5E Advanced Materials Stock

Hello, and welcome, everyone, to Water Tower Research fireside chat. I'm your host, Dmitry Silversteyn, Managing Director, Chemicals and Materials Technology at Water Tower Research.

Today, I'm being joined by Paul Weibel, Chief Executive Officer of 5E Advanced Materials, which is developing the Fort Cady project in California into a vertically integrated producer of boric acid and advanced boron materials for industrial, energy, defense and advanced manufacturing markets.

Over the past few months, the company has announced multiple customer agreements, advanced its commercialization strategy and demonstrated additional upside through lithium carbonate by-product opportunity, positioning Fort Cady as potentially the cornerstone of a U.S. critical minerals and metals supply chain. Welcome, Paul, and thank you for joining us today.

Good morning. Great to be here today. How are you?

Great. Thank you. Before we begin, I want to remind the audience that 5E Advanced Materials safe harbor statements are available and can be found on the company website at www.5eadvancedmaterials.com.

Also, this fireside chat may not be reproduced or written transcript distributed without the expressed written consent of Water Tower Research. With that out of the way, let's get going. Paul, the boron market is historically flown under the radar, if you will, for many investors, but that seems to be changing. What are the biggest changes taking place in the boron industry today? And why do you think boron is becoming an increasingly strategic material?

Yes, great question. I think it's flown under the radar because it's been this historic global oligopoly where 85% of global supply is dominated by two groups. And one is a private nationalized mining company out of Turkey. It's about 60% to 65% of global supply. There are some financial statements out there, but they're in Turkish. So it's not really very hard to kind of understand what their production capacity is.

Two is Rio Tinto's U.S. Borax, which financials are disclosed, but they're really buried in Rio segment information. So just from -- it's a relatively opaque market with very little reporting. And as you look into that, I think the U.S. government got it right and in November flagged Boron as a critical mineral. Rio has a depleting mine life. There was a reserve downgrade in 2018.

The business is for sale right now that has been publicly announced by Rio. And I think the main driver of why it's becoming so important is supply and demand. Project Blue, which is a really great market research platform, they're formerly out of the Roskill, Wood Mackenzie team. They have the Boron market in a deficit today.

And when you look at what happens when a commodity or chemical is in a deficit and there's excess demand oversupply, ultimately, that drives higher pricing. It -- it's very similar to what we've seen in the lithium market or the tungsten market or as supply gets short and utilization is overused, in turn, prices drive higher. And then why it's becoming so important on a go-forward basis is that, one, what China is to rare earths, Turkey is to boron, so that you have different tariff regimes.

But then ultimately, you have the specialty applications where the neodyominium sic [ neodymium ] permanent magnets, ferroboron comes predominantly from China. Boron carbide production, again, China. And you have a depleting asset in the U.S. that while we had reliable long-term supply, for the long term, that position isn't as secure as I think everyone has previously assumed.

So the punchline being, it's -- we're in a deficit. And two, this market is growing, and it goes into so many different applications of which many are critical to make life as we know it exists today.

Thank you, Paul. That does provide a good overview of why Boron is becoming strategically important. That brings -- let's bring the discussion back to 5E specifically.

Very few advanced boron development projects you mentioned, whether it's in North America or globally. What differentiates Fort Cady from other boron assets around the world that may be in the development stage? And where do you believe it fits within the global competitive landscape?

See, you can count the prospective sizable economic boron deposits that aren't in production today on kind of one hand. There's about four of them globally. So there's high barriers to entry in the Boron market, specifically tied to geology.

While Boron is kind of common trace mineral in large economic quantities is incredibly rare. You really -- and this is why you see it kind of dominated deposits dominated in Turkey, California, kind of Nevada as well as Serbia, right? That's where you find the deposits.

There's a couple of smaller South American producers as well, but you predominantly need faults in geology. And so large economic deposits, they're just inherently rare. Fort Cady, we have a large colemanite deposit. The benefit of colemanite, it's a calcium-based boron mineral. It's very easy to leach. There's four types of minerals where boron is commonly found.

That is Colemanite, it is Tincal, Kernite, which coincidentally Rio is located in Kern County, California. So that's where the Kernite comes from and Ulexite. Those are kind of -- if you have mineralization of those four, you can extract the borates' relatively easy. So I think we have a colemanite deposit. Our method of mining is in sitsu sic [ in-situ ] leaching.

We have all of our major permits. We'll inject a very dilute hydrochloric acid underground, that leaches up the minerals, we'll pull that to surface. And listen, I think the benefit is we're dealing with aqueous chemistry. So as you think about processing, it's not like we have to move dirt and then crush and float and ultimately refine that.

We're always -- when we pull up to top surface and we process that, we have an aqueous solution that's easy to crystallize and remove out the borates. Additionally, with our process, we can now produce different levels of borate grades. We have our metaboric acid, which is an 80% B2O3 as well as our traditional boric acid. So I think from there, then that's our base business.

We'll also have value-added byproducts such as the gypsum the calcium sulfate as well as the lithium carbonate. So I think from a differentiating perspective, we have kind of this portfolio of critical minerals. And then you have the ability to further refine and kind of go into some of those specialties. The metaboric acid is definitely a specialty.

Additionally, we've -- we're almost on our first round of bench testing for ferroboron. So that's an iron oxide produced in a furnace with high B2O3 products. So I think you have the ability to vertically integrate and then solve some of those downstream derivatives, which the Chinese dominate today.

Well, that certainly helps put the Fort Cady's competitive positioning into perspective. Of course, a great asset can create value or can only create value if customers want the product. Now you've made some meaningful progress on that front over the past few months.

One of the more noticeable developments this year has been the series of customer agreements that you have announced. How do these agreements validate the project? And what should investors understand about the commercialization strategy behind them?

Sure. I think we've really focused probably since March. We've been talking to various customers for the better part of 1.5 to 2 years. I think we've qualified, we've demonstrated that the product we can produce out of our deposit through our small-scale facility meets customer specifications across almost every industry.

We're at a point in the business where it's to move this forward, you need heads of agreements that kind of form the basis for those binding offtake agreements. And so in March, we did a customer roadshow. We visited probably 9 or 10 various customers of different shapes and sizes, all domestic predominantly.

And that was intentional because there's a small -- much smaller producer that had exited the boric acid market. So customer concerns were elevated. And listen, we're 2.5, 3 years out. We have to -- we're going to go to FEED engineering and then ultimately, you want to build this project and you got a commission.

And ultimately, for -- if you're going to go into FEED engineering, which is an 8-month process, and it's about $8 million. You need to know that on the other side of that, you can achieve FID. And what you need is pull side demand and customers saying they're going to -- if you build this project, there's going to be buyers that are going to buy your product, very rational, keep it simple.

So we put together -- we proposed different structures. And I was on a kind of a previous webinar earlier in the year. And I said, listen, we're going to have a diversified basket of customers across multiple industries with various contract structures, of which they all need to be bankable.

Obviously, you can get debt lending on those contracts. And today, we have five initial HOA contracts. One is a letter of intent. But basically, the important part is that the commercial terms are flushed out, right? And that is something we can look to take to lenders and say, "Hey, I have a revenue leach even in our financial model." That ultimately underpins the bankability of this project.

Our contracts today, a handful of them are fixed pricing with annual escalation. The most recent two we put in place are indexed to Fastmarkets forecasted FOB price on the West Coast and they're collars. There's a floor and there's a ceiling. And the floor that ceiling, they ultimately escalate over the life of the contract. So that's something where a lender can come in, they can look at our contracts, they can then say, okay, I can model in a worst case, a mid-case and a best case scenario.

And listen, they're not going to lend on the worst case. They're not going to lend on the best case. They're going to kind of find the midpoint. And I think that's what we're doing. I think there's probably one more domestic U.S. customer we're looking to kind of close out here. And then we -- our team was over in Asia maybe 2 months ago, 6 to 8 weeks.

And we're looking on kind of doing this next round of contracting in HOAs with the Asian customers to kind of get our export access here, and that takes us to a point where we can ultimately have a nice portfolio, probably as we think about any loan on 10 to 12 customers, which I think when we're at full-scale production, we'll have closer to 25.

Understand. Okay. So those commercial milestones certainly suggest the market is responding to what you're building, given how quickly the agreements came together after your March trip or your marketing and commercial exercise.

So beyond the core boric acid business though, you've highlighted several additional opportunities that could enhance project economics. You've outlined opportunities in lithium recovery, calcium chloride, you mentioned, gypsum and longer term, getting into the specialty boron products. How important are these additional revenue streams to the long-term economics of Fort Cady?

So it's really important because I think it gives us the opportunity to sell at higher prices, which thus in turn make us that much more bankable. For the -- obviously, in our pre-feasibility study, the lithium economics were not included. We've always had a lithium chloride stream. And we equate out what we've seen over millions of gallons injected in recovery at our demonstration plant, it's that you probably produce -- we'll produce 500 tons a year of a lithium carbonate for about every 130,000 tons of boric acid. And we were very intentional when we were going into FEED engineering that the lithium stream could be viewed as a bolt-on.

It's relatively small in the grand scheme relative to the boric acid production as well as the gypsum. So we had -- when we first kind of got capital numbers from Fluor, there was a significant amount of CapEx tied to sodium removal. We also produce some salt as well. Salt maybe sells for $30 or $40 a ton. It's not a value-added byproduct. And there was the $45 million of CapEx.

And so we kind of -- well, we just said we can't spend that much money on a product that we're not going to make that much money. Is there an alternative way to extract? And you can. You can use good old-fashioned solar evaporation ponds to kind of get the salt water out of the back end of the process. So we incorporated five ponds into design. They're all in our real property. We have 200-plus acres on our land. San Bernardino County is really friendly.

So we -- easy to get them included. And this winter, we kind of -- is it winter in California and not really. But in January, February, we said, okay, lithium prices seem to have found a floor here. They're on the upswing. Let's take a look at the lithium stream. And it was really a sixth solar evap pond, very small for 500 tons. And it's the same technology package that ultimately they use in the Atacama desert every day. We're in the high desert of California. So it's very similar climate to Northern Atacama.

And it's a place where solar evap ponds work. And so that got included in the design. And I think at 500 tons, anyone who's operating a solar or lithium, they can -- it just takes time to let the sun do what the sun needs to do. So you ultimately will be a very low-cost producer of lithium when you are using solar evap ponds. And so I think nominal cost to that and the CapEx is incredibly low. We did the trade-off. We looked at DLE and for 500 tons, it didn't make sense.

And that can be an additional $50 per ton credit to boric acid at kind of $18 a kg lithium price. So it's very accretive and will help us be that much more bankable. On the metaboric acid, listen, there's stoichiometric value there. No question about it, like we've tested that with various customers. And customer feedback is like, hey, if I use your metaboric acid in my textile fiberglass process, I can use less product of your 80% than the 56%.

So I'm happy to pay a higher price in turn for that. And I've kind of outlined how that pricing could work. And I think it gives us some boundaries to negotiate. We are working on some of those meta contracts today. And I think that will be included in the design as well. On the -- obviously, colemanite being a calcium-based deposit, you have optionality where you could either produce a calcium sulfate, which is the gypsum or a calcium chloride, which is ultimately another industrial mineral.

The interesting thing is that -- and we did this because it gives us optionality on our variable cost profile. So most recently, because of what's going on in Iran and the Strait of Hormuz, the sulfur market has gotten very expensive. And is that specifically tied to Iran kind of like China exports a lot of sulfuric acid. And because of the strait, they kind of have -- any of their production has -- they've decided not to export, and that has made the sulfuric acid very expensive.

Sulfuric acid and hydrochloric acid, which are two reagents, we mine with HCL, but we can actually aqueous -- we can take sulfuric acid, which has been historically the cheaper of the two reagents and through aqueous chemistries actually precipitate gypsum and regenerate hydrochloric acid, which becomes our feedstock to mine. We don't have to buy sulfuric acid. We could just buy hydrochloric acid.

And over the last couple of months, sulfuric acid has gotten more expensive than hydrochloric acid. So if you wanted to just use hydrochloric acid, you could. And as a result, the byproduct you would produce in that situation is calcium chloride. And so you would actually be relatively mitigated to some of these crazy up prices we've seen in sulfuric.

Yes, you're going to pay more for your reagents, but because you have optionality, you can actually buy the -- you could procure the lesser of the two expensive reagents given what we're seeing on the geopolitical front. And there's ample demand for both of these in Southern California. You have -- the majority of calcium chloride production in the United States does come out of Michigan. It's an occidental asset. There is some production in the Southwest, but there's demand.

And on the gypsum side, you do have two very large cement manufacturing companies that have qualified our product as well that are very local to 5E. So I think having those two byproducts in our design. One, it actually ends up being a risk mitigation from a variable cost perspective. But two, it gives us optionality to kind of pipe one off of the other and kind of get the highest netback at commercial production.

Understood. So it sounds like those additional revenue opportunities illustrate how integrated the project could ultimately become and the flexibility that this gives you in terms of purchasing of raw materials as well as the markets which you're going to target with your byproducts.

So sticking with commercial theme for a second. Let's talk a little bit about the end markets that have been driving demand. You referenced the fact that demand for boric acid seems to be picking up and for borates in general.

The industry forecast suggests that the boric acid demand could outpace supply or is already outpacing the supply and that could certainly grow significantly over the balance of the decade. Where are you seeing the strongest sources of demand growth? And how do you expect those trends to influence Fort Cady's development?

So what we've seen, obviously, the most recent customer agreements have been domestic users. And so you had a small domestic producer exit the boric acid market kind of circa 50,000 tons, that immediately has pushed it into the deficit.

And if you kind of look at those customers who were contracted with that group, they kind of were left scrambling. So if you look at the 5 offtake agreements, it's about 18,000 tons firm up to about 30,000 tons on max volume. I think that was kind of front and center, there was a need on the domestic side.

We continue to work on LCD and textile fiberglass out of Asia kind of to round out the remaining balance. And I think, listen, we've known that like right now, like everyone is contracting for their 2027 contracts. And kind of all -- as Rio Tinto has done a great job pushing up price, the revenue metrics kind of validate that. While their production is flat, what we're seeing and what we're hearing is Turkey is following.

In natural oligopoly, Rio has broken out of this prisoner's dilemma, and there was always a question of like, oh, what's Turkey going to do? They're going to follow the price. That's the only rational thing to do. And my understanding is this is coming from Mark and various customers we're talking to a lot of end users are in a dog fight in their contract negotiation right now. And because the prices just aren't going to be what they previously have been in the past.

And that's a function of this market is growing and supply is short. And so listen, until 5E comes online, that's not going to change. So I think we're in this first inning of this the boron market becoming kind of what rare earth and have been. And I don't see that changing at all in kind of the -- it's not going to change until the medium to long term.

Understood. It certainly sounds like the demand backdrop is becoming increasingly favorable, especially with the supply being reduced a little bit by the exit of the small player. With that, investors will naturally be asking what comes next for 5E. So let's talk about that. As the project moves closer to commercialization, you talked about maybe 2.5, 3 years out or so. What are the key milestones investors should watch for over the next, let's say, 12 to 24 months?

Sure. I think at some point, we get -- we will move into FEED. No question about that. That's a function of our customer pull, which is increasing. I think there's the advanced materials, there's additional work streams we've been working on. I think we've done a handful of tests with Ferroboron. It's very close. We feel very good about that.

And I think on that side, that's something that -- listen, I think from a government funding aspect, my view is we want to take this to Department of [ War ]. Obviously, there's criticality from a China perspective and that the ferroboron is predominantly captive to China, and there's been no U.S. domestic solution for ferroboron at all. And so we can provide -- we will provide that solution, very confident in that.

And I think the only thing holding me back from taking that kind of to informing the government of what we've done is I want the finalized sample that meets magnet specifications, and we're close. So I think that's -- once you've demonstrated, you know how to produce, you've dialed in all your temperature parameters as well as your specific chemistries on your utilizations, that can run on itself, you would obviously look to do some larger samples, and this is all done in lab and it's very inexpensive.

And then the question is like, okay, how can you be a reliable producer for FEV in the long term? I think in the next 12 to 24 months, there's a ton of optionality there. And -- but we've got to kind of get that out there, inform the U.S. government. There's end users that have reached out to us as well. And it's what kind of potential partnerships or offtake constructs can you think about bolting on with the FEV.

So I think there's that there'll be more commercial progress. We're kind of 18,000 to 19,000 firm tons in and 29,000 tons max kind of my sort of -- near-term target here is 50. So I think we're under -- well on our way. I really only started focusing on this 4 months ago. So I think there's diligent execution behind. We're going to do what we say we're going to do. And that's -- I think I'm quite pleased on the progress we've made on the commercial front.

Excellent. So it sounds like achieving these milestones is doable. Of course, they will require capital as well as execution. So let's spend a few minutes discussing how you're thinking about financing the next phase of Fort Cady's development. Large critical mineral projects require significant capital, as we all know. How are you approaching the financing strategy for Fort Cady? And what advantages do you believe the project has as you engage potential financial partners?

Sure. I think for Feed engineering, what we have in mind is the EXIM loan. We've kind of been back and forth. We applied. We've been back and forth with EXIM on that. There's kind of a biweekly touch point on that application. And I think we feel good about where we are at. We kind of -- listen, the business has evolved. When we first applied for the smaller loan that can cover the cost of feed, we were raising money every 4 to 5, 6 months, and that's not the case right now.

We had $25 million in the bank as of March, and we've successfully raised capital that we don't need to come back to the market today. So I think for the feed portion of this, like that would be the EXIM loan. And listen, the benefit of that is we have a larger LOI with EXIM. XM can loan up to 80% project finance.

But again, you're going to have to make sense with the commercials and you're going to have to maintain a 1.2 coverage ratio in your financial model. And I think -- listen, what we're doing is very intentional. The metaboric acid can contract at higher prices, the floors and the collars, they give us downside protection and fixed pricing is very kind of straightforward to model.

So I think there's -- listen, while the LOI we have with XM is 285, like if it makes sense to -- we can clear underwriting at more, we will. It just -- it's going to come down to what is the offtakes ultimately bode for that ultimately underwriting process. And then we do have multiple grant applications out there. We have a DOE grant as part of their mines of the future. Again, that's -- it's -- I can't undersell how competitive that will be.

We applied in January. We should hear sometime soon. That was a $31 million grant. A decent amount of that goes to the commercial well field at scale. And so I think between some of the -- whether it's the longer-term debt, the XEM debt for feed that can be refied into a larger debt facility. And then obviously, potential prepayments.

We are unencumbered by any royalties, the lithium streams and really interesting optionality on that. And so I think the goal is to not have to come back to the market anytime in the near term. We don't need to. We have $25 million in cash as of March 31. And I think we're in a decent spot. And the focus is actually executing on the business plan that we've laid out in that February raise.

Understood. You get the plan going and then let the financing follow, makes sense. Before I wrap up, I'd like to take a step back and look at the bigger picture. So when you think about where the company is headed over the next couple of years. In other words, if we were having this conversation, let's say, 2 years from now, what would you like Fort Cady to have accomplished over that time frame? And what would success look like for the company if we were having this conversation in 2028?

Yes. I mean, I think we're thinking about commissioning a large-scale boron facility. That would be the success. I also think there's optionality to in the near term with some of this meta products or if you can -- I think it starts with -- we're in the more infancy stages of ferroboron, like do you have tolling operations in place that are potentially on the meta product, like we can produce boric acid, but there's the ability to take someone else's boric acid and potentially refine that to a higher B2O3 product.

So we're waiting on some of the customer pull-side demand, and that's something we could look at it as well, like we have a team, they're capable. We've done this. In the interim, do we actually focus on -- like once -- as we think about going through the loan process and the feed, our operating team we'll have bandwidth. So could we work on some kind of internal tolling mechanism or internal further processing of midstream B2O3 products where we're actually getting customers what they want sooner than later and actually making some money or some revenue.

So I think that's something we look at and we examine. I think in 2 years from now, if you're doing that, that reduces equity dilution potentially. And then it also gives us the -- we're looking at a large-scale commercial production.

Understood. So to paraphrase Tom Petty, the future looks wide open. Thank you for that, Paul, and thank you for joining us today. Paul Weibel, CEO of 5E Advanced Materials. To learn more about the company, please visit our website at 5eadvancedmaterials.com.

Please note that the views expressed on this fireside chat are not necessarily reflective of the views of Water Tower Research LLC and are provided for informational purposes only. This fireside chat may not be distributed or reproduced without written consent of Water Tower Research and should not be considered research or recommendation. WTR is an investor engagement firm, not a licensed broker, broker-dealer, market maker, investment bank, underwriter or investment adviser. Additional disclaimers can be found at www.watertowerresearch.com. Thank you, everyone, for joining us today.

Time zone is represented today. So thanks for joining us from all across the world. I'm lucky enough today to be joined by Paul Weibel, CEO of 5# Advanced Materials to discuss the recent developments with the company, but also give a view into the future for investors and prospective investors who are both here in the room and watching the replay. Paul, how are you today?

I'm good. Glad to be here.

Awesome. Let me do some quick housekeeping, how it's going to work today just for the folks in the crowd. I've got some questions for Paul just based on both recent news but also what's coming up. But it is an interactive event. I know some people have already submitted questions in advance over e-mail. I appreciate that very much. But there is also a chat function at the bottom of the screen. Please do ask questions during the event or you can also e-mail them in. I'll keep an eye on those too. If we don't get your question for whatever reason, either we run out of time or it's a little off topic or doesn't quite fit. I'm still going to make sure that the team gets those questions afterwards. I'll be sure to get back to you either on e-mail or by phone, depending on what you put in during your registration.

The only other two things I'll say is that this is being recorded and will be available for replay in the early -- sorry, late afternoon, Eastern Time, probably before end of day for folks on the East Coast. And also there's a request meeting button at the bottom of the screen. Please feel free to press that if you'd like to have an opportunity to meet with Paul or anyone from the team. I'll make sure we connect those following this event. Paul, let me get into the meat and potatoes here.

The headline this quarter, to me, the first offtake heads agreement, a long-term deal with domestic industrial customer, 7,500 tons of boric acid a year with optionality all the way up to 10,000. So after years, I know you've gone through of qualification work, what does it mean to finally have a signed commercial commitment in hand? And why was this the right first customer to anchor your book? Yes. Great to be here. It's good to get the monkey off the back.

Yes, I think it's a major catalyst. The market likes offtake agreements. I think it's confirmation we're real. We've qualified multiple industry segments across various industries. I'd also say like it was important, one, because this is a large buyer of boric acid. There's more opportunity there. I think this is kind of the first what they felt comfortable. It also made logistical sense, just where we're based, cost to serve relatively reasonable. And so those factors went in. And obviously, there's a relationship aspect too, for our commercial team to get them comfortable. And I think it kind of sets the stage for more to come. I think you're still muted.

I got embarrassed myself once a day. It's like it's the law of webinars once a day you go good. The structure I found notable of the deal, the fixed pricing with annual escalation. You got that 5-year initial term and automatic renewal out to 10 years. So walk us through why you went for that shape rather than spot index-linked pricing, all these other options and what locked-in revenue does for conversations with project lenders at this point?

Yes. So we have offtake proposals of various shapes and sizes. The structure, though, at its core, the principle is about bankability. The reality is if you talk to lenders, they're going to say, how are you going to mitigate price and quantity in your off-take agreements? How can we model revenue and so the simplest way is actually fixed pricing. And I think that comes in -- bankability comes in various shapes and sizes from -- at its simplest form or a fixed agreement. Cost plus or you can index to a certain benchmark with the floor or potentially collared and that has a ceiling.

And so for this customer, this industry, this made sense. It obviously has the annual escalation, which is good because, obviously, what you do see in reagents, especially hydro park acid and traditionally sulfuric, though that's been an interesting conversation in the market today, but they tend to kind of go up inflation. So you can kind of lock in and really model and underpin the debt financing.

One of the other proposals we have out there today is actually the borrow market is very opaque. When we first started approaching customers, they would ask for market-based contracts. And I'm like, well, what's the market? Well, it's a proposal that the other 2 players in the oligopoly who have already spent their capital are offering. That's not going to work. I mean what China is to rare earth, [indiscernible] can beat to boron. So we need to mitigate price and quantity. And so what we've actually done too is we fast markets does provide a West Coast FOB benchmark price. We've kind of walked customers through that. We've vetted the their price, it's pretty close. And it's not going to be perfect, but I think what they're going to do a very good job of is capturing a trend.

And sometimes, maybe our customers' procurement team could do better or worse than that benchmark, but I think over time, it's going to be relatively reasonable. And the proposition we've kind of made to other customers, and this was a big theme of the roadshow is kind of walking them through 5E and also to like what we would envision a contract structure looking like has been, listen, I think we would propose a fast market benchmark. We talk about the trend. It will capture that. In turn, what we would propose is to establish bankability as a floor price. And listen, if that floor price, if the price would go below that floor, they would have to pay that floor.

But in exchange for that, we would offer a ceiling price. And listen, if boric acid prices go to $1,500, $1,400 a ton, $1,600, which supply and demand definitely is a big driver of pricing and utilization, you have a great contract because you're capped at a ceiling price and relative to your competitors, you're going to make a lot of money. And at the same time, you're going to introduce a third supplier into the market by giving us a bankable structure.

And kind of given what we're seeing in the market today from just actually a supply and demand, the deficits here at least in the U.S., people say that's fairly reasonable. And so it's only been until kind of back of last year kind of this year, that we've been able to really kind of soften ground and make that progress where people are amenable to these structures.

Sure. It's been so long people talk about the incoming deficits, but they've arrived of conversations. Yes. I do want to talk about Roto that you were on in March. I'm going to ask you some crystal ball gazing here, so bear with me. I know you met with a dozen or more industrial boron customers and distributors. Where does the broader pipeline stand right now? And how many -- again, ballpark crystal ball gazing, how many of those conversations do you realistically see converting to binding offtake over the next year or so?

Yes, I call my commercial team daily. I'm like, what's the status?

Where are we.

Yes, I think the first thing to know is like there's general consensus. Customers want a third reliable U.S. domestic supplier. Americans tend to be very reliable and it's a very secure jurisdiction here. So that's a common theme and a trend we saw with all the customers. I think sometimes like always price does matter. And we've been very good with thinking outside the box creatively on ways to bring value to each specific customer that all of a sudden says, that's a really good idea. That's something we should pursue. So I think, listen, there were 12 customers kind of various shapes and sizes. We probably have 6 active proposals in the [indiscernible] and I'd say 3 are very close, like they're like through a review like I'm waiting on nominated volume.

So like there's -- we kind of are close to or I've had their proposal back where I'm like, why would really like this in there. And we have approved templates, we're kind of lean with that. And then, listen, everything -- everyone has really kind of marked it up kind of for what's comfortable to them. And okay, we go back and forth. And it's a negotiation. And we kind of get to a meeting of the minds. But there's 3 that are very close that I continue to talk to to Mark and the commercial team and it's like, all right, like what do we need to do? And I think it's -- they're coming. This is going to be a big theme for 2026. We knocked down the first, and there's more to come.

Mark was in Asia last week, out of the Asia trip. Now we have -- we're a much more diverse portfolio of bore products and just a forecast we can talk about Med in a little bit. And I think 6 customers, here's what they ordered on the menu from a sample size. Here's the contact, here's their phone number, here's the address, and let's get this out. So that all kind of, listen, Asia is going to be a little slower. I think the commercial team went over there. Again, similar conversations to what they saw on the U.S. trip where, again, one another supplier, there's concerns. And I think the plan will be another visit towards the back end of the summer after they've digested done their analysis on those samples.

And then you can kind of hopefully expect a similar progression where, okay, March, mid-March, we were on the road, mid-May, two months or so, you start knocking down some of the Asian customers. We also did engage one of Mark's former colleagues at Rio. It's actually -- it's more domestic based and we call it North America, but it's a segment we actually have not targeted. Again, like I wish I could be more transparent from like listeners, in the industry, but we're trying to break into an oligopoly here you just kind of hold your cars to the best. But progress is being made. And I think that's a big industry segment because Mark's an industrial guy, that at Rio and Eddie, when he was there, that was his kind of bread and butter.

And now 1 of his former colleagues has a whole different sector of the borate market that there is very large bankable customers as well as ultimately size. And I think we're just looking for a piece out of the gate. We don't need all supply. It's 130,000 tons in the model, it's 90,000 in year 1. So you can kind of see like it doesn't take that many customers to start to build a substantial portfolio.

SP1 Okay. No, I appreciate that. I don't want to -- I want to kind of zoom out for a second and talk about boron generally, because I know we've even discussed today, but I know you've spoken generally about the domestic boric acid market slipping into a pretty serious supply deficit. I'd love if you could just help investors in the room understand what's driving that first -- and then how much of a tailwind kind of tightening U.S. market is for domestic producer that isn't even in production yet.

Yes. Really interesting time in the borate market. Obviously, boron was added to the critical minerals list in November last year. We kind of foreshadowed that occurring. Once it was added, you really had a couple of interesting fundamental shifts. And I can say like I do applaud the U.S. government because relative to some of the other minerals, where they're adding things is critical and acting kind of on the back foot, at least on the boron side, like I would have loved to see it added 3 years ago, and that would have got an A+ rating.

I think you still get the B rating, like it still really good that it's added now. The deficits kind of here and you got a 5E project that can be is a near-term solution. And I think we're a bit more on the front foot than the back foot. So I think that's that was a big positive. But I think -- all right, so you've always had -- we talked about this oligopoly. And so the second largest global producer is for sale right now that should conclude here, I don't know, in 2 months or so from what I hear, it's the process is moving along.

That customer, they're not expanding. It's a depleting asset and they kind of are who we thought they were. They produce, they are very, very great like producer. They're 25% of global supply, and they definitely -- they produce their 0.5 million tons of oxide, but there's no expansion coming right? That's one.

There's always been another much smaller producer in California on borates. It's -- there's a soda ash primary producer. And listen, it's a shame there was an earthquake damage and then ultimately, COVID and like just kind of a tale of unfortunate events and really compounded by the soda ash market is long and China is supplying some very cheap soda ash, and that has caused them just they can't compete on the cost curve. So they've they're restructuring the business in the sense that they've exited soda ash and then also for acid, they're going to -- there's a couple of different refined borates, sodium borates is 1 of them. It's more of the commodity of the borates, but they'll produce not boric acid -- and that was about 55,000 to 60,000 tons, and they were predominantly supplying in North America. And this is all public, and they exited. And we saw on our supply and demand analysis, 2025 was kind of the year of parity. It was always like a little -- because it's just such an opaque market. '24, '25 we're like teetering on is there excess spot, excess demand, deficits, and once they took their 60,000 tons out of the market, like the full deficit was here.

And what we saw was customers scrambling for challenging South America product or begging Eddy to supply them. And listen, I think it's like people scramble it. And in that point, it's like, what's the price because there's really like where is the bid and the offer. And when you're in a deficit, price discovery is really interesting. And so I think that -- and what we've seen now is like it's a little tight in Asia, but like any of the large Asian customers are contracted.

They really weren't buying from this domestic producer. And so what the anticipation is, and this is really kind of strategic on why we sent Mark over to Asia now that boric acid and borate contract negotiating season for '27 starting. And so massive like ripples and waves are hitting U.S. markets while customers are scrambling, but Asia was kind of relatively insulated. And as you go and renegotiate and contracts are, up what's going to happen is those ripples are now going to hit the Asian markets because listen, those existing producers, they're 60,000 tighter on utilization. Their utilization went up. And so that drives higher pricing that drives a tighter supply in demand. And -- so I think that bodes well for what we have going on in Asia.

And so that was the big driver that really pushed it to deficit. Also now you see boron getting more coverage. Project Blue, which is actually like spun out of the Wood McKinsey Roskill Group. They actually do have a -- they've reinitiated their boron coverage. They had a fantastic 2015 report, like 350 pages forward detailed it. And so we had a call with them recently and they're -- like -- and these are like some of the best market research teams and like the deficits here on their radar. So I -- it's -- I think, like, it's definitely the year of boron.

There you go. I want to zoom in on one thing because the meta boric acid product for you guys seems to -- to me, come out of basically nowhere this year, roughly about 80% boric oxide equivalent with the provisional patents already filed. What's the customer pull on that material specifically? And how should we think about where it sits on the margin curve versus standard granular boric acid?

Yes. We're excited about that. And I think they're similar to the meta like there'll be some more products that kind of come out of that technology package that we've been working on. Listen, a lot of customers, and it's not all, but they strive -- they seek higher B2O3. And so -- just from a basic molecular level, boric acid is actually 3 hydrogens a bore on molecule and 3 oxygens or on oxide is just B2O3. So when you look at a specification boric acid is actually quoted as 56.3% B2O3 -- and at the molecular level, there's additional water molecules with hydrogen and oxygen. The boron oxides and anhydrous product, i.e. less water molecules. And so customers pay a premium for boron oxide, typically about 3 to maybe 4x the price of oil acid.

They're compensated for additional capital spend to drive off the water. What and what certain industries do want specifically LCD, textile fiberglass, pyrex, they want higher B2O3. But again, they may be price sensitive and that they would like a higher B2O3, but they don't want to pay for it. And ultimately, what we've seen is that, and this is a product that we created, we -- there's some literature on it, but ultimately, we kind of questioned like why isn't this in the market? And the reality is actually the 2 large producers, they produce the bookends. They make boron oxide, which is pretty capital intensive and they also make or boric acid.

There's no reason to have an intermediary. They can charge a higher price for customers that want the 97%, 98% B2O3, boron oxide. And so we've been able to get there to at a meta product, free flowing meat specs and samples are out to customers and listen at a very minimal basis, there's a stokiometric value. If you -- if a customer really wants the B2O3 content, they can in turn if they procure an 80%, they can use less product. So in theory, there's a parity point on a B 203 basis where they'll just pay a higher price because it's the same prices for acid relatively speaking, on an 80% basis. they're buying less tons. So that provides a higher price point. Additionally, you're shipping more valuable bore on, so your unit economics can get better on a shipping basis, -- additionally -- and so like you have actually 2 opportunities to convert customers. You have your traditional people that are buying bored acid, but they would like a higher B2O3 product, fine. You can come up with that stokiometric price point on the low end coming up from boric acid, but then let's assume boric acid sells for $1,000 a ton, boron oxide will use a simple analysis where it sells for 3x the price of boric acid so $3,000 a ton.

Someone who's buying boron oxide maybe they would like an intermediary product, right? They found out that their manufacturing process does better with higher B2O3, but there hasn't been this intervener in the market. Also, maybe they're really sick of paying 3x the price. So you can take 3000 x0.8, right? I don't have my calculator, but that is maybe $2,400. And all of a sudden, you have a ceiling price for boron oxide customers. So now what you've done is you've taken boric acid at 1,000, boron oxide at $3,000 and and you maybe have a spread of $1,400 to $2,400 where there's value potentially to these customers and you have higher price points, you can start to contract it, really, really novel and innovative.

And it was really important to file the patents, too, because we don't want anyone else to do this. So yes, I think there's -- I think that can kind of give you some indication on like what the margin is because you have some price points how I'm thinking about it. And yes, there's going to be some incremental OpEx on the energy side. But like, listen, we get the PFS and in the economic analysis, what is the biggest driver to the model is actually commodity price.

And so you creatively through this technology get to a better product that gets us a higher price point, and it's going to be accretive to economics.

Here you're going -- and then kind of other direction, I'll throw you for a second. I know a recent announcement highlighted a lithium PEA because your PFS included a LCE lithium resource, but no reserve because it was not included in the economics. Can you help explain what drove the update for the lithium PEA just for folks in the room?

Sure. Listen, we've always had a lithium chloride in our solution. And it kind of ranges from 40 PPMs up to 100 PPMs in solution. And when you kind of -- when you extrapolate that on a mass and energy balance, about 500 tons a year at 130,000 tons of production, okay? Obviously, if you can hit some higher areas of lithium, maybe you get to 150 ppm, but that's the driver of your output in quantity. And so when we were starting the pre-FEED engineering phase that led to the PFS, we actually had a very good, robust discussion and intentional about do we include lithium in the scope -- the reality is you're going to produce about 130,000 tons of boric acid, 130,000 tons of gypsum, like serious logistic aspects, the 500 tons of lithium, man, this is interesting, and it can be accretive to economics.

But like that's not our core business out of the gate. And given we're dealing with aqueous chemistries, you can always add a valve or a slip stream and both that on the back end. And so -- and also at the time, the lithium market got beat up, prices were $9 a kg, and it just was like this isn't a high priority.

So fine. And now we're at a point where the business is simple and a lot of emphasis on the offtakes and the commercials. And so we -- our technical team had some capacity. One of the other things we did was we included some solar EVA ponds in our design. We do have sodium, which is salt that is not very -- listen, you can sell it, but it's just not a huge economic driver.

And there was about $45 million in kind of our initial CapEx for specifically evaporation or evaporator equipment and installed -- total installed cost for the sodium. And I'm like, guys, like this just -- we can't be spending this. We got to find another way. Listen, we're blessed that we're in high desert in California, which is very similar to the Atacama, that solar EVA ponds are a very viable technology path. And so we included additional 5 ponds.

Listen, there's nothing contentious about this. It's actually like the back end of our process. So you're really just removing saltwater and just letting kind of the sun take out the sodium. And or sun take out the water, so you get a remaining sodium and then that gave us some optionality to make a liquid calcium chloride.

And so we put that into the design. And so we came back now to floor and we said, "Hey, okay, DLE technology has actually like made some strides from just a technical readiness perspective, and we have this lithium chloride, let's kind of do a trade-off of potentially 2 or 3 options. So it was DLE adding a sixth pond, pretty small, too. And then we also looked at potentially would we sell a liquid stream if we had a counterparty, but that was a little bit more difficult to price.

And the focus really came into the DLE versus the solar EVA. And I mean, it just made -- and we've kind of used the $18 a kg we're seeing today in the market. as kind of our base case. We have real prices on what we could procure commodities. We know the CapEx. And listen, there -- and that's what Fluor did, and it's one additional pond plus some equipment to make a lithium carbonate.

And we think we have actually all the equipment predominantly today. So that while the CapEx is in there, it's already sunk because we can repurpose small-scale facility, and it's a sixth pond. And really like inexpensive and very proven technologies. Listen, it's definitely not fast. You won't get it right away. There's kind of you got to build kind of flow in the ponds and let it build up and so you can evaporate. But it's how they do it in the Atacama, and you ultimately are like a very low-cost producer on that byproduct then. And it kind of at $18 a kg kind of equates to a $50 per credit to boric acid at 130,000 tons. And that's nice.

And it's really pretty like nominal capital that we're going to have to deploy. So we kind of did it. It was pretty inexpensive before and was a bolt-on and kind of similar to what we're -- while we're kind of progressing commercials, really focusing on with the Meta and potentially ferroboron.

Yes. And I actually -- I wanted to get into Ferroboron actually because I know that does have the market's attention to some degree. For people in the audience who know you as a boric acid story, -- can you explain what magnet grade ferroboron is and how it fits into the neodymium iron boron magnet supply chain just because I think most investors probably don't know that story.

Sure. And so like 5B stands for the fifth element and Advanced Materials is ultimately from a boric acid product, you can make various boron derivatives. And it's it's always been a medium term, like a longer-term vision of the business. And we are at a point where the network has grown and we can start to do a little bit of R&D that's actually not very expensive. And the big -- the first -- so let's talk like the basics, a neodymium iron permanent magnet, i.e. what everyone in the government's talking about to the rare earth permanent magnets. Those magnets, chemistries are Nd for the neodominium, Fe for the iron and B for the boron. And so the rare earths are in the manufacturing process combined with the [indiscernible] and they don't take iron and they don't just take a boron. There's actually an intermediary step, which kind of were doing the R&D on, and it's actually not that novel of the technology well known to get to ferroboron, right?

And it's aluminum or carbon there reduction in [indiscernible].

And that's how it's made. Now we don't know the exact process, the baking time, the temperatures, and that's what we're fleshing out. And -- but the reality is no one in the U.S. makes ferroboron and that creates a supply vulnerability. In fact, most of it does come out of China. And there is Japanese production, but this really kind of came on our radar as the commercial team was was received an inbound from a Chinese ferroboron manufacturer, and they're looking to scale up to 4,000 tons a month of boric acid. I'm like, wow, that's a sizable contract.

Delicious.

And that's 48,000 tons a year of boric acid and I'm like, okay, we need to learn more here. And so we did. And then we were talking to a couple of industry folks in the rare earth and Magna space, and they kind of said, like, listen, we can buy Japanese ferroboron or we can get Chinese ferroboron, like that's obviously found upon secure magnets. And we have a need. And so I said, so it was like, okay, this is -- and we know it's growing. It's -- I can't go on to LinkedIn without seeing something about magnet CAGRs and supply concerns.

And so we kind of went down that path. And as we started to also do additional homework and research, well, the barrier to entry is actually it's the B. So it's kind of -- that's our core competency. And so if you think about it, what I expect is ultimately, if you convertibly integrated and this isn't -- like I think we need to do the R&D and then there's prospect then kind of start from the bench in the lab and then go up to some level of pilot or make larger quantities. And we have multiple specs for the Magna grade. And the major difference is it's a lower carbon ferroboron to go into the magnet and because also ferroboron goes to steel. And that's the much bigger market, but the magnets are very much growing. And so I think that long term, like our cash cost is our input cost into that work stream. And so you can have a competitive advantage there. I don't know if we will compete I need to do some, obviously, as we work through [indiscernible] energy balance and get those details, we can start to model it out, and we'll do the market analysis to understand where people are on the cost of China. But I think like the value proposition is like what can provide is a domestic reliable, fully like mine to magnet on the ferroboron piece, iron readily available in the United States and kind of round out the domestic supply chain, and we can be a much more reliable supplier relative to the Chinese.

And I think still like very competitive because it's our cost -- our cash cost coming in the China input side. And so I think that's exciting. I also think there's whispers where I saw it from another CEO, as long as distribution list, there's kind of whispers, China may just like cut off rare earth,and I've heard whispers that that could also be the ferroboron too. And so -- like there's a reason they got it right and they added boron as a critical mineral, it just wasn't about boric acid. It was about some of the -- definitely the derivatives that are in there as well and what China dominates.

So yes, I think it's a very interesting and exciting work stream we have going on.

No, I'm going to stick to ferroboron because I think the strategic case is it's kind of obviously like you outlined, the U.S. doesn't produce it domestically. The supply chain all runs through China, which is tightening export controls seems like every month, they're stopping the export of something new that American fortunately has relied on. So I guess my question, just as an add on to what you just went through, how quickly could 5E become a meaningful domestic source of ferroboron.

Sure. And I have my government affairs team, like pestering me to go take this to Department of War now, and like we've -- so we've done the testing in the sense that we've dialed in parameters. And this month, we will -- like the lab space is rented like we're going to take those parameters and work on the reduction. And so I think if we can provide successful samples, then you would look to in the fall make a larger quantity that we could say, you can put this in trial this in a magnet production, make a magnet. That's the goal. I would rather have the conversation with the Department of War with here's my samples. Take a look. Here's the spec we've made. That's a much more powerful, we've done the R&D because then I would expect it's like, okay, wow, great, can we -- how can we help.

No, that's -- it's a good framing to come in with. So I'm sorry, I appreciate you going to my flight of fancy with ferroboron that element is so interesting. I want to talk about the balance sheet for a second because obviously, you closed $36 million in February is more than 4x oversubscribed, and then added Jonathan Siegler to your team to the borate. with his project finance background, and I know you're ongoing interactions with exam, what is his arrival? Or what should it signal to investors about how you intend to fund that kind of heavier capital phase at Fort Katy? And what do you expect to be debt? What role could federal financing play? And any information you can give on that?

Yes. Listen, that last -- the offering was 4x oversubscribed. It was an S-1. So it was -- look, those are hard deals to get off when you're public. SEC has actually changed the rules that we could -- that would have no longer be the case if we did that now, which probably would have been better pricing. But I think, like, listen, it definitely shored up our balance sheet, put us in a really good position. The goal is not to have to come back to the public markets. It's to really kind of focus on the debt piece and building the relationship with [indiscernible] and additionally, it's -- if there is a -- there's nondilutive aspects, other grants we've applied for, we can touch on that in a little bit, if it makes sense. And but I think, like, listen, we -- and this is why the offtakes are so important because the stronger they are and the more they mitigate price and quantity, the more we can actually take on on debt. And ultimately, listen, I think that usually the one point, when you talk to the lenders, it's kind of a 1.2% interest coverage ratio they're going to target to look at. And to the perspective, you have a fixed price offtake or you have a floor price, you can really get a good sense of what the revenue is going to be like behind those contracts that ultimately can validate and get under comfortable on the coverage ratio.

And so like, listen, XM can loan up to 20% -up to 80% of the project, but like the interest coverage ratio needs to make sense. So that's why, especially as we look at some of these higher-priced products on the meta side that's really important. And ultimately, a potential lithium carbonate credit helps us get more competitive on the cash cost. So I think we would target as much debt as makes reasonable sense on we can maintain those coverage ratios and that's driven by the commercials.

And then, listen, I think what we're seeing today is the -- like U.S. governments are investing in companies. We submitted a grant application and that was all a question that it was like would you be open to, including the government on the capital stack. We do have listen, like we've had proposals for royalties. I think what I'm very sensitive about is like your royalty, if you're going to do something and especially having like a lithium stream, you could potentially royalty off of that as well. But you would look at -- you don't want to mess up your project finance because royalty tends to be a -- that will get recorded in accounting, and I'll sit on your deeds or your BLM claims.

And you just -- sometimes the language of a royalty agreement can cause lenders to have pause. So I think we want to really progress on the debt side, and then any kind of optionality as the last and top up on a potential royalty as well? Like it's -- there's an option for that. And then I think if there's any equity deficit you would -- like we plan to have meetings with the OSC. I think we're waiting on a DOE grant. So that would open. If we win that, we would target like in the grant agreement like have that conversation because it was in their NOF.

And so I think the goal was to do a bigger raise so we can mitigate the possibility of coming back to public markets. And I think, the goal would be the agency debt. It is a really cheap form of capital, and we're building that relationship with XM, and that's important. And it's ultimately a cornerstone on the offtakes.

Here we go. So I want to next just try to pull a lot of these threads together, if you don't mind. So between the offtakes, metaboric asset, the ferroboron program, the financing pieces, what do you -- are there specific boxes that still need to be checked before 5E can take that final decision on Ford Cady?

Yes. It's -- the business is pretty simple. It's -- the focus is commercials and a little derisking on the wellfield side. We're going to test a jet pump here. We've done it on the bench, and it looks good, and we'll put it down well. And -- but it's really building the commercial pipeline to go into feed because if you're going to go into feed, you're going to build something and additionally, it you need confidence that there's customers on the other side of feed. So if you raise the debt and you put steel in the ground, when that steel is constructed, you have a product that customers will buy.

So that's -- and candidly, like I had not -- like Mark's fantastic, has great relationships. But a lot of the focus of the business previously was on the bit of the derisking and capital raising at times. And that raise ultimately did open up the door that I can kind of go arm and arm with Mark and really focus on the commercial aspects of the business. And so if you think about like I started really focusing on this 3 months ago, and like we're -- here we go. So we're -- this is the big -- this is what needs to happen, is the commercials. And I think they're massive validation and it's definitely a great catalyst as well.

Listen, the other thing is what's interesting on the meta as well as potentially ferroboron, but we've got to progress that. It's not quite as far as meta. But either toll like we have various samples out to customers now where they're being shipped after the Asia roadshow. And listen, I mean, you need a contract, you need supply, which is for that's -- but there's traders out there. So it actually potential we're looking at more near-term cash flow opportunities on on some on the meta side. So that's something we're lifting many stores.

Great. Last one for me, and then we'll jump to some of the stuff that's coming from the audience, a lot of which we've already covered, so it should be pretty speedy. But I just wanted to zoom out and take a look at, looking forward a little bit because for an investor looking at 5E today, and I know there's some folks in the room is the first time looking at the 5E story. So today versus a year ago, what's the single biggest thing in your opinion that's changed about the risk profile of the story? And what catalyst can you point to that folks in the room should keep an eye on in the next 12 months?

Like 2026 will be the year of offtakes. So that's the big big catalyst on the horizon. Listen, we did apply for a DOE grant as part of mines of the future. I mean it's going to be competitive, but it was a sizable grant. We thought we'd know by the end of February, it's going a little slower. But I think it's -- we've kind of heard whispers it's under review. I don't know the exact status, but if that would be a major catalyst would be -- it's a decent about a nondilutive funding. I was like a 60-page grant. I mean it was we spent our Christmas rating. Yes. And I think like -- listen, it's just a simpler business now. Like we know it's dressed predominantly, and it's been done at a decent size. So it's -- and the market started -- the market has turned. So there's there's a need for that reliable supplier. And it's taken us a little bit of time to get there, but it's here. So I think next 12 months is a big focus on the commercials.

Great. No, I appreciate that. Going to some stuff that's been asked by the audience. One, they asked about other federal or shape grant applications or nondilutive funding efforts. You've already touched on it, but if you got any other additional comments on status of those or whether any awards are likely to materially reduce the need for equity financing. I'll let you give another go, but I know we've already kind of covered it. So just if you that.

DOE award would potentially materially reduce any need. So that -- I mean, super would be -- it's a home run. The -- I mean we are monitoring other grant opportunities. There was actually one that got dropped yesterday. It's -- I mean, it's interesting. It's -- a white paper would be due in 15 days. We can actually take our existing application and kind of repurpose that into that -- and then there's a -- you would find out on your white paper by pretty soon and then you would have to submit a formal application. And if you get moved on from there, you get invited to pitch at a conference later this summer like shark tank.

So it's an interesting way. It's a bit on orthodox. Interesting. So we'll see. I think we're going to -- we'll apply and we'll go through that. So we're consistently working and I know Curt's been in D.C. and will be in D.C. this week, meeting with another agency that we can -- we're talking nondilutive. So it's always on the radar.

Great. No, I appreciate that. I just somebody asked so good to reiterate. One person asked just a quick question and now they can look up your disclosures, and I'm sure that's a number you're about to quote. But somebody is just asking current treasury of the company as far as last reporting.

Yes. I think $25.3 million and listen, I think we target like having kind of burned we're still operating in the pilot, but we target $1 million a month. So like the benefit there was a point where the small-scale facility was operating 24/7. And like we're a much smaller team now. We kind of have adjusted. And so it's a much more reasonable burn rate today. I think our Maxim analyst, we surprised them with this last quarter, and we'll continue to really kind of stewards of capital on the burn. I know I do see 1 question on the permits, and so we got a record decision in 1994. That basically gives us the ability to operate on the federal land that surrounds our real property.

We have State of California and San Bernardino County approved a mining and reclamation plan and use permit. Also in 1994, that's how we operate today actually, and that's our licenses to operate to the permits are very real. Obviously, you'll have some ancillary, like so those are two of the big permits. The other major permit is our underground injection control permit with EPA. We've received authorization to operate. And so like the demonstration plant, we we operate today is really licensed under those permits. Now there's other like ancillary permits, not major mining permits, air permits. We have all that. Again, we'll pull some additional permits. It's -- you don't do that till feed when you actually understand every piece of kit that's going to go in there.

And those specification it spec sheets on the kit has actually the NOx and the SOx emissions. And then in turn, you will -- you go apply for the permit, the very high degree of late, there's no reason we won't get them. And obviously, we included in the scope of solar [indiscernible], we will -- we've had conversations with them with the water board, like there's nothing contentious about this. Like even the water we produce, it's actually a closed basin. It's brackish like regear. So like it's not going any groundwater. We have -- water is adjudicated in California, like we've been demonstrating use. So it's not -- it is for us. And so like we'll put those solar E-bands, not going to be a gating item. And that -- well, actually, now that we've included a bond the application will get updated, and it's pretty much ready to go, and it's a couple of months process.

It's -- California gets a little bit of a bad rap. But I think if -- when you're in Sambrano County, it's a good county to be in.

It seems like a pretty clear it. Now just before getting to the last 2 questions from the audience, I just want to remind everybody because I know there's a lot of you in the room. There's a request meeting button at the bottom. If you would like to meet with Paul or the 5E team, please you hit that button, I'll try to eat you guys connected following today's event. Robert from the chat asks one of those questions, it's tough to answer, but I'll throw it to anyway. What's the anticipated average contract size to get the throne out up?

Yes. I think like we target price points that are in our PFS. And so that's obviously -- we've had to think outside the box and kind of be creative with some of that stuff, but that's kind of look at the PFS, and you can kind of see where we need to be because all the commercials are kind of all underpinned by like what's going to get us to FID. And listen, I think from -- we will -- we're not going to be where we have like 2 or 3 or 4 customers like we're going to have a portfolio of customers.

And I could very realistically see a scenario where probably targets 25%, maybe it's closer to 20% or it could be as up as 30%. Some of the distributors are smaller, lower tonnage, but they're good, reliable customers. And so I think you would have this diverse portfolio across various industries, definitely meeting export Nexus. And in turn, you're going to have a diversification of a combination of various contracts that some are fixed, some are colored. And then you would obviously have some portfolio in there for just spot market, where you can take advantage of what we think is going to be a higher-priced environment because that's driven off of supply and demand.

No, I appreciate that. Last question. We've already touched on it, but -- and also the people's last opportunity to ask a final question, if you like, well, Paul answers this one. Todd, just wants reiteration what status of financing in the XM.

Yes. So the big loan we -- like for me, like a large project finance like, we'll have a check-in at about 25,000 tons under contract with counsel like for project finance. And then like for me, my gut is like at 50,000 tons, that's when you should apply for a loan. So like that's a KPI for us. Perpetual just got their loan. And we've been talking to XM to start to get them familiar with the project through a smaller E&P loan. And that would -- because I think there's a relationship aspect, that's really important here. And also it gives people an XM the ability to familiarize themselves with the team as well as the project and kind of some of the technicals. So that's, for me, that's like the target. Obviously, there's 7,500 tons under like more is going to come. And I think that because that's -- those are kind of like what I have in my mind, but again, it could change. But I think like as you think about it, maybe it's less because like in first year production, you really probably only going to produce 90,000 tons of 130,000 because you've got to kind of scale up and work into that. And so I think you have some -- there's still, obviously, very large customers, specifically out of Asia that have multiple plants.

And the way I'm thinking about it is that you could potentially Obviously, you want to get closer to 130,000 tons. And as your sequelae sequencing that, like what you would be -- what we're talking to about some of those customers is like, okay, implant in year 1, this plan. In year 2, I need that plant. And so you start to be very strategic on what's that kind of revenue lead sheet look like?

Awesome. Well, Paul, thank you so much for letting me Grill on a recent history of the company, going through some of the recent news. Everybody in the audience, another lot, thanks so much for joining. If you have additional questions, you think of the perfect one to ask right after the event ends, somewhat often happens to me. Please do send it in. I'll make sure that the 5E team gets it and gets back to you. But Paul, thank you very much. I think this is very informative, and thanks, everybody, for joining.

Thanks. Have a great day. See you.

Have a very great day, everyone. Cheers.

Good afternoon, and thank you for joining us today for 5E Advanced Materials Fiscal Third Quarter 2026 Conference Call and Shareholder Update. During today's call, management will reference the company's quarterly report on Form 10-Q for the quarterly period ended March 31, 2026, which is available in the Investor Relations section of the company's website. For a copy of the Form 10-Q, you may also contact PRA Communications at [email protected].

As a reminder, remarks made on today's conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding expected future results, costs, production capacity, market dynamics, capital expenditures, liquidity, cash spending, finance objectives and options, customer demand, purchase order commitments, offtake arrangements, customer qualification activities, commercialization strategy, development plans, engineering and project financing activities, including FEED-related work and the timing and scope of future engineering phases, advancement of supply chain initiatives and products, the potential benefits of our ASX delisting, the potential applications of our products across energy, defense and industrial markets, government-based financing opportunities, including EXIM-related diligence, the company's ability to continue operating the small-scale facility and developing the project and potential development of advanced boron derivative products, including meta boric acid and ferroboron.

These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially and adversely from those projected or discussed. Additional information concerning factors that could cause actual results to differ materially and adversely from these forward-looking statements is contained in our disclosures and public filings with the SEC, including our Form 10-Q for the quarter ended March 31, 2026. The company undertakes no obligation to update forward-looking statements, except as required by law. Today's call may also include a discussion of non-GAAP financial measures as that term is defined in Regulation G. Non-GAAP 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. Management will first lead off the call by making prepared comments, after which we will open up the call for your questions.

I'll now turn the call over to Paul. Paul?

Good afternoon, and thank you for joining us today. The third quarter of fiscal 2026 was a pivotal one for 5E Advanced Materials and one in which the team delivered a number of important operational milestones. Most importantly, we signed our first offtake heads of agreement with the domestic and industrial end user of boric acid. The agreement is for 7,500 tons of boric acid per year with optionality to increase supply to 10,000 tons per year. The agreement is a long term with fixed pricing, annual escalation and an initial 5-year term with an automatic renewal for up to 10 years.

This agreement represents a major milestone for the company and the countless hours that our team has spent cultivating relationships with potential end users. Moreover, it sends a clear message to the market that our products meet industry specifications and end users desire a new market supplier. While a definitive purchase agreement is expected to be finalized in conjunction with project finance diligence, this is an important step in the process of converting customer interest into commercial terms with price and quantity specified that can support lender diligence and underwriting.

[Technical Difficulty]

Apologies, Paul, we seem to have lost your order. Are you still connected?

Can you hear me?

Yes, I can hear you now.

This offtake comes following a customer roadshow that 5E's team undertook in March, where we met with key decision-makers at 12 end users and distributors of boric acid across various industrial market segments. The purpose of the roadshow was to provide an in-person 5E project update as well as understand each customer's business, the technical requirements, logistic needs and discuss contract terms.

The key message that we took away from these end users is that there is a growing urgency to develop a new, resilient and reliable domestic supply chain. Multiple customers requested proposals and commercial terms with the first agreement now signed. As a result, we strongly believe today's announced offtake is the first within an expanding pipeline of additional offtakes to come. We have various proposals at different stages. And over the coming weeks and months, we expect to continue advancing additional offtake agreements with bankable terms that are intended to underpin project debt financing.

Our near-term commercial objective is clear: continue converting demand into agreements with bankable terms while maintaining discipline on pricing, counterparty quality and long-term project value. A second important operational milestone that was achieved during the third quarter was our successful development of a meta boric acid. Meta boric acid enables 5E to offer a high-value specialty boric acid and uniquely positions 5E to deliver a boric acid with higher grades of B203. Thanks to our highly talented in-house R&D team, we believe we have produced a stable free-flowing meta boric acid, achieving approximately 80% B203 equivalent content.

Meta boric acid provides an option for potential customers seeking higher boron content products. For context, in today's market, boric acid is 56.3% B203 and boron oxide is approximately 98% B203. Typically, boron oxide is selling for 3 to 4x the price of boric acid. So for example, if boric acid is sold for $1,000 per ton and boron oxide is sold for $3,000 per ton, and boric acid is 56.3% B203 and boron oxide is 98% B203, there is a stochiometric price for an intermediary product with 80% B203, where we believe we can achieve a higher price point somewhere in between. Hypothetically speaking, a contract for 10,000 tons of boric acid with a fixed price of $1,000 per ton would potentially yield $10 million in future annual revenue. A 10,000 ton contract for meta boric acid could yield an equivalent stochiometric price relative to boric acid of $1,750 per ton or a contract yielding approximately $17.5 million in future revenue.

There is also a logistical advantage whereby the cost to ship 10,000 tons is the same for both boric acid and meta boric acid, where the meta boric acid ultimately drives the same shipping cost as boric acid, it is a much more valuable contract. This accomplishment solidifies the next step in becoming the U.S.'s only domestically owned vertically integrated producer of boron and high-value advanced boric acid products from mine to end products. Given this technological advancement, we filed a provisional patent application to protect the company's intellectual property and enable additional commercialization pathways. Secondary trials are ongoing and samples have been provided to end users for testing and qualification with the expectation that we can contract on this product. We are working to advance commercial discussions with prospective customers. Importantly, this work will also give us the optionality to pursue higher-value product pathways in parallel with and potentially ahead of the full-scale commercial product.

In February of this year, we announced the kickoff of a ferroboron product trial program, in which we are evaluating production of magnet-grade ferroboron, crucial to the U.S. specialty steel and permanent magnet supply chains. At this point in time, initial crucible testing has commenced and over the coming weeks, we expect to produce a magnet-grade ferroboron and provide samples to various customers. This program comes on the heels of collaboration with potential magnet producers.

Ferroboron is used in the creation of specialty steel and permanent magnets destined to numerous high-demand market segments, including high-efficiency electric motors, wind turbines, industrial automation and defense systems. Global magnet supply chains remain highly concentrated and recent export controls and geopolitical friction are forcing customers to focus on resilient U.S. domestic magnet supply chains as an alternative to Chinese imports. This trial reflects our strategy to expand beyond first derivative borate products and into high-value performance materials, supporting our long-term revenue mix and strategic relevance to growing market segments.

The team will continue to aggressively market our product offering. And in June, our commercial team will begin marketing in Asia with a goal of replicating what we are now executing in real time in the U.S. market. Our objective will be to introduce 5E as a viable supplier of borate products, discuss our range of product offerings and to lay the foundation for contract proposals. As the domestic boric acid market has slipped into a supply deficit, we believe tightening will transition to Asia for the upcoming contracting season. We now have a growing ability to provide a portfolio of borate products to a global customer base. All of the previously mentioned accomplishments have been underpinned by the company's strong cash balance supported by a successful 4x oversubscribed $36 million public equity offering that closed in early February. This capital raise demonstrated strong support from capital markets for our vision and growth strategy. This bolstered 5E's balance sheet and has enabled us to focus on delivering meaningful catalysts centered on commercial contracts and financing readiness to develop the Fort Cady Project.

As we think about longer-term financing needs, we recently attended the Export Import Bank of the United States Annual Conference, where we met with delegates to discuss 5E's longer-term project finance needs and the expected offtake agreements that will underpin a make more in America project finance debt facility as well as our current application under XM's engineering multiplier program where loan proceeds can be applied to valid FEED engineering expenditures. I'm pleased to report that active diligence is progressing for the E&P loan and that we maintain a biweekly call cadence to work through real-time deliverables.

Historically, this quarter's milestones are important because they directly support the work required to advance the project towards its next phase. Our focus is on continuing to convert customer interest into increasingly financeable commercial agreements, advancing active lender and government financing diligence and completing the technical, commercial and execution readiness work necessary to support the next phase of engineering when the appropriate conditions are in place. While there is still work ahead, we believe the progress made this quarter meaningfully derisked the project, delivers catalysts, strengthens our financing pathway and reinforces our confidence in Fort Cady as an economic and investable domestic boron platform.

Overall, our third quarter efforts and accomplishments have enabled us to take major steps forward in our strategy of becoming a mine-to-market supplier of borate and advanced boron derivative products. With a diversified portfolio of borate products, our first product offtake agreement in place, a pipeline of others being stage gated towards signature, the supportive undercurrent of boron market dynamics in support of U.S. legislation and domestic policy, we believe we have a solid foundation to continue derisking the project while diligently preparing for the next phase of engineering and financing for Phase 1 of the Fort Cady Project. We believe these efforts will deliver shareholder value.

With that, we are ready to open up the call for questions.

[Operator Instructions] Okay. And there were no questions currently from the lines. I will now hand the call back to Paul Weibel.

Thank you to everyone for joining today. We look forward to keeping you updated as the next milestones come in, advancing through additional customer offtakes, engineering, project financing and Phase 1 construction readiness. Thank you, and have a great day.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Good afternoon. Thank you for joining us today for 5E Advanced Materials Fiscal Second Quarter Conference Call.

During this call, management will be referencing our Form 10-Q that can be found in the Investor Relations section of our website. For a copy of our Form 10-Q, you may contact PRA Communications team at pracommunications.com or go to our Investor Relations page on our website.

As a reminder, the remarks made on today's conference call will contain forward-looking statements, including our expectation of future results, costs, production capacity, market dynamics, liquidity, cash spending, financing, objectives, and options, 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 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, non-GAAP 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. Management will first lead off the call. By making some prepared comments, after which we will open the call to your questions.

I'll now turn the call over to Paul.

Good afternoon, everyone, and thank you for joining us today. The second fiscal quarter of 2026 marked another step forward in a transformational year for 5E Advanced Materials and for boron in the United States. Q2 was defined by execution, validation and advancement turning the strategic momentum we discussed last quarter [ and ] to tangible progress across financing, customer engagement, critical minerals awareness, resource expansion and project readiness.

Last quarter, we spoke about alignment, alignment between market fundamentals, U.S. industrial policy the 5E's position as the most advanced domestic foreign development assets. This quarter, that alignment was translated into measurable progress. Before diving into the details, let me briefly summarize this quarter's key highlights.

First, we continue to advance federal financing engagement building on boron's designation as a critical mineral and [ deep ] in discussions across multiple agencies aligned with critical minerals, supply chain security and advanced manufacturing.

Second, we made further progress on customer validation, expanding to successfully complete a full-scale glass trial, which has progressed commercial discussions with future customers following our initial large-scale shipment and successful trial.

Third, we advanced engineering and pre-FID work streams, maintaining alignment with our objective of reaching a final investment decision.

And finally, we continued strengthening the long-term foundation of the Fort Cady Project, including mineral tenure, substantial increase in our mineral resource estimate, technical differentiation as we filed an omnibus patent that covers our [ Insitu ] leaching mining process and strategic positioning as a next-generation boron producer. Altogether, these milestones reinforce that 5E is moving decisively from development towards execution.

I want to start again with the market backdrop because it continues to underpin the fundamental economic opportunity in front of us. The global [ boron ] market remained structurally tight with Turkey, controlling approximately 70% of global reserves and approximately 65% of global production. Turkey is to boron, [ what ] China is the [ rare ] ERS. The U.S. legacy supply continues to face rising costs, declining grades and limited flexibility, while demand for boron-based materials continues to expand across energy transition technologies, advanced manufacturing, national defense and to high-performance glass and ceramics.

What has become increasingly clear through customer discussions and trials is that security of supply, jurisdiction diversification and reliability now matter as much as price, which all play directly to Fort Cady strikes. Fort Cady is a long-life, scalable U.S.-based asset that aligns with national supply chain priorities. Since boron's conclusion on the USGS Critical Minerals list, engagement with strategic stakeholders has increased. The designation has moved boron and Fort Cady from a niche industrial mineral conversation into a broader national supply chain discussion.

That is an important shift and one that continues to open doors. Building on what we outlined last quarter, we made additional progress across federal financing pathways. We remain engaged with the U.S. export Import Bank under the [ make ] Moran America framework where 5E holds a previously issued letter of interest.

During the quarter, we further advanced discussions about how Fort Cady aligns with U.S. export competitiveness, downstream manufacturing and supply chain resilience. We also progressed work related to the XM engineering multiplier program, which is designed to support advanced engineering activities on a non-dilutive basis. This effort was slightly delayed given the fall of 2025 government shutdown, but we will formally kick off with XM underwriting team next week. [ Reminder ] this program has the potential to fund a significant portion of our FEED activities and further derisk the project ahead of FID.

In parallel, we continue to evaluate opportunities across the Department of Energy's loan programs office, the Office of Strategic Capital and the U.S. Development Finance Corporation. Each of these frameworks are now directly accessible as a result of boron's critical mineral designation. As part of our federal engagement, we submitted a detailed application to the Department of Energy's mines of the future, [ NOVO ], which provides non-dilutive funding for projects, piloting advanced mining and processing technologies.

Fort Cady aligns with eight of the nine DOE focus [ areas ] in this [ OFO ] demonstrating that we are not just a boron development project, but a technology forward next-generation critical minerals platform. The DOE is expected to announce winners next month. While the program is highly competitive, Fort Cady's technical sophistication, strategic partners and alignment with U.S. priorities makes 5E a compelling candidate. With the DOE expected to announce [ winters ] next month, our objectives remain clear. To construct a capital-efficient financing strategy that strengthens the balance sheet and supports long-term shareholder value.

Operationally, the Fort Cady project continues to progress in line with our development road map. As discussed previously, our pre-feasibility study confirmed a strong economic foundation, including a nearly 40-year mine life based only on our proven and probable mineral reserves and compelling project economics based solely on Phase 1 of the development cycle. That foundation continues to guide our engineering and our execution strategy.

During Q2, our team continued advancing fee-related work streams. Refining process design, infrastructure planning and execution sequencing. These efforts are focused on ensuring that Fort Cady is construction ready, not just permitted or engineered on paper. In parallel, we advanced initiatives to strengthen long-term mineral tenure to find and expand our mineral resources and began laying the groundwork for a portfolio of intellectual property related to our proprietary [ Insitu ] recovering and processing approaches.

As the largest [ ore ] producer in the U.S. undergoes strategic review, we believe the IP for our recovery and processing technology can play a pivotal role in expanding the resource life and improving economics at this producer. While the [ Omnibus ] patent was a strategic move with the anticipation that our IP can be accretive to the strategic review process. These efforts are designed to protect competitive advantages and support scalable long-term growth.

On the commercial front, Q2 represented continued momentum following the successful shipment and trial for the glass trial, we expanded engagement with additional customers across multiple applications. And this now includes specialty applications such as [ Feroboron ], a critical component and permanent magnet manufacturing.

Importantly, commercial discussions for [ boric ] acid are now increasingly centered on commercial structures and long-term supply relationships rather than just technical qualifications. Each successful [ trial ] shipment and validation milestone brings us closer to offtakes. As we look toward the remainder of fiscal 2026, our priorities remain focused.

First, we'll progress customer engagement towards commercial discussions, converting validation and discussion into structured offtake agreements.

Second, we'll execute our pre-FID and FEED [ work ] streams with discipline, ensuring [ 4K ] is the next long term [ for a ] producer in the United States.

Third, we will continue advancing non-dilutive federal financing pathways, leveraging the critical minerals designation to access larger and more strategic pools of capital. Layered on these three objectives will be the specialty [ boron ] work stream where [ Faroboron ] has become a priority with the goal of providing [ Magnegrade ] variable on to potential customers for testing and raring -- we remain committed to moving methodically, derisking each stage of development and building a project that is durable, scalable and strategically aligned with U.S. priorities.

In closing, Q2 reinforced that 5E is moving decisively from development towards execution. We operate in a market that values a secure fully integrated domestic supply chain, and we are aligned with U.S. policy priorities. With these tailwinds, 5E is positioned to become the next major U.S. boron producer creating long-term value for shareholders.

Thank you to our employees, partners and shareholders for your continued support. We look forward to updating you again as we continue advancing towards construction and commercial production.

With that, we are ready to open up the line to any questions.

[Operator Instructions] Okay. There are currently no questions in the queue. I'd like to turn the floor back over to Paul for any closing remarks.

Thank you, everyone, for joining us today. We believe 5E has a rare opportunity to become the next major boron producer globally and the leading domestic supplier in the United States. Fort Cady is a long-life asset with a clear development path and we remain focused on executing responsibly and creating long-term value. We appreciate your continued interest and support, and we look forward to speaking with you again.

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

Good day, and welcome to the 5E Advanced Materials Earnings Conference Call. [Operator Instructions] After the prepared remarks we will open the floor for a question-and-answer session. Please note, today's call is being recorded.

Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially.

For more information on these risks, please refer to the company's filings with the Securities and Exchange Commission. 5E Advanced Materials undertakes no obligation to update or revise any forward-looking statements.

At this time, I would like to turn the call over to Paul Weibel, Chief Executive Officer of 5E Advanced Material. Paul, please go ahead.

Thank you, and good afternoon, everyone, and thank you for joining us today. Fiscal 2026 is shaping up to be a pivotal year for 5E, a year defined by momentum, achievement meaningful progress toward establishing ourselves as a leading U.S. borate producer. We've reached what is, for us, the most significant moment in both domestic borate market and the evolution of supportive U.S. policy.

Boron, the fifth element on the periodic table is now officially recognized as a U.S. critical mineral. On November 7, the U.S. Geological Survey and the Department of the Interior formerly added boron to the final 2025 Critical Minerals list. That recognition is a major validation of our strategy, confirming what we've long advocated that boron is a cornerstone of America's energy policy, national defense and high-technology sectors, while also being essential to glass, ceramics and agriculture.

There is a clear necessity to secure and maintain a reliable domestic borate supply chain and for the U.S. to remain an important global exporter of high-quality borates. 5E is a proud leader in the effort to maintain the United States position of strength in the borates market and with this designation, we believe it brings meaningful economic advantages that include expanded access to federal funding and financing as well as strategic partnerships that will accelerate the development path for Ford Cady.

Before I dive deeper into what this means for 5E, let me summarize the quarter's key highlights. First and foremost, is that boron was added to the U.S. Critical Minerals list which confirms the importance of Ford Cady's positioning as the leading advanced stage boron project in the U.S.

2, the addition of boron to the list expands our eligibility for federal funding programs including USXM, the Department of Energy's Loan Programs Office, Department of Wars Office of Strategic Capital and the International Development Finance Corporation.

3, continued customer validation with full-scale product testing underway with multiple Tier 1 specialty glass manufacturers. 4, progress on feed engineering, supported by our application to the XM engineering multiplier program for a $10 million loan facility.

And finally, we remain on track towards final investment decision in 2026. These achievements built directly on what we discussed during our year-end 2025 call. Our foundation is strong, our milestones are stacking and we're steadily moving towards construction readiness. Before turning to our progress, I want to briefly address the broader borates market because understanding that context helps highlight the opportunity 5E is stepping into.

Legacy producers continue to face rising operating costs, decreasing grades and depleting reserves that have created a market opportunity for 5E a new generation boron company to be built on innovation, operating efficiency and long-term resilience. Market research, insight and customer discussions highlight a clear tightening of supply and demand in the borates market with an expectation of demand outpacing supply.

Demand for borate materials continues to accelerate across EVs, wind, nuclear energy, semiconductors, defense applications, ceramics and specialty glass, exactly where Boron's thermal, optical, density and hardness properties are essential. 5E is uniquely positioned to step in and fill the market deficit with a project that has logistical advantages and a flow sheet and process that is modern, low cost and high value underpinned by resilient domestic boron supply that supports both commercial and national priorities.

Market participants are increasingly viewing 5E as a strategic partner for the future. When combined with the U.S. Critical Minerals designation, these market dynamics further strengthens 5E's position and reinforce Ford Cady's importance to the U.S. supply chain security. As the only pure-play U.S. advanced stage domestic boron asset, Ford Cady now qualifies for several federal funding and grant programs designed to rebuild American mineral supply chains.

These include the U.S. export import bank, where 5E already holds a $285 million letter of interest under the Make more in America initiative a program specifically created to support U.S. manufacturing exports, infrastructure and supply chains. XM's engineering multiplier program, where we have applied for a $10 million loan that has the possibility to finance a significant portion of our feed activities on a non-diluted basis.

The Office of Strategic Capital and the U.S. Development Finance Corporation, where Executive Order 14241 to find a mineral largely with reference to the USGS list. The executive order delegates the Defense Production Act, lending and investment authorities to the Secretary of War and the CEO of the DFC and requires the establishment of certain mineral funding mechanisms including the Department of War Office of Strategic Capital.

The 1 big beautiful Bill Act of 2025, authorized $5 billion for investments in critical mineral supply chains -- sorry, $5 billion for investments in critical mineral supply chains made pursuant to the industrial base fund and up to $100 billion in principal amount of direct loans and guaranteed loans for critical minerals and relative industries and projects.

The Department of Energy's loan program office, where in addition to Title 17, the innovative energy and innovative supply chain prongs are enhanced by this designation given the explicit reference to the statutory reference of critical minerals being the USGS list. 5E is ideally positioned to benefit as a shovel-ready advanced stage project aligned with national priorities.

Access to these programs has the potential to strengthen our balance sheet reduce equity dilution and accelerate execution. That's a direct result of the federal government recognizing what we've built and our strategic domestic resources and reserves ready to move into production. Operationally, our team continues to execute with precision, maintaining strong alignment with our milestones and reinforcing the quality of our technical and commercial foundation.

As we discussed last quarter, our pre-feasibility study confirms strong project economics, a 39.5 year mine life and 19.2% pretax IRR and a pretax NPV of $725 million for only Phase 1 of the -- Ford Cady project. Those fundamentals continue to anchor our forward plan. We've now successfully qualified our high-purity boric acid with multiple customers across sectors, including specialty glass, fiber glass, ceramics, agriculture, defense and advanced materials.

Most notably, we have advanced to full-scale testing and furnace trials with a Tier 1 specialty glass manufacturer, following the successful shipment of 20 tons of boric acid from the Port of Los Angeles to Taiwan, I can confirm that as of last week, the shipment had arrived in Taiwan and will be deployed in a live testing environment in the near term.

Additionally, we supplied an additional 1,000 pounds of boric acid to a domestic boron carbide manufacturer. China currently controls much of the boron carbide supply chain, and we're excited to do our part in reassuring domestic boron carbide production as it is critical to our national defense.

On the back of the 20-ton shipment, we're also preparing additional product shipments for other LCD glass producers, reinforcing both the scalability and reliability of our operation. Each one of these milestones build customer trust and advances us towards long-term offtake agreements, a key bridge between development and commercial operations.

Looking at the market opportunity, the critical minerals designation aligns perfectly with broader U.S. industrial policy. Boron is essential to technologies that support advanced manufacturing and enable the energy policy objectives. Everything from permanent magnets, semiconductors, EVs, wind turbines and defense armor systems to advanced glass and composites, which 5E position as a strategic enabler within multiple national frameworks.

From a development standpoint, our trajectory remains clear. We are nearing completion of field ready engineering deliverables, advancing strategic financing discussions and negotiating offtake terms. Each step brings us closer to our goal of a 2026 final investment decision. As we move through these milestones, our goal remains consistent with what I outlined in our previous call.

To progress methodically derisk every stage and build a capital structure that supports long-term value creation. The remainder of fiscal year 2026 will be focused on 3 primary priorities: 1, securing non-dilutive U.S. capital support through XM, OSC, DFC and DOE programs. While skeptics may have heard this previously from 5E, the [ RESI ] designation is a major catalyst and milestone to having a much more broader and in-depth discussion on financing our project and providing access to larger pools of capital; 2, advancing customer agreements in commercial offtake contracts where we expect a more detailed negotiation to commence before year-end.

And 3, executing a rigorous and diligently planned feed and brief FID work streams to ensure we are construction ready in 2026. Additionally, we have commenced the work stream to upgrade our mineral resource statement on the back of securing and recording the remaining federal load claims for the rest of the colemanite mineralization of the deposit.

Further, we have begun steps to build a portfolio of intellectual property on our proprietary mining techniques and processing solutions. These steps position 5E to cement our mineral tenure for the long term, become the premier ISL borate producer in the United States and transition confidently into construction and, ultimately, commercial production, delivering long-term value for our shareholders and strengthening America's domestic mineral independents.

In closing, this quarter truly represents an inflection point, one that underscores our growing momentum, validates our strategy and sets the stage for sustained growth and value creation. The federal recognition of boron as a critical mineral validates years of technical work, market engagement and policy advocacy. It affirms that what we're building at Ford Cady matters, not just commercially, but strategically.

As I said on our last call, this is a story of proof, not potential. And now with federal alignment and growing customer attraction, we're proving that 5E is positioned to become America's trusted borate supplier of Advanced Materials.

Thank you to our employees, partners and shareholders for your continued commitment. We're building something rare and a foundation for America's energy and Advanced Materials future.

With that, we'll open up the call to any questions.

[Operator Instructions] Our first question is coming from Tate Sullivan of the Maxim Group.

And Paul, congratulations on having boron beyond the critical mineral list, and [ also ] you highlighted the potential in your last call and how you were part of that process. So congratulations.

Is part of being on that list, is there any word from -- or previous comments from the Defense Logistics Agency that boron that there may be government stockpile boron going forward? Or any boron derivatives?

I think the trend has been to in the past, stockpile carbide on the USGS commodity summary, there was a pretty large award, maybe about 1 year, 1.5 years ago to a company through DPA for domestic production of boron carbide obviously, that's a supply chain that's dominated by China. That customer has reached out to a couple of the other borate producers kind of our understanding has been a bit ignored.

And so we partnered with them went through the initial qualification process with smaller samples and now they are piloting production, looking to move to full scale and that was 1,000 pounds as part of that pilot process.

And I think, listen, there's -- so to get back to your question, I think the stockpiling of carbide has occurred in the past not sure, if there's stockpiling right now, especially given what is happening on the midstream with that producer, but I think the plan is to ultimately get off of China and domesticate that supply chain.

And then separately in the 10-Q, I saw some language about the horizontal wells -- 2 horizontal wells that you're drilling. Is that for resource expansion and definition work? Is that for flow testing and have you started flow testing if that is part of the process?

No, this is actually validating the commercial design. So we drilled in July into early August to horizontal lateral. So we had 4 injection recovery wells and about maybe each of those wells were going down to about 1,500 feet total depth vertically.

And we have at about 1,080 feet below ground. We've sidetracked off those 2 wells with 1,500 foot laterals. We got a minor modification from EPA to get commission to do that. Our commercial mine plan contemplates 4,000-foot laterals. So we're kind of -- as you think about scaling and proof of concept. And so we've run about 6 or 7 cycles on those wells. And the results have been really good.

One of the things that as we're coming up on 2 years of operating the small-scale facility here in January. And 1 of the things we saw with the vertical wells is you'd have head grades that would be consistently at 5% and then they jump to 7%, 8% and then back down to 3%. You had a bit of variance. And from a geology perspective, our deposit was a late millions of years ago and it evaporated and it's pretty homogeneous.

It's about the mineralized zone is 1,300 to 1,500 feet underground. And that gives us the ability to take a horizontal well and run kind of for a couple of thousand feet through high-grade colemanite zones. So what has happened now as we've tested these wells, all samples, right from a head grade and boron percentage and solution, the variance has like gone away. And there's a much higher rate of efficiency from a mining process and that we're consistent.

And as you think about your design going into feed engineering, the basis you're going to give your EPC contractor we now have a really high degree of confidence on what that bell curve looks like from a boron in solution percentage as well as our metal and purities and our calcium to boron ratio. So it really gives -- it just gives us a much better position to have a successful feed program and ultimately design a plant at commercial scale that's going to work.

Our next question is coming from Heiko Ihle of HC Wainwright.

Paul, it's [ Chase ]. Heiko is on the plane right now listening to the webcast.

No problem. Chase, how are you?

Great. Earlier on the call, you discussed several government programs that supported Boron. Can you give us some color on maybe the percentage or in dollar terms that you think we could see from such programs? It seems pretty pertinent given the long-term demand drivers are pretty obvious.

Yes. Great question. Listen, I think now that you have this critical minerals designation, it really opens up all aspects of the capital structure from the loans to what you saw what happened with [indiscernible] where they came in and now they're a 10% shareholder and they did the preferred.

So I think I would get asked previously at different conferences and as we're talking to investors, is that a possibility? And my kind of first response was, listen, we need to get the government to acknowledge boron as critical mineral. So now that we've done that, I think we can really have a much more in-depth discussion on, hey, what's the right loan we want to go after.

We have the LOI with XM, but now you can kind of run parallel processes. As you go get the debt, and obviously, the debt helps geared IRRs. So you can optimize your cash flows through the loans, but then you can have the conversation about, hey, what does the balance of the equity look like? And could you have a conversation with OSC on potentially providing some of that capital.

And so now on the back of that, like, I would say, like -- we have a $435 million capital estimate like that's the sky is the limit. In the interim, there's had a call today on we are a member of Cornerstone Consortium. What we're doing on the well field side is both innovative and just on an extent -- we're proving that the horizontal -- we know the vertical wells work. We're proving that the horizontal wells are actually a better design, and the results are already speaking for themselves.

But hey, can we go get smaller wells now through cornerstone on the mining side. And I think on the back of some of these executive orders that kind of came out earlier in the year, now you're getting through CRs have been passed. You can -- people returning to their guests, you can actually go have those conversations.

Absolutely. One more question. You mentioned some of the fluctuating head grades on the call. From a geological point of view, what exactly is this based on? And how does it impact your internal model as you mentioned, having more clarity on the bell curve to see what's going on?

Great technical question there. So when we say high grade we're talking about what's the boron percentage by weight in solution that's coming and being extracted from underground to surface. And so -- when we start an injection recovery cycle to go mine the bond, we're starting for our permit with 95% water, 5% hydrochloric acid.

And just HCL, it's no different than the muriatic acid I put in my swimming pools as a conditioner. But that with the water and increases in temperature, creates the ability to leach the colemanite. And so when we inject, we let that then sit underground, what happens in that a 24- to 48-hour time period is that HCL reacts to colemanite and dissolves the minerals. And so when we come up above ground, what ends up happening is we catch multiple samples of solution. We send them to our lab on site, and we run an ICP analysis on that.

And what happens is you can see what's your HCL concentration in that solution. And so when you -- before you injected, you started at 5%. And when we test in the lab, it's about 0.25% to 0.5% HCL. So that HCL has now been reactive and replaced with dissolved boron and solution. And because boron is super soluble, i.e. with temperature, the more you can dissolve the better head grade you can get, we -- you can supersaturate and outperform on the mining side.

And so our base case assumes 9% to 10% head grade. We've proven the solubility curve out on the low end. And ultimately, what we're focusing here on the next like 1.5 month, 2 months is really bedding that out on the commercial design. So economics for the PFS remain intact. And I think we -- we've had some really initial good results, where we've gotten kind of right around that 7% head grade.

And -- but we're limited today on the temperature we can actually inject at the small scale facility. And so one of the items, and this is kind of a teasing out like the next call is like we have downhole heaters on order. They're used in oil and gas and every day, they can get up to actually 300 degrees C. That's not the temperature we need to mine at. We're going to kind of hang it right around 160 to 180 degrees at.

[Operator Instructions] Our next question is coming from Dmitry Silversteyn of Water Tower Research.

Quick question. When you talk about -- you talked about one of your goals for 2026 is to secure offtake contracts and you're working right now to have your products trialed. Is there, in your mind, a sort of percentage of your annual production that you would like to have under offtake agreements and long-term contracts at what level would you feel comfortable deploying capital and how do you see maybe a steady-state business operating between offtake agreements and selling on the spot market?

Great question, Dmitry. Glad to have you on the line. Yes, I think the first kind of group we proposed to, they were -- we pitched about 20% of our production, so about 24,000 metric tons. There's 2 or 3 other customers in queue. I think what we'd like to get to is a bankable portfolio that consists about 70% of our production under offtake agreement, maybe 75%.

And then you want to take advantage of the spot market and specifically distribution because they are not bankable customers, but they ultimately do provide a higher price in the spot market, that's how you can -- there's boron is using 300-plus applications and the way you can kind of scale is ultimately through those distribution channels, where you have smaller participants buying it, but they're buying at much higher prices.

And so from as we're thinking about that offtake portfolio, you target 70% of the 130,000 tons under contract and then you keep another 25% to 30% for the spot market. Understood.

That's very helpful. And then just a point of clarification. When you talk about making the final decision by the end of 2026 or talking about offtake contracts by the end '26? Do you mean your fiscal year or the calendar year?

Great question. So that was a reference to calendar year 2026.

Thank you very much. Well, there are no further questions at this time. I will now turn the call back over to Paul for any closing remarks.

Thank you, everyone, for your time, interest in dialing today for our Q1 2026 call. We have a tremendous opportunity in front of us to become the newest borate producer in the world. We have a proven asset and a strategy to modularly expand the asset over the next several years. We're looking forward to sharing this journey with all of you in the coming quarters, and thank you for dialing in. Have a great day.

Thank you, Paul, and thank you to everyone for joining today's call. This concludes today's conference. You may now disconnect.

Good day, and welcome to the 5E Advanced Materials Fiscal Year 2025 Year-End Results Conference Call. [Operator Instructions] Please note, today's call is being recorded.

Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements. These statements are based on current expectations and assumptions and subject to risks and uncertainties that may cause actual results to differ materially. For more information on these risks, please refer to the company's filings with the Securities and Exchange Commission. 5E Advanced Materials undertakes no obligation to update or revise any forward-looking statements.

At this time, I would now like to turn the call over to Paul Weibel, Chief Executive Officer of 5E Advanced Materials. Paul, please go ahead.

Good afternoon, and thank you for joining us today. Fiscal year 2025 has been a transformative year as we move from development to commercial readiness. We achieved broad validation across our project from the SK-1300 pre-feasibility study to customer qualifications and supply chain milestones.

Before I go into detail, let me summarize the key achievements from fiscal year 2025. Strong project economics have been validated. Our recently published pre-feasibility study for Phase 1 only confirms a 39.5 year mine life with a robust after-tax NPV of $725 million and a 19% project IRR.

Commercial front, we have successfully qualified our high-purity boric acid with 14 customers across multiple segments and have now advanced to full-scale production testing with a Tier 1 specialty glass manufacturer.

On the financing front, we received a nonbinding LOI from USXM for a potential $285 million project debt facility, a major step towards securing funding for Phase 1 construction.

And in regards to on track for being -- towards the project FID, we now have milestones and are well positioned to advance towards FEED engineering and a final investment decision in mid-2026.

Today, I will cover these 4 areas in more detail and discuss the upcoming fiscal year 2026. First, the recently published SK-1300 PFS provides a strong validation of the scale, economics and longevity of our Ford Cady resource and reserve. This study covers Phase 1 only, not including future expansions or higher-value boron derivatives. The results underscore the strength of our project fundamentals. The project shows a pretax NPV of approximately $725 million with a 19% project IRR.

The after-tax NPV is about $469 million with a 16% project IRR. We estimate free cash flow over the life of mine have roughly $3.7 billion pretax with an after-tax payback of just under 6 years. The study outlines a 39.5 year mine life, supported by 5.4 million short tons of boric acid reserves. Phase 1 targets 130,000 short tons per year of boric acid, which we believe has a strong need in today's global market.

On the cost front, all-in sustaining costs are estimated at $555 per ton with initial capital at about $435 million. This is inclusive of contingency and a gas cogen facility. These results are underpinned by real-world operating data from our small sale facility, which confirmed our expected recovery and efficiencies. Thus far, we have received highly favorable feedback from analysts, prospective customers and the investment community.

Next, I'd like to turn our attention to our traction with customers where we see growing validation. Earlier this year, 14 customers successfully qualified our boric acid. They span a wide range of industries that includes specialty glass, fiberglass, ceramics, insulation, agricultural, defense and chemicals. We continue to see accelerating demand for our high-purity U.S.-based boron supply and additional customers are in advanced testing phases.

As we move from breadth to depth, we recently hit a significant milestone with a Tier 1 specialty glass manufacturer. We completed a full logistics and handling trial, shipping 2 tons of product from the California Port of L.A. to Taiwan. This trip took approximately 20 days and the material passed all on-site handling tests, including successful deployment in a glass furnace.

As a result, we have received a green light to advance to full-scale product testing within this future customers' production system. As it currently stands, the product for the full-scale product test is produced and fits ready to ship. We are coordinating the shipping PO and the shipment of 20 tons of high-quality borate product is imminently expected. The next trial is expected to take 2 to 3 weeks to ship overseas and approximately 5 weeks to test in a commercial glass furnace.

Furthermore, our team has begun producing the next batch of high-quality borate that will go to other large LCD glass manufacturers who are waiting in queue to implement a similar test. Our operation is proven, scalable and consistently meeting the strictest global quality standards.

With these successful milestones being delivered, we have formally entered into long-term offtake discussions and have had 2 formal presentations with the most recent being a presentation of specific offtake terms. Most recently, our forecast of supply and demand has been resonating with our future customers, and industry dynamics are creating a clear opportunity for 5E, particularly in light of recent announcements from 1 of the 2 major borate producers. 5E and our stakeholders believe there is a fundamental need and requirement for a new market producer to reduce supply chain risks and our method and approach thus far has reinforced confidence and strengthens trust within the borate market and investor communities.

Finally, I'll cover our road map to FID and financing. We remain on the path towards an FID by mid-2026. We have commenced early FEED engineering activities with 5E targeting the formerly stage gate to FEED engineering before year-end. We have prepared an application for the EXIM Engineering Multiplier Program and target $8.5 million to $10 million in a loan facility that will provide the capital and liquidity to fully fund FEED engineering. Once stage-gated to FEED, we expect that process to take approximately 8 to 9 months to complete, which leads to FID in mid-2026.

Last week, we submitted a formal response to the USGS draft critical minerals list, where we strongly believe boron has a place on the list. The draft list was released prior to the second largest borate manufacturer, citing that their business is under strategic review. As it currently stands, we believe the United States has a single point of failure in the borate market. Per publicly available financial results the second largest port producer and single point of failure in the United States supply chain have seen their costs increase approximately 60% for 2017 on a B203 basis.

Given the material announcement at the largest U.S. borate producer, their 2018 reserve downgrade and what we believe are weakening business fundamentals, there is a need add boron to the proposed critical minerals list. Without this producer, the United States would lose its position as the second largest producer and as a nation, we would transition from a net exporter to a net importer.

The boron market is an oligopoly. The United States has a single point of failure and without further investment in new borate projects, the United States will be reliant on Turkey for boron and China for its critical advanced boron materials. We view 2025 as an inflection year for boron, as independent analysis shows supply shortfalls beginning in 2026, which we believe supports the fundamental need for a new market producer.

Looking ahead, we are focused on several key catalysts in the upcoming quarters. These include progressing full-scale testing with multiple specialty glass manufacturers, securing additional qualifications and initial offtake agreements, securing a small XM loan to cover FEED engineering costs, completing fee-ready, engineering deliverables, advancing the larger project finance and XM loan process, finalization of our mine plan in connection with our horizontal well trials and lastly, the potential opportunity for USGS to do the right thing and add boron to the final critical minerals list.

In closing, I want to thank our employees and partners for their dedication. With the achievements from fiscal year 2025, we are well positioned to advance towards FID in mid-2026, and build long-term value for our shareholders and our stakeholders.

Thank you, and I look forward to your questions.

[Operator Instructions] Okay. And it looks like -- apologies, just about to hand it back to you, Paul, but we did get a question coming in from Tate Sullivan from Maxim Group.

Can you review the comments you had about the disruption to the California boron mine? What was the specific announcement that you cited?

Tate, yes. No, appreciate you dialing in and thanks for the question. So at the end of August, Rio, with the appointment of the new CEO, made announcements that they've streamlined their business. Historically, Rio has been broken up into 4 different business segments. And on a go-forward basis, they're now structured where they have 3 business segments, which is one, iron ore; two, copper; and three aluminum or lithium.

And essentially, the industrial minerals, which I believe that's where their diamonds, borates and titanium business sat, are essentially up for -- well, they now sit with the chief -- the office of the Chief Commercial Officer for the release and they are up for a strategic review.

Okay. And then to get boron on the USGS critical mineral list, is it a -- I mean 3, 6-month process or what needs to happen in terms of the review?

Great question. So we were in D.C., I was down there and met with Interior in July. Kind of the word on the Street was that sometime this fall, the draft list would come out. And there was no comment on it, boron would or would not make the list. But essentially, the appropriate measure to get boron added to the list is essentially to submit public comments. My kind of gut told me at a time, I should expect to see a draft list by October. Was pleasantly surprised that kind of came in ahead, and I think it was maybe the first week of September or last week of August the draft list was published, which essentially opened up a 30-day public comment window.

All comments are available on the Federal Register. And we submitted our comment, as did believe 8 other groups, that you could search for borate on the Federal Register under the comments and they're all there. I was pleased that there was some well-known groups that did apply. And so we're not now the kind of the only one in the room kind of ringing the bell that there are supply chain concerns there in this market.

And there were no other questions at this time. I will now turn the call back over to Paul Weibel for any closing remarks.

Great. Thank you. I appreciate the Q&A during today's call. As noted, we believe 5E has the right resource, and now it's the right time. We are committed to building a strong and resilient borate supply chain that underpins the U.S. industrial base for many generations to come. We look forward to fiscal year 2026 and delivering on our expected milestones as we go into 2026. Thank you.

Thank you. And this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.