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

Good afternoon. My name is Tiffany Moehring, and I'm the Director of Communications and Marketing at the American Battery Technology Company. I would like to welcome everyone to our second quarter fiscal year 2025 earnings call. On behalf of the entire team at American Battery Technology Company or ABTC for brevity, I would like to thank everyone for taking the time to join our call today. A recording of this call, along with our press release and our quarterly SEC filing will be available on our website at investors.americanbatterytechnology.com following this presentation. This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Act of 1995. These statements are subject to risks and uncertainties that can cause actual results to differ from those anticipated. Additional information regarding the factors that may cause actual results to differ can be found in today's quarterly filings. On today's call, our CEO and CTO, Ryan Melsert will provide remarks regarding our 2 lines of business, which include our lithium-ion battery recycling business and our primary Klayy Stone to lithium hydroxide business. Ryan will answer a few questions that we've received recently and end with closing remarks. It is now my pleasure to turn the meeting over to Ryan Melsert.

Great. Thank you, Tiffany, for that introduction. As many of you know, us here at ABTC have multiple lines of business within the critical mineral manufacturing sector. We have designed and commercialized the system for the recycling of lithium-ion batteries. This allows us to take in waste and end-of-life materials from many different markets, process them in our recycling facility and make battery-grade products that we sell back into the domestic market. While battery recycling is great for keeping materials in the loop once they're already in the field, as the total amount of occupied batteries in the field is growing, we also have to fill that loop the first time in addition to closing that loop. And as a result, we have a second business unit where we have purchased and developed our own lithium-bearing resource within Central Nevada and developed our own technologies for to access the lithium from that resource in a competitive fashion. So we're excited to be scaling up these 2 parallel business units that are both working to onshore the domestic manufacturing of critical minerals. In the past quarter, we were excited to have gone through a few equity and debt financing rounds, providing us almost $30 million in gross proceeds to the business. We use those funds to continue to ramp the throughput of our first battery recycling facility here near Reno, Nevada and also to continue to implement the second phase of recycling within that facility. The first phase produces intermediate materials that are sold into the market. And as the second phase is implemented, we'll be further upgrading those intermediate materials into high-purity refined battery metals that will be sold directly back into the domestic market. We're also excited to have progressed the exploration of our Tonopah Flats lithium resource near Tonopah Nevada. This is our fourth program that we've done over the past few years. And this program is specifically performed in order to gather the remaining information needed to be able to complete our pre-feasibility study to really document and demonstrate the attractiveness of building a commercial-scale lithium hydroxide refinery directly in our property near Tonopah, Nevada. Over the past quarter, we're excited to have continued to manufacture commercial quantities of these intermediate battery metals from our first recycling plant near Reno, Nevada. Because of the attractiveness of this process, we were fortunate enough over the past year to win an additional competitive grant from the U.S. Department of Energy for about $144 million to be applied towards the construction of a second battery recycling facility. So we're in a very interesting part of our growth plan as we are ramping the first phase of our first recycling plant, implementing the second phase for that recycling plant, developing and constructing an entirely new second battery recycling facility and also going through design and development of our commercial scale lithium refinery. Within the battery recycling business, we performed some key improvements to the plant over the past quarter. We intentionally planned some downtime in operations to implement these large-scale enhancements to be able to increase both the throughput within the plant and the quality of the products that we make. Since the end of the quarter, we've already seen very significant input increases in the throughput of the plant. So in our first month of operation after these improvements, we saw an increase of throughput over 225% compared to the average monthly throughput in the last quarter. And even more recently, just within the past week, we've seen an increase of over 350% compared to the average weekly throughput over the last quarter. So we're already seeing dividends being paid from the investment we made in improving the processes in this plant over the past quarter. And we're excited to continue to improve the throughput and take advantage of these enhancements as we go forward. These enhancements are being reflected in the design of our second battery recycling facility as well, and that plant will have the 100,000 tonne per year capacity as we move forward into that design. As we continue to ramp up this first recycling facility, in addition to those process enhancements, we've also been hiring quite substantially over the past few months. We did bring on a new Head of People back in December, and she has been leading a lot of the hiring efforts as we build out our facility. So we've been adding additional headcount per shift and adding additional shifts as we go forward, which is a key enabler to the increased throughput that we've seen recently. We're continuing to develop our next generation of technologies. So these are at the laboratory scale currently. These are also supported by an additional U.S. Department of Energy grant that is helping to fund the development of these next-generation technologies. So we're wrapping up the laboratory scale development of 3 of these new critical technologies that allow us to recover even additional types of material from our recycling plant and to do so at much lower operating cost. So as we ramp these up from our laboratory scale systems right now into piloting technologies, and then we will be implementing them at our first recycling plant near Reno and in all subsequent recycling plants going forward. Again, we were proud to have received the second grant for our new battery recycling facility from Department of Energy. Many of our partners joined in the celebrations with us, including the NASDAQ Exchange here, putting their congratulations on their tower screen in New York City. And as we received notification that we had won this award end of September, we were fortunate enough to work very closely with the Department of Energy team and our own in-house team who has worked on many of these grants in the past. And we're able to go from being selected for that award negotiation all the way to having the award contract in hand by mid-December. So this project had a kickoff of January 1 and is ongoing now. So we're excited to be moving forward with the design of this second recycling facility supported by the U.S. Department of Energy. As we build out our current facility and future ones, making sure we have an engaged and educated workforce is very important, especially as we build out our second recycling plant and our lithium refinery, which are in new territories for us. It is important that we engage with our corporate partners as well as local communities to make sure that we have a ready workforce that's able to work with us. So we were excited to be selected to join the Department of Energy Hosted Battery Workforce Challenge as the battery recycling lead sponsor in that competition. So through that, we're engaging with many universities and corporate partners throughout the U.S. to really demonstrate how designing a battery and battery pack from the very beginning with the end of life of the system in mind can be very impactful. So right now, we receive a wide variety of form factors of batteries from many different automotive OEMs and of many different chemistries. We've intentionally designed a recycling system that can take in this wide breadth of material. But when we have automotive OEM partners on site, they often say something to the effect of if we had thought about how this pack would be recycled at the end of life, we would have designed it differently from the beginning. So through this engagement with partners and with the U.S. Department of Energy, we're working to make sure that intentional design of how a battery will be recycled at end of life is encapsulated at the beginning of design process, working with all these OEMs. So it really is a way that we refine operations going forward over the long term and can ensure that as even larger quantities of material come to us at the end of life that it is strategically designed to be recycled in a systematic and low-cost fashion. On our Klayy Stone to lithium hydroxide business, we're excited to have finished our multi-ton per day integrated pilot plant last summer and to continue to operate and refine the process. We're making large batches of battery-grade lithium hydroxide material that we're sending to prospective customers for their facilities throughout the U.S. and North America. It's relatively rare to have built this size of facility to demonstrate our pilot operations. When we have automotive OEM partners on site, they very often state that this is much larger and much more involved than they usually see for different types of bench and pilot operations. It allows us to show the confidence we have in our process and to make meaningful quantities of battery-grade lithium hydroxide that we can deliver to these partners for them to evaluate on their side and to actually make their own precursor and cathode materials to really demonstrate how our material works within their specific components. And having this integrated pilot facility allows us to refine the operations as we go through the development of our commercial scale 30,000 tonne per year lithium hydroxide commercial refinery that we will be building directly on top of our property near Tonopah, Nevada. We've been doing quite a bit of field work at our lithium site over the past few months. As mentioned, we're doing our fourth drill program to further evaluate and explore this property. We're also gathering the information needed to complete our pre-feasibility study and also for different documents that are needed for remaining permit operations, such as our mine plan of operations. We're working with our partners, both on our engineering and our construction side to make sure that they're each informed of our operations as we move forward. So we now have detailed 3D models of how this resource is performing and also of how we will design the specific mine as we move forward. This program itself is just about completed, and the initial material is already under analysis by our local laboratory. So we look forward in the near term to be able to publish the most recent data from this most recent drill program to further demonstrate the composition and performance of our Tonopah lithium resource here. As far as our financials from the past quarter versus the same quarter a year ago, as mentioned, we are excited to have continued to make and sell recycled product from our first recycling facility. This is different than we were a year ago this quarter. We still received significant amount of grants from our government operations. Some of our earlier grants, we actually just finished a few months ago. These were 2- and 3-year projects that we have concluded. And as mentioned, we did just win and contract a few new grants as well over the past year. So as far as our cash for operations, we've significantly reduced the capital expenditures over this past quarter, really because our current recycling plant is now constructed and the majority of focus is on operations. We'll be adding additional components going forward, but it's fortunate that over the past year, we have invested enough to build out this facility that is now producing commercial-grade product that we are selling into the market. As we've ramped to operation this recycling plant, we have increased the expenses we have at that facility. We've raised substantially more funds over the past quarter than we did the same quarter a year ago. And as a result, we had a cash balance just over $20 million at the end of the past quarter. As we have brought these new grant contracts on, one of which just started over the past month, we do have a significantly larger balance of our contracted grants now. So just over $200 million in undispersed but contracted grants. And separately, we've won competitively awarded investment tax credits from the IRS worth almost $60 million. So we're looking forward to continue to move forward with these projects as we continue to ramp up our first recycling plant to continue to generate revenue that allows us to move this company and our business model forward. With that summary, I think now we'll receive some questions from the audience and provide some answers to the public here.

Yes, Ryan. We actually have received a few questions recently through our normal communications. So we have 2 questions that I'd like to post you to answer. The first question is, given that the company has 2 lines of business, can you share how it intends on simultaneously funding the commercialization of both?

Yes, it is rather rare to have both a battery recycling and a primary mining business under one roof. And from a cash flow and fundraising perspective, they do end up being quite complementary. Normally, when you have a mining and refining business, you have to raise funds initially, and then it can take many years to go through permitting and construction and ramping until you get your first dollar of revenue. And if that was your only business, that's a very long period to wait from when funds are invested until funds are returned through the sale of product and revenue. By having our battery recycling system in parallel, we spent capital last year really to build up that plant to install the equipment. And now that plant is generating revenue internally. And the cash flow from our battery recycling business is helping to fund a lot of the design and development of our primary lithium system. As we ramp up a lot of the CapEx for the recycling business over the next few months, then it really does transition into needing those dollars for the primary lithium side. So for the rest of this year, there are limited expenses needed for that primary lithium business. And then as we move forward and build out that commercial scale lithium refinery, that's when the larger expenses come in. So really having the revenue from operations and the capital expenditures per business unit be out of phase with each other allows them to work forward in a very complementary fashion. And when we speak with potential investors about this, they really do see how these business units are synergistic and actually reduce the total amount of funds that have to be raised externally by the 2 business units working together.

Thank you for that, Ryan. The second question is, are you seeing a slowdown in the electric vehicle market and the corresponding demand for battery minerals? And then the second part of this question is, if so, how does this affect ABT's ramp-up plans?

Yes, there's a lot of perception about the relative growth of the electric vehicle and stationary storage battery market. Some of the numbers from last year just came out. And worldwide, in 2023, about 13 million electric vehicles were sold. In calendar '24, that number went up to about 17 million. So even though there may be a perception that the electric vehicle market is slowing down, there actually has been substantial growth within calendar '24. And when we speak to many of our OEM partners, we hear similar sentiments about there being a difference between the perception of growth and the actual growth. And especially over the past few months, there has been a transition between preference of where these battery metals are sourced. There is increased demand to actually source these battery metals from the U.S. versus abroad even from free trade agreement partners. And just over the past few weeks, we've been speaking with several domestic battery manufacturers and automotive OEMs who say they are strongly prioritizing sourcing the battery metals from the U.S. because they want to make a closed-loop domestic supply chain. So we still do see growth in the electric vehicle market, and we do still see a strong preference for U.S.-based OEMs to source these battery metals from OEM-based providers. Great. Well, thank you for those questions from the audience. I think that wraps up our summary for our fiscal quarter 2, 2025. Our full financial filings are also published and available for review. So at this time, we just want to say thank you to all of our employees, our shareholders and our stakeholders who allowed us to get to where we are today, and we look forward to moving forward with you as we go forward here. Thank you.