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?

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.