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Lightbridge Corp. (NASDAQ:LTBR)

Q1 2014 Earnings Conference Call

May 9, 2014 11:00 AM ET

Executives

Gary Sharpe - Head of IR

Seth Grae - President and CEO

Jim Guerra - CFO and COO

Jim Malone - Chief Nuclear Fuel Development Officer

Analysts

Operator

Good day, ladies and gentlemen, and welcome to the Lightbridge 2014 and First Quarter Business Update and Financial Results Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions)

I would now like to turn this conference call to Mr. Gary Sharpe, Head of Investor Relations at Lightbridge Corporation. You may begin, Sir.

Gary Sharpe

Thank you, Kevin, and good morning. Welcome to the Lightbridge 2014 first quarter business update. Our earnings news release was distributed after the market closed yesterday, and you can view that on the Investor Relations page of our website www.ltbridge.com.

Seth Grae, our CEO, will lead today's call. In addition, the following executives are available to answer your questions. Jim Guerra, our CFO and Chief Operating Officer; and Jim Malone, the company's Chief Nuclear Fuel Development Officer.

Today's presentation includes forward-looking statements about the company's competitive position and product and service offerings. And during the course of call, words such as expect, anticipate, believe, and intend will be used in the discussion of goals or events in the future. These statements are based on our current expectations and involve certain risks and uncertainties that may cause actual results to differ significantly from those estimates.

The risks include, but are not limited to the degree of market adoption of the company’s product and services offerings, market competition, dependence on strategic partners, and the company's ability to manage its business effectively in a rapidly evolving market. These and other risks are set forth in more detail in Lightbridge's filing with the Securities and Exchange Commission. Lightbridge does not assume any obligation to update or revise these forward-looking statements whether as a result of new developments or otherwise.

Now you can participate in today's call two ways. First, you can submit questions for management in writing to ir@ltbridge.com. If you've already submitted a question, and we have several, we thank you. You can also submit them at any time during the prepared remarks or during the Q&A period. Second, and of course after the prepared remarks, the telephone lines will be open for live questions.

Now let's get to it. Here is Seth Grae, CEO of Lightbridge Corporation.

Seth Grae

Thank you, Gary. And good morning everyone. Our summary of Lightbridge's progress in the first quarter was distributed last night after the close of trading. We also filed the Form 10-Q with the Securities and Exchange Commission. While it's been just five weeks since our last update and conference call, there are new developments and a few key strategic points that I want to emphasize before we open today's call for your questions.

Lightbridge remains on track to meet our near-term milestones in the development of the Company's patented nuclear fuel technology. Moreover, Lightbridge is increasingly well positioned to gain new consulting contracts with governments interested in establishing civil nuclear energy programs. Awareness continues to increase within our growing global industry of the compelling value proposition of Lightbridge fuel technology and comprehensive strategic consulting services.

For new participants on today's call, it is important to reiterate just how Lightbridge's innovative fuel technology and value adding advisory services can solve the toughest problems facing the commercial nuclear energy industry today. Our fast growing global industry needs technology and services that enhance operating economics and increase safety. Lightbridge offerings can deliver on both of those demands. If you download our current investor presentation from the Investor Relations section of the Lightbridge website, you will see how only Lightbridge's patented metallic fuel design offering nuclear utilities the benefits of increased power output from existing and new reactors, reduced nuclear waste, improved safety and enhanced proliferation resistance of spent fuel.

According to a cost study performed by Siemens Industry Inc., U.S. nuclear utility using our fuel technology with a 10% power uprate and a 24 month fuel cycle can deliver carbon free, base load power at a lower total levelized cost per kilowatt hour of incremental electricity than even new build power plants bring hydrofrack natural gas or coal. Further, our comprehensive advisory services are helping existing clients with on time on budget development and safe regulation of nuclear power plant in countries where expanded electricity generation is needed. The company's competitive position was reinforced earlier this year in the first quarter by the issuance of a broad U.S. patent of our fuel technology. This patent protects Lightbridge's unique fuel rod design and fuel assemblies as well as our anticipated future royalty revenue stream.

In addition, detailed discussion are ongoing with the subsidiary of Babcock & Wilcox Company exploring the potential use of an existing Babcock & Wilcox facility for fabrication of Lightbridge designed metallic fuel samples for irradiation testing. Lightbridge and B&W subsidiary expect to complete this evaluation in 2014. We entered into the memorandum of understanding on this project in late 2013. Further, Lightbridge has identified and begun evaluating additional test reactor facilities for irradiation testing of company-designed metallic fuel samples to be fabricated in collaboration with Babcock & Wilcox. All of these factors why we can say Lightbridge is well positioned domestically and internationally for even more progress in 2014.

Our confidence and enthusiasm is bolstered by a recent survey conducted on behalf of the Nuclear Energy Institute, they found strong support among Americans for diversified electricity portfolio that includes nuclear energy. 74% of the 1000 survey respondents say they want nuclear in the U.S. energy mix because they regard it as reliable, clean, affordable and efficient. 70% of those surveyed agreed that U.S. nuclear power plants are safe and secure. The Nuclear Energy Institute survey was published just two days after an authoritative report by the United Nations' Intergovernmental Panel on Climate Change that calls for a dramatic increase in worldwide investment in nuclear energy to help curb rising temperature related to greenhouse gas emissions.

I recently returned from a weekend meetings in Europe where the IPCC reports are regarded as a clarion call in support of low carbon electricity. Report says that fossil fuel generation without carbon sequestration technology must be phased out almost entirely by the end of this century. The IPCC characterize nuclear as a “mature, low green house gas emission source of baseload power.” The report also frames the extraordinary global investment opportunity in commercial nuclear power estimated as much as $50 billion per year through 2030. In the U.S. five reactors are being built in Georgia, South Carolina and Tennessee. 19 companies in consortia are studying licensing or building more reactors in the U.S. The Nuclear Regulatory Commission is reviewing nine combined construction and operating license applications from eight companies in consortia for new nuclear power plants. Worldwide 72 reactors are under construction in 14 countries including the U.S. project, another 173 reactors are planned and an additional 309 reactors had been proposed according to the most current data gathered by the World Nuclear Association.

The global commercial nuclear market is poised for robust growth and Lightbridge's nuclear fuel technology and consulting services are ready to respond to this opportunity. Considering the new report by the Center for Climate and Energy Solutions, urging replacement of retired nuclear power plants in the U.S. as a path to a low carbon future. Naturally, we endorse that recommendation. But we also acknowledge that new construction will take a long time. By using Lightbridge's fuel technology to upgrade existing reactors we can shorten the time needed to reduce greenhouse gas emissions. If the 100 existing U.S. reactors were to use our 10% uprate fuel, the resulting increase in power production would equal 10 new plants. If new built reactors use Lightbridge's 30% upgrade fuel then the increased production from three new plants would nearly equal the generation of four reactors. In short, Lightbridge fuel technology can improve the operating economics of a commercial nuclear power industry. And help the climate policy goals.

We are also confident that Lightbridge can create tremendous value for shareholders in the course of solving our industry’s current challenges.

Now let’s open the call to your questions. Remember, in addition to asking live questions by telephone. You also can submit questions in writing to ir@ltbridge.com. We will pause while the operator reviews the procedure for asking live questions. Kevin?

Question-and-Answer Session

Operator

(Operator Instructions).

Gary Sharpe

While we are waiting let's take the first of the call -- the question that have come in over the Internet. And the first one is, hits right to it, is Lightbridge a takeover target due to its projected revenue stream?

Seth Grae

Lightbridge has not received any takeover offers. We don't respond to rumors or innuendo, the company is being operated for the long-term profitability and benefit of our stockholders; when and if at some future date if there are takeover offer that ever happen, management would make a recommendation, the stockholders would vote on it.

Gary Sharpe

Next question. Would nuclear utilities use Lightbridge fuel for its safety benefits alone as opposed to just the uprate potential?

Seth Grae

Let me start and then turn to Jim Malone, our Chief Nuclear Fuel Development Officer. The four nuclear utilities represented on our Nuclear Utility Fuel Advisory Board do have strong interest in the safety of the fuel. And I think it is possible that some utilities might start by using the fuel just for the safety advantages and move to power uprates a bit later and some might start with power uprates immediately. There are benefits to the safety advantages that could be economic, it depends on the individual utility, what regulatory regime they are under and what country and their operations in terms of how it might offset other safety related cost they might have, and that will vary by utility and by reactor. But even just using the fuel for the safety benefits has other direct economic benefits as well and the fuel could still be used for the longer fuel cycle. So if you operate the reactor say for 24 months instead of 18 months, the reactor is shutdown fewer days per year, is selling electricity more days per year, bringing all that revenue of millions of dollars per day into the utility even without the power uprate. So that's real dollars. Whether the fuel without the power uprate could run even longer than 24 months, is something that I think could be feasible but we have not studied because we are looking at what the utilities want, and utilities want is 24 month fuel cycles. And with that I will turn the question over to Jim.

Jim Malone

Seth really addressed most of the relevant points regarding the question. However, I would like to focus on the fact that the 24 months cycle is very important to the utilities for reasons that go beyond the simple fact of having fewer refueling outages in the six year period. It is important because the manpower to support an outage is not easy to come by. Therefore the fewer outages they have to support the better off they are. And for a two unit site they can avoid the situation on a periodic basis of having both units refueled in the same year. So the 24 months cycle has important implications beyond the initial thing that people would think off. With respect to the fact or the question, would a utility use the fuel solely for its safety benefits? We have been asked that question by utilities, by people who are related to the fuel but not directly like reactor engineers and they see the advantages of the safety aspect of the fuel however the fuel managers look holistically at everything and they are going to consider more than just the safety although the safety is paramount in their mind. It is not the only thing that they consider to make the proper decision for their utility.

Gary Sharpe

Okay, thanks, Jim. Next question. Is there any news or new development in regard to the manufacturing agreement with Babcock & Wilcox?

Seth Grae

There is nothing new beyond what I said in my opening remarks that has definitely moved forward. We are working towards arrangements to announce this year, beyond that we have nothing to announce today. However, what we can expand upon is a bit about why we are doing this and the importance to the company. And I think Jim is the best person to take us through that a bit.

Jim Malone

Yes, I think the situation with B&W is encouraging; I would use that word in the context of all that's going on in the nuclear fuel world right now. The constant is B&W’s interest in the fuel business. We are working to complete an assessment conduced by B&W of their ability to produce samples for irradiation in test reactors that's a major step going forward and B&W has taken the approach of examining their ability to use existing facilities at their disposal to do that work. And we follow it very carefully and are in constant contact with them. I think the future bodes well for B&W's participation in the fuel project. Getting those samples made in the U.S. and deployed to research reactors for irradiation testing is a critical step in developing the fuel and bringing it to the point where we have sufficient technical information to support our analytical request to the U.S. Nuclear Regulatory Commission for them to approve the fuel for use in power reactors on a lead test assembly basis, that would be the first step. So we are on track to get to that point, although it is a slow grind, nothing ever moves at the speed of light in fuel except the neutrons.

Gary Sharpe

Okay. Next question. This comes from an investor who is inquiring about potential competition for our -- with our fuel from a specific company that’s developing a fuel pellet design that involves beryllium it looks like. What's the likelihood that that company could beat Lightbridge to the commercial market? And if they do what would be the impact to Lightbridge's metallic fuel that delivers the 10% uprate?

Jim Malone

The IBC fuel is different. It is a ceramic product which is different from a metallic. It is directed in a different direction than the Lightbridge fuel. The primary interest at the moment has been shown by Boiling Water Reactor utilities; however, there was a report as indicated in the question that the measured thermal conductivity is better than the analytical report would indicate. That by itself means a lot however unless we emphasize that that is on un-irradiated fuel. In both cases the irradiation of sample is critical to the program to bring the fuel to market. I think there is room for both in the market. I think the Lightbridge fuel with its ability to extend the fuel cycle significantly is in positive position. IBC's product is slightly different position and may be working with cladding other than zirconium in the accident tolerant fuel area. So the products are somewhat competitive but not as much as a lay person might understand from reading some press release information.

Gary Sharpe

There is a follow up question by the same investor. Is Lightbridge considering potential teaming with IBC to create that fuel that was outlined?

Jim Malone

There is no ongoing or any consideration at the moment in that regard.

Gary Sharpe

All right. Kevin, operator, Kevin, if you would please repeat the Q&A procedure and we will see if there are any new questions.

Operator

(Operator Instructions)

Gary Sharpe

All right. While we are waiting for the any additional question. We have one from long time investor who is asking, what events, milestones or business contract will give comfort to shareholders in the coming year?

Seth Grae

Well, I think it will be as we've discussed the contract relating to fabricating fuel, fabricating fuel sample, announcement of test reactors that will test and demonstrate that fuel in them. And also new consulting contract and expansion of work with existing consulting clients.

Gary Sharpe

Well, I see no further questions in the queue. And nothing further is coming over the internet. So, Seth, if you have any closing remarks, I think now is the time.

Seth Grae

Well, thank you. And as we said before but if there is repeating Lightbridge is very well positioned to serve the rapidly expanding global nuclear power market with our fuel design and expert independent advisory services. Until the next conference call, our lines are always open at ir@ltbridge.com and 1571-730-1213. Thank you and good bye.

Operator

Ladies and gentlemen, that concludes today's presentation. You may now disconnect. And have a wonderful day.

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