PureCycle Technologies, Inc. Q1 FY2023 Earnings Call

Good day and thank you for standing by. Welcome to the PureCycle Technologies First Quarter 2023 Corporate Update. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Charlie Place, Director of Investor Relations. Please go ahead.

Thank you, Therese. Welcome to PureCycle Technologies' first quarter 2023 corporate update conference call. I'm Charlie Place, Director of Investor Relations for PureCycle. And joining me on the call today are Dustin Olson, our Chief Executive Officer; and Larry Somma, our Chief Financial Officer. This afternoon, we will be highlighting our corporate developments for the first quarter and subsequent to quarter end. The presentation going through on this call will also be found under the Investor tab of our website at www.purecycle.com. Many of the statements made today will be forward-looking and are based on management's beliefs and assumptions and information currently available to management at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in our Safe Harbor provisions for forward-looking statements that can be found at the end of our first quarter 2023 corporate update press release and in our quarterly report on Form 10-Q filed this morning as well as in our other reports on file with the SEC that provide further detail about the risks related to our business. Additionally, please note that the Company's actual results may differ materially from those anticipated, and except as required by law, we undertake no obligation to update any forward-looking statements. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties included, among other things, changes in connection with quarter end and year-end adjustments. Any variation between PureCycle's actual results and the preliminary financial data set forth herein may be material. You are welcome to follow on with our slide deck or if joining us by phone, you can access it at any time on purecycle.com. We are excited to share updates from the previous quarter with you. I will now turn it over to Dustin Olson, PureCycle's Chief Executive Officer.

Thank you for joining us today for our first quarter 2023 corporate update conference call. We appreciate your support and look forward to discussing our recent developments. Our flagship state-of-the-art purification facility in Ironton is certified mechanically complete and has completed the pre-startup safety management documentation required for solvent deliveries, which we started yesterday. We have the initial solvent charge delivery scheduled over the next five days and then expect to circulate solvent early next week. All of our core operations have been commissioned and are ready for startup. We are on track to begin commercial pellet production using the first post-industrial recycled and then post-consumer recycled feed in the second quarter. We still expect to be able to complete our startup timeline in order to meet the milestones as outlined in the recent bondholder agreement. Our goal is to produce between 45 million pounds and 75 million pounds of ultra-pure recycled resin in 2023. We have continued to advance pre-construction activities for our Augusta project since our last call. Importantly, we are working toward an agreement with the AEDA for a plan to begin development activities. Additionally, preparation for module construction is in progress, and equipment is beginning to arrive at Gulfspan's facilities in Beaumont, Texas. Our international projects are making progress. Our European team has initiated pre-construction engineering work for the permitting process at our site at the Port of Antwerp. Our joint venture with SK Geocentric continues to advance the collaborative engineering process for a multiline purification facility in South Korea. And we continue to make progress with detailed joint venture discussions and site selection efforts with Mitsui in Japan. Our joint venture team has started the feasibility study process on two locations that have the capacity for the development of two to four purification lines. We are frequently approached and also actively seek out opportunities to amplify what PureCycle's technology means to the global polypropylene recycling marketplace. As you can imagine, our primary focus has been on commercializing our first plant in Ironton. This is, quite frankly, where all employees have been spending most of their time. Having said that, we are beginning to spread our message globally through several recent events. I was invited to Davos to present on a Procter & Gamble panel, which highlighted PureCycle's technology. Several of our team members are active in national industry associations such as the Plastics Industry Association, the Institute of Scrap Recycling Industries, and the Association of Plastic Recyclers, where we are often provided speakership opportunities. And recently, PureCycle representatives traveled to Washington, D.C. to participate in Domestic Plastic Recycling Tabletop discussions as well as the U.S.-Korea Sustainability Summit discussions. While there, we also met with numerous members of Congress and other senior policy officials. We expect this participation to increase over the coming years as critical legislation is crafted to govern this emerging industry. We're proud to have secured an additional $62 million of non-dilutive debt financing and are working on several other equipment financing packages that we intend to close in the next few months. The AEDA has received our financing plan for one line in Augusta, and we are working on closing the land bonds by June 30, 2023. Turning to Slide 4. This project has been a testament to grit, determination, and a desire to finish. As you can imagine, there are a number of minor equipment issues when starting up the facility, and our team has been managing through all of those challenges. This is normal. They are teething challenges for all new technologies. We've spoken several times about needing to work through the early startup headaches, and this is what we're doing. While we have encountered some delays over the last two months, we're now excited to move forward with startup. I can tell you personally that the plant just feels different now. There's a new energy building within our team, and we are ready to run this facility. Our PureCycle team and field contractors who have worked on this project have willed this facility to mechanical completion. And I'm very proud to say we've positioned the facility to receive solvent deliveries; three arrived on Monday. We are currently in the following position: completed key pre-startup and safety requirements; utility plant is operational and in service; PrEP is operational and in service; flare systems are operational and in service; extruders are commissioned and ready for startup. As a result of all of this, solvent is being delivered to the site. The next step is to make every effort to ensure a safe and smooth startup that's focused on long-term operational success. We are not going to rush into the next steps. I hope you've had an opportunity to watch some of the videos that we've posted on our website, on social media, and on YouTube that showcase our PrEP, purification, and born-digital operations. We intend to continue showcasing our company with these videos all the way through initial pellet production. Turning to the next slide, I will walk through the next steps of Ironton's startup process. This is an updated slide from last quarter's call that shows our progress in achieving the operational milestones for the certification of the Ironton project. This is what we call our path to pellets. We closed the first bond milestone by achieving certification that Ironton is mechanically complete by June 30, 2023. PureCycle formally received third-party engineering certification just a few days later on April 28th, with agreement that the plant was mechanically complete on the 24th of April. We're currently in the in-between stage and between mechanical completion and first pellets. During the last call, I underestimated the time it would take to transition to first pellets. Instead of dual tracking activities like we originally planned, we purposefully slowed down our process for solvent introduction in order to more effectively facilitate a path to mechanical completion. This ultimately slowed down our initial forward progress but also helped us to build a better and long-term foundation for steady operations. Given this is our first facility, we took extra time preparing the plant through a process called PSSR, or pre-startup safety review. This involves final operations checks, safety walk downs, final equipment commissionings. During this process, we spent a significant amount of time testing instrumentation and working valves to ensure we are ready to operate. This is all now complete. Yesterday, we cleared another major hurdle and accepted solvent to the site for the first time. This is a big step and paves the way for commercial operations. The next two weeks will involve testing of solvent circulation systems, commissioning of the remaining equipment, primarily our filter media systems, while the solvent is circulating, and then we will introduce feed. Once feed is introduced, we will set levels, and then we will make our first pellets. We will notify the market of our success and start ramping up production rates from there. We remain committed to achieving these milestones in the time frames I've just described, given where we are today in ramping up the Ironton operations. Moving to Slide 6. I want to spend a few minutes to highlight the operational progress that we've made on executing the next phase of our growth strategy. In Augusta, our engineering teams have completed approximately 90% of the ISBL design and have begun work on the OSBL design. Gulfspan, our contracting partner, has started module preparation for the Augusta construction project at its site in Beaumont, Texas. We continue to make progress on our international projects. We have initiated engineering work at the Port of Antwerp in Belgium to support the permitting process. This activity will set this facility's critical path. Our joint venture engineering team in South Korea has advanced plant designs in accordance with the schedule and priorities identified in the JVA with SK Geocentric. Our core focus right now is to ensure that the final design measures seamlessly with the feedstock available to the site. And finally, our JVA discussions with Mitsui have progressed as anticipated, and we started feasibility studies on two preferred locations. All of this at PureCycle is fully committed to the Company's mission of providing a new solution to global plastic waste. Ironton is critically important today, but it's just the beginning of what PureCycle will become. I will now turn it over to our CFO, Larry Somma, for the financial update.

Thank you, Dustin, and please turn to Slide 7. We ended the quarter with just under $264 million in total available liquidity, a decrease of $62.2 million from the prior quarter. As stipulated in the bondholder agreement we executed in March, we transferred $87.5 million from unrestricted cash to restricted cash, or a net of roughly $74 million once PCT was reimbursed for the remaining original bond requisition. Our corporate and pre-operational employee expenses were $6.6 million during the first quarter, which was a slight decrease from the prior quarter despite additional taxes paid on employee stock vesting. We used $7.6 million of cash during the quarter for normal corporate operations, such as insurance, professional fees, and various other expenses. Additionally, we continue to make investments in our Ironton, Augusta, and PreP facilities, the majority of which came from unrestricted assets. As a consequence and in conjunction with the payments that we made to the bondholders, cash and debt securities available for sale decreased from December 31st by $124.1 million. One positive note is that we were able to execute a $25 million surety bond, which is relevant for our Augusta restricted escrow construction account. Our agreement with one of the multiple vendors supplying long lead items for the Augusta purification modules requires us to fund the escrow account with funds to address future costs and the risk of payment to their sub-suppliers. Closing the surety bond allows PCT to recoup some of the cash that had previously been in the restricted escrow construction account. Subsequently, we were able to progress the Augusta project during the quarter with $15 million of payments from the restricted construction escrow, $5 million of which was returned to our unrestricted cash balance. Now let me comment on our budget for completing the Ironton project. As noted in our 10-Q filing this morning, PureCycle anticipated as of March 31 that the remaining investments in 2023 to complete the Ironton facility could range from $26 million to $51 million. This range is dependent upon various contract contingencies and their ultimate resolution. The most important point is that we have already spent or forecasted the need for a total of $51 million, which means that any positive resolution of contract contingencies will be favorable to our future cash forecast. Please turn to Slide 8. Before I discuss the points on the slide, let me provide some details on the financing events that were completed since our call in March. We are pleased to continue executing on our financing plans with $62 million raised from non-dilutive sources. Our ability to execute additional agreements and term sheets, some of which I will discuss in a minute, enabled us to present a plan of financing to the AEDA related to the completion of at least one purification line in Augusta. In addition to the plan that we sent them, we informed them of more than $50 million of completed spend on the second purification line. The information sent now has us ready to focus on closing the financial bonds which will grant tax incentives for PCT to build and operate in Augusta. We are working diligently to close this land transaction by June 30th, so that we can begin to prepare the land and ready it for the required OSBL work. Now I will discuss our cash and capital raise strategy. In past calls, we highlighted our focus on managing our cash uses against available sources. So this slide is intended to summarize our goals, present the opportunity, and depict what has been achieved so far. Our goals are simple: manage the corporate cash burn rate until Ironton is operational. Pursue capital that provides financial flexibility and optionality while being mindful of our long-term capital structure. And pursue and execute cost-effective longer-term project financing transactions for our growth projects once technology risk is removed with Ironton operating. Near-term financing opportunities have been focused on equipment financing, shareholder loans, and capital outsourcing of non-core operations referred to as DBOOM, which is the acronym for design, build, own, operate, and maintain. A few relevant examples are the Augusta central utility plant and the Augusta PreP building, which will house sort and wash lines. We estimate that we have approximately $125 million of Augusta PreP equipment, sale leaseback, and capital outsourcing opportunities, excluding the central utility plant. Since our last update, we closed on a $24 million sale-leaseback transaction with CSC Leasing, which is secured by the Augusta PreP wash equipment. It's a 36-month lease with a 7% interest rate and flexible end-of-lease terms. We also secured a $40 million term loan with an entity controlled by Dan Gibson, the Chief Investment Officer of Sylebra Capital, PCT's largest shareholder. The loan matures on December 31, 2025, bears interest at a floating rate of SOFR + 7.5%. We are also actively working to close additional sale-leaseback transactions of Augusta PreP equipment. We have received proposals and are evaluating next steps. Now let's turn to Slide 9 for a summary of our first quarter achievements. We continue to execute on both near- and long-term goals. As we noted, Ironton is mechanically complete and certified by the independent construction engineer. Ironton has completed pre-startup process safety management, and solvent is on site and is prepping for circulation. We secured $62 million of additional non-dilutive capital raises, that's the $22 million sale-leaseback I referenced and the $40 million term loan that will keep our Augusta project moving forward, and we're evaluating other additional proposals that we've received. We're working to close on the land for the Augusta project by June 30th now that we've submitted a plan to the AEDA. We're preparing Augusta modules for construction in Beaumont, Texas. We've initiated engineering work at the Port of Antwerp, which will set the construction timeline for our Belgium project. And we were voted One of the Best Places to Work by Plastic News for the second year in a row. We look forward to updating the market with respect to upcoming milestones achieved in completing the startup process of our flagship Ironton facility and, of course, the Augusta financing process as soon as we are able. Thank you to everyone for joining us on the call today. At this time, we would like to open up the call to questions.

Our first question comes from Eric Stine of Craig-Hallum.

It's Aaron Spychalla filling in for Eric. Dustin, you mentioned 45 million pounds to 75 million pounds coming from Ironton in 2023. Can you elaborate on the factors that could influence that range?

It really just depends on how quickly we ramp the facility. As we get through the next week or two, we start circulating solvents and then introduce the first feed to the plant. We're going to have a pretty good idea of how the plant operates, and this is going to sound silly, but we're going to listen to the plant. The plant will tell us kind of where the pinch points are, how well it's operating, and how quickly we're going to be able to ramp the rates. So we have the estimate in our current forecast of kind of a linear ramp rate over the first six to nine months. But if all goes well, and we feel good about raising rates, then we'll do that earlier.

Okay. Good. And then maybe just at a high level, can you just kind of talk about some of the lessons learned from Ironton as you look to expand into Europe and Asia? Anything on kind of customers, feedstock, etc.?

That's a great question, Aaron. I'll start with the project side and then touch on the commercial side. When we made early decisions for this project about three to four years ago, the recycling market had many unknowns and required several assumptions for building the facility. As a result, the initial design decisions regarding the type of feed and operation were more robust than necessary. Looking at the plant's operation from a broader perspective, I see potential extra capacity in certain areas, possibly indicating some over-engineering, which was intentional. We aimed to construct it in a way that could handle any potential scenario. As we operate this facility and understand how it truly works, I'm confident we will have opportunities to streamline aspects based on actual performance. From an execution standpoint, there are a couple of key points. First, we need to focus more on modularization. Everything we built in Beaumont with a modular design fit perfectly and was done very efficiently. However, some of the onsite work was less efficient and more expensive than building it in Beaumont. Additionally, we encountered some execution misses. Moving forward, we will prioritize modularization. Also, although we have 3D models and walked through them virtually, seeing the construction come together in the field reveals obvious items that could be done differently. While these adjustments aren't groundbreaking, they highlight many areas for improved construction efficiency. For example, decisions about valve and pipe placements can be refined for future projects. We have compiled a comprehensive list of lessons learned and are actively applying them to Augusta.

Right. Right. That sounds good. Thanks for the color and best of luck to scale up.

Yes. Thanks a lot, Aaron.

Our next question comes from Hassan Ahmed from Alembic Global Advisors.

Being a pre-revenue company, I guess, most of our analysts are valuing you guys obviously using a DCF approach. Now historically, in the early days, you guys would provide us with a best estimate of where you thought tonnage or poundage would be at your cycle, call it, by the end of the decade. And I know you guys are sort of actively involved in a variety of expansion trends, be they what's happening in Ironton or Augusta and now obviously, more projects out in Europe as well as Asia. So I mean, any thoughts with regards to where that number could be in terms of pounds under production by the end of the decade? Do you guys intend to sort of update one of those older slides that you used to have?

Yes. Thank you, Hassan. Yes, that's a good question. I think that we've been so focused on Ironton right now that we haven't given as much detailed focus on the growth plan per se as we want to get through the Ironton project, test the technology, and find out where the real capacity is on the plant because we think there's good potential for incremental capacity at Ironton alone. With respect to the growth plans, I think we've been pretty straightforward on our overall plans. The timeline with which we will attack those will be different in each region. But one area that I think that you can get a good sense from is the kind of availability on each property. For instance, Augusta is big enough to hold eight lines. Belgium is big enough to hold four lines. SK is one, and Japan is two to four. And I think that simple math across 130 million pounds per line gets you in the ballpark. The question will be how quickly can we get to those capacity numbers. And I'm going to reserve that for a future call as we put a tighter pen to paper and see how the startup goes.

That's actually super helpful. Now as a follow-up, two parts to the question. One, just on the pricing strategy side. I mean, historically, you guys would talk about maybe $1 a pound, then you took that number up to $1.26. So how should we be thinking from a modeling perspective about pricing? And are you using it off of market pricing and then a premium? So one good part on the pricing strategy. And then a second part of the question, just on what you guys are seeing with regards to feedstock availability as well?

Thank you for your question. Regarding our pricing strategy, we have incorporated significant flexibility into our off-take agreements, allowing us to set both minimum and maximum prices at our discretion. This enables us to secure sales at contracted rates while also giving us the option to sell additional products on the spot market as needed. We consistently offer a strong premium over virgin materials, which aligns with the overall virgin polypropylene pricing. As the virgin price fluctuates, the difference we offer may vary. Our intention is to ramp up production at Ironton, allowing us to distribute a large volume of products globally for customer trials, application development, and testing, ultimately shaping demand and influencing our contract pricing strategies. On the feedstock front, we feel confident. Our technology, which involves a molecular wash, allows us to handle various feedstock forms effectively. We have established active discussions with feedstock suppliers worldwide who are eager to collaborate with us, as our process can accommodate more contaminants than others. This presents a unique opportunity for them to expand their market as well. Many feedstock suppliers have not focused on polypropylene due to limited demand, but our innovative technology is reshaping the landscape by providing a high-quality, circular product, thereby attracting more feedstock into the market. We look forward to partnerships that allow for mutual growth over the years. Overall, we do not anticipate any issues in meeting our feedstock needs for Ironton and our other planned facilities.

Our next question comes from Michael Hoffman with Stifel.

Two questions around money. What is the agreed amount now that you have with the AEDA for the line 1? And how much do you have in hand? And therefore, what's left?

So I'll take this, and then I'll pass it to Larry. The line one's expected CapEx is around $400 million. And we have sufficient sources to satisfy that demand. Now remember, the $400 million can be offset through various financial mechanisms through the DBOOM, and we have several different opportunities for DBOOM that are substantial and can significantly reduce that number. I will pass the question to Larry to answer as well.

Yes. So Michael, we've talked about this. Dustin is right, around $400 million is correct. Remember, the first line at any site with multiple lines will be the most expensive because of infrastructure. So you can expect lines two and beyond to be less than $400 million, significantly probably. But as we alluded to, we wrote a formal letter to the AEDA presenting a plan of financing for one line, and we showed them either cash spent or committed funds for in excess of the $400 million. We were closer to $500 million of what we presented, and we also showed them the details behind the $50 million that we've already spent on line 2. So we are in a good position there. And as we've indicated, we're working diligently to try to close the land by June 30th, so we can begin surface work on the land there.

Okay. I still have my second question, but I mean, I guess, I'm just going to be sort of rigid about this. What are the details? How much do you have left to raise to get to that minimum of $400 million? Truly raised as opposed to...

None.

So it is completely done. If we were to call them, they would say you're done.

Well, there's a process to go through with the AEDA. They're in the review process right now, and then ultimately, they'll take it to their Board for final approval. But yes, we are working with them on the details so that we can close by the end of June.

Okay. That's what I wanted to hear. And then what is going to be the final spend on Ironton versus what we were shown in March?

The numbers have not appreciably changed from what you saw in March.

So a little bit higher, but not meaningful.

It's a little bit higher, a little bit of creep, but really it's on par.

Yes. Michael, I'd say quickly, I referenced that as of March 31, we had the range of $25 million to $51 million left to spend. Remember, that was as of March 31. As of today, we've exhausted all the money in the construction fund. So the rest will be funded in cash on our balance sheet. The number left to spend, assuming no recovery of contingencies, is in the neighborhood of about $25 million. And remember, half of that is payment upon complete performance completion to our partner subcontractors. So the majority of the funds have now been exhausted.

Our next question will be from Noah Kaye with Oppenheimer.

So Dustin, this has been a huge push to reach mechanical completion and congratulations on that. My question to you is, one, how is the team doing? And two, as you're standing up operations, what kind of capacity have you put in place to do troubleshooting along the way? I think the steps you laid out for the next several weeks and months make sense. Just talk to us about what is that capacity to do rapid response, troubleshooting, how much of that is internal, how much of that is with partners?

The team is doing well, Noah. The atmosphere in the plant is noticeably different today. As you walk through the facility, there's an exciting energy in the air, not just from the equipment running but also because everyone is eager to start. It's fascinating to see the shift from contractors building the plant to operators learning how to run it. We have experienced some delays in mechanical completion recently, but we've gained valuable experience on the operations side. Everyone is familiar with the workflows and has a deeper understanding of the facility than ever before, growing more confident in their ability to operate it. I'm very optimistic about our team; we have a strong group that’s developing well, and we've effectively created the right training and operational readiness tasks. Regarding the project's timeline, we have always been focused on the critical path and likely remained optimistic about the plant's completion date. Although we have encountered some delays, we are still performing better than many projects in the industry, particularly considering that most are about a year behind due to COVID, while we are only about six months behind. As for our capacity, we expect it to range from 45 million to 75 million pounds. There are some unknowns as we start up, like potential early issues that might arise, but we've already addressed a few. Nonetheless, there may also be some unanticipated advantages to our capacity. I believe we are well-equipped to run the facility, and our team is prepared and enthusiastic about it; we likely have more capacity than the figures suggest. Once we begin operations, we will have a clearer picture. As for the schedule, there isn't much flexibility right now. This is our current status and outlook, and while unforeseen events could cause delays, I feel confident that we can catch up and potentially exceed our production expectations for the year, which is the key measure of our performance.

Yes. And to put a finer point on that and this isn't a comment on whether it's better to have internal or outside help running and setting up these operations. We'd just like to better understand is the team that's in place for PureCycle to run the operations. I mean, is this pretty much all internal folks now? I mean, did the contractors kind of hand over the keys? Is there ongoing help to debottleneck? Go ahead.

Yes, I appreciate your follow-up on that part of the question. We have reassigned almost all of our engineers from the Augusta project to focus on Ironton. Our internal team is now primarily dedicated to supporting Ironton. Most of the contractors have left the facility; previously we had around 80 to 100 contractors on site, and now we’re down to just a couple for each contractor. They are mainly there for start-up support. We kept some construction crew members to assist with initial issues or adjustments. Our entire PureCycle staff is now concentrated on the Ironton startup. Additionally, our core partners, like KMPS, are fully engaged in technology development and are providing their experienced engineering teams to assist us. They’ve already contributed significantly. Our joint venture partners, such as SK, have also offered their support. I know I can reach out for assistance quickly if necessary. I feel confident in our team because we’ve gained a lot of expertise and have the most knowledge about the technology, and I also trust our industry partners for additional help as needed.

And our next question is from Thomas Boyes with TD Cowen.

First, I just wanted to kind of follow up on the feedstock question from earlier, just given that facility is now so close to its ramp-up period. A couple of quarters ago, there was just some issue with suppliers that just couldn't make good on the agreements and had to be replaced. And have you gone back to your feedstock supplier base at Ironton just to confirm availability as you get towards that 45 million pounds to 75 million pounds that you're potentially targeting?

100%, yes. And also all of the feedstock suppliers that we have engaged for Augusta as well as feedstock suppliers that we've engaged around the world, we have continued to deepen the relationship with them, so they're on the ready to supply as well. The reality is that as we begin to operate, more polypropylene will come, and also our suppliers will be willing to sell us more and more over time. They want to know that we're going to take reliably. They want to know that we're going to pay reliably. And so we are all kind of waiting for the start of this facility, and then it will go. But really, the work that we have done on Augusta and also with our JVs is really helping to, let's say, build a safety net around Ironton that's really strong and wide. And so even if we had other suppliers that couldn't deliver, we have a well of people that we can call on to fill the gap. And so we are very excited about this.

Can you remind me of how much feedstock you already have on site at Ironton in advance of startup? I know you've given a number, I think maybe a quarter or two ago?

I don't know the exact numbers today. It's on the order of two million to three million pounds of processed flake and agglomerate and on the order of another two million or so of feedstock, I believe, that's unprocessed right now. We've been running the PreP facility for quite a while. And quite frankly, we've been working through growing pains there and learning how to operate it better and better every day. But as an example, one of our silos is completely full, and we've been bagging out for the last month. We have a bunch of blue super sacks, setting all over the property, which has got feedstock for purification ready to go. So I think it's on the order of, let's say, processed and unprocessed feed on the order of four million to five million pounds.

That's helpful. And then maybe just as my follow-up, a housekeeping one. We're not in housekeeping, but just maybe some clarity on the $125 million that you identified related to Augusta PreP, was that exclusive of the $22 million that you already raised or inclusive of that amount?

Larry, do you want to...?

Yes, the $22 million is part of the $125 million opportunity.

And our next question comes from Gerry Sweeney of ROTH MKM.

I have just one question for you regarding the project financing opportunity. We know that you are working on getting Ironton operational, which will help reduce risk. At what level of capacity utilization does Ironton need to operate to truly reduce risk and improve access to capital?

That's a great question. It's really aimed at investors willing to fund us. From what we've heard, it varies among investors. However, a significant amount of technical risk is mitigated once we produce our first pellets. Economic risk will also be reduced once we demonstrate the ability to operate at certain rates. There will always be questions regarding the reliability of this facility, which we will need to address over time. Nonetheless, reaching our first pellets and achieving 100% at the Leidos test are critical milestones. Once we accomplish those, I believe we will have overcome the major hurdles.

Got it. And the Leidos test is running Ironton at five consecutive days. Is that correct?

Yes, that's basically right, Gerry. It's a five-day test at 100%. And we haven't scheduled that yet. This is another situation where we are going to listen to the plants and decide when...

Go ahead. Sorry. I didn't mean to interrupt. And pardon me, I'm not an engineer, but I'm assuming five days, that's 24 hours a day, seven days a week.

Yes, sure... This facility is designed to run 24/7, 365, and we will have periodic outages. But for the five-day tests, for sure, it's going to be a 24/7 operation.

I would now like to turn it back to Dustin Olson for closing remarks.

Yes. Okay. So thank you very much for joining the call today. We thank you for your continued support. It's a big step that we crossed actually yesterday when we took the plant to mechanical completion and ready for solvent. Getting to ready for solvent is a really big deal. And now we're truly in full operations mode and just running the plant to the paces until we get the first pellets. We feel like Ironton is now truly operational. We're optimistic about our growth plan. We can't wait to show the world what we can do, and we are excited to start making pellets and start delivering them to all of our customers around the world. Thank you so much for your patience and your time and your continued support. Look forward to talking to you again soon.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.