American Resources Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 14, 2023

There are 6 speakers on the call.

Operator

Day, everyone, and welcome to today's American Resources Corporation Second Quarter 2023 Conference Call. At this time, all participants are in a listen only mode. Call. Please note this call may be recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mark LaVrugueta, Head of Corporate Finance and Communications.

Operator

Please go ahead.

Speaker 1

Thank you, and good afternoon, everyone. On behalf of American Resources Corporation, I'd like to welcome everyone to our Q2 of 2023 conference call and business update. We always welcome this opportunity to provide an update on our businesses and discuss our accomplishments we've made over the past several months And how we are uniquely positioned within the markets that we serve for our American Carbon, American Metals and Re Element Technologies division. Also on the call today is Kirk Taylor, our Chief Financial Officer. Chairman and CEO, Mark Jensen is currently en route to Africa For meetings relating to lithium ore partnership opportunities.

Speaker 1

Sir, Kirk and I will provide some prepared remarks, Then we will get into the question and answer part of the call. Before we kick it off, I'd like to remind everyone of our normal cautionary statement. Certain statements discussed on 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.

Speaker 1

We also do not undertake any obligation to update or revise any forward looking We're going to begin today with a few comments from our Chief Financial Officer, Kirk Taylor. Kirk?

Speaker 2

Thank you, Mark, and thank you, everyone, for sharing a couple of minutes here this afternoon to listen about our Q2 results and business updates. Over the past several months, we have continued our execution on slow finding our strategic positioning within our addressable markets, which we believe positions our companies for long term value creation. In doing so and in conjunction with the direction Our strategic committee, we have embarked on several initiatives to unbundle our unique platform of assets to better unlock value for all of our shareholders and position each entity as a standalone company. I will go into some further detail on each of these initiatives. First, the spin off of Realme Technologies.

Speaker 2

As we've previously discussed, our intention is to spin off our wholly owned Realme Technologies division Into a standalone public company, this has given this will give its strategic positioning and groundbreaking innovation This past January, we have filed our Form 10 registration statement with the SEC to begin that process. Subsequently, we have filed the necessary amendments to update the financial information and address comments and questions raised by the SEC. All of our filings related to this can be found at sec.gov under Relevant Technologies. And at this time, we have addressed all comments and questions We've also engaged a top Tier 1 investment bank to advise us through this process, While also commencing a capital raising process at the subsidiary level, this is to fund Re Element's initial growth plans as a pure play next generation Critical Mineral Refining Platform. Feedback and interest from potential strategic investors have thus far been very positive.

Speaker 2

We expect to have this process completed later this year or early next year and we'll communicate our progress as much as we are able to. 2nd, spin off of American Carbon Corporation. This morning, we filed our initial Form 10 registration statement with the SEC to spin off our wholly owned American Carbon Division into a separate stand alone public company. The filing can be found As well on sec.gov under American Carbon Corporation. In conjunction with the recommendation from our strategic committee and approved by our Board of Directors, Spinning off American Carbon into its own public platform, Vedra enables the business for growth, capital allocation And to a dedicated separate operating team.

Speaker 2

In basic terms of structure, American Resource shareholders We'll receive approximately one share of American Carbon for every 2 shares of American Resources' common shares, which are owned. Additionally, American Resources Corporation will receive up to $300,000,000 in the form of royalty payments from American Carbon over a period of time. Additionally, we have secured a $20,000,000 factoring facility for American Carbon to support its normal course of business. And upon the spin off of American Carbon, we are in negotiations with $100,000,000 equity financing facility That will be in place under American Carbon PubCo as an additional option to fuel acquisition and operating growth. Both of these financing facilities will go alongside in the already closed and announced $45,000,000 tax Our financing capacity for standalone American Carbon, we feel the American Carbon platform will be the Most well capitalized streamline operation in the met coal space.

Speaker 2

Further, we've looked at monetization of the carbon platform In other ways other than standing out. As we have reiterated, we remain highly focused on monetizing our substantial platform of carbon assets, either through operations, leases or divestitures. We've also previously communicated that we've successfully closed our $45,000,000 Texan Industrial Development Bond offering The West Virginia Economic Development Authority, which will fund expansion and technological improvements to existing metallurgical Carbon processing facility at our Wyoming County Coal Complex. Thus come to that closing, we have seen an increased interest in certain and all of our carbon assets from several parties. These include an unsolicited bid for all the assets associated with American Carbon of the consideration payments, which we have previously announced.

Speaker 2

We also previously announced that we entered into a binding letter of intent Sell certain assets associated to our Dean Mining Complex for a total enterprise value consideration of approximately $20,600,000 or 0.26 Stands per share. More recently, we also received a non binding letter of interest from a non affiliated party To purchase remaining assets of American Carbon for a total consideration of approximately $300,000,000 or $3.83 per share. We've also received a non binding letter of interest from a separate non affiliated party to purchase assets associated with our Perry County Resources Complex For a total consideration of approximately $40,000,000 in cash and enterprise value or $0.51 per share. Management and our Board and strategic committee are currently reviewing these opportunities and will of course provide updates when appropriate. There are obviously several options for us to explore.

Speaker 2

We have a world class set of assets, world class operating team and very well funded path high production levels. We will pursue each of these scenarios and determine which best benefit our shareholders and our workforce alike. Next, I'll turn to our SPAC that we have sponsored, AMAO, American Acquisition Opportunity Inc. When we IPO ed MAO as its main sponsor, we sought out to merge with a dynamic cash flowing company that did not require a complicated or AMAO announced the definitive merger agreement to merge with Royalty Management Corporation, whereas RMC would become a public company. As a reminder, RMC is a next generation royalty company focused on expanding its current cash flow and revenue streams By identifying undervalued assets within sectors, including natural resources, land, sustainability, controlled environment agriculture and Last December, AMAO filed its Form S-four registration statement with the SEC in conjunction with the plan to merger between AMAO and RMC and have since been working through the comments provided by the SEC.

Speaker 2

On May 4, AMA will file its amended Form S-four to update for December 31, 2022 numbers and to address questions and comments received from the SEC. Soon, AMA will file an updated S-four, Further updating numbers as required by the SEC and addressing further comments and questions. Following the proposed De SPAC merger, American Resources will remain a shareholder and will liquidate its interest over time when it believes it maximizes value to all shareholders and stakeholders. Our unique platform of assets is in a great position to deliver what we believe are attractive returns and value to our shareholders, including our mining assets, our Re Element Technology division as well as our American Metals division, which we are in the process of strategic positioning within the electrified economy. Now I'll turn to our quarterly summary for American Resources.

Speaker 2

As a reminder, on January 31st this year, the remaining amounts of the convertible notes in the amount of approximately $9,800,000 It was converted into approximately 9,400,000 common shares of the company, extinguishing all future liabilities under the convertible note. The only new debt we took on over the Q2 of 2023 was associated with the issuance of the Texas and Industrial Development Bond For the development of Wyoming County West Virginia Mining Complex. As of today, August 14, 2023, our current shares outstanding 2023 was approximately $51,500,000 Over the Q2, we're able to showcase our operational flexibility to where we're able to operate at Slightly cash flow positive while driving our value creation mission forward. Lastly, it is probably worth reiterating, Given the recent regional bank events that all of our excess cash above FDIC limits are held in the top 2 U. S.-based bank.

Speaker 2

I'd now like to turn over the call to Mark LaRougetta for some additional comments. Mark?

Speaker 1

Thanks, Kirk. I'd first like to applaud our team on another exciting quarter of continued execution in positioning all of our divisions within our end markets, While also leveraging our processing and groundbreaking refining technologies into new and exciting markets, We truly sit at a very interesting position with our ability to bring cost competitive refining of critical minerals To our domestic market in the most environmentally safe and sustainable methods ever developed. At no point in our history Has our business been better positioned to serve the markets we operate in and to capitalize on our broad asset base, our talent and our ability to produce, And we continue to execute on our strategic plan to unbundle assets to extract value and to better position each division for growth, Capital allocation and with separate operating teams. Let's dive into some of these. First, American Carbon.

Speaker 1

I will first address the revenue shortfall for this past quarter. As global net carbon market softened over the 2nd quarter, We chose to idle carbon production. Over most of the second quarter, our customers became constrained when taking product Due to port logistics and bottlenecks within the supply chain, we believe this was largely a result of the shift in China's and Australia's relation shift around product sourcing, which created significant shifts within supply chains and the timing of product deliveries. Our ability to idle back production showcases our operational flexibility and also highlights that given our expansion around our Re Element division, We do not want to take unnecessary risks associated with inventory expansion and rather focus on cost constraints. In other words, we chose not to run our minds just to build up inventory, but rather focus on value creating initiatives such as Re Element Technologies, The closing of our tax exempt bond and potential divestitures of American Carbon Assets.

Speaker 1

We are seeing these short term bottlenecks As such, we are beginning to look at restarting mining operations at our Carnegie mines in the near term to capitalize on market demand And pick up where we left off earlier in the quarter where we were realizing some of our best fundamental production levels, while on the vision of our American Carbon team, including the development of Wyoming County Coal to prepare for its operations next year. As Kirk just mentioned, we are in receipt of 2 letters of interest for all of the mining assets of American Carbon and Perry County Resources, which provide us ample opportunities to execute on our mission to monetize our carbon assets to best benefit our shareholders. It's worth reiterating, our platform of carbon assets is unique given the significant mining infrastructure that we own, the quality of carbon that we produce and have access 2. The restructuring efforts and investments we have made over the past several years to right size and streamline the operations, Along with the substantial embedded organic growth, we have to provide incremental high quality carbon products to the global markets. With the recent updates we have provided, I believe we are beginning to see the fruits of that labor materialize.

Speaker 1

And on a side note, we continue to see the industry drive consolidation as evidenced by today's news of Cleveland Cliffs making a $7,250,000,000 bid for U. S. We feel that we're in great position with the assets that we own today. Re Element Technologies. As we frequently state, our Re Element Technologies division represents an incredibly exciting and very strategic opportunity for us.

Speaker 1

We've never been involved with an entity that in our opinion has a higher ceiling. As 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. Re Element is an innovative and advanced refining platform for critical minerals. While we believe we are Our high value component within the recycling value chain, we are not solely recycling platform. However, we do believe our position in the recycling market And a sustainable supplier of critical minerals is highly important as we move towards a highly mineral dependent electrified economy.

Speaker 1

That being said, and again, in our opinion, recycling platforms alone are going to have a hard time bringing bridging the gap When end of life manufacturing scrap volumes materialize to levels that can support their CapEx and OpEx fundamentals, That is where our innovative and distinctively different are distinctively different in how we are positioned. Our innovative and advanced refining methods using chromatography displays the toxic conventional methods used in China Such as solvent extraction or hydrometallurgical here domestically will be very challenging. They are extremely But there is a reason why most of these facilities are located in remote areas of Inner Mongolia. Our ability to refine A variety of critical mineral feedstocks from urgent ores, manufacturing scrap, end of life and unconventional sources in a low cost, low impact, Modular and small footprint allows us to grow congruently with the market's needs, meaning we spend less to produce ultra pure products. The world has never really needed innovation in critical mineral refining until now, or maybe we just became complacent with China's dominance of the market.

Speaker 1

And that is the value proposition of Re Element Technologies. The world needs advancements in refining these raw materials, and we believe we provide the most It's worth noting a few of our recent milestones at Re Element as well. We recently achieved The production of ultra pure lithium carbonate, which is needed in battery cathode manufacturing, verified by an independent 3rd party laboratory at 99.9978 purity from LFP, lithium iron phosphate Battery manufacturing scrap at commercial scale. We believe we are the first that we know of to achieve this milestone worldwide, A very significant achievement. This achievement comes on top of us achieving a 99.986 pure lithium carbonate Produced at commercial scale, which was recycling end of life LFP lithium ion batteries.

Speaker 1

What makes these milestones is our ability to effectively and very cost efficiently refine materials from LFP battery chemistries. Typically, lithium and a lithium iron phosphate battery is very difficult to recover using conventional refining methods. Usually, it's lost. And without the inherent cobalt and nickel that resides within NMC battery chemistries, it hasn't been remotely cost effective. We are able to flip the paradigm where actually LFP battery chemistry is more economical for us to refine given our ability to quickly extract and capture the lithium at high purity.

Speaker 1

And as we see it from our perspective, The market, especially EV, is migrating more towards lithium iron phosphate batteries. We expect about 60% of the market will eventually migrate to LFP versus NMC Battery Chemistry, which puts us in a great strategic position. This is also why we are aggressively pursuing Sourcing agreements for lithium spodumene ore given how we technically are able to refine lithium. Obviously, Mark Jensen is currently pursuing such opportunities right now, and we look forward to communicating future developments on that front. We believe the opportunities 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.

Speaker 1

We've had early success in developing partnerships such as the one we have established with our magnet and battery partners, Wind Energy, Consumer Power Tool and broader energy storage and recycling markets. We are very excited and confident about developing these pilot programs into long term commercial partnerships. The number of opportunities we are seeing to provide Our next generation advanced refining capabilities as a value added service continue to accelerate. We're confident as we continue to showcase our competitive distinction, I'd like to recognize our Re Element team for the groundbreaking success that we've achieved to date And in the quick timeframe, we have achieved it. We do believe that time is of the essence.

Speaker 1

We also believe as we put together The best team to continue to drive this revolutionary refining technology and from a technical perspective, we believe we have the world's best Ted has had longstanding success developing and commercializing the foundations of our technology at Eli Lilly. We have and will continue to add top talent to further execute on our vision as well as position Re Element as a standalone company And as a global refining leader, our goal is to build Re Elements into a multibillion dollar business, and we believe we have the team and the line of sight to do just that. At American Resources, we'll continue to execute on our strategic plan. American Resources is focusing on its highest value opportunities and will look to expand its asset base Within the natural resources industry, utilizing cash generated from any asset sales, royalties To acquire interest in high value critical and rare earth mining assets that can feed our Reelement Technologies division to be refined and its cost effective environmentally sustainable method. In closing, we remain very confident in the positioning of all of our assets foresee us needing to issue equity at the AREC, American Resources level to raise cash, especially with some of the sources of non dilutive capital that we have available.

Speaker 1

Just to reiterate, as the largest shareholders of American Resources, our management team is committed to maximizing the value of all of our business and believe our continued execution and the unbundling of certain assets will help us achieve that. With that, I'd like to turn the call back over to the moderator for questions and answers.

Operator

And we'll take our first question from Mike Niehauser.

Speaker 3

I'm not quite sure I understand the reduction in revenues on the carbon side, but it sounds like It just made a lot of sense in order to not to be able to maintain a positive cash flow. And My interest I'm curious if you're flexible enough to do that or if there's any degradation to the assets By such a significant swing in pausing production or slowing.

Speaker 1

Hey, Mike. Well, first appreciate your questions and all of your support. Hope you're doing well. So, yes, thank you. The first answer on the degradation of assets, no, we don't believe there's any degradation.

Speaker 1

I think from How we're positioned within all of our businesses, and we look at the overall platform, and taking a conservative approach And as I mentioned earlier on the call, we weren't just going to produce through What we view as a blip in the supply chain, given we're relatively on the global landscape, we're a relatively Small producer of met coal, met carbon. Our customer base is somewhat limited and we have good customers. However, we weren't going to sacrifice the overall execution of all of our platforms, Including Re Element Technologies, just to put inventory on the ground. Our customer, our main customer became constraints, just given Some of the supply chain dynamics, so we chose not to overextend ourselves, dial back on production, Focus on continued execution. We continued to assess a variety of options They came out in front of us.

Speaker 1

We executed an LOI to sell our demining complex. As we just mentioned, we've received multiple LOIs All of our assets, we closed on our Wyoming County tax exempt bond issuance. So Our execution was still head down driving forward, but from a capital standpoint and from an overall risk profile, We weren't just going to spend a bunch of money to put inventory on the ground, just given the execution that we continue to have on the Re Element side of the business. I hope that makes sense for you.

Speaker 3

Absolutely. Thanks for the answers. Sorry just to dive into the question. But so it sounds like you've got the flexibility between Dean and Perry and Wyoming County and these LOIs. What sparked all those things to Come to a head this quarter, is it just coincidence or a lot of these things been worked on for 6 to 12 months or is there something in the environment that's causing this The reason I'm asking is I'm going to try to get an indication of where you're going with this side of

Speaker 1

the business. Yes. I'll go ahead. Sure. No, I think it's you can read between the lines.

Speaker 1

I don't think it's a secret. I think As we said, we're steadfast and focused on monetizing our assets and that includes selling of specific assets or all of those assets. I think the closing of our of the tax exempt bond issuance are fully capitalized in that as one of the last virgin boundaries of mid vol Met carbon in the Appalachia region brought back some parties to take a better look At our Carbon platform, additionally, we press released that we received An unsolicited bid coming out of the gate post the closing of that bond issuance. I think that had people that were kicking the tires on the platform of looking at certain assets to get more aggressive with them. And you've seen it in the marketplace today and that's why I mentioned earlier on the Paul, the Cliff's bid for U.

Speaker 1

S. Steel, I think where we sit in this cycle of the commodity cycle Folks are very focused on supply chain resiliency, Sourcing their feedstocks for global steel production and vertically integrating, Cliffs has done a great job of it. They are a great example and they continue to be aggressive in the market. I think that's part of it as well. I think it's a macro trend of Producers in the global steel markets looking at vertically integrating their supply chain and sourcing material.

Speaker 3

Well, I know that the quality of the Wyoming County is something else. And so, I think that gives us kind of a clue as to How others might be looking at you for that supply chain resiliency. So that's another good answer, Mark. The also before I forget, congratulations to Tarlas. Really a competent hands on big picture Guys, so I think this is great for him, but be careful what you want.

Speaker 4

And Shif, you don't go ahead.

Speaker 1

No. Well, appreciate that. I'm sure Tarlas appreciates that. And you've, like I said, we appreciate your interest. And I know you've spent You spent a good part of the day with Tarlas touring our assets.

Speaker 3

So he's the man. Yes. So on the lithium side, could you just define I'm not the lithium guy at Ross, but what is manufacturing scrap For lithium, is that from, I guess, what's left over on the cutting room floor at a battery Yes.

Speaker 1

So, yes, I think at a high level, the best way to explain it, And I said it earlier, we from our perspective, we believe the energy storage market and it depends on the application, whether it's just general whether it's just general energy storage, electric vehicles, small power tools or things like that, everybody uses a different battery. Your cell phones Using LCO typically or your laptop uses an LCO battery chemistry, EVs have kind of been a mix between NMC, nickel manganese cobalt and LFP, lithium iron phosphate. It's migrating more towards LFP, In our opinion, just given the you don't need the nickel cobalt, which are High priced commodities that go into the chemistries of an NMC, lithium iron phosphate, the lithium is relatively valuable. Iron phosphate carries Less of a value, so the inputs on that. The difference between the two is the energy density.

Speaker 1

NMC can carry a higher energy density. But as we The battery technology continues to evolve at a rapid pace and you're starting to see good Energy density and LSP, it provides a little bit better safety characteristics as well. So the market is migrating more towards that as the energy density, safety and Less expensive feedstocks that go into the production of an LFP battery chemistry. So you're starting You've seen Tesla announce LFP Gigafactories, Ford And the like. So EV is definitely migrating more towards an LFP battery chemistry.

Speaker 1

And when you're manufacturing Cathodes or batteries, there's a lot of waste. It's a messy process. When you spray coat your cathode material, you trim it for sizing, there's a lot of waste in the process. I think it's estimated there's about 20 Waste currently, I know battery manufacturers want to reduce that, but my understanding is they'll never get to 0 And trimming it to very low levels is going to be very hard just given the inherent capabilities. So there's a lot of Scrap material that goes into the process, our ability to take that scrap and recycle it back into high purity forms, Having the ability to modulate and co locate with certain parties gives us a very strategic advantage of when you're looking at Domestic manufacturing, because logistics matter, input prices matter, And we're able to reduce that, be able to do it in a collaborative manner to reduce the cost structure for everybody.

Speaker 1

And that's key when we're competing Head to head with China and the Asia Pacific region on on shoring manufacturing.

Speaker 3

So this goes along with the theme of that You can pretty much take anything, but pretty much anything. And regardless of what kind of waste it is from different kinds of batteries In conditions sprayed, left out in the rain, whatever it is, if you have a basic understanding of your feedstock, you're able to Purify it so that none of it goes to the minimal amount as possible goes to the dump. I think that's what I'm taking away here. And I I guess that depends on you just proved that you can do it. Just a matter of finding the right partner at

Speaker 1

the right place and such. So that's what I drive. You're right. Auto manufacturers are highly focused on all of that, reducing the total amount of waste that come out from any of their production. Our ability to do that, we provide very efficient solutions for that problem.

Speaker 1

And our strategic positioning of being able to handle LFP, LFP is more cost effective For us, it showcases how low our cost structure is. We can extract the lithium very effectively, very cost efficiently in a low cost matter and very high purity At commercial scale from LFP Battery Chemistry. Again, we're the only ones that we know that have been able to showcase that.

Speaker 3

Okay. So along those lines, you've got a shipment of spodumene coming from Africa. How soon do you think you're going to be able to tackle that? And is that going to kick off marketing to Lithium mining companies as they seek to upgrade their lithium With maybe what could become a standardized process in the industry? Is that what's the

Speaker 1

timing of that? Yes, it's a good question. I think Timing is always hard to predict just given counterparties timelines. But what I think you can take away from it is Our ability to refine lithium very effectively from manufacturing scrap or end of life, whether it's LFP or NMC or if it's The feedstock input is ore based, virgin spodumene ore. It really doesn't differ From a technology perspective, it's very, very similar from a cost structure and purity perspective.

Speaker 1

We look forward to communicating our milestones of purifying lithium coming from natural occurring ores. We have our We know what our technology capabilities are. We're fine tuning those Today, and I think we'll be in a position here in the short term to communicate those milestones. And then, right, as you think about it, I think, well, It hasn't been it's already begun. The reason Mark Jensen is not on the call today is because He's visiting some of our partners and looking to expand some of our partnerships abroad, to source Those raw materials, those natural lithium based stores to bring in.

Speaker 1

And again, it showcases Our technological advantages of purifying that lithium ore into high purity carbonate or hydroxide form what the battery industry really needs.

Speaker 3

Well, just a question for modeling for me. As far as like either revenues, etcetera, on the re element side with the rare So the lithium with what you just mentioned or with the carbon assets with everything that's going on there, Gnarling activity there. Should we just assume that it's market dependent Production there and as you move closer to be able to start Wyoming County in earnest, there's going to be a couple Order slump in revenues as things come back into place and you sort out some of these sale agreements. It looks like there's a lot going on.

Speaker 1

There is a lot going on. I think from the press release today, you could I think there's some decent value that we've tried To showcase that the market is putting on our carbon assets, right? We've we talked about earlier on the call and in the press release, We believe our platform of carbon assets is very attractive given the hard work and restructuring efforts that we've taken place. And I think the market Looking at that as a valuable asset, a valuable growth asset, We're seriously considering all options. But I think the fact that we put that on the front page, We're moving towards certain divestiture options.

Speaker 1

But again, we're only going to make decisions that are in the best benefit

Speaker 3

Well, meanwhile, how soon could Wyoming County move into Something respectable as a startup, startup of the existing infrastructure with the additional opportunities, etcetera.

Speaker 1

Yes, we've started some of that early development over at Wyoming County. I think sometime next year, we would be in position to start getting some development production Start it over there.

Speaker 3

Meaningful. Yes, okay. And as far as like revenues from Re Element or The lithium, too early to tell when we might start seeing revenues?

Speaker 1

We're and I think some one thing to consider As this entire infrastructure here in the United States gets stood up, right? There's very little that's Being produced today. There's not a whole lot of magnet manufacturing that's being produced in the United States, but we're partnered we have partners with 2 of The 3, we've heard of a 4th, with Grand plans to put magnet manufacturing here in the United States. We're in discussions with them. But currently today, very little Rare Earthsintraforming manufacturing happens, same with Gigafactories here for energy storage and battery production.

Speaker 1

So we continue to Stockpile product, we continue to run our pilot programs where you've been at our facility, we're running our facility much more Frequently in a batch process. A lot of times we're taking that purified product and showcasing it back to our Potential partners or pilot program partners that we are nurturing into full commercial partnerships. We think that's more valuable than Dropping a few kilograms into the marketplace, showcasing Our technology and putting up really sound commercial partnerships is probably what suits us best currently.

Speaker 3

Well, inquiring minds want to know. But one last question, and I'm sorry for hogging the Q and A. But could you just make a couple Comments about your facilities. It looks like things are starting to take shape as far as capacity and co locating. And I'll just step off

Speaker 1

Yes. Well, currently, as we've talked about in the past, our Noblesville, Indiana facility is currently running. It's really an R and D center, but just given the technological advantages of our of chromatography, we can actually run good throughput Through that facility, we've talked about our expansion up in Marion, Indiana, 42 Acre Campus, Building that out with much larger scale capacity initially. Initially, we'll look to build that capacity out of 2,000 Tons of output of pure rare earth oxides per annual, as well as

Speaker 3

How many tons did you say?

Speaker 1

2,000 tons of purified rare earth oxides per year on the rare earth side and on the critical minerals Saiid, again, it's a little bit harder to model on the battery side of things based off of the Variety of inputs, the quality of the inputs, the different chemistries of the inputs, but we're building that out To be about a 5,000 per year of high purity lithium carbonate, 5,000 tons. And a third of that was, let's just say recycled NMC Chemistry from a black mass perspective, from an input, that would equate to about 3,000 to 3,500 tons of A mixture of nickel and cobalt sulfates. And then we currently are looking at Advancing lithium preprocessing in Eastern Kentucky.

Speaker 3

Right. Thank you, sir. Don't forget that. Okay, well, I'm done. And congratulations, things are actually starting to take shape,

Operator

We'll take our next question from Michael Samuels with Fisher. Your line is open.

Speaker 1

Yes, Mark. I just have a couple

Speaker 5

of questions. Number 1, when I was looking at your current quarter, why was your cost Of wholesale and processing, it went up almost $1,000,000 this quarter, but yet Our sales went down $14,000,000 So how was that so high? That was one thing. And the other question I had another question I have too is, you announced the buyback some time ago. Did we buy any shares back in the last Yes, this year so far?

Speaker 1

Two points, Kirk. You want to maybe jump in on the Cost of coal processing? Yes. And so it's

Speaker 2

just it's a timing aspect related to when you capture Inventory costs, when you take it off of your balance sheet and expense it through the P and L when the coal is sold through, We should see that evening out over the next quarter. Our coal shipments are fairly chunky. So if you have One large shipment the day before or the day after the quarter that can provide some More impactful inventory cost swings. So as you look at that over 3, 6, 9, Program, we do note that to the strategic committee is one of the points that they brought up. We as we discussed On the year end earnings call, we did buy back shares During the end of 2022, but we have not disclosed or bought back any during 2023.

Speaker 5

I mean, I'm looking you're saying you've got this letter of intent and we've had letters of intent, letters of intent and you're saying that could be worth like $3.83 a share. I just so happen to be watching the stock in the after hour here and the stock just continues to go down, down, down, And so at $1.60 you would think you would at least be looking at a buyback, If you're going to get $383,000,000 from just look. And then the other question I had is, you also mentioned at the beginning of the call that we were going to spin off American Carbon Like one share for every 2 shares of American Resources, but then we also last year we were going to do the same with Re Element. So why would we be spending both sections off at 0.5 a share each?

Speaker 1

You want me to take that one, Kirk? Or do you want to continue to?

Speaker 2

No. Yes. So again, as we've gone through the options through the strategic committee, Each operating business does deserve to be its standalone public company. They do seem to deserve to be on their own. Once those are executed, American Resources would remain as a NASDAQ listed The company, it would give it the flexibility to execute on some opportunities that lie outside of the current Operating business model, and we give it more flexibility to take on those So again, as we progress in the business plans of those subsidiaries, each of them have a clear defined Structure and message to the investment community as well as to workforce and to customer base.

Speaker 2

And so Yes, the strategic committee and the Board and management feel that they each deserve to be their own public company.

Speaker 1

Okay. Mike can add in on that too. Each separate entity, we would capitalize American Carbon differently than we would American Re Element Technologies. Those things would look differently just given the markets that they operate in And the opportunities that they have in front of them, they probably also carry a different multiple in the public market as well. Hence, the reason to drive forward with that unbundling of assets to extract that value.

Speaker 1

We think both of them carry different multiples as well. So capital allocation for growth, multiples in the public marketplace, And then separating it from an operational and governance perspective as well makes a lot of sense to do so. So and then where American Resources would sit post that Potential split or divestiture of any of the carbon assets, American Resources We continue to leverage the re element refining just given that strategic advantage of refining critical minerals To be able to broaden the natural resource play. Again, March over in Africa, we're looking at a variety of different lithium plays, Again, because we can refine lithium very cost effectively into high purity forms. It's a hard element to refine.

Speaker 1

Right.

Speaker 5

Will you be able to get enough batteries?

Speaker 1

Well, that's the unique thing. The opportunities we're exploring right now are for spodumene, Which is natural occurring ore, right? Just like coal, just like iron ore or any other mine based product. That is Again, strategically differentiates us because it helps us bridge that gap of when are all these batteries going to become to an end of life? Is it going to be 5 years from now, 10 years from now, 15 years from now?

Speaker 1

The recycling market is dependent End of life or manufacturing scrap. But like I said earlier, nobody is producing a whole lot of things here in the United States yet. The mandate has been set, the capital is being deployed, infrastructure is being stood up, but manufacturing scrap isn't widely available in Large volumes today. Getting our hands and access on high quality ores in the lithium market It's very attractive for us. That helps us bridge that gap to when recycling takes on a much larger Products mix or input mix of your feedstock.

Speaker 5

Okay. And then last question. You had it's been a while now Since we applied for the Re Element side, and I know you had questions back from the SEC and I thought you answered them. So how far along are we on the spinoff of Re Element right now?

Speaker 1

Time is relative, Mike. I think The reason why we announced it initially was from a strategic perspective because having a really clean tech Refining company embedded inside of a coal mining company, it's called spade a spade. There is some Some portfolio managers aren't allowed to buy and want a piece of Re Element, but they can't buy it within American Resources. But Announcing that we have a planned spin off maybe gives portfolio managers and there's some other strategies That makes a whole lot of sense from other aspects within the supply chain, in developing commercial partnerships and looking at different Government based incentives or grants opportunities as well. So there's a reason why we announced it maybe Early in the process because we wanted to be on record of this is our plan.

Speaker 5

So have you gotten the clearance if we wanted to go forward?

Speaker 1

Kirk, do you want to?

Speaker 2

Yes. I think at this point, we're navigating discussions with SEC and we're trying to back Shareholder and strategic value along that process. We wanted to make sure that it is a proper Public company and not just spun out just for the sake of spinning out. So we really wanted to go through the process, keep our options open, and get it to this Point of being actionable when the value is there to act upon. I really I think that's Probably as far as we want to go, I don't want to get into we have one comment or no comments or so.

Speaker 2

Right.

Speaker 1

And I've always Mike, I've always also said repeatedly when you've talked to me in the past or I've talked is the spin out of Re Element is A, strategic, but B, it's not we like to execute on things quickly, right? And I think we've showcased our ability to do so. But in regards to the Re Element spin off, it's not Speed is not the primary objective here. I think if speed were the primary objective, we could Separate Re Element and let it drop off into the public market and let the public market figure out how to value it. Or we can Help investors hit the easy button by discovering value through the capital raising process through strategic partnerships.

Speaker 5

Okay. No, I understand. Okay. Thank you.

Speaker 1

Thank you. We appreciate it.

Operator

And we'll take our next question from Steven Siegel with KBB Asset Management, your line is open.

Speaker 4

Hi, Mark. The question I was going to ask was just answered. But was just wondering, I know we talked a lot, Omar, you talked a lot about lithium so far on this call. Has there been any

Speaker 1

On the magnet side of things or on the lithium?

Speaker 4

Yes. Magnet side.

Speaker 1

We continue to have very strong pilot programs In our pipeline today where we intake a variety of feedstocks from Large power tool manufacturers, auto OEMs, we continue to showcase the efficacy of our technology, Showcasing what we're able to do in providing sustainable sources back into their supply chain of those critical raw materials. So yes, there continues to be progress and developments made. We just haven't gotten to a point yet where we're able to publicly announce them by name, But we're getting I would say we're getting closer on the magnet side. I think one thing to also highlight, Steve, is The flexibility of our platform allows us to look at from looking at different feedstocks, our ability to take the entire Powertrain of an EV and recycle it back into high purity sustainable products It's differentiated as well. So our ability to take the motor and magnets out of an eBay, recycle them back gives us the ability to talk to OEMs, battery team as well and vice versa.

Speaker 1

Rather than just looking at we're a battery recycler and we can only handle NMC battery We have a much broader and appealing proposition from an autos perspective, I would say, to look at. But We continue to drive those pilot programs forward with what we feel is a high degree of success. And, yes, we look forward to communicating those Milestones when we're able to.

Speaker 4

Okay. And then the other question is, not sure, As far as the

Speaker 2

LOI goes

Speaker 4

For the whole CL, like is there some type of time frame on that? Because in the or in the meantime, you still have to Progress and get Carnegie reopened when you can and get Wyoming charging right?

Speaker 1

Yes. I think that's why we talked about both paths forward, right? We're not just not going to hang our hat on one path. We need to drive our execution forward An operational standpoint, as far as developing Wyoming County, getting our Carnegie mines back up and running When we feel the market is solidifying, I did mention earlier on the call that our customer base is fairly narrow. We're working on broadening Our customer base is well there.

Speaker 1

So we continue to drive that execution forward, while we explore other alternative avenues as well, like divesting The entire platform are pieces of the platform.

Speaker 4

Right. Thank you.

Speaker 1

Thank you. Appreciate you. Appreciate you guys. I'd like to thank everyone for your interest in American Reis' and your You took out of your busy schedules to participate in today's call. We look forward to executing on your behalf and communicating with you in the near future.

Speaker 1

Thanks again.

Operator

This does conclude today's program. Thank you for your participation and you may disconnect at any time.

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Earnings Conference Call
American Resources Q2 2023
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