5E Advanced Materials, Inc. Common Stock Water Tower Research Virtual Insights Conference

Paul Weibel, Chief Executive Officer of 5E Advanced Materials. Welcome, and thank you for joining us, Paul.

Thanks, Dmitry. Great to be here today.

Thank you. Before we dive in, a quick note. 5E Advanced Materials has posted its safe harbor statement on its investor tab of their website, and in the latest presentations on their website, which can be found at www.5eadvancedmaterials.com. Also, feel free to send your questions in through the chat and we'll work them into the discussion or cover them in our management series report to be published later. If you'd like to request a meeting with 5E Advanced Materials, simply indicate that on the conference portal. With that out of the way, let's get started. Paul, let's start at the highest level, particularly because 5E looks quite different today than it did even a few days ago.

For investors new to the story, can you introduce 5E Advanced Materials, explain what you're building around boron and critical materials in Southern California, and then put the proposed Searles Valley acquisition and Fort Cady into the context of that broader strategy?

Sure. Appreciate the question. Fort Cady and 5E were a boron-based project in California. The boron market is a global oligopoly where predominantly two companies dominate 85% of global supply. The investment thesis in 5E was really underpinned on fundamental supply and demand. The boron market often get asked what does boron goes into. It is 300 plus applications, makes life as we know it exist. It goes into very mundane, ordinary things such as cleaning supplies, ceramics. It goes then into all forms of glass. That is actually fiberglass, PYREX, and LCD. Then it goes, boron is a micronutrient, so all liquid fertilizers, about 10% of the formulation is boron. Then it touches semiconductors, nuclear, permanent magnets. There is your ordinary, regular inflation-based growth, and then you have the specialty applications, permanent magnets, nuclear, AI, et cetera, that gets you above normal CAGRs.

This market is growing 4% or 5% per year on the demand side. On the supply side, it is the oligopoly. So, 85% of global supply, as I mentioned, is two companies. The smaller of the two, which is again, a very large market supplier, is 25%. They have a finite mine life. It is an asset that is available for sale. Their financial metrics clearly demonstrate revenues aggressively up, prices are following, and then you can use those metrics to identify that ultimately cost is going up as well. As you get to an end of a mine life, the variable cost profile escalates. So you have two phenomenons right now where demand is growing, pulling prices higher, and on the supply side, costs are getting pushed higher. As a result, prices are going up.

We had one of five potential deposits that could come online, and this is where it will tie into Searles. There was always a smaller producer, made 135,000 tons a year of five mole sodium borates and about 45,000 tons a year of boric acid, but 1 million tons of soda ash. That company had challenges, which we can talk about some of that, and it is a very sad series of unfortunate events. But ended up filing Chapter 11 bankruptcy, which we acquired. For 5E, this gives us the ability to work. Upon closing this acquisition, we are revenue generating. They are producing today. They have been operating through bankruptcy. What this positions 5E is really you have our large colemanite deposit that sits in Newberry springs that we have de-risked. It is a mine life on a reserve basis today of 40 years. The resource is much larger.

If you look at the production that is forecasted and total resource, adjusting for reserves could be a 200-year asset. You have Searles, who is about 90 miles north of us. They are a tincal deposit, so geological complements. In production today, you have our other neighbor who is the 25% global supplier, had a reserve downgrade in 2018, is for sale right now, finite mine life. Now you have two of the assets under one entity. With production and with revenue right out of the gate. What this positions 5E is to, as the other asset depletes down, 5E between the two projects can be the second-largest global boron producer in the world.

Okay. Well, that's a great summary and a very timely pivot, if you will. Let's go directly to Searles Valley because this appears potentially transformational for the company. You're acquiring one of only two operating boron producers in the U.S., as you mentioned. This company has a 150-year operating history, including operating through bankruptcy, as you've said, an existing customer base, and more than 9,000 acres, I think, of brine resources that they can pull out of. Can you walk us through exactly what you're acquiring? You mentioned soda ash, but I don't think it's part of the acquisition. Explain how this changes 5E from a pre-revenue project developer into an operating critical minerals and specialty chemicals company.

There's a lot we've bought with this. We did buy the soda ash plant. We could turn on soda ash down the road. It doesn't make economic sense today. To generate the soda ash, the market just is actually unfavorable from a soda ash perspective. There's a West End plant that is what's making their V-Bor today, as well as their sodium sulfate. There's an operation where they make salt. They have almost an unlimited supply of salt. They're selling that into oil and gas out of Bakersfield, California. Some very good customers that they're selling to. It comes with their Trona plant that's been idled right now. That's where they can make 45,000 tons of boric acid. It does come with their Argus plant. That's what they made soda ash with.

It comes with their SAC plant, which is a soda ash consolidation plant where you can actually capture emissions. It reduces the brine carbonation and actually reduces pH, so it's a free source of acidification. That can put out a byproduct of actually 240,000 tons of sodium bicarbonate, baking soda. There's different specs on the market. They have a brand-new sulfate of potash plant that is sitting there. It was built in 2018. It's like a new car that you kept in the garage and put a cover over. They have two very large boilers that previously ran on coal, but they now run on natural gas. They were fungible. Each of those boilers can put out 27 megawatts of power. There's two of them. They can sell back to the grid in California. There's not a nice, clean technical report. We will do that. But there's mineral tenure.

75% of the land is federal land. They have long-term leases with the BLM for that mineral tenure. They own 25% of the minerals as well, so mineral rights are conveyed with the real property in California. What they did in 1990, they partnered with the BLM, and they papered up these mineral leases, and they agreed on a net royalty. The size at the time was at 200 years, so you have a mine life. That needs to be really qualified under a nice S-K 1300 technical report that we'll work on. But just use approximations, 200 years at Fort Cady, 200 years at Searles, very large deposits. There's that path to be the second-largest global boron producer. Those are the assets we bought there. It comes with a railroad, 30 miles of track that we'll own.

It's a water utility plant because they service about 700 residents in the town of Trona, as well as provide the potable water to all the utilities. It was quite the buy.

It certainly sounds like it. I tell you something, my jaw dropped when I read that press release, because it absolutely changes the story, as you said. Once the deal closes, it makes you a revenue generator, and a cash and free cash flow producer, hopefully, which will let you put that cash back in developing Fort Cady. That's where I want to go next. Let's connect the Searles acquisition back to Fort Cady, because strategically, that seems to be where the transaction becomes especially interesting. Rather than viewing these two as separate California assets, how does Searles' existing production infrastructure, workforce, customer relationships, all the things that you mentioned, the rail line and everything, de-risk the Fort Cady part of your story? What could the combined company ultimately look like as a U.S. boron and advanced materials platform?