American Resources Corporation (AREC) Earnings Call Transcript & Summary

Greetings, and welcome to the American Resources Corporation Second Quarter 2024 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Mark LaVerghetta, Executive Vice President. Thank you, Mark. You may begin.

Thanks, Lisa, and good afternoon, everyone. On behalf of American Resources Corporation, I'd like to welcome everyone to our second quarter of 2024 conference call and business update. We always welcome this opportunity to provide an update on our businesses and discuss our accomplishments we've made over the past several months, and how we're uniquely positioned within the markets that we serve for American infrastructure, American Metals and ReElement Technologies divisions. Also on the call with me today is Mark Jensen, our Chairman and CEO; and Kirk Taylor, our Chief Financial Officer. We'll provide some prepared remarks, and then we'll get into the Q&A part of the call. But before we kick it off, I'd like to remind everyone of our normal cautionary statement. Certain statements discussed on today's call could 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 statement. 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, for anyone wanting to ask a question today, I believe you have to dial in by phone to get in the queue. first, on the prepared remarks. And before we get into that, I'd like to recognize our Chief Financial Officer, Kirk Taylor again, as we continue to work through our recent changes and upgrades in our new PCAOB, registered public accountants. As we continue to execute on our strategic plan of action upon bundling certain assets from the American Resources Holding company, we're conducting current and past audits on each of our entities to prepare them as stand-alone companies as we've discussed in the past. We'd also like to thank our new PCAOB, registered public accountants at GBQ Partners for their hard work, time lines and professionalism and enabling us to execute on their plan and meet our deadlines without having to take any further extensions. We strive to be transparent as possible with how we are positioning American Resources in each of our subsidiaries and the milestones that we are achieving. Looking back, it's been remarkable how far we've come and how fast we've done it since we first announced our ReElement Technology division only about 3.5 years ago. And we tried to recap our accomplishments on a quarterly basis, and we find ourselves selectively choosing, which milestones to highlight. Our milestones are supported and driven by our substantial platform of assets, our groundbreaking intellectual property and technology and our best-in-class team. ReElement has positioned itself as a world leader in deploying efficient, low-cost and environmentally safe critical mineral refining capacity outside of China. We have positioned ourselves at the forefront in providing real critical mineral refining and sustainable solutions to the world, and to diversify away from a single source monopolistic economy, which is afforded by China. Our application of chromatographic separation technology to the industry enables us to produce high purity critical mineral products at high throughput and at a competitive, if not lower cost than China. As much of the world is moving to develop a more diversified critical mineral supply chain, we are leading in providing efficient refining solutions to bridge upstream production and recycling to downstream manufacturing in a collaborative way. While a more diversified and resilient supply chain is still very much developing around the world as demand for critical minerals is increasing in a big way to meet the needs of our energy transition, national security and more advanced consumer technology applications, ReElement has put the pillars in place and leading the world in a more diversified supply of ultrapure manufacturing-grade critical mineral products. Our approach to the market includes operating and scaling our own facilities, including our Noblesville Commercial Qualification facility, our Kentucky Lithium complex and our Merian Advanced Technology Center, as well as our asset-light powered by ReElement offering. Our ability to produce ultra-pure critical mineral products solves probably the most complex part of the supply chain challenges, and is bolstered by our great team, our extensive asset base and our breakthrough technology. And that really is the value proposition of ReElement Technologies. But we believe our current stock price does not properly reflect the value of ReElement or the sum of all of American Resources parts. We are confident in our platform of assets and the path that they are on to create significant shareholder value. From a corporate standpoint, our goal is to continue to execute on our strategic directives and continue to spin off the majority of both American Infrastructure Corporation and ReElement Technologies Corporation in stand-alone companies and execute on the De-SPAC merger between American Metals and AITR that we've previously announced. With that, I'd like to turn the call over to our Chairman and CEO, Mark Jensen. Mark?

Thanks, Mark. I appreciate it. And thank you all for joining today. We'll go through this pretty quickly here but really excited about the position of where each one of our asset bases and where each one of our divisions are currently positioned and where they're going here in the future. As we have stated several times, we are extremely well positioned within the divisions to create value for our shareholders, and ultimately unlocking that value through the separation of these divisions. So the management teams and the shareholders can drive value from their respective divisions. Over the course of the last 6 months, we have been putting the puzzle pieces together to capitalize on the opportunities and the momentum across each of these divisions with the respective management teams. And I can say today, we are in a position to unlock that value and drive value for the shareholders while also reducing the risk profile of each one of those divisions. It's important to understand and to reiterate, as we continue to undergo a growth from a consolidator and restructure of carbon operations, to focusing on monetizing and deploying that asset base for growth and for cash flow as well as developing a technology and innovation hub that is truly revolutionary in terms of how critical minerals and rare earth elements are refined today outside of China at a cost structure that is lower than China. The stock price today does not reflect what we believe the value of the company is. And ultimately, we also understand that it's probably confusing in the public market today of how to value our company because of the 3 different divisions as they have grown and as we have positioned those business lines to be stand-alone entities. We look to unlock that this year. So our goal is for American Infrastructure and ReElement Technology to be separate companies by the end of this year. And our team, our financial team, our audit team is putting the puzzle pieces in place to enable that to happen, as well as American Metals to be its own stand-alone company through the SPAC merger, which valued through a fairness opinion at $170 million valuation. Our focus is on preparing and positioning these businesses for growth, building out the management teams to drive these businesses forward and to unlock that value and provide a clear, concise message to the market of what each one of these divisions can accomplish. Recently, we have distributed 25% -- approximately 25% of American Infrastructure with the goal of either merging the entity into an existing public company or getting it spun off through a Form 10 merger -- Form 10 dividend to our investor base so that American Infrastructure can focus on its own growth division of the business. Similarly, ReElement Technologies, our goal ultimately is for this to be a stand-alone entity. ReElement Technologies is having a phenomenal start this year and second -- beginning of the second half of this year, where it's positioned itself as a premier refining technology company to the critical and rare earth element space. And we'll talk a little bit further about that here shortly. And then ultimately, the de-SPAC merger with American Metals and AITR. There's a lot going on behind the scenes in American Metals, which we'll touch on a little bit of that today in terms of its positioning around the preprocessing and recycling of critical minerals as well as ferrous metals and other highly important electrified metals. Let me dive a little bit here into the American Carbon business line. As we've discussed, our core divisions of this business are focused on either signing leases or bringing these operations into production in the near term. Our McCoy Elkhorn complex, we have signed a lease with an operator and our goal is to restart the mine this year, hopefully here very shortly in the near term. This is positioned as one of the lowest-cost metallurgical carbon -- high-vol metallurgical carbon assets in the country. The efforts we put forth to reduce holding costs through reclamation as well as positioning and setting up these mines to bring in a top-tier operator, which we have done, through our market value will drive cash flow to the bottom line of American Infrastructure through a royalty-based structure, focusing purely on cash flow and reduction of CapEx required from us as well as operational risk. Our Wyoming County complex is probably one of the most exciting complexes and having done a tremendous amount of development off-site to bring that equipment on site to unlock this mine here in the near term. This is a mid vol metallurgical carbon operations, one of the few, if not the only greenfield mid-vol mines in the country that can be deployed in a low CapEx model. We are also in negotiations with a multinational customer that has expressed interest in buying 80,000 tons a month at a very attractive price from both the McCoy and Wyoming County complexes. They'll be in town into our offices here this week to further those discussions with the hopes of putting that deal and getting that deal put in place, along with some other opportunities we are working on to drive near-term revenue growth for our Wyoming County division as well as our McCoy complex. By blending these 2 products together, you're creating a the premier met carbon quality of product for the steel mills across not only our country but also the world. Furthermore, at the American Infrastructure division, we have our rare earth element component of the business. The Wyoming County complex has had third-party verified characterization of rare earth elements of over 500 parts -- 550 parts per million from unconventional resources, which is by far and above the highest rare earth concentrate that we have seen from any carbon-based feedstock in the country. There's been other players within our industry that have announced it closer to the 400 level but 550 parts per million tied in on the back end of an existing mining complex going into production here in the near term is the most economical resource we've seen from this, and being a byproduct we'll be able to generate cash flow because we're not developing it solely for that. We're developing it to produce mid-vol met carbon to the steel industry and generating value from the rare-earth elements as a byproduct off the back end of that processing plant. We hope to have some very positive announcements coming out of Wyoming County and McCoy Elkhorn here shortly. We're also entertaining leases for our Perry County complex as well as our Deane complex once we get through with the litigation we are pursuing against our former [indiscernible]. Let me dive here into ReElement Technologies. ReElement Technologies, we started off many years ago focused on the ability to produce rare earth elements from carbon-based materials. And then when we secured the technologies from Purdue University, we've expanded that footprint substantially to the highest value denominator within the industry. And now focusing on rare earth ores from end-of-life magnets, rare earth oxides for end-of-life magnets, rare earth oxide from rare earth ores as well as battery ores, lithium spodumene, cobalt, nickel from end-of-life batteries as well as from the ore-based resources. What we have proven is that we can go head-to-head against China and produce rare earth oxides and battery-grade materials and a lower cost structure than they can in the competitive environment over the long term. And we're going to continue to develop that technology and continue to optimize that technology to stay ahead of that curve. We've also proven the efficacy on concentrated brines. Lithium brines from DLE, we can take their flow sheets and simplify them dramatically. And we're working with a couple of members within the industry to help them achieve that to make it DLE economic. What I'm super excited about is the direction that the business is going. We are running a hybrid model at ReElement. Our hybrid model is driven by the fact of building out our core facilities, our Marion facility, which has the ability to produce rare earth oxides as well as battery materials as well as our Kentucky lithium facility that will process lithium spodumene from lithium carbonate to the battery materials. From there, those are the ability to drive cash flows for our investors but also demonstrate our technology to the world at highly commercial scale. Over the course of the last few years, we've been operating our Noblesville facility, to get our products qualified with various customer bases. On the lithium side, it takes about a year, and we're through that with a number of parties. On the rare earth oxide department, we've also been shipping oxides to our customers, which we are now either signing contracts with, have signed contracts with, or negotiating with. From there, further than that is developing our Powered by ReElement division. Powered by ReElement is effectively refining as a service, where we provide our technology and our team locally at other company sites to reduce their CapEx, reduce their OpEx, supplement their flow sheet or replace their flow sheet. The amount of interest we're having in this division is substantial. What's exciting about it is it's asset-light. By asset light, meaning our customers will CapEx the facility and pay us services fee on top of that to deploy our technology for them, which enables us to grow rapidly and become the technology of choice across the critical in aerospace on the separation and purification step, the most complex step within this industry as a whole, and typically the most expensive step within this industry. We simplify that and we deploy it and ultimately replace those flow sheets permanently for the future. Our Noblesville facility continues to operate on a daily basis, producing lithium carbon from LFP batteries. We are doubling the size of that facility and capacity that facility here very shortly, if not tripling it based on some minor investments that we can make. And that's the exciting aspect of our technology, either increasing our production trains or expanding our production trains at very low CapEx expansion points to increase our production significantly. Our Marion facility, we are at the point now where we're scoping equipment, ordering equipment, deploying assets to the facility to be able to start production here in the future for both -- starting off initially for rare earth oxides. Our Kentucky Lithium site. We actually have our crews on site. They are delivering equipment this weekend to start the teardown of the former coal mining complex and start laying the foundation for our Kentucky lithium refinery. We're excited about the infrastructure that we're able to utilize there and the current attributes that, that site offers to us and the team that we have in place to be able to handle this facility. Our feedstock focus today is pretty broad. We are the only player in the space that can produce both heavy rare earth as well as light rare earth in a refined basis, and we're going to stay ahead of that curve and be the largest producer of those in the United States from our Marion facility, being able to process natural ores from hard rock lithium to rare earth ores from all over the world, and be able to deploy those here in the local environment. Internationally, we have signed our MOU with Jupiter project, probably the largest lithium ion in the world, and they are currently in the development phase of that project with the goal of bringing that project on next year. Also in discussions all throughout Europe, having numerous discussions on both the rare earth and lithium side as well as South America, Canada, Japan and Australia. Our team is deploying -- working on deployment of our technologies as the joint ventures to Powered by ReElement or through our existing facilities. But the full focus is to get the facilities generating cash flows and deploying our technology quickly this year. The opportunity to provide low-cost and environmentally safe critical and rare element refining around the world in a collaborative manner to meet the needs of the energy storage markets are abundant. The market is looking to us and more to provide solutions. Stranded capital, both from the strategic and finance side is looking for ways to unlock their capital, and that comes down to the bottleneck within the world, which is refining. And we are highly confident that our technology and our suite of technologies will enable that to happen here in the near term. ReElement's value proposition is unique. Our goal is to build into a multibillion-dollar business, and we believe we are well positioned with our assets and our team to be able to do that in a low CapEx, low OpEx manner. American Metals is, as we announced, is doing preprocessing for ReElement and it does the dirty work of ReElement in a safe, secure way. It helps break down in device motors, power tools. It helps break down batteries. It helps establish the partnerships within the battery recycling space and partnerships. We have currently signed the definitive agreements with our -- with the SPAC merger, AI Transportation Acquisition Corp., AITR, that will enable us to execute upon the separation of this division and grow this division. Prior and after the signing of that definitive agreements, we have been in numerous joint venture relationships throughout the not only the U.S. but also the world, including Europe as well as in India and looking to execute upon those joint venture agreements here in the near term, which we hope to be able to share with you. The value of our individual divisions, we believe is substantially undervalued. At American Metals with a fairness opinion that was brought to us of $170 million would value the company at over 5x the current market cap. We are currently pursuing growth -- and the capital we're pursuing at ReElement would value the company at over 5x the current market cap. And we have numerous patriotic capital funds that have stepped up stating their desire to invest in the company and to invest in this round of capital that we're pursuing. American Infrastructure has equipment that we've acquired that has a replacement value of over $270 million from coal processing plants to underground equipment to surface equipment. The royalty model that we're deploying there is going to enable us to generate substantial cash flow and put the focus of our operating team on our Wyoming County division, which has a significantly attractive market to operate into today with the price of mid-vol coal versus our extraction costs. We believe that the current market does not reflect the value of our divisions. And ultimately, our focus is on getting these separated so we can unlock that value for all of our shareholders. We remain very confident in our positioning of all of our assets and the long-term value they provide to our shareholders. We remain hyper focused on unlocking that value and working behind the scenes to get all those puzzle pieces put in place, including the reaudit of our numbers, due to the replacement of our auditor as well as the positioning within the regulatory agencies to get these businesses separated. The evolution of our company and the transition of our technology-centric business and approach is well underway and better positions all of our American Resources divisions for growth. We have ample liquidity, and we do not foresee us needing to issue equity at the [ ARAC ] level to raise capital. We will pursue subsidiary based financing that is being offered to us today should we need additional capital to unlock this value. We also continue to explore and work through the capital raise, which we mentioned every element and are working with numerous patriotic capital funds and understand the importance of our Department of Defense as well as our Department of Energy to source critical minerals produced locally in the U.S. And as the only refining company in the country that can refine both rare earth elements as well as battery materials, we are very well suited to protect and build our national security supply chain. Thank you all for joining today. I am highly confident in our ability to execute upon our business plan and excited about the progress we've made over, the last few weeks, the last few months to position these assets and to drive cash flow here in the near term to unlock the revenue potential of all of our assets. We look forward to communicating with you in the near future and being transparent about the objectives of the business as well as the execution on the business. With that, I'd like to turn it back over to the moderator for some Q&A.

[Operator Instructions] Our first question comes from the line of Jesse Sobelson with EF Hutton.

A lot going on but a very interesting story here. I just wanted to focus in on the ReElement piece of the business here. Firstly, in the press release, you mentioned demonstrating the purification of rare earth ores at 99.5% or magnet grade. Can you explain how this grade for rare earth ores is different from something and maybe refining lithium to be battery grade? And secondly, can you elaborate on this demonstration conducted? And was it at a commercial scale? And if not, what was the scale demonstrated and what is the time line to build this out and prove out this technology at a commercial scale?

Yes. Thanks, Jesse. I appreciate that. So what we've seen with our technology, and I'll work my way backwards on that. And hopefully, if I miss a point, please jump in and correct me or reask the question again but the uniqueness of our technology and what we've seen so far is we've scaled it up well over 1,000x from lab scale that was originally developed at Purdue University and obviously then further developed by us, was that the efficacy of our technology is better at higher volumes. And that's due to the surface area interface of our resins that we utilize. So we've demonstrated commercial scale. We've been to the qualification process on the battery side. The quality that we produce on the magnet side for rare earth oxide is the 99.5% purity, which is really what the battery guys need as well, the 99.5% targeting on specific impurities. But the -- what we produce for our customer was they sent us a sample. So it wasn't -- we weren't out there procuring the ores. They asked if we can process their ores and they wanted a sample sent back to them. So this is a lab scale process that they asked us to perform. And that's just the volume of material they gave us. And they were very pleased with the results that we gave them back at greater than 99.5% for both the light rare earth as well as the heavy rare earth, which is really part of the major problem we have within our country and there is no heavy rare earth production, and we can obviously solve that for them. But we delivered that to customer. That was specifically core customer that wanted us to process their ores. The attractiveness of our technology and the CapEx side of our business is, the rare earth ores is actually lower CapEx than our -- even the rare earth magnet side, which is still a low CapEx model. So it's -- we're excited about the results and excited about the position of that. On the battery side, 99.5% is what most will produce, 99.9% is a very easy product for our team to produce from a lithium carbonate perspective. Now we'll produce what the customer wants. They want at 99.5%, we'll produce them at 99.5%. Did I address all your questions there?

Yes, essentially, it sounds like the production was based on their sample. And just in terms of scaling, there isn't really a time line there. It sounds like you guys are ready to go once maybe the partnerships are in place in order to build the facilities needed. Is that fair to say?

So we're starting -- I was actually just got our facility today giving a lithium spodumene customer, a tour of our facility. But we are currently identifying the equipment with the goal of in the next 30, 60 days to pull the trigger on the first equipment that will be going into the Marion Facility specifically for rare earth oxide production. We have end-of-life magnet feedstock arrangements with large Detroit Automotives with a number of wind turbine companies such as EDP Renewables as well as power tool companies that we recycle those rare earth oxides from end-of-life magnet. And so we're not necessarily waiting on them. We're moving forward as we speak to procure that equipment and get producing. The margins on rare earth oxides for us is extremely attractive right now in the market. And so we we're moving as aggressively as we possibly can.

Great. Great. Just one quick follow-up just on the technology itself, and this is more of a bigger picture thing. We talked a lot about recycling and refining there but there is a big push to potentially start working with brines lithium. Is your technology as applicable there as it is to the recycling side of the business we see today?

Absolutely. So we've actually worked with I think 2 DLE companies today that direct lithium extraction companies for the brines, and we significantly simplified their flow sheet. We reduced -- we took 6 steps out of their flow sheet to get to battery-grade materials by doing so. And that's really where Powered by ReElement comes in, right? That's going to be -- the DLE side will be pretty much specifically a powered by ReElement piece of business for us where they use our separation purification equipment in their facilities. We charge them a service for that and we lower their cost of production dramatically. It takes out all that precipitation and all the water extraction side of what they're trying to do.

Our next question comes from the line of Heiko Ihle with H.C. Wainwright.

That fairness opinion, you talked about earlier that 6x the value, can you give us some of the input factors used to derive that value? And then also really maybe just a little bit more color on the fairness opinion, please.

I wish I actually could. It was not a fairness opinion that we paid for. So that was a fairness opinion that the SPAC itself put together. So we're -- that was -- we obviously gave them a full data room access of the business and the opportunities and the partnerships we have in place under the American Metals business line. And they conducted that fairness opinion without any involvement from us, which ultimately is what you're supposed to do. So I don't -- we don't have a lot of the details around it. We've just seen the language that will be included in the S-4, which we hope to get filed here once we get the quarterly numbers for American Metals completed here shortly. If we can access to it, obviously, we'll put that out in an 8-K if we can, if they...

Yes, I think you should. Because I think it will make you look pretty good if the numbers you're talking about come in the way they are and if the input factors make sense.

I will work with our lawyers. If we can, we will. I assume in the S-4 that there will be language around that but that's a lawyer question, which I'm not.

Yes, I'm not one of those either. Fair enough. So in all these spin-offs and all the corporate M&A that's rather divestitures and everything that's going on with the company, can you walk us through item by item, how much cash has actually been brought in the door? And how much more you're trying -- or you're assuming you're going to be getting call it between now and the end of the year?

Yes, I will do my best. So at ReElement, we have credit facilities, which we've been operating on, we've received some revenues from customers such as our Japanese partner, but the ReElement division, what we were talking to the Patriot Capital funds about is between the $10 million to $20 million raise of which a soft circle most of that already at a significant premium to the current market. The uniqueness of the ReElement model today, combined with tax intent bonds and/or debt financing as well as customer prepays, that could be the last amount of capital we need to raise at the ReElement level with the focus of the business turning to Powered by ReElement. And so that puts us in a really attractive spot along with the actions and bonds, the S-4, which we hope to unlock your shortly through the development of that facility as well as the opportunity to bring that production line online as well as we are pursuing a taxes and bond for our Marion facility, which is probably one of the most attractive opportunities I've ever seen, given we already have all the infrastructure and spend all the money doing that to build that facility out and have it ready for prime time today. The American Carbon division, we obviously are developing our complex, and it will be a state-of-the-art complex within our Wyoming County division. We are negotiating with the customer to date that wants to come to the table with a very big order and prepay for all of that revenue as well. So hopefully, here in the near term, we can provide some updates on that if it comes to fruition or not. But then also credit facilities we've had on the equipment leasing side and the ability to draw additional capital based on that. We have a significant asset base that's relatively unlevered at the American Infrastructure side of the business that we can continue to expand that business. But the uniqueness of the business is with where Wyoming is getting close to just finishing the face up and all the equipment is being delivered there from an Infrastructure perspective, there's not a lot of additional capital that needs to be spent on American Infrastructure all. McCoy complex is already set up. So it's not a -- it becomes from a one of the few mining companies in the met carbon space, that's really not a mining company other than our focusing on our Wyoming division, which is the focus of the business is a CapEx-light model going forward, just generating cash flow streams by leasing out the core assets that we focus on developing over time. American Metals has been traditionally a revenue driver on a relatively small scale from the reclamation side of the mining properties, where we've cleaned up and reclaimed over $30 million of liability that we acquired through the 8 acquisitions we've made over the last 8 years. And then we are merging with the SPAC. We'll see how much capital stays in trust but we also have credit facilities available for American Metals should we want to grow faster than the SPAC capital in itself in and the SPAC capital doesn't stay in trust or how much of the stay in trust, we're figuring that out as we speak. But the business doesn't need a substantial amount of capital today outside of what we just discussed right there. We have a low overhead, we don't have a significant capital need. The main focus is just getting equipment into our Marion facility as we speak in getting the Wyoming County division running. Does that answer your question, Heiko?

Yes, pretty comprehensive. I appreciate that. Thank you very much.

Awesome. Thank you.

Our next question comes from the line of Bobby Genovese with BG Capital Group.

Just to follow up on Michael's train of thought. If you added up -- and I'm glad you've got your accountant on the line as well. If you added up the value of the equipment, the value of what you believe American Element fairness of opinion is and the rest of the properties, minus the debt, could you give the shareholders on this call a rough idea of what that asset base is that would be in the next audited financials, and then we would be able to take that number, put it in today's share price and figure out with 80 million shares at the equipment alone to be valuing this company at $1.50 plus. With the furnace of opinion from American Element it should be a multiple of that going forward. But I'd just like to hear your accountant sort of you must have those ballpark numbers. And the research you've had done on the company, when do you anticipate that being updated as well?

I'll take a quick stab, and if Kirk wants to interrupt me, he can, and I appreciate the question, Bobby. So if you look at our equipment: One, they also in our GAAP financials and happy to give anybody as to or any of our operations down in Kentucky and West Virginia, to see the infrastructure and the equipment that we possess. But how we acquire these assets, they don't show up on our balance sheet because we bought them mostly through 363 bankruptcy sales. So we bought the assets, and we bought them timely. We bought them in 2016 where nobody else wanted to but the replacement value of these assets would be roughly around $300 million, let alone the new equipment we've acquired and put in place for our Wyoming County division. Now we have $55 million in -- or about a little less than $52 million, $53 million accounting the taxes and bond, which we had substantial cash under still as well as -- which we're completing the Wyoming County complex as well as about $8 million of equipment leases. as it's going down substantially over time. So take that roughly $300 million of replacement value, $170 million is the fairness opinion under American Metals. And then as I stated, on the ReElement side, a minimum of $150 million valuation is what we're working with Patriot Capital funds as the initial value, which we believe is substantially higher than that based on comps. That would put it at roughly $600 million minus the $50 million. Based on 80 million shares outstanding, I'm not saying that should be the stock price. I'm saying those are the numbers that we believe the assets are worth, and that's the focus of unlocking that value in the public domain, and separating these businesses. So they're more clearly easy to understand business line for everybody to invest in. But we do believe based on those values that we're substantially undervalued, and we're not just sitting here saying that. We're putting action into work. Action -- putting forth the effort to create the action to unlock that value and realize that value, which we believe would still undervalue our ReElement division based on the growth profile that we have within the marketplace. Is that help you? Is that clear enough or you need more clarification?

No, I think that's it. I just -- like I'm sure the rest of the shareholders are a little shocked at the asset base alone of the company, where the stock is trading. And I think for the next research report comes out of the clarity in the next set of financials come out to show this thing is actually substantially undervalued but we'll wait until that point but thank you.

Yes, absolutely. And I think also the -- I mean, if you look at the ReElement side, we didn't expect to generate revenues from Powered by ReElement this year. Yet we're bidding on 2 projects already and have a third in the works that can generate a couple of million dollars of revenue just on the upfront component of it based on the demand that the market needs. And really, honestly, the downturn in lithium pricing is a huge opportunity for us because everybody is realizing that our technology is what unlocks that. So bringing -- signing the lease with our mining customer to get them into production working on this project, which could be substantial revenue on Wyoming as well as the revenue generation that's kicking in on the ReElement side, through Powered by ReElement as well as building out the facilities to generate our own internal revenues beyond Powered by ReElement is substantial. And I think that's where we're focused on keeping our head down to drive this value for our investors and keep costs extremely low so that falls to the bottom line.

Our next question comes from the line of Kyle Gallagher with Merrill Lynch.

Mark, good to talk to you again. Just wanted to kind of continue down that path of revenues on the rare earth side. You had mentioned, I think in the call, you had said you were through the qualification process with some of your customers and entering into contracts for purchases to sound like. Is part of you expanding the Noblesville location to be able to like fill orders and start realizing revenue or is Noblesville is simply a qualification that really won't be revenue generating and it's going to be kind of all run through Marion?

Yes. Good question, Kyle, I appreciate it. So correct. The reason why we're expanding Noblesville is the sheer amount of volume of material that we're getting asked to test and also because we're getting POs from our customers that they want us to deliver product on. So we're expanding that to be able to deliver that product faster to expand our revenue base. Now the way to -- I wouldn't look at Noblesville as the focus for revenue generation for ourselves. The big return on capital we get is in our Marion facility. But if you look at the CapEx of a lithium refinery or a rare earth refinery, most of it has been the separation purification stuff but ultimately for us, a majority of that is in the building and infrastructure because our separation purification step is very low CapEx. And so our goal with the attractiveness of Marion today is we have all of our natural gas finally installed. We have our water. We have our utilities installed, which could be a really long lead time item for most but we've got renovated this building. We're finishing the roof here in the next few weeks, but that doesn't hold us back from ordering equipment from the section that we're moving into. That's where the revenues really kick in. If you look at the rare earth oxide mine, we have -- we're looking at building this out at a 2,000 metric ton a year rare earth oxide line with a payback period post start-up commencement of operation in about 2 years. Today, based on average price, I would put it at about $160 million in revenue. And the only producer in the country that produces dysprosium as well as terbium from these products, which is in strong demand, let alone the neodymium and presidium that we produce from both ores as well as magnet material. That's where the revenue is really going to come from. But more importantly, I would also say Powered by ReElement. Most people are realizing the hydromet doesn't work and the change in chemistries of batteries as well as magnets and everything else, is creating a huge problem within the industry. And so a lot of people are scoping out building a hydromet plant. Now they realize they can't do that because chemistries are changing. And now they're coming to us to help them design that process in a partnership way and to truly optimize everybody's flow sheet and make it simpler and better. And with that, we get near-term revenue generation for ReElement and a very low risk way for us, low CapEx model for us. And -- we look forward to talking a lot more about Powered by ReElement over the next few months.

Yes. Are you able to give any sort of color or information kind of general size of some of the purchase orders, like I mean is it a scenario where they just say, "Hey, we'll pay x per ton up to 1,000 tons or whatever the number is." How are generally those structured? And can you -- is there anything you can kind of give us more detail on what those look like, generally speaking?

Yes. I mean, if you look at it, they're traditionally index based, so we would like to live on the indexes today. We ultimately think the indexes are at a low point. I think lithium will drop below $10 here shortly but I think it will pop back up to that $25 number going into the end of next year. On the rare earth oxide level today, you're sitting at -- for neodymium and presidium, you're about $50 a kilogram, for dysprosium, you're at about $250 a kilogram. Blended average price based on the weight of the elements that we produce, we produce about $65 to $70 per kilogram. So that's where our maybe slightly upwards on that. That's where the -- from the Marion initial production combined with Noblesville will put us at that $160 million number roughly. The offtakes we have, we have the USA Rare Earth offtake. We have partnerships with 3 or 4 of the smaller ones, and then we have -- that could be very big ones. And then we have a very large multinational company that was the one that sent us the ore base sample that they wanted their process for one of their OEM customers. And then we have a few more on the ore side that we're working with. But -- those are all coming into fruition right now and developing as we build out the facility. But we typically would like to stay on the indexes. We don't want to go into fixed-price contracts. We think it's -- with the cost of -- low cost of our production we think we're best suited to maximize margin for our customers by living on the index pricing.

Great. And then just lastly, I just want to make sure I heard you correctly. Were you saying that you expect to start having Marion up and running and product going out the door in 2024?

Not Marion in 2024. We're starting to buy equipment for Marion now. We just got the facility rebuild and renovated. Noblesville will, but then Powered by ReElement, we also believe we'll be starting to generate revenue in 2024, which is really the core focus of the business going forward. That's just coming together a little bit faster than we thought on the Powered by ReElement side. Marion will take a little bit of time to build out but we'll start doing preprocessing in Marion and then build into full processing that could feed -- the preprocessing could feed Noblesville in the meantime. But we're going to -- we're building it up pretty quickly. And we'll get with the operational team to provide guidance on that once we get a little bit more clarity on it -- on the time frame for Marion.

Our next question comes from the line of Mark Sloan with -- as a private investor.

How does the American Metals back deal go through to American Resources shareholders?

Yes. So American Metals is 100% owned by American Resources today. Once we get a little bit further down with the -- once we get a little bit further down the path on the S-4, getting through effectiveness, we will distribute a portion of those shares to our underlying investors, which they will own -- which will be a separate stand-alone public company but the majority of that is currently -- or all of it is currently held by American Resources today.

What percentage are you expecting to be distributed to the shareholders?

I'm not exactly sure yet. I didn't meet with the Board on that. I don't think the Board has dictated the amount of the percentage that's going to be distributed to date yet. But obviously, it will be either hold the value in American Resource or it will be distributed. But once we get -- once the Board makes that determination of how much we're going to distribute, that will be communicated through your public press release as well as an 8-K .

Now how much of the total value of the SPAC is actually going to American Resources. So forget about the distribution. So how much is going to American Resources versus how much is going to be other side of the SPAC deal?

So they valued American Metals at $170 million. It ultimately depends on how much capital statement [ trust ]. The sponsor will get a piece of the equity and then if the full $62 million stays in trust, then it'd be $170 million plus $62 million plus the sponsor shares to roughly $240 million, $250 million in value, roughly estimating but American Resources alone that $170 million value.

Well $170 million to American Resources [ assuming ] that value?

That is the value that they have proposed to us and it was an indefinitive agreements.

Okay. So one other separate question. What is the time line on completing your 10-Q?

10-Q for American Resources?

American Resources, yes. Since there was a notice last week about a delay.

Yes, it was filed today. Our audit chair was traveling, unfortunately, out of the country, and we needed him to sign. But our internal management team does not sign off on the quarterly reports. You need your audit chair to do that. He was unfortunately traveling overseas. So it was unable to do that. So we had to file the NT.

Our next question comes from the line of Keith Goodman with Maxim Group.

Most of my questions were answered. I just had a question about the Patriotic Capital, as you called it, or I guess the potential of raising some money from Patriotic Capital funds, I think, is the way you described it. what is that capital going to be used? Is that directly for ReElement?

Yes, that would be -- that's a private. So we're not raising -- as we stated publicly, we're not diluting our investors at the American Resources level. We would be doing subsidiary based financings for the division if we pursue capital. We have -- had a number of Patriotic Capital funds, express interest in a structure that would value the business potentially higher than where it has today. The -- and we are working through that with them as we speak. But Patriotic Capital fund is -- and there's 3 or 4 of them that have approached us that we've known in the industry that are trying to develop a national security supply chain and investing along that path. And so that capital will go directly into ReElement. The attractiveness of it is -- some of that will go into the Marion n facility to buy equipment in the near term but most of it will be just working capital that sits on the balance sheet at the cushion of capital on the balance sheet of ReElement as we pursue the spin-off and get the company in its own separate public company. But there's -- the good thing about the business today, other than ordering equipment, there's not a huge need for capital to ReElement level other than containing the existing facilities.

So right now, you're doing testing on in Noblesville and you're shipping at some point you're going to ship -- you're obviously not charging for the testing that you're doing there. And if I'm not mistaken, [indiscernible] order that's changing. Okay. So you have purchase order or purchase orders, I think you indicated a month. Sure. But that you're producing in Noblesville, obviously, it's a small facility. The goal is to get marrying up and running so you can produce larger volumes and charge for delivery of that or you're going to pivot and everything is going to become Powered by ReElement? Or you're going to hybrid, you're going to produce some and you're going to do powered by Marion?

That's correct. So it's a hybrid. So we will -- so when we initially developed the model and we move towards the Powered by ReElement business, offering, which we believe is a huge [indiscernible] and I can work that briefly here again. The -- we initially said we're going to build our commercial facilities in Marion and Kentucky, and that will be the ability to showcase the low-cost, low CapEx scalability of our technology in the commercial environment to generate substantial revenues and cash flow to our investors. But more importantly, from there, is if we build additional production lines, we'll either do it with joint venture partners, we'll do it through power by ReElement or our customers will CapEx the additional production lines in Marion. And so our model is not to constantly go out every element, our model is not -- in any of our business lines for that matter, is not to constantly go out and raise capital to incur the CapEx risk. Our model is to deploy the uniqueness of our technology and let other people CapEx it because they need what we offer. And I will say that the interest level we're getting on that front from big multinational corporations to smaller players that are building out their flow sheet is substantial. So today, historically, we have never charged for testing. We are now charging for testing. We are now in a position of strength and more importantly, a position of collaboration with our partners and customers that we will start testing if they want us to test and develop flow sheets for them, we will charge for that. And we're excited about the revenue potential of that of monetizing our lab and monetizing our Noblesville facility in a very, very attractive way to be cash flow positive and not incur that OpEx cost ourselves going forward, unless it's a very unique circumstance. But also the ability to utilized Powered by ReElement as a way of supplementing and reducing people's CapEx on facilities they've already announced. And most people today -- most hydromet facilities for lithium spodumene as well as recycled materials, hydromet doesn't make any sense right now. One, you can't recover all the materials and; two, it's really expensive to build, and it's not flexible reversal. Our technology is and it's low CapEx, low OpEx. So we can step in and deploy our technology and their facilities replace components of their flow sheet and make it more viable for them to be successful. So truly developing a collaborative environment to utilize our technology to unlock the national supply chain but also the global supply chain. There's no reason our technology shouldn't be the refining technology within everybody's facilities and through Powered by ReElement, we can make that happen.

And you have indications from partners and customers that they're sort of on board with that?

Yes. Yes, and [indiscernible] partners. I think that's -- the exciting thing about it is it's not we're helping -- people want to do business with us because we can save them money. And people will do business with us because we can either save them or make them more money, and get permits from what we're trying to accomplish, where other technologies are pretty hard to do so. We're chemical like. But the interest level we've had since we've announced power by ReElement is amazing, and I will say the team, Chris moorman and our team, Shane Tragethon, Jeff Peterson, Yi Ding done absolutely phenomenal job of getting back to these partners that need a solution and working with them on developing the flow sheets to deploy our technology in their facilities.

Does it matter, which political party gets into office in November?

No, not really. This is commercial. We don't rely upon -- we qualify for 45X -- in this round of applications we did apply to 48C. If Trump wins, he's probably going to kill the IRA, it doesn't really matter. We don't put that in our model. We don't -- I think it's a case best to build a business based on subsidies. So we don't do that. We don't need it from a cost structure perspective. The -- we try to stay out of politics the best we can, and build a commercial enterprise that survives any administration. And I will say that no matter who wins, we need a strong national security supply chain. We don't have 1 at all today from zirconium to niobium to rare earth elements to battery materials, we need to unlock the supply chain and make sure we have the materials here to defend our nation. And I think both parties recognize the importance of that.

So this isn't just about electric vehicles and demand being less, this is for Department of Defense equipment as well?

Yes. And energy storage, I would say, energy storage, given we are probably the only player in the space that can recycle LFP batteries profitably, which is what predominantly energy storages are provided by. We destroyed our energy grid in this country. We created huge variability, huge swings, which create high pricing pressure for utility customers, which is the individuals on taxpayers. We need to build out -- one way we could balance the disruption we created within the grid is energy storage. You could actually use it as peaking, nonpeaking, cut the top off the spikes in the energy prices. So the growth of energy storage, I think, is going to be robust, and that's LFP, which is really the heart of our battery recycling technology given we're one of the few, if not the only players in the space that can recycle on LFP battery very, very profitably even in today's environment.

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

You've explained the ReElement a lot. I had one other question about it. Should we think of ReElement as like an asset light, it's just it would be your employees and you're just going out to different sites all around the world and licensing ReElement chemical processes and gaining some type of return on that? Will there be upfront fees and royalties for what's produced, do you think?

Yes. That's -- I mean, I will say if you asked me 2 years ago, when we first developed -- and not first developed, but when we started commercializing ReElement Technology, we initially said broad ambitions of being the largest refinery in the world of rare earth elements and critical minerals. Not to say we don't have up there but it's more through the Powered by ReElement component of it. And there's no reason for us to go replicate other people's flow sheets when we can supplement them. And in that process, we reduced our CapEx requirement, and we reduced the need to hire thousands and thousands of people. If people are already building the front-end processing from lithium spodumene or from rare earth ores or rare earth oxides, we can help supplement their flow sheet, deploy our technology and charge a service fee, not necessarily a license fee but a service fee to operate our technology within their flow sheets. That's really the focus of the business. Now in the near term, and the focus is getting our Kentucky lithium site up and running, which is very economic in today's markets still where most lithium processing are getting hurt by current pricing. We still have a very good cost structure and a lot of room given our processing cost as well as the -- on the rare earth oxide side in our Marion facility, very, very high margin, still at today's pricing. So it is a hybrid model. Our focus is on building these facilities out, making money, letting people come in and see them operate and then deploy our technology in their facilities thereafter. But it's becoming more of an asset-light business over time.

Right. And then just a curious question, the Kentucky facility that you have the bond on and Marion, will they be kind of competing for the same material eventually? Or there will be different, won't be?

So Kentucky is focused on lithium spodumene, which we have a number of partners -- supply partnerships sits on that from all throughout the world. And then our Marion facility is focused on rare earth ores, rare earth magnets, feedstock as well as recycled battery materials. So they both will produce lithium carbonate but they're from different feedstocks. And the uniqueness is the contribution of assets, which we're doing in appraisal on our Kentucky infrastructure as we speak, that is being contributed to this project is substantial and enables this project to move a lot quicker from an empowerment, from piping, from infrastructure, from rail load out and all that stuff that we're able to utilize in our -- from our Kentucky site, to get that project up and running in a low cost way without respending that money again.

Got you. And then the magnets will be in Merian then, right?

Yes. Rare earth oxides from end-of-life magnets as well as from rare earth ores in Marion.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Mark for closing comments.

Excellent. Well, one, I want to thank you all for joining today. I understand we have a lot of moving parts within the business. We hope to continue to streamline and clarify the objectives of the business of unlocking value through the separation of the division. Ultimately, we are very thankful for the efforts of our team and for our external partners as well that have helped us position the assets to where they're at today to unlock this value start to drive near-term revenue generation as well as to build the future of the businesses by creating business models that make a ton of sense in any economic environment, regardless if we hit a recession or don't hit a recession, we are very well suited to continue to grow the business and generate value for our shareholders. Please follow us over the next few months, we have a lot going on. We look to continue to provide transparency and communication to the investor base to help showcase what we're doing in positioning and growth of where the business is going. But I thank you all for joining today.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.