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spk01: Good afternoon and welcome to the AquaMetal second quarter financial results call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You can submit a question via the web at any time by typing them into the ask a question field. Please note that this conference is being recorded. It's now my pleasure to turn the conference over to your host, Bob Myers at Levin K. Investor Relations. Bob, please begin.
spk02: Thank you, Operator, and thank you, everybody, for joining. Earlier today, Aqua Metals issued a press release providing an operational update and discussing financial results for the second quarter ended June 30, 2023. This release is available in the Investor Relations section on the company's website at aquametals.com. Hosting the call today are Steve Cotton, President and Chief Executive Officer, and Judd Merrill, Chief Financial Officer. Before we begin, I would like to remind participants that during the call, management will be making forward-looking statements. Please refer to the company's report on Form 10-K, filed March 9, or Form 10-Q, filed today, August 9, 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 such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will be taking questions. Questions will be accepted over the phone from analysts, and all other investors can submit a question using the online webcast portal provided in today's and last week's press releases. 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 AquaMetals. Steve, the call is yours.
spk06: Thank you, Bob, and thank you to everyone who joined us today. AquaMetals continues to make significant progress and has recently marked a number of major milestones towards commercialization of our patented aqua-refining recycling technology. We are delivering tangible results across every critical facet of our business, and our vision for the future of the company is coming into clearer focus. In recent months, we have advanced our core recycling technology, announced innovative new partnerships, secured a multi-year diverse supply of raw materials, started inking our first global licensing deal, and raised $25 million in new operating capital. Though each of these milestones is substantial on its own, and taken all together, we are painting a provocative picture of what a sustainable lithium battery recycling company is and how we plan to grow within and transform the electrification and energy storage industry. During the second quarter of We successfully completed commissioning of our state-of-the-art pilot facility and transitioned to a 24-hour by five-day-a-week operation. We are currently producing high-purity, saleable quantities of recycled battery materials at what we believe is the first operational, sustainable lithium battery recycling facility in the United States. Our patented and patent-pending low-carbon technology is now further demonstrated as both readily scalable and cost-effective compared to other approaches. Many companies in this sector are currently building material preprocessing or shredding capacity and beginning to make black mass at scale. Aqua Metals is the first among peers to be taking black mass and actually recycling it into critical materials and high-value products without using polluting furnaces or train loads of one-time-use chemicals. This achievement is the foundation of our future success and is attracting interest from industry leaders and strategic investors around the world. We are actively shaping that future by establishing key partnerships, supply agreements, customer relationships across the battery and EV value chain to capitalize on our demonstrated and continuously operating pilot facility. And that begins with our own supply of materials. In the second quarter, We contracted for an additional 3,000 tons of lithium battery black mass, which is the ground up mixture of valuable metals from spent batteries that we recycle. This is enough to supply our commercial scale operations and meet customer demand well into 2025. And we continue to build a diverse array of black mass processing partners to ensure a steady supply to fuel our growth and to create deeper partnering opportunities with these key suppliers. While metals prices continue to fluctuate, each ton of black mass is worth roughly $20,000 in the recycled components, so this confirmed supply represents an estimated $60 million in revenue once we recycle it. With our proven capability to produce high-purity metals from black mass, next is our growing ecosystem of off-takers and customers for the critical minerals we deliver. During the quarter, we announced a first-of-kind partnership with 6K Energy, to develop the next generation of sustainable materials for domestic battery manufacturing. We are executing on our non-recurring engineering agreement to jointly develop and commercialize a low carbon battery metal conversion process. We are on schedule to complete that work this year and the company's plan to jointly pilot this conversion technology in Tennessee next year. More importantly though, 6K plans to use recycled materials from aqua metals to feed its 13,000 ton per year PlusCam manufacturing facility in Jackson, Tennessee, which uses their low-carbon Unimelt plasma technology. We are currently finalizing that long-term agreement to supply thousands of tons of high-value critical minerals each year starting in 2025. This is a big deal and central to our commercial growth domestically. PlusCam is a massive manufacturing facility that will produce cathode materials to power millions of electric vehicles, many gigawatt hours per year. and the ability to use our recycled content is essential to their operations. Meeting demand for Plus TAM alone will represent the lion's share of recycled material that we produce in phase one of our commercial scale facility and will be key revenue driver as we ultimately scale our own Tahoe Rio campus to 10,000 tons per year. But our growth as a company is not limited to recycling at the facilities we build and will operate ourselves. More recently, we announced a new strategic investment and global partnership with South Korea-based Yulho Materials. Yulho is already established as a leading black mass producer in South Korea and is currently building the nation's largest black mass processing facility. South Korea is one of the biggest global markets for critical battery minerals and is home to some of the world's leading electric vehicle and battery companies worldwide. who already supply Yulho with both end-of-life batteries and manufacturing scrap to convert into black mass. Yulho Materials has made a $5 million strategic equity investment to help accelerate our commercial growth in the U.S., underscoring their confidence in AquaMetal's transformative technology and demonstrated results at our pilot-scale facility. That in itself is great news, but in addition, Yulho provides will be our first licensing agreement for our aqua refining technology for use in their own facilities in South Korea. This is a realization of our strategy for future global expansion and will deliver immense benefits for our company and for all of our shareholders. We are negotiating final terms and expect the initial licensing agreement to cover up to 100,000 tons of material processed each year in South Korea. At an average value of $20,000 a ton, That represents a $2 billion market opportunity annually that the companies will share in. We expect Yulho will commence with their first aqua refinery in South Korea in 2024-2025, and they plan to embed part of their technical team with Aquametals to accelerate the commissioning of their own facility. With their growing partnerships in global EV and battery leaders, Yulho is also poised for success and rapid growth. Beyond its initial license, Both companies have also agreed to explore together further expansion in Asia and the European Union as those markets continue to build out global battery and EV manufacturing hubs to meet the rapid demand for electrification of the transportation sector. With our innovative recycling process proven at scale and an expanding roster of industry-leading customers for our products and our technology, the next gate in our commercial strategy we have successfully traversed was securing the funding need for our accelerating growth. In addition to the $5 million investment from ULHO last month, we completed a public offering which raised an additional $20 million in operating capital for the company. This offering was quickly oversubscribed, demonstrating the confidence expressed by investors in our fundamentals and our strategy for Aquamentals' growth going forward. First, this capital will be used in part to continue building our first commercial-scale facility and five-acre recycling campus right here in Tahoe, Reno. a short distance from our Innovation Center. Second, this capital is also a necessary component of other non-diluted funding sources that Aqua Metals is pursuing. As we have previously discussed, Aqua Metals is applying for a loan with very favorable terms guaranteed by the USDA. And one of the requirements of these types of loans is necessary capital on hand, which we now have. And similarly, many of the grant and loan application programs managed by the Department of Energy and federal agencies would also have cost share and capital requirements. By raising these funds today, we not only get necessary capital for equipment and operations, but we are also able to access larger funding opportunities in the future, even including traditional debt financing. Our company now has a more robust balance sheet, cash position, and overall value because of the investments received, and we are confident this makes Aquamentals an even stronger company going forward. In short, we've made tremendous progress in a short period of time. With the necessary capital in hand to reach commercial scale, new innovative partnerships that stand the globe, and a growing list of industry-first achievements under our belt, we believe there is no stopping our vision of transforming the critical minerals and battery materials industry. In the coming months, in the remainder of 2023, you can expect opera metals to continue to make strides, including and not limited to finalizing a multi-year supply agreement with 6K Energy for their Plus 10 facility, signing the first licensing deal with Yulho for aqua refining technology in South Korea, generating initial revenues from sales of recycled materials at our pilot facility, providing updates on Department of Energy grant and USDA loan funding applications, And we will continue to advance construction and commissioning of Phase 1 at our new commercial scale facility with plans to be operational by mid-2024 and reach our target of 3,000 ton per year run rate by the end of 2024. The future of Aquamentals as a global leader in sustainable battery recycling is coming into clear focus, and we expect to finish 2023 as a commercial company selling the valuable battery minerals that we recover. We are solving difficult challenges and building a truly sustainable energy storage industry that is destined to become as large as oil and gas and ultimately eclipse it as electrification and decarbonization take hold and capitalizing on our unique opportunities to pass our peers before they are even up and running. I look forward to sharing further updates with you all soon, and I'll turn it over to Chief Financial Officer Judd Merrill to discuss the results for the second quarter.
spk05: Thanks, Steve. Let me start my comments with our balance sheet. As of June 30, 2023, we had total assets of $22 million and working capital of $4 million. We ended the quarter with total cash of approximately $6.2 million. On July 21, 2023, we completed a public offering of approximately 18 million shares, resulting in $20 million of gross proceeds. In addition to the capital investment, the company entered into an agreement to execute a license agreement with Yule Hole. Yule Hole invested $5 million into Aqua Metals, and that money was received last week. Cash on hand and cash received from these transactions totals approximately $30 million of cash available to the company to fortify our balance sheet, enabling the company to fund and pursue debt for the first phase of development of our 10,000 ton per year campus facility. Also, changes on the balance sheet include a reduction in both the lease receivable assets and the building purchase deposit liability. Both of these went away as we completed the sale of the $2,500 Peru asset, which netted approximately $6 million after paying off the $6 million bridge note with Alvin Moore. There were no other significant changes to our balance sheet since our last quarterly report, so I'll move to the income statements. In Q2, we were focused on advancing and executing on our operations at our pilot facility. The costs related to operating this facility were approximately $1.5 million for the quarter. Although no revenues were recognized during the quarter, we did record modest service fees from our development agreement with 6K, and those fees are recorded in other income. Research and development costs were consistent compared to the quarter ended June 30, 2022. Included in R&D expenses are costs related to our agreement with 6K. General and administrative expenses increased approximately 19% for the quarter end of June 30th, 2023, compared to the quarter end of June 30th, 2022. This was in line with expectations and guidance. Non-cash charges included in G&A, includes dot-com, were approximately 0.6 million. For the second quarter, 2023, we had an operating loss of 4.9 million compared to an operating loss of 4 million for the same period in 2022. Our net loss for the quarter ended June 30th, 2023 was 4.8 million or a negative six cents per basic and diluted share compared to a net loss of 3.2 million or a negative four cents per basic and diluted share for the same period in 2022. Moving to the cash flow statement, cash provided by operating activities for the six months ended June 30, 2023 was $5.5 million and includes approximately $12.3 million cash received related to our lease receivable offset by operating expenses. Net cash used in investing activities for the quarter was $5.5 million. This consisted mainly of $4.3 million utilized towards the purchase of property and equipment. Net cash used in financing activities was $0.8 million for the quarter. This consisted of $2.8 million net proceeds from the sale of AquaMetal shares pursuant to the market offering and $2.9 million in proceeds from the loan agreement secured with Summit Investment offset by $6 million used to pay off the note payable as noted in Note 11 of our financial statement report. We have bolstered our balance sheet and have managed our operations responsibly. When we include our cash balance in $25 million from the capital raised in the direct investment by U-Haul that we completed subsequent to quarter end, we believe that we have sufficient capital to fund our proposed operating plans through 2024. This would include the commencement of the phase one build-out of our recently acquired five-acre recycling campus at the Tri Center. And with that, that concludes my remarks on the financials. I will now turn it back over to the moderator for Q&A.
spk01: Thank you. We'll now be conducting a question and answer session. If you'd like to verbally ask a question, please press star 1 on your telephone keypad, or if you'd like to ask a question via the webcast, please type it into the Ask a Question feature on the left side of your screen. One moment, please, while we poll for questions. Our first question today is coming from Samir Joshi from HCWainwright. Your line is now live.
spk03: Hey, Steve. Hey, Jeff. Thanks for taking my questions. For the YOLO agreement, is there any revenue sharing once the plant is up and running?
spk06: So for UHO, the licensing agreement, we will share in the revenue from that production facility. So as it scales, we will share with them a percentage of that revenue. So it's like a royalty kind of payment or? Exactly. Yeah, in the form of a licensing royalty. Correct.
spk03: Okay.
spk06: Is there an addition to the $5 million equity investment they made in the company that they already made?
spk03: Yeah. Is there any commitment for aqua metals to spend a certain amount to make sure that ULO does what it says it will do?
spk06: So the beauty of this arrangement is that the $5 million they've invested is earmarked to help us ensure that we continue to quickly build our facility, phase one of our campus environment here. They're going to be sending technical and management folks here to embed with us to help us stand that up and effectively put together the plans for the twin of that in their facility area. where they're going to have an aqua refining operation there. So there's really no capital cost to aqua metals. And, in fact, the $5 million investment really helps support what it is that we're doing here. So that's why that deal was attracted to both parties, is that we could both move as quickly as we could, and they could spend the capital in South Korea while we focus our capital spend here in the U.S. in the Tsauho-Reno Industrial Center.
spk03: Understood. And just another clarification on that, is this – license for development within a certain region or up to a certain extent? Is it up to 100,000 tons and then beyond that it doesn't apply? Or is it applicable to South Korea and maybe Asia? What is the scope? So the tonnage is up to 100,000 tons.
spk06: They're going to start with 8,000 tons and then go to 24,000 tons in that first facility of theirs. But the 100,000 tons is kind of the overall licensing umbrella that we've agreed to with them. We're going to be exploring opportunities even beyond South Korea together because some of their partners that are in South Korea have global deployments and global operations, being battery cell manufacturers. And so there are going to potentially be other opportunities But the licensing arrangement in South Korea really is for the up to 100,000 tons. And that would equate, by the way, to about $2 billion worth of material being processed that the companies would share.
spk03: Right, right, yes. On the 6K energy front, again, similar questions. Is there any commitment from Acclimate to spend a certain amount of money?
spk06: So on the 6K Energy deal to date, what we've agreed to is that 6K Energy has been paying Aqua Metals non-recurring engineering or NRE dollars towards our development of this connector technology that allows us to take our pure metals and get them into a specialized slurry concentrate for them so then they can deploy that technology in their Jackson, Tennessee PlusCamp facility that they recently broke ground on. And so that is really the money that's exchanged hand so far is 6K Energy sending money to Aqua Metals to develop that technology. That program is on budget and on time and going very well, expected to wrap up by the end of the year and then move forward with a pilot of that connector technology in their facility as its next step, as well as considering offtake arrangements for what we produce in the campus environment phase one and beyond out here in Tahoe, Reno, as well as considering how we get our process closer to their process in Jackson, Tennessee, and working out what that might look like in the longer run. So there's no real capital cost dollars for aqua metals. In fact, if anything, we're getting money.
spk03: Understood. And then just two quick ones. Should we expect initial revenue dollars in 3Q or 4Q? And then the second question is, what is the expected burn over the next two quarters? Is it around the $5 million range or something else?
spk05: Yeah, so we believe we'll have some small revenues from the pilot plant in this quarter and in the last quarter of this year, so the third and fourth quarter. The purpose of the pilot plant is to get us ready for the demonstration commercial size 3,010 facility that will generate a lot better revenues. And so we've done that. And so we're, we're starting to build that out, but so we'll see some revenues there. The, the first has remained consistent. We've been about on a cash basis for our base, you know, DNA and operating has been about 900,000 a month. So we're, we're kind of saying, you know, budget wise about a million a month. for kind of maintaining that cash needs.
spk03: Understood. Thanks for taking my questions and congrats on all the progress.
spk01: Thank you. Thank you. Next question is coming from Colin Rush from Oppenheimer. Your line is now live.
spk04: Thanks so much, guys. Can you remind us of the CapEx plans for the balance of this year and 2024 to get to the commercial round?
spk05: Yeah, thanks, Colin. So that's That commercial demonstration facility is going to be about $30 million CapEx needs. We started spending a little bit on that already. We ordered some of the long-retime equipment. We're already in there doing some of that work, getting ready for it. But in total, between now and the first part of next year, it will be about a $30 million CapEx expense.
spk04: Okay, that's helpful. And then with this debt facility that you're looking at, can you give us a sense of how big a facility you're looking at and kind of what the spread is, you know, kind of penciling out in a rough way, you know, versus any of the benchmarks that you may be back to? So with what? Can you just repeat that? The size of the debt facility that you're looking at doing and where you think interest rates shake out on that facility. Okay.
spk05: Yeah, so this is the debt facility we're looking at with the USDA guaranteed note. You know, we're getting very close to applying for that, and we think that's probably interest rates below 10. It's probably closer to 8% on that. And the size of that is $25 million. And then, you know, that would be used to fund the $30 million CapEx fund.
spk04: Okay, and then the final one is just how far along you are in customer conversations and starting to qualify any product that might get used in a battery.
spk06: So we've definitely been going through share of materials to battery manufacturers. One of our announced battery manufacturer partners is Dragonfly Energy, which is actually right here in Tahoe, Reno, developing silicon anode solid-state next-generation batteries. LFP, lithium iron phosphate batteries, and others that we've shared our materials with. And we've gotten great feedback so far on the high purity and high quality that people are seeing from the products that we're producing, particularly that lithium in the form of lithium hydroxide. So we've already validated some great progress on customer receptivity to the materials that we're producing, which is quite heartening. In fact, we've been told by one, partner that the lithium hydroxide that we provide is the purest lithium hydroxide they've seen even compared to mining materials.
spk00: All right. Thanks, guys.
spk01: Thanks, Colin. Thank you. I'd like to turn the floor back over to Bob for any web questions.
spk02: Yes, thank you. A few questions from the webcast. First, why did Aquamentals decide to raise equity capital now?
spk06: Okay, great. So, well, first and foremost, our decision to initiate an equity offering for the first time in really four years, over four years, was made from a position of strength. The timing aligned seamlessly with our long-term strategy, and that ensures that Aqua Metals remains really at the forefront of our advancement as a company and in the industry. And this capital injection really empowers us to accelerate the phased development plan of our commercial-scale campus, It also strategically positions us to seize these imminent growth opportunities. And one of the pivotal benefits of this move is the enhancement of our creditworthiness. As we continue the process that Judd was just talking about to apply for the government programs, including the USDA loan, let alone the grants, this capital really serves as a robust financial backstop. And as we all know, that's really a prerequisite that all funding departments mandate. You need to show that you have money in order to borrow money. So the confidence level in our financial stability is really now quite bolstered, and that sets us up for success in gaining access to these non-dilutive types of funding sources. And I'll add, when viewed in conjunction with our recent strategic investments, this equity raise is also a testament to our commitment to really being prudent stewards of our balance sheet and keeping it strong and unlocking the opportunities to have access to these additional financing opportunities, but also just be a company with a strong balance sheet as it talks to partners and potential partners. So it really has helped. And, you know, one more thing I would add is that our recent partnerships combined with our strength and balance sheet really do create a potent formula. We're not just optimistic, but we're confident that this sets us up on a continued trajectory of success.
spk02: Perfect. Thank you. Next question. Can you discuss the evolving strategy around both owning and operating a recycling plant and the opportunity around licensing agreements and potential JVs the company is exploring with current and potential partners?
spk06: Absolutely, yeah. And this is critical to understanding the future of aqua metals and how we'll grow and evolve in the coming years. And the main highlight here is the flexibility of our strategy and our ability to adapt to the rapidly growing and evolving market and capitalize on those kinds of opportunities. Our core business is owning and operating our own commercial scale, sustainable recycling facilities that are going to be central to our growth. as evidenced by our 10,000 ton per year campus that we're currently developing and building in the Tahoe, Reno, Spain lithium loop right here in Reno, Nevada. But at the same time, we don't want to be limited to sole ownership. So for future aqua refining campuses and other facilities, we can also develop these alongside partners, black mass supplier partners, or even offtake partners, EB manufacturers, cell manufacturers, and look at creating joint ventures or even other arrangements We have previously shared that we are in discussions with 6K Energy to jointly develop and operate a pilot on our innovative low-carbon battery materials conversion process. And this structure can work in a number of scenarios, especially in co-located facilities with large battery and CAM or cathode-active material or pre-CAM, pre-cathode-active material manufacturers. And, you know, of course, our exciting announcement with ULHO embodies our licensing strategy. Because with our technology proven out and demonstrated the ability to scale, the licensing enables us to rapidly and capital efficiently scale this aqua refining technology globally, and sooner rather than later. There's obviously a distinct financial advantage to licensing arrangements, and that creates another revenue stream for aqua metals in the future, in addition to our own operations. And aqua metals can support multiple licensing projects simultaneously, yet still keep our core focus, allowing us to expand rapidly in markets that are really otherwise inaccessible to us at this time. And I'll add each of these pathways to future growth is equally viable because our groundbreaking technology and demonstrated success to date has gone very well. And so for Aquamentals, it comes down to identifying the right partners to work with in our expanding roster of industry-leading partners that really reflects our multifaceted growth strategy. So it's not just a singular strategy, and it allows us to propagate our technology as quickly as possible so the right infrastructure gets built rather than putting in smelters and hydro facilities that would consume train loads of toxic chemicals.
spk02: Perfect. Thank you. And regarding our commercial plant, can you provide an update on the production timeline of the new facility at the Waltham site?
spk06: Sure, happy to. So things are really going great over at our commercial campus and progressing so far on time and on budget. We recently started this week concrete demolition for some of the internal structures that we're building to put in a mezzanine level to get more square footage out of the facility. And we've upgraded the electrical and other systems and even put on a nice new paint job on the outside that looks just like the picture that we put out of what the facility would look like, as well as the inside. And we also outfitted brand new office space, which is now already housing several of our engineers and project management function to oversee the build while they're on the site. And equipment is being purchased and moved into the location. And that includes our state-of-the-art R&D lab, which already lives and operates on the campus as well. We moved that from the Innovation Center, so we would have that R&D lab right there on the campus environment, also supporting the Innovation Center just down the street. We also expect that we'll complete the installation and upfitting of the current building really early in 2024. and begin commissioning and then introducing black mass input and ramping up the operations at that point in time. Our plan is to ramp to the commercial scale through the second half of 24, which in this building is projected to get to that 3,000 tons of run rate of black mass being processed as we get towards the end of 24, which is that $60 million a year revenue run rate. With a recent announcement of the successful completion of our pilot, I'll also add that we're able to dedicate our senior engineering team and the senior operations team to the build-out as they've handed over the operations of the Innovation Center pilot, and they can focus on operating the pilot 24 hours a day, seem to be seven days a week from five days a week, while the engineers and senior operations team can focus on the completion of the first commercial campus.
spk02: Great, thank you. And speaking of the pilot plant, there's a few questions around that. Can you talk a little bit about what we're doing with the material that we produce there beyond some of the comments we made in the prepared remarks?
spk06: Yeah, so the initial materials that we were producing at the pilot really do have a few purposes. And, you know, I've already kind of mentioned that we're already using some of the material for our own testing as well as providing to partners, but we're also stockpiling some of the material to help us commission our commercial scale facility. And that helps to kind of prime the pumps over down the street as we bring that equipment online soon. And there's, as I mentioned before, significant demand for samples that we're seeing from all these leading companies across the battery and electric vehicle supply chains. Because as the first non-smelting or chemical-intensive recycler, and really the only technology that's currently operating at scale that is an alternative to those, we believe that we're the only company that can share representative samples of these recycled materials with these types of manufacturers, which we have been doing. They're obviously in a rush to secure supplies of critical minerals that are U.S.-based, but also that are sustainably produced, so it's a double whammy. And there's been a lot of demand for those high purity samples. So that's what we're spending a lot of the efforts on with that pilot is bringing those folks through, getting them samples, and working towards building lasting relationships. And as we build up, lastly, the supplies in sight, we will sell some of those recovered materials. Judd mentioned that earlier in the call today. And we'll make those materials and sell them. And we'll also build up enough supply to justify some of the shipping costs from the pilot because there's lower quantities of production, but still get some actual first revenues from the first sales of sustainably recycled materials beginning in this current quarter. So that's a really exciting thing as well for us. But this is, of course, a pilot-scale facility, and we expect to generate pilot-scale revenues, as Judd mentioned, in the near term. But our unique ability to deliver these samples to these strategic partners today to further develop those relationships gives us a real distinct advantage, we believe, in the marketplace. So all the materials that are being produced at our pilot facility are being put to good use. Anyone can come and see them if they'd like. We've had people come through and see it with their own two eyes, the metals and the lithium products that we're generating. And we're using the pilot to not only get ready for the commercial plant, but to advance those commercial interests and partnerships and generate some additional revenues for the company while we're at it.
spk02: Great, thank you. Moving on, can you provide some granularity on the differences between AquaMetal's technology as compared to some of our competitors who have been afforded much higher valuations?
spk06: So opera refining is very differentiated in that we've decarbonized the process because we generate a tiny fraction order of magnitude amount of CO2. And that's because if you're smelting and burning the batteries, you're creating massive quantities of CO2 greenhouse gas. In fact, by weight, believe it or not, more greenhouse gas than black mass processed. The hydro gets a little bit better with the hydrometallurgical processes, but they still generate nearly triple the amount in weight of CO2 in the form of CO2 gas. We capture the carbon and don't create CO2 gas with our process. And that carbon can get actually put into a reuse scenario like with cement and things like that, but the key portion of that is it doesn't go into the air. And that's the gas side and the greenhouse gas side of the equation. We regenerate the chemicals in our process using electricity. That's very unique to AquaBettles as compared to the other folks that are out there. And what that means is that we don't have to bring in train loads of caustic chemicals on the front end to go through what are more like traditional mining processes of leaching that then create a back end challenge of a waste stream of sodium sulfate. And the sodium sulfate, as a percentage of the weight of the materials that come in, whether it's pyro or hydro, is very high, if not equal to the amount of material that's being processed to begin with. And our process, because we use the electricity as the reagent to drive the process, rather than chemicals and fire, we regenerate the chemicals that we use and we create zero sodium sulfate. So that's advantageous to us as a planet and as a species and multiple species because we're not wasting the atmosphere and creating a bunch of solid waste streams. But we also have improved economics because we don't have to spend all that money and all those chemicals. We don't have to buy a bunch of fossil fuels. We don't have to spend millions of dollars on crystallization systems to create sodium sulfate crystals that just get thrown into the landfill or the ocean, let alone the transport costs, et cetera. So it's a very different approach, and that – is our differentiator. And why these other companies have disparate valuations to us is up to the market. And we do believe that as we are steadily trotting along and producing materials, that we're going to see a little bit of adjustments in those tides of valuations. It can't be as disparate as it is for much longer, in our opinions.
spk02: Great. Thank you. And then we have a two part question on partnerships. Do the partnerships announced to date preclude you from doing licensing deals with other companies? And what does the landscape look like for additional partners?
spk06: So the landscape is really exciting because we're talking to players from every aspect of the ecosystem ranging from black mass suppliers, to offtake partners that are making cathode active materials like a 6K energy, to cell manufacturers discussions directly, to EV manufacturers that are verticalizing that want to have control of those minerals and close their own loop on that. So we are evaluating each partnership and making sure that we set up our, I would call it our dance card, so we have the right mix of partnerships. So we're taking the time While we have the pilot operating and why we're meeting with all these folks to make sure that we allocate the best result of partnering for us and for our shareholders really and also ensure that we don't get tied up in any sort of a scenario where we can't operate one function of our business. If we partner too strongly with one particular entity our goal. both economically and altruistically, is to propagate aqua refining technology as quickly as possible and get it in the hands of not only our own selves, but in the hands of partners that can help capitalize and deploy the far environmentally superior suite of technologies, which, by the way, is far better for worker safety because you don't walk into work every day to the hellscape of smelting, or with a hot suit or of a chemical suit to do the standard hydro processes. And so we want to create those kinds of jobs from our process as well and get that technology into the hands of others, but yet not constrain ourselves.
spk02: Great. Thank you. A little bit of an extension. What are the prospects for Aqua Metals becoming a contracted recycling provider? for the large automobile manufacturers? And are we talking to Tesla and other brands?
spk06: So what that question is about is kind of like what I would call tolling. So a merchant business is where you're buying the black mass feedstock, you know, your input supply, and then processing at your own cost and then selling that offtake to others. What this question is about is our willingness and ability to do tolling arrangements And particularly EV manufacturers, it certainly may make sense because they get that material back and they want to close their loop and are looking for, some of them are looking for suppliers that can help them do that. And that's something that we see great opportunity with our existing black mass and even offtake partners such as a 6K Energy that together we can toll that for those EV manufacturers and show that chain of custody of when those batteries come back, they get cleanly crushed and converted to black mass, go to a process that's a lithium off-refining process instead of a smelting or a hydro process that makes that environmental mess. They get the benefit of those materials on the back end going through a cathode active material manufacturer such as a 6K Energy. and then back into their stream. So we see that type of opportunity, and those are the very types of things that we're talking to some of these folks about. I can say that each significant major deal that we anticipate doing is going to have its own unique aspects, and that goes back to the prior question where we've got to make sure that when we do one deal, we don't constrain ourselves from doing other deals so we can continue to propagate the technology and not allow anyone to tie it up.
spk02: Thank you. A couple more here. A couple related to grants. And just to clarify for folks, do you expect to be eligible for other sources of government grants through the DOE and the USDA? And maybe we could just provide an update to clarify a few questions.
spk05: Yeah. we not only expect to be eligible, um, we've read some of the language, um, that we, you know, that's coming out and some of the full ads for both IRA and the built back better plan. Um, and we believe that we're like very good fits for the DOE next round. Um, and we actually believe that that's very, very soon that we'll be seeing, um, you know, that come out, um, to the point where we, you know, our Chief Business Officer David McMurtry and others of our team are spending a significant amount of their time working on making sure that we are ready and able to apply for these grants. We've hired a consulting firm out of Washington, D.C. that's done these grants before for other companies. They're very familiar with the process. They are working for us, consulting with us, and getting us prepared to apply for those grants. So we're going to be very, very aggressive. We think that right now, There's an opportunity that hasn't been there before. And so we're going to take advantage of that and work to get these grants. In addition to that, we did apply for, these grants are like in the $50 million plus range. So these are very significant dollar amounts. In addition to that, we did apply for a grant related to our recycling process, mainly around the lithium side, earlier this year to $5 million in. And so we'll be waiting to hear back on that one as well. So that's an important piece. But we're also familiar with, as we talked about, the USDA, what programs they have. There's some other programs that we think we're eligible for. We're also looking at tax credits. There's a production credit and a capitalization credit that we think we qualify for and apply for in 2024. We think that's a good timing that changes. We'll look at what that looks like. But those are coming up. We've applied for tax abatements that are specific to the state of Nevada. So we're spending a lot of time trying to make sure that those things are available to augmentals as well.
spk02: Perfect. Thank you. Kind of a new question here. How does your cost of recycling compare to mining and what do you see in the future?
spk06: So it's quite interesting because the cost per ton of material produced when you're mining high grade materials such as black mass is significantly less. So that puts us at a really interesting cost advantageous perspective of being able to urban mine that high grade or quote unquote of that black mass material. So that is an advantage that we have over the mining in terms of our cost envelope. That will obviously very much help us. And in the longer run, as students of history of the battery industry, if you take a lead acid battery today that you bought and analyze what percentage of that material came out of old batteries, it's about 90% in the U.S., you know, 80 to 90% globally. And the rest of it came from mined materials. Right now in the lithium world, close to 0% of that material is recycled. Certainly the lithium hasn't been recycled successfully yet until we've been doing it really. And so that gives us a vision of the future where what we want the world to get to is the point where we've dug this stuff out of the earth once. And now we're using it perpetually over and over and over again. And then now you're only mining to feed the growth. And then overall, you're reducing the cost of per kilowatt hour of storage of battery energy storage because you can continuously recycle and reuse that material on a more cost effective basis than mining. So it'll take some time for the industry to get there. But recycling is really the linchpin for us to get from where we are today to as a society to a closed loop battery age society that's infinitely recycling all these critical minerals.
spk02: Perfect. Thank you. And I know we're running out of time, but one quick question here that's a little different. Will your clients be able to apply for renewable energy credits for using your products versus other more hazardous or polluting product processes?
spk06: So that is a really interesting question, and we are looking into that. You know, Tesla, for example, got paid by the other auto manufacturers for their, you know, they got subsidies basically from the other manufacturers for some years. We see opportunity there as we are fully decarbonized, and we might have the ability to monetize that, but we haven't confirmed that as of yet, but we certainly have our eyes on that opportunity. I will add one other comment there is that because we are net zero in our approach to get to a net zero capability with getting to that 100% renewable energy, 100% carbon free, we're that part of the supply chain for all these players. And so by working the materials through an aqua metals process and the partners that we work with that are also electrically based, and CLEEM on the black mass production and on the cathodic material production, together we can be the scope one, a.k.a. the supply chain, a creative benefit to EV manufacturers and cell manufacturers, et cetera. So that is a real advantage that we can bring to the table from that perspective.
spk01: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Steve for any further closing comments.
spk06: Well, thanks again, everyone, for your time and attention today. And we're rapidly advancing our operational and commercial initiatives, as you heard today, on a global scale. And it's really an exciting time for Aquametals, and we look forward to providing continued updates and our continued progress. And in the meantime, if anybody has questions, you can always go to our website and see in the media section, we have a blog. And that has a lot of up-to-date information and videos and things like that. You can also contact us directly as well, of course, as FNKIR.
spk01: Thanks again, everybody. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
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