5E Advanced Materials (FEAM) risk factors, FY2024 10-K

Risks Relating to Our Business

1. 01There is substantial doubt regarding our ability to continue as a going concern. We will need to raise substantial additional funding, which may not be available on acceptable terms, if at all, to be able to continue as a going concern and advance our Project
2. 02We will need to obtain additional financing to continue as a going concern and to continue our ongoing development and proposed operations
3. 03We have incurred significant net operating losses since our inception and anticipate that we will incur continued losses for the foreseeable future
4. 04Our future performance is difficult to evaluate because we have no or only a limited operating history in the minerals industry and no revenue from our proposed extraction operations at our properties, which may negatively impact our ability to achieve our business objectives
5. 05If we do not obtain additional financing and maintain sufficient funds to continue our ongoing development and proposed operations, our proposed business may be at risk or the execution of our business plan may be delayed
6. 06adverse regulatory actions that affect our development and construction plans or the use of borates or lithium generally
7. 07a focus on boron and lithium extraction (as opposed to boron and SOP under our previous plans)
8. 08Full operation includes targeting production of 450,000 short tons of boric acid and 5,500 short tons of lithium carbonate per annum
9. 09Our inability to successfully operate the SSF, and our inability to complete further technical and economic studies (including a bankable feasibility study) with respect to the Project, may have a material adverse impact on the Project
10. 10We have no history of mineral production and we may not be able to successfully achieve our business strategies, including our downstream processing ambitions
11. 11We may be unable to develop or acquire certain intellectual property required to implement our business strategy successfully
12. 12Third parties may claim that we infringe on their proprietary intellectual property rights, and resulting litigation may be costly, result in diversion of management’s time and efforts, require us to pay damages or prevent us from marketing our future products
13. 13All of our business activities are now in the exploration stage and there can be no assurance that our exploration efforts will result in commercial development
14. 14We are an exploration stage company with no known Proven or Probable Mineral Reserves, our estimates of resources and mineralized material are inherently uncertain and subject to change, and the volume and grade of ore actually recovered may vary from our estimates
15. 15Estimates relating to the development of the Project and mine plan are uncertain and we may incur higher costs and lower economic returns than estimated
16. 16other known and unknown risks involved in the conduct of exploration, development and the operation of mines
17. 17We depend on a single mining project
18. 18Our long-term success will depend ultimately on our ability to achieve and maintain profitability and to develop positive cash flow from our proposed operating activities
19. 19global political, economic and market conditions, including political disturbances, war, terrorist attacks and changes in global trade policies
20. 20Our growth depends upon the continued growth in demand for end use and future facing applications that require borates, lithium, and related minerals and compounds we expect to produce
21. 21Changes in technology or other developments could adversely affect demand for lithium compounds or result in preferences for substitute products
22. 22Our growth depends upon the continued growth in demand for electric vehicles with high performance lithium compounds
23. 23Our long-term success will depend on our ability to enter into and deliver product under supply agreements
24. 24In May 2021, we announced the entry into a non-binding letter of intent with Compass Minerals America Inc. (“Compass Minerals”), a subsidiary of NYSE-listed Compass Minerals, Inc., to progress negotiations with respect to Compass Minerals taking responsibility for the sales and marketing of SOP from our operations
25. 25In May 2022, we also announced the entry into a non-binding letter of intent with Rose Mill. Under the terms of the letter of intent, we agreed to work together on supplying advanced materials that focus on industrial and military applications
26. 26In May 2023, we signed a non-binding letter of intent with Orbital Composites to provide boron feedstock for 3D printing of wind turbines, permanent magnets, and boron carbide for defense applications
27. 27The cost and availability of electricity and natural gas are subject to volatile market conditions
28. 28Uncertain global economic conditions could have a material adverse effect on our business, financial condition, results of operations or prospects, including the pricing of our products
29. 29Our business could be affected by macroeconomic risks
30. 30Government efforts to combat inflation, along with other interest rate pressures arising from a recently inflationary economic environment, could lead to higher financing and Project completion costs
31. 31Inadequate infrastructure may constrain our future mining operations, including at the Project
32. 32Title to mineral properties and related water rights is a complex process and we may suffer a material adverse effect in the event the Project property or other properties that we may acquire are determined to have title deficiencies
33. 33Restrictions on our ability to obtain, recycle and dispose of water may impact our ability to execute our development plans in a timely or cost-effective manner
34. 34The mining industry is historically a cyclical industry and market fluctuations in the prices of borates, lithium, and lithium byproducts and other minerals could adversely affect our business
35. 35Fluctuations in the value of the United States dollar relative to other currencies may adversely affect our business
36. 36We face risks relating to mining, exploration, and mine construction, if warranted, on our properties
37. 37other unknown risks involved in the conduct of exploration and operation of mines
38. 38Mineral exploration and development, such as our proposed operations, are subject to extraordinary risks
39. 39Our proposed facilities or operations could be adversely affected by natural or human causes outside of our control, such as natural disasters, wars or health epidemics or pandemics
40. 40A shortage of skilled technicians and engineers may further increase our operating costs, which may materially adversely affect our results of operations
41. 41A shortage of equipment or disruption in our supply chain could adversely affect our ability to operate our business
42. 42Disruptions in production at our proposed facilities may have a material adverse impact on our business, results of operations and/or financial condition
43. 43Failure by our vendors or our component or raw material suppliers to use legal or ethical business practices and comply with applicable laws and regulations may adversely affect our proposed business
44. 44Competition with and new production of borates, lithium, and other minerals from current or new competitors in the market could adversely affect prices and our proposed business
45. 45Industry consolidation may result in increased competition, which could have a material adverse effect on our proposed business
46. 46We are subject to significant environmental and government regulations and compliance with such regulations requires significant expenditures
47. 47We may in the future be subject to claims by third parties or employees relating to exposure to hazardous materials and the associated liabilities may be material
48. 48We may face increased costs and be subject to liability resulting from the generation and disposal of certain wastes, including hazardous wastes, in the course of the Project’s development and/or other future operations
49. 49Land reclamation requirements may be burdensome on our financial position
50. 50The physical consequences of climate change could have a material adverse effect on our properties and proposed business activities
51. 51particularly given the inherent complexity of multiple, overlapping GHG reporting regulations with respect to calculating and reporting GHG emissions
52. 52We are required to obtain, maintain, and renew governmental permits in order to conduct development and mining operations, a process which is often costly and time-consuming
53. 53Lawsuits may be filed against us or arbitration proceedings may be commenced and an adverse ruling in any such lawsuit or arbitration may adversely affect our business, or financial condition
54. 54We are vulnerable to the risks associated with operating in a single geographic region and concentrating our capital investment in the State of California increases our exposure to that risk
55. 55The operation or development of our facilities could be adversely affected by local communities and/or other stakeholders
56. 56In addition, disputes surrounding Indigenous land claims regarding lands on or near our properties could interfere with future operations and/or result in additional operating costs or restrictions, as well as adversely impact the use and enjoyment of our real property rights with respect to our assets
57. 57We currently plan to continue to invest significant amounts of capital in a variety of exploration activities, which involve many uncertainties and risks that could prevent us from realizing profits or may result in the total or partial loss of our investment
58. 58Our future success depends on the continuing efforts of our management and key employees and our ability to attract and retain highly-skilled personnel and senior management
59. 59Our inability to hire and maintain suitable personnel could have a material adverse effect on us and could prevent us from effectively pursuing our business plan, including developing, growing, and operating our business profitably
60. 60We will need to increase the size of our organization and we may be unable to manage our growth effectively
61. 61Our directors and officers may in the future be in a position of a conflict of interest
62. 62The transition to a new Chief Executive Officer (“CEO”) and new Interim Chief Financial Officer (“CFO”) will be critical to our success and our business may be adversely impacted if we do not successfully manage the transition process
63. 63We have experienced significant turnover in our senior management team and across our organization, and our failure to attract and retain qualified personnel, skilled workers and key officers could have an adverse effect on us
64. 64We may acquire additional businesses or assets, form joint ventures or make investments in other companies in the future that may be unsuccessful and may harm our operating results and prospects
65. 65Risks related to global economic instability, including global supply chain issues, inflation and fuel and energy costs may affect our business
66. 66We could be subject to information technology system failures, network disruptions, and breaches in data security which could negatively affect our business, financial position, results of operations and cash flows
67. 67A third party or supply chain incident, e.g., incidents that impact our company due to an impact on a vendor, service provider, supply chain player, partner, or any other third party

Risks Relating to Our Common Stock and CDIs

1. 68The market price and trading volume of our Common Stock and CDIs may be volatile and may be affected by economic conditions beyond our control
2. 69the other factors described in this “Risk Factors” section and elsewhere in this Annual Report
3. 70We incur significant costs as a result of being publicly traded in the United States and Australia
4. 71We incur increased costs as a result of operating as a U.S. listed public company, and our management is required to devote substantial time to new compliance initiatives and corporate governance practices
5. 72An active trading market for our Common Stock and CDIs may not be sustained and the trading price for our Common Stock and CDIs may fluctuate significantly
6. 73Because we do not anticipate paying dividends on our Common Stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain on our Common Stock
7. 74If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, the market price and trading volume of our Common Stock and CDIs could decline
8. 75we have elected to rely on an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act relating to internal control over financial reporting, and we will not provide such an attestation from our auditors
9. 76the date on which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 of the Exchange Act, which would occur if the market value of our Common Stock that are held by non-affiliates exceeds US$700,000,000 as of the last day of our most recently completed second fiscal quarter
10. 77Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud
11. 78Our Certificate of Incorporation and Bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that shareholders may consider favorable and may prevent attempts by our shareholders to replace or remove our current management
12. 79a prohibition of cumulative voting in the election of our Board, which would otherwise allow less than a majority of shareholders to elect director candidates
13. 80Raising additional capital could adversely affect the voting power or value of our Common Stock and CDIs
14. 81committed external source of funds. In addition, we may seek additional capital due to favorable market conditions or strategy considerations, even if we believe that we have sufficient funds for our current or future operating plans
15. 82Nasdaq may de-list our securities from its exchange, which could limit investors’ ability to transact in our securities, subject us to additional trading restrictions and substantially increase the number of shares issuable upon conversion of our outstanding convertible notes
16. 83a decreased ability to issue additional securities or obtain additional financing in the future
17. 84Sales by our existing shareholders can reduce the market price of our Common Stock and CDIs
18. 85We are a holding company and, as such, we depend on our subsidiaries to generate cash to fund our operations and expenses

Risks Related to the Convertible Notes

1. 86There are risks associated with our Convertible Notes that could adversely affect our business and financial condition
2. 87Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt
3. 88Our obligations to the purchaser under the Convertible Notes are secured by a security interest in substantially all of our assets, and if we default on those obligations, the purchaser could foreclose on our assets
4. 89Conversion of the notes will dilute the ownership interest of our existing stockholders or may otherwise depress the price of our Common Stock
5. 90We may require additional financing to sustain or grow our operations and such additional capital may not be available to us, or only available to us on unfavorable terms

Risks Relating to our Reorganization

1. 91We may be unable to achieve some or all of the benefits that we expect to achieve from the Reorganization, which could materially adversely affect our business, financial condition and results of operations