Aqua Metals, Inc.

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.

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.

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.