American Resources Corporation (AREC) Earnings Call Transcript & Summary

Well, good morning, everyone, and thank you for joining us today for our virtual Investor spotlight event featuring American Resources Corporation and Advanced Magnet Labs, Inc. My name is Jenene Thomas. I am CEO of JTC IR, and I will be the moderator for today's event. I am very pleased to be joined by Kirk Taylor, Chief Financial Officer of American Resources; and Mark Senti, Chief Executive Officer of Advanced Magnet Labs. Welcome, gentlemen.

Thank you.

So before we get started, I just want to inform our audience that American Resources is publicly listed and traded on NASDAQ under the ticker AREC. During today's discussion, both companies will be making forward-looking statements, and I encourage you to not only view the SEC filings, but each of the company's website, so americanresourcescorp.com and mitusmagnets.com for the latest information. So gentlemen, very excited to get started for this discussion. We will be having a moderated portion of this event. I have a bunch of questions lined up for both of you really to be able to outline the opportunity here and explain further this strategic partnership you guys have. Then we will open it up for Q&A [for] our audience. And at the end of the moderated portion, we will have the opportunity for you to ask questions specific to today's discussion. So Kirk, so glad to have you back on the platform. It would be great if you could kick off today's discussion by providing a brief overview of American Resources with specific focus on your ReElement business.

Thanks, Jenene. Thanks Mark and team for joining and thanks for everyone out there for taking an hour out of your Thursday morning to join us here. Like always, we always have updates Jenene, but we're going to keep it pretty straightforward today to talk about Mark and his great team at AML. We just did a corporate update a few weeks ago. And even though we progress on all fronts, we want to keep a pretty good this year. I think we communicated in the past, ReElement is a wholly owned subsidiary of American Resources, as you mentioned, we trade on NASDAQ under AREC. We have also publicly disclosed and discussed previously, our intent to spin out ReElement when the time is right for -- to maximize value for all of our shareholders. We continue to push forward both on a technological front as well as a strategic and partnership front, which is why we're super excited to talk to Mark here about his innovation on the Magnet side.

Wonderful. So Kirk, let slide in a little bit deeper here. So in late 2022, ReElement signed a memorandum of understanding or an MOU of offtake with AML. Are there synergies here more than just a customer relationship?

100%, selling oxides into the market is something that anybody can do, but trying to build a domestic supply chain from the ground up, is only things that come out of having strong partners. We have an amazing technical team behind us, researchers and developed PGs out of Texas Tech out of Perdue. And Mark and his team have the same thing. But so by combining both the initial inputs into the domestic magnet side as well as the ability to actually innovate in creating magnets is an amazing partnership. We're not just looking for simple magnets used in simple applications. Mark and his team have demonstrated great ability to innovate for aerospace or DoD. Really strengthening our ecosystem domestically from within for the last 30 years or so. All the innovation in this industry has been gutted and taken overseas, which leaves our defense department in the hands of our adversaries, right? When we are constructing F-35s, advanced missile systems, right now, all of those magnets on a large scale come from our adversaries. So they're able to turn this [indiscernible] off whenever they want. So just like we're doing on the battery side with partnering with innovative lithium ion battery producers for the DOD. We're doing the same thing here with Mark and his team. So it's really more than just a commercial relationship, working together to create this domestic supply chain to want to be more resilient and allow for a better use of all of our resources here domestically. But Mark, this is your going to be your showcase, so I will -- I'll stop here and Jenene back to you.

Perfect. Thank you. Mark, we're so happy to have you on our platform. We've been very much looking forward to this conversation. I think it's going to be great for investors to understand. I think on both sides, the strategic relationship here and the opportunity that exists. So it would be great if you could provide an overview of AML for those that are not familiar, and focus on the nature of the problem that AML is working to solve.

Perfect. Thank you so much, Jenene. Yes, so we are AML, Advanced Magnet Lab, Inc. We are located in Melbourne, Florida. We have 2 facilities. The genesis of this company actually goes way back, working in something called super productivity. You might know about that. If you've had an MRI, you might know about that if you've heard of accelerators and colliders. I'd like to talk about how we got where we are today. But first, why magnets matter? And first of all, we have electricity. Thanks to generators, which magnets are the heart of. All of our motors that we use for manufacturing, industrial processing, pumping water. The computers we're on today or our cell phones that we're on today, they all rely on magnets. And those magnets, of course, that's a discussion today. In terms of the raw materials and the production magnets, 80% to 90% of that is done in China. So over the years, as we worked in that area, what we call Superconductivity, we were focusing with NASA on something called turbo electric aircraft, which would be the future of aircraft, electrically propelled. We're also working with the U.S. Department of Energy for very, very large offshore wind turbines, but all based on superconductivity. It became evident to us around 2014, 2015, that superconductivity just wasn't going to get there. And so we looked at how could we really change, how we approach, not just the production of magnets, but the actual application of them and looked at how they were made in the past. And that's when -- that was the genesis behind what we did was to come up with higher power density motors primarily for transportation. Because we are working in superconductivity, we knew of a unique technology, a wire drawing process for producing superconductor wires. Now why is that relevant? Well, that was the genesis behind the idea of something we call PMI. And that's what we -- back in 2016, when we filed for our first patents, of which we have one patent granted for permanent magnets and a couple of patents, I'm sorry, for applications in terms of motors using them. That's when we kind of switch focus, really basically 100% to this whole idea of a different way to design, manufacture and apply permanent magnets.

Extremely helpful. Can you talk about the biggest challenge with competing with China?

Yes, absolutely. So as Kirk mentioned, all the Magnet manufacturing went away years ago, it all went to China. And historically, many companies have tried to compete with China. And the problem is, is when they go to compete with China, if you produce them the same way China does, you can't compete. China has low or no cost labor. They have low environmental standards. They can absolutely manipulate the market. So for us to produce magnets in the same way and apply it in the same way, it's just not sustainable. So we believe that it's really the downstream innovation. In other words, improving the performance and lowering the cost of the products that use the magnets, i.e. motors, which is the biggest market. If you can do that, that opens up markets for the upstream suppliers, such as ReElement, in terms of going all the way from oxides to alloys to magnets to the end-use product.

Really like to focus now on AML's breakthrough technology. You mentioned PM-wire. Can you provide us with an overview of how it is different from China's technology?

Sure. Perfect. And I have a slide to kind of give an overview of that and obviously, I'll try not to keep it too technical. So what you see on the top there is what we call these me-too piece part magnets and that's how they're produced in China. The way to produce those is they manufacture them in blocks. They didn't cut them into shape and they're sold as a commodity. They're sold by the kilogram or the metric tons. They're very restricted in their shapes and in their size and how what we call magnetize them, which is what really matters. And if you look at motors, motors require dozens, hundreds, sometimes thousands, and I'll show you an example here in a minute of magnets in there, and these magnets have [indiscernible] of have ever had the opportunity to play with strong permanent magnets. You can see they're very, very difficult to manipulate. They don't want to go where you want them to go. So the assembly of these magnets into the end-use products is complicated and adds to the cost of that product. What you see there on the slide there, again, is the Chinese piece part magnets at the top. We're able to produce very long magnets. We're able to produce magnets that have different shapes. In the motor industry, folks that are in this industry understand something called a halbach array. And a halbach array gives you kind of a perfect field for a motor. The problem with that is that those magnets are very complex, how they cut them out of blocks, how they have to control the magnetization. The way we do it is we can actually produce a halbach array in a single piece. And again, I'll show you an example on an upcoming slide. So yes, we don't look to compete in that commodity market. We focus on the end use product. How do you make that motor perform better and how do you lower the cost.

Okay. Very helpful. So if we can have you highlight now some examples of the value proposition with PM-wire.

Absolutely. And I have a slide for that as well. So I'm going to give 3 examples, just have a slide for one of them. So this is a program that we are collaborating on with the Oak Ridge National Laboratory. The laboratory in [indiscernible] there is the Department of Energy's group that focuses on energy and a lot of work in motors and particularly electric vehicle motors. So -- and this is all public. There's actually a paper that's been published by Oak Ridge and AML on this program. So they have a design, which is funded by Department of Energy which uses 2,750 magnets that are in that halbach array configuration, very complex. The other problem we have is that this motor requires active cooling, so liquid cooling of the motor. And if you could start that video for me, please. So we will replace 2,750 magnets with 8 of what we call PM-360, but 8 rings, and we will eliminate the need to actively cool the rotor. So you can see that in terms of the cost, we will be at a fraction of the cost as compared to using a conventional approach to such a motor design. So again, we placed 2,750 magnets with 8 rings and eliminated the need for active cooling. Another example, we were approached by one of the largest motor generator companies in the world. And they came to us and asked if we could increase the temperature of their motor from 120 degrees C to 150 degrees C. So we took a look at it, and we didn't have a solution initially. But because of the flexibility of our permanent magnet technology, what we, again, what we call PM-wire, we came up with a unique configuration, which, first of all, yes, we were able with the same material get them from 120 degrees to 100 degrees C. We also eliminated the iron or steel in the rotor to reduce the weight. It is very, very simple to assemble. We also improved the performance significantly, taking them from something called a conventional North-South configuration of the poles to the halbach type performance. And we also reduced something called the overwrap on a rotor, which absolutely shows performance. And coming away from that, what we realized and that leads me into a third example is that we could actually -- we convey what we do, we can actually say we're actually a materials enabler company. And what I mean by that is that same configuration that we use for that company, we have done through our studies shown that we can actually achieve the very lofty goals of the U.S. Department of Energy in terms of the power density for electric vehicles, so high powered and low weight. Their goals are 50 kilowatts per liter. We show we can achieve 80 kilowatts per liter with a non-rare earth material. It turns out that most of the industry is striving for higher and higher grade materials which is more expensive and more quantities of rare earth, we're actually going in the other direction. And ultimately, over time, once these materials are available, for example, the non-rare earth ones and other materials, which use less rare earths, we eliminate the need for those more costly higher-grade materials. So yes, we're a Magnet company. Yes, we developed great technology, but really at the end of the day, we're addressing the full spectrum, including lower cost materials.

Extremely helpful. Such innovation, Mark. Can you just talk through what your business model is for AML?

Yes, absolutely. So again, we focus on the end-use products. looking at the application, whether it be a power tool, whether it be an electric pipe, whether it be an electric motor, whether it's an EV motor, whether it's your vacuum cleaner, whatever that application is, we work with the end-use manufacture and say, what are your goals? What are your specifications? How can we optimize that? And so instead of just taking piece-part magnets and trying to level them together, if you will, we actually can take their desired shape magnetization and we can manufacture it in a very, very cost-effective way. It's a very, very high rate manufacturing process. We have been funded by the U.S. Department of Defense in multiple areas, but one of them was, and that's what's behind me now is a fully robotic, fully automatic high-rate manufacturing line for PM-wire. So that's the business model in terms of how we really solve the problems. It's kind of like people say, well, trying to mix all the TVs. Well, unless you come up with a better way to make a TV, you can't compete. And that's kind of -- that's what we've done here. So our business model is a combination, of course, moving into we're transitioning into first low-rate production and then high rate production. We're addressing things upstream, teaming with ReElement, for example, in developing our own alloys, which are lower cost as well. We will consider licensing to very large end-use customers, but very much like ReElement, our manufacturing and our CapEx is very, very low, number one, and it's very deployable. So for example, we'll be setting up lines in some of our ReElement facilities. We can set up lines in the actual customers facility. We can set up the lines regionally based on where the raw materials are or where the customers are. It's a very, very flexible approach as compared to the conventional way. So a combination of manufacturing and licensing, including licensing the actual use of it. So not just selling the magnets, but if we're going to -- we're going to reduce your weight in half and improve your torque by 20%, whatever it might be, that value comes at a cost. So not just sell the magnets, but get a small piece in terms of the royalty and the actual product that, that end-use customer is selling. And just a couple of other things in terms of the business model. I've already kind of talked about the competition, really not going to compete in that me-too market, that commodity market. And of course, the other big question is intellectual property. How soon it will take to China to steal it. We have no control over that. Obviously, we have patents that exist. We have many applications in process. But there's a lot of trade secrets. And there's things that we do that are kind of magical and you cannot reverse engineer them. If you cut those magnets apart, you'll never figure out how we were able to get that fancy magnetization in the way we did. So you do the best you can, we get to the market as quick as we can. We have strategic partners. We have a very large U.S. and aerospace and defense company, for example. I can't talk about any details. But as we have those relationships, it's not just AML out there to protect the IP.

Mark, extremely helpful. I think you answered a lot of what people were not able to understand or just didn't know, so that was extremely helpful. Kirk, let's now talk about what's next. What is next and the ultimate goal for your strategic partnership with AML?

Well, there are so many things, right? And Mark, you touched on the ability to innovate away from China. We're doing the same thing on refining the elements. You can't just do the same thing that they're doing and expect to achieve better results because they're always going to be cost competitive and resource competitive. One of the interesting things, and maybe I'll throw it back to you in a second, Mark to comment on is your ability to customize magnet solutions for end markets. So as we're talking with OEMs of different varieties, they're delivering us motors and magnets of different shapes to recycle and purify the rare elements. I believe this to be the case that you're able to customize solutions potentially if we work together on these OEMs to deliver better results for their motors or for their applications. But maybe just touch back on how you can take your technology and to make sure it's fully customizable for that -- and use that when we can continue to innovate beyond just the process, but also on the application.

Yes. So that's -- it's a really great point. And I do want to make it clear that we have the ability to make those 2 magnets actually at a better way. And we will do that as an introduction to some customers who aren't ready to go to a newer technology. So we can begin to provide them with a domestic supply and then get involved with their engineering and you guys -- and your team has already introduced us to some of your partners and their takeaway was, wow. We think about innovation in motors and there just isn't any. And this just opens up the whole toolbox for them. So it's both being able to, in the near term, possibly provide the more me-too magnets, but really what matters is in either. Let me give you a couple of examples. So it is customizable, but we have different ways to approach it. So for example, plug and play. If you take -- let's just use a drone motor, for example. We can remove the me-too magnets, replace it with one of our rings without even changing any design to the rest of the drone order and they get an immediate 10% improvement in performance. What does that mean? They can have 10% more torque or for the same given torque, it takes less energy. So they can travel further or lift more. So we have the plug-and-play opportunity, which is fairly benign to the customer. And then, of course, we have the ability, for example, with a drone, if we're able to optimize the other aspect of the motor, something called the stator or armature, we see upwards of 30% to even 50% improvement. So we have various ways that we can kind of come into a company, support them in immediate needs and then support them and now once they see our technology in a way to move down the road to address not just performance, but obviously costs.

No. That's great, Mark. And so as we look to -- and I guess, real quick, just a point of clarification, they're really on a large scale. There is no domestic supply for advanced magnets and advanced motors. Is that correct?

That's correct.

And so as we looked at even just the commercial consumer use of advanced magnets and advanced motors, if our adversaries if other countries who want to diminish our consumer economy, they can turn off their export of magnets and all the EV production would likely cease. Is that right, Mark?

The world ends without magnets, to be --

That's right. That's right. So even -- we think about defense, we think about advanced aerospace, those are concepts that are cool, but maybe they don't touch all of us, right? But if you're not unable to buy -- if you've been on a wait list for a new Rivian or something and [indiscernible] F150 lighting is delayed a year, 2 years, 3 years, that's affecting the consumers. But beyond that, so many aspects, right? Mark, from computers to your phones, all have these magnets that we don't make here domestically.

I mean if you start your day, maybe you brush your teeth, that rechargeable toothbrush driven by magnets. Maybe you want to make a smoothie in your blender for breakfast, and we [indiscernible] done with that, maybe you want a vacuum with your Dyson or maybe you've got Rumba. And then after that, maybe you want to go to the garage and you want to do some work with all your cordless tools, and your cordless blowers and et cetera. And maybe you want to get on a scooter that's electric. Maybe you want to get on a bike, a motor, et cetera. And one of the other areas that we're working on, what you mentioned, is really aerospace. And aerospace is -- in parallel, it's really following the same track as automotive. We will have all electric and turbo electric aircraft. That is the future. If you look at your large commercial aircraft, and this is a program that we are on to actually develop a very high-power density, propulsion motor aircraft, they're looking to really cut the CO2 emissions. And it turns out that it's more -- so at Turboelectric, you still use a fuel, but instead of putting that fuel from the big gas burning turbine engines, you put it through a turbine generator. So it turns out it's more fuel efficient to take that fuel to generate electricity and distribute it out to the propulsion motors than it is the gas burning turbine engines that is if you can have motors that achieve a power density equal to or greater than turbine engines. So all of transportation is going that way. The latest destroyers, all electric. All your cruise ships are. And so that just even puts more pressure on coming up with a sustainable way, a, to have oxides to produce metal alloys and then to produce magnets.

Yes. Our Chief Operating Officer, Jeff Peterson, was a naval nuclear officer. And he is -- it's overwhelming the parts that put that sub together that don't come from our [alloys]? And on the aerospace electrification, we're seeing the same thing on the battery side, right? But the purity really matters. And the high level of, obviously, I would say low fail rate, high level of accuracy is extremely valuable, right? That all comes down to the magnets in the purity and the reliability of the inputs, right? And so all those things really matter as we try to innovate across all of these industries. But yes, Jenene, sorry, you asked about what's next. It's just a little bit of a taste, right? So some of the companies that we're working with on the intake of end-of-life material. We're able to -- on the rare side, we're able to recycle it, purify it down into the purified isolate oxide form that we're working together with Mark and his team on to then turn them back into magnets. And then each of these feedstock partners that we're talking to were introduced to Mark's innovation team to really see, how not just to replicate what's already being done, but how to take those raw materials, keep it within our ecosystem and then innovate something better, which is what we're really excited about. And we're also really excited about the opportunity to co-locate, right? Mark touched on that. Any sort of commodity has material handling costs and logistics costs. The more you reduce those, the better your margins are, but also the better the results are because you're not -- you don't get spoiled traveling back and forth and your science teams and your production teams are in the same building. Understanding the outputs and understanding the input to making sure everyone is aligned. So of course, we've talked previously, Jenene, publicly about expansion locations. And within our campus, we're definitely looking to design a magnet facility with Mark and his team. But I guess it's a little bit of the taste of what's to come, Jenene, but every day with us, it gets a little bit better. But I want to leave a little bit of time for any further Q&A, but so I'm gonna turn it back to you.

Perfect. Kirk, I think before you got into what's next, your questions and conversation with Mark, I think, was probably the most powerful part of this entire discussion. We really got to understand the magnitude and the importance of what you guys are doing. So I appreciate it. I think I'm going to -- have you sit in the seat next time you ask the best question of the day. So...

We were on yesterday with State Director for a Senator, and he's former 24 years in Air Force. And he was just amazed by the work that we're doing together. But to get the military complex to see that there is a domestic solution for their supply problem isn't [indiscernible] So you have to have partners like marketing AML that can execute at a high level because you take it out of a theoretical and put it into our practical. And that's what military purchasers need to put in those large orders to innovate together. And we're so fortunate to have partners like AML to do this together. So sorry, again, to hijack there.

No, I love it. Wonderful. Okay. So that's all the questions I have. And I know that our audience usually has great some questions, and I don't think we'll be disappointed this time. So to our audience to ask a question. You can just click the Q&A button at the bottom of your screen, type in your question, and we will get to as many questions that allow. We are going to keep the questions to the focus of today's event, just to make the best use of everyone's time here.

Okay. So our first question is, can you outline your agreement with AML and how do the both companies benefit?

Yes. So I'll start, I guess. We both benefit because we're innovating together. And so we're looking at our partnerships, not just selling commodity to someone who could use a commodity, but how do we enhance our entire ecosystem together. So we've made a small investment in AML because we believe in the forced innovation, both in traditional rare earth magnets, but also advanced lower rare-earth or non-rare earth magnets as well. We want to be entrenching electrification economy and support innovators, but also from a feedstock development standpoint, it makes no sense to create an oxide, that's unusable. We want to create the rare oxides that are uniquely usable to what our outcome needs to be, which is domestic production of magnets. And so by just creating material in a vacuum, it doesn't meet any of our shareholders stakeholder needs. That's kind of how we're working together. And then from a technology side, I believe our technical team and Mark's technical team have been in really in conversations both on how we can improve our process, what we need to do to make a usable product for them, and then more globally, like I talked about introducing our feedstock partners, to, again, Mark and AML team to see how they can work together to then have a customer for them once their product is done. But Mark, that's just my viewpoint, but [indiscernible] welcome to your thoughts, too.

No, I couldn't have said any better. And I think what this relationship, the way we tie in our access to the market, your access to the market, this idea of a certain economy can really work. And I like to -- when I talk to people about it, I always kind of use the example of a cordless drill. Every day, somebody buys a cordless drill, every day, maybe somebody throws one out. If you're able to recycle 100%, the magnets in that cordless drill, you wouldn't have to mine other than what you need incrementally for the increase in cordless drills that are purchased each day. It really can work. But that ability to really work with the end-use customer, both with their end-of-life products and then come full circle to the new life product which by the way, is better. That's pretty exciting.

Right. Okay. Our next question is, does American Resources have a financial investment with AML?

We do, and I think all of that has been previously disclosed. We touched on our announcement in 2022. So I would just direct people to that 8-K for the details. But really, it just goes beyond -- again, it goes beyond the financial investment, and it goes beyond just selling a product. It's really about a partnership. I don't -- I can't speak to Mark, but I don't think the investment or the money mattered as much. But the commitment to the partnership I think matter more. Again, I don't want to speak for you, Mark, but that's how we view it from our side.

Yes. I mean from soup to nuts, from the raw material side, today end-use products, we collectively are doing it not just to be different. We're doing it in what we think is the most sustainable way to really have a great business and a great return for the shareholders, et cetera. And we wish our competitors that are investing hundreds of millions of dollars to best to make those little piece part magnets. We wish them the best. Again, historically, that just hasn't worked. So being able to have your inputs, working with ReElement is critical to us. And yes, we're excited about it. It's more about relationship than the funding for sure.

Okay. Our next question, can you talk to the IP around your PM-360 technology? Is your plan to produce these magnets or license?

Yes. Yes, very good. So -- we have some interest to license, but it would only be with a very, very large customer. We kind of want a black box it even if we did do that, but we would actually be producing magnets in their facility, just because of some of the -- a lot of the trade secrets we have, wwe have a bunch of trade secrets. Again, I kind of explain briefly how conventional magnets are made today. Achieving what we're achieving was not easy. It was really hard. And in doing so, there's so many trade secrets that's really our best IP protection. Those of you that worked in the whole patent area. The problem with patents is you tell everybody what you're doing, right? So certainly, we still do that. But anything that can't be reverse engineered and we keep that, obviously, as a trade secret. And then again, aligning ourselves with large stakeholders, even end users who are also there, if necessary to defend the IP. Being aligned with the U.S. government and DoD and the DOE is very important. So we're a small company, but we have relationships with very, very large companies, and we hope that really gives us more -- a bigger lever and if need be in terms of defending our IP.

Okay. Our next question is, can you speak to the efficiency and differentiation of the PM-360 technology in terms of energy consumption and power output?

Yes. So -- when we liked to talk about performance, a lot of you want to talk about efficiency, that really doesn't mean anything to us. If you look at the biggest market, which is motors, sure some -- a big industrial motor that just sits in the corner of the factory, absolutely efficiency is important. And yes, we can improve that efficiency, but it's marginal compared to what we can do obviously, for applications and transportation. So we do -- one of the ways that we go about this, and I'm going to answer that question. I didn't mention before in our business model is our onboarding process. So we have been developing software since 2008, which is funded by NASA, which basically allows us to take a customer's requirements, maybe it's efficiency, maybe it's torque, maybe it's all kinds all the constraints we put it into our software, and we do something called design space exploration, where based on their requirements, we will look at thousands, sometimes 10,000 design solutions. And we will provide to them at no cost, a pareto chart which shows the boundary in terms of the opportunity of trade-offs. So there's always a trade-off between efficiency and mass, et cetera. And it's a great way to get another application. It's a great way to put a customer to get to know our expertise. And ultimately, to answer the question, it's a great way to see how can we improve the performance, whether it be efficiency, whether it be torque, whether it be reduced weight, how can we do that. Now when you look at a magnet, it has something called an energy product, if you will, there's a certain amount of quote energy. And what you want to be able to do is use as much of that as possible. So the way conventional motors are made today, they use a North-South configuration, which means in a motor and you have a rotor which turns is that your South pole is going where you don't want it to go. And that's why you need iron and steel to direct the field back around. We and our PM-360 for example, can magnetize in a way that all the field is going in the right direction, in a right configuration. It's absolute ideal magnetization using the majority of the energy product that's available based on that certain magnet material. I hope I didn't get too technical.

No, I think it was perfect. Okay. We do have time for one more question. So our last question is, what is the plan and time line for quantities of rare earth oxides sold by ReElement to AML?

Yes. So we're scaling right now. I think we've talked about publicly before what our flow-through rates are. I think the last step that we're working with you, Mark, is the form of oxide that you guys can take. And that's actively going on. We're producing rare earth -- purified rare earth elements currently on a daily basis. And so just working on what is the best form that Mark and his team can take. Mark, given -- as you guys scale, we're able -- we'll be able to provide you testing oxides, right, as you test different outputs. But Mark, can you talk about your scale levels.

Yes. So I mean, in terms of scale, obviously, we'll start out in low production. And it's our belief in what we've seen in terms of the pull from the market, which is huge. We -- once we transition, we're still doing a little bit of R&D in certain material because there is a big -- there's a wide sweep of different materials that are used out there, and we're very close to finishing all that in the next month or less. Then we're going to start to look at high-volume producers. We're not really going to be interested in low volume. So it's going to be metric tons. I mean if you look at the industry out there, in terms of the U.S., the other players that are, again, investing in this capability. They're looking at some of them at 1,000 metric tons per year, some 2,000 metric tons. That's kind of the metrics that they're looking at. Of course, we don't really think about metric tons. We think about the value proposition in terms of how we add value to the product for the high margins. We did -- we've been working on a program. We have our men here with the U.S. Navy. And they had asked us, I can't tell you the details of it, but they had asked us to go to another supplier, a great company in the U.S., of course, who buys the blocks in China and cuts them up. And they asked us to use them to build a ring of magnets, actually quite simple, about 200 milimeters in diameter, long story short. Those rings were, I think, going to cost us about $3,500 each, and I forget the crazy lead time. We can simply make a PM-wire, which we first make straight. We roll it into a ring and it's done. We can make that for a fraction of the cost. So I got a little bit on the tangent there, but I did think about other application is a good example because we're about high-value margins. We're not about what the price is per kilogram or metric ton magnets -- that makes no sense.

Okay. So that does conclude the Q&A portion of today's event. Before we close, Kirk, Mark, any parting words?

Yes. I'd like to kind of leave this with, when you look at publicly what people see out there that's happening in the world and a lot of excitement about, for example, electric vehicle motors -- electric vehicle, sorry. And everybody talks about the batteries. So magnets were kind of the Rodney Dangerfield. But if you think about EVs, drones, hand tools that have batteries, guess where all that energy goes. Almost all of it goes to the motor. So I'd just like to leave this great call with magnets matter.

I like it. All right. Kirk, anything on your end?

No. Well said, Mark. Again, appreciate your partnership. And I know our team is super excited to continue to supply you with the inputs that you need to execute and we're really excited to see where this goes together.

Likewise. Awesome.

Gentlemen, great discussion, so helpful, so informative and so exciting for what's to come. So can't wait to have you back. We'll definitely do then to get an update down the road. In the meantime, again, thank you. I want to thank our audience for your participation today. Always great questions. We did cover a lot. So if you want to view the replay, go to virtualinvestorco.com. We have a replay of today's events, as a replay of recent events that have taken place on the platform. So again, I want to thank everyone. American Resources is publicly listed trades on NASDAQ under the ticker AREC. Thank you, gentlemen, and wishing everyone a great afternoon.

All right. Thank you, Jenene.