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spk08: Greetings. Welcome to the AquaMetals Q1 investor call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. You may submit a question via the web at any time by using the ask a question feature on the side of your screen. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to spokesperson Glenn Axelrod. Thank you. You may begin.
spk06: Thank you, Alex, and thank you and welcome to the AquaMetals first quarter 2022 results conference call. Earlier today, AquaMetals released financial results for the quarter ended March 31st, 2022. This release is available in the investors section of the company's website at www.aquametals.com. Joining us for today's call from management is Steve Cotton, President and CEO of Judd Merrill, the company's Chief Financial Officer, and Ben Taker, Chief Engineering and Operating Officer. During today's call, management will be making forward-looking statements. Please refer to the company's report on the Form 10-Q filed today, April 28th, for a summary of the forward-looking statements and the risks, uncertainties, and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaims any obligation to update or revise said statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after management's formal remarks, we'll be taking questions. Questions will be accepted over the phone from analysts, and all other investors can submit a question using the online webinar portal provided in today's and last week's press release. We will take as many questions as we can in our available time slot. And with that, I'd like to turn the call over to Steve Cotton, CEO of AquaMetal. Steve, please go ahead.
spk05: Thank you, Glenn, and thank you, everybody, for attending today. For those of you that have access to the slide deck, you can follow along, and we're going to refer to the slide numbers as we go through the slides for those of you that are looking at the slide deck, not synchronized but offline. And for those of you that don't have access to the slides, you can listen along and refer to the deck at a later time. So I'm going to start with slide number one. which is that aqua metals, as evidenced today by some announcements that we made earlier this morning, as well as further materials that we will be providing, we are really leading a revolution in both lead and lithium battery recycling. Moving on to the next slide, Glenn read to you guys the Safe Harbor, so I'm not going to belabor that. That's for your reference. Slide number three is our mission statement. That is to provide sustainable metal recycling for materials that are strategic to energy storage applications. Our proven breakthrough technology, aqua refining, returns these raw materials to the manufacturing supply chain in both a clean way and an economical way, reducing reliance on mining to meet the growing demand. Slide number four. is a quote that shows two quotes, really, from the U.S. Secretary of Energy, Jennifer Granholm, as well as a general comment from the U.S. Department of Energy. And I won't read those quotes to you, but you can see that effectively the vision for the future of stored energy recycling and closed-loop processes is about air and water and clean energy as inputs. OpRefining differentiates greatly from the other technologies that are out there because we uniquely use the renewable electron versus fire that's used with smelting, which is the only commercially proven process today to recycle lithium ion batteries and lead batteries, and also chemicals as the reagent. It's a really important differentiator for aqua refining that we use that electron because it can be renewable and it makes it worthwhile to make this whole energy transition and power that energy transition from clean processes. The next slide, number five, is that our technologies are really aligned with the DOE vision for these reasons. We use a room temperature closed loop fundamentally non-pollutive process. We've already commercially proven our lead recycling capabilities, which we'll talk about where we are with our lead deployments very soon here in this presentation. We've got a cleaner and more cost-efficient recovery and recycling process, so the economics are there as well as the environmental. We produce a higher-quality end product with flexibility that I'll talk about. And we're expanding, of course, to the lithium recycling metals, which are inclusive of cobalt, nickel, manganese, copper, and lithium. In order to do all this as an enabler as well as a technology partner, we are patent protected on a global basis. Slide number six is a summary of our recent milestones, and we've had a very busy year so far, and we're going to talk about that as well as what's coming up for the remainder of the year. As you'll see in the blue, which is the past to present, and then we'll get into the green, which is the present to future, In March, we already announced that we produced the high-purity lithium hydroxide at our Innovation Center, where Judd, Ben, and I are sitting today. Our high-purity lithium hydroxide is unique, and we'll talk about some of the attributes of that, but that's quite a milestone, and we believe that we are the first company that has produced high-purity lithium hydroxide from black mass in the lithium ion recycling world. We also, on March 22nd, announced that we produced high-purity copper at our Innovation Center in metal form. And we'll show pictures of these materials, by the way, as we move through the deck. On April 28th, which is basically our announcement today, we announced that we produced high-purity nickel at our Innovation Center. So we have one more metal to get the high-purity production to go, which is the cobalt, as we prepare as we move towards to the green line for Q2, Q3 deployment at ACME in Taiwan, our lead recycling, which we're very excited about and we'll talk about more. And we're also preparing by Q3 of 2022 our pilot scale operational testings of our end-to-end black mass to end-product lithium ion aqua refining system right here at the Innovation Center in Tahoe, Reno Industrial Center. By Q4, Q1 of 2022, getting into 2023, we could see the potential first full-scale deployment of aqua refining for lithium ion batteries. Our ticker is AQMS on NASDAQ. We are incorporated in 2014. We have 75 million shares outstanding as of March 31st. Cash on hand of $9 million as of March 31st, and the company is debt-free and has a very strong balance sheet. And Judd will be speaking to our financials a little bit later on in our presentation today. Moving on to slide number seven, let's summarize the highlights of our accomplishments just in the past 90 days and to date in this quarter, Q1. First off is that our lithium off-refining here in the Innovation Center, the Black Master, the critical metals production is nearly complete. And we, as I referenced earlier, produced the world's first lithium hydroxide, what we believe is the world's first high-purity copper metal in metal form, and the world's first high-purity nickel metal in metal form from varied battery chemistries and varied black mass sources. I'd like everybody to close their eyes for a second and envision a world that has a future of clean energy production. closed loop that has a company that can produce these materials and then open them and look in front of your eyes what we've accomplished with our innovation center. Nobody else has accomplished that. Second, our secured black mass feedstock is really critical for our pilot system through the year of 2023. You'll see in our press release that we put out today on our quarterly results that we secured that black mass feedstock And that ensures our supply to meet the pilot scale needs as we get through the year 2023 through varied supply chain commitments that we've made for that black mass. So there's no more concern on supply through the year 2023 for the company for input feedstock to its processes. Third, we've added key organizational capabilities. We've added engineers to help our innovation proceed at a more rapid rate. For the Asia-Pacific region, we brought on a leader, Justin Chen, that we announced. You can see in our prior announcements to help us on the ground there in Taiwan with our length of deployment of aqua refining in Taiwan, as well as the business development related to that, which we'll talk about, and our overall Asia-Pac strategy, inclusive of lithium. Justin was the country manager for China for Agrimal, which is the world's largest lithium company. We also hired our chief strategist to the company as a really strong individual, Dave McMurtry, who is helping us drive forward pursuing government grants from the infrastructure bill as well as working with Silver State Government Relations to help us make sure that our local senators in Nevada as well as governor and the folks in K Street are well aware of what Aquamentals is doing here. Quite a bit of organizational capacity added for just this quarter. Next point, our patent portfolio has continued to grow in quarter. We added one U.S. and two international patents, which now totals 82 that have been issued and allowed matters, nine in the U.S., 70 foreign-issued patents, and three allowed foreign applications. Our lithium-ion patent application this quarter progressed from a provisional to a pending status. as we continue to add to the IP portfolio. Next bullet point is that our Taiwan lead aqua refining equipment for Acme Metals shipped, and the installation and commissioning is really the next step. That commissioning is slated to start in July instead of June, and there's been about a 30-day delay due to COVID restrictions, but we anticipate that that's the only delay that we should see. Next bullet point is we've accelerated our research and development efforts And we did access in the quarter the ATM for a total of $3.9 million, as we said we would do before, to achieve strategic steps. What we used those funds for was to invest in the equipment and people and that black mass that I referenced in the second bullet point here to support our pilot and the potential future scaling of that pilot, which could turn our pilot line here at the Innovation Center into a revenue-producing facility that we'll talk about shortly. Moving on to the next slide, slide number eight, this is more detail on Acme in Taiwan, which is still on track for our Q2 and Q3 install commissioning and ramp. In Taiwan, Acme is our first partner in the largest and fastest growing part of the lead-acid battery market, and really even the lithium battery market, which is in the Asia-Pacific region. As I mentioned before, our leader is on board and on the ground in Taipei working with Acme closely. We will showcase the clean lead recycling technology called aqua refining in a market where the environmental drivers are getting stronger and much more quickly growing in importance and in their nature of clean processing of metals. And ACME has those strong relationships to the third bullet point with global battery manufacturers to develop a methodology to produce oxide directly from the aqua refined material. You'll see A couple of pictures from the corridor below of our team members saying goodbye to the equipment as it gets packed up and prepared for shipment to Acme in Taiwan. And we're very excited about moving forward with that installation and moving forward with the commercialized version of the first awkward finding technologies for lead. Moving on to slide number nine, this is just really a marked opportunity that is staggeringly quickly growing in the lithium space. as well. And the predicted volumes of used batteries make it imperative that recycling is done sustainably so we can feed the growth for demand and do it in a sustainable way. So it was worth it to transition from fossil fuels to a clean energy source and clean stored energy. For aqua metals, we estimate our total addressable market to be quite interesting at $10 billion by mid-decade and up to $31 billion by 2030. And that's really based on aqua refining recovery rates specific to our recovery and the value of what we can create from the materials. So we're quite excited about the market opportunity that we have as we move forward into the future. Moving on to slide 10, this summarizes in three areas how lithium demand is rising at a very rapid rate. You can see in the upper left with the global demand for lithium ion batteries being over 3.1, really, terawatt hours by 2030. And the second graphic to the right of that talks about supply chain risks. You'll see the regions where the various metals are coming from. And you might notice that in North America, there's none when it comes to nickel and cobalt and lithium. However, ophthalmologists demonstrate that we can utilize our technology to generate nickel, cobalt, and lithium and do the nickel and cobalt in metal form. and the lithium and hydroxide form, all of which are high value to feed that growth in demand. So recycling really does change the game and puts a great opportunity on a go-forward basis. On the bottom graph, you'll see that the lithium ion battery recycling can become a game changer in the supply of lithium ion battery material as we get towards the end of the decade. So now let's do a comparison on slide 11 of smelting and standard hydro and off-refining. There's three basic processes that are out there today. 95% of the lithium batteries today are unfortunately not recycled and end up in the landfill. And the 5% that are recycled go through a smelting process, which results with a high environmental impact and is not a viable long-term solution as it does not recover any of the lithium. So smelting is not lithium recycling. In fact, really, there's no commercial lithium recycler going on today in the world. as we stand today, so there's a great opportunity to improve upon the old smelting processes. And the first step towards that is hydrometallurgy, which we've seen multiple players that are out there in that hydrometallurgical world working on chemical precipitation. First off, the challenge with chemical precipitation is it's not proven at scale. And it's expected to produce battery-grade precursors. We think that's high risk. We think that's high risk because of the impurities that can get into those chemical precipitation processes. And also, using 200 times the chemicals that we'll talk about compared to aqua refining can have great economic costs and great environmental costs and worker safety costs. And there's challenges to those methodologies that have not been proven. And we think aqua refining, frankly, is a better way. And what aqua refining differentiates, as I mentioned earlier, is that we create the high purity metals in metal form. And that is a low risk to get to precursors. As you'll see in our press release that we put out today, and I'll show you a picture of it in the next slide, we not only produce nickel in metal form, we easily were able to take that nickel in metal form and make a nickel sulfate. And that is a really important step in getting to battery precursors with a known process, which is the way the primary metals are mined and today turned into those precursors from those pure metals. If you're making the pure metals to begin with, you can not only sell them to the pure metals market, you can also get to those precursors without lengthy multi-year prequalification processes that are very stringent that we know all about because we had to go through that with our lead op refinings. and it'll be even more complex in the lithium space. Going from metals to salts is a much straightforward more path. Slide number 12 shows what materials we've produced from the black mass that we've publicized to date. And you'll see in the left the picture of the black mass, and that's the amalgam of the ground of lithium ion batteries that have been discharged and ground into a material that can then begin to be processed. Today, again, that goes to a smelter. In the future, in a commercial level, we believe off-refining will be the best solution because we've already produced that lithium hydroxide. And lithium hydroxide, as compared to lithium carbonate, has some advantages in the way that that becomes a cathode precursor for batteries. We've also produced the copper in metal form for copper foil production for new batteries. And today's announcement of the high-purity nickel also easily to getting the nickel sulfate from that high-purity nickel is a great step forward in the full link of getting from black mass to the end products. We're very proud of our accomplishments on this front, and we like to sit around and look at those pictures all day long, frankly. Moving on to slide number 13. This is why the NCIL announcement is a major accomplishment. First of all, the high purity has been validated by an accredited third-party lab. The high purity nickel sells for over $30,000 per ton. And the aqua refined nickel can easily be sold in the global metal markets because it's not just battery people buying nickel. It's the steel and super alloys industry, et cetera, that has a high demand for nickel. We've seen quite a bit of news about nickel based upon the Russian invasion of Ukraine. and the offlining of the nickel that is on the global markets and driving up the costs of nickel. And that's a very interesting element as we go into the future. The high-purity nickel enables the battery-grade nickel sulfate and how that nickel sulfate is made today, as I mentioned before. And other hydro-precipitation methods will be much more difficult to qualify and to manage those impurities, especially as they trickle through the system in developed systems. We are the only non-smelting process to prove that we can recover these high value minerals in ultra pure form without multiple refining steps. What that equals is better economics and better environmentally favorable results for everyone. Moving on to slide 14, the extraction of all critical minerals is nearly proven. The path to lithium revenue for aqua metals could begin in 2023. We are commencing orders of key lithium aquarefining pilot equipment for our Innovation Center, which is being prepared for commissioning of pilot operations to commence in a matter of months by August. We have already secured, as I mentioned earlier, the black mass input feedstock from multiple sources for pilot operations through the latter half of 2022 and all of our plans for 2023. And we have an upside opportunity. We believe that we can take the pilot operations at the Innovation Center and scale to meaningful quantities to achieve revenue of significance in 2023. We are also making significant progress working with Linoco and will be planning to deploy lithium aqua refining in the Linoco facility just down the road from our pilot and demonstration facility also in 2023. Judd, Ben, and I just completed the meeting with the Linoco team and are very excited and proud of what they've been able to accomplish and provide us that feedstock of black mass so we can begin that process in addition to our own efforts. Slide number 15, I will summarize lithium off-refining. The expected advantages are that the lowest operating costs that are possible, we believe we can achieve. And the OPEX, which means operating expense estimates for competing technologies, as published with global reports, are between $2,200 and $5,000 per metric ton of black mass and we expect to be significantly below the $2,200 in our processing costs. Acrofining also uses one-two-hundredth of the chemicals of hydro processors, and we recycle the chemicals that we do use. Our highest quality products that we produce have the highest percentage of the minerals recovered, and the valued range, depending upon the various types of feedstock, are quite large numbers per metric tonne. As you can see, $12,500 to $32,000 per metric ton. We think we've got the best business model. We have the option to sell product to the battery supply chain or the metals industry. We also have a geographically unbound capability with our business model to do that through licensing, as we intend to work through with Linoco right here in our own zip code, but anywhere in the world. So we're not plant-constrained. We have the optionality to engage in joint ventures with all parties that are interested in a joint venture to build and operate a recycling plant utilizing our refining technology and or be a recycler ourselves, inclusive of our pilot line, which could become a meaningful demonstration plant that produces revenue for the company. And this is a nation industry, and it's not replacing an incumbent technology, but rather setting the standards. So all lithium recycling facilities are being built from the ground up. In other words, they're all green fields, and we want the green fields to be green. We want the lowest environmental impact. We want the only way to get to net zero through recycling to be through off-refining because we are the only ones that use that renewable electron as the reagent. rather than the chemical, rather than the fossil fuel-based fires. So we also improved the worker safety greatly because we're not doing hot work and we're not dealing with highly caustic large quantities of chemicals and waste streams. So the worker protection, particularly as we arm the United States and other regions that want to defend and support their critical minerals with technologies, we also want to arm our workers with the safest way possible. to work in these plants in places that people want to go work. And that's a really critical element of our core plan is that worker safety. So I'm going to pass the presentation on now to Jud Merrill, our CFO, to give the financial overview. And Jud will begin now. Go ahead, Jud. All right. Thank you, Steve. I've got a few comments on each of the financial statements. I'm going to start first on the balance sheet, which is on slide 17. As of March 31st, 2022, we had total cash of $9 million, working capital of $7.9 million. And this keeps us with our continued healthy cash and working capital balances. The accounts receivable amount includes money due from the sale of equipment. The assets held for sale include non-core assets that are no longer necessary for our future operating plans. And, in fact, we'll note that there were some assets sold in Q1, including about $800,000 worth of equipment to Linneco and $600,000 of non-core equipment to other vendors. Also, during the quarter, we exercised our warrants with Linneco, which increased our ownership in the company. The amount of increase was $500,000 payment that was made in Q1, and our current ownership is approximately 12%. The lease receivable includes our lease to buy agreement with Winneco, which is accounted for as a sales-type lease. On the liability section, there was very little change compared to year-end, and as the company continued to be debt-free. Now moving to the income statement on slide 18. During the first quarter of 2022, Aquamento's was focused on research and development activities to enhance our ability to recycle metals found in lithium ion batteries, and we commenced shipping equipment to Acme Metals. So we were not in commercial production during the quarter of 2022, and as a result, we didn't generate any revenues during this quarter. Cost of product sales decreased by approximately 38% during the quarter compared to 1.6 million in Q1 of 2021. The decrease in Q1 of 2022 is largely due to wrapping up the plant cleanup project. Research and development costs included expenditures related to improving the lithium ion battery recycling technology. During the three months ended March 31, 2022, research and development increased overall for the quarter by approximately 91% compared to the three months ended March 31st, 2021. Research and development has allowed us to make significant improvements in our lead processing and is rapidly advancing our lithium battery recycling processes. General and administrative expenses increased by approximately 20% for the three months ended March 31st, 2022 compared to the three months ended March 31st, 2021. The increases in general and administrative expenses include changes in payroll and an increase in professional fees. We ended the quarter with a net loss of $4.4 million or a negative six cents per basic and diluted share. That was compared to a net loss of $4.1 million or a negative six cents per basic and diluted share for the first quarter of 2021. Okay, and then finally, I'm going to move to the statement of cash flows, which is on slide 19. Net cash used in operating activities for the three months ended March 31, 2022, with $3.6 million. This covers our OpEx and G&A cash needs and was adjusted for non-cash items. This amount is partially driven by 2021 accrued plant cleanup costs that were paid in Q1. This quarter's average monthly cash needs totaled a little over $800,000 per month, which is higher than our average last year of approximately $700,000 to $750,000 a month. The increase is also partially due to higher annual compliance and audit costs. We do expect our monthly base cash costs to be closer to $800,000 a month due to addition of more employees and consultants as we exist. in more lithium-ion battery recycling technologies. The net cash provided by investing activities for the three months ended March 31st, 2022, was $0.4 million, which was made up of the receipt of $1.1 million of proceeds from the sale of equipment offset by $0.3 million used towards the purchase of property and equipment and $0.5 million used towards the warrant exercise for Linneco. The net cash provided by financing activities totaled $4.1 million for the three months ended March 31, 2022, and consisted of $3.9 million in net proceeds from the sale of aqua metal shares presented to the ATM. For the last three quarters of 2021, we had minimal use of the ATM. However, in Q1 of 2022, we did strategically and opportunistically make use of the ATM to strengthen our lithium battery recycling efforts, and this includes securing the Black Mass, investing in equipment for the pilot plant at the Innovation Center, and adding optionality of scaling the plant with larger size core infrastructure, all with intent to get to revenue sooner. With that, that includes my remarks on the financial statement. I will now turn it over to the operator to begin the question and answer portion of our call.
spk08: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, you may submit questions via the web by using the ask a question feature on the side of your screen. Our first question comes from the line of Sean Severson with Water Tower Research. Please proceed with your question.
spk02: Sean Severson Hi, thanks guys. My first question is around lithium hydroxide in pure form. When you say that, what does that mean to Aqua Metals and I guess what is produced otherwise? I'm just trying to understand the importance of that.
spk05: Sean Severson Yes, Sean, thanks for the question. It's unique to Aqua Metals that we are the only company that's produced lithium hydroxide And I'm going to ask Ben to kind of talk about the meaning of that and how that works as a precursor.
spk01: Yeah, thanks. So the advantage of it being very pure is it is able to meet an existing spec, which allows it to go directly into the precursor manufacturing. Many of the existing processes out there result in, like Steve said earlier, carbonate. that has to be converted in a costly manner to a hydroxide. Us going directly to the hydroxide has multiple benefits and cost savings to the precursor manufacturer.
spk03: Okay, thanks for the explanation.
spk02: My second question is regarding when you say you could generate some revenue, what does that mean? Is there any scope or scale that we can get around that for the perspective on the timing and actually how much revenue the pilot plan might generate.
spk05: Yeah, so we're excited about the Innovation Center. It's not a small facility, so it allows us the opportunity to not only build our first pilot, which will commence very soon in a matter of months, but to scale that pilot to really effectively a small demonstration plant. And those economics of that demonstration plant could be exciting for the company. I'll ask Judd to comment on that. Yeah, I mean, the The size of the plant allows us, even with the pilot, to reach run rates of up to $20 to $25 million a year in revenues.
spk03: And that's at current pricing for metals? Yeah, that would be at current pricing.
spk02: Yeah, gotcha. Okay, then my last question is sort of a longer-term economic model question for you guys. When you look at securing, I assume, predictable long-term costs, supply of black mass, right? And then you look at, you know, royalties or production on your end. I assume there'd be offtake agreements there as well. So my point is, is over the long term, do you end up with a very predictable, consistent, fairly recurring cash flow, let's say? I mean, minus obviously, you know, volatility and some of the prices of metals and things, but trying to understand the supply-demand balance in terms of, you know, supply and offtakes.
spk05: Yeah, so that's a great question. And the predictability will probably be the biggest variable in the metals costs, which, you know, we probably will likely see more upwards pressure than downwards pressure based upon the high demands and the lower availability of some of those critical minerals like we were talking about in the presentation. But our business model is also fairly predictable in the various models that we can approach with. If we have a recurring revenue-based licensing arrangement, we would gain a royalty that would still only really be impacted on the variability of the pricing of those metals. And as long as the plant could produce that we're licensing to, we could collect those running royalties and obviously the equipment sales and services that are related to those. In our own black mass production capabilities, which we would be doing at our pilot plant that will turn into a demonstration plant, we believe that the predictability of those revenues, as long as we're producing those materials, will also be subject really only to the variables of the metals markets. And then the added element of our ability to operate, if we can operate more efficiently and more of an improved conversion cost through our own operations, that helps. And if it costs us a little bit more to operate, that would impact negatively the margins, but the revenues would remain the same. And then the third part of our business model, which is really what we're evaluating in the form of joint ventures, It's kind of a hybrid between those two, and each one of those deals will be unique. So I can't really comment exactly on how those will work out, but ultimately we would be solving for predictable revenues that we can stack on top with each deal that we work out with the various players, inclusive of Lineco.
spk03: Great. Thanks. That was very helpful. Thanks, Steve.
spk08: Our next question comes from the line of Colin Rush with Oppenheimer. Please proceed with your question.
spk04: Thanks so much, guys. With these experiments that you're doing on the recovery with nickel and lithium, can you talk about the recovery levels that you're getting to from a percentage of the base material that you're coming from?
spk01: Sure. This is Ben. I can take that one. Right now, all of our planning and our lab data suggests that we're going to be able to achieve 90% recovery or better. So that's what we're using for all the metals at this point.
spk04: Okay. That's super helpful. And then When you look at the European market, obviously there's an awful lot going on there in terms of wanting to move towards energy independence and materials independence, you know, circularity. And you had a very strong European partner historically. Can you talk a little bit about the opportunity for recycling in Europe, you know, kind of where you're at from a sales perspective related to the lead opportunities?
spk05: Yeah, so we're geographically inbound with our model, and we're engaging in discussions with various entities that have operations and interests in Europe as well as the U.S. and Asia Pac. And we see great opportunity. And, in fact, from a legislative perspective, when you look at smelting as the incumbent methodology, that has to come to a close in Europe because certain percentages of metals need to be recovered based on the earlier question that Ben just answered. in terms of the percentage of the minerals that we can recover from the black mass, certainly would meet those legislative needs. Smelting will not. As I mentioned earlier in our presentation, there's no lithium recovery with smelting. So today, commercial lithium ion battery recycling produces a grand total of zero lithium recycling. Hard to believe. But in Europe, that legislation is more advanced than even in the U.S., which will probably catch up, and Asia Pacific. So we see great opportunity there. for interest in our technologies for parties that are interested in recycling batteries and building that ecosystem in the European model.
spk04: I think I was looking specifically for what was going on in the lead market other than the lithium. So I don't know if there's an update on a potential lead partner within the European market.
spk05: Yeah, so in terms of the lead side for the European market, we see more activity really in the Asia-Pac region and in Mexico and South America. And I think that's because there's more growth and capacitization of facilities, and greenfield builds is where the technology fits best. It checks all the boxes. And those are the regions that you're seeing those types of projects being planned more than in the U.S. and more than in Europe, because those are more mature markets in terms of the lead-acid battery industry that don't have as much of a need for the capacitization.
spk03: Perfect. Thanks so much, guys. Thanks.
spk08: Our next question comes from the line of Amit Dayal with HC Wainwright. Please proceed with your question.
spk07: Thank you. Good afternoon, everyone. In terms of scaling, you know, the lithium-ion recycling opportunity, what are the catalysts that you sort of need to now, you know, deliver on to go from pilot to commercial?
spk01: So we're following a technology readiness level system that's common in the chemical engineering world that allows us to meet certain metrics, meet certain efficiencies, throughputs based on a defined test plan. Once those metrics are met, then it's typically about adding additional operational hours and adding additional capacity to reach those higher scales. And that's where... Steve and Judd mentioned earlier the ability to scale even this facility that we're at here at the Innovation Center. Once we meet those metrics, the goal is to start adding unit operations and adding capacity based on that TRL level.
spk05: One thing I'll add to that, too, Amit, is that on the TRL levels, as we progress through them and having a facility scale, we are much better positioned than I think a lot of players in the market that are applying for all these infrastructure opportunities. It's a once-in-a-generation opportunity to be able to receive something like a $50 or $100 million plus grant, and that's the word grant, non-dilutive, to be able to build and operate a very large facility. And getting through those TRL levels as quickly as possible gives us the opportunity to to unlock grants like that, which were, again, from an organizational capabilities perspective, actively working on.
spk07: So is this like a 12-month timeline or a two-, three-year timeline?
spk05: So for the technology deployment part of it, I'll let Ben comment, and then I'll add to Ben's comments on the grant timelines.
spk01: So what we've called our prototype here, or pilot, I think Steve referred to it earlier, here at our Innovation Center, we expect this year still to get through the scaling demonstration and proof, which would allow us to start scaling well under a 12-month timeline.
spk05: And that fits also well within the timeline of these government grants. There's multiple grants that are out there that are pursuable. And those do take time. And we're already underway in working on those. And those are typically around a year plus or minus to get through the entire grant process. So we could be quarters away or a year and a quarter or two away from a very large grant, but possibly sooner because the U.S. government is particularly based upon what's happening. Ukraine is very focused on it. And in I don't know if anybody else heard, but driving into the office this morning, I heard our president talking about the war in Ukraine. And then in the midst of that, referenced in the discussion that the United States needs to secure lithium and nickel in-country. And that is something that I think the government is very interested in working with parties that can help affect that goal. And I showed that graph earlier that showed a grand total of zero mineral production in those areas in North America – And so the U.S. government is nothing more than motivated and interested in finding the right opportunities to make that happen.
spk07: And can these two processes, you know, one with the government grants and one just with the technology itself, can they run in parallel or does the technology need to be readied first and then you apply for the grants?
spk05: So the technology needs to get through certain TRL levels in order for the government to choose which entities that it prioritizes and stack ranks who it doles out the grants to. So it's not an unlimited supply of grants. And so there's going to be a limited number of entities that are applying for those grants. And we feel that with our announcements proving that we can extract these critical minerals that the president himself is referencing in the midst of discussion on the biggest news in 50 years, the war of Ukraine. it gives us an opportunity to win those grants. There's no guarantees for any party applying for those grants, but we feel that we have a great opportunity based upon the progress that we've made.
spk07: Understood. And, you know, my other question is around just, you know, you're able to extract sort of other metals from the black mass like nickel, copper, et cetera now. How much complexity and cost, you know, come into play
spk03: to do that versus just focusing on the lithium extracting or recycling the lithium?
spk01: Steve mentioned earlier our target conversion cost being well below $2,200. Each one of those metals has a certain amount of conversion cost with them, but the system works most efficiently as an entire system. Just going after the lithium, for example, leaving those other metals wouldn't be the most efficient process, but surely you could save money by not recovering the nickel and cobalt. We just don't think it makes sense to do so.
spk03: Okay, understood. And my other questions were already discussed. I'm taking my other questions offline. Thank you. Great, thanks.
spk08: And I'm seeing no further questions over the phone. I would like to turn the call over to Glenn Axelrod for web questions.
spk06: Thanks, Alex. We do have quite a few questions in the queue, Steve, so we'll try to get through them all in the next 15 minutes. First question, let's say you extract nickel from black mass using the aqua refining process. Can the remaining black mass go through the process again to extract a different metal from the same black mass, and if not, why?
spk01: If we were just able to go at, or if we did actually run the process just to recover nickel Surely you could take the rest of the material and go back after it. But the way our process is designed is to upfront set up to recover all of the metals. So it wouldn't be a problem to come back and get the other ladder. It's just the way the process is designed to run into following a process flow individually go after each metal with the initial path.
spk06: Okay, I think you may have partially answered this next question, but I'll ask it anyway. Maybe you could follow on. Would getting the four metals out require four separate steps?
spk01: So yeah, there's going to be, it's definitely a multi-step process. For the most part, each metal that we're going after, when you're referring to the four, I would imagine you're talking about the cobalt, nickel, lithium, and copper. And those all individually require on their own step and on module. We also recover the manganese as a fifth metal as well.
spk06: Thank you. Next question. What is your capability to scale aqualizers, speak to the capital inputs, and possible normalization of production?
spk01: Similar in both our lead and our lithium program, we design and typically lay out a new installation with a up front and downstream scale a little bit larger than required, which basically allows us to take and add modular metal recovery units in what I call the middle of the process. That's where the aqua refinery technology becomes very important. So we look at the fertility footprint, we look at the up front processing, the downstream processing, and design it also you can efficiently add in additional modules without having too much capital involved. And you can do that in a very modular form if you wanted to add on modules in a quarter-by-quarter basis. That's something that can be done.
spk06: Okay, thank you. New EV and legacy OEM companies are looking into lithium battery recycling. Is Aqua Metals planning to talk to these guys and see if there are opportunities there?
spk05: So we're not only planning to talk to those entities, we are, and we have a commercial team that is engaging as quickly as possible with the various entities that are out there. Those are some of the areas that can potentially include opportunities like in the joint venture category, as well as feedstock supply for Lineco, as one example, and tying together partnerships of an eco-network of supplier of lithium-ion batteries, breaking and separation, creation of black mass. Linaco will be producing a lot of black mass in the future, and that gives an opportunity for us to process those materials not only within Linaco, but it even expands the black mass production as we go forward. So those types of discussions and relationships are of a high priority for the company, and they continue.
spk06: Okay, thank you. Next question. Will the operational cost and capital cost of extracting nickel, copper, and lithium be the same as for lead?
spk01: So, no, the operational and capital costs will be significantly different. Steve mentioned the $2,200 per ton that we expect to be below. That's more than the value of lead historically. So there is a significant difference in operational costs. But what we're most excited about is the amount of margin that is available through lithium recycling is significantly higher than what we're currently experiencing in the lead industry.
spk06: Thank you. Next question. Do you anticipate royalty revenue to begin with the startup of operations in Taiwan?
spk05: The answer is yes. So it will be not a large sum of royalties, but we'll collect royalties really beginning with the first production of material off of those machines. So we'll enter into our first royalty collection in the next one to two quarters.
spk06: Thank you. Next question. Where does the black mass come from? Is Linacle providing any black mass?
spk01: So black mass comes from broken up lithium ion, spent lithium ion batteries. And yes, we have received and are working with Black Mass that Linaco is providing as they go through their own scaling operations.
spk06: Thank you. Next question. When do you expect Linaco to complete the purchase of the facility?
spk05: Yes, Linaco, when we did the lease to buy agreements, Haskell March of 2023 to make the full payment. They are incentivized to pay that off in October. If they pay it in October, the purchase price is $1 million less. So it's either October of this year or March of 2023. Okay, thank you.
spk06: And your last question, then I'll turn the call over to you, Steve. How should we view the scale-up? Is it similar to the lead path where you went from one small bench scale electrolyzer to a single full-size unit to multiple full-size units?
spk05: So the scale-up of the technology for the lithium is going to look different than we did it for the lead. We went from one full-size aqualyzer to 96 of them, and that was a big jump. And we see other players in the industry in the lithium space trying to make that same big jump And we probably learned a thing or two from making that big jump. And what we're doing is more of a methodical approach with pilot to demonstration plant to larger demonstration plant to large deployment of facilities. So it's going to be a step-by-step process. The fortunate thing about that with the lithium recycling, it does generate, as we mentioned earlier, potentially significant, meaningful enough amounts of revenue that you could even carry the company. But that allows us to really take each step through that technology risk level reduction as we go through the process with our really eye on the large facility being paid for substantially, if not all, by a government grant, by a government that is very interested in entities that can produce these critical minerals right here in the U.S. in a safe environment for its workers.
spk06: Perfect. There's no further questions in the queue, and I don't see any in the phone. So I'll ask you, Steve, for some closing remarks, and then we'll end the call.
spk05: Well, great. Well, thank you, everybody, for attending today. A lot of new information. If you have any need for follow-up, please feel free to reach out to us through Bristol. We'd be happy to engage and discuss with you. And we'll continue to keep everyone updated as we move forward and really appreciate everybody's interest in aqua metals. And thank you for attending again. Have a great day.
spk08: Thank you, ladies and gentlemen. This does conclude today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful
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