American Resources Corporation

Greetings and welcome to American Resources Corporation third quarter 2021 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Lavagetta, Vice President, Corporate Finance and Communications. Thank you. You may begin.

Thanks, Doug. Good afternoon, or good morning, everyone. On behalf of American Resources Corporation, I'd like to welcome everyone to our third quarter of 2021's conference call and business update. We welcome this opportunity to not only discuss our accomplishments over the past quarter and first nine months of the year, but also on where we have our sights set as we embark on this exciting time. Also on the call today is Mark Jensen, American Resources Chairman and CEO, Kirk Taylor, our Chief Financial Officer, and Tom Sauve, our President. Before we kick it off, though, I'd like to remind everyone that this call is being recorded and of our normal cautionary statements. Certain statements discussed on today's call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from the results discussed in the forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors, uncertainties, and other cautionary statements which are laid out in our press releases and SEC filings. We also do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Lastly, we will be holding a question and answer session today following our prepared remarks. For anyone wanting to ask a question, you'll need to dial in by phone to get into the queue. With that said, I'd like to turn it over to Mark Jensen.

Thanks, Mark, and thanks, everyone, for joining. The third quarter of 2021, we continued to show material execution in terms of the long-term positioning of American Resource Corporation as a long-term supplier for the raw materials of the infrastructure and the electrification marketplace. We showcased our ability to innovate in industries and utilize an asset base that is positioned extremely well to supply these high-growth markets, which is fully aligned with the U.S. priorities within the electrification and infrastructure market. Over the first half of 2021, we were able to define our critical and rare earth element technology chain specifically to capture, process, and purify critical and rare earth elements in the most environmentally safe methods ever developed. More recently, we've been able to showcase our ability to process and purify battery and magnet metals to ultra high purities and yields to levels that are currently not being done with the United States market today. We remain very motivated to bring these innovative applications to the commercial market while focusing on the circular lifecycle of the critically important materials. We remain highly motivated to bring these innovative applications and solutions to the commercial market at a time when we feel that the stars are aligned in the infrastructure and carbon markets and deliver the best year and our company's history in 2022. Just to give a brief reminder on the business that we've built over the years and how we got there. Since inception, we've closed on over eight acquisitions beginning in late 2015, where we acquired an asset base and substantial discounts to replacement value. Basically utilizing the team's efforts and the efforts of our partners to restructure this asset base and acquire it at times when the market was suppressed. and reposition that asset base for a more forward-thinking business model from a low-cost structure but also scalable structure to take advantage of markets similar to what we're in today. Our goal has always been to leverage the entire asset base, to basically streamline the operations and flatten the organization where all of our employees and our shareholders benefit. Since we announced our critical element division, we've acquired over 16 patents and technology and supplemented those patents and technologies with three sponsored research programs with very, very strong university partnerships and a very strong team where we can refine the technologies that we've acquired to be commercially viable and to showcase that commercial operations in the coming year. I want to dive into our American Carbon Business Line. which is at a unique moment in time today, and we're in a unique spot as a business. If you open up any market journal or any news organization, you can see that the carbon market is seeing significant strength. We've seen prices double in our market, and we've seen customers clamoring for supply as the need for steel and the need for infrastructure has grown rapidly, not only here domestically, but also internationally. Recent publications have announced that the carbon market is sold out for 2022. On a substantial basis, given our industry relationships and industry knowledge, we can confirm that that's effectively true. Shortly thereafter, the United States passed an infrastructure bill. That infrastructure bill is going to set essentially a higher floor for carbon prices for the foreseeable future, at least forecasting over the next three years. It puts our restructured mines in a very strong position, given we're going out to market and we're ramping up our production aggressively as we speak. Federally funded projects, you're going to start to see U.S.-produced steel. And within an infrastructure bill, there is legislation that says that U.S.-produced, that infrastructurally funded bill from federal funds will need to use U.S. steel. And we're going to see additional demand, we believe, coming online during the coming years. I'll dive into a little bit of updates on each one of our complexes. Our Perry County complex, which is the first complex we opened, is currently ramping up production. Current section is producing and now finally producing stably. We've been able to secure substantial labor force and a really strong labor force of dedicated men and women at this operation. We've invested heavily into the infrastructure and the equipment. Just to put it to take a step back to walk through this operation. We acquired this out of bankruptcy and it was in rough shape when we bought it, but the bones were solid and the quality of this carbon and the capability of this operation was strong and we saw that. We streamlined this, we invested heavily into the mining equipment and to the infrastructure within the mine, the belts, the continuous miners replacing dbt miners with joy continuous miners that are much more efficient and much more able to be serviced in terms of getting parts and supplies in we've invested heavily into the processing plant developing just recently the middling circuit where we can recover more of the carbon that was traditionally going to the landfills and establishing protocols within the labor market so we can enable our employees to also benefit from from the growth of the organization and the profitability of the organization including including this week alone we're announcing a clean ton bonus for the men. As they perform and our shareholders benefit from it, they will also benefit from it. We see our ability to continue to drive growth at the Perry County Complex to be substantial. We have new sections coming online, and by the end of the year, we'll have over three sections running within this mine to take advantage of the market. Three sections have not run in this mine since five years before we bought it, and the ability to add a fourth and fifth section has already been planned on the engineering side of our business. Our McCoy complex, we announced we just commenced operations in early October and recently just announced we've already begun selling carbon from this complex. This is a Hyval B complex, a very high in demand complex. We have the Carnegie 1 mine that is currently producing. Carnegie 2 is in the final stages of mine development and will be in production most likely by the end of this year. And then already starting to move on the planning side of Carnegie 3 Carnegie surface mine, as well as our mine 17, which is our PCI mine in that area. We're seeing the ability to attract labor given the quality of the equipment that we're putting into these operations and the stability of these operations. And most importantly, we're able to bring these operations online in a very, very strong market, which is enabling us to attract high sales at a price where we see when we first started to bring these complex online, we were looking at sub triple digit sales prices. And we're seeing substantially more than that today as we're ramping up these complexes. So we're able to benefit from these higher price markets. The labor and supply chain challenges within our industry are real and no different than the real across the world in any industry out there. What we've seen is our ability to track labor is the quality of the equipment and the quality of team we have in place. And we've been able to attract labor and we're confident we're going to continue to be able to attract labor. We're putting in policies and procedures to be able to react faster and be more nimble. On supply chains, you can see we invested heavily back into our business where we're buying more inventories and more supplies to have them on the shelf so we're not ordering on a real-time basis as we've historically done. We're establishing those procedures to enable us to hit our growth profile that we're targeting to achieve in the 2022 year. As stated, to discuss the market environment, It is highly public that the industry is sold out, and this is one of the most unique aspects I've ever seen in the coal industry in my entire life. Getting into this industry in 2006, I've never seen a market as strong as this, but more importantly, a market that is undercapitalized and won't be able to grow at the same rate that we're seeing the demand grow at, which enables us to forecast that future where we're going to see strong prices for a significant period of time. and be able to capitalize on that while also still keeping our cost structure extremely low. The strength of this global market we find ourselves in today, it puts us at a unique spot for asset value and the ability to provide incremental supply in this very tight market, given our growth platform and given the quality of assets that we've acquired over the last five years and the efforts that we put forth to restructure them. Regarding our sales outlook for the next year, On a go-forward basis and until the world normalizes from the supply chain and labor shortages that we see within these interruptions, we're only going to focus on our discussions on the mines that are currently in operation and are currently producing carbon for the steel industry. As stated, we have other mines in the development, but given the challenges in the market, we don't want to provide forecasts on those future operations. We're only going to discuss the current production we have. Discussing current production from our minds, coming online, discussing production from our minds into production that are coming online, even in the near future, is challenging. The time and being off even a month or a quarter has a significant effect on us being able to hit our forecast. And we want to be cognizant of that to our investor base. With that being said, going into the 2022 year, based on first quarter pricing, we have today, we have an order book that would equate to over $110 million in revenue for the 2022 year from our two currently producing mines. Regarding our fourth quarter production in 2021 guidance we previously provided, as of today, we are producing out of both of the two mines that we initially guided for. That being said, ramping up the production during the course of the year, as shown through the three quarters of production, has been slower in getting mine plans approved labor brought on board, equipment and supplies delivered, et cetera. As such, we will be short of our guided revenue for the year, but we believe we will continue on a path of solid quarter-over-quarter and year-over-year growth. In our industry, given the stair-step growth of revenue from bringing new mines and new sections online, being slower by a month or even a quarter is substantial when you're starting up newly restructured mines. that being said by the end of the year we will be on a run rate consistent with next year's monthly order book i just previously discussed overall we had hoped things would have happened a month or two quicker but we are static about the performance from our team our current production and the current market environment as we're ramping up our production which probably would not have existed in the market had been more normalized and would not have been able to take advantage of this current pricing that we're seeing in today's market Given we're only talking about our current order book, we will provide additional updates over the coming months when additional mines come online and those additional complexes come online. And additional sales commitments are established for this new production, beyond the 110 million of current order books we have for the 2022 year. Now I'd like to turn it over to Mark Labragetta to discuss updates on our rare earth and battery metals division, American Rare Earth.