American Resources Corporation (AREC) Earnings Call Transcript & Summary

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

Thanks, Rob. Good afternoon. On behalf of American Resources Corporation, I'd 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 I want to discuss how we are 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'd 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'll be holding a question-and-answer session todays following our prepared remarks. [Operator Instructions]. We're going to begin today with a few comments from our Chief Financial Officer, 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 of 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 plan and execution, as well as believing in our value of the 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've gone through during 2022. For ReElement Technologies, we've 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 the worldwide leader in critical mineral refining, is worth reflected upon. In October of 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 the 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 in 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 stand-alone public company. Over this brief timeline, we have also secured an initial independent working capital facility at the ReElement level. We've 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 2 domestic magnet manufacturing companies in existence. 2022 marked 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. We remain focused on monetizing our platform of assets for our shareholders. We will also discuss the options and actions we are taking with 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 ReElment 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've 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. 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 million 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 2 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?

Thanks, Kirk. As we frequently state, our ReElement Technologies division represents an incredibly exciting and very strategic opportunity for us. 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. 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 develop 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. As Kirk just highlighted, the expeditious timeline of some of our milestones, I'd like to reiterate some of our -- 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 these separated and purified rare earth and critical battery elements. Our technology is showcase that we, meaning the United States, can migrate away from and no longer needed to depend on foreign adversaries to refine these minerals necessary to advance 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 technology's 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 or 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 nonspec as well as virgin ores. Similar to the MOU we signed earlier this year to refine spodumene or 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 or manufacturing scrap. In fact, we're 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 chemistries evolve 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've had early success in developing partnerships such as the ones we've established with our Magna partners, USA Rare Earth Magnets and Advanced Magnetic Lab in establishing the first complete domestic life cycle 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 element 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 and 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 refining 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?

Thanks, Mark. First, I'd like to thank our team for the hard work and efforts they put in to condition 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 sales for us, our ReElement Technology division and commercializing our leading -- we accomplished as well 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 is generated from our McCoy Elkhorn complex. This was offset by the idling of our Perry County Resources Complex, which we'll discuss later. At no point in our history, as our business has 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 but also believe that the enterprise value of a whole is currently a substantial discount relative to the sum of the parts or comparable to peer valuations. Let's dive into each division area. 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've set up 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, Carlos 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 gooses 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're starting to see the world open back up, including the U.S. market with 2 new blast furnaces opening up in the last few months. Now this will take time for it to trickle through but met carbon prices are still at very attractive levels, and we're starting to see the transportation and logistics bottlenecks hit, but also open back up, which will drive revenue and drive value. The supply for high-quality met carbon remains constrained. There's not a lot of new investment going into the space. A lot of the existing mines within the space are all legacy mines that are producing a 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 and which resulted in substantial downtime of expanding the mines and positioning the mines. And then also in the first quarter, setting up the mines for the long-term growth, including adding the second section at Carnegie 2, which we could talk 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 just 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 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 a substantial amount of assets over there, we have a 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're 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 derisk the Wyoming County and expedite the production of Wyoming County in an extremely accretive way. Wyoming County is a mid-vol complex with also a very, very high-quality, high-vol AECOM mine in the same complex with the processing plant and rail load-out facility on site. 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 to our business and based on our opinion. Upon evaluating several opportunities, we're 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 3 sections we have running at the Carnegie mines are, one, accretive and very high-margin complexes for us now that we've went through the development, spent the development over the last 6 months and position 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're positioned to do that going forward. The mines and the production capacity and the production run rates that our men have hit would enable us to hit that growth and to be profitable going forward based on the production we're currently achieving right now. One thing we've 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 through their processing plans. 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's no need to do that, and what we realized we needed to going forward. Now we control our own destiny. We have 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 impoundments. And we're showcasing that now. The processing plant is up and running. We're able to start monetizing the inventories on the ground and setting ourselves up for a record second quarter. The -- as I stated earlier, we will continually evaluate all of our mining complex. Our Deane mining complex is -- has started production. The team over there is running. They're hitting strides, they're set up for growth, and we're excited that they've been able to get that mine into production which would ultimately generate cash flow streams for the business in itself. We'll look 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. The -- to help facilitate the start of the processing plant, we also stockpiled over $6 million worth of met carbon over at our McCoy Elkhorn complex. That is revenue and cash flow that we'll be able to realize here in the next few months -- next few weeks, actually, now that the processing plant is up and running, and it's 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 plant 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're able to run very efficiently. Now with 2 sections, the margins and the margin expansion we get from doing that will be showcased here very shortly. And we're 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 2 operating sections at Carnegie 2, we're 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 stoker 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're at today. And we're starting to see the production coming out of the Carnegie mines, which are 2 very high-quality mines that are very minable 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. The -- as recently communicated, we continue to work through the process for the $45 million tax-exempt bond in the state of West Virginia that has preliminarily 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've 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're 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 derisk 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're excited about the developments and the progress we're making and the planning that we're making at that complex to get that mine -- that complex online. With the issuance of 2 non-dilutive capital sources, we're excited to showcase how we position the complex to be a first-of-its-kind advanced carbon and rare processing facility by combining premium mid-vol met carbon production with unique rare earth capture process technology, utilizing electroless on-site to treat your water and your waste material coming off your plant and then further capturing it 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 stand-alone rare earth element recycling facility or processing facility. It's a fully integrated coal processing facility capturing your water streams coming off there. We're excited to showcase that in the next year as we get this complex further advanced. Lastly, we'll also explore leasing opportunities of our other idle assets. And similar to our structure, we've done with Deane mining complex, which they've started production recently, we'll continue to explore opportunities to monetize additional assets and support the existing production that we have in our existing team that's running our hand -- running our mines to be the most profitable and the most accretive to our investor base. We'll expand a little bit on the ReElment Technologies division that Mark just made. We've never been involved with amenity that is as exciting or to a higher ceiling than ReElement does. Looking at it, where you see a lot of the companies within the battery recycling space, there's nobody that's fully integrated from the battery to the magnet. Our technology developed at a 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 cost, make it truly a more circular economy and a more efficient and optimized economy. Our technology can do that. We're Hydromet. Hydromet is multi- -- hundreds of millions of dollars 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 it. We've had numerous calls with parties, new battery manufacturing plants popping up throughout the United States, and we're excited to continue to advance those discussions forward to contracts for our investors. We're 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 chemistries of 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 Rare Earth, which is standing up one of the largest magnet manufacturing facilities in the United States, and we're 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 technologies enabled us to enter into numerous partnerships and MOUs and conversations within the African environment, one of the most resource-rich nations, accessing the ports where we're 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 and chemistries and ability to grow. Ability to be efficiently deployed due to modular design and environmental sensitivity is something that has not existed in this industry and something we're bringing to this industry. We're thankful for the team that we've been able to put in place at ReElement 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. There's -- he was the #2 employee at CATL, the Chief Technology Officer. He helped build that business from the ground up, and he's helping us do the same. He's extremely valuable. And the people that he's working with and his team that he works with are phenomenal. And we're excited to have them on board, and we're excited to further expand that talent pool, which we'll be talking about here in the next few months -- next few weeks. We're seeing numerous opportunities in the recycling space beyond what we've announced with our Magna partners, and we're seeing those opportunities for both magnets and batteries in localized regions. We've 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 industries, which would not -- 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 position our value-added partners in addressing our sustainability. 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're 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 utilize 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 ReElement spin-off, you'll see that we filed a Form 10. We're working with the SEC through the review process of that. We're excited about the progress that we're 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'd like to give a shout out and recognize our ReElement team for the groundbreaking set that 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'll 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 we'll 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 long-standing success developing the technology and operating such as Eli Lilly and Dr. Yi Ding 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 advisers, as I referenced, Bob Galyen, as well as a few others, which we'll announce here shortly. We'll 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. Back to recycling and what was mentioned earlier in this call, is probably a good segment to our American Metals division, and I'll keep this relatively short. American Metals has predominantly been a ferrous metal recycler for us as we reclaimed the legacy mining operations that were no longer viable in the current market environment. As we've 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 a 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've developed a process to 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 Magna grade materials today. The ability to do that within American Metals will enable us to keep ReElement as a pure-play refiner, which would 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, to 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. We had ample liquidity and do not foresee 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 at 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 from that matter. Just to reiterate, as the largest shareholders of American Resources, our management team is committed to maximizing the value for all of our shareholders, and we believe continued execution in splitting the ReElement divisions are the early steps in doing so. We believe we're 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. I'd now like to turn it over to the moderator for some Q&A.

[Operator Instructions] And our first question is from the line of Heiko Ihle with H.C. Wainwright.

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?

Yes. I'll actually say we're starting to see a lot of stabilization in that environment today. I mean from a labor market perspective, McCoy, they're effectively 2 new mines. So they're pretty good places to work, pretty attractive places to work. Supplies were starting to -- I mean, there's less suppliers out there than they were 5 years ago. but you're 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 somewhat to normal, but there were still a lot of challenges then. I will say now, we really don't see much of that anymore.

Fair enough. Okay. So fair to say progress can be felt even in the last 2 months.

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 he was a great customer, a great colleague, but the processing plant that we were having it processed out was struggling. I mean it was running at less than 1/3 capacity. So we made the investment to bring our own -- we have a state-of-the-art processing plan. It 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 -- they're doing a really good job actually. But also third-party business that we can bring in because of our processing capacity. That was probably in the fourth and a little bit in 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 grow off.

Got it. Okay. Perfect. And then just one quick one. You spent a decent amount of time talking about partnerships, both in your press release and earlier on this call. How 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 users or markets that you're mostly against? Or are you just anything that comes that may be beneficial?

On the ReElement side? Is that what you're referring to?

Yes.

Yes. No, we're worldwide. 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 and very aggressively in the African nations and feel really good about the resource origination of that. Obviously, domestically throughout, we're in numerous discussions. Hopefully, here shortly here some additional co-location opportunities. We're designing with another battery manufacturer right now, an in-line recycling process for them, how our technology can sit at their battery manufacturing plant to be recycle -- to recyle their waste material. Nobody else in the industry can do that. You can't put a Hydromet facility next to a battery manufacturing plant in a matter of 6 months. It would take you years and they don't want it next to -- they wouldn't want a Hydromet facility next to their battery manufacturing plant. We can do that. So those are -- those are the conversations we're having, but even our -- some of our -- couple of our board members have been over in Australia, talking to other lithium producers over there about our technology displacing their current processing capacity because it's lower cost. So we're not just focused on the United States market by any means. We believe that if we can replace solvent extraction throughout the world and position our technology as the solution for that, that's our focus today. And I would say from -- if you look at our team, you look at Bob's experience, I think we're going to be successful at that.

Next question is from the line of Mike Niehuser with ROTH Capital Partners.

Very helpful answer from the last analyst. So if I can understand what you said earlier in your narrative, the fourth quarter there is investment in the expansion facilities, and that was related to the processing, I'm assuming and the reason for stockpiling the $6 million worth of ore? Is that somehow related and we're transitioning out of that phase with -- at the end of the first quarter with increased processing capacity? Is that close?

Yes. I mean that -- I mean that just -- that did trick into the first quarter as well. We needed -- I mean, our customer is still running their plant, but it just wasn't running efficiently, which slowed some of our production internally as well. So stockpiling the ore slowing the production because we didn't have our own processing capacity up and running. And then, I mean, during the Christmas holidays, we also expanded. We started the development of expanding the Carnegie 2 mine, which during that period of time is relatively slow. Now I will say today, where we sit, the mines, all 3 sections are operating, plus the prep plant is operating, and they're hitting production levels, which would be commensurate with that 28,000 to 30,000 tons a month, which we think we can expand upon, which would put us at a very profitable state as a business going forward. Now we are also expanding currently our customer base as well, just diversifying a little bit with that additional production coming online. And we think we'll be able to -- we're in conversations with -- the good thing is you're seeing a lot of blast furnaces opened up right now. So there's quite a bit of demand right now. And even with the logistics, which are relatively tight right now, we're starting to see that open up.

So it's still met coal, correct?

Yes, everything. Yes, everything is met coal. I mean that's really where our business is focusing on the Carnegie mines right now just because they're -- that's what generates cash flow for the business. That's what will put cash on the bottom line going forward and focusing on the high-margin met coal versus exploring lower-margin products.

And you mentioned that Deane was starting production. Can you give some idea of the scale of that through the fourth or first quarters?

Yes. So they just started up recently doing some development mining. The attractiveness of what the team brought in over there, they brought a high wall miner. High wall miner is a very, very efficient form of mining, very low-cost form of mining. They're targeting right around that start off phase around 30,000 tons a month is what we're being told, which would translate into right around a couple of hundred thousand dollars of revenue to us, cash flow to us, a month. And they're looking at some pretty significant expansion opportunities around there. But they're hitting what they said they're going to do, I mean they've been delayed a little bit, but it's not unexpected, I guess, in this industry when you're starting up a new mine. But thankfully, they're in production today and they're hitting their stride.

Got it. And as far as like with Perry, you mentioned that the trying to get the right price for it and taking some of the equipment and moving it or transitioning it over to Wyoming County, in West Virginia. If you take that away from Perry, is that going to cannibalize or degrade the value of that asset as you would presented to a potential purchaser?

I mean we're looking at maximizing the value for our investors. We believe Wyoming County is one of the most attractive opportunities we have in front of us today, high margin, looking at generating cash. I mean we can talk very frankly. Coal business is sometimes -- we want to look at maximizing the value of our coal business today, maximizing the revenue and the cash flow generation from our coal business today. We believe the value of our assets redeployed to Wyoming County would be roughly $40 million of cost to reclaim the complex would be roughly $5 million. That would be a net realization of value to our investors of roughly $35 million, if we deploy it to Wyoming County. If there's an investor that would like to buy it, they can come in around those values and pay us cash for it. We are open to that. We are open to monetizing it in the most accretive way for our investors. But those assets and that equipment and there's other assets and equipment we can bring to Wyoming County as well. But today, our focus -- it needs to be run as a 3-section mine. If that was all our focus and all we were focused on doing is just running Perry County, we can put 3 sections in there, we can make money. There's a lot of people that want to do that. And we've had offers on the complex. They're not in a position, those offers weren't quite as high. Some of them were close, actually quite close to the replacement value of redeploying those assets to our Wyoming County division, but they weren't there yet. And so ultimately, right now, it's -- we're looking at the cost benefit analysis and looking at what's the most accretive aspect for our investors. And if that means redeploying our equipment and infrastructure and assets to Wyoming County, we'll do that, but what we're not going to do is sit on our hands and wait for somebody to come and match that value. They either need to move quickly or we're going to redeploy the assets and maximize the value today.

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

No. I mean I will say that -- I mean the $45 million is built in quite a bit of contingency. Also the ability for near-term revenue growth -- revenue generation during the development phases of that. We actually think we can be in revenue very quickly there even during the pace of development and offset those costs. I would -- I actually believe that -- I mean, $45 million is -- would be extremely well capitalized, especially with -- there's a lot of infrastructure we're already setting aside, rebuilding and ready to deliver over to the complex. What we're doing by doing that is we're offsetting. We're derisking it for ourselves and the tax investor -- tax and bond investors by doing those moves already. We've already started investing into that equipment. We've already started investment in the infrastructure. Now if we redeploy the infrastructure over from Wyoming, it's going to be an extremely de-risked investor and de-risked deal for both us and our taxes and bond investors. And that's a good thing. More higher likelihood for success and monetizing the asset, getting the assets online for the long term.

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

No. I mean I think it can be -- I'm going to be -- I'm going to caveat this. I don't control the bond markets. I mean I never -- we had -- how many banks just failed what a month ago, not even. So there's -- people like to sometimes pull me to the time frames on certain things outside my control, but this one is. When the bond markets are fully open and when we -- and I think our advisers [ Hilltop ] are doing a phenomenal job. I mean, world-class team over there, fully understand this environment. We're navigating, and we want to make sure we put a good deal in place with good investors, but right now, it's an extremely attractive mine to bring online. I mean our customers are beating down the door. We have offtakes that are very interested in that. There's numerous offtakes we can go to. Some of the legacy mining companies around the region also have expressed interest and desire for that product. So it's -- we want to get it online quickly. But we also want to make sure we do navigate the current market environment. And I think what we're seeing now is, I mean, even with unemployment rate climbing today, I think the interest rate environment is probably stabilizing, which is a good thing. That's the most important thing to get a tax and bond done. Over the last 5 months, it would have been nearly impossible, just because that's what killed those banks, right, with rising interest rates and pricing deals below it. So we're -- but I think we're starting to get a pretty good environment for it.

Once markets stabilize -- sorry for interrupting, Mark, I apologize. Once they stabilize and pretty much closure would be imminent at that point. I'm wondering and then how long to build and start seeing some benefit from Washington County or Wyoming County.

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

But as far as production goes I don't...

Yes, we just started generating revenue in 3 months. I mean there's some work -- we got to put cap, which is the taxes and bonds will fund. We're bringing infrastructure over for the processing plant from other plants we already have that are idle and not being used. And then -- but it's -- within months, we can start generating some revenue on the development -- that would be development revenue, though. But within 6 months, and building in a little bit of cushion for myself, we can be producing at pretty good -- pretty steady state.

But I'm a little ignorant here or totally. Aren't you going to have to build a plant? Or is there an existing plant that you're working on?

Yes. Wyoming County is a really attractive complex. The way that we developed it and the way that we -- the way that it's set up and the way that our plan has been developed, is there's 2 deep mines that would build directly into the processing plant that's already on site. Now we are going to upgrade that plan using a lot of the infrastructure we already have and equipment we already have at various projects. So we'll -- that will be the focus is developing the deep mines and upgrading the plant simultaneously. There's a real load out on site as well that accesses the Norfolk Southern rail. So it's -- why -- we paid over $26 million for this complex when we bought it a number of years ago. The reason we bought it is one, it's fully permitted; two, that has the existing plant on site that can be upgraded quickly, got the 2 deep mines within a strata that is very similar to what we already mine in Kentucky at the Carnegie mines. And so it's a relatively straightforward development plan and a low-risk development plan given what's already on site there today.

Excellent. I appreciate it. You have a lot going on and Wyoming County doesn't get a lot of press except for the bond in the last couple of years. So thank you for your patience. Moving on to ReElement. I'm really quite interested in the spodumene and your ability to co-locate. It seems that there are so many of -- there's like dozens of lithium companies out there, resource companies that each have their own kind of like blackbox or bag of tricks to be able to concentrate that the lithium to ship. And I just want you to tell me if I got this right, but it sounds like you're talking to lots of people. There's really an opportunity. But I'm wondering, sometimes disruptive technologies have a tough time penetrating until it's seen that it really is lower cost. And I'm just wondering if you have the flexibility to be able to dominate that space in terms of really the difficulty that lithium companies are having to be able to produce a concentrate. And I'm not -- the reason for the long question is I'm just -- I don't want to overstate that. But it just seems like you're in an excellent position in a market where if this EV thing is going to work out, lithium is going to be kind of one of those critical items that it really rises to the top and being scarce. And so how do you see you fitting in from an industry level as being the go-to technology to be able to -- for the initial extraction of lithium and production of spodumene.

Yes, that's a good question. And that is really what -- so why our technology is able to be showcased in a very efficient way. One, our energy use and our chemical use versus the alternative is a fraction of solvent extract. We're not using a series of mixers and settlers, hundreds of them at times, even thousands of the time. We're using columns. And we're not using high pressure or high heat within those columns either. So it's a very efficient form of processing. The cost structure matters, right? Everything matters. But most -- what a lot of people don't realize is logistics matter. So when you're dealing with commodities, if you're transporting a raw commodity halfway across the world to be refined, there's a huge cost to that. Lithium spodumene is typically a 6% lithium ore, meaning you're transporting 94% rock halfway across the world to be purified to a 99.99% pure. Most people can't get to that high, we can. But more importantly, we can localize that. So why Africa has been such a huge opportunity, there is hundreds of thousands of tons of lithium spodumene that is transported from African nations to China today to be purified. We've already been testing that material in our facility, and we've already been processing it to showcase what it can do one at small scale, but what we've proven is that our technology works as it scales up even better. And that's because of the surface area interface. Basically, the service area is the resin. So the bigger the columns, the more resin you have, the more surface area you have, which lowers our cost structure. But the ability to localize that and the ability to do it timely, meaning we can build a plant and deploy it in 3 to 6 months. The agreements that we're putting in place throughout different African nations right now, predominantly imports because then we can process multiple products and multiple mines, that's a big deal. And there's a lot of volume of material that can be processed and can be processed very quickly. So I do think that the localization, not only at the spodumene side but also on the battery manufacturing side in the battery industry is a big deal. If you can offset that transportation cost, take things off the highways and you're transporting back and forth multiple times, you're saving everybody money in the equation. And we were working with a number of the OEM partners showcasing our technology and that takes time. I mean everybody wants us to find an offtake immediately. And so that we also want to select our partners and they want to select us and make sure that they feel comfortable with it. Now we are in third, fourth, fifth, sixth, eighth meeting with certain parties that have seen the technology and including the one that we're co-locating a design facility for them as we speak right now for their facility. So it's a big opportunity. Now I would say the African opportunity from a revenue perspective are huge. These are big mines that are mechanized mine. These aren't children labor, there's a misconception of how things are mined over there. And and really not fair to some of the attractive opportunities that are over there. But these are big revenue opportunities. I mean the one -- the first one we're working on is a pilot program. It's an exploration phase permit of 8 million tons of lithium spodumene, targeting to produce, their initial production is 35,000 metric tons of spodumene a year under the exploration plan. That's a big opportunity, a big potential for us and could be substantial revenue right off the bat, and we could build on that pretty quickly. We're working aggressively on that. We've working on it for almost 8 months now and it's coming to fruition pretty quickly.

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

You hit on a good point. So what's unique about -- so our patents are great and our trade secrets are better. But what's also -- what else do we possess is the ability to run simulation software that we can plug in based on [ our CPS ] machines that we own that we can plug in the data that will run the virtual simulations to tell us our mass balance calculations, which means we can process any ores, any chemistries. Because of that software, we can move very quickly. We don't have to spend weeks or months in labs running analysis to dial in or solve an extraction call tanks and change our emulsion chemicals and ratios. We don't have to do that. All we need to do is run it through our math balance calculations based on what orebodies coming in to run those simulations virtually. That software we control that was put together through 40 years of research by Dr. Wang and Dr. Yi Ding on our team now is an absolute game changer for us, not only for the lithium bodies, but also the magnetic materials. And that is what's unique about the flexibility of our technology. And then the purity. I mean, purity matters, purity is -- I mean, the impurities within a battery are oftentimes what causes a combustion event, which causes fires with the batteries. When I first met Bob, that's one thing that he's like, you need to make sure you can bring high purity and we showcased it to. He joined our technical advisory board and then just recently agreed to join our Board because he felt comfortable with the efficacy of our technology and the proof in our technology and how it works. He watched the facility run. He's like, that's gold. That's a game changer. And we're -- I mean, I'm obviously super thankful to have him on our team because he's a rockstar. I mean it's probably the most respected or one of the most respected guys in the battery industry to have him on our team -- I mean hard to express our gratitude towards that, but he believes in the technology, and that's important.

Does the colocation that you're seeing that opportunity, does that reduce the need to be able to build this southern facility in Indianapolis that you've kind of got online? Or is that -- and what's the timing for that?

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

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

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

Are you talking about cobalt mines there?

Yes.

Okay. I do apologize -- I apologize for keeping this long. Last question. Do you think we're going to see -- start to see meaningful revenues on the -- from ReElement on the rare earth and the battery metals this year?

I think by the end of the year, I mean we are already making money on the metal side of the business and part of our breakdown recycling process. Our -- I know USA Rare Earth and AML are actually both doing really well on the magnet side. They're getting really close, and that will open lock some pretty significant revenue for us. From everything I'm hearing, they will be up and running this year, which is, I know, AML will. I mean I think USA Rare Earth can be a lot bigger producer. And I mean they're being led by a world-class team. And then on the battery side, I mean, I think some of these projects we're working on could move really quickly. So by the end of the year, I think we can be generating pretty substantial revenue but there is time. There's things outside of our control. We wait on our partners for some of those things. Now that being said, they're advancing quickly though, and we feel good about those time frames.

Our next question comes from the line of Steven Segal with KBB Asset Management.

Mark, congratulations on all of the benchmarks you've already accomplished with the element especially. Most of my questions I was going to asked have been asked and answered already. So I was just wondering if you can talk a little bit about Novusterra.

Yes, absolutely. So we sold -- Novusterra actually ties into the Wyoming County Complex as well, part of what -- that will be the initial pre-feedstock process. But we ended up selling the exclusive rights to those patents, to Novusterra -- for equity Novusterra. As you can see, what we've said -- we set out earlier or end of last year with the ability to align the interest of all of our team members, but also people dedicatedly focused in that. And so Novusterra was restructured. We brought in a new management team, part of our team moved over there. And now they have a dedicated focus on operational control. Now what's really exciting about Novusterra is we did a sublicense with [ Kniefense. Kniefense ] already got the first contract with one of the military division and now we're -- they've been approved for the second one as well. So Novusterra itself knock on wood here very shortly, it will be a profitable entity, which is really attractive based on those partnerships that had signed and the agreements it has with the DoD related parties through [ Kniefense. ] But ultimately, then the technology development and the commercialization of it internally through Novusterra will be tying into the electrolysis technology. The goal -- the new team, the new CFO, Josh [ Bimba, ] who's a phenomenal guy, has come on board. He's getting the audits back in line. He wanted to recreate them so that their his work, and he feels comfortable with them not that there's anything wrong with the prior, but he is kind of dedicated guy that wants it perfectly. And then the company will refile S1 to go through that public process. And it will be a lot easier of a process than it was before because they won't have to raise the full $16 million the way that they're structuring it, they can do a much smaller deal and the company doesn't need that kind of money. So we feel really good about it. It's progressing nicely. The team is in place. They're focused on it. They're dedicated on it, and they're hitting the milestones...

And where would that be located, do you think? Would that be located in the Wyoming area?

Yes. Yes, I think Wyoming. It will also be throughout Kentucky. And then I'm not on the board of members there anymore, but from my conversations with them, I believe it will end up being technology that's licensed the third parties as well and the ability to license that out to monetize it because it's a really unique technology processing waste material that otherwise would end up is completing in the early taken process before it goes there to be utilized.

And that's for the fly ash, right? Fly ash.

Predominantly starting off with carbon waste materials. So tying in from the coal that's sitting on the ground post processing and fine particulates that couldn't be recovered is the optimal feedstock for this, which is ultimately using electrolysis where you can also recover the critical rare earth elements that are present within those feedstocks as well as a pretty byproduct out of it.

Next question is from the line of Kyle Gallagher with Merrill Lynch.

Mark, first off, thank you for your patience with all of the questions. This is a great call. Very informative, and it's not lost on all of us at the time that you guys are sacrificing here. So thank you on that. I'm wondering if you could just kind of broadly speak to like the length of your guys' patent portfolio. Just kind of specifically on the ReElement side, centered around the chromatography and then the electrolysis side. I'm just kind of trying to understand like what type of runway you have as far as patent protection is concerned?

Yes. So I'll walk through those relatively high level, but I'll dive in a little bit. On the produce technologies, the chromatographic separation for batch processing of magnets is about 19 years to 20 years worth of life left on it. So it was originally filed as a provisional patent and then it was filed thereafter. So these are relatively new patents. And then the battery patent, we actually worked with Purdue on modifying that patent to run continuous multimodal chromatography that was filed as a provisional and we actually just filed a few months ago the actual process patent, which -- so that will have roughly 20 years' worth of life on it. Our electrolysis technologies were filed through Ohio University developed by [ Dr. Body, ] who's on our board, She is a genius, one of the most talented hardest working ladies that I've ever met in my life beyond my wife. The -- I got to give her prop -- those patents probably -- roughly, there's about 5 patents, including the patents we sold in Novusterra have roughly about 15 years of the life on them. So we have a pretty long runway on all of our patent portfolio. Now we're also working on about 3 additional patents around our process chain for various materials and hopefully get at least 1 or 2 of those filed here within the next 6 months.

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

Yes. I'm going to work my way from the end of your question for backwards. Offtake-wise, the people -- there's been a lot of offtake signed in the industry through people that had prior relationships with those firms. But what people don't realize is those firms are actually up and running. So most battery manufacturers that have announced production in the United States are anticipating running by 2025, 2026. So they're not actually supplying material yet. That being said, offtakes, we don't believe are going to be a problem. One, domestically, everybody is searching for IRA compliant material. Our process enables IRA compliant material. We -- there's nobody that refines rare earth elements in the country other than us. And then on the battery side, you have -- our competitors like Life Cycle or Ascend, they have -- Ascend has a unique technology where they can produce can material. That's also going to a customer and trying to tell them to take a new product that changes how they do things today. We produce isolated highly purified elements back to effectively better than the virgin ore. That gives us the ability to have a lot more flexibility and our customers to have a lot more flexibility. So we do not anticipate based on our conversations and based on the feedback of having issue with all things. I think we can sell everything in this industry 10x over, which is a great problem to have, especially the purities that we produce at. Now there's -- as we work with the battery manufacturers, of showcasing our technology on a colocation aspect, there's definitely -- I mean, we're bringing a new technology -- not a new technology, an existing technology to a new application that is -- that they have to -- they want to see it, they want to come through our facilities, which they -- a lot of them have visited our facilities, and they feel very good about what they see, but they still want to see it and they want it to be showcased. And so that's what we've been doing over the last 6 months. We've had -- on a weekly basis, we've had battery manufacturers to partners coming through our facility, learning about our technology and getting up the feet on it. I mean the technology, as I said, is not new. It's been used in the sugar industry, which is a very low-margin industry for years. Insulin, ELI Lilly produces insulin using chromatographic separation. That's how it was actually through Dr. Wang, he worked with the ELI Lilly for generations. That's how we met Bill Smith who had 35 years at Lilly running chromatography facilities and building them to them. Now he's on our team as our Director of Engineering, which is -- I mean, we're standing on the shoulders of giants with regards to our technology. The feedstock -- yes, feedstock is probably the -- I will say, on the refining side, there's -- batteries are starting to come to end of life. On the ores we're starting to see a tremendous amount of progress there, which we're going through some very resource originations that we can talk about here shortly, hopefully, which we're progressing very nicely. Magnet size, we're working with one of the largest wind mill manufacturers in the world. That is now delivering us magnets, and we have another call with them in the next week to discuss the amount of magnets they're supplying through there, working with the wind farms and stuff of that nature. But the feedstocks are still building. It's on the rare side, it's an education, telling people throwing them away because we can recycle them. And then two, we've developed an innovative way to break them down. I can recycle our hard drive cost effectively now, which are small magnets. But our process that we developed internally to be able to process those magnets really cost effectively is a game changers. Actually, the idea came by Jay Campbell, who works for us alongside Jeff Peterson, who's -- I mean just very smart guy, thinking logically on how to do this. But that's -- developing those feedstocks comes into developing innovative ways to be able to process those feedstocks and cost effectively process those feedstocks. So that -- I would say feedstocks is probably across the industry as a whole, it's probably the biggest bottleneck. But once you get to the black mass, then there's nobody else that's doing what we're doing, the ability to process and refine locally, in the United States that does not exist. Everybody else is trying to build [ hydromet. ] I don't think it's going to be able to operate profitably, and I think they're going to have a tremendously difficult time trying to keep it in compliance post operating, but along the energy and chemical costs associated with it.

I can jump in here too and add some color -- Taylor. As regards to feedstock, it's probably the biggest bottleneck, especially on the recycling side, as more batteries become closer to end of life or get the end of life, obviously, with the adoption of EV and other technologies, those supply sources will grow. But the flexibility of our technology allows us to navigate through those bottlenecks of feedstock supply, and that's why we've not pivoted but looked at natural recurring sources of lithium in spodumene ore that come Africa comes from the African continent because they today are producing lithium spodumene. They're exporting it to China in a raw form to be processed. Getting our hands on those type of feedstocks today is key for us. Currently, there's a lot of lithium projects being explored and developed in the United States, and there's also need for permit reform. I think everybody can understand that here. But to get a mine up and running here in the United States takes somewhere between 10 and 15 years, just given all the regulatory constraints that we have here in the United States. And those are good from an environmental standpoint and labor standpoint and everything like that. And that's why our technology, the flexibility of our technology fits really well within -- and solves those constraints in the supply chain because we can navigate it, we can co-locate abroad where we can add value of producing purified resources as well as growing congruently with the market on the recycling side, where we don't have to make massive CapEx that hope that the supply -- those feedstock supplies pick up or if there's a big [ CASM ] there between deploying that capacity and not having the feedstocks to feed it, which is going to -- which we think will probably cause a problem in the recycling space as other refining methods tend to be deployed. Does that makes sense?

Yes. Thanks a lot, guys. Appreciate it, and it's been really fun to watch the development of the company here and bringing these new technologies online.

Our final question is from the line of Derek Stone, Private Investor.

Concerning the ReElement, can you tell us for the SEC filing, is there any more input required from American resources or any kind of additional feedback that might be -- what that means for the timing of the spin-off.

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

I can add some additional comments, Derek, as well. I mean, as we work through that SEC comment process, and like Mark said, there was nothing catastrophic in those questions or comments, and we continue to work. And it's hard to comment on the timing of that process. But I will say that what we're focused on from spinning out the ReElement technology is creating value for our shareholders. This is not an exercise of speed. This is an exercise of value. We feel really good about where the ReElement division stands as far as the spinout goes as well. We want to make sure that we do right for all of our shareholders and extracting the commensurate value, which we think is worth and Mark said, we -- our intention is to build ReElement into a multibillion-dollar company. We think we have the team and we think we have a line of sight to do that. And we want that to be represented in the value of the spin out, just not -- we just don't want to spin it out for the sake of speed. We want to spin it out for the sake of extracting value for all of our shareholders.

So could there be another round of questions from the SEC when you refile.

Hard to say. We can't. Absolutely. That's definitely a possibility. But we'll have to wait and see.

And there's not in a situation where you would then have to wait for a 10-Q for the first quarter and refile again? Is it just a 10-K for once a year that will cause that?

It's hard to speak on the timing of it. Yes.

Yes. Yes, I mean, I wish we could give you a lot of clarity on that. If the 10-Q would need to be refiled. There's a -- so by the time that it would come out again, would the numbers go sale potentially. We hope to move quickly, but we -- and obviously, we believe it's in the best interest, the investors to do it. We will move it as quickly as we possibly can, but the SEC is going to do what it does, and we appreciate the fact that what they do. I mean, they rather protecting all of us. So they will run their process. We will respond as expeditiously as we can to answer their questions, should they have any additional questions and push this process forward as quickly as it possible.

Thank you. I'll now turn the floor back to Mark LaVerghetta for any closing remarks.

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

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