TRONA — Five days after taking over the 150-year-old mining operation that anchors Trona, 5E Advanced Materials laid out for investors how it intends to make the business pay in an Oct. 6 investor call.
The company took over operations in the remote northwestern San Bernardino town on Oct. 1 after buying assets of bankrupt Searles Valley Minerals, Inc. 5E is based in Hesperia and already produces boric acid at a pilot facility near Newberry Springs.
Paul Weibel, 5E’s CEO, said in a news release following the call that the transaction is the “single largest step this company has taken toward its mission. We have gone from a developer with a great deposit and a commercial plan, to a producer with immediate revenue, an experienced workforce, multiple operating plants and products, and a credible, identified path to approximately $40 million of steady-state annual adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) under our base plan.”
Minerals have been pulled from Searles Lake since the late 1800s. The town of Trona was established on the lakeshore as a company town around 1913. From late 2007 until the recent sale, the operation was held by Searles Valley Minerals, a wholly owned subsidiary of Karnavati Holdings, Inc., which is owned by Nirma Limited, a major Indian industrial conglomerate.
In bankruptcy filings, Searles claimed strong earnings before the 2019 Ridgecrest earthquakes that caused extensive damage. In addition, the company cited oversupply by lower cost producers of synthetic soda ash from China as a trigger for its bankruptcy filing in June.
“We bought the operating platform, not the old balance sheet,” Weibel said. He added that the company “did not pay for the tungsten, lithium or boron-expansion optionality” and he explained how changes in operations can help the company achieve profitability.
“Our immediate focus is on operating the assets, delivering against the commercial reset and executing the identified path to profitability,” he said. “At the same time, we believe we have significant opportunities to expand the value of the platform beyond our base plan.”
Weibel also pointed to possible additions beyond the base plan. He said the operation includes a pilot plant that has produced lithium from the lake’s brine and has ‘real potential to become a California-based lithium provider.’ He said tungsten, also found in the brine, is ‘what excites me the most.’ He noted that U.S. Bureau of Mines research in the 1980s showed the metal could be recovered but was only marginally economic at the prices of the time. He said current prices, driven up by China’s export restrictions, make it worth pursuing, though he called the company’s analysis preliminary. None of it is included in the base plan, he said.
Weibel said energy changes will help 5E attain profitability.
In a follow-up email, he noted —as an example — that currently Southern California Edison provides electrical power to meet about half of the needs of the company’s Westend plant.
“The power required from So Cal Edison is about $38k per day,” he said.
The company expects that planned capital expenditures to “decouple” from the grid will result in savings.
Although boilers used at Trona have been fired by coal in the past, they are currently using natural gas, Weibel said.
5E did not inherit SVM’s $76 million environmental obligation to the California Air Resources Board and the company is working to establish its operation at Trona as a new covered entity under the state’s cap-and-invest program, Weibel said.
“Our obligations will be based on production and CO2 generated via the MMBTU of gas we utilize,” he noted.
Although he referred to an experienced workforce of roughly 257 employees in the call, Weibel did not respond to a question about how many former SVM employees were offered jobs when 5E took over or how many accepted.
In his presentation, he pointed to new contracts for products at a notably higher price than Searles’ contracts, selling to a different part of the market, and increasing borax production by restarting part of the Argus plant, with boric acid production returning.
More information about 5E Advanced Materials is online.
The bankruptcy
The Searles bankruptcy continues in federal court in Delaware. A hearing was set for Thursday to take up procedures for creditor voting on the liquidation plan, creditors have until Oct. 21 to file most claims, and the court is scheduled to consider approving the plan on Nov. 18.”
More information is online at cases.stretto.com/SVM.
Claudia Elliott is founder and editor of The Mojave Beat. She can be reached by email: claudia@mojavebeat.news.