Lightbridge still negotiating with utility and reactor partners

Lightbridge has fuel development efforts with both Russian and domestic development partners/vendors. A domestic partner/vendor may eliminate the need to seek a separate U.S. export license authorization for this work.

[From transcript of shareholder conference call] On the fuel, Lightbridge does a great deal of work in Russia and they are in discussions with some European countries, discussions in China, elsewhere in Russia. It is point-to-point work with utilities in those countries. They will work with few fabricator companies like Babcock and Wilcox in the U.S. and could be like TVEL in Russia and others around the world to license our patents to them. They manufacture the nuclear fuel and they work with their existing customers or new customers, selling the fuel to utilities. So the short answer on fuel is their focus is U.S. and Russia for fuel fabricators and some discussions now in China, little bit elsewhere. The main nuclear fuel fabricating countries for the world, as well as some European that they’re talking to.

Lightbridge increases the surface area of the fuel by changing the shape from a cylindrical rod to the other shape. For Boiler Water reactors it is often a cylinder shape (so inside areas along with outside areas). These alternative fuel shapes are called Annular fuel and were originally developed at MIT. South Korea is also working on it. By increasing the surface area they make it easier to cool and also enable more power to be generated from the same reactor. Reactors were built with extra safety margins so increasing the power by 10 to 17% is possible. There are extended uprating and other kinds of nuclear power uprates. This would be a fuel uprate. I did not include the full uprate discussion and annular fuel discussion as it involves repeating many previous articles.

More economic and technical details of the Lightbridge uprates are here

Here is the latest investor presentation

Here is the latest annual report

Research and Development Project Schedule

Lightbridge currently anticipate that we [Lightbridge], working in collaboration with our development partners/vendors and contingent upon execution of collaborative research and development agreements with them, will be able to:

* Have semi-scale metallic fuel samples fabricated in 2015-2016 for irradiation testing in a test reactor environment;
* Perform in-reactor and out-of-reactor experiments in 2015-2020;
* Establish a pilot-scale fuel fabrication facility and demonstrate full-length fabrication of our metallic fuel rods in 2017-2018;
* Develop analytical models in 2014-2017 for our metallic fuel technology that can be used for regulatory licensing; and
* Begin lead test assembly (LTA) operation in a full-size commercial light water reactor in 2020-2021, which involves testing a limited number of our full-scale fuel assemblies in the core of a commercial nuclear power plant over three 18-month cycles.

Accordingly, based on our current estimated schedule, final qualification (i.e., deployment of fuel in the first reload batch) for our 10% power uprate fuel in a commercial reactor is expected in 2023-2024 (at the end of two 18-month cycles of LTA operation). In the interim, over the next 1-2 years, we expect to enter into a commercial arrangement with one or more major fuel fabricators that may include upfront technology access fees and/or engineering support or consulting payments to us.

Government Approvals and Relationships with Critical Development Partners/Vendors

The sales and marketing of our services and technology internationally may be subject to U.S. export control regulations and the export control laws of other countries. Governmental authorizations may be required before we can export our services or technology or collaborate with foreign entities. If authorizations are required and not granted, our international business plans could be materially affected. Furthermore, the export authorization process is often time consuming. Violation of export control regulations could subject us to fines and other penalties, such as losing the ability to export for a period of years, which would limit our revenue growth opportunities and significantly hinder our attempts to expand our business internationally.

In July 2011, we submitted to the DOE a Part 810 export authorization request in connection with our proposed collaboration with the Russian State Atomic Energy Corporation “Rosatom”, or Rosatom, and its subsidiary companies relating to the planned irradiation testing at the MIR research reactor in Dimitrovgrad, Russia and the ATR test reactor at Idaho National Laboratory. In the third quarter of 2012, Lightbridge was notified by the US Department of Energy (DOE) that Rosatom had provided non-proliferation assurances to DOE that would become effective upon entry into an agreement between Lightbridge and Rosatom entities. Our understanding is that this is the last key step of the Part 810 export authorization review process prior to approval by DOE.

Some of our planned critical path research, development, and demonstration activities to be performed by Russian entities under future contracts with us will require formal authorization from Rosatom, which owns those entities and is the main Russian government agency that oversees Russia’s civil nuclear power industry. TVEL, a Russian fuel fabricator and a wholly-owned subsidiary of Rosatom, agreed, in principle, to fabricate our metallic fuel samples for irradiation testing.

We are currently in the process of contract negotiations with TVEL and MSZ Electrostal, a wholly-owned subsidiary of TVEL, which was designated by TVEL as the fabrication facility where our fuel samples will be fabricated. Until commercial negotiations with Rosatom and/or its subsidiary companies are concluded and a legally binding agreement is entered into between the parties, a risk of development program schedule delays or a lack of sufficient interest from Rosatom or its entities in proposed collaboration still remains. We believe that we will be able to conduct our operations in this regulatory environment and obtain the necessary approvals. Following entry into an agreement with Rosatom entities and DOE approval of our Part 810 export authorization request, we expect to proceed with the proposed collaborative work in Russia.

No safety regulatory approval is required to design nuclear fuels, although certain technology transfers may be subject to national and international export controls. The testing, fabrication and use of nuclear fuels by our future partners, licensees and nuclear power generators, are heavily regulated. The test facilities and other locations where our fuel designs may be tested before commercial use require governmental approvals from the host country’s nuclear regulatory authority. The responsibility for obtaining certain necessary regulatory approvals will lie with our research and development contractors that conduct such tests and experiments. Nuclear fuel fabricators, which will ultimately fabricate fuel using our technology under commercial licenses from us, are similarly regulated. Nuclear power plants that may utilize the fuel produced by these fuel fabricators require specific licenses relating to possession and use of nuclear materials as well as numerous other governmental approvals for the ownership and operation of nuclear power plants.

Separately, some of the planned critical path research, development, and demonstration activities require access to certain highly specialized technical expertise and licensed facilities where such development and demonstration work can be carried out. There are a limited number of commercial entities or government research laboratories in the world that possess this kind of technical expertise and have an operating licensed facility, including a limited number in the United States. We are currently focusing our fuel development efforts with both Russian and domestic development partners/vendors. A domestic partner/vendor may eliminate the need to seek a separate U.S. export license authorization for this work. If we proceed with a U.S. national laboratory, any agreement will be subject to DOE’s review and approval. Any delay in such approval of our proposed agreement by DOE could cause program schedule slippage. If we proceed with a U.S. commercial entity, some aspects of the development and demonstration work may still require certain U.S. regulatory approvals (e.g., 19.7% enriched uranium). Any delay in such regulatory approvals could have an adverse impact on our program schedule and future financial results.

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