American Battery Technology Company (ABAT) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm excited to welcome you to our first earnings call. My name is Jesse Deutsch. I'm CFO at American Battery Technology Company. We appreciate you attending and listening in. I'm joined by Ryan Melsert, our CEO, and I will now read the forward-looking statement. So this presentation contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Although American Battery Technology Company's, also known as the management -- the company, management believes such forward-looking statements are reasonable, it cannot guarantee that such expectations are or will be correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the company's future results to differ materially from those anticipated. Potential risks and uncertainties include, among others, risks and uncertainties related to the company's ability to continue as a going concern, interpretations or reinterpretations of geologic information, unfavorable exploration results, inability to obtain permits required for future exploration, development or production, general economic conditions and conditions affecting the industries in which the company operates, the uncertainty of regulatory requirements and approvals, fluctuating mineral and commodity prices, final investment approval and the ability to obtain necessary financing on acceptable terms or at all. Additional information regarding these factors that may cause actual results to differ materially from those forward-looking statements is available in the company's filings with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ending June 30, 2024. The company assumes no obligation to update any of the information contained or referenced in this presentation. I would like to now hand over the presentation to Ryan Melsert, our CEO. Thank you.

Great. Thank you, Jesse. And welcome, everybody, to our fiscal year '24 earnings call. Today, we'll be going through some opening remarks, talking about our 2 main business lines, so both our lithium-ion battery recycling system as well as our primary claystone to lithium hydroxide technologies, going through some of our financial summaries for the past fiscal year and closing out the meeting. As many of you are likely aware, we have a multipart business that fits into the ecosystem shown here. We are moving towards a circular economy within the electric vehicle and battery space. Within the U.S., right now, there are large amounts of cell manufacturers, large amounts of end-use OEMs. However, the other portions of the supply chain are virtually nonexistent. This is making for a very imbalanced domestic supply chain and what we at ABTC are working to address. So first, in order to make sure that when materials enter this market, they stay there throughout their lifetimes. We've developed our own lithium-ion battery recycling system that we designed at bench scale over the past few years. And then within the past year, we've built our first commercial scale facility, brought that online and now operating this recycling plant. Closing the loop on these batteries is very important, but as the amount of occupied batteries in the field grows, recycling alone cannot solve these problems. We also need to fill the loop the first time in addition to closing this loop. So as a result, we've also developed separate technologies for how to manufacture these same battery metals made to the same specifications, but from primary mineral resources found within the U.S. So we've purchased large amounts of land in Nevada that holds lithium in the form of a sedimentary claystone, developed our own bench scale systems, how to economically extract lithium from this type of material and have now built our own integrated pilot facility that demonstrates how we go all the way from this raw claystone material to making a battery-grade lithium hydroxide that we're able to sell to our commercial partners. So we're one of the very few companies within North America and in the world that is developing and commercializing both sets of these technologies. We see it as necessary for both of them to move forward and very synergistic to have them both within one company. Many of the unit operations using each technology are the same. We have the same engineers and scientists working in developing both technologies, the same operators running both plants and we make identical product that we sell to the same customers. So as we have now closed out our fiscal year '24 back in June 30, '24, we'll start up with some of the financial output that we've had over the past 12 months. So as we work to ramp up both of those technologies, 2 years ago, we were really in the bench scale development phase. A year ago, we were in the piloting system, and we have now moved into commercial operations for our battery recycling system and ramping demonstration and commercial operations for our primary lithium business. We manufactured large amounts of recycled metals over the past fiscal year. And within this year, we have sold our first set of products and generated the first revenue for the company. So this is for the products sold up until the end of June this calendar year, and we've continued to manufacture products since then. It's obviously a long time in the making, going through first-of-kind system design, bench optimizations piloting and then constructing and operating this first plant over the past year. So we're excited to have sold the first lots of material back in the spring and to now be recognizing these as revenue for the company. We've secured many government grants over the past few years. Several of these were just contracted over the past year and started ramping up last fall. So this is a very strategic way to take funds in. It's nondilutive, nondebt. These are not loans. And other than the overhead for operating these grants, there's no other expense to the company. So we're happy that within the fiscal year ending back in June, we were able to take in about $3.3 million from these grants. As mentioned, many of these ramped up over the past year, and we have several new grants we've just won recently that we'll talk through as well. And we see this as a growing income source for the business going forward. On a cash basis over the past year, we've reduced substantially the amount of cash used in investing activities. This really comes down to purchasing the building for our first recycling plant and much of the equipment that went in that plant. So most of that was purchased within fiscal year '23, a year ago spring, which really let us secure that building, install the initial set of equipment and then ramping commission that plant starting last fall. Correspondingly, we've increased our expenses on the operating side as we've ramped that plant, increased the shift count and now move to a steady-state operations at our first recycling plant. Last summer, we did take out a convertible note option for about $25 million. Over the past fiscal year, we've paid back over $18 million of this through redemption of the notes. This has been one of the major cash uses for us over the past fiscal year, and we are near the end of paying back this note in full. With all of this, our cash balance has increased over the past year, up to $7 million as of the end of June. And as we look at opportunities for funding over the near term, again, we have just over $67 million of government grants that have already been contracted that we've yet to draw down on, a very large increase over the end of fiscal year '23, where we only had a handful of grants contracted. So again, these are agreements that we have in hand. These are projects already underway. And the way these grants work is that at the start of the project, we develop a multiyear budget, it's approved by the government. And then we draw down on these funds based on the budget that we set for each of those projects. So this will continue to be an increasing source of cash for us as we move forward. We did just announce a few days ago that we've been selected for another government grant. This one is significantly larger, $150 million of federal funds. We were just selected this past Friday. We're in the negotiations phase, but we expect this project to be contracted and begin in early 2025. So again, this can make up a very large portion of our income going forward and help to fund our operations. Outside of traditional Department of Energy grants, this spring, we're also able to win almost $60 million worth of quantified tax credits from both the Department of Energy and the IRS. We'll talk through some specifics of what these really mean, but we've drawn down no funds as of now from this $60 million that has already been allocated to us by the IRS. When we look at our specific projects, within the recycling business within the fiscal year '24, we had a handful of goals that we really tried to attack during that 12-month period. The most important one being to implement and accelerate operations of our first recycling plant. So initially, we were constructing a greenfield site for our own facility. Last spring, we did find an opportunity to purchase an existing building that was vacant with infrastructure facilities already installed. We purchased that building throughout the summer of '23, and then we're actually able to start operations last fall in the fall of '23. So this significantly accelerated our time to market to bring our first recycling systems online. Once that facility was purchased, the goal was to ramp the throughput within that plant. So since last fall, we've been adding shift counts, adding personnel and increasing the throughput of that facility. The goal was then to manufacture commercial quantities of recycled products from this facility. We've done that over the past few quarters, and as mentioned, have now sold the first commercial quantities of these recycled products to the market to our strategic partners and recognize that revenue within the fiscal year. In addition to these initial recycled products that we've made, we also have designs for how to make even higher value-add materials. So these are to make battery-grade components through our internally designed hydrometallurgical train. So we've been running this at bench scale for the past few years. We've been making large batches of material, sending them to our strategic customers and have had these products qualified and certified by these partners that each of these battery-grade materials meets the requirements that they need in order to purchase through their supply chain. So with these qualifications at the bench scale behind us, we're moving forward with the installation and commissioning of our own internally developed hydrometallurgical train that we'll be installing inside the same facility in our recycling plant near Reno, Nevada. And in addition to this battery recycled products, there's another set of materials that are beyond recycled metals, so many nonmetal portions within a battery that most recyclers cannot access. At the bench scale, we have several technologies that are able to recover these additional components. We've been proving at the bench scale that we can access these materials in an economically competitive fashion. And last year, we were fortunate enough to win another government grant for $10 million federal to help bring these technologies to market going from bench scale to piloting and then being implemented inside our current Reno battery recycling plant again. So these were the major goals for fiscal year '24 ending back in June and how each one of them were addressed. Selling these recycled products was one of the major goals for the past year. We've made large amounts of these intermediate filter cakes and recycled metals that we've been able to sell to the market, both to our strategic customers and through different types of brokers. So initial sales were recorded back before June in the springtime within fiscal year '24, and we're continuing to operate this plant and sell product into the market. Now that we have this initial product made, the initial portions of the plant running, a major goal is to ramp the throughput of this facility to really be able to increase how quickly we feed material, the rate at which we generate products and the operational efficiencies within this plant. So in order to do that over the past year, we brought on a new Chief Operating Officer, whose goal really is to drive the ramp rate and operational efficiencies of this recycling plant, to increase the operations of our other business unit as well, the claystone to lithium hydroxide demonstration scale facility and to define and really start the achievement of a lot of our key performance indicators and really make sure we're achieving our company milestones. So we're excited to have Steven Wu on board, really help driving these goals and his experience throughout the manufacturing and battery space over the past few decades has really demonstrated his abilities to come into existing operations and really help to drive the growth and ramp rate of these different types of facilities. So we're excited to have him on board and look forward to be able to sharing information going forward about increased operations at our recycling plant at our claystone to lithium hydroxide pilot facility and throughout the company. I mentioned our project of how we're making these products beyond the recycled metals is partially funded by a government grant that was kicked off last fall. So these $10 million federal dollars are really set to show that beyond the initial materials, beyond the battery-grade products that the remaining of the material in the battery can also have value and be recovered with positive margin. So within the bench scale, we've been working recovering different components of the battery, including the active anode materials, the graphite and silicon materials, developing methods of regraphitization about how to recover these components, which are generally over 30 weight percent of a battery, how to recover them, how to regenerate them and how to return them to initial performance before they were inserted into batteries themselves. Different ways of recovering the electrolyte solvents and dissolve species. These are generally 10 to 15 weight percent of a battery and are very rarely recovered within recycling operations. And also different methods of making one of our main products, lithium hydroxide, without the very energy and capital-expensive conventional process of mechanical vapor recompression technologies. So again, each of these, we're running at the small bench scale right now. We'll be ramping up through pilot operations, and then we'll be plugging into our existing Reno recycling facility. So while this project kicked off last fall, this first year up until June really was mainly design work without many purchase of components yet. So out of this $10 million of awarded funds, we've only drawn down about $600,000 so far. So the remaining $9.4 million we'll be receiving over the next 2 years of this project. The tax credits are something many people have asked about. These are through an ITC, so an investment tax credit, which is a relatively standard program. But within the IRS Section 48C they've made a couple of customizations. So within investment tax credits, generally companies apply for them after expending dollars and at the end of their fiscal year. And they hope that as they meet those qualifications, they're approved for that type of investment tax credit. The 48C program is a little different where it pulls the proposal and qualification phase up to the beginning. So last fall, the DOE and IRS put out a solicitation to apply for these tax credits. So this first round had a fixed allocation of $4 billion. So we put together proposals for how our current and future capital expenditures could apply under the requirements of this program and demonstrated what funds we thought were applicable. We went through an evaluation round last fall and then another one this spring. And in March, we were notified that we have been allocated these funds by the IRS. So we've won $20 million to be applied for our current battery recycling plant. So again, the technology evaluation, the financial evaluation has already been completed. We've already been allocated these funds by the IRS. And now as we simply follow through with what we propose to do, continue to build out this recycling plant, we'll be able to claim these $20 million of tax credits through this program. So this is a very competitive process. Fewer than 9% of all dollars proposed were funded back in March. And as we continue on our proposed plan, continue to build out this plant, we're on pace to be able to claim this credit and then cover many of the costs for this first recycling facility. We have many strategic partnerships and relationships throughout the closed-loop economy. We have a very strong relationship with BASF. We were working to source feedstock for a plant to sell our recycled products back into the market. And we've been working with just about all of the automotive OEMs, battery manufacturers, material refiners and brokers throughout North America. There's a very large amount of material available to be recycled. And there are very few recyclers that are able to go through the vetting and the down-select process that many of these OEMs are going through. So we've had many on-site tours on a safety basis, on a compliance basis, much work on the ESG and compliance front with many of these strategic partners and have gone through the down-select rounds with many of them and are now under negotiation for large amounts of material to be recycled on a multiyear basis. So right now, already the material under negotiation is far beyond what could be processed within our first battery recycling plant here near Reno. And as we make these bids and go through these strategic negotiations, several of these OEMs have essentially said, because the quantities are so large, they would ask us to build a new battery recycling plant near their existing facilities to make this much more of a strategic partnership than a simple contractual offtake. So since last fall, we've been doing site selections and negotiations for property and infrastructure near a few of these strategic partners so that as we lock down these agreements, we can expand near our partners and bring significantly larger capacity online. So our first Reno plant is really about proving out this first-of-kind technology, manufacturing commercial scale quantities of these products. And as these OEMs are now able to come into our plants to see our product, we are in these negotiations to build a second recycling plant. Because we were in these negotiations last fall, we applied for a second award under that same IRS 48C program. So under the same process, we detailed how we would build out our second plant, how it complied with the requirements for both the DOE and the IRS and the cost of the second facility. And again, back in March, we were awarded a $40 million allocation from the IRS to support the construction of the second recycling plant. So this is something we've also not drawn any funds on yet. These are funds available to us, already selected and allocated, to be applied to the second battery recycling plant as we go forward. In addition to these tax credits, last fall, there was also another opportunity. This was more on the Department of Energy grant side. So again, the DOE was looking for domestic facilities that can manufacture large quantities of critical minerals. We applied to this program last fall, went through the first down-select in January, another down-select in March, another process in July and then just this past Friday, it was publicized that we have been selected for another Department of Energy grant. And this one is for $150 million to be applied towards the construction of our next battery recycling plant. So we're in the contracting phase. We expect to have the project start in early 2025, and this is a 4-year project to go through the design, construction, operations, commissioning of this next recycling plant. And because we're in discussions with these strategic partners to build next to their sites, we're intentionally designing the throughput of this plant to be equal to the throughput of our partners. And because of that, we've designed this plant to be about 5x the size of our current Reno plant. So we use many of the same technologies and our same internally developed system, but a much larger scale to really be rightsized with the rest of the industry as the EV and stationery market grows over the next few years. So again, this will be a large part of our cash flow going forward, how we pay for the design and construction and operations of this facility. Because we are targeting the Southeast U.S. for our second plant, really where many of the strategic partners we've been in discussions with are located, we have decided to sell one of our existing properties. So our property in Fernley, Nevada, we've had for quite a few years, this was going to be the first construction project for our first battery recycling plant. As we did find the facility on Peru Drive that was already constructed, already had existing infrastructure, we did choose to pivot to purchase that facility and to install our equipment there instead of completing construction of this Fernley plant. Now that our second facility will likely be in the Southeast U.S., there is not as much of a need for this location in Fernley. So we have listed this property on the market and do intend to sell this in the near term. In addition to battery recycling, we do have our second business unit. This is our claystone to lithium hydroxide business. In a similar fashion, we've had goals for fiscal year '24 for the 12 months ending back in June. We really were trying to finish out a third drill program to be able to upgrade the resource classification of our own material near Tonopah, and we were able to achieve that within the year. So we finished our drill program. We wrote and published our initial assessment, and we're able to increase the classification of much of our resource there from an inferred status up to measured and indicated. So really showing the increased confidence in our understanding of the resource itself and increased understanding of how we process that material and make this battery-grade product. As we've moved from our bench scale trials, we did use the information to publish this IA. And through that data and modeling, with our outside third-party qualified person, we're able to calculate our production cost of about $4,600 per tonne. So it's a very competitive cost to be making a battery-grade lithium hydroxide, specifically within the domestic U.S. And after publishing this, the next step was to further prove out this technology at much larger scale. So we have constructed and commissioned our pilot plant. So again, this is an integrated system we've built near Reno, has each of the operations needed in order to go from our claystone material to make our battery-grade lithium hydroxide out the back end. We were awarded a grant from the DOE a few years ago to support this project, so $2.3 million of federal funds. And as of this spring, we have finished construction of that project. We have commissioned the system and have made our first battery-grade material from this pilot plant. As we finish that process, made our first battery-grade product, we did receive a visit from the U.S. Secretary of Energy from Jennifer Granholm to come tour our plant to see these operations herself and to physically examine the products that we've made, both from this claystone to lithium pilot plant and also from our battery recycling operations. And because of those successes, we have moved forward with the design of our commercial scale refinery. So this is a commercial scale facility we'll be building directly on top of our resource near Tonopah, Nevada, and we are in discussions with many strategic OEMs about the long-term offtake of the commercial scale quantities of products from this plant. So again, receiving the visit from Secretary Granholm was great to have that recognition for her to come and see this pilot plant in person. The DOE grant that supported this project, we started back in the fall of 2021 and will wrap up in the next few months. So we've received about $1.7 million from the $2.3 million initially awarded and the remaining $600,000 we'll be collecting over the next few months as this project winds down. But we've had several different teams from Department of Energy on site the past few months to close out this project. And they've said they are very impressed that essentially what we proposed to do over 3 years ago, we have now done. So for us, it seems like a very straightforward process. We put a plan together, we proposed how we would do it, we've achieved those milestones and now sent samples and communicated how we've done it to our funders, the DOE, and to our strategic partners. So we're excited to have wrapped up the construction and commissioning of that plant, to have made that product and to have achieved the goals we said we would back during the proposal stage of this opportunity. Operating this pilot plant well did lead to another government grant, which we were awarded last fall. Again, this is now to build a commercial scale refinery based on the technologies we've proven out in that pilot plant and now to be able to sell much larger quantities to our strategic customers. So this was a $57.7 million award from the government. The contracting was completed and the project started last August. So this is a 5-year project. And while the contracted amount is large, the first year was largely design work and engagement with our partners. So through the end of June, we've only drawn down about $1.7 million out of the $57.7 million from this project. So $56 million remaining already contracted that we're drawing down on a monthly basis to support all of our payroll, to support purchasing equipment and a lot of the engineering services we have from our partners. So this will be a very large portion of how we fund the company and our growth going forward and a very rigorous and defined process for how we work for the next 4 years of this project. So again, the financial summary from this past fiscal year: We are excited to be selling product from our first recycling plant, to be collecting revenue, to be collecting significant amounts of funds on a monthly basis from our current government grants and having much larger ones ramping up and going through contracting right now. We have shifted from essentially using funds for buying the plants to now using funds to operate the plant. In the next few months, we plan to have this convertible note fully paid off, removing a very large use of cash in the company. And again, the contracted grants and the contracted and allocated tax credits are something we'll be monetizing in the very near term. So having those already in place, having those technology validations and vetting already completed, those are our very attractive sources for nondilutive and nonbased funding of how we operate and grow the company going forward. So as we report our annual financials today, we are also scheduling our Annual Shareholder Meeting, which as of now will be in early November of this year. So we look forward to going much more into depth on the status of each of these projects and about our plans going forward during this next shareholder meeting. So we thank everybody for joining this meeting. We will be putting out further communications about the date and processes for this Annual Shareholder Meeting and look forward to speaking with everybody then. So thank you for joining.