Start Time: 16:00 January 1, 0000 4:25 PM ET
Lightbridge Corporation (NASDAQ:LTBR)
Q3 2022 Earnings Conference Call
October 31, 2022, 16:00 PM ET
Company Participants
Seth Grae – President and CEO
Larry Goldman – CFO
Andrey Mushakov – EVP, Nuclear Operations
James Fornof – VP, Program Management
Sherrie Holloway – Controller
Matthew Abenante – Director, IR
Conference Call Participants
Operator
Thank you for standing by, and welcome to the Lightbridge Corporation Business Update and Third Quarter 2022 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.
Matthew Abenante
Thank you, Carmen, and thanks to all of you for joining us today. The company’s earnings press release was distributed last Thursday and can be viewed on the Investor Relations page of the Lightbridge Web site at www.ltbridge.com.
Joining us on the call today is Seth Grae, Chief Executive Officer; along with Larry Goldman, Chief Financial Officer; Andrey Mushakov, Executive Vice President for Nuclear Operations; Sherrie Holloway, Controller; and Jim Fornof, Vice President for 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 offerings. 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 estimates. 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.
Seth Grae
Hello, Matt, and thank you all for joining us to discuss today’s third quarter 2022 results. Last week, we held our 2022 annual meeting of stockholders. Thank you to Lightbridge’s shareholders who cast your votes, resulting in approval of all the proposals. We appreciate your vote of confidence as we gear up toward the next phase of our fuel development activities. I also thank Dr. Victor Alessi for service to Lightbridge as an Independent Director. Vic departed the Board after last week’s meeting and we wish him the very best in his retirement.
Lightbridge has continued to make progress on our fuel development program, including our work at Pacific Northwest National Laboratory from our second GAIN voucher award, which is focused on the manufacturing process of Lightbridge Fuel. The ongoing activities are in their final stage, and we expect them to culminate by the end of the year in a process suitable for producing fuel samples for our upcoming irradiation tests.
We are in advanced stages of negotiation for a strategic partnership project. This will be our first formal step toward helping America meet its clean energy and energy security goals. This series of agreements will allow for cooperative work at Idaho National Laboratory, INL, leading up to the irradiation testing of our fuel material samples in the Advanced Test Reactor, which is America’s largest research reactor and is at INL. This is a key critical path step necessary to support fuel performance modeling and regulatory licensing efforts for the commercial deployment of Lightbridge Fuel.
I look forward to this work at a research reactor as an important step in gaining entry to commercial power reactors, including existing and future light-water reactors, large light-water reactors, can do type reactors and future small modular reactors. This step entails fabrication of the fuel material samples and their irradiation testing in the Advanced Test Reactor where that data will be relevant for eventual deployment of our fuel in the abovementioned types of commercial power reactors.
Now over to Andrey Mushakov, Executive VP for Nuclear Operations, to review our ongoing fuel development activities. Andrey?
Andrey Mushakov
Thank you, Seth. Last year, the U.S. Department of Energy awarded us a second voucher from the Gateway for Accelerated Innovation in Nuclear, or GAIN program, to support the development of Lightbridge Fuel in collaboration with Pacific Northwest National Laboratory, PNNL. The scope of the project is to demonstrate Lightbridge’s nuclear fuel casting process using depleted uranium, a key step in the manufacture of Lightbridge Fuel.
On July 14, 2021, Lightbridge entered into a CRADA agreement, Cooperative Research and Development Agreement, with the Battelle Memorial Institute, Pacific Northwest Division, the operating contractor of the Pacific Northwest National Laboratory, in collaboration with the U.S. Department of Energy. The project commenced in the third quarter of 2021 and is expected to be completed by the end of this year. The total project value is $0.7 million with three quarters of this amount provided by the U.S. Department of Energy for the scope performed by Pacific Northwest National Laboratory.
Under the GAIN voucher, we have been working with PNNL to develop a reliable and reputable casting process utilizing PNNL’s existing equipment. To date, several castings have been performed and the cast ingots analyzed. In an iterative process, the casting methodology is modified based on the characterization results as we approach an optimized process to achieve the desired outcome. This work is expected to culminate in a process suitable to produce fuel samples for our upcoming irradiation tests.
Back to you, Seth.
Seth Grae
Thank you, Andrey. Last week, I was part of the industry component of the U.S. delegation at the International Atomic Energy Agency’s Nuclear Energy Ministerial Conference, which was held in Washington DC. As the official statements of the conference showed, there has been a shift in the conversation, in addition to climate, emphasizing energy security as a theme of great importance.
The conference reflected a global competition among countries, which has been heightened by Russia’s invasion of Ukraine. Russia is using energy as a weapon and is attacking civilian infrastructure, including nuclear power plants. Through two GAIN vouchers, our work at U.S. national labs and the new collaborative project getting underway at MIT with new scale, Lightbridge is very much becoming a part of this important effort.
Regarding energy security, it’s important to remember that fossil fuels require trains or pipelines to reach downstream markets. The length of the track or the pipeline is always vulnerable to a physical attack and possibly by cyber attack. Any adversary from anywhere in the world can turn your energy off, because you can’t protect the entire length of a train track or a pipeline. Two natural gas pipelines in Europe have recently been attacked.
Much of the infrastructure for fossil fuel relies on constant deliveries of new fuel. Coal plants get tons of coal delivered every single day by train, while natural gas is a constant replenishment of gas to the plant through the pipeline. If you don’t get the fuel, the plant has to shut down after running through their onsite storage inventory. Same for an oil burning plant. But with nuclear, the fuel generally lasts about a year and a half in between refueling outages and some plants keep up to several years of fuel on site, reducing adversaries’ ability to cut off energy supplies, and Lightbridge Fuel can even lengthen the fuel cycle additionally.
Countries seem to be waking up to the realization that they can’t meet their national security, energy or climate goals without a significant increase in nuclear power. And now we’re seeing that this is starting to happen. Since our last conference call, Canada, the United Kingdom, Japan, Belgium, South Korea have announced plans to extend the operations of existing nuclear plants and explore the feasibility of building new reactors, heightened by the successful issuance of Green Bonds to Canada’s Bruce Power to refurbish six units at its nuclear power station in Ontario. That issuance is the first for a nuclear project and will open doors for future Green Bonds support for nuclear power.
In the U.S. the state of California reversed its decision to immediately shut down the Diablo Canyon plant and intends to operate it until 2030. Similarly, in Georgia, the Hatch Nuclear Power plant has announced its intention to apply for a license extension. Michigan is investigating options to restart the Palisades plant. In Lightbridge’s home state of Virginia, Governor Glenn Youngkin released the comprehensive energy plan that endorsed expansion of nuclear energy and the goal of installing a small modular reactor in Southwest Virginia within 10 years.
Virginia’s North Anna Nuclear plant has a pending license extension to operate until at least 2058. State level developments such as these in the private and public sectors are occurring with bipartisan political support, underscoring nuclear energy’s advantages in terms of energy security and zero carbon emissions. Overall sentiment and public acceptance for nuclear power is increasing, with positive developments coming from government, academia, municipalities, electric utilities, and innovative technology companies such as Lightbridge. I look forward to the progress we will make through the rest of this year and for the momentum to continue.
Now I will turn the call over to Larry Goldman, Chief Financial Officer, to summarize the company’s financial results.
Larry Goldman
Thank you, Seth, and good afternoon, everyone. For further information regarding our third quarter 2022 financial results and disclosures, please refer to our earnings release that we filed last Thursday and our Form 10-Q that we will file with the SEC later today.
The company’s working capital position at September 30, 2022 was $30.4 million compared to $24.7 million at December 31, 2021. Total assets were 31.7 million and total liabilities were 1.2 million at September 30, 2022.
Total cash used in operating activities decreased by 4.7 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 from 8.8 million to 4.1 million. This decrease was primarily due to the $4.2 million arbitration settlement payment in 2021 related to the dissolution of the joint venture and changes in certain working capital accounts.
Total cash provided by financing activities was 10.6 million for the nine months ended September 30, 2022, an increase of 7.2 million compared to the same period in 2021. This was due to an increase in the net proceeds from the issuance of common stock in 2022.
In support of our long-term business and future financing requirements with respect to our fuel development, we expect to seek government funding in the future, along with new strategic alliances that may contain cost sharing contributions and additional funding from others in order to help fund our future R&D milestones, leading to the commercialization of Lightbridge Fuel.
I will now turn the call over to Sherrie Holloway, our Controller, who will go over our P&L financial information for the third quarter of 2022.
Sherrie Holloway
Thank you, Larry. Net loss for the third quarter of 2022 was $2 million compared to $1.9 million for the third quarter of 2021. Total R&D expenses decreased by $0.2 million for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. This decrease was primarily due to a decrease in consulting and outside R&D expenses.
Total G&A expenses increased by approximately 0.2 million for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. There was an increase in stock-based compensation expenses of $0.1 million and an increase in director fees, employee compensation and employee benefits of $0.1 million.
Net other operating income was $0.1 million for the three months ended September 30, 2022 and $0.3 million for the three months ended September 30, 2021 generated from the GAIN program and recorded as contributed services – research and development with a corresponding charge to R&D expenses.
Not over to you, Seth.
Seth Grae
Thank you, Sherrie. And with that, we will go to the question-and-answer session. Thank you to everyone who has submitted questions. And Matt, please go ahead with the questions.
Question-and-Answer Session
Matthew Abenante
The first question is a technical question. Does Lightbridge Fuel the definition of a high-assay low-enriched uranium fuel product?
Seth Grae
Yes, it does. The Department of Energy in the United States defines high-assay low-enriched uranium, HALEU, as being enriched above 5% in the element U-235, Uranium-235 to just below 20% enrichment and that is the range in which our fuel will be enriched for light-water reactors. So the answer to that one is yes.
Matthew Abenante
What happened to your seed-and-blanket thorium core? Is thorium still considered a viable alternative to uranium by Lightbridge and its investors?
Seth Grae
Yes, I’ll start and I’ll go over to Andrey. I’ll just say a lot of interest in thorium in the world had been driven by India’s interest in using thorium. But when under the George W. Bush administration, a deal was made that opened India up to import uranium and current reactor technologies, a lot of the driving interest in thorium moved away. And Andrey, over to you.
Andrey Mushakov
Yes. So based on our previous analysis and discussions with nuclear utilities, we concluded that the thorium fuel cycle was not economically viable at the current price of natural uranium. It might provide some fuel cost savings if the price of natural uranium were to exceed $200 per pound, which is quite a bit higher compared to where the price of natural uranium is today or has been in the past. While we are currently not pursuing thorium-based seed-and-blanket fuel assembly designs, we still own patents to that technology. So if the price of natural uranium surges above $200 per pound in a sustainable fashion in the future, we will take another look at thorium fuel cycle at that time. Back to your, Matt.
Matthew Abenante
Thank you. Countries around the world are refurbishing old plants and building new plants. I can’t help but wonder why it is taking so long to get your rods out there. Are you just staying under the radar so they don’t steal your invention before you get more patents?
Seth Grae
Okay, good question. Andrey, you want to start with that one?
Andrey Mushakov
Yes, sure. So ongoing projects involving the refurbishment of old plants or building new ones are largely based on existing technology or incremental evolutionary improvements to that existing technology. And that technology has been previously commercially deployed or extensively demonstrated in operating reactors over the past several decades. Lightbridge has developed a next generation metallic fuel technology for existing and future water cooled reactors. As part of our ongoing fuel development program, our fuel technology must undergo extensive in-reactor and out-of-reactor tests and experiments, the January fuel performance as well as other relevant data required for regulatory license and approval by nuclear regulators around the world. Nuclear experience shows in the nuclear power industry that bringing new nuclear technology to market typically takes 20 years or longer. For example, there are a number of advanced reactor designs that have been in development for quite some time. Many of these advanced reactors are expected to be deployed commercially in the 2030s at the earliest. We’re hopeful that advances in computational analysis coupled with our plant in reactor [indiscernible] can shorten these timelines. Back to you, Matt.
Seth Grae
Matt, I’ll just quickly add that following Fukushima and political issues, research reactors either closed in Norway and Canada or we lost access to them in Russia. And this has added to timelines of many U.S. and other companies, including Lightbridge. And we’re very grateful for the U.S. government stepping up now and making the Advanced Test Reactor available and giving us the support they need that didn’t used to be available. So as we lost capability in other countries, we’re gaining capability now in the United States, which helps us tremendously. Next question?
Matthew Abenante
I would like to know when your fuel rods will start testing at the National Laboratory. It’s been a year since your design for testing was approved. And you were just waiting for an opening in the schedule to start the retesting. Can you update us on the current status?
Seth Grae
Jim, take that one.
James Fornof
Sure, Seth. Since the completion of our GAIN voucher program with INL for the experiment design in the Advanced Test Reactor, we’ve been working with INL to identify the source of uranium material and define the fabrication processes necessary to develop and produce the coupon samples for this experiment. We believe that we’ve had general technical agreement with INL on these items, and that the contractual documentation for this work is undergoing final review and approval with INL and with the DOE. The current schedule for coupon fabrication is approximately two years. So we expect that irradiation in the ATR could begin in early 2025. Back to you, Matt.
Matthew Abenante
Okay. How does the current low availability of HALEU affect the timing for creating Lightbridge Fuel samples?
Seth Grae
Jim?
James Fornof
Yes, again. Yes, while it’s true that the supply of commercial quantity of HALEU is currently quite limited, we believe that there’s enough in the inventory at INL for the production of our coupons samples for the ATR irradiation. So we see no effect on timing of our coupon fabrication due to the availability of HALEU. However, as Lightbridge and other advanced fuel and reactor suppliers ramp up to commercial scale deliveries, the availability of HALEU could become an increasingly important constraint. The U.S. Congress and the Department of Energy recognize this limitation and have begun forward-looking HALEU procurement initiatives. These programs once fully implemented are intended to make available up to 25 metric tons of HALEU per year, and this would be in the form of uranium hexafluoride, uranium oxide and metallic uranium. And status on that is initial supply. Supplier expressions of interest for the program are expected by the DOE in the next few months.
Matthew Abenante
And for our last question submitted, will INL have ATR test loops available in the near term for Lightbridge Fuel testing, and what might be the approximate ATR queue wait [ph]?
Seth Grae
Can you take that one too, Jim?
James Fornof
Sure. As we have discussed in the past, the irradiation in the ATR and as Seth has mentioned, it’s a scarce asset and it’s quite in demand from its principal use or the United States Navy as well as users in a variety of industry and university programs. This is particularly true for the limited number of flux trap flow loop positions in the ATR. As such, INL can’t really provide us with a guarantee of slots in the ATR. However, in the case of our near-term testing plans, Lightbridge doesn’t need a flow loop for our current experiment. Instead, we’ll be using what’s known as a drop-in capsule location. And we’ve been working with INL to target its availability to be consistent with our coupon fabrication schedule. The ATR has quite a few more positions available for drop-in capsule experiments. As we go forward and continue to move through our fuel qualification program, we’ll ultimately need access to the flow loop capabilities of the ATR. In that regard, INL is investigating opportunities to increase the number and availability of flow loops in the ATR in the future. And we’ll continue to work with them closely to coordinate access to the ATR as they support the development of our fuel program.
Matthew Abenante
Back to you guys.
Seth Grae
Okay. Well, thanks for that, Jim. And 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@ltbridge.com. Stay safe, stay well. Goodbye.
Operator
And with that, ladies and gentlemen, we conclude today’s conference call. Thank you for participating and you may now disconnect. Good day.
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