American Resources Corporation

Greetings. Welcome to American Resources Corporation's fourth quarter 2021 conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Mark LaVarghetta, Vice President, Corporate Finance and Communications. Mr. LaVarghetta, you may now begin.

Thank you, Rob. Good afternoon, everyone. On behalf of American Resources Corporation, I'd like to welcome everyone to our fourth quarter and full year 2021 conference call and business update. We welcome this opportunity to not only discuss our accomplishments over the past year, but also on how we have positioned ourselves and 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 Salve, our President. Before we kick it off, I'd like to remind everyone that this call is being recorded and of a normal cautionary statement. 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 statements, whether as a result of new information, future events, or otherwise. Lastly, we'll be holding a question-and-answer session following our prepared marks, and for anyone wanting to ask a question, you will need to dial in by phone to get into the queue. With that said, I'd like to turn the call over to Mark Jensen.

Thanks, Mark, and thanks, everyone, for joining today. I apologize, my voice is a little bit raspy as we get going, but excited about having the opportunity to speak to you and walk through what we did last year, but also focus on where we're at today and where the business is going. Overall, the fourth quarter of 2021 continued to show ongoing execution and growth of execution in terms of positioning American resources as a low-cost and most innovative supplier of raw materials to the infrastructure, metals, and electrification market. Given our strategic positioning, we remain extremely well aligned with our national priorities in terms of providing steelmaking carbon to traditional and modern infrastructure initiatives worldwide, as well as being the first domestic supplier of isolated and purified critical and rare earth elements to the domestic supply chain to support the rapid growth and advancement of electrification, clean tech, and national security. Our innovative processes allow us to not only bring these solutions to the domestic marketplace, but also to accomplish it through a low cost and the most environmentally safe and scalable methods. Last year, we defined our critical and rare earth element technology chain specific to capture, process, and purifying critical and rare earth elements More recently, we have had the opportunity to begin introducing our strategic partnerships that enable us to leverage expertise and networks that we feel will ensure our success in synthesizing the domestic and circular supply chain. As of today, we are just a handful of weeks away from the commercially producing domestic sourced and sustainable purified critical and rare earth elements, which as of today, As far as we know, we will be the first in the country to be able to do this within the domestic supply chain of producing purified and isolated rare earths and critical elements of the 99.5 to greater percent purity. As we embark on this very important milestone, it's worth noting that this is occurring as we are hitting a higher and more consistent level of metallurgical carbon production in one of the strongest markets we've ever seen. which puts us in a much stronger position to fulfill our 2022 order backlog of approximately $110 million. With the confluence of these factors, we are both confident and excited about our ability to deliver our best year in our history. As we go through and talk about where we're at today, I want to take a brief reminder for those that are just joining us on our history and why we position ourselves within the marketplace that we have done. Over the course of – since 2015, we closed on over eight acquisitions, where what we did was we lasered in focusing on acquiring an asset base at a very substantial discount to replacement value. More importantly, an asset base that could be repositioned and drive innovation on that to drive not only revenue growth, but also utilizing our high-value technologies on these properties to eliminate the legacy liabilities, but also drive future value from what these assets can generate. We are leveraging that asset base using a streamlined, efficient operational platform across several business lines and positioning these assets to be able to capitalize on current and future markets at a very low cost because of the efforts we put forth over the last few years. Additionally, we've acquired a suite of patents and technologies that allow us to drive innovation and expand the resources we produce and how we produce them. Subsequently, we've been strategically aligning ourselves with best-in-class partners to efficiently synthesize our technologies and processes to be more efficiently established in domestic supply chain, as we announced with the Heritage Group and additional partnerships we are currently working on as well. What I'd like to do now is take a quick moment to walk you through the carbon market strength and walk you through where we're currently at within the business line. Carbon demand for steel production remains very strong and supply remains very constrained. As we've heard over the past several months, the vast majority of our industry in 2022 production is largely sold out. And we continue to corroborate that assessment. More importantly, obviously the labor markets are tight and so are the supply chains for getting parts and materials and getting the equipment needed to grow the existing marketplace. And due to that, you're seeing a strength in metallurgical carbon pricing And we anticipate that pricing to actually be more stable than what we've seen in the peaks and valleys of the industry in its prior years. Overall, the demand for metallurgical coal, like most commodities, is being driven by the broad economic and infrastructure growth worldwide. And as the world emerges from COVID-19 pandemic, along with also the craziness taking place within the world today, we see a significant amount of demand taking place on the infrastructure side of the world. as well as the increased government stimulus to continue to drive economies out of this pandemic. The infrastructure bill, in our opinion, will keep a higher floor under carbon prices. And as federally funded infrastructure projects require U.S.-produced steel, that will help drive the demand for products such as ours that we produce out of our complexes today. Unlike past cycles, the industry remains more constrained with its ability to bring incremental supply online due to a number of factors. But more importantly than most importantly, we're seeing demand a lack of invested capital over the years for growth projects, an extremely tight labor market, and an aging of existing industry and existing infrastructure at existing mines that are operating today, and a number of mines being close to being mined out. Overall supply issues remain for parts, supplies, and equipment. As we go through this call, we'll discuss how we are handling those issues and how we are currently positioned within the marketplace to be in a much better position than our peers. Even though we are not immune to these issues, though, we do have a platform of assets and a strong asset base that we can draw upon to position ourselves in a better position than our peers and others entering the market today. And the investment we've made over the course of the last two years – The position that puts us in puts us in a very strong position to continually ramp up our revenue on a monthly basis, as we will showcase and talk about here further. Out of Perry County, I'll give you a quick update on where we're at there, but what we continue to see is a higher realization and a more consistent output from the complex. We started this mine last year, and we were struck with challenges of a labor market where we were competing against federal stimulus and other factors that delayed our ramp-up of production. What we see today, though, is strength. We have a strong labor force here, an extremely talented team of individuals that are hitting their stride in terms of what we're needing to produce and hitting our stride in terms of producing the product, processing the product, and getting that product shipped to our customer base. Of note, at the end of 2021, we were operating one section at our Perry County mine, utilizing two continuous miners. As of mid-February, we've been able to expand our production to where we are now, currently operating out of two sections, utilizing four continuous miners, one super section and one walking section, so that we have the redundancy of operations to continue to hit our stride, essentially doubling our production. Like we've said, we've seen a stronger and more consistent rate of output at Perry County, and as a result of getting our second section properly equipped and staffed and efficiently operating, we applaud our team for its hard work and execution and applaud the workforce that we've been able to attract that are looking at a long-term, stable place of operation, given the mine plan that we're executing upon. Our mine plan at Perry County is a testament to our restructuring efforts, to where we'll be accessing our reserves more efficiently and more foreseeable for the future. Our near-term plan includes adding a fifth continuous miner, that will be running in a pillar section that we are currently developing with the anticipation that will be running over the next 60 days. Then our second growth update at the complex is also adding a sixth continuous miner that will be approximately 120 days out from today where we'll be accessing another boundary of goal. What's unique about this mine plan is the cost structure. And one thing I'd like to delve into a little bit here is the plan that we put in place when we acquired this complex is to pull the mine back to a much more accessible boundary of carbon that we have available to us. And we're executing upon that today. Over the course of the next two years, we will be pillaring a vast majority of our mining. Now, what pillaring enables us to do is combat the current supply chain issues that we see today, where we're not out there trying to buy water line, which is very challenging to do. We're not out there paying a very high price for roof bolts because of our mine plans. We're not out there trying to buy belt and structure. We're able to utilize our existing infrastructure to continue to expand the mine through our development sections and the lower boundaries, but at the same point, access the current boundaries by pillaring and retreat mining for the next two years, which will significantly improve the yield of what we're producing, but also drop our cost structure dramatically. That puts us in a very different position than a lot of our peers in the industry that are constantly out there fighting the supply chain issues for parts and materials. And by doing so, we're going to be able to reuse those materials, those belt lines, and reuse that infrastructure that we already bought at not only our Perry County operation, but also at our McCoy-Elkhorn operation, as well as we continue to develop our Wyoming County operation. At our McCoy-Elkhorn complex, we are currently operating with one continuous miner at our Carnegie One mine since its restart. Most recently, we announced we've expanded that by delivering our second continuous miner. What that provides us is the ability to effectively double our production and expand our mine plan there to hit a more consistent production and expanded production, and we'll start to reap the benefits of that going into the April month. Similarly, at PCR, we are now essentially doubling our production and looking at additional expansion opportunities at the McCoy Elkhorn Complex, more importantly also at the Carnegie One Complex, where we can add an additional miner for three miners and add additional production out of that existing portal while also having to rely upon a smaller labor force by doing so. With these production enhancements, we feel that we are in a better position and a strong position to fulfill our stated order backlog. And as you can see through our press release and an announcement of a March number that puts us in not only a strong revenue generation and a strong growth of revenue, but also in an operating profitable status from our operations, which puts us in a strong cash position to continue to expand our business and continue to execute. To provide that further visibility, with the additional section operating at Perry County, we expect to end the month of March with met carbon production reflecting a $5.25 to $6 million revenue number for the month of March, which we believe we're executing upon and hitting a higher end of that. With these advancements, we are now able to begin to realize an operating profit in March and continue to drive the business forward without having to rely on the capital markets to grow this business. We can execute out of cash flow and continue to put additional cash back on the balance sheet given the profitable numbers we're putting forth today. Furthermore, we're confident that we have implemented the mind plan, the structure, and the team to capitalize on the current and future market prices. And as we continue to ramp up our production, we'll be able to take advantage of the current spot market prices, which is extremely strong, while also fulfilling our existing backlog of orders for our existing customers, which we're thankful for. On the recent announcement of acquiring the operating rights of a service operation to feed our McCoy Elkhorn complex, it highlights our ability to be nimble, but also to utilize our existing infrastructure to bring incremental supply online in this strong market to feed additional customers and take advantage of current market environments. Our Wyoming County update I'd like to provide here is about our $45 million tax exempt bond that we've been preliminary approved from the state of West Virginia. This is an innovative capital source for what we're looking at doing in Wyoming County where we can not only produce mid-vol metallurgical carbon to the steel industry and the steel industry that desperately needs that product today, but also to be able to utilize our rare earth and advanced carbon technologies that we were able to license from the state of Ohio to produce rare earth concentrates in a very low cost form. What we will utilize in our Wyoming County complex is our electrolysis technology. Electrolysis is a unique technology to produce high value concentrates in a very low cost format because of the ability to create byproduct economics, which you've heard us talk about. The byproduct economics from electrolysis is by processing coal-based waste material coming out of the processing plant, we're able to produce hydrogen from the facilities because of the high iron and water content coming out of the slurry, but also in that electrolysis within the anode, we're able to separate out and produce a rare concentrate that we can then send to our Indiana facility to be further purified and isolated out of our chromatography facility from the technology license from Purdue University. Overall, we're going through that process on the tax-exempt bond issuance, and we anticipate in the first quarter of 2023 looking at the Wyoming County complex, and there's some things that could pull that forward. But we are currently developing there, currently moving the infrastructure that we have from idle mines and idle facilities to lower that cost of implementing and reduce the timeframe of getting that complex back into production. What I'd like to do now is to turn it over to Mark LaBergetta to discuss some of our updates on our rare earth and battery metals division, American Rare Earth.

Thanks, Mark. Our American Rare Earth Division represents a very strategic opportunity for us to provide the domestic supply chain with not only domestically sourced critical and rare earth metals, but ones that are truly sustainable, being produced from recycled end of life products and waste streams. We believe that this is a critically important component in establishing ourselves and our great country as a competitive leader, while also making a whole lot of strategic sense. Addressing our domestic supply chain and sustainability challenges, in our opinion, makes the largest impacts throughout our economy. As a reminder and as a point of reference, last year at this time, we were still unveiling and defining our suite of IP that we acquired. Today, and as Mark just mentioned, we're only a short time away from having our first commercial production line operating. This first production train will be focused on producing isolated and high purity rare earth magnet metals such as neodymium, praseodymium, and dysprosium from recycled rare earth permanent magnets. Shortly thereafter, our second production train will be operating, which will isolate and purify battery metals such as lithium, cobalt, nickel, and manganese from end of life recycled lithium ion batteries. These high purity critical and rare earth metals will have the ability to be sold and used in manufacturing new high growth products and applications such as electric vehicles, defense, green energy, and tech devices. I think it is important to mention and highlight our execution, sense of urgency, strategic positioning, and incredible team and partnerships. With that being said, we'd briefly like to tout some of our strategic partnerships and explain what we feel we are collectively leading the way in addressing these challenges. Purdue University and their Davidson School of Chemical Engineering, along with Texas Tech and their Department of Chemical Engineering, contribute science and laboratory excellence in applying processing technology and chromatography expertise to the process of isolating and purifying critical and rare elements. It's worth noting that while chromatography is a proven and commercial technology, which is largely used in the pharmaceutical industry, food and beverage and chemical industries as well, it is not a plug-and-play or off-the-shelf type of process. Our team from Purdue, combined with our partners at CMID, are the leading experts in applying chromatography for the separation and purification of a variety of critical and rarest element feedstocks. It's worth noting as well, our partners from CMID bring decades of experience in chromatography design, expertise, build, and operations from Eli Lilly. and they're the perfect partner to efficiently bring this process from lab or bench scale to our commercial scale facility congruent with the growth of the market. Again, I'll highlight our partnership with the Heritage Group and their investment arm, HG Ventures, is a highly strategic relationship for us. Given their longstanding success in environmental services, material science and sustainability, as well as their pioneering and leadership position in battery recycling, This helps us ensure our execution and further synthesize our upstream and downstream partners. These are obviously a few of our top partnerships that we've discussed publicly and highlight our ability and willingness to work with industry leaders and bring real solutions to fruition. And we look forward to communicating additional relationships in the near future. Lastly, with a high degree of federal government attention to these matters, with the passing of the infrastructure bill which includes funding for supply chain for clean energy technologies we believe we're in a great position and align very very well with our national priorities whether it's traditional infrastructure for roads and bridges or ports or the advancements of green energy or clean tech infrastructure as we embark on this exciting time in being the first domestic commercial supplier of domestically sourced and truly sustainable high purity critical and rare earth elements, we believe the market will better reflect the value of our highly important and high growth initiatives. I'd like now to turn the call over to our Chief Financial Officer, Kirk Taylor, for some additional comments.

Thanks, Mark. I'd like to begin by mentioning our entrepreneurial, innovative, and shareholder-focused culture and some of our additional value-creating initiatives. Novastera Inc., as a reminder, was a company that we licensed on a non-exclusive basis two of our exclusive licenses and patents for the production of carbon nanostructures and graphene. Additionally, as we discussed previously, American Acquisition Opportunity, Inc., which is a SPAC that American Resources sponsored and where American Resources has the opportunity to participate in the value creation of future acquisitions, in a non-diluted basis. Just to reiterate, as the largest shareholders of American Resources, approximately 30% of shares outstanding, our management team is focused and committed on maximizing the value for all of our shareholders in every possible way. Also, as we've previously discussed, we have a strong desire to dividend out a portion of these underlying shares to all of our shareholders so everybody can participate in this value creation. From a progress standpoint, I would point you in the direction of each of the respective companies, Novastera and American Acquisition Opportunity, Inc., for their latest current updates. Let me go over a few financial highlights of both this past quarter and past year. Over the course of 2021, we materially improved our balance sheet to position us to best capitalize on the strength of the modern infrastructure and raw material markets that economies emerge from COVID-19 disruptions. By having a strong and nimble balance sheet, we're able to navigate labor shortages as well as supply chain shortages and make sure the suppliers that we critically need are well benefited and able to supply us with what we need. We're able to eliminate approximately 15.6 million of debt and payables while adding approximately $30 million in cash through an offering of common stock during 2021. Both of these items allowed us to remove the going concern disclosure that had been in our financial statements, proving our long-term viability and strength. Again, coupling all three of these together have opened up new non-dilutive capital sources for our growth. The first is that we established an equipment line of credit with a leading equipment lender to allow us to strategically and nimbly capitalize on equipment that becomes available. In this day and age, if you do not have cash or a very liquid source to purchase equipment, it is gone before you can acquire it. In our rapid growth, equipment is vital. Securing proper equipment is vital for securing that rapid growth. In addition, as Mark talked about, we're able to secure initial funding commitment of $45 million of tax and bond finance out of the state of West Virginia. Again, this is solid equipment. non-dilutive method of financing our growth into West Virginia, which again, as Mark described, will be the highest quality carbon that the metallurgical coal market desires. We also had a success during 2021. We successfully navigated our new market tax credit program, which we entered into in 2016. As a refresher, this is a jobs program, the first outside capital that we secured as a company. The net benefit to American Resources was over $1 million and was the initial impetus for us creating 40 direct jobs in 2016, which over the years has been the platform for creating hundreds of well-paying jobs, both directly and through our contractor partners. During 2021, we continued to invest in our operations. most notably $18.1 million of expense development costs to improve equipment and infrastructure at American Carbon, both in the Perry County and Carnegie operations, as well as our processing and purification equipment with the development of our American Rare Earth process chain. These investments have positioned our metallurgical carbon assets to scale at a time when the industry has very little incremental supply growth, which is providing us with a certain degree of pricing power as we bringing more production online. As other industry participants locked in contract pricing last year to market that as large as sold out, we were able to provide this increasingly tight market with incremental supply at opportune time based upon our investments we have made. Upon recommencement of our American Carbon operations and sales of products last year to our steelmaking customers, we have seen sequential pricing increases. albeit at a slower initial rate due to variables discussed, supply chain, labor tightness, but we are now seeing this rate accelerate. Our debt balance currently sits at approximately $15 million in total, of which $2.6 million is equipment financing, $9.1 million is in the form of convertible notes with long-term partners, and $2.7 million is in the form of outstanding PPP loans. Currently our shares outstanding is just at 65.7 million of Class A common. We ended the year 2021 with approximately 11.5 million cash on hand. Our balance sheet, our capital structure, our development and growth plans to their strongest position is the most flexibility to execute our innovation and growth plans across all divisions. With that, I'd like to turn it over to call back to the moderator for some Q&A.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star 1 from your telephone keypad and a confirmation tone to 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 that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, star one from your telephone keypad. Thank you. Thank you. And our first question is from the line of Heiko Eil with HC Wainwright. Please receive your questions.

Hey, Derek. Thank you guys for taking my questions.

Thank you for joining.

Hey, just a clarification. Your backlog, Conor, 10 million, obviously extremely meaningful number. Can you walk us through what you've been seeing with pricing, then versus now, and also if there are timelines to delivery, please?

Yeah, that's a good question. So pricing, when we built this backlog of $110 million, we actually built it in with a fixed band. So we had downside protection on that given pricing. I mean, at the end of the day, it's kind of a crazy market, so you don't know if it was going to go up or down. But what we also wanted, we wanted to protect ourselves from the downside, but also enable us to take advantage of the upside. And so we're currently selling at the peak of that out of Perry County. We're realizing the high end of that realization. On the McCoy-Oakland complex, our pricing over there, was very similar, but it's quarterly pricing adjustment based on it. And that adjustment was based on the next pricing. So we're starting to realize the, we're also realizing the higher end of that each quarter, we, we experienced a higher realization, um, than the previous quarter, given the market environment today. Um, what we're doing, I mean, right now, as you can see from the month of March, we, we provided guidance of, uh, we provided an update, I would say at 5.25 million to 6 million. We're, we're on the higher end of that. Um, And we anticipate that growth to continue to be experienced and continue to benefit from it. As no different than Perry County, we just added that super section in there. We're adding another minor section. And more importantly, also, as much as revenue growth is important, also the profitability, which we stated we're realizing in the month of March being profitable. And we expect that to continue here on. But also with the new mine plan, it's really important. Running a pillar section or two pillar sections within the next 60 days, that drops our mining costs by about 25% to 30%, which is a big deal. And we'll be able to run these pillar sections for the next two years, which will enable us to build a strong cash flow generation machine as we continue to expand elsewhere. But that backlog, we're realizing that backlog each month, and we're growing our production each month to continue to benefit from the higher prices, but also to fulfill that backlog. And we'll continue to ramp up production each month out of our existing operations to fulfill that backlog, so you'll see that continued growth.

Makes a lot of sense. Thank you for that. And then I guess this is a little touchy-feely question. can you just sort of walk us through what you're seeing with end market demand from geopolitically safe sources for really anything, but especially rare earth metals? I mean, given what's been happening in the world over the last month, I'd assume you're getting calls from people that had never called you before and never really cared to reach out and make sure that they can source some longer, longer, longer term supply for the out years for what they might need. Thank you.

Yeah, I mean, so rare earth elements as well as battery metals. I mean, rare earth elements are obviously extremely important for the electrification economy, wind turbines, electric vehicles, anything that needs that strength and motor, but also U.S. government, Department of Defense for high-end drones and stuff of that nature, these permanent magnets, which you need rare earth elements from. Over 85% to 90% of rare earth elements are isolated and purified in China. Using solvent-based extraction. So, one, people are obviously concerned about where they're getting their materials nowadays, but more importantly, they're also starting to care about how they're produced. And utilizing chromatography is an extremely environmentally friendly process compared to solvent-based extraction, but more importantly, also very cost-effective, where we can go head-to-head against the Asian markets and be able to produce them at a price point that's important. And we're starting to see that. You're correct. And we haven't announced any of our strategic partnerships yet, but we're in talks on that front. and having a lot of success now. What we're very focused on today is getting the facility up and running and showcasing the cost structure and showcasing the quality and consistency of our product. And we're having some really good conversations on the end users of those products for raref magnets. Then battery metals is a huge market. There's very few, if any, lithium or cobalt or nickel producers domestically that are recycling batteries to battery grade material our technology and our multimodal chromatography enables us to do that producing a 99.99 percent purity or greater of battery metal that can go directly back into the battery marketplace and there's a lot more battery manufacturing taking place in the domestic market than there is electric motors so the ability to scale that division is very real and the ability to scale our revenue rapidly post this first initial facility getting up and running is very real because of the presence of the battery market here domestically. I mean, you look at cobalt's produced mostly out of the Congo. Lithium is – there's not a lot of actual lithium production taking place in the domestic market. So we're excited to showcase this, and we're excited to provide a real solution to the domestic marketplace and do it with best-of-class personnel. Jeff Peterson – Dave Sabe, Bill Smith, and the team at Purdue, Christian Bogalesi at Texas Tech, and Dr. Boddy on our board. We have a team that we built that knows how to operate this facility, knows how to build these facilities and scale them rapidly.

Okay. No, that's good. I appreciate that. Thank you guys a lot, and we'll stay in touch. Thank you, Heiko. Appreciate you joining the call.

Thank you. Our next question is from the line of Steven Siegel with KBB Asset Management. Please proceed with your questions.

Hey, Mark. How are you? Great job on all the advancements you're making. I was just wondering, I heard you mention, sorry, I heard you mention the pillar mining, and can you just explain that a little bit as far as the cost and current – how that helps the company with cost and current supply issues? Does it make it more efficient to make new production?

Yeah. Thanks, Stephen. Thanks for joining as well. And our team has worked pretty hard to get us in a position where we're able to reap the benefits of the current market environment. And one thing that we looked at when we bought this complex was the ability to pull back the mine and be more efficient. And honestly, producers have to have a safer mine. And the pillar strategy was developed two years ago. Now we're executing upon that today, which we knew was going to take time to get into a position to be able to do this. But with the developments we're putting in today, the current section is pillaring at this week. The next section that we're putting into production, which would be additional production, will be going in in the next 60 days. What's unique about that is you're pulling all your infrastructure back. So right now, if you go out in the world today, including the Starbucks by my house, you can't get labor, and they're running out of raw materials to actually sell. We're in a unique position compared to our peers because we're not buying infrastructure. We're actually taking it back out of the mine to reuse at this mine and our other mining complexes, which will enable us to show a really strong gross profit margin from the operations and operating profit margin from the operations. At a time where other operators are struggling to buy these components to keep producing, we're actually effectively not only mining the carbon out of the mine, but we're also remining our infrastructure and taking our infrastructure back out to be reutilized in a way that enables us to continue to expand the mine elsewhere and or expand our other mines. So it'll drop our costs by about 30%, but it puts us in a really unique position within our peers to take advantage of not the current pricing, because you'll produce more coal through the pillar mining than you do driving a section of But also at the same point, we're able to continue to utilize our infrastructure in a much more cost-effective way. So we're excited about the cash flows that it will generate for us. We're excited about what it's doing in March, and we're really excited about the April month and the second quarter we're going into, given this will be the first quarter that we're experiencing this higher revenue generation as well as higher operating profit margins.

Okay, great. Well, thank you for that.

Thank you. We appreciate you. Thanks for joining.

Appreciate you and your team. You've done a great job.

Thank you.

Team effort, for sure. Thank you. As a reminder, to ask a question, you may press star 1. Our next question is coming from the line of Kyle Gallagher with Merrill Lynch. Pleased to see you with your questions.

Yeah, hey, thanks, Mark, for the call and grinding through this with the the voice issues. Um, I think you probably earned yourself a cold one after that, after this call, but, um, just a question. I want to make sure I'm kind of wrapping my head around this correctly. You had a tweet come out, uh, I think it was like March 1st, if I believe correctly. And it said something in a sect of, um, This is our mini Stoker. It's 22% of our daily output that represents about $110,000 of daily sellable revenues from Stoker. So just back of napkin mathing this here, am I to expect that you guys are able to sell about $500,000 a day in Stoker? Am I reading that correctly?

The Stoker represents – so we pull on the high end about 22% of our production out of our Perry County operation gets pulled to Stoker. So it's not the – that doesn't represent all – our Stoker production is not a half a million tons. The Stoker production is not 22% of that. It's 22% of our overall production pulled or generated. We pull a Stoker product. Does that make sense?

Okay, yeah, so you're saying, okay, 600 tons of stoker represents about 22% of your daily product output. And so you're going to realize different pricing for different types of products you're pulling out, right? And so I presume that this stoker is probably a higher value product.

Yeah. I mean, our stoker is definitely the highest margin product. It's a very specialized size and very specialized ash product. It actually goes – it's kind of a cool product. It goes towards – it gets shipped overseas to the Nordic market where they actually produce it into – use it for the silica value. It actually goes into Gorilla Glass. So actually, the carbon we're producing at Perry County goes into iPhone screens and other high-value applications like screens. So it's not burned. It's not utilized for that purpose. But because of that, it drives high profit margins. Now, I will say that we're starting to see some strength in pricing across the board, not only on our stoker, but also across all of our products that it starts to get really interesting for the current market environment, given the strength of the market in general. But it's definitely the highest margin product we produce.

Okay, so for simplification purposes, is there like, do you think there's like an easier way I should think about like, you know, kind of what your revenues are going to look? I mean, obviously I know you guys are ramping things up and there's market fluctuations that go into all of this. But just kind of thinking through it, like how should I think about that revenue ramp for the remainder of the year? Like what would be sort of a basic idea you know, a dumbed down version of, of that.

Yeah. I mean, it's probably one, I mean, we think our revenue is going to continue to show strength for the month of March. We provided an update of 5.25 to 6 million. We think it's going to be on the high end. Um, we, we, that's, we're adding an additional section. We just added an additional minor economy. Um, we're looking at adding an additional section at, uh, Yeah, Perry, beyond that, so two additional sections there, which will effectively increase our production here by about 60%. But also, I mean, as we continue to ramp up, I mean, it's, and obviously March was our strongest month by far. But we anticipate to continue to see that growth, and we're seeing stability of operations. We invested heavily into the mining infrastructure. We invested heavily into our people. And now we have, we're seeing a lot more stability. So we think April just standalone will be We'll see better performance. We're building inventory right now for our April month out of all of our operations. We're in the month of March still of how we time the realization of our revenues. I think you'll start to see that continued growth of revenue going into April just from our core business, let alone the advancement of the sections. We obviously have been developing our Carnegie 2 mine as well, which is something that we'll bring online later this year or later this probably in the summer time frame, which will provide additional revenue and then the additional section over at Carnegie One. So you'll continue to see that revenue growth on a monthly basis. I mean, we don't anticipate any major factors that would prohibit us from doing that given the workforce that we have at the mines and the ability. We've been able to attract a good team. We've been able to attract a good workforce because of the investment we made, because of the advancements we made in not only our equipment but also the safety and the reliability of our equipment, of how it runs for the workforce that want to be productive.

Got it. Yeah, I appreciate the extra color there. I think in some of my notes here, I just misunderstood something you said earlier, but much appreciated kind of that just refreshing me on the March numbers and kind of what to consider moving forward. Thanks again for everything, guys. Thank you. Thanks for joining.

Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the call back to Mark Jensen for closing remarks.

I want to say thank you for everybody joining the call today. Sorry, my voice is a little bit raspy, maybe a little bit hard to understand. My little boy pulled something home and got me a little sick, and thankfully my wife, who's a rock of our family, is at home taking care of him while I'm able to go out and do what we do. But at the end of the day, it was great. 2021 was a development year. Things kicked off slower than we anticipated. And at the end of the day, we understand we have to perform and we have to hit our numbers. And we take that seriously. We put our money where our mouth is. We're hitting our stride. We're executing upon the business plan from a revenue generation perspective and also an operational profitability perspective. Management continues to invest into the operation, continue to invest into the company. We're buying stock personally. We believe we're undervalued based on our peers, and we believe we're undervalued based on our current performance. Ultimately, the value and the technology that we have in our critical and rare earth element component tied in with our revenue generation and operational profits that we're generating from the carbon side of our business puts us in a really unique position to execute and execute without having to go back to the investment community to raise additional capital, which we do believe, unfortunately, does put pressure on the stock. We don't have to do that with our current cash that we're generating from a business, and at the end of the day, positioning the business to continue to grow, utilizing our core assets that we own as a business today. We're excited about the current market environment that we see duration to that. We see that the market is strong today, and we see we see the future of the market being strong for a number of years for the demand of our products. We're excited about getting our first rare earth processing facility up and running, and we think it's going to be a great year for us in terms of the rare earth business as well as the carbon side of our business. We don't take it lightly that you've chosen to listen to what we're doing and to be involved in our company and be an investor in our company, and we thank you for that. And I can assure you that our team is dedicated to succeeding and putting forth the efforts to hit our numbers, to achieve growth as a business, and to generate shareholder value for all of our shareholders so that at the end of the day, we can all be rewarded in the long term. I can't thank you enough, and we look forward to the next quarter. We look forward to continually providing updates to our investors as we continue to hit additional milestones within our business. And thank you for joining.

This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.