Hi, everyone. I'm George Giannikas, one of Canaccord Genuity's sustainability analysts, and we're quite pleased to have with us today the CEO of ASP Isotopes, Paul Mann. Paul, welcome.
Thank you for having me. It's great to be here.
I had a list of questions to ask you, but I'm going to start off with what appears to be the most interesting news over the last couple of days, is that there appears to be a helium shortage that's potentially impacting semiconductor production and other modes of production. I wonder if you could give us a brief history of what's happened in helium, why it's in short supply, and what ASP could help us do to fix that problem.
I mean, helium's a very unique element in that it's a very concentrated group of suppliers, and it's also the only element on planet Earth which you can't create, really. Once you've used it's lighter than air, it vanishes off up into the space, and it's gone forever. Unlike things like iron or carbon or oxygen, which exists as molecules, you can't. Helium doesn't. It's an element. It just exists and once it evaporates up. There's a very challenging supply-demand situation, and we've seen a number of crises in the past. I mean, I think we're probably going into the fifth supply side crisis in the past 20 years, and that's because of the challenging supply chain.
In fact, actually, if you remember during COVID, you know, people stopped producing new cars because they couldn't get semiconductors. Well, the reason they couldn't get semiconductors was they couldn't get helium. Helium's used in semiconductor production, launching rockets, MRIs, all that kind of stuff. What's happened right now, we understand or we believe from talking to customers, is that about 25%-30% of the world's helium supply is offline because it's produced in Qatar. We're probably running at an annualized production rate right now of about sort of 4.5 BCF versus an annual demand of about 6.5 BCF. There's gonna be some form of rationing, and people will have to work out and manage with that.
Obviously, the recent closure of the Strait of Hormuz has obviously put immediate pressure on the supply. In addition, local press in Qatar have reported that Ras Laffan, which is Qatar's large LNG facility, has suffered damage as a result of a direct drone or missile hit. It's unclear how long this damage is gonna take to resolve itself. This could be the fifth helium crisis during the last 20 years. We'll have to wait and see. Now, in terms of how it impacts ASPI, what we can do, we obviously own Renergen, which will be one of the world's largest helium producers around the end of this decade.
Right now, we're in phase I of the helium liquefied natural gas plant build-out. Our helium facility is quite unique in the world in that, geologically, it was formed about 2 billion years ago. Two meteorites hit planet Earth, one in exactly the same spot, one 3 billion years ago and one 2 billion years ago, and created this unique geological feature that's very special for South Africa. Beneath it is a vast helium reserve, along with natural gas. When you drill for natural gas in Qatar, maybe you get 0.04% helium. When you drill for natural gas in, say, northern Africa or Russia or the United States, maybe you get 0.4% helium.
When we drill for natural gas in the Free State, we get north of 3% on average natural gas. We've seen as much as 12%. We get 10x as much helium per unit of natural gas as you'd get elsewhere in the world, so it's a very unique geological feature. We're developing phase I right now. Phase I , we've said, will be complete this year, towards the end of the H1, H2, that kind of timeframe. Actually, we're ahead of that schedule right now. Since we took control of the assets, we've had our engineers down there. We've increased the size of the drilling fleet. We've got some proper size next couple drilling there. We're well ahead of schedule in phase I.
Phase I, we'll do about 2,500 gigajoules of LNG per day. Think of a gigajoule as being equivalent to an MMBTU. You know, our local market is, call it $12-$14 per gigajoule. That would be, you know, maybe $12 million in revenues on an annualized basis, perhaps $3 million in gross profit. On the helium side, phase I should produce about 58 MCF per day of helium. You know, who knows where the price of helium will be? Let's say it's $350-$400 per MCF, and that's about $8 million of revenue a year, maybe $2 million of gross profit. Combined, annualized, you're looking at $20 million of revenue and maybe $5 million of gross profit, that kind of number.
You know, if prices go to $800 or $1,000, all that incremental pricing just drops straight to the bottom line. At $800 per MCF, you know, it's a $17 million operation and eleven million dollars in gross profit. It really accrues very quickly, and we're working hard to get phase I up and running as soon as possible. The world needs more helium right now. Actually, the U.S. government has deemed our helium facilities as critical to the security of the United States, which is why we're getting so much money from the U.S. government. The U.S. government's committed $0.5 billion to phase II. Now, phase II will start before the end of this year is finished, and that's a 44-month process to build out phase II. That will do about 34,000 gigajoules of LNG.
You know, at $14 per gigajoule, that's $170 million in revenue, $130 million of gross profit, that kind of number. Then they produce 890 MCF and 900 MCF per day of helium, and so that's, yeah, $125 million in revenue and call it $100 million in gross profit. But obviously, if prices are higher, that's obviously more. Those numbers I've given you were all public filings from Renergen. They're out in the public domain. I've just attached some approximate prices to it. That's kind of what helium does for ASPI, what we're trying to do to help solve the helium supply crisis. But it is real.
I'm told by some of our customers that, you know, some of them have got six months' supply, others haven't. They're trying to find more supplies. We'll see how things play out.
Maybe for the audience who may not be as familiar with that market, you know, first and foremost, what are the bottlenecks to getting to stage II, to phase II? And second, how do you extract helium from LNG? Like, well, how does that work? What does the process
Yeah
look like?
Actually a very simple process. It's just a big fridge. Just a big fridge, all it is. You cool the gas down to about -170, and then the LNG comes out as a liquid, and that leaves behind a stream of cold gas that consists of helium, nitrogen, and carbon dioxide. We then cool that helium down to -272, and that's where helium becomes a liquid. Prior to getting to that point, we lose our nitrogen and our carbon dioxide, and that gives us a very, very pure stream of helium. At 6N, its chemical purity is 99.9999% chemically pure helium as a liquid. That's the process for doing it.
You know, phase I, Renergen relied upon a Chinese contractor to build the plant. They've proved to be not very reliable, hence the delays they experienced. phase II, we've chosen Chart Industries to build the plant on a turnkey contract. It's you know, Chart Industries, that's what they do is build LNG plants and you know, helium plants. That is their sole line of business. We're very confident that phase II shouldn't experience the delays we saw for phase I. We'll see if we can accelerate it in any way. That's the process. In terms of what we've got to do, we have to commit $170 million of capital to the project. Well, first we have to complete phase I.
Then we have to commit $170 million of capital to the project, and that allows us to draw down the $0.5 billion loan from the U.S. government, the U.S. International Development Finance Corporation, and from Standard Bank. Then that's the bulk of the capital we need to get to phase II.
Maybe the focus on the other core operations for a second.
Yeah.
The original ASP. Excluding uranium, can you sort of talk about the isotopes that you hope to bring to market over the next, you know, 12 months- 18 months? Maybe there had been a couple of operational bottlenecks in the past, but how you expect to sort of overcome those over the next year or two years.
Yes, let's talk through each product, separately. Let's talk about Silicon-28 to start off with. We shipped our first samples of Silicon-28 in August last year. They're with our customers. Our customers analyzed those samples. We analyzed them as well. We confirmed that our analytical methods were identical, which is important and not straightforward either. There are probably only two labs in the world that can measure Silicon-28 to 50 parts per million and impurities to parts per trillion. We have one of those labs, our customer has the other. We confirmed that the labs were measuring correctly. We also confirmed that the enrichment was.
It follows a kind of a line going up, an exponential line going up, and the product was being enriched in line with our expected enrichments, in line with our theoretical calculations. That was encouraging as well. Two of our customers flew out to see our plant in September, October time last year. They recommended a couple of changes to the plant, really a couple for safety reasons, a couple for operational efficiency improvements and also some to make the plant more robust, last longer, basically. We're implementing those changes at the moment. We've implemented most of them. I think now the only thing we've got left to do is to change the O-rings on the compressors. Our compressors come from Switzerland.
The compressor company, about five-10 of their engineers from Switzerland came down to South Africa to swap out the O-rings in the compressor. The problem with the previous O-rings was the customer felt that by using those O-rings, they become brittle, and when they become brittle, they leak, and that would then lead to either catastrophic failure of the plant or product not on spec. We decided to change out those O-rings for a different type of O-rings that would withstand silane, better longevity, greater robustness. That's happening right now. Once those O-rings are swapped out, we'll restart the plant. We should ship our first product, you know, 18 days later, that kind of thing. I don't have a final date yet when the plant is finished, but you know, it's imminent.
You know, it's imminent. That's Silicon-28. As a reminder, we've signed three contracts with Silicon-28, one with a large U.S. semiconductor company, one with a large global industrial gas company, and then one with a large U.S. buyer. We'll leave it at that for now. There are our three contracts for Silicon-28. Carbon-14, the other ASP plant. The feedstock is about to arrive from Canada. It's gonna arrive imminently. That plant's been working, it's been operational for the last two years. We've been enriching Carbon-12 in that plant to date. Carbon-12 is not really a commercial market to us right now, but Carbon-12 may well be required to make next generation global positioning systems, GPSes, and stealth coatings on planes.
The nuclear spin on our atom, you can detect that nuclear spin using advanced tools, and that's how the Russians and the Chinese are able to spot stealth planes now they couldn't spot 10 years ago. By making coatings with zero-spin atoms, apparently that can help make the plane stealthy again. There's a growing interest in Carbon-12 and Nitrogen-15 for certain markets. We produced some Carbon-12 and shipped that. Commercially, monetarily it's worthless, but well, to us it's not worth much, but it's, you know, it's interesting and hopefully develop a market in the future. Carbon-14 should start up as soon as our feedstock arrives, and that'll take about 60 days-90 days to produce the first product. As a reminder, we've signed a take or pay contract with a Canadian customer for a minimum of $2.5 million a year.
The maximum, you know, maybe it's five, maybe it's a bit more. We'll have to wait and see.
The feedstock, by the way, is on the way now for Carbon-14, so it's.
It hasn't left Canada yet, but it's about to, I'm told. It's imminent. I'll get an update tomorrow. I speak to them every Friday, so I should know then. For Ytterbium-176, we shipped our first Ytterbium-176 sample in September last year to a customer, who's analyzed it and likes what they saw. In October, we had a catastrophic failure of the laser. The laser had one of the three lasers. It had to be shipped back to the manufacturer to be repaired. We now have the laser back again. The plant is back operating again. It's enriching ytterbium in small quantities, admittedly using the batch process rather than the continuous process. The continuous process should start up some point during this H1 of the year.
That'll allow us to really ramp up to commercial volumes and ship our first commercial product, basically. As a reminder, we haven't signed any contracts for Ytterbium-176, but we've probably got about two kilograms of interest from customers, and we believe our plant could do about a kilogram a year once we've got the continuous process in. During the batch processing though, we're seeing product come out at spec and it looks great.
Just to compartmentalize all of this, these appear to have been more operational issues, lasers, feedstock, not science issues, so to speak.
Yeah. Actually, what happened with the laser was our laser plant is located in a location where it shouldn't suffer from load shedding, so it has 24/7 power. Then suddenly one day the entire power to eastern Pretoria went down. There was some failure at a transfer station or something. When they started back up again, the laser got a pulse of energy and it destroyed the laser. You know, most of our plants have uninterrupted power supplies and generators as backup. This plant doesn't because it's not supposed to ever suffer some load shedding. Anyway, that was an unusual problem we had, you know? Yeah.
Your view is on all three of these isotopes, we should start to see commercial revenue 2026? I mean, is that sort of the time-
Oh, yeah. Definitely 2026. I'd have thought H1 of 2026 for some of them, yeah. Maybe even all three.
Okay. I know we're somewhat limited on what we can talk about relative to the uranium opportunity, but, I do want to talk about two recent developments that I thought were super interesting. You wrote about them and potentially game changing. One was the regulatory advancement in South Africa, and the other was a commercial agreement in the United States. Maybe to break them down one by one, can you talk about the regulatory hurdles that you overcame so far in South Africa and why that's so important to scaling the operation?
Yeah. You know, we're limited in what I can say on QLE because we're in the S-1 registration process with the SEC for the spin-out and what have you. What the press release said for QLE was that we'd signed a service level agreement with Necsa. Necsa is South African Nuclear Energy Corporation. They run Pelindaba, which is the nuclear site in South Africa. Pelindaba has a nuclear reactor on it. It actually has two large buildings which are used to enrich uranium. The great thing about that service level agreement and our ability to operate at Pelindaba is that Pelindaba has a lot of the licenses and processes in place already for us to start enriching uranium.
You should assume from that press release our scientists are going into Pelindaba imminently to start enriching uranium and other similar kind of materials, in a site that has been permitted for R&D type activities in uranium enrichment. The second agreement related to signing an MOU of a large U.S. customer to collaborate and work together to try and get more uranium enrichment done in the United States and, I'm not sure there's much else I can say about that that wasn't in the press release.
Understood. We did have one of your partners today at our summit, and they said very nice things about you. I mean, TerraPower, I mean, this is all public and I can say you don't have to, but they've been clearly a partner that's been discussed in the past and they talked about sort of relying on you, particularly for their first batch of reactors that are gonna go hopefully into power by the end of the decade, so.
Yeah, exactly. They need to fill their reactor about 2 years before they turn the switch on. There's a timeline here we've got to try and meet or exceed, and we're working hard to do that. TerraPower have been down to see us three times now. Many members of their management team have been to visit us. We talk to them I think probably every week. I give them an update of what's going on. They've helped us greatly in the country in terms of getting, you know, persuading South Africa to go back into the front end of the fuel chain again, which is a big step for South Africa to take. It's more of a partnership than it is a customer relationship, you know.
Got it. Maybe to refocus again on Renergen. You know, when you announced this acquisition, it appeared to be a, at least for us, just to be frank, a little bit out of left field. Like what does this have to do with what you do and your core operations? Now it could pay huge dividends to sort of maybe readdress the logic behind acquiring Renergen and what that brings to the company.
Yes. When you think about our business, we kind of have three verticals or three industries we operate in. We've got nuclear fuels, and we're spinning that out at some point in the future 'cause nuclear fuels is very different to medical and semiconductor isotopes. We've got medical isotopes and semiconductor isotopes. In a semiconductor vertical, you know, it's widely believed that Moore's Law has stopped working and the TSMC 2 nanometer chip would be the fastest chip you can make with currently available materials. That's what experts are telling us. We've basically exhausted the laws of physics. To make faster semiconductors, we're gonna need new materials, specifically isotopically pure materials such as silicon-28, such as germanium-70, silver, copper, ytterbium, barium, these types of elements.
you know, when you sell into a fab, you know, you're not just selling Silicon-28 or silane, you're also selling helium, fluorinated gases, a whole suite of gases. you know, putting my investor hat back on again, when I look at the fastest-growing, highest return on capital, highest gross margin businesses that the industrial gas companies have, companies like Linde, Praxair, Air Products, Air Liquide, it's the electronic gases business. if we had a fully integrated electronic gases business that's capable of selling the gases we need in the future, and we had helium, that creates an incredibly powerful company that has huge strategic value to many kind of people around the world.
By putting the two companies together, you know, I kind of thought that, you know, this will create the next generation electronic gases company the world's going to need. It looks a little out of left field initially, but it's been in the back of my head for a few years. I'd love to have this asset and put the two together. You know, Renergen was in financial difficulty. They were struggling to raise capital. You know, I spent most of my career trying to find really high-quality assets trading at distressed valuations. That's how you make the most money, how you get the best return on capital for your shareholders, and so that's why we put the two together.
which sort of begs. I hope I'm not going too far afield here, but to the extent you wanna become an industrial gases company that supplies to large semiconductor companies, how does natural gas fit into that? In other words
Oh, natural gas doesn't. You know, that's a by-product of, you know, we can't produce helium without producing natural gas. The two come together. We'll use that natural gas to generate a good return for our shareholders. Don't get me wrong. When you've got $0.35 per MMBTU wellhead cost of natural gas, you can make a lot of money from that. It's not core to our critical materials business, which is basically electronic gases, medical isotopes, and nuclear fuels.
As you scale, if you go through stage one and stage two, are there sort of creative ways to create more shareholder value? Do you have to own the asset to produce the helium, or are there ways to-
No, we don't have to own it. Maybe we own part of it. Maybe we pick up the phone to a fertilizer company, see if they're interested in building a fertilizer plant down there, an ethanol company. When you've got this cheap natural gas, let's use it to maximize value for our shareholders. We'll take the helium from it and sell the helium, but the natural gas stream isn't critical to our organization at all. We can't not have it. It comes out with the helium, but it's, we don't need to use it for what we in our purposes, you know.
Interesting. Okay. There are ways maybe in later years to maybe create more shareholder value by rethinking the way the ownership of the natural gas asset over time.
I can assure you we're thinking about that right now. Yeah.
Understood. Maybe to take a step back, this is a question we get quite a bit too. You have these two distinct enrichment methods, right? You have ASP for the ASP Isotopes, and you have Quantum Enrichment. How do they fit together, you know, broadly, and how confident are you that over time, and maybe this is a question for QLE, but that Quantum Enrichment process can scale, and how do the two technologies sort of complement one another?
Yeah. I mean, they're very different processes, but we've got many other isotope enrichment processes we're working on we haven't announced to the market yet. We've got an R&D team of 20 people working on different methods. You know, they're quite complementary in that the ASP method is great for anything you can turn into a gas, particularly light gases. But not everything turns into a gas. There's no gaseous form of ytterbium. There's no gaseous form of nickel. You know, if we can use Quantum Enrichment to enrich things that don't turn into a gas, then that's a complementary technique to produce isotopes others may not be able to do. Uranium's one of the unique assets which is both a gaseous form, UF6, as well as a solid form, uranium metal. That may.
Is zinc, actually. Those isotopes may lend themselves to driver, basically.
Enriching through ASP is also, from what we understand, very energy-intensive, so you've explored building facilities in other geographies that may have cheaper access to energy. Sort of update us on what that looks like and.
Yeah
What other geographies you're contemplating?
We've lowered the energy use of ASP by probably sort of 30 fold-40 fold over the last sort of 20 years-30 years. We've really brought the energy costs down a lot. We improve it every year. We get better and better as we work through different models and different methods of doing it. But yeah, if the energy costs cap towards zero, then suddenly your cost of production of isotopes caps to zero or close to zero. Our goal is to build plants in locations with very, very cheap energy, specifically Iceland, various places in North America, and actually Belgium, where we have very, very cheap natural gas. They're another location to potentially build plants.
You know, we would like to become the lowest cost producer of isotopes as well as a unique producer of isotopes as well.
How are those conversations in places like Iceland going?
Very well. We're waiting for one final permit in Iceland. I'm going to South Africa next week. I have to speak to a couple of people, and then we should have that wrapped up, you know, imminently. I think we've actually already started the procurement for Iceland even without the permit. We've started the procurement, started the construction. You know, it's a fairly quick process to build a plant there.
Well, I think we're up on time, Paul. It's a great place to stop, and good luck with bringing the helium to market.
Yeah
We need it, so.
I'm told we need it as well. We'll see.
Thanks, Paul.
Thanks very much. Have a good day. Bye.