeks that we're discussing about this, does make that something that we put a special focus on.

But in no way have we stopped or slowed down the thorium seed and blanket fuel, which is also going forward and that the metal fuel, as I said, is the seed of portion of. Of the seat and blanket fuel itself.

So they do both go forward together. Did you have a follow-up, Sean?

Yes. Basically some detractors may say that it apparently seems -- and I think you maybe addressed it a little earlier a little bit. But it seems that there hasn't been a hell of a lot of R&D monies focused on the metallic fuel from a released corporate perspective, unless that has been an ongoing thing for 10, 15 years.

It just seems like it just popped out of -- basically, how do you addressed the issue that it popped out of nowhere and all of a sudden now is the forefront of the Company's direction?

We started working on the metallic fuel in 1998. We have been working on it as a rather significant effort for 12 years. The cumulative R&D on it has been quite a lot.

As with any R&D, project I would caution against assuming value of the technology being based on the amount of money that has been spent on it. Lightbridge prides itself on our ability to get this done very efficiently with our investors' money.

Many of you who have come to our shareholder meetings and other public meetings have seen samples of this metal fuel and even held it in your hands over the last few years as we have developed it for the seed rods and now as a standalone rod. Those of you who came to our meeting, our annual shareholders meeting, that we held a few months ago in Washington saw the seed samples there, the seed assembly, actually sitting in the room where we held the meeting.

The R&D spend in a sense is blended with our thorium seed and blanket, because it does so much overlap with the seed portion of what we are doing on that technology.

I don't know, Andrey, if you'd want to add any more on this?

Yes, I just want to add that basically, as Seth pointed out, we have been looking at the metallic fuel for over 10 years. In particular over the past year, year and a half, we have been looking at the metallic fuel assembly design for existing nuclear power plants.

And then more recently, I would say for the past nine months, we have been also looking at the application of the metallic fuel design for power uprates.

So the benefits of this metallic fuel comes from R&D made over the past, over 10 years, in spending. And only recently we were able to get to the point where we were confident enough that this fuel would potentially provide up to 30% in power uprate and could be used in pressurized water reactors, but could also potentially be used in boiling water reactors, small modular reactors, and down the road with future types of fast reactors.

I will just mention, Sean, that the way we handle some of this metal fuel work versus the way we handle some of the thorium-based fuel work were two very different approaches. The Company was founded on developing the thorium-based fuels, and that is what we have been doing ever since.

With the metallic fuel that came out of it, for patented reasons in particular we had to keep that very quiet as we were proving it out. We actually announced the approval to use it in the reactor in the United States a week before we announced the power uprate benefit of the metal fuel itself.

So that was sort of a very different order, that we actually had approvals from the US government to demonstrate it here in this country before we even publicly announced what it was that we thought we had as the major claims here. We are very confident that this demonstration in the US next year will validate what we have done, because we have essentially already done this at a reactor in Russia.

And after validation Seth, what is a time frame for commercial deployment? I mean, your best guesstimate.

Well basically our current estimate is in the US type pressurized water reactors we are talking about a five- to six-year timeline for the start of lead test assembly -- operation in an operating reactor.

In a commercial reactor.

Correct. In the meantime there will be a multiple interim technological milestones that would validate this fuel in a test reactor environment, starting with the capsule test at [that] National Laboratory in next year.

Thank you.

Okay, thank you. Linnea, next question.

[Bill Anderson], private investor.

Good morning, Seth. How are you this morning?

Fine, good morning. How are you?

Pretty good. I had a couple quick questions with respect to the metallic fuel. I think it is just clarifying things for myself.

We have heard you talk a lot about the benefits with respect to additional power generation that the metallic fuel is going to provide. Along the lines of the non-prolif-ability of the thorium seed and blanket design and weapons disposal uses, are we going to see those same benefits out of metallic fuel? Or is it strictly the additional power generation?

No, it has all of Lightbridge's other benefits for our fuel technology in there. If you look at our thorium-based seed and blanket, where basically half the fuel is the blanket -- which is where the thorium is, those darker rods around the outside of the fuel assembly; and more silvery color metal rods on the seed -- that seed in there is the same fuel we are talking about, just expanded to be the whole fuel assembly on the metal fuel.

So everything that was within the seed of our thorium-based fuel carries over to this fuel. All the proliferation resistance, the less spent fuel, the ability to dispose of nuclear materials, generating power while disposing of plutonium, in addition to the power uprate. What sets it apart mostly is the power uprate.

Okay, thank you.

There are a few questions that have been received online. I would now like to turn the call over to Bob Cavosi to introduce them.

Thanks, Linnea. We have a new feature on this call for Lightbridge, including the webcast questions that have come in. We received several of those. Seth, I will read to you a few of these questions and provide an opportunity for you to respond.

This question is asked by [Robert MacLean]. In at least one of the press versions of the metal fuel rod announcement, it was stated that there is no proliferation material in the spent fuel rods. Can you elaborate on this?

Right. Basically what we are talking about is a fuel that is not intended to be reprocessed; but even if reprocessed the material that would result would not be usable to develop nuclear weapons. We are talking about an isotopic mixture that would not go supercritical.

I don't know, Andrey, if you would want to add to that a bit. There is just so much we say in this area.

Yes, what we said on our press release is that the all-metal fuel design provides enhanced proliferation resistance. What it means is the enhancement comes primarily from a reduction in the quantity of plutonium, reactor-grade plutonium, that would be embedded in spent fuel compared to standard uranium oxide spent fuel. The reduction is quite significant, and that's where most of the enhanced proliferation resistance comes from.

Then the second aspect is the isotopic composition of that plutonium is also worse if someone wanted to use it for weapons purposes.

Worse meaning worse for them. They couldn't make a bomb from it.

Correct.

Great, great. We have several more questions. Again thank you for the questions that have come through on this call and the webcast.

This question is asked by Daniel Kornhauser. Seth, in a recent conference call you said there would be a strategic investment in the first half of 2010. What, if anything, became of that?

We have done this investment now with these financial firms, with institutional investors. What we are doing is we are working with strategic partners, including major companies in this industry now, in several ways where we determined it was better for the Company not to have an ownership stake from one of those companies and work with them in other ways, including as customers.

We just thought this was the right direction to go on. The investment was the firms that we ended up working with.

Okay. Two-part question from [Kevin Mauney]. What is the status and technical milestones and timing of completion of the AREVA collaboration?

Right, there is a Phase 1 and a Phase 2; let me turn it over to Andrey to address that.

Yes, as of right now, we have pretty much wrapped up and completed Phase 1 work with AREVA. There are certain internal meetings and discussions that will happen between now and early fall that would determine the scope and the timing on Phase 2.

So as we proceed with those internal discussions, we will make at an appropriate time a public announcement about subsequent phases of work, the timing, the scope, the pricing, etc.

Thank you. A second follow-up question from Kevin. Do you expect the Company to need to float more stock for working capital needs in the next two years? How much, if so?

I think that's very unlikely. As I said in the four years that we have been a publicly traded company and since listing on the NASDAQ last year, this is the only raise that we have done. We have raised more money through the earnings from our own revenues from our consulting business than from this raise.

And I think that will continue. I think it's very unlikely we would see that happen.

Great. A few more questions, Seth. This one from [John Acerra]. You mentioned several months ago that you have entered an agreement with a new foreign entity. When or can you reveal the name of this foreign government?

Right. This is the country that first wants to see the results of the work that we're doing on whether it's technically and economically feasible for them to deploy nuclear reactors, and whether they have sites that are feasible in which to build their reactors.

We are expecting those results to be finalized in the next few months; and if positive we would expect that at about that time a public announcement of which country that is. So not yet.

Great, thank you. Three more questions. This one from [Thomas Dahuty]. Can you elaborate on additional consulting contracts with foreign governments? When, timing, size, length, etc.

Well, we are meeting with several and we do expect to be able to announce more this year. I think they will follow a pattern of having more feasibility-type work earlier on, which is why lower revenue, and if the feasibility studies are positive for nuclear power, then some step-ups in the amount of work.

We would expect with the countries we are talking to that these could be very long-term relationships for the life of a nuclear power program. So, I would still say more announcements this year.

Okay. We've got, sorry, Seth, a couple more questions have come in, three or four more. I think, operator, we will end it from there.

A technical question. How can you get more power out of a reactor without increasing its heat exchange and heat dissipation capacity and its transmission capabilities?

Right. Well, first of all on the transmission capability, that is the transmission lines connected to the reactor that you either need to have the ability to handle more power or be expanded. And many reactor sites in the world were licensed and designed to have more reactors than they now have and have a lot of infrastructure, including in transmission to handle more power.

I'm going to ask Andrey to address the other parts of that.

Yes, depending on the power uprate level, if you're talking 30% power uprate level, then of course if you are talking about an existing type of reactor that is in operation today, typically those PWR pressurized water reactors do not have the margin to handle up to 30% power uprates. So you would have to change some of the primary and secondary loop equipment in the reactor, in an existing reactor, to be able to accommodate a 30% increase in power output.

Now if you are talking about a smaller increase in power output for an existing reactor, say on the order of up to 10%, then most of the existing equipment should be able to handle that level of power uprate. There could be some changes to the turbine. But overall, that kind of power uprate does not typically require significant changes to existing equipment in an existing reactor.

So far, utilities have been doing power uprates using standard oxide fuel. They were able to do up to typically 5% increase in power output using standard oxide fuel. And those power uprates did not require any significant changes in the reactor equipment.

Now if you are talking about a newbuild reactor, the reactor that hasn't been built yet, then of course accommodating a 30% increase in power by upgrading the primary and secondary loop systems would be easier because the owner who is going to build the reactor and own the reactor would only have to cover the incremental cost for the upgraded equipment. In which case the average cost, average capital cost per megawatt electric would be expected to go down dramatically. So that is where the benefits come into play.

And [then they want] for a 10% power uprate on existing plants, again if you can do that without significant changes to the reactor equipment then you basically get an additional 10% increase in power output without significant additional capital outlays upfront.

So the benefits on a per-kilowatt-hour basis as a result of those types of power uprates would be significant.

Anymore questions from our lines?

Yes, a couple more. Yes. One from -- another follow-up from Kevin Mauney. What are the current prospects for the PU destruction program? And is design work proceeding for this purpose?

The United States and Russia used to have a vibrant effort to dispose of weapons-grade plutonium in each country. They really don't now. They are going about it in separate ways that are really not a joint effort.

The plan in Russia is to basically keep the plutonium at the moment and use it in the future in new types of fast reactors called BN-800 reactors, if they are able to get those deployed and operating to use the plutonium.

The situation existed back in the '90s where this plutonium was largely unsecured and even unaccounted for in Russia. It is not as much the case today. It is quite well secured in Russia. So the sense of emergency on dealing with it isn't there at this time.

That being said, something is going to have to happen with this plutonium in the US and Russia, and our fuel designs are the most efficient ways to handle it in the existing types of reactors, where it can actually be done. We have had some discussions in each country and with some companies as well.

This is not an area that is going to move quickly, dealing with governments on their weapons plutonium stocks. But there is some movement. We have also talked with some other governments that have plutonium, including from reprocessing from civilian nuclear fuel cycles and extracting the plutonium from those.

So we do offer what I think is the most efficient way to extract the energy value from that plutonium in reactors disposing of that plutonium. But it is not something I would expect to move nearly as quickly as simply using uranium and even thorium in the existing reactors.

Great. Two more questions, then I think we have approached the end. This question is from Adam Whitten. If the new metal rods are proven next year in testing, can you please explain why it would take another four to five years to commercialize a simple upgrade? Thank you.

Well, that is the law. That is the regulation. We are having our first meeting with the Nuclear Regulatory Commission staff on that coming up, and these are the timelines that are required to assure public safety in reactors.

What we are talking about in a research reactor is a reactor that is not hooked up to the power grid. We are talking about starting with 6-inch long fuel samples and then longer. In the commercial size reactor we're talking about more than 9-feet-long fuel rods at commercial reactors of over 1,000 megawatts electric powering more than 1 million homes. A huge, huge, giant commercial nuclear power plant.

To assure public safety with the new fuels that we put into their reactors, there is a clearly defined and understood and responsible demonstration and testing method -- just as the FDA has with drugs going through three phases.

So this is what will go through, and it will take another five years, but we will get there.

Great. One last follow-up question and the last webcast question. This one from Thomas Dahuty.

If equity raised is not necessary to support operating finances, what will the funds be used for?

The bulk of these funds will be used for the technology, for what we were just talking about, the scale-up, demonstration, licensing, commercial deployment of this technology, which we believe will lead to significant licensing revenues to the Company. There will also be associated patenting costs.

There are no formal use of proceeds provisions on the money. It does go to general corporate purposes, but that is what we're going to be using it for.

Great. That concludes the questions from the webcast. Operator?

Well, well, well -- go ahead, operator.

Actually we do have one final question over the phone. Do we have time to take it today?

Of course.

[Alan Birch], Morgan Stanley.

I just had a quick question on the capital raise. I just wanted to know if you had a sense of how committed these investors are, as opposed to being in there for a quick flip; and how confident you are that that equity raise will go through.

Well, I'll take one angle on the answer then I will ask Jim Guerra, our COO and CFO, to answer as well, Alan. We are very confident; we wouldn't have worked with these firms if we felt any differently.

There are some people at some of these firms that we have known for years and have invested previously in the Company. And with these particular firms and individuals, we are very confident these are long-term investors.

The warrants do go out seven years, which is also an aspect of long-term investing. And for a small-cap company I think these are very high-quality investors. Jim, if you want to add to that?

Yes, I mean -- I think the two specific points of support, that is with one that Seth already mentioned, is that the warrants go out seven years. And that is reflective of the R&D process that is associated with nuclear projects. It is a longer term time perspective.

The other thing is that these firms specialize in small-cap type of investments. As a result they are used to longer term or a longer-term horizon which would be typically associated with these type of funds.

No, I want them to be a longer-term horizon. I just wanted to know, is there is any restriction on the first tranche, the actual common, as far as them holding?

No, no, no. It's (multiple speakers)

But you expect them to hold?

There are no legal restrictions on [that].

I understand.

We do expect that, based on who these people are, who the firms are, and our conversations with them. We do expect that.

We would have had to in a sense pay for different terms I would think legally if they were restricted. But that is what we expect.

We were very clear, obviously, with the time horizons associated with the R&D development.

Okay. No, I think that's great. Thank you.

Well, thank you. With that I want to thank all of you who have called in and listened, including those who have asked questions on the phone or sent in questions online.

We will look forward to speaking with you on the third-quarter call. We do expect some announcements in the interim that we will be putting out as well. And we will look forward to speaking with you on the next call.

That does conclude today's conference. Thank you for attending today's presentation. You may now disconnect your lines.