American Resources Corporation (NASDAQ:AREC) Q4 2022 Earnings Call Transcript

American Resources Corporation (NASDAQ:AREC) Q4 2022 Earnings Call Transcript March 31, 2023

Operator: Greetings. Welcome to the American Resources Corporation’s Fourth Quarter 2022 Conference Call. Please note this conference is being recorded. At this time, I will now turn the conference over to Mark LaVerghetta, Vice President, Corporate Finance and Communications. Mark, you may begin.

Mark LaVerghetta: Thanks, Rob. Good afternoon. On behalf of American Resources Corporation, I would like to welcome everyone to our fourth quarter and full year 2022 conference call and business update. We always welcome this opportunity to provide an update on our business and discuss our accomplishments since our last update and also discuss how we uniquely positioned within the markets we serve, for our American Carbon, American Metals and our ReElement Technologies division. Also on the call today is Mark Jensen, American Resources’ Chairman and CEO; Kirk Taylor, our Chief Financial Officer; and Tom Sauve, our President. Before we kick it off, I would like to remind everyone of our normal cautionary statement. Certain statements discussed in today’s call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from the results discussed in the forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors, uncertainties and other cautionary statements, which are laid out in our press releases and SEC filings. We also do not undertake any obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise. Lastly, we will be holding a question-and-answer session today following our prepared remarks. And for anyone wanting to ask a question, you need to dial-in by phone to get into the queue. We are going to begin today with a few comments from our Chief Financial Officer, Kirk Taylor.

Kirk Taylor: Thank you, Mark and thank you everyone for your interest and your time this afternoon. The fourth quarter of 2022 and the beginning of 2023 have continued to showcase our focus and execution that positions our company for long-term value creation. When looking at our recent execution, it is important to take a step back and highlight some of our accomplishments on all fronts. From a corporate standpoint, during 2022, our Board established a special committee to evaluate strategic opportunities to best unlock value of the company. And out of that committee, we had announced a share repurchase program, which our team began to execute upon and repurchased 86,400 shares as of December 31, 2022. Additionally, we purchased back 7.5% outstanding interest of our ReElement Technologies division, making it again a wholly owned subsidiary of American Resources.

We believe this will contribute meaningful value to our shareholders. And we subsequently announced our plan to spin-off ReElement into its own public company. In conjunction with ReElement’s planned spin-off, we filed a Form 10 information statement with the SEC this past January for 2023. I would refer you or anyone interested in reading more about that to go to sec.gov and search under ReElement. We have also sold the exclusive rights of our carbon nanostructure and graphene patents to Novusterra, showcasing our focus and ability to monetize value of our broad asset base. Lastly, during January 2023, our last and largest convertible debt holder converted all of its debt into common stock, which reduced our debt by over $9 million and further strengthens our balance sheet and exemplifies strong confidence in our business planning and execution as well as believing in our value as a company.

While we will dive into our business pillars in more detail throughout this call, it is worth noting a couple of achievements that we have gone through during 2022. For ReElement Technologies, we have achieved groundbreaking success in commercializing our revolutionary critical mineral refining technologies by producing greater than 99.5% pure rare earth elements and critical battery elements in a commercial scale. We are the first to accomplish this domestically. Our rapid execution in advancing ReElement Technologies as a worldwide leader in critical mineral refining is worth reflecting upon. In October 2020, we unveiled our critical and rare earth element division for the first time. November 2021, we successfully permitted our first refining commercial scale refining facility, which took under 2 months of permitting process.

This is a clear and unique differentiator of our leading technology and how environmentally safe it is. In April of 2022, we announced the advancement of our intellectual property with a filing of multimodal chromatography patent for critical mineral separation and purification. In August of 2022, we announced our commercial scale success in rare earth element refining, separation and purification from recycled material. And then just as January 2023, we announced again our commercial scale success in lithium refining from recycled battery material. We believe we have uniquely positioned ReElement as it plans to be a standalone public company. Over this brief timeline, we have also secured an initial independent working capital facility at the ReElement level.

We have added key talent to bolster our best-in-class team and entered into our first long-term collaborative partnerships to help secure our domestic supply chain for critical minerals, including sales MOUs with the only two domestic manufacturing companies in existence. 2022 marks a record year for us. We have realized nearly $40 million of revenue, which increased more than 400% over 2021. This again showcases our valuable carbon assets as we opportunistically acquire and restructure them. While mining is not completely linear, our carbon platform is uniquely positioned to be a meaningful contributor to much needed supply growth of metallurgical and specialty carbon products from our region, where a lot of mines are becoming exhausted and closing down.

And we remain focused on monetizing our platform of assets for our shareholders. We will also discuss the options and actions we are taking within our control to do just that. Our unique platform of assets is in a great position to deliver what we believe is an attractive return and value to our shareholders, including our mining assets, our ReElement Technologies division as well as our American Metals division, which we are in the process of strategically positioning within the electrification economy. Over the past year, we have been able to eliminate approximately $12 million of debt and payables and invested approximately $28 million of expense development costs positions both our American Carbon and ReElement Technologies platforms for strong growth in high-demand markets.

As of December 31, 2022, our traditional debt balance totaled approximately $1.9 million in total, of which $300,000 is equipment financing and $1.6 million in the form of mine development loan from one of our top customers. As of December 31, 2022, our convertible note balance totaled approximately $9.7 million. And as mentioned previously, on January 31, 2023, the entire convertible note was converted into common equity, which is reflected in the current shares outstanding of just over 78.2 Class A common shares. Cash on hand at the end of 2022 is approximately $8.9 million. And lastly, as part of our ongoing risk management process, all of our excess cash above FDIC limits are held at a top two U.S. domicile bank. I’d now like to turn our call over to Mark LaVerghetta for some additional comments on our ReElement Technologies division.

Mark?

Mark LaVerghetta: Thanks, Kirk. As we frequently state, our ReElement Technologies division represents an incredibly exciting and very strategic opportunity for us. We continue to strategically position ourselves in the global supply chain for critical minerals. I think it is important to reiterate and emphasize our position within that market. ReElement is an innovative and advanced refining platform for critical minerals. While we believe we are a meaningful part of the recycling value chain, we are not solely a recycling platform. We do believe our position in the recycling market and the sustainable supply of critical minerals is highly important as we move towards a highly mineral dependent electrified economy. However, we also believe our refining methods hold an important position in the global value chain of processing and purifying natural ores, such as lithium.

Additionally and in regards to our strategic positioning, it is worth noting that our innovative and advanced refining technology holds a critically important role for our domestic supply chain of critical minerals and our domestic manufacturing of goods. China’s global dominance of critical minerals has a lot to do with their ability to refine, both natural ores and in recycling, where they use conventional, environmentally and socially toxic refining methods. Their low environmental and social standards allow them to produce these minerals at a lower capital cost. We believe that deploying these conventional and toxic refining methods in the United States market will be very, very challenging. As we put together and developed our intellectual property, we set out to solve the biggest bottleneck in the supply chain, which we see as economically competitive refining, which is highly flexible to a variety of feedstocks and very environmentally safe.

Our innovative and advanced refining methods using chromatographic separation and purification displaces the toxic conventional methods used in China and we believe is an important linchpin in making the United States competitive within the electrified economy. Kirk just highlighted the expeditious timeline of some of our milestones. I would like to reiterate some of the significance of our milestones in producing ultra-high pure rare earth and critical battery elements in a commercial scale. First, we are the first domestic commercial producer of the separated and purified rare earth and critical battery elements. Our technology is showcase that we in United States can migrate away from and no longer need to depend on foreign adversaries to refine these minerals necessary to advanced high tech green energy, including electric vehicles and wind as well as defense applications.

Our innovative chromatography technology is a clear differentiator in the market for several reasons, which specifically addresses the refining bottleneck within the supply chain. Our refining technologies, modular structure and design enable it to scale congruently and efficiently with the needs of the market, meaning we do not have to lay out a huge CapEx investment and wait for the market to adapt or catch up and they can be deployed either using a larger aggregation hub model, where we can co-locate customized refining capacities for certain supply chain partners, allowing them to reduce logistics and control a portion of their critical mineral supply. Our refining technology is very flexible to the type of feedstocks and materials that we choose to refine, meaning we can handle end of life recycling, manufacturing waste, scrap and non-spec as well as virgin ores.

Similar to the MOU we signed earlier this year to refine spodumene ore for high-lithium €“ into high-lithium carbonate or lithium hydroxide, which is needed in the production of a variety of lithium-ion batteries. We believe the opportunity to provide low cost and environmentally safe lithium refining around the world in a collaborative manner to meet the needs of the energy storage market are abundant. Additionally and specific to the battery materials market, our technology can efficiently adapt to different and evolving battery chemistries. An important distinction for our technology is that we can economically recycle lithium-iron phosphate or LFP end-of-life for manufacturing scrap. In fact, we are the only ones that we know of that can effectively do this economically.

From our perspective and everyone can do their own research, it seems that the battery market is moving more towards a more broadly adopted LFP battery chemistry. As such, we feel we hold a significant value-add position with our ability to economically refine and recycle material as battery chemistry has evolved within the energy storage space as well as define our value-add and competitive advantage beyond just the production of black mass or black sand within the battery recycling market, while not having to try to make conventional high cost refining methods similar to those used in China work here domestically. Given our competitive and value-added refining capabilities, we are confident that we will continue to develop additional collaborative partnerships throughout the supply chain.

We have had early success in developing ownerships such as the ones we have established with our magnet partners, USA rare earth magnets and advanced magnetic lab in establishing the first complete domestic lifecycle for rare earth magnet manufacturing in the United States. And we continue to have good success with several other pilot programs, where we are fostering collaborative opportunities that we are really excited about developing into long-term partnerships. These partnerships cover both rare earth elements and critical battery minerals from a variety of feedstocks. Ultimately, our innovative and high-performance refining technology is not a science experiment and well beyond lab scale. The technology has been around for over a century and is utilized in commercial large-scale operations in industries such as pharmaceutical manufacturing and sugar purification all around the world.

Our research partners and us have adapted this technology to be applied to critical mineral finding in a way that we believe can undercut China’s cost structure with high throughput and able to produce ultra-pure mineral and mineral compounds. We are confident as we continue to showcase our competitive distinction and collaborative value ReElement Technology will garner significant value for our shareholders. I’d now like to turn the call over to Mark Jensen for some additional comments. Mark?

Photo by Denys Nevozhai on Unsplash

Mark Jensen: Thanks, Mark. First, I would like to thank our team for the hard work and effort they put in to position our business going into 2023 and also prepare our business to be more resilient across all of our platforms. As we mentioned earlier, 2022 revenue of $39.5 million increased more than 400% year-over-year as we accelerated our carbon production. While achieving this record sale for us, our ReElement Technology division in commercializing our leading clinical €“ we accomplished this while also our ReElement Technology division commercialized our leading, world-leading critical mineral refining technology. Having the team in place to be able to accomplish the growth of the carbon industry, while also developing and building out and commercializing ReElement is a key factor for our business and our focus going forward.

The majority of our revenue was generated from our McCoy Elkhorn complex. This was offset by the idling of our Perry County Resources Complex, which we will discuss later. At no point in our history has our business been better positioned to serve the markets we operate in and to capitalize on the broad asset base and our talent and our ability to produce, process and refine raw materials that are in very high demand across all of our platforms. Given our execution, we are extremely excited about the opportunities for both entities we have in front of us. I’d also believe that the enterprise value as a whole is currently a substantial discount relative to some of the parts or comparable to peer valuations. Let’s dive into each division. So American Carbon, our mining division, we have spent a significant amount of time in the fourth quarter, but also in the first quarter evaluating what generates the most return for our investors.

And we have setup a strategic plan to not only be able to execute upon this plan, but also to evaluate the opportunities to monetize certain assets. Over the course of the last 3 months, Tarlis Thompson has done a phenomenal job of stepping up and running this division in assistance with Joel Stanley setting up a plan for this business to make money and generate substantial value for our investors focusing on the highest value assets that we have, while also not chasing golden divisions out there. And I think the strategy that they put in front of us, which we can talk about here, is important for us. The carbon side of this division needs to focus on making money and driving fundamental value in the lowest risk possible scenario for our investors.

From our perspective, the outlook for met carbon looks extremely strong with China coming back online following their zero-COVID related shutdowns and you are starting to see the world open back up and including the U.S market with two new blast furnaces opening up in the last few months. Now, this will take time for it to trickle through, but net carbon prices are still at very, very attractive levels and we are starting to see the transportation and logistics bottlenecks hit, but also open backup which will drive revenue and drive value. The supply for high-quality met carbon remains constrained. There is not a lot of new investment going into the space. A lot of the existing mines within the space are old legacy mines that are producing higher cost structures.

We have made substantial investment into our complexes to position them for one, low-cost production, but two, long-term production, including some investments we made in the fourth quarter, which resulted in substantial downtime of expanding the mines and positioning the mines and then also in the first quarter of setting up the mines for the long-term growth, including adding the second section at Carnegie 2 which will be talked about here going forward as well. We remain steadfast on monetizing our carbon assets now that could be through joint ventures that could be through sales and/or monetizing the growth and cash flow from the operations versus focusing on aggressive growth. We believe that we have opportunities for substantial growth by monetizing existing assets and relocating assets.

Our Perry County Resources Complex, we idled for most of the second half of 2022, this is a large complex that was hit hard by the floods and the region and the workforce in that area has been somewhat limited. Now, I think that’s opening back up pretty substantially. That being said, our focus for Perry County at the current moment in time is not to put that back into production. We are focusing €“ we have substantial amount of assets over there. We have substantial amount of value over there. And we believe the value of our assets would result in about $40 million in value to our business, the equipment, the infrastructure that we put into it and the ability to relocate that equipment and infrastructure to other mines. Now, we also are evaluating offers on the complex to potentially sell it.

We believe that the cash today would be very accretive to the business if somebody would offer a value that is commensurate with what we are willing to sell it for. That being said a substantial amount of these assets, we believe would be very accretive to our Wyoming County Complex and relocating these assets to Wyoming County to maximize and de-risk the Wyoming County and expedite the production in Wyoming County in extremely accretive way. Wyoming County is a mid-wall complex, with also a very, very high quality high-vol A mine in the same complex with the processing plant and rail load-out facility onsite. As we pursue our tax-exempt bond and waiting for the markets to stabilize within the bond industry, we believe we can advance this project forward faster, better and stronger by utilizing existing assets that we have by relocating them in a very accretive way by bringing over $40 million of value there.

The net value we believe post-reclamation if we go to that at Perry County would be approximately $35 million in value of our business and based on our opinion. Upon evaluating several opportunities, we are not sitting on our hands. We made the decision to deploy certain assets also to our McCoy Elkhorn complex and support the embedded organic growth there. McCoy Elkhorn as a complex is an extremely high value complex. We put the value of our carbon business on McCoy and Wyoming County. We have invested into expanding the McCoy complex by adding a second section at Carnegie 2. These three sections we have running at the Carnegie mines are one, accretive and very high margin complexes for us now that we have went through the development, spent the development over the last 6 months, and positioned these mines for growth and the ability to add another section at our Carnegie 1 mine as well as looking at our Carnegie 3 mine down the road without having to spend substantial CapEx. Our focus, as I said earlier, is about generating cash and we are positioned to do that going forward.

The mines and the production capacity and the production run-rate that our men have hit would enable us to hit that growth and to be profitable going forward based on the production we are currently achieving right now. One thing we have realized on our carbon complex we need to control our own destiny. We have relied upon in the fourth quarter and the first quarter we relied upon our one of our customers’ processing plants and it struggled. They had trouble moving product and they had trouble getting product to their processing plants. So, we made the decision. Our team on the ground made the decision to bring our state-of-the-art processing plant back online. At the time when we started the mine, it didn’t €“ there was no need to do that and what we realized we needed to going forward.

Now we control our own destiny. We had the ability to diversify our customer base and we have the ability to monetize and maximize the margins within our product by now operating our current €“ our processing capacity, which is a state-of-the-art plant with long life empowerment. And we are showcasing that now. The processing plant is up and running. We are able to start monetizing the inventories on the ground and setting ourselves up for a record second quarter. As I stated earlier, we will continually evaluate all of our mining complex, our Deane mining complex have started production. The team over there is running. They are hitting strides. They are setup for growth. And we are excited that they have been able to get that mine into production, which would ultimately generate cash flow streams for the business in itself.

We are looking at monetizing other assets we have as well, including the Perry County Complex if somebody is willing to pay the commensurate value for it. But we believe with the Wyoming County Complex going online, those assets and that value would have to be commensurate with that $35 million to $40 million in value that we believe will generate by bringing that to the Wyoming County Complex. To help facilitate the start of the processing plant, we also stockpiled over $6 million worth of net carbon over at our McCoy Elkhorn complex. That is revenue and cash flow that we will be able to realize here in the next few months, next few weeks actually, now that the processing plant is up and running and is hitting its stride and doing well. The sequential decline in top line revenue growth in the fourth quarter of 2022 was partially due to us beginning to stockpile production and given our plans to restart our own processing plants as well as expand our mines to position them for future cash flow.

At the end of the day, certain mines need to be run at scale. Thankfully, our Carnegie mines are smaller. They don’t need huge production. And they are able to run very efficiently. Now with two sections, the margins and the margin expansion we get doing that will be showcased here very shortly and we are already starting to realize the benefit of that internally. McCoy Elkhorn continues to be our biggest contributor and our growth engine for American Carbon. Now that we have two operating sections at Carnegie 2, we are looking at adding a second operating section to Carnegie 1. And then looking at our other mines that can be brought online with minimal CapEx given we already have our processing plant up and running and the ability to produce specialty products for the specialty sulfur market, specialty carbon market, but evaluating our Carnegie 3 mine, Mine 17, Mine 15A as well as surface mines we have in the region that won’t take a lot of CapEx to get up and running and further expand the revenue base.

Our platform is unique given the significant mining infrastructure that we own and ultimately adds a lot of value and the quality of the carbon that we produce and have access to the restructuring efforts and the investments that we made to streamline clean up environmental liabilities left behind by the legacy companies and position this business as a high margin, high-growth asset is exactly where we are at today. And we are starting to see the production coming out of the Carnegie mines which are two very high quality mines that are very mineable to showcase the revenue growth that we can achieve from exceeding revenue that we did last year in a pretty meaningful way. Additionally, we remain focused on progressing our Wyoming County Complex over the next year.

As recently communicated, we continue to work through the process for the $45 million tax-exempt bond to the state of West Virginia that is preliminary been approved for. The credit markets are seeing some stabilization following a very aggressive interest rate policy from the Federal Reserve as well as the allocation commitment to totaling $4.9 million of the federal new market tax credits. Now with the interest rate stability, we have also seen on stability within the banking environment. And so right now, our team that’s working on the tax-exempt bond is doing a phenomenal job of navigating the current market environment. And we are also advancing the project forward and relocating assets there which is just further reducing the risk, not only for us and our investors, but also for our tax-exempt bond investors by offsetting the costs that would be required out of the new capital coming in with existing equipment and infrastructure that we already possess within our business.

We can de-risk this and expedite the production to bring this mine on €“ these mines on very quickly and at nice margins right off the bat. And we are excited about the developments and the progress we are making and the planning that we are making in that complex to get that that mine €“ that complex online. With the issuance of two non-dilutive capital sources, we are excited to showcase how we positioned the complex to be the first of its kind advanced carbon and rare earth processing facility by combining premium mid-vol met carbon production with unique rare earth capture process technology, utilizing electrolysis onsite to treat your water and your waste material coming off your plant, and then further capturing and monetizing byproducts that are coming off of that is the first of its kind and a unique structure that a low cost structure by utilizing the processing capacity to generate the rare earth elements.

It’s not a standalone rare earth element recycling facility or processing facility, it’s a fully integrated coal processing facility capturing your water streams coming off there. We are excited to showcase that in the next year as we get this complex further advanced. Lastly, we will also explore leasing opportunities of our other idle assets. And similar to our structure we have done with our Deane mining complex, of which they have started production recently, we will continue to explore opportunities to monetize additional assets and support the existing production that we have in our existing team that’s running our mines to be the most profitable and the most accretive to our investor base. To expand a little bit on the ReElement Technologies division that Mark just made, we have never been involved with an entity that is as exciting or to the higher ceiling than ReElement does.

Looking at it where you see a lot of the companies within the battery recycling space, there is nobody that’s fully integrated from the battery to the magnet. Our technology developed out of Purdue University sponsored by Eli Lilly through decades of research and investment is revolutionary. One we can process lithium ores at dollars per kilogram, very efficiently, very effectively localized processing as well as the ability to co-locate at existing battery manufacturing sites to help offset their costs, make it truly a more circular economy and a more efficient and optimized economy. Our technology can do that where hydromet cannot. Hydromet is multi hundreds of millions of dollar investment, years and months of planning where our technology takes months of permitting and fractions of the dollars to invest, which gives us the opportunity to grab market share and showcase them.

We have had numerous calls with parties, new battery manufacturing plants popping up throughout the United States and we are excited to continue to advance those discussions forward contracts for our investors. We are also continually entering into additional pilot and partnership programs with some very exciting companies out there that provide different feedstocks, anything from end of life magnets to different chemistry to batteries as well as the lithium ores. Currently today, the opportunity is very attractive for us to continue to expand this division and partner with some of our existing partners such as USA Earth, which is standing up one of the largest magnet manufacturing facilities in the United States. And we are excited to see their growth as well as AML, the magnet manufacturer in Florida, which is doing a phenomenal job of commercializing their technology and expanding their technology.

With regards to the natural occurring lithium refining, we believe our technology is game changer. We can process at the local level, we can cut out the logistics costs, we can cut out the need for transporting lithium spodumene, which is a 94% rock material halfway across the country to be processed using heavy chemicals and solvent extraction. We can process it locally. And given that unique technology has enabled us to enter into numerous partnerships and MOUs and conversations within the African environment, one of the most resource richest nations, accessing the ports where we are currently in discussions of building and refining facilities on the West Coast of Africa as well as on the East Coast of Africa to be able to access the lithium reserves and the current lithium production that is being exported in raw form bringing that value set to the African community bringing in partners within the African community that are on a world stage in terms of their knowledge as well as their experience.

Opportunities like this further exemplify the unique attributes of the ReElement refining platform in terms of its feedstock from chemistries and ability to grow. Ability to be efficiently deployed due to modular design and environmental sensitivity is something that is not existed in this industry and something we are bringing to this industry. We are thankful for the team that we have been able to put in place every element and the team that we continue to expand upon. We brought Bob Galyen on as a board member and Bob’s team in itself are first class. He was the number two employee at CATL, the Chief Technology Officer. He helped build that business from the ground up and he is helping us do the same. He is extremely valuable and the people that he is working with and his team that he works with are phenomenal.

And we are excited to have them on board and we are excited to further expand that talent pool which we will be talking about here in the next few months €“ next few weeks. We are seeing numerous opportunities in the recycling space beyond what we have announced with our magnet partners. And we are seeing those opportunities for both magnets and batteries in localized regions. We have also commenced several pilot programs to recycle these critical minerals from feedstocks such as consumer power tools, wind turbines, black mass producers, battery manufacturers as well as industrial battery sources on energy storage platforms, which is predominantly LFP chemistries, which would not have been very challenging to recycle using traditional legacy technologies very cost effectively to recycle utilizing our technology.

In terms of recycling, I think it’s worth reiterating how we strategically positioned our value-added partners in addressing our sustainability needs. Our flexibility in refining technology does not require massive CapEx. It does not require a hub-and-spoke model. We can recycle at the local level. We can recycle at the source. We are not transporting dangerous battery materials across highways. We can recycle it locally reducing the risk profile not only for us, but also for our customers and the community. The innovative and economic process that we utilized has a payback period of less than 3 years and often on projects less than 2 years, which is unheard of in the battery recycling space. In regards to the realm of spin-off, you will see that we filed a Form 10.

We are working with the SEC through the review process of that. We are excited about the progress that we are making. This business deserves to be its own public company. It doesn’t fit within the platform of a mining operation on the coal side to a green energy recycling platform using the most environmentally sensitive technologies. We have the teams in place to be able to manage that process and operate these businesses post spin-off so that they can both be very successful businesses in their own right. I would like to give a shout out and recognize our ReElement team for the groundbreaking stuff they have achieved. Being able to produce 99.99% purity products is a game changer. That is ultimately what has separated us from our peers but also being able to do that cost effectively.

We believe we put together a team that is not only entrepreneurial, but also has the history of success in operating big industrial facilities and will be able to drive this business forward very profitably and very efficiently for our investors. We will continue to add top talent, interviewing top talent daily from within the industry as well as outside the industry and bringing them in from a technical perspective, which we believe will have the world’s best chromatography experts and team behind our ReElement division, whether it’s with university partners at Purdue as well as engineering teams and longstanding success developing the technology and operating such as Eli Lilly and Dr. Yi Bing, that’s joined our team internally as well as our Chief Commercial Officer who joined us recently has done a phenomenal job, Chris Moorman.

Our technical advisors, as I referenced, Bob Galyen as well as a few others, which we will announce here shortly will continue to position ReElement as a global refining leader and the entity that will deliver significant value to our shareholders as well as a goal to build ReElement into a multibillion dollar business by executing upon the need for recycling not only in batteries, but also in magnets. Battery recycling and what was mentioned earlier in this call is probably good segment our American Metals division and I will keep this relatively short. American Metals has predominantly been a ferrous metal recycler for us as we reclaimed legacy mining operations that were no longer viable in the current market environment. As we have continued to expand our business and to keep ReElement as a pure-play refining division, we are in the process of developing American Metals into a world-class shredding operation, the ability to not only shred end-of-life batteries very efficiently and safely and working with the leading industry partner to help ensure that we are the standard for battery shredding in a safe way to reduce the combustible events that take place in the battery shredding as well as being able to shred magnets and shred the products that magnets come with it.

We have developed a process that can efficiently and effectively recycle rare earth magnets in a cost effective way extract the magnets out of what they come in, which would be a motor or a rotor or a wind turbine and extract them very cost effectively to be recycled back to high purity magnet grade materials today. The ability to do that within American Metals will enable us to keep ReElement as a pure-play refiner, which will not compete against our other customer bases that provide us end-of-life products already today, but also enable us to capitalize on the ability to take both not only magnets and batteries from our partners that want us to recycle these materials to get them back into the circular economy. As such, we believe American metals is a great platform to leverage ReElement’s refining capacity, be able to produce products that we can then deliver to ReElement to be able to efficiently and effectively expand our revenue base.

In closing, we remain very confident in the position of all of our assets and the long-term value they provide to our investors. We remain hyper-focused on unlocking value and have already communicated our initial strategic steps to do so. With ample liquidity and do not perceive us needing to issue equity to raise cash, especially as we €“ especially some of the sources of non-dilutive capital we have. We also feel very good about the current production levels at the mines themselves. From Carnegie 1 to Carnegie 2, we believe based on the roughly 30,000 run-rate of tons of production would put us in a highly profitable state month over month going into the second quarter and for the rest of the year and for the next 10 to 15 years for that matter.

Just to reiterate, as the largest shareholder of American Resources, our management team is committed to maximizing the value for all of our shareholders. And we believe continued execution and splitting the ReElement divisions are the early steps in doing so. We believe we are well-positioned to capitalize on opportunities as they come to us to monetize assets and bring assets online in cost effective ways as we continue to expand the McCoy complex, which ultimately will generate the cash flow to continue to support the business as a whole in its entirety in a very profitable way as well as our Wyoming County Complex, which is probably one of the most attractive virgin opportunities in the market today. I thank you all for your time and look forward to the balance of this year as we continue to showcase the execution of where the businesses are positioned today and the opportunity that we have in front of us.

And now, I can turn over to the moderator for some Q&A.

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Q&A Session

Operator: Thank you. And our first question is from the line of Heiko Ihle with H.C. Wainwright. Please proceed with your questions.

Heiko Ihle: Hey there. Thanks for taking my questions.

Mark Jensen: Yes, thanks for joining.

Heiko Ihle: Of course. At McCoy Elkhorn, are you guys facing any issues with either supply of materials any sort of supply chain issues or with labor or is everything going swimmingly?

Mark Jensen: Yes. I will actually say we are starting to see a lot of stabilization in that environment today. I mean, from a labor market perspective and McCoy is a €“ they are effectively two new mines. So they are pretty good places to work pretty attractive places to work, supplies, we’re starting to €“ I mean, there’s less suppliers out there than they were 5 years ago. But you are seeing stabilization within the supply market. I would say even in the fourth quarter of last year, there was probably it was people were starting to return so much normal, but there were still a lot of challenges, then I will say now, we really don’t see much of that anymore.

Heiko Ihle: Fair enough. So fair to say progress can be filled even in the last 2 months?

Mark Jensen: Yes, I mean, I would say the biggest issue we had was, for us to expand our revenue was the processing capacity. I mean, we had €“ we’ve predominantly sold to one customer, and with the great customer, great colleague. But the processing plant that we were having it processed that was struggling, I mean, it was running at less than a third capacity. So we made the investment to bring our own, we have a state of the art processing plant. That is €“ we just at the time, when we started the mines, it was easier just to ship to our customer, he was processing it. Now, we had to make the decision to drive revenue growth and margins to bring our own processing plant online, which we did about 2 weeks ago. So that was probably the biggest limiting factor was the processing capacity in the region.

And thankfully we are €“ we own and possess not only the newest, but also the largest processing capacity in that region, I think there’s going to be some pretty significant growth for our business, not only the existing production that we have coming out of the mines right now, which is good, very good. They are doing a really good job, actually, but also third-party business that we could bring in because of our processing capacity. That was probably the in the fourth and a little bit of the first quarter here. Now the production in the first quarter was great. The processing capacity was slow. And now with our own processing plant coming online, it’s going to be €“ we’re pretty excited about where we’re positioned at right now and the cash flows at the business throw off.

Heiko Ihle: Got it. Okay, perfect. And then just one quick one, you spend a decent amount of time talking about the partnerships, both in your press release and earlier on this call. So wide of a net, should we expect you to see when it comes to partnerships, I guess what I’m saying is, are there any end uses or markets that you’re mostly against or are you just anything that comes that may be beneficial?

Mark Jensen: On the ReElement side, is that you are pointing?

Heiko Ihle: Yes.

Mark Jensen: Yes, worldwide. The €“ I mean, obviously, we’re going to be a little bit sensitive about certain areas of the world where we got to protect our IP. But we are €“ we’ve signed an MOU with a Japanese recycler, we are working obviously pretty aggressively in and very aggressively in the African nations and feel really good about the resource rich nation of that obviously, domestically throughout. We are in numerous discussions. Hopefully here shortly here are some additional co-location opportunities we are designing with another battery manufacturer right now and in mine recycling process for them, how our technology can sit at their battery manufacturing plant to be recycled €“ to recycle their waste material.

Nobody else in the industry can do that. You can’t put a hydromet facility next to a battery manufacturing plant in a matter of 6 months. It would take you years and they don’t want it next. They wouldn’t want a hydromet facility next to their battery manufacturing plant. We can do that. So those are the conversations we are having but even our €“ to some of our couple of our Board members have been over in Australia talking to other lithium producers over there about our technology displacing their current processing capacity, because it’s lower cost. So we are not just focused on the United States market by any means. We believe that if we can replace all of an extraction throughout the world, and position our technology as the solution for that’s our focus today.

And I would say from €“ you will look at our team, you’ll get Bob’s experience, I think we’re going to be successful at that.

Heiko Ihle: That’s helpful. Thank you, all.

Mark Jensen: Thank you.

Operator: Our next question is from the line of Mike Niehuser with ROTH Capital Partners. Please proceed with your questions.

Mike Niehuser: Hi, thanks for taking my call or taking my questions that is. Very helpful answer on the last €“ in the last analyst. So if I can understand what you said earlier in your narrative, the fourth quarter, there is investment and the expansion facilities, and that was related to the processing, I’m assuming and the reason for stockpiling the $6 million worth of ore, is that is somehow related. And we’re transitioning out of that phase with at the end of the first quarter with increased processing capacity. Is that close?

Mark Jensen: Yes. I mean, that €“ and I mean that’s just €“ that did trick one of the first quarter as well. We needed I mean, our customers still running their plant, but it just wasn’t running efficiently, which slowed up some of our production internally as well. So stockpiling the ore, slowing the production, because we didn’t have our own processing capacity up and up and running. And then I mean, during the Christmas holidays, we also expanded, we were started the development of expanding the Carnegie 2 mine, which, during that period of time is relatively slow. Now, I will say today, where we said, the mines, all three sections are operating, plants operating, and they’re hitting production levels, which will be commensurate with that, that 28,000 to 30,000 tons a month, which we think we can expand upon, which would put us at a very profitable state as a business going forward.

Now, we are also expanding currently our customer base as well. Just diversifying a little bit with that additional production coming online and we think we will be able to €“ we’re in conversations with, the good thing is you are seeing a lot of blast furnaces open up right now. So there is quite a bit of demand right now and with the logistics, which are relatively tight right now, we are starting to see that open up.

Mike Niehuser: But still all met coal, correct?

Mark Jensen: Yes, everything, yes. Everything is met coal. I mean, that’s really where our businesses focusing on those the Carnegie mines right now, just because they’re, that’s what generates cash flow for the business. That’s what I’ll put cash in the bottom line going forward and focusing on the high margin McCoy versus exploring lower margin products.

Mike Niehuser: And you mentioned the Dean was starting production. Can you give us some idea of the scale of that through the fourth or first quarters?

Mark Jensen: Yes. So they just started up recently, doing some development in mining, the attractiveness of what the team brought in over there, they brought a hydro mining, hydro miners are very, very efficient form of mining, very low cost form of mining. They’re targeting right around that start off phase around 30,000 tons a month, is what we’re being told, which would translate into right around a couple $100,000 in revenue does have cash flow does, a month. And they’re looking at some pretty significant expansion opportunities around there. But they’re hitting what they said they’re going to do, and they’ve been delayed a little bit but or, but it’s not expected. Not unexpected, they guess in this industry when you’re starting up a new mine. But thankfully, they’re in production today. And they’re hitting their stride.

Mike Niehuser: Got it. And as far as like with Perry, you mentioned that the trying to get the right price for it and takin, some of the equipment and moving it or transitioned over to Wyoming County, in West Virginia. With if you take that away from Perry is that going to cannibalize or degrade the value of that asset as you would present it to a potential purchaser?

Mark Jensen: I mean, we’re looking at maximizing the value for our investors. We believe Wyoming County is one of the most attractive opportunities we have in front of us today, high margin looking at generating cash. I mean, we could talk very frank, coal businesses sometimes aren’t €“ we want to look at maximizing the value of our coal business today, maximizing the revenue in the cash flow generation from our coal business today. We believe the value of our assets redeployed to Wyoming County would be roughly $40 million, the cost to reclaim the complex would be roughly $5 million, that would be a net realization of value to our investors of roughly $35 million. If we deploy it to Wyoming County, if there’s an investor that would like to buy it, they can come in around those values and pay us cash for it.

We are open to that. We are open to monetizing it in the most creative way for our investors, but that those assets and that equipment, and there’s other assets and equipment we can bring to Wyoming County as well. But today, our focus, it needs to be run as a three section mine, if that was all our focus, and all we were focused on doing is just running Perry County, we could put three sections in there, we can make money. There is a lot of people that want to do that. And we have had offers on the complex, they’re not at a position, those offers weren’t quite as high. Some of them were close, actually quite close to the replacement value of redeploying those assets to our Wyoming County division, but they weren’t there yet. And so, ultimately, right now, it’s we’re looking at the cost benefit analysis, and we’re looking at what’s the most creative aspect for our investors.

And if that means redeploying our equipment and infrastructure and assets to Wyoming County, we will do that. And but what we’re not going to do is sit on our hands and wait for somebody to come and match that value, they either need to move quickly, or we’re going to redeploy the assets and maximize the value today.

Mike Niehuser: Well, I would never accuse you of sitting on your hands, that’s for sure. With regards to Wyoming County, I think the bond is $45 million. With that, if that’s correct it will that balance the construction budget. And of course, you’ll benefit by moving equipment over but there’s also inflation. So at the end of the day, are you going to need to raise equity or do you think you’re going to be able to €“ with cash flow and equipment and all these things together not need to go to the markets?

Mark Jensen: No, I mean, I will say that I mean, the $45 million is built in quite a bit of contingency. Also, the ability for near-term revenue growth, revenue generation during the development phases of that, we actually think we can be in revenue very quickly. They’re even during the phase of development and offset those costs. I actually believe that I mean, $45 million is €“ would be extremely well capitalized, especially with €“ there is a lot of infrastructure, we are already setting aside rebuilding and ready to deliver over to the complex. What we are doing by doing that is we are offsetting we are de-risking it for ourselves and the tax incentive of investor to tax amount investors by doing those moves already.

We have already started investing into that equipment. We have already started investing in the infrastructure. Now if we redeploy the infrastructure over from Wyoming, it’s going to be extremely de risked investor and de-risks deal for both us and our taxes and bond investors. And that’s a good thing more higher likelihood for success and monetizing the asset getting the assets online for the long-term.

Mike Niehuser: Got it. And as far as that goes, it seems like it’s going to be a real sexy project, if you can say that about a carbon producer. But if what’s your sense about closing that, that bond building and being able to move into production? Is that the €˜24 production are you looking at?

Mark Jensen: No, I mean, I think it can be €“ I am going to be caveat this. I don’t control the bond markets. I mean, we had how many banks just failed what a month ago, not even, so there is people like to sometimes hold me to timeframes on certain things outside my control. But this one is when the bond markets are fully open, and when we €“ and I think our advisors hilltop are doing a phenomenal job, I mean, world class team over there, fully understand this environment. There were navigating and we want to make sure we put a good deal in place with good investors and but right now it’s an extremely attractive mind to bring online I mean, our customers are beating down the road we have off takes that are very interested in that there’s numerous all takes we can go to select some of the legacy mining companies around the region also have expressed interest in desire for that product.

So it’s €“ we want to we want to get it online quickly. But we’re also want to make sure we do navigate the current market environment. And I think what we’re seeing now is I mean, even with unemployment rates, climbing today, I think the interest rate environment is probably stabilizing, which is a good thing. That’s the most important thing to get a tax bond done over the last 5 months it would have been nearly impossible just because that’s what killed those banks, right, with rising interest rates and pricing deals below it. So we are starting to get pretty good environment for it.

Mike Niehuser: Once market stabilized €“ sorry for interrupting, Mark, apologize, once they stabilize in pretty much closure would be imminent at that point, I am wondering and then how long to build and start seeing some benefit from Washington County or Wyoming County?

Mark Jensen: Yes, I mean, we are going to mobilize quickly. We have already narrowed it down on the development team that’s going to be up there. Our current operating team, led by Tarlis Thompson had been to the site numerous times already doing the engineering planning phases of it. I think it’ll be €“ it would be months, not years, not quarters before we start moving dirt there, it’d be days I think before €“ we will probably start moving dirt. They are here in the near-term anyways, even before it closes.

Mike Niehuser: As far as production goes, I don’t

Mark Jensen: Yes. We could start generating revenue in 3 months. I mean, there is some work we got to put cap which is the tax and bond will fund. We are bringing infrastructure for the processing plant from other plants we already have that are idled and not being used and then but it’s, within months, we can start generating some revenue on the €“ that’d be development revenue, though. But within 6 months and building in a little bit of cushion for myself, we can be producing at pretty good €“ pretty safe state.

Mike Niehuser: But I’m a little ignorant here are totally is €“ aren’t you’re going to have to build a plant, or is there an existing plant that you’re working on?

Mark Jensen: Yes, Wyoming County is a really attractive complex and said, the way that we developed it, and the way that we have €“ the way that it’s set up, and the way that our plan has been developed is there is two deep mines that would built directly into the processing plant that already is onsite. We were €“ we are going to upgrade that plant using a lot of the infrastructure we already have and equipment we already have at various projects. So we will €“ that will be the focus is developing the deep mines and upgrading the plant simultaneously. There is a real load out onsite as well that accesses VNS, Norfolk Southern Rail. So it’s why €“ we paid over $26 million for this complex and we bought it a number of years ago, the reason we bought it is one it’s fully permitted to it has the existing plan on site that can be upgraded quickly, got the two deep mines within a strata that is very similar to what we already mined in Kentucky, at the Carnegie mines.

And so it’s a a relatively straightforward development plan. And, and a low risk development plan given what’s already on site there today.

Mike Niehuser: Excellent, thank you for that tutorial on that, I appreciate that. Don’t €“ you have a lot going on. And Wyoming County doesn’t get a lot of press except for the bond in the last couple of years. So thank you for your patience. Moving on to the ReElement, I am really quite interested in the spodumene, and your ability to co-locate, it seems that, there’s so many of the €“ there’s like, dozens of lithium companies out there, you know, resource companies that each have their own kind of like Black Box or bag of tricks to be able to concentrate that the lithium to ship. And I just want you to €“ tell me if I got this right, but it sounds like, you’re talking to lots of people, there’s really an opportunity.

But I’m wondering, it’s sometimes disruptive technologies have a tough time penetrating until it’s seen that it really is lower cost. And I’m just wondering if you have the flexibility, to be able to dominate that space, in terms of the really the difficulty that lithium companies are having to be able to produce the concentrate. And the reason for the long questions, I am just I don’t want to overstate that. But it just seems like you’re in an excellent position in a market where if this easy thing is going to work out, lithium is going to be, kind of one of those critical items that it really rises to the top and being scarce. And so how do you see you fitting in from an industry level as being the go-to technology to be able to, for the initial extraction of lithium production to spodumene?

Mark Jensen: Yes, that’s a good question. And that’s, that is really what show €“ why our technology show is €“ is able to be showcased in a very efficient way. When our energy use and our chemical use versus the alternative is a fraction of solvent extraction, we are not using a series of mixtures and settlers, hundreds of them at times, even thousands of the time, we’re using columns. And we’re not using high pressure or high heat within those columns either. So it’s a very efficient form of processing. The cost structure matters, right? Everything matters, but most of €“ what a lot of people don’t realize is logistics matter. So when you’re dealing with commodities, if you’re transporting a raw commodity, halfway across the world to be refined, there’s a huge cost to that lithium spodumene is typically a 6% lithium ore, meaning you’re transporting 94% rock halfway across the world to be purified to a 99.99% pure.

Most people can’t get to that high, we can. But more importantly, we can localize that. So, why Africa has been such a huge opportunity is, there is hundreds of thousands of tons of lithium spodumene that is transported from African nations, to China today to be purified. We have already been testing that material in our facility. And we have already been processing it to showcase what it can do, one, at small scale, but what we have proven is that our technology works as it scales up even better. And that’s because the surface area interface. Basically, the surface area of the resin, so the bigger the columns, the more resin you have the more surface area, which lowers our cost structure. But the ability to localize that and the ability to do it timely meaning we could build a plant and deploy it in three months to six months.

The agreements that we are putting in place throughout different African nations, right now predominantly imports, because then we can process multiple products in multiple mines. That is a big deal. And there is a lot of volume of material that can be processed, and can be processed very quickly. So, I do think that the localization not only spodumene side, but also on the battery manufacturing side of the battery industry is a big deal. If you can offset that transportation costs, take things off the highways that you are transporting back and forth multiple times, you are saving everybody money in the equation. And we have been working with a number of the OEM partners showcasing our technology, and that takes time. I mean everybody wants us to sign an off-take immediately and sort of weep.

We also want to select our partners, and they want to select us and make sure that they feel comfortable with it. Now, we are in third, fourth, fifth, sixth, eighth meeting with certain parties that have seen the technology and including the one that we are co-locating a design facility for them as we speak right now for their facility. So, it’s a big opportunity. Now, I would say the African opportunities, from a revenue perspective are huge. These are big mines that are mechanized mines, these aren’t children, labor, nuts, and there is a misconception of how things are mined over there. And really not fair to some of the attractive opportunities that are over there. But these are big revenue opportunities. I mean the first one we are working on is a pilot program.

It’s an exploration phase permitted 8 million tons of spodumene a year targeting to produce. Their initial production is 35,000 metric tons of spodumene a year under the exploration plan. That’s a big opportunity, a big potential for us and can be substantial revenue right off the bat, and we can build on that pretty quickly. We are working aggressively on that. We have worked on it for almost eight months now and it’s coming to fruition pretty quickly.

Mike Niehuser: Great. That’s just super. The transportation, you laid out is undeniable, a huge cost savings. But I guess as I have learned about your technology, it’s, it is so effective in producing high purity material that, that I have the side benefit of being flexible for different types of material that you process. And I was €“ the original part of my question was, is that each one of these lithium mines has a unique or, and my sense is, is that your chromatography process isn’t distracted by the nuances of the ore in terms of you just have to get it into the right condition, and then just present it to your columns with the technology. And so it just seems like it could be a universally a very €“ something that would be considered by every company going in as opposed to feeling like they need to develop something proprietary, it would take years and cost like?

Mark Jensen: So, what’s unique about not only is our patents are great, and our trade secrets are better. But what also we possess is the ability to run simulation software that we can plug in based on our Ictus machines that we own that we can plug in the data, that will run the virtual simulations to tell us our mass balance calculations, which means we can process any orders any chemistries. Because of that software, we can move very quickly. We don’t have to spend weeks or months in labs running analysis to dial in or solvent extraction call of tanks and change our emulsion chemicals and ratios. We don’t have to do that, All we need to do is run it through our mass balance calculations based on what ore body is coming in to run those simulations virtually.

That software we control that was put together through 40 years of research by Dr. Wang and Dr. Yi Bing on our team now is an absolute game changer for us, not only for the lithium bodies, but also the magnet materials. And that is what’s unique about the flexibility of our technology and then the purity. I mean purity matters. Purity is I mean the impurities within a battery are oftentimes what causes a combustion event, which causes fires with a battery. When I first met Bob, that’s one thing that he is like, you need to make sure you can bring high purity. And we showcase that to him, he joined our technical advisory board and then just recently agreed to join our Board, because he felt comfortable with the efficacy of our technology and the proof and our technology of how it works.

He watched the facility run and he is like, that’s the goal. That’s a game changer. And I mean, I am obviously super thankful to have him on our team, because he is a rock star. I mean he is probably the most respected or one of the most respected guys in the battery industry. To have him on our team, I mean it’s hard to express our gratitude towards that, but he believes in the technology, and that’s important.

Mike Niehuser: Does the co-location that you are seeing that opportunity? Does that reduce the need to be able to build the facility in Indianapolis that you have kind of got online, or is that €“ and what’s the timing for that?

Mark Jensen: Yes. We have not announced our second facility. We did say it’s going to be in Indiana. We are €“ the bid has been approved for that facility. Now, we are waiting on documents. We have already started renovating it. But no, so the co-location opportunities would not displace and we still need a bigger facility. We weigh over on our existing facility already. So, we need to meet our larger scale facility, but that we €“ also the partnership opportunities for people to co-locate at our facility. The facility we selected, this 42 acres, it’s a huge site. And so the ability to bring in partners alongside of us, we get magnet producers, battery producers, can producers. We are in conversations with them, because we will have a lot of excess capacity at that site. And it will be our first €“ it will be our large scale internal site. But also then, from there, it will be all about co-location.

Mike Niehuser: Got it. I apologize. I just realized how long I have been on this call. I have enjoyed your answers. As far as like the magnitude of the purification of a particular metal, does lithium look like it’s going to be several magnitudes more than what the other metals that you are involved with as far as market size and acceptance and demand. Is lithium, the big one?

Mark Jensen: Yes. I mean, so lithium ores is the largest opportunity we have in front of us right now, just because we have some opportunities that are really large. That being said, I think I mean there are some cobalt operations that just shut down, because of the market environment today, because prices went up, prices went back down. We can actually help make those projects profitable. And so that’s I think they explore the other ores and the other materials you get. On batteries, you are going to produce more nickel and cobalt than you will lithium.

Mike Niehuser: Are you talking about cobalt mines there?

Mark Jensen: Yes.

Mike Niehuser: Okay. And I do apologize. Yes. I apologize for keeping this long. Last question, do you think we are going to see starts to see meaningful revenues and it’s from ReElement on the rare earth and the battery metals this year?

Mark Jensen: I think by the end of the year, I mean we are already making money on the metals side of the business and part of our breakdown recycling process. I know, USA Rare Earth and AML, are actually both doing really well on the magnet side. They are getting really close, and that will help unlock some pretty significant revenue for us. From €“ everything I am hearing, they will be up and running this year, which is I know AML well. I mean I think USA Rare Earth well, USA, there’s going to be a lot bigger producer. And I mean they are being led by a world class team. And then on the battery side, I mean I think some of these projects we are working on could move really quickly. So, by the end of the year, I think we could be generating pretty substantial revenue.

But there are times, there are things outside of our control, we wait on our partners for some of those things. Now, that being said, they are advancing quickly though, and we feel good about those timeframes.

Operator: Thank you. Our next question comes from the line of Steve Segal with KBB Asset Management. Please proceed with your question.

Steve Segal: Hey Mark. Congratulations, all the benchmarks you have already accomplished with ReElement, especially. Most of my questions that was asked have been asked and answered already. So, I was just wondering if you can talk a little bit about Novusterra.

Mark Jensen: Yes, absolutely. So, we sold €“ Novusterra actually ties into the Wyoming County Complex as well. It’s part of what €“ that will be the initial pre-stock, pre-feedstock process in fact. But we ended up selling the exclusive rights to those patents to Novusterra for equity in Novusterra. As you can see what we have said is, we have set out earlier, end of last year with the ability to align the interests of all of our team members, but also the people dedicatedly focused in that. And so notice there was restructured. We brought in the new management team, part of our team moved over there. And now they have a dedicated focus on operational control. Now, what’s really exciting about Novusterra is, we did a sub-license with Kenai Defense.

Kenai Defense already got the first contract with one of the military divisions, and now are, they have been approved for the second one as well. So, Novusterra and itself knock on wood here very shortly, it will be a profitable entity, which is really attractive based on those partnerships it had signed and the agreements it has with the DoD related parties through Kenai Defense. But ultimately, then the technology development and the commercialization of it internally through Novusterra will be tying into the electrolysis technology. The goal €“ the new team, the new CFO, Josh Brumbaugh, who is a phenomenal guy, has come onboard. He is getting the audits back in line. He wanted to recreate them, so that they are his work, and he feels comfortable with them.

Not that there is anything wrong with the prior, but he is that kind of dedicated guy that wants to work perfectly, and then the company will re-file, assess one to go through that public process. And it will be a lot easier of a process than it was before. They won’t have to raise the $16 million the way that they are structuring it. They can do a much smaller deal. And the company doesn’t need that kind of money. So, we feel really good about it. It’s progressing nicely. The team is in place. They are focused on it. They are dedicated on it and they are hitting the milestone.

Steve Segal: And where would that be located you think? Would that be located in the Wyoming area?

Mark Jensen: Yes. I think Wyoming. I will also be throughout Kentucky. And then I am not on the Board of Members here anymore. But from my conversations with them, I believe it will end up being licensed €“ technology that’s licensed out to third-parties as well. And the ability to license that out to monetize it, because it’s a really unique technology products and waste material that otherwise would end up as a pollutant and the Rare Earth taken process before it goes there to be utilized.

Steve Segal: And that’s for the fly ash, right, for the ash?

Mark Jensen: Well, predominantly starting off with carbon waste materials, so.

Steve Segal: Okay.

Mark Jensen: Tying in from the coal that’s sitting on the ground, post-processing and fine particulates that couldn’t be recovered is the optimal feedstock for this, which is ultimately using electrolysis, where you can also recover the critical and rare earth elements that are present within those feedstocks as well as a free byproduct out of it.

Steve Segal: Right. Okay. Great. Thank you.

Mark Jensen: Excellent. Thank you, Steve.

Operator: Next question is from line of Kyle Gallagher with Merrill Lynch. Please proceed with your questions.

Kyle Gallagher: Hey Mark. First off, man, thank you for your patience with all of the questions, just as a great call. Very informative, and it’s not lost on all of us, the time that you guys are sacrificing here. So, thank you on that.

Mark Jensen: Thank you guys, we appreciate you guys taking the time.

Kyle Gallagher: Absolutely. I am wondering if you could just kind of broadly speak to like, the length of your guys’ patent portfolio, it’s kind of specifically on the rare €“ the ReElement side, centered around chromatography and then the electrolysis side. I am just kind of trying to understand like, what type of a runway you have, as far as patent protection is concerned?

Mark Jensen: Yes. So, I will walk through those relatively high level, but I will dive it in a little bit. On the produce technologies that chromatographic separation for batch processing of magnets has about 19 years to 20 years for the life left on it. So, it was originally filed as a provisional patent, and then it was filed thereafter. So, these are relatively new patents. And then the battery patent, we actually worked with Purdue on modifying that patent to run continuous multimodal chromatography that was filed as a provisional. And we actually just filed a few months ago, the actual process patent which so that will have roughly 20 years worth of life on it. Our electrolysis technologies were filed through Ohio University developed by Dr. Botte, who is on our Board. She is a genius. One of the most talented hardest working ladies I have ever met in my life, beyond my wife. I got to give her props, so

Kyle Gallagher: Smart man.

Mark Jensen: Those patents price, roughly there are about five patents including the patents we sold to Novusterra have roughly about 15 years for the life on them. So, we have a pretty long runway on all of our patent portfolio. Now, we are also working on about three additional patents around our process chain for various materials. And hopefully get at least one or two of those filed here within the next six months.

Kyle Gallagher: Got it. And then just last thing for me. I am kind of trying to read between the lines here a little bit and just in listening to the call, but hope maybe you can kind of just speak to it like, do you think it’s a fair characterization? I am trying to look at your guys’ business, specifically on the ReElement side and think, I understand on a high level, you guys have positioned the ReElement business that what you feel is the bottleneck and the process as far as the purification and recycling of these rare earth elements. As you guys are ramping that business up, what do you see the bottlenecks to ramping that business? Is it more on the securing feedstock side offtake agreements, or is it just simply the process of, hey, these companies, there is plenty of feedstock, there is plenty of offtake, it’s just more working to the process with those companies, to your point for them to see you, see the technology and make sure that you are the right partner?

Could you maybe just provide a little bit of clarity on kind of that portion of the business?

Mark Jensen: Yes. I am going to work my way from the end of your question backwards. Offtake wise, the people, there has been a lot of offtake signed in the industry, through people that had prior relationships with those firms. But what people don’t realize is those firms aren’t actually up and running. So, most battery manufacturers that have announced production in the United States are anticipating running by 2025, 2026. So, they are not actually supplying material yet. That being said, offtakes we don’t believe are going to be a problem. One, domestically everybody is searching for IRA compliant material. Our process enables IRA compliant material, we €“ there as nobody that refines rare earth elements in the country other than us.

And then on the battery side, you have our competitors, like Lifecycle or Ascend. They have €“ Ascend has a unique technology where they can produce cam material. That’s also going to a customer and trying to tell them to take a new product that changes how they do things today. We produce isolated, highly purified elements back to effectively better than the version of ore. That gives us the ability to have a lot more flexibility and our customers to have a lot more flexibility. So, we do not anticipate based on our conversations and based on the feedback of having issues with off-takes. I think we could sell everything into this industry 10x over, which is a great palm to have, especially the purities that we produce there. Now, as we work with the battery manufacturers of showcasing our technology on a co-location aspect, there is definitely I mean we are bringing a new technology €“ not a new technology, an existing technology to a new application.

That is they have to €“ they want to see and they want to they want to come to our facilities, and a lot of them have visited our facilities. And they feel very good about what they see. But they still want to see and they want to it to be showcased. And so that’s what we have been doing over the last six months. We have had €“ on a weekly basis, we have had battery manufacturers to partners coming through our facility, learning about our technology and getting up to speed on it. I mean the technology, as I said is not new. It’s been used in the sugar industry, which is a very low margin industry for years. Insulin, Eli Lilly produces insulin using chromatographic separation. That’s how it was actually through Dr. Wang. She worked with Eli Lilly for generations.

That’s how we met Bill Smith, who had 35 years at Lilly, running chromatography facilities and building them to them. Now, he is on our team, is our Director of Engineering, which is I mean we are standing on the shoulders of giants with regards to our technologies. The feedstock, yes, the feedstock is probably the €“ I will say, on the refining side, there is batteries are starting to come to end of life. On the ores, we are starting to see a tremendous amount of progress there, which we are going to some very resource rich nations that we can talk about here shortly, hopefully, which we are progressing very nicely. Magnet side, we are working with one of the largest windmill manufacturers in the world that is now delivering us magnets, and we have another call with them in the next week to discuss the amount of magnets they supplying through there, working with the wind farms and stuff of that nature.

But the feedstocks are still building. It’s on the rear earth side, it’s an education telling people, what’s throwing them away, because we can recycle them. And then two, we have developed an innovative way to break them down. I can recycle a hard drive cost effectively now, which are small magnets. But our process that we developed internally to be able to process those magnets really cost effectively is a game changer. Actually the idea came by Jay Campbell, who works for us. Alongside, Jeff Peterson, who is absolutely just very smart guys thinking logically and how to do this. But that’s, developing those feedstocks comes into developing innovative ways to be able to processes feedstocks and cost effectively process those feedstocks. So, I would say feedstocks is probably across the industry as a whole.

It’s probably the biggest bottleneck. But once you get to the black mass, then there is nobody else is doing what we are doing, the ability to process and refine locally. In the United States that does not exist, everybody else is trying to build hydromet. I don’t think it’s going to be able to operate profitably. And I think they are going to have a tremendous time, tremendously difficult time trying to keep it in compliance, post operating, but alone the energy and chemical costs associated with it.

Tom Sauve: I can jump in here to an add some color, Kyle. As regards to feedstock, yes, it’s probably the biggest bottleneck. Especially on the recycling side is more batteries become closer to end of life, or get the end of life. Obviously, with the adoption of EV and other technologies, those supply sources will grow. But the flexibility of our technology allows us to navigate through those bottlenecks of feedstock supply. And that’s why we have not pivoted, but looked at natural occurring sources of lithium in spodumene ore that come from the African continent, because they today are producing lithium spodumene. They are exporting it to China in a raw form to be processed. Getting our hands on those types of feedstocks today is key for us.

Currently, there is a lot of lithium projects being explored and developed in the United States. And there is also need for permit reform. I think everybody can understand that here. But to get a mine up and running here in the United States takes somewhere between 10 years and 15 years, just given all the regulatory constraints that we that here in the United States. And those are good from an environmental standpoint, and labor standpoint and everything like that. And that’s why our technology, the flexibility of our technology fits really well within and solves those constraints in the supply chain, because we can navigate it, we can co locate abroad where we can add value of producing purified resources, as well as growing congruently with the market on the recycling side, where we don’t have to make massive CapEx that hope that the supplies €“ those feedstock supplies pick up, or if there is a big chasm there between deploying that capacity and not having the feedstocks to feed it, which is going to €“ which we think will probably cause a problem in the recycling space as other refining methods attempt to be deployed, if that makes sense.

Kyle Gallagher: Yes. Thanks a lot guys. Appreciate it. And it’s been really fun to watch the development of the company here and bringing these new technologies online. So, thanks again guys.

Mark Jensen: Thank you for your time.

Operator: Thank you. Our final questions in from the line of Derrick Stone, private investor. Please proceed with your questions.

Derrick Stone: Concerning the ReElement, can you tell us with €“ for the SEC filing, is there any more input required from American Resources, or any kind of additional feedback that might €“ what that means for the timing of the spin off?

Mark Jensen: Yes. So, we filed the initial Form 10. The SEC came back with some very good questions, just pretty standard questions, just understanding how the management team would work and stuff of that nature. We have responded to those questions, but we are also waiting to €“ we have had those answers and ready to re-file it. But the filing would stale without our fourth quarter numbers in there. So, we needed a way for our audit. So, are we intend within the next week to re-file that again. We think it could happen pretty quickly from there. Their questions were relatively standard. I can’t go into too much detail, but nothing that would prevent this from happening. But it was just we are working through that process. We needed to get the 10-K filed and now that we have got that filed, and we can re-file the amended Form 10 to push that through to fruition.

Tom Sauve: I can add some additional comments Derrick as well. I mean as we work through that SEC comment process. Like Mark said there was nothing catastrophic in those questions or comments and we continue to work. And it’s hard to comment on the timing of that process. But I will say that are €“ we are focused on from spinning out the ReElement Technology is creating value for our shareholders. This is not an exercise of speed. This is an exercise of value. We feel really good about where the ReElement division stands as far as the spin out goes as well. We want to make sure that we do right for all of our shareholders and extracting the commensurate value, which we think is worth and Mark said we €“ our intention is to build ReElement into a multibillion dollar company.

We think we have the team and we think we have a line of sight to do that. And we want that to be represented in the value of the spin out, just not €“ we just don’t want to spin it out for the sake of speed. We want to spin it out for the sake of extracting value for all of our shareholders.

Derrick Stone: So, could there be another round of questions from the SEC, when you re-file?

Tom Sauve: It’s hard to say, we can’t. It’s absolutely, that’s definitely a possibility. But lots of wait and see.

Derrick Stone: And is there going to be a situation where you then have to wait for a 10-Q for the first quarter and re-file again. Is it just the 10-K for once a year that cause that?

Tom Sauve: It’s hard to speak on the timing of it. Yes.

Mark Jensen: Yes, it’s hard. I mean I wish we could give you a lot of clarity on that. If the 10-Q would need to be re-filed, if there is €“ so by the time that it would come out, again, with the numbers go sale potentially. We hope to move quickly. But we €“ and obviously, we believe it’s in the best interest of the investors to do it. We will move it as quickly as we possibly can, but the SEC is going to do what it does. And we appreciate the fact that what they do. I mean they are although protecting all of us. So, they will run their process. We will respond as expeditiously as we can to answer their questions, should they have any additional questions and push this process forward as quickly as we possibly can.

Derrick Stone: Alright. Thank you.

Mark Jensen: Thank you.

Operator: Thank you. I am going to turn the floor back to Mark LaVerghetta for any closing remarks.

Mark LaVerghetta: Yes. As far as our team at ReElement and American Resources, we thank everybody for the time they spent on this conference call as well as being valued shareholders, we don’t take it lightly. We as the largest shareholder group of American Resources, we are here to build long-term value for our shareholders and that’s what we plan to do. So, again, thanks everybody for the time today and for your interest and we look forward to keeping you updated in future progression and future updates.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.