Good afternoon and welcome to the 5E Advanced Materials' Fiscal 2024 Shareholder Update Call. At this time, all participants are in a listen-only mode. After today's presentation and prepared remarks, 5E's Executive Management team will conduct a question-and-answer session with the company's sell-side research analysts and will also respond to questions submitted by investors. Please note that today's conference call is being recorded. I will now pass the call over to Nathan Skown, Investor Relations. Nathan?

Good afternoon. Thank you for joining us today for 5E Advanced Materials' fiscal 2024 conference call. During this call, management will be referencing our earnings press release and a webcast presentation that can be found in the Investor Relations section of our website. For a copy of our press release or the supplemental presentation, you may contact Alpha IR Group at [email protected] or go to our Investor Relations page on our website. Please turn to our legal disclaimers. Remarks made on today's conference call will contain forward-looking statements, including our expectation of future costs, production capacity, market dynamics, liquidity, cash spending, and other items. Our actual results may differ materially and adversely from those projected or discussed in these forward-looking statements. Additional information concerning factors that could cause the results to differ materially and adversely from these forward-looking statements are contained in our press release that went out earlier today, as well as the disclosures in our public filings with the SEC. The company is under no obligation to update forward-looking statements. Today's call may also include a discussion of non-GAAP financial measures as that term is defined in Regulation G. Financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. This afternoon's conference call is hosted by 5E's Chief Executive Officer, Paul Weibel; and Chief Strategy Officer, J.T. Starzecki. Management will first lead off the call by making some prepared comments, after which, we will open up the call to your questions.

Thank you, Nathan and thank you everyone for joining us today. We recently closed the books on our 2024 fiscal year. Despite fiscal year 2024 being a challenging one for 5E, there has been significant progress made, which now positions the business for a much stronger, better future in 2025. In 2024, we made significant strides having obtained our final approval from the EPA, started the small scale facility, achieved first production and recently finished the month of June by shipping first customer samples. As we enter fiscal year 2025, our goals include completing the first phase of engineering for our 90,000 ton boric acid commercial facility, securing offtake agreements, exploring partnerships for our various byproducts that we'll produce and commencing the diligence phase for project finance. On today's call, we will discuss the recent capital raise, current state of the small scale facility, report progress on our cost optimization, and outline the outlook for fiscal year 2025. Please turn to Slide 4. Last week, we announced a capital raise of $10 million. The new capital consists of a $4 million direct common equity offering from a new U.S.-based shareholder as well as a commitment from our two lenders to issue via private placement, $6 million of additional convertible notes. We believe that this capital raise provides the runway to complete the first phase of commercial engineering and allows our management team to focus exclusively on this effort. We have a strategy and a deliberate plan in place for the use of these recently raised funds. The use of proceeds from this capital includes the following; advancing the first phase of the commercial plant engineering program, which we target to complete in December or January of 2025. Upon completing this phase of engineering, we expect to then quickly update our technical report summary. Second, to fund the operation of the small scale facility, where we will continue our efforts to optimize capital and operating costs and advance production of our product for customer qualification. Thirdly, the new capital will aid in our ongoing pursuit of offtake agreements and commercial negotiations. And finally, advancing various government initiatives already in the works. Please turn to Slide 5, where we will report on the progress of the small scale facility. I'm pleased to report that we had zero safety incidents during the quarter. I'm proud of our team, and the behavior-based safety program we have implemented continues to drive accountability, awareness, and a culture of safety. Additionally, we continue to achieve head grades of 5.5% to 6% boric acid in solution, which equates to approximately 10,000 parts per million of boron when we sample. This result continues to demonstrate that 5E is in possession of a world-class resource. Despite the good results, we have not gone without headwinds that have resulted in some plant downtime. Recent maintenance issues included downtime to repair a leak at our heat exchanger as well as revising the design of our screw conveyor that feeds boric acid from the belt filter to the dryer. Additionally, we paused operations for about two weeks in the month of August to install a sifter and enclose the bagging section of the plant to prevent final product from being exposed to the elements. Our team was judicious, swift, and diligent in executing the necessary solutions to have us back up and running. With the modifications made, our current production rate is one short ton per day of on-spec product. When we initially started producing, the goal was to first produce boric acid; the second goal was to achieve a product that meets prospective customer specifications, and the third goal was to begin increasing rates. While we continue to assess increasing production rates, we are currently comfortable operating at a rate of one short ton per day as it provides us with a liquidity profile, whereby we can complete the first phase of engineering, continue to optimize costs and progress customer qualifications while we work towards offtake agreements. As we build towards and assess higher production rates, we continue to obtain critical information that is integrated into our commercial engineering design.

Thanks Paul. If we can turn to Slide 7, we will quickly touch on our commercial strategy and how we are advancing down this critical path. The commissioning of our plant and subsequent operations has allowed us to use this early production to initiate our customer qualification program, which we recently launched in late June. This is a key step forward in the development of our project as it lays the groundwork for broad product acceptance, which will underpin the platform to execute offtake agreements with a variety of customers. Since launching the customer qualification program, we have been progressively advancing commercial discussions with interested parties who are actively looking to diversify their supply base of boric acid now and into the future. Initially, our qualification program included two customers who are leaders in specialty glass production for premium consumer electronics and fiber optics, as well as pharmaceutical glass products. After distributing our initial samples as part of our growing discussions, we have received positive feedback and have progressed to the next stage with both customers. We note that these potential customers carry with them very attractive growth profiles and long-term demand outlooks. For these customers, the need to secure a domestic source and a reliable supply chain of boric acid is of critical importance now more than ever. More recently, we have added two additional customer prospects to our pipeline and have already shipped samples to them. These customers are also industry leaders with strong long-term growth needs and demand profiles, with one being in the energy transition space and the other in a military defense-related industry. Encouragingly, with only a few months of formal discussions behind us, our commercial strategy has made and will continue to make incremental progress. Furthermore, our project continues to capture attention and recognition in the marketplace and we continue to receive inbound inquiries and new interest from parties looking to receive product samples for testing and qualification. If we can move to Slide 8 for a quick update on the progress towards our Federal government program. Our government affairs program has always pursued three main outcomes as part of our initiatives in Washington, D.C.; first, Federal funding support to advance current operations as well as financial commitments for our commercial Phase 1 facility. Second, congressional backing on Capitol Hill for the support of domestically produced boron and its derivative products; and third, the inclusion of boron on the USGS Critical Minerals list. Multiple Federal funding applications remain in process for both the Department of Defense and the Defense Logistics Agency. Within the last quarter, the company was recently accepted into a Federal program called Cornerstone, which administers investments under the Defense Production Act. It's worth noting that we continuously look and apply for Federal funding as both short and long-term solutions for the business. To update everyone, we continue to monitor a submitted application we made to the Department of Energy earlier this year under an open funding call. Per the agency's website, winners of the awards are expected to be announced this fall. The final highlight to note related to government support comes through an application submitted to the U.S. Export-Import Bank for the Made in America initiative. 5E completed our initial application in mid-July for loan-backed guarantee of up to $285 million in project debt finance for our Phase 1 commercial plant. We hope to receive formal feedback and a letter of interest from our application this fall. Lastly, we remain very engaged with key members in Washington, D.C. to drive support for the newest domestic source of boron in the United States.

Thank you, J.T. As we turn to Slide 9, we'll discuss the next steps forward we'll be taking on our project as we execute our strategic playbook and deliver catalysts over the next five to six months. As J.T. mentioned, we have applied for the U.S. EXIM Bank's Made in America initiative. We expect the letter of interest this fall, which is an invitation to project diligence. To successfully secure project finance, we'll need to progress the first phase of commercial engineering and execute firm offtakes with bankable customers. In June, I outlined that we would utilize the summer to optimize our design. Today, given our superior research, we know that chilled crystallization is the optimal process design to produce boric acid for our commercial facility. Fluor, our EPC firm, has already begun moving forward with this design, has started the process for budgetary bids and our team has a parallel work stream to assess gypsum against calcium chloride as our byproduct mix. Our engineers have dedicated sub-work streams that include vendor and equipment testing, on-site lab testing for further processing improvements, and multiple scenarios of material and energy balances. Through this, we'll be using a data-driven methodology to test CapEx and OpEx, which will create the ability to drive down total cost and determine the optimal design. Today, we know we have multiple potential pathways for co-product revenue streams, and we are putting each under its own standalone test. These potential revenue streams, and the enhanced optionality they bring to the project's economics, have come as a function of our ongoing project cost optimization work. As the first phase of engineering progresses, we will report this progress and lift the veil on catalysts that we expect will drive our share price higher. Additionally, the product we produce at the small scale facility will be used to increase to customers in our pipeline and our announceable letter of intents and work towards offtake agreements that will underpin bankability for project finance. Lastly, we continue to progress our already submitted applications and monitor the appropriations, DoD and DoE submissions with hope for a favorable result in the near-term. I'll conclude on Slide 10. Ultimately, both the progress we've made on the ground at our Small Scale Boron facility and with the successful recent capital raise, we have runway ahead of us to complete the first phase of commercial engineering. This has given our management team the latitude to focus on the business, improvement of economics, and reporting on our progress. This is critical for 5E's next stage of development and I'm highly confident in the plan we have in place. Despite the headwinds of 2024, which we have overcome and advanced, our business case remains firmly intact. Our key permits are in place, our customer qualification program is underway, and we have a clear direction to progress forward in 2025. As always, I'd like to thank the entire team at 5E Advanced Materials for their hard work and contributions. With that, we'll open up the call to your questions.

Thank you. We will now begin the question-and-answer session. The first question comes from Matt Summerville with D.A. Davidson. Please go ahead.

Hey guys, You've got Canyon Hayes on for Matt Summerville today. Thanks for taking the questions. Maybe just an update on recent spot market pricing and J.T., I remember a couple of months ago, you had mentioned that there were taking issues at some of the larger market constituents, I'd be curious to hear if that was ongoing still?

Canyon, first, thanks for joining us today and having some input. So, let me first address the taking comments that pertains to other producers within the market. There, we are still hearing instances based on the environments in which product is being transported into that there still is a struggle with certain producers to put product in large quantities into markets where caking is still a continued issue that potential customers are working on. As far as spot pricing goes, recently, Fastmarkets launched coverage of boric acid and they have continued to put some guidance into the marketplace where spot pricing for boric acid is in the range of $1,100 to $1,250 per ton.

Great. Thank you. Moving over to the balance sheet, a couple of moving parts here. You've got the recent capital injection. Kind of where you're standing today and at current cash burn rates, maybe an update to where that will bring 5E over the next months, years, et cetera?

I appreciate the question. As mentioned earlier, this will take us through our first phase, the FEL-2 Engineering program, which should lead us into early 2025.

Great. Thank you for the questions.

Okay. The next question comes from Tate Sullivan with Maxim Group. Please proceed.

Thank you, Paul. You mentioned the customer qualification program. Do those customers prioritize the consistency of grade over an increasing volume? Also, could you provide more details on how the qualification program will function?

Yes, when discussing different customers, each has their own specifications. Boric acid is often viewed as a commodity; however, the customers we're engaging with have specific requirements that differentiate it from being just a commodity. Factors such as moisture content, impurity profile, and particle size are important. Ultimately, it comes down to who meets the best specifications. For instance, while some customers may require chlorides and sulfates to be at 25 ppms, others may have a threshold of 50 ppms. We are currently aligned with the specifications of our existing customer. The process began with KD samples, and the next phase will involve material handling, where customers will take one or two tons. It’s important to note that every customer has unique needs, and their processes vary accordingly.

Yes. Is one ton a day enough to satisfy most of the customer qualification program?

J.T., you want to take that?

Sure. So, at this point, Tate, yes, it does meet the needs that the customers and the testing programs that we've launched, plus the testing programs that we're starting to queue up. As Paul mentioned in some of his opening remarks, that one ton a day we view as the cost optimized amount of tonnage coming out of the small scale facility right now to feed into the customer qualification program and it gives us runway as we continue to do that to bring in more customers into the program. So, we do feel that at this point, that's the right balance for us.

Great. Can you discuss the operating costs of running the small scale facility? Is it primarily focused on processing now rather than injection? Could you elaborate on where most of the costs will come from while operating the plant in the future?

At one ton a day, we have a manageable variable cost primarily related to hydrochloric acid, LNG, lime, and some sulfuric for regenerating HCl. The fixed costs are currently the larger component because we operate continuously. That's why we feel comfortable at this one ton level, especially since we've raised ten, allowing us to continue with customer qualifications. A ton a day is sufficient for securing offtake because most customers are focused on long-term supply when we reach 90,000 tons. We plan to build some inventory to offset incremental sales against production credits. Given our current position and liquidity, we believe we are in a favorable situation.

You mentioned some of the work from August. Are you finished with the shutdown-related work, or could there be more shutdown-related tasks in the future? Also, was that work connected to a bagging machine process?

Yes, the plant is predominantly outdoor and utilizes solution mining. The process involves piping into the crystallizer and then to the belt filter. From the belt filter, the material is moved to a screw conveyor for bagging. We identified the need to enclose the back end of the plant where material exits the dryer and enters bulk material handling for filling super sacks. Although it was a straightforward task, we temporarily halted production to complete the enclosure. We are conducting preventative maintenance, but some aspects are challenging. To be honest, our process has a unique element to it, and as we've progressed, there have been initial challenges, which we've worked through. We have addressed a few of those issues and are on track to recover. Although we may experience temporary setbacks, we consistently find ways to advance further.

Thank you on all the great details. Thank you very much.

The next question comes from Matthew Key with B. Riley Securities. Please proceed.

Hey good afternoon Paul and J.T. Thanks for taking my questions. Obviously, a lot of progress being made in terms of boric acid production. I did want to touch on lithium briefly. I think you noted in your prepared remarks, you're currently evaluating various recovery methods for the byproducts. Could you maybe go into a little bit more detail on that? And what's the current timeline for producing a customer-ready lithium product from Fort Cady?

So, what we're observing today is that test samples show parts per million in the range of 40 to 60, which is encouraging. We want to gather more data. As we examine some of the byproducts we might produce, like calcium chloride, we could see lithium concentrations build up over time, potentially leading to interactions with sodium, or we could employ ion exchange on the remaining calcium. Alternatively, if we pursue the gypsum method, we could extract lithium through ion exchange after removing the metal salts. We are very aware that the current market conditions have imposed headwinds on emerging producers, and while we are optimistic about the bullish trend in lithium, we aim to extract and recover it at the lowest possible cost. We have a couple of strategies in our current design to achieve this. Additionally, we are conducting ongoing testing, where increasing our HCl rate has led to a threefold increase in results in the lab. This indicates potential game-changing economic benefits, and it’s reassuring to know that we have this data available. This is also relevant to the DoE grant application we submitted, as we explore how to maximize this potential. Once we conduct a bit more research, we will be in a better position to discuss timelines.

Got it, that's helpful. Thank you. And you mentioned that 5E has submitted applications for funding with both the DoD and DoE. Assuming that's all successful, could you remind me a ballpark of how much financing could potentially be received from those programs?

In our opening comments, we discussed the size of the EXIM credit back guarantee we have requested. We are pursuing substantial grant applications for 2024, amounting to tens of millions of dollars across various programs. We have made some progress as the applications have moved forward. There are specific processes we need to follow for appropriations requests, similar to any federal funding that falls under this category. The funding we are seeking from both the Department of Energy and the Department of Defense is significant and will have a major impact on our Phase 1 capital expenditure. All of this is connected to the credit back guarantee. If we succeed in the EXIM process, we will secure the $285 million needed to support project financing, along with the grant funding. The unique aspect of the grant programs from the DoD is that we can submit requests annually. Under the Defense Production Act Title III, we are not restricted to a single request; there are several opportunities available. While we do not control the timelines, the applications and requested amounts are expected to be very impactful and beneficial to our broader stakeholders.

Got it. Thank you. That's very helpful. Yes, that's it for me and good luck moving forward.

Thanks Matt.

Thanks Matt.

We have a follow-up question from Pete Sullivan with Maxim Group. Please proceed.

Thanks, it's Tate Sullivan from Maxim, just following up. I know you have time to file a 10-K given your fiscal year ended in June. Are you planning to file it tonight by chance or to be determined?

Yes. Based on the deal last week, all the subsequent disclosures are being updated and are in final review. If everything goes smoothly, we expect to release them first thing next week.

Okay. And then J.T., the last one is that you mentioned getting on the USGS list of Critical Materials for 2025. Does that increase funding eligibility? Can you just list some of the benefits of potentially being on that list?

Great question, Tate. Does it unlock additional funding opportunities? The broad answer is yes. The Critical Minerals list, which involves both the Department of Energy and the Department of Defense, includes funding opportunities for extraction projects related to Critical Minerals. If boron were to be added to the Department of Interior's USGS list, it would provide access to more funding specifically from the Department of Energy and potentially open up opportunities within the Loan Program Office. If we choose to go that route, there are additional elements in our strategy that would also play a role. In short, being added to the list would enhance our profile and unlock further funding opportunities.

Thank you very much.

Thank you, John. For a moment, I will recite a number of frequently asked questions that were submitted by our investors in advance of this call. While a number of the questions that were submitted were also asked by our sell-side analysts, I will go through the most frequently asked questions now to the management team. Can you provide any additional detail on the funding applications that the company has submitted and any anticipated expectations regarding the level of funds related to these applications?

Paul, do you want to take that or would you like me to?

No, that's kind of government, so go forward.

Thank you, Joe. I appreciate your input. This is a question we receive quite frequently. I will share some ranges for the funding request without going into specifics regarding the Department of Defense. Earlier this year, we requested $20 million as part of the defense budget to support the ongoing and increased production of domestic boric acid, which is essential for various derivative products. Additionally, we submitted a request under Title III of the Defense Production Act through the Defense Logistics Agency for more engineering work, equipment pre-purchases, and scalability of our current facility, with a request amounting up to $35 million. It's important to note that the U.S. government has the authority to modify these figures, potentially reducing or increasing the amounts. They can also decide on the allocation between the Defense Logistics Agency and the industrial base. The key takeaway is that we have applied for significant funding, and we believe that our base case and the arguments presented in our funding applications are among the strongest available in the market today.

Thank you. And another investor submitted question. What are the anticipated next forthcoming steps in your customer qualification program?

I can outline some general steps. Each customer has a unique way of using boric acid in their production. Some will test the impurity profile, the chemical content, and the particle size. As long as they meet those criteria, they will move forward with production testing. Depending on the discussions and processes we're engaged in, some customers will include storage and handling testing due to their operational environment. Typically, we start with lab testing, which we've begun with a few customers, and then proceed down the value chain. Some customers will add storage and handling tests, while others might bypass that step, which depends on the target market. Usually, the next phase involves small-scale production where they create laboratory-based products from a raw materials standpoint. Eventually, some customers may want to produce full batches using all necessary inputs, including boric acid. This process varies widely. We must adhere to customer timelines since they are utilizing their facilities and personnel and fitting this into their schedules. I believe the broader audience would be keen to know that we maintain ongoing communication, frequently receiving feedback about the testing process. We are continuously mapping out the next steps, including the quantity of materials needed for upcoming tests or for new customers. We have a clear roadmap of our current status, what's ahead, and where we plan to go. As developments occur, we will keep the market informed.

Thank you. And another investor submitted question. Do you anticipate that you will have production-based revenues in fiscal 2025?

Thanks. I can take that. Yes, I think we want to build inventory of on-spec product, continuing to progress with customer qualification. As we overcome the challenges and set up vendors, any additional inventory will allow us to make sales, which then contribute to production credits. To maintain momentum, we would want to sell any surplus product.

Thank you. And the final investor submitted question is regarding the company's existing FEL-2 Engineering program. What are the biggest risks ahead of completing 5E's FEL-2 Commercial Engineering program and submitting a pre-feasibility study?

Thanks. Good question there. I think we feel really good about where we are on the boric acid side. And kind of as I noted, boric is, kind of, moving forward with budgetary bids, which is great. Know where we are basically up until that calcium stream, and that's what we continue to assess. And so I think that's a little bit of the unknown today, but we have the parallel work stream where we have optionality to kind of keep going on gypsum. And as we kind of do more homework and go to partnership opportunities, whether it's existing producers or on the licensing side with existing technology packages, can we bolt that on because there's a better outcome for project economics. So, I think that's like well aware of what we need to kind of do and the team is working really hard to make sure we hit that timeline.

Thank you. That concludes the investor submitted questions and I will now turn the call back over to Paul Weibel, CEO of 5E Advanced Materials.

Thank you everyone for your time and interest in 5E Advanced Materials. This does conclude our remarks. We have a tremendous opportunity in front of us to become the next producer of boric acid and lithium producer in the world. We do have that proven asset and a strategy to modularly expand the asset over the next several years. Look forward to sharing this journey with all of you in the upcoming quarters to come. Thank you.

Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.