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39:24·3 SPEAKERS·3432 WORDS
AThat, that piece of our, if you like, accounts receivable and accounts payable so that we wouldn't have to pay for the input, which is the cobalt hydroxide. And it would be payable on the basis of the receivable of the cobalt sulfate that we would sell for the distribution. So that, that, that's going to be an interesting piece which we're working on that'll be announced, you know, next couple months. But that would then take us to almost full off take, so full inputs and then full offtake. Right. And then the only thing that's missing for the EXIM bank firm commitment is the back of a feasibility study. So. So what EXIM wants is binding supply, binding offtake with a reason, good credit, counterparty and bankable feasibility study. And then, and then what they do is they release a binding letter, commitment letter for the debt facility that would only be contingent upon sufficient equity. Right. And that's when we are either going to do an IPO or we're going to do a private placement to raise that piece.
BOkay.
CSajan, do you have any questions? So, yes, my friend also has joined.
BHey guys,
Cmaybe you can also introduce.
BYeah, hey, hey. Hey guys. Yeah, I mean I think Pradeepta basically summarized it pretty well. Like we were looking at EB5 projects at the time and that's where we found this. And yeah, there's a lot of like recent news about rare metals and, and the reliance of rare metal refining from like China and like having the US become more independent in that. So. So yeah, I mean that piqued our interest mainly and that's why we wanted to revisit this project. Yeah, just wanted to know. Yeah, I mean, I think we talked like three or four months ago and a lot of things were not finalized at that time. Which was also why we were hesitant to use this as our EB5 project at that time. But looks like things are falling into place now. So. Yeah, looks promising. So we are definitely interested.
AWell, we're very glad to see Naveta and I. I'll let you, you know, let Navet talk a little bit about himself. But Naved and I have known each other for a long time and were sort of pretty experienced in infrastructure, me more in mining, NVADE more and sort of international infrastructure facilities. So we think this is a great opportunity and we're happy that you see that too.
CSo just one question. Like the facilities now, I think like the earlier one said it was 2027 and now it's like 2029. And do you See like any more delays or do you think it's like the pretty final version? Like do you expect any more?
AAll our delays are being caused primarily because of funding. So we are, because of Nave's extensive experience in building infrastructure, we have taken the view that we're not truly going to begin constructing until all of the financing is in place. Because what happens is if, if we hit the button on construction, on full construction and we don't have the full financing in place, we're going to inevitably have delays. And unfortunately, when you have debt, you probably know this is a trade more than anyone. You've got to be very careful because you're going to have servicing during your construction period. We want to make sure that we structure both the firm commitment and the firm commitment on the equity before we truly begin to build. Now that doesn't mean that we can't get the project moving forward building the access road we have. We are legally, I wouldn't say we're legally required, but we're required in order to take advantage of the investment tax credit to begin construction of the, of the solar panel and battery facilities prior to July 6, 2026. So that's going to be sort of our initial focus. And what that means is we need to build the access road, we need to verify the water and build the water wells. We need to then flatten that part of the land and we need to build, if you like, the concrete basis for the, for the solar panels. And then we'll receive a legal opinion of council that will say in terms of the IRS rules of commencement under the irc, you know, you've been been deemed to commence for purposes of the investment tax credit. So that with that we will do. But we don't want to start the whole. And we'll get the bankable feasibility study. So for us it's now we've gotten the firm commitment, then we'll get the bankable feasibility study, then we'll get the firm commitment from exim and once we have the firm commitment from exim, we'll get either the cash or firm commitment on the equity.
COkay, I like, like when. Yeah, like what's the. Like, do you see any other delays like on the EXIM part of the bankable or like if everything is kind
Aof in the exam is going to be relatively easy because they've got. Sorry, Navet, do you want to add something or. No, it's. My phone went off. Oh. So I think that EXIM is going to be relatively easy one because we've talked to them a lot and two, and obviously they know we're coming. But the second part is that they're really focused on assisting the building of a critical mineral supply chain in the United States. And that's really, really been their focus. If you see all about Project Vault and they're getting involved with financing the development of the critical minerals commercial stockpile, they're really focused on this industry. And so given the quality of our counterparties, given the fact that there's not that many of us doing this and that we've built credibility both based on our experience and our counterparties, we think that exit was not going to be the delay. Once we have exim, now that we've closed Mitsui in the process of closing trial Figora, then we think the equity raise is going to be pretty simple because essentially we'll then be fully a project finance deal with guaranteed OFF Inc. At market prices. Right?
BYeah. And you also mentioned like you're expecting to like close the class B offering soon. How is that likely to be done before the EXIM deal finalizes and yeah, if so, absolutely. What kind of repricing are we talking about and will that affect the deal with EXIM at all?
ANo, not at all. It just reprices the equity portion of the deal. Right. For. So the way that we're viewing in terms of order is we're raising all the capital that we need either in the form of EB5 subordinated debt or equity class B. I mean to be able to fund the bankable feasibility study and and basically get to shovel ready and get our exit from commitment.
BYeah.
AAnd then from there the only thing that's pending, the project's ready to go, the off thing's ready to go, the supply is ready to go, the land's ready to go, the permitting is ready to go. The only thing that would be pending then would be the equity component. And on the equity component we don't think it's going to be that problematic one because as you've probably seen all over the place, there's an enormous amount of interest in the market for this. Everyone's looking at how they can participate in the energy transition. And so if we already have the supply and the offtake guarantee and the permitting and the credit facility, I think that the seed offering will be not difficult to achieve both. We've already talked to bmo, we've talked to Scotiabank, we've also talked to JP Morgan and Bank of America. Whether it's a private placement or ipo, we haven't decided yet that will, you know, we'll leave that at a later date. But we think that, that that would be a successful equity raise. We're envisioning that if we do it sort of just a Class C privately, probably going to be in the vicinity. We're going to reprice the seas, probably around 300 to 350 million. So that's about, just to get an idea, that's about little more than half of what we think the IPO would price at. Because by the time we get to ipo, the potential project was we were negotiating a deal with Saudi Arabia. The potential project, Saudi Arabia would, you know, kind of be more digested and so we'd have something to offer the market if we went to IPO route. So we think that probably a C round in the 300 million to 350 million pre money valuation is probably what's going to make sense.
CAnd what's the Series B? The B round is valued at. I'm sorry, what is this round valued at?
A34.5 million. So you're going up about eight or nine lakhs.
CAnd can you talk about the tax rebates because of the qualified opportunities on that part? I didn't really get.
AAll right, so if you invest in 2026, you're going to get a very short deferral on the capital gains tax so that you would have to pay capital gains on your invested capital gains in 2027. So let's just say, take an example. You know, you, you sell a position, you bought it at 50, you sell it at 100, you have 50, 50 million or 50,000 capital gains, whether you invested it or not, you're going to be paying 50,000 capital gains in 2027 over your 2026 tax returns. So that doesn't change. So, and it's because the program is expiring, that deferral is exp. Kind of no longer hugely helpful. What is helpful is once you invest it, you have three major effects. The first effect is whatever you make from the investment, if you hold it for more than seven years, will be 100% capital gains tax free. The second is, and this is, in my view, the more interesting one is you're going to get a pro rata allocation of the accumulative depreciation. And because of the new rules, it's likely that that's going to be a bigger number in the first couple of years because we're allowed to accelerate the depreciation of most of the equipment. So, you know, take, let's say put a round number, it takes us 300 million, we have a 300 million basis to build a facility. That means we will likely be able to take 250 something above that and accumulated depreciation aggressively on a bonus basis and when we complete construction, which is 20, 29, so that's going to be a huge tax savings which you can use for other things, not just this investment. That's going to offset other. Yeah.
CWill it be like active income offset?
AYes.
CLike oil and gas?
AYes, it'll be active income offset.
COkay.
AWhich is why it's very useful.
CAnd I think it will be leveraged.
ARight.
CBecause we are investing earlier. So because of the valuation goes up. So then it will be a leverage effect or not?
AWell, the base, the base is. Yes, you're going to benefit from the leverage. So that's going to be one very, very attractive possibility. Second, and that in and of itself could shelter any income that you make over the next seven years, which we, you know, once we're operational, we'll be distributing a pro rata share of the income. So that could offset all of that. Right. And more what's really interesting about the depreciation is unlike let's real estate depreciation in a qualified opportunity zone you don't get the clawback. You don't ever sort of have the redepreciation recapture. And that's because when you sell the law makes your basis at the time of sale equivalent to the sales price. So essentially reprices your basis all the way to sales price. So you never have to take the capital gains on the decreased basis because of the depreciation. You just never pay it back. And that's another massive tax benefit. Right. That that accrues to, to investors. So I would, I would sort of phrase it in those, in those parameters, capital gains tax exemption. I mean you, you would have a fourth one which is the deferral. But that's coming to an end. So you have the capital gains tax exemption, then you have the depreciation and then you have no depreciation and the
Cdepreciation will be in the schedule K1 that I'll get.
ACorrect, Correct. Okay. Fully pass through to us, obviously.
COkay.
AYou have to be a U.S. person but you, you know, you work in the state, so you're going to be a US person tax. But we have some foreigners that obviously don't live in the states and are not US Persons who won't benefit. From a US tax perspective
Cand let's say like we invest now and then like later sometime, like if we feel like, like, okay, things are going well and we want to invest more, we'll have to. Will we get like anything? Like which round can we like participate in later if we, well you, you
Acan certainly always participate in later rounds.
COkay.
AYou want to invest additional funds before we close the B route, we can certainly let you know. You know, hey, we're about to close the B route. You got a couple weeks if you want to put any more money in the B route. Right. But you're always welcome to invest and we expect that we're going to get a decision on the EB5 literally in the next month or two. So if you haven't yet allocated your UE5 that, that'll also be a possibility because we will have been an approved project by then.
BYeah, unfortunately I think we filed our EB5 so that wouldn't be an option.
AAll right, well good for you. That's good.
BYeah. But yeah, also one last thing. Maybe we, I don't, we. I saw the discussion over email because we've already invested in our EB5. We're a little short on liquidity right now. So we were wondering if we could both do like less than 100k. You, you replied I think saying that less than 200k that we would like to likely need to get a accredited investor certificate.
AYeah, Pradeep already got one so no problem. You just go and put your information on these third party sites and then they issue, they issue a credit investor certificate. That's just a requirement of the law. It's not difficult to comply with.
BOkay.
AYou know, and, and, and as long as you, we get that certificate. Yeah. You can invest 200,000 below. 200,000. The only reason why we're using 200,000 because that's what the law requires.
BGot it.
AIf we only sort of, if we're only asking for an investor to certify rather than a third party to verify.
BOkay, sounds good. And like what would the next steps look like if we like would, would be received some documents that we should probably review and then.
ARight, so I have, I forward a pretty, that you, you got the ppm, right, and the, and the accredited investor presentation.
CYeah, I got the ppm.
ASo that's, that's the, that's the document that contains all of the information that you need to make an investment decision. It's quite complete. It has the limited partnership agreement, has the secretion documents, it has, you know, the limited partnership agreement. All of the ppm. We have pretty you know, both David and I are lawyers. I've done capital markets all my career, relatively sophisticated. But we've also, as you would expect, we retained top tier law firms to advise us and help us with this. We retain Hussein Black while. And so, you know, it's a very well drafted, thought out document that contains everything you need to make your decision.
COkay.
AAnd obviously we're available to, to answer any questions you might have subsequent to your review once you make your decision to invest and you tell us how you are investing. So I don't, you know, you could be forming an llc, you could be investing personally. Whatever structure you decide to take, you would just tell me. I would draft the subscription agreement, which is already drafted, just basically structure it for you and we send it to you. You sign it, provide us with id, and then we send you the wire transfer structure. Then you wire to an escrow account. Bank of America, our registrar transfer agent is, would then verify the receipt of the funds. They would be the ones that would issue the potential position for the fund. And then once essentially they issue the book entry position, we move, we move the funds into our regular account, it leaves escrow and the transaction closes.
COkay. And the 10%, like we won't get anything until like 2029, right? That's when the capital is paid back first.
ASo this is why that investment tax credit is so important because let's just say we estimate, you know, these are very round numbers, right? We're still finalizing, but we estimate that our, our battery facility and our solar panel facility, which is subject to the investment tax credit, is going to cost about $40 million. And we're ensuring that we begin construction so that we get the full investment tax credit. So that means that we're going to get 30 to 40, 40% tax credit back on that full cost. So right off the bat, that's anywhere from 12 to 16 million dollars. Right. Which is why you see us keeping the size of the B round under that because we're expecting to use those funds to repay the, or return the capital invested by class B investors in 2029. And in order to get that investment tax credit back, you have to complete the facilities, you have to certify completion, and then the investment tax credit can be received and therefore allocated to you guys in a return of capital plus the 10, 10% annual. Prof. And then you continue to hold your position with no further capital risk.
COkay,
Byou also mentioned like we might want to invest as an llc.
AWe perfectly fine. Yeah.
BWe've just not explored that Is there like a benefit to that? We don't really own an llc, but
Alike, it's only able to group. If you're able to group, you know, losses or other issues that you want to group into that llc, then yes. Makes sense if, if you don't have stuff that you want to group. Right. That that would benefit from the tax treatment, then it makes less sense to do it through. Through an llc.
BGot it. Okay.
CThe position is limited partnerships.
BRight.
CSo there is. We won't have any liabilities if you
Awill not have any liabilities. Okay.
CAnd then we can have a trust. Right. I can invest.
ASo I trust we have several investors that have invested through trust.
CYeah. I think trust makes a bit more sense if we have like a family, if we want to pass it.
AAbsolutely.
CThanks.
AYou just want to make sure that you check on the trust structure so that the K1s that are issued to the trust can flow to you personally. There are some trust structures depending on the trust structure where that would not be the case. You just want to make sure that you check that whatever cross structure you're setting up, you can flow through the K1s for the personal offset.
BMakes sense.
AYeah. Yeah.
CThat's all the questions we have, I think as of now. And if you can send the PPM also to Srojan would be great. And we'll come back to you online.
ADo I have his email?
CYeah, I. I had added him, but I'll add him back again.
AOkay.
COn the email. Okay, thank you. And then Susan can also send him send you his accredited investor. We both are accredited because we had. EB5 doesn't allow otherwise. But we'll send. I had sent you and Susan will send his email his document again. Perfect.
AYeah, thank you. Excellent. Thanks so much.
BYeah. Nice talking to everyone. Bye.
ABye.
CThank you, guys.
ACheers.
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