Lightbridge Corp (LTBR) 2021 Q1 法說會逐字稿

Thank you for standing by, and welcome, to the Lightbridge Corporation Business Update and First Quarter 2021 Conference Call. Please note that today's call is being recorded. It is now my pleasure to introduce Matthew Abenante, Director of Investor Relations for Lightbridge Corporation.

Thank you, Catherine, and thanks to all of you for joining us today. The company's earnings release was distributed after the market closed yesterday, and can be viewed on the Investor Relations' page of the Lightbridge website at www.ltbridge.com. Joining us on the call today is Seth Grae, Chief Executive Officer, along with Larry Goldman, Chief Financial Officer; Sherrie Holloway, Accounting Manager; Andrey Mushakov, Executive Vice President for Nuclear Operations and Jim Fornof, Vice President for Nuclear Program Management.

I would like to remind our listeners that any statements on this call that are not historical facts are forward-looking statements. Today's presentation includes forward-looking statements about the company's competitive position and product and service offering. During today's call, words such as expect, anticipate, believe and intend, will be used in our discussion of goals or events in the future. This presentation is based on current expectations and involve certain risks and uncertainties that may cause actual results to differ significantly from such estimate.

These and other risks are set forth in more detail in Lightbridge's filings with the Securities and Exchange Commission. Lightbridge does not assume any obligation to update or revise any such forward-looking statements, whether as a result of new developments or otherwise. And with that, I would like to turn the call over to our first speaker, Seth Grae, Chief Executive Officer of Lightbridge. Hello Seth.

Well, hello, Matt, and thank you. Thank you all for joining us to discuss Lightbridge's first quarter 2021 results. We enter 2021 on a very positive trajectory, in terms of our fuel development activities, highlighted by our announcement yesterday that we have successfully demonstrated our proprietary manufacturing process for three-lobe six-foot rods using surrogate materials. The surrogate rods were manufactured through our coextrusion process at a length designed for small modular reactors or SMRs. Andrey Mushakov will provide an overview of this process, after my remarks.

This manufacturing is important for Lightbridge for many reasons. We are beginning to physically produce rods utilizing our technology, between production of rods and our two gain vouchers. This is all beginning to move to tangible products that are backed by our extensive patent portfolio. We are designing Lightbridge Fuel, to enable small modular reactors to more efficiently load follow, ramping up and down in power as renewables are available, replacing fossil fuel plants. In addition, we expect this technology to reduce the cost of generating electricity from an SMR, which strengthens the business case for deploying large numbers of SMRs to deliver reliable power and meet climate goals.

Our development steps are also applicable to the existing large light-water reactors. Last month, DOE awarded Lightbridge a second GAIN funding voucher, to support development of Lightbridge fuel in collaboration with the Pacific Northwest National Laboratory, PNNL. The scope of the project is to demonstrate Lightbridge's casting process using depleted uranium, a key step in the manufacture of Lightbridge Fuel. The total project value is approximately $664,000 with 3/4 of this amount, funded by DOE for the scope performed by PNNL. We expect the project will begin later this quarter.

We are pleased with our ongoing efforts at Idaho National Lab or INL, performing under our funding voucher now from the Department of Energy's GAIN program. We are designing an experiment for testing our fuel samples in the advanced test reactor at INL. We anticipate our work under this voucher will be completed in the second half of this year. Being awarded t2 funding vouchers by the federal government through the DOE with access to their teams of experts and world-class facilities, which are unmatched in the private sector, allows Lightbridge to take meaningful strides in our fuel development program.

In addition, these funding awards further validate our patented fuel and patented manufacturing process, fitting in strategically with the goals of the federal government. We are seeing an increasing understanding in the Biden administration that the nuclear energy must increase to meet the administration's zero emission goals. In fact, you may have seen news reports that tax subsidies for existing nuclear facilities might be included in the upcoming Infrastructure bill.

It's becoming clear that there is a paradigm shift in the way governments around the world are looking at nuclear power. In the last year, the U.S. government, through the Nuclear Fuel Working Group, outlined a bold plan that commits to federal funding of R&D for advanced nuclear energy as well as lifting of the ban on investment by the U.S. International Development Finance Corporation into advanced nuclear energy projects for export. From there, the Nuclear Energy Leadership Act was included as an amendment to the National Defense Authorization Act, that passed last fall, focusing DOE efforts on demonstration of advanced reactor concepts, including nuclear fuel technology. And this month, the European Commission announced that it will include nuclear energy in the European Union Taxonomy Regulation, which steers investment into low carbon projects. All of these developments matter in setting the stage for attracting greater investment in nuclear energy technology development. Investors and nuclear tend to follow government actions when leveraging their investments. So we expect these changes will lead to more meaningful investment in the nuclear power industry.

Lightbridge presents a unique opportunity in the nuclear industry. Our fuel design marks the only truly new fuel design since the dawn of light-water reactors in the nuclear industry. These are significant changes that will bring significant safety and economic benefits for both existing and new reactors. In many ways, Lightbridge Fuel can help the nuclear power industry reduce the costs of generating electricity and operating nuclear plants. Over the long run, we expect to transition from most nuclear energy being generated in large reactors to much more generation from larger numbers of small modular reactors, powered by Lightbridge Fuel, offering superior ramp rates for load following with renewables, while providing a meaningful increase in power output.

And with that, I will turn the call over to Andrey Mushakov, Executive VP for Nuclear Operations, who will update us on some recent news and review our near-term research and development opportunities. Andrey?

Thank you, Seth. Yesterday, we announced the successful demonstration of our patented coextrusion process using surrogate materials in place of uranium. The surrogate rods are manufactured using our coextrusion process at the six-foot nominal lengths designed for small modular reactors or SMRs. This successful demonstration of our high temperature coextrusion illustrates the primary performing process for Lightbridge Fuel including the helical twist of the fuel rods and the metallurgical bond between the central displacer surrogate fuel alloy and the cladding. Rods reduced during this demonstration will be used for further development activities, including validation of computer models of the extrusion process and corrosion tension of as-fabricated palladium alloys.

In parallel, we continue to make progress on our advanced test reactor experiment design with Idaho National laboratory. We are nearing the completion of the conceptual design phase in which our INL colleagues have been optimizing the combination of design elements, in order to achieve burn up of the fuel samples within the defined window of time in the fast reactor. Once the conceptual phase is complete, Idaho National Laboratory will immediately begin the detailed design and safety case for the experiment. We expect to experiment design to be completed later this calendar year. Completion of the ATR experiment design will also allow us to finalize the scope support with Idaho National Laboratory or high-assay low-enriched uranium supply, coupon sample fabrication, reactor radiation and ultimately post radiation examination of the samples.

There are also progression on the contract and on quality control aspects of our second GAIN voucher with the Pacific Northwest National Laboratory, with demonstration of our fuel casting process using depleted uranium in a 50% weight percent alloy with zirconium. This is a key step in the fabrication process for our fuel, and it also feeds into our needs for fabrication of irrigation fuel samples for the advanced test reactor at Idaho National Laboratory. The GAIN contracts with PNNL are almost complete, and we expect to be able to execute these contracts with the National Lab shortly.

We have also begun the quotation on quality assurance process with our sub vendors for the supply of depleted uranium and zirconium materials, which is a component of why we just mentioned contribution to the project. The total value of the project is approximately $664,000. The 3/4 of this month funded by DOE for the scope performed by Pacific Northwest National Laboratory. Back to you, Seth.

Thank you, Andrey. Now I will turn the call over to Larry Goldman, Chief Financial Officer, to summarize the company's financial results. Larry?

Thank you, Seth, and good afternoon everyone. For further information regarding our first quarter 2021 financial results and disclosures, please refer to our earnings release, that we filed at the close of market yesterday, and our Form 10-Q that we will file with the SEC later today. The company maintained a strong working capital position at March 31, 2021 with $15.2 million of cash and cash equivalents, compared to $21.5 million at December 31, 2020. We had working capital of $15.2 million at March 31, 2021 as compared to $17.1 million at December 31, 2020, with no debt financing. Total assets were $15.9 million and total liabilities were $0.6 million at March 31, 2021. Total cash used in operating activities was $6.3 million, an increase of approximately $4.3 million for the 3 months ended March 31, 2021, compared to the 3 months ended March 31, 2020. This increase was due primarily to the dissolution of the Enfission joint venture, and the payment of approximately $4.2 million to Framatome for outstanding invoices for work performed and other expenses incurred by Framatome.

Cash provided by financing activities decreased by approximately $0.4 million for the first quarter of 2021 as compared to the first quarter of 2020. This decrease was due to the decrease in cash proceeds from the issuance of our common stock, as we did not raise any equity capital for the three months ended March 31, 2021. In support of our long-term business and future finance with respect to our fuel development, we expect to continue to seek additional DOE funding in the future, along with new strategic alliances that may contain cost sharing contributions and other additional funding from others, in order to help fund our future R&D milestones, leading to the commercialization of our Lightbridge Fuel.

I will now turn the call over to Sherrie Holloway, our Accounting Manager, who will go over select P&L financial information for the first quarter of 2021. Sherrie?

Thank you, Larry. Net loss for the first quarter of 2021 was $2 million, compared to $2.3 million for the first quarter of 2020, primarily due to these factors. Total R&D expenses were $0.4 million in the first quarter of 2021, compared to $0.4 million in the first quarter of 2020. Expenses were consistent period-over-period, as we transition to a new fuel development strategy with the DOE's National Laboratories. There was a decrease in employee compensation and employee benefits of approximately $0.2 million offset by increase of approximately $0.1 million, and outside research and development work and an increase of approximately $0.1 million in patent expenses.

R&D expenses consist primarily of employee compensation and related fringe benefits and other allocable overhead costs related to the research and development of our fuel. G&A expenses for the three months ended March 31, 2021. were $1.8 million. The G&A expenses were decreased by approximately $0.2 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Due to a decrease in legal and professional fees of approximately $0.1 million related to the Framatome arbitration, and a decrease in employee compensation and employee benefits of approximately $0.1 million. Net other operating income was $0.1 million for the 3 months ended March 31, 2021, due to the recognition of grant income from the first GAIN voucher. There was no grant income for the 3 months ended March 31, 2020. Now over to you Seth.

Thank you, Sherrie. And with that, we will go to the question-and-answer session. Thank you to everyone who has submitted questions. Matt, Please go ahead with the questions.

Thank you, Seth. The first question. How does the recent coextrusion announcement differ from your previous work?

Okay. Andrey, you take that one.

Sure. Seth. The work we announced this week is different. We used our patented high temperature coextrusion process for our three-lobe Lightbridge Fuel design variance incorporating the central line displacer and use in nuclear grade cladding alloy materials. These extrusions also include some specimens with intentional internal defects, they're going to perform certain type of non-destructive examination tension on those particular surrogate rods.

The components produced from this work will enable Lightbridge to begin technically validating our finite element computer models of the fuel fabrication process, before the corrosion takes in on as-extruded cladding material needed for future licensing, and begin the development of non-destructive examination techniques for our fuel. These activities are part of our ongoing efforts to qualify on the sanction process and develop as-fabricated specifications for our metallic fuel rod design, that will ultimately be used to design and manufacture enriched-uranium fuel rods for lube irradiation testing -- test reactor and commercial length fuel rods for operation in a commercial reactor.

Thank you, Andrey. Our next question. Can you provide an update on where things stand today, one year later, in terms of the work to be done at INL?

Yes, Jim's been in charge of that work. Jim, you want to take that one?

Yes, sure, Seth. As we previously mentioned the ATR experiment design at the Idaho National Lab is moving forward with an expected completion date at the end of the third quarter of this year. We are nearing the completion of the conceptual phase of the experiment. What this means is that we will have a detailed specification for the fuel sample geometry, the fuel -- the enrichment levels of the coupons, the position of the sample capsules within the ATR core, and most importantly, the resident time of each capsule in the reactor. These factors are being optimized by INL using an iterative nutronics and thermal hydraulics modeling approach, with the goal of achieving the desired range of fuel burn-ups within a minimum amount of reactor time.

Once completed this conceptual phase will allow INL to proceed with the development of the engineering and fabrication drawings of specifications for the capsules themselves, and the fuel coupon samples as well as to complete the safety case for sample insertion into the ATR. We have identified a potential target date in late 2022 or early 2023 for insertion, following the ATR core internals change on outage. This state, of course, -- the target date of course depends upon the final schedule for the ATR outage as well as INL's other commitments for reactor irradiations. In addition to completing the experiment design that will allow Lightbridge to move forward with contracting for sample material and test coupon fabrication and ultimately this will allow us to perform post radiation examination and measurement of the samples in collaboration with INLY. Back to you, Matt.

Our next question. Can you discuss which SMR or advanced reactor types might be used for Lightbridge Fuel? And what reactor types may not be feasible? And do these designs have any application in the current power reactor fleet?

Hey Jim, take that one.

Yes, yes. The Lightbridge Fuel has a potential application in most water-cooled reactor types, including pressurized water, boiling water, and heavy water designs. Of the current SMR advanced reactor designs, the most obvious application for our fuel would be in NuScale Power module, the GE Hitachi BWRX-300 and on and in the Holtec SMR-160. Other advanced designs, such as the TerraPower sodium fast reactor or the X-Energy Xe-100, which is a TRISO fuel helium cooled reactor, would not have a direct application for the current Lightbridge Fuel design.

However, these companies do share some synergies with Lightbridge, in the areas of HALU supply and in metallic fuel fabrication. We have not completely explored the other advanced reactors such as molten salt or low power density graphite moderated designs, but these are less likely to have application for our current fuel. And finally regarding the current power reactor fleet, most of the R&D efforts accomplished first water-cooled SMR designs will have some if not a direct application to the existing reactors. And these include the current fleet of PWR, BWR, CANDU plants. As such, we can still see a great potential to deploy the Lightbridge Fuel under the current fleet. Back to you again, Matt.

Thank you, Jim. Per my understanding, Lightbridge Fuel uses uranium and zirconium. Do you have designs to use other materials?

Yes. We have done work on a version of our fuel utilizing plutonium and zirconium, and that technology is included in some of our patents that we've issued -- that have been issued. This version of our fuel could be used to dispose of plutonium from dismantled nuclear weapons, utilizing in reactor fuel to dispose of a plutonium.

And this technology could also be used to produce power by disposing of reprocessed plutonium from used reactor fuel. In the past, we designed a thorium-uranium fuel that we also patented. We are no longer working on thorium fuel. The reason we are focusing on our metallic zirconium-uranium fuel is that this design best addresses the needs of the market. It best provides the power uprates and longer fuel cycles that reduce the cost of electricity generated by reactors, and that's what utilities are looking for. And this fuel design also adds tremendous additional safety and non-proliferation benefits. Next question, Matt?

With the recent talk from the Biden administration supporting existing large reactors in the upcoming Infrastructure bill, how can this be viewed as a benefit for Lightbridge?

Well, what I'd say is that energy production is crucial for infrastructure. And there is talk, as I mentioned earlier in the call, about apparently including talk by the Secretary of Energy, Jennifer Granholm of production tax credits for nuclear power plants. And that type of support plus the economic benefits of Lightbridge Fuel, could significantly improve the economics of owning and operating nuclear power plants, large and small, keeping existing plants open, that could use our fuel, and lead to the construction of new reactors that can use our fuel, including we believe large numbers of SMRs. Next question.

This is our last question. Nuclear plants like at Indian Point are being shut down throughout the country. When do you think that the perception of nuclear will change to the better in this country?

Let's start today. If we are really going to meet IPCC climate goals, large growth in nuclear power has to be part of the answer. And if the U.S. is really going to compete in energy markets globally, with China and Russia, advanced nuclear technology that the customers prefer, has to be a part of the answer. Lightbridge's technology can help make nuclear power more acceptable.

And with that being our last question, I'll say thank you everybody for participating on today's call. We look forward to providing additional updates in the near future. In the meantime, we can be reached at IR at ltbridge.com. Stay safe, stay well. Goodbye.

That concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.