2025 Small Cap Investor Conference. My name is Michael Matheson. I'm a senior equity analyst here with Sidoti. Before introducing our presenters today, let me just cover a housekeeping issue. We really encourage Q&A. You'll find that there's a little Q&A box at the bottom of your Zoom screen. Just type your questions in, and management will get to them toward the end. I'm very pleased to say that this morning we have joining us the management team from IperionX, Taso Arima. Taso, please take it away. Taso is the CEO. I'm sorry, I should have said that.
No problems, Michael. Thank you very much for the intro, and it's great to be on the conference. I'll try to keep this to about 15 minutes as an introduction to our company to allow for plenty of Q&A because we're doing some extremely interesting stuff for reassuring the defense industrial base, and I'm sure in the United States, and I'm sure everyone will have a lot of questions. As Michael said, I'm the CEO. I'm also the founder of IperionX together with my team. Founded the company in 2020 with the express purpose of reassuring the titanium supply chain. The reason was in 2019, the last titanium metal sponge plant, which is akin to a crude steel plant, announced that it would shut, and in 2020, it shut.
That was the opportunity that me and my team saw to reassure a titanium supply chain, but go well beyond that and reassure a titanium metal supply chain, which is cheaper and more environmentally friendly as well. What we're doing is doing that right now. We're using innovative technologies to do that. We secure technology out of the University of Utah that developed out of the University of Utah, which we have now taken through to commercial scale after a long period of piloting in Salt Lake City. We're now ramping up our commercial scale facilities with funding from the Department of Defense. We've been awarded over $160 million worth of funding from the Department of Defense, and we've raised over $160 million from equity investors, from institutional investors over the last four to five years to develop our business.
Our ultimate goal is to bring back a secure and uninterruptible supply chain of titanium metal to the United States, whilst also dropping the cost so that we can expand the use of titanium metal. If titanium metal was cheap enough, there would not be a need for any stainless steel in the world today. Just as a primer, titanium metal is a superior metal. Like I just said, if it was cheap enough, you wouldn't need stainless steel in the world today. As compared to stainless steel, it's far stronger, it's far lighter, and it's much more corrosion resistant. The only reason it hasn't been used extensively in applications where you see stainless steel being used today is because titanium metal is expensive. Today it's used a lot in our defense industrial base because it's lightweight, strong, and super corrosion resistant.
We use it a lot in our Air Force, Navy, and our Army platforms, but it's also extensively used in commercial aerospace for lightweighting. It's been increasingly used in areas like consumer electronics because of its unique properties, and that's a huge growth area we're participating in as well. If we are able to, and as we bring down the cost of titanium metal, we expect it to be much more widely used across many industries and to have a big disruptive effect, not just on the existing titanium metal supply chain, but on the supply chain for other metals, especially stainless steel. Going back to the start and the origins of why we started the business is really because of this map. When the last titanium metal sponge plant closed in the United States, again, this is akin to a crude steel plant.
The first iteration from titanium minerals to titanium metal, the refining of titanium metal essentially, and the last plant of its kind closed in the United States, this is what happened. We became completely reliant on imports, or the United States became completely reliant on imports. Most 75%+ of production and growing comes out of China and Russia. Luckily, there is still Japan supplying the world, but if anything was to happen, like a war or conflict in the South China Sea, then that supply chain would be cut off and we would not be able to make critical defense products for any potential conflict in the South China Sea. We identified this in 2020. We looked very smart to our government people in 2021, 2022 when Russia invaded Ukraine.
We have been, and over that time we have shown to the government that we are a successful business that can scale up and reassure the supply chain. We have been heavily funded by the Department of Defense to scale our business in three different rounds. This is the impetus for us starting the business. For us, we saw the opportunity to not just reassure the supply chain, but to make it better. The current supply chain for titanium metal, which is still carried out in China, Japan, and Russia, is to take titanium minerals and go through a very intensive Kroll chlorination process to make titanium metal sponge. That sponge is then either melted in places like China and Russia, but it is also exported here to the United States.
That melting of that product into ingots happens here in the United States, and then the further processing into titanium metal parts. Now that whole supply chain is very complex and it's very expensive and leads to very high cost titanium metal products, and hence why titanium metal is not as big of a market as, say, stainless steel. Just to give you an example, the stainless steel market is over $100 billion. The titanium metal market is around $6 billion-$8 billion per annum. It is far smaller than the stainless steel market, and that's only because titanium metal is much more expensive because of the process that it goes through. When we looked at reassuring the titanium metal industry, we were lucky in that there was technology being developed out of the University of Utah that was funded by the Department of Energy.
The Department of Energy was looking for a cheaper way to make titanium metal so that it could be used more in the automotive supply chain for lightweighting. Hence why we have a strong relationship and now a relationship with Ford Motor Company, where we're putting parts starting next year into Ford vehicles. But this technology was developed to lower the cost and make the supply chain for titanium metal more environmentally sustainable as well. The top graph here, or the top chart here, is the current industry. It takes in minerals, goes through this cryothermique chlorination process to make titanium metal sponge. That is what's not done anymore in the country, and 75% of the control of that is in China and Russia. This sponge is then exported to the United States. 90%+ of exports comes from Japan.
If that went away, the alternative would be China or Russia imports. Here in the United States, we melt into titanium metal ingots and then go through a very complex process of forging and rolling or extruding into titanium semi-finished products or mill products, as the industry calls it. There is a lot of yield loss in that. From there, to make, say, something like a fastener, like nuts and bolts, there is then a significant additional yield loss to make that final product. For us, we saw that as a very complex, very high energy, and very low yielding supply chain. With our technologies, we can take mineral, we take scrap as well, which is a huge benefit for a lot of our customers who are looking at 100% recycled supply chains.
We're able to take that through, go through our first hammer process to make titanium metal powder, and then from that powder, avoid the sponge and titanium metal ingot supply chain, so avoid melting at all. In a meltless process, take it through our HSPT sintering process to make any shapes and forms. We take our powder, we form it into shapes. We can form it into things like plate, bar, wire, or we can go directly into the shape or the near net shape of the final product and then make our final products with far higher yields than what the current industry is. For instance, with fasteners, the current industry's yields on fasteners can often be around 10%, whereas for us, we can bring that yield up to well over 80%, closer to 90% across the supply chain.
That impacts cost immensely. We can make titanium metal products far, far cheaper. That way, we're not just reassuring the titanium metal supply chain in the U.S., we're doing it with a cheaper product as well to allow for additional market share to be gained over time. Today, we've already taken our company through piloting and into our first commercial operations, which are starting up right now in Virginia as we speak. Today in Virginia, what we have is the ability to take titanium out of scrap, turn it into either spherical or angular powder. The spherical powder can go into additive manufacturing for some very complex shapes or some rapid prototyping. The vast majority of our production is in the form of an angular powder, which we then take in.
We form it into shapes and forms using traditional powder metallurgy methods, which are used in the steel industry a lot, uniaxial pressing, cold isostatic pressing. This is machinery and equipment which has been around for a century, making parts for the automotive industry. We take it through our HSPT process to make final products. Today, we're very focused on these types of products here: fasteners, enclosures, actuators and gears, brackets, things like that. They are typically the types of titanium metal products today which have very low yields and very high pricing from the current supply chain. With us, we can inverse that. We can make them with very high yield and thus very low cost. We're very focused on that. Over time, we will expand and we will make, and we do work on traditional products like bars and wire and plate.
We have an enormous industry ahead of us to lower the cost of titanium metal just in things like fasteners, brackets, gears, and stuff like that. These industries are multi-billion dollar industries, which we can very much control with our low cost titanium metal production methods. Now we've taken it through piloting already. With that piloting, we were able to secure some initial customers, and we've got a lot more customers than this that we're working on as well. Over that, we were able to then, through our piloting, form the basis for the engineering work that goes into our first scale-up facilities. We chose Virginia because we've got an excellent incentive package together with great support from Governor Youngkin, Senator Warner, and Senator Kaine. Our first commercial facilities are here in southwest Virginia. We've got two buildings there that are already getting built out.
Our first 1080 building, as we call it, our titanium powder production facility, it's pretty much up and running now with manufacturing titanium metal powders. It's over a 60x increase, and we're going to be coming out soon with how much bigger we are from our titanium metal powder production there. This powder is taken and formed into shapes and forms in our 1092 facility, which allows us to take that powder and make titanium metal products for our customers. This year is very focused on advanced prototypes and doing the final qualifications for some of our larger production runs that we expect as we go into 2026. As we grow into 2026 and 2027, this is where the additional funding from the Department of Defense is coming in to support that growth.
Just as a background, this 1080 building was the recipient of a Department of Defense Defense Production Act Title III program. At the start of this year, with some of you that are following us, we received another $47.1 million award to scale the business here in addition to the manufacturing of titanium metal products. Just over the last week, we received our first phase III RDRQ award via the Army for $99 million SBIR cap, with our first task order just being announced last night for U.S. Army components to be manufactured from this facility. Eventually, today, we manufacture everything from scrap. Our ultimate goal over the next five and ten years is to have a fully integrated supply chain where we take titanium minerals and titanium metal scrap and produce titanium metal products. This is why we have the Titan Project.
The Titan Project is strategic to us in our relationship with the government. We can showcase that we can have the entire supply chain tied up. We permitted the Titan Project in 2023. Right now, the Department of Defense is funding what's called a definitive feasibility study, which is the final engineering studies, to allow for that Titan Project to become construction ready by the middle of next year. We have every piece of the puzzle that's needed to reassure an efficient and an uninterruptible supply chain of titanium metal, from upstream titanium raw mineral supply through to the downstream manufacturing of titanium metal parts and everything in between. We are the complete solution for the titanium metal supply chain.
We're doing this on the back of tailwinds in the titanium metal industry, together with the reshoring of manufacturing and advanced manufacturing in North America and the reshoring of the defense industrial base in North America. We are bipartisan supported, and we are a business where, whether you're a Democrat, whether you're a Republican or independent, whatever, this is a good business. This is something that is required in the United States, and there's nobody that can say that this is not something that all parts of America want to happen. All people in America want to happen in the United States. With that, we're well capitalized right now. Last quarter, we had $66 million in cash. We're going into a ramp-up of productions. Over the next few months, we'll be announcing where our production is going to be getting to in 2027 and beyond.
We're on a very fast growth pathway. We've got very strong institutional support with one of our large shareholders being Fidelity Management Research out of Boston, with some very strong funds as well out of here in the United States and in Australia as well. As a management team, we hold a lot of stock. We've done extremely well over the last few years in building our business, and we expect, as we hit our milestones, we expect to continue to do well. With that, yep, 15 minutes. We've got 15 minutes of Q&A. Michael hand , over to you.
Very good. Very interesting. Quite a few questions have come in. Why don't we start with someone who wanted to know about your plans for reporting details of your production capacity and deliveries once you're fully into production?
Yes, we're ramping up right now.
We had put out some numbers about 18 months ago on what we expected these facilities to have in the first phase, which was 125 tons per annum in this first phase. We put out some high-level numbers as to where we expect to take it over the next few years. Now that we've started operations in Virginia, we'll be coming to market with what the current capacity is and then what the future capacity will be in late 2026 and into 2027. We'll also at some point come with our production plans for capacity increase over the period from 2027- 2030. That's some of the milestones that some of the investors should look forward to over the coming months from us as we've started up production.
Right now, as we're growing, other than production and operating costs, we're not putting much other guidance out there. As we grow, late 2026 into 2027, as we go cash flow positive, that's when we'll probably come back and start giving guidance like other companies might give to investors. Right now, we're not focused on giving guidance outside of production and cost estimates.
Very good. If we could just kind of turn to how production will look once you get started, go to slide with Ford and maybe 1/2 dozen other potential clients. If they were all signing up, what percentage of the production capacity would that represent?
There are some customers which we're in discussions with that would be in excess of what we've built to date, and hence why we're expanding. We have to be careful, or we don't have to be careful.
We just want to be cognizant that we don't want to be tied to any one customer. If you look at what's happening within the Department of Defense, there are certain customers within the Department of Defense who could be the entire production capacity for us right now and over the next few years. The same is the case with some of the consumer electronics companies that we're working with. We announced last year that we're doing a pilot program for the recycling of consumer electronic scrap that we expect to lead into larger scale contracts from the consumer electronics sector. That alone could also be a significant portion, if not all, of our production capacity from what we're planning in the next few years. What we're going through right now is we're working with a range of customers.
We've obviously announced in public with Ford Motor Company and with U.S. Army, but with some of our other customers that we've yet become public with, we're working through different prototyping of products and how those products fit into our production capacity over the next six, 12, 18 months. That is all milestones that we expect to announce to market as we sign contracts, just like we did with Ford. The short answer is there's multiple customers out there that we're in discussions with now that would be the entire production, but we don't want to just be tied to obviously one customer for our entire production. We need to make sure that we allocate to our customers, making sure that we see them, we work with them to grow with them as they want to use more and more titanium metal products.
The titanium metal market, as you make it cheaper, can be enormous. We're only talking about a very, very small percentage of the existing titanium metal market right now as we're scaling up. The opportunity to make this into a multi-billion dollar revenue business is there over the next sort of few years. We want to be very careful in choosing and working with our customers that are going to support that growth as well.
We had a follow-up question regarding guidance for production capacity. I'll read it off to you. What guidance are you giving in production capacity per annum by end of 2025 in Virginia? Is that the 125 metric tons per year? Also, what do you anticipate for yield for that capacity?
That 125-ton capacity is post-yield. That's what we gave, what we sent out to investors 18 months ago.
That needs to be updated. As we talked about in our last quarterly and in the shareholder letter I put out at the start of the year, that capacity will be updated. We've seen since starting up commercial operations and starting up the main part of the process and running the main part of the process from late last year, we probably underestimated or we were very conservative on our numbers 18 months ago. So we need to come, we will be coming back to market to update those numbers.
Speaking of the yield, you mentioned earlier that essentially your process runs at a much higher yield than conventional processes, and that gives you much lower costs for production. You have kind of a strategic choice there of whether to pass on the low costs or to run fatter margins or a mix of both.
How do you anticipate making that decision?
It's really going to depend on the product. We've stayed away from a lot of qualification into aerospace in the last few years. Right now, we have a lot more interest in commercial aerospace. We have commercial aerospace companies or supply companies coming to site and seeing what we're doing in Virginia, getting very interested in the prospect for lower-cost titanium metal products into the commercial and defense aerospace sector. In those sort of products where you have more intensive qualification processes, it may just be a discount to the existing titanium metal products that are out there. Whereas with some of the products like fasteners, we may be looking at taking market share now from other metals like stainless steel.
We're looking at a percentage of margin that we want to capture while still being low-cost enough to take a share from stainless steel. It's on a product-by-product basis. I think as we grow, there will always be that market where we're taking market share from the qualified products, which will be at a discount. I think a big chunk of our production will just be maintaining a margin. Whether that's 50%, 60%, 70% is still yet to be decided.
I think you're going to see us take an approach of maintaining a very significant, very fat margin, except for where titanium metal is already qualified and in use, and we're taking market share from there. Those margins will be higher because we wouldn't need to, we will still be discounting, but we wouldn't need to discount to the level where we're taking market share from other metals.
In terms of future development, growing the business, you've already had three rounds of funding from the US government. Do you think that there is more potentially available, or where does that?
Yes. There's a lot more funding available for the continued scale of the business.
I would say we're well ahead as being the, in the last two decades, the company that the U.S. government and the Department of Defense has funded to reassure the titanium metal supply chain and by far the largest amount of money gone into it. We expect, or we're seeing opportunities for a lot more funding. We have got a lot of support from Congress through to the program managers across different products. This is a key national security issue where we don't manufacture some of these titanium metal products anymore in the United States, and we need to reassure them, whether it's for Navy, whether it's for Army, whether it's for Air Force. There's a lot of military programs today to make our war fighters and our military platforms a lot more efficient, and that requires titanium metal and an increased use of titanium metal.
We are the clear solution for that. There is a lot more contracts. There is a lot more potential grant funding, and there is a lot more other funding mechanisms out there to continue to help scale our business. We are in a very good position right now with bringing on our initial production and our scaled production from what we've received from the Department of Defense already. I think you're going to see us continue to be supported by the Department of Defense. I want to make it clear that we didn't build this business to only be a Department of Defense supplier. The Department of Defense is extremely important for us. We're patriots. We want to support the reindustrialization of our defense industrial base in America.
We built this business to be a successful and financially viable and financially sustainable business as well as an environmentally sustainable business. We see enormous markets outside of the defense industry, whether it be automotive, whether it be consumer electronics, whether it be the marine industry, where titanium metal is sparingly used today, but could be used in a much larger way as we bring down its cost. I think the Department of Defense likes that as well. We are not reliant on Department of Defense contracts to survive. We will be a very successful commercial business outside of the Department of Defense whilst also supporting the defense industrial base.
We had a question come in about the stock. It is up 80% in the last year. Investors see something there that they like.
What would you point out to investors as being the key elements of the IPX story?
Yeah, we're reassuring a much more sustainable and much more financially viable and lower-cost titanium metal supply chain in the U.S. We're doing that through innovative new technologies, breakthrough technologies that have won multiple awards that we've proven at commercial scale as well. I think last year was a big year for us. The reason, I think over the last five years, we've outperformed, I think, NVIDIA or something like that. If you look at that, I think that comes down to an excellent team, an excellent group of shareholders, and also excellent execution on the vision. We've been able to, especially over the last 12 months-18 months, prove out the commercialization of the technology as we've gone into operations.
As people understand the market potential, the multi-billion dollar market potential here that we can own, investors get extremely interested. We've had very strong support from mutual funds, superannuation funds in Australia, some very long-term, long-only investment funds that are focused on these sort of thematics. Every investor that comes in or comes to site or digs in likes the story, understands the story, and gets behind the story. We've been very successful in being able to bring on a great set of investors. That's because the team has been outstanding at being able to communicate that to investors and execute on the vision as well over the last few years. I believe you'll continue to see us do that. There are a lot of things ahead of us that are extremely exciting that we're working on.
There's even some things we work on which I can't see because of the defense nature of it. I'm not a U.S. citizen, although I live in the United States. I'm not a U.S. citizen, so I'm not privy to some of the products that we're making. There's some really exciting products that we're working with across defense and non-defense industry, which I'm really excited about over the next six, 12, 18 months to come to market with some of those customers of ours.
Very good. We had a question come in about the cost curve for the Virginia facility. You're scaling up production now, expect to be in full production relatively soon. When do you think you'll have really optimized production efficiency to the point where you've reached the low cost of goods that I know you're driving for?
From an operational standpoint, we're seeing this technology is still relatively young. The first patents, the discovery of the science that allows us to undertake this lower-cost refining of titanium metal is less than a decade old. We continue to see huge operational improvements. We're going to have, we've already seen enormous efficiencies that we're gaining from going to commercial scale equipment as we have been over the last six months, especially how we've had things installed and now running that a lot more. We're going to have a good cost structure already as we ramp up to the full-scale production of what we have now. As we scale, you naturally get economies of scale in the equipment as well. A lot of the equipment that we're using today, while it's large industrial scale, it's the smallest models of that industrial scale equipment.
Now, you're still able to produce a fastener from that equipment at 10%-20% of the cost of the existing titanium metal supply chain. You're going to see that continue to come down as we scale beyond. To give you an example, there's a piece of equipment that can operate at about 1,000 tons per annum today. You might take two or three people to operate that. The same piece of equipment in the next model up, which only costs two times the amount of capital, is at 5,000 tons per annum. The labor intensity of that equipment drops dramatically without any increase in labor cost. You're going to see a lot of that across a lot more pieces of equipment, across all pieces of equipment, actually, that we have in place today.
Again, we are already in a cost structure for making certain products like fasteners, brackets, things like that, that is already lower cost than the existing industry when you take it through to the near-net shapes. As we scale, that's just going to continue to come down dramatically. You're going to see great cost structure already towards the end of this year into next year. As we scale throughout the next sort of two- five years, you're just going to see that really, really come down a lot. We're already seeing improvements in the efficiencies of the process themselves as well, how much reagents we're using, how much gases we're using, things like that, how much power we're using. Everything's just, we continue to optimize everything.
Excellent and very, very interesting.
Unfortunately, we've come to the end of our time. There's still tons of questions left to be answered. If I didn't get to your question, I apologize. Please follow up with your Sidoti representative. We'll run down answers for you. Taso, thanks very much for a very interesting presentation. Good luck to you and the company.
Perfect. Appreciate it very much. Thank you. Bye.
Very good.