Lightbridge Corporation
Q1 2021 Earnings Call Transcript

Published: 12 May 2021

[Operator:]

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.

[Matthew Abenante:]

Thank you, Catharine and thanks to all of you for joining us today. The company’s earnings release was distributed after the market closed yesterday and could 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.

[Seth Grae:]

Welcome, Matt. And thank you. Thank all of you for joining us to discuss to Lightbridge’s first quarter 2021 results. We entered 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, and a lens 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're 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 deal he 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 our fuel. The total project value is approximately $664,000, with three quarters of this amount funded by DOE for the scope performed by PNNL. We expect the project will begin later this quarter.

[Andrey Mushakov:]

Thank you, Seth. Yesterday, we announced the successful demonstration of our patented core extrusion process using surrogate materials in place of uranium. The surrogate rods were manufactured using our core extrusion process at the six foot lengths designed for small modular reactors or SMRs. This successful demonstration of high temperature coextrusion illustrates the primary performing process for Lightbridge Fuel, including the helical twist of the fuel rods and the metallurgical bonds within the central displacer surrogate fuel alloy and the clad. Rods produced during this demonstration will be used for further development activities, including validation of computer models of the extrusion process and corrosion testing of as fabricated palladium alloys. In parallel, we continue to make progress on our Advanced Test Reactor Experiment Design with Idaho National Laboratory. We’re nearing the completion of the conceptual design phase in which our INL colleagues have been optimizing a combination of design elements in order to achieve burnup of the fuel samples within the defined window of time in the test reactor. Once the conceptual phase is complete, Idaho National Laboratory will immediately begin the detailed design and safety case for the experiment. We expect the experiment designed to be completed later this calendar year. Completion of the ATR Experiment Design will also allow us to finalize the scopes of fork with Idaho National Laboratory for high-assay low-enriched uranium supply, coupon sample fabrication, reactor irradiation, and ultimately post-irradiation examination of the samples. We are also progress and on the contract and 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% to 8% 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 irradiation fuel samples for the Advanced Test Reactor by Idaho National Laboratory.

[Seth Grae:]

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

[Larry Goldman:]

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 three months ended March 31, 2021, compared to the three 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?

[Sherrie Holloway:]

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 $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 Laboratory. There was a decrease in employee compensation and employee benefits of approximately $0.2 million offset by an 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 consists 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 three months ended March 31, 2021, due to the recognition of grant income from the first GAIN voucher. There was no grant income for the three months ended March 31, 2020. Now 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. Matt, please go ahead with questions.

[Operator:]

[Q - Matthew Abenante:]

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

[Seth Grae:]

Okay. Andrey, you take that one?

[Andrey Mushakov:]

Sure, Seth. The work we announced this week is different. We used our patented high temperature core extrusion process for our three lob Lightbridge Fuel design variance, incorporating a central line displacer and using nuclear grade cladding pelo materials. These extrusions also include some specimens with intentional internal defects, they're going to perform certain type of non-destructive examination based on those particular surrogates rods. The components produced from this work will enable Lightbridge to begin technically validating our finite element computer models of the fuel fabrication process, deform the corrosion testing on as extruded plating material needed for future licensing, and begin the development of non-destructive examination techniques for our fuel.

[Matthew Abenante:]

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?

[Seth Grae:]

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

[Jim Fornof:]

Yeah, sure, Seth. Yeah, 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 of the coupons, the position of each sample capsules within the ATR core, and most importantly the residence time of each capsule in the reactor. These factors are being optimized by INL, using an iterative neutronics and thermal hydraulics modeling approach with the goal of achieving the desired range of fuel burn ups within a minimum amount of reactor talk Once completed, this conceptual phase will allow INL to proceed with the development of the engineering and fabrication drawings and 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 to early 2023 for insertion, following the ATR core internals change on outage. This state of course, target date, of course, depends upon the final schedule for the ATR outage, as well as INL other commitments for reactor radiations. In addition to completing the experiment design 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 INL. Back to you, Matt.

[Matthew Abenante:]

Thank you Jim. Our next question, can you discuss which SMR or advanced reactor types might be used - might use Lightbridge Fuel and what reactor types may not be feasible? And do these designs have any application in the current power reactor fleet?

[Seth Grae:]

Jim, take that one.

[Jim Fornof:]

Yes, yes, thanks again. 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 applications for our fuel would be in new scale power module, the GE Hitachi, DWX 300 and in Holtec, SMR-160. Other advanced designs such as the TerraPower sodium fast reactor or the X energy XC 100, which is a 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 HA LA supply and in metallic fuel fabrication, excuse me. 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. These include the current fleet of PW or BWR candian plants As such, we can still see a great potential to deploy the Lightbridge Fuel into the current fleet. Back to you again…

[Matthew Abenante:]

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

[Seth Grae:]

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 the 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 upgrades 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.

[Matthew Abenante:]

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?

[Seth Grae:]

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, you know, 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?

[Matthew Abenante:]

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.

[Seth Grae:]

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 US 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.

[Seth Grae:]

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.

[Operator:]

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