American Resources Corporation

Greetings and welcome to the American Resources Corporation second quarter 2024 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Mark Lavaretti, Lavaretta, Executive Vice President. Thank you, Mark. You may begin.

Thanks, Alicia. And good afternoon, everyone. On behalf of American Resources Corporation, I'd like to welcome everyone to our second quarter of 2024 conference call and business update. We always welcome this opportunity to provide an update on our businesses and discuss our accomplishments we've made over the past several months and how we're uniquely positioned within the markets that we serve, for American Infrastructure, American Metals, and Re-Element Technologies divisions. Also on the call with me today is Mark Jensen, our Chairman and CEO, and Kirk Taylor, our Chief Financial Officer. We'll provide some prepared remarks, and then we'll get into the Q&A part of the call. But before we kick it off, I'd like to remind everyone of our normal cautionary statement. Certain statements discussed on today's call could constitute forward-looking statements within the meaning of the Private Security 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 statement. 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, for anyone wanting to ask a question today, I believe you have to dial in by phone to get into queue. First, on the prepared remarks, and before we get into that, I'd like to recognize our Chief Financial Officer, Kirk Taylor, again, as we continue to work through our recent changes and upgrades in our new PCAOB, Registered Public Accountants. As we continue to execute on our strategic plan of action of unbundling certain assets from a the American Resources Holding Company. We're conducting current and past audits on each of our entities to prepare them as standalone companies, as we've discussed in the past. We'd also like to thank our new PCAOB registered public accountants at GBQ Partners for their hard work, timeliness, and professionalism in enabling us to execute on their plan and meet our deadlines without having to take any further extensions. We strive to be transparent as possible. with how we are positioning American resources in each of our subsidiaries and the milestones that we are achieving. Looking back, it's been remarkable how far we've come and how fast we've done it since we first announced our re-element technology divisions only about three and a half years ago. And we try to recap our accomplishments on a quarterly basis. And we find ourselves selectively choosing which milestones to highlight. Our milestones are supported and driven by our substantial platform of assets, our groundbreaking intellectual property and technology and our best in class team. Rielemann has positioned itself as a world leader in deploying efficient, low cost and environmentally safe critical mineral refining capacity outside of China. We have positioned ourselves at the forefront in providing real critical mineral refining and sustainable solutions to the world and to diversify away from a single source monopolistic economy, which is afforded by China. Our application of chromatographic separation technology to the industry enables us to produce high-purity critical mineral products at high throughput and at a competitive, if not lower, cost in China. As much of the world is moving to develop a more diversified critical mineral supply chain, we are leading in providing efficient refining solutions to bridge upstream production and recycling to downstream manufacturing in a collaborative way. While a more diversified and resilient supply chain is still very much developing around the world, as demand for critical minerals is increasing in a big way, to meet the needs of our energy transition, national security, and more advanced consumer technology applications, ReELEMENT has put the pillars in place in leading the world in a more diversified supply of ultra-pure, manufacturing-grade critical mineral products. Our approach to the market includes operating and scaling our own facilities including our Noblesville Commercial Qualification Facility, our Kentucky Lithium Complex, and our Marion Advanced Technology Center, as well as our asset light powered by re-element offering. Our ability to produce ultra-pure critical mineral products solves probably the most complex part of the supply chain's challenges and is bolstered by our great team, our extensive asset base, and our breakthrough technologies. And that really is the value proposition of re-element technologies. But we believe our current stock price does not properly reflect the value of re-element or the sum of all of American resources parts. We are confident in our platform of assets and the path that they are on to create significant shareholder value. From a corporate standpoint, our goal is to continue to execute on our strategic directive and continue to spin off the majority of both American Infrastructure Corporation re-element technologies corporation and standalone companies and execute on the dspac merger between american metals and aitr that we've previously announced with that i'd like to turn the call over to our chairman and ceo mark jensen mark thanks mark i appreciate it and thank you all for joining today uh we'll go through this pretty quickly here but um really

excited about the position of where each one of our asset bases and each one of our divisions are currently positioned and where they're going here in the future. As we've stated several times, we're extremely well positioned within the divisions to create value for our shareholders and ultimately unlocking that value through the separation of these divisions so the management teams and the shareholders can drive value from the respective divisions. Over the course of the last six months, we've been putting the puzzle pieces together to capitalize on the opportunities and the momentum across each of these divisions with the respective management teams. And I can say today, we are in a position to unlock that value and drive value for the shareholders while also reducing the risk profile of each one of those divisions. It's important to understand and to reiterate, as we continue to undergo a growth from a consolidator and restructure of carbon operations, to focusing on monetizing and deploying that asset base for growth and for cash flow, as well as developing a technology and innovation hub that is truly revolutionary in terms of how critical minerals and rare earth elements are refined today outside of China, that cost structure that is lower than China's. The stock price today does not reflect what we believe the value of the company is. And ultimately, we also understand that it's probably confusing in the public market today of how to value our company because of the three different divisions as they have grown and as we have positioned those business lines to be standalone entities. We look to unlock that this year. So our goal is for American infrastructure and re-element technologies to be separate companies by the end of this year. And our team, our financial team, our audit team is putting the puzzle pieces in place to enable that to happen, as well as American Metals to be its own standalone company through the SPAC merger, which valued, through a fairness opinion, at $170 million valuation. Our focus is on preparing and positioning these business for growth, building out the management teams to drive these businesses forward, and to unlock that value and provide a clear, concise message to the market of what each one of these divisions can accomplish. Recently, we have distributed approximately 25% of American infrastructure with the goal of either merging the entity into an existing public company or getting it spun off through a Form 10 merger, a Form 10 dividend to our investor base so that American infrastructure can focus on its own growth division of the business. Similarly, Realment Technologies. Our goal ultimately is for this to be a standalone entity. Realment Technologies is having a phenomenal start this year and beginning of the second half of this year, where it's positioning itself as a premier refining technology company to the critical and rare earth element space. And we'll talk a little bit further about that here shortly. And then ultimately, the D-SPAC merger with American Metals and AITR. There's a lot going on behind the scenes in American Metals, which we'll touch on a little bit of that today. in terms of its positioning around the pre-processing and recycling of critical minerals, as well as ferrous metals and other highly important electrified metals. Let me dive a little bit here into the American Carbon business line. As we've discussed, our core divisions of this business are focused on either signing leases or bringing these operations into production in the near term. Our McCoy Elkhorn complex, we have signed a lease with an operator, and our goal is to restart the mines this year. hopefully here very shortly in the near term. This is positioned as one of the lowest cost metallurgical carbon, high-volume metallurgical carbon assets in the country. The efforts we put forth to reduce holding costs through reclamation, as well as positioning and setting up these mines to bring in a top-tier operator, which we have done, to unlock this value will drive cash flow to the bottom line of American infrastructure through a royalty-based structure, focusing purely on cash flow and reduction of capex required from us as well as operational risk. Our Wyoming County complex is probably one of the most exciting complexes, and having done a tremendous amount of development offsite to bring that equipment onsite to unlock this mine here in the near term. This is a mid-vol metallurgical carbon operation. It's one of the few, if not the only, greenfield mid-vol mines in the country that can be deployed in low capex model. We are also in negotiations with a multinational customer that has expressed interest in buying 80,000 tons a month at a very attractive price from both the McCoy and Wyoming County complexes. They'll be in town to our offices here this week to further those discussions with the hopes of putting that deal and getting that deal put in place along with some other opportunities we are working on to drive near-term revenue growth for our Wyoming County division as well as our McCoy complex. By blending these two products together, you're creating a the premier met carbon quality of product for the steel mills across not only our country, but also the world. Furthermore, at the American infrastructure division, we have our rare earth element component of the business. The Wyoming County complex has had third party verified characterization of rare earth elements of over 500 parts, 550 parts per million. From unconventional resources, this is by far and above the highest rare earth concentrate that we have seen from any carbon-based feedstock in the country. There's been other players within our industry that have announced it closer to the 400 level, but 550 parts per million tied in on the back end of an existing mining complex going into production here in the near term is the most economical resource we've seen from this and being a byproduct, we'll be able to generate cash flow because we're not developing it solely for that. We're developing it to produce mid-vol met carbon to the steel industry and generating value from the rare earth elements as a byproduct off the back end of that processing plant. We hope to have some very positive announcements coming out of Wyoming County and McCoy Elkhorn here shortly. We're also entertaining leases for our Perry County complex, as well as our Dean complex once we get through with the litigation we are pursuing against our former lessons. Let me dive here into Realment Technologies. Realment Technologies, we started off many years ago focused on the ability to produce rare earth elements from carbon-based materials. And then when we secured the technologies from Purdue University, we've expanded that footprint substantially to the highest value denominator within the industry. And now focusing on rare earth ores from end of life magnets, rare earth oxides from end of life magnets, rare earth oxides from rare earth ores, as well as battery ores, lithium spodumene, cobalt, nickel from end of life batteries, as well as from the ore based resources. What we have proven is that we can go head to head against China and produce rare earth oxides and battery grade materials at a lower cost structure than they can in the competitive environment over the long term. And we're going to continue to develop that technology and continue to optimize that technology to stay ahead of that curve. We've also proven the efficacy on concentrated brines. Lithium brines from DLE, we can take their flow sheets and simplify them dramatically. And we're working with a couple members within the industry to help them achieve that, to make DLE economic. What I'm super excited about is the direction that the business is going. We are running a hybrid model at Re-Element. Our hybrid model is driven by the fact of building out our core facilities, our Marion facility, which has the ability to produce rare earth oxides as well as battery materials, as well as our Kentucky lithium facility that will process lithium spodumene for lithium carbonate to the battery materials. From there, those are the ability to drive cash flows for our investors, but also demonstrate our technology to the world at highly commercial scale. Over the course of the last few years, we've been operating our Noblesville facility to get our products qualified with various customer bases. On the lithium side, it takes about a year, and we're through that with a number of parties. On the rare earth oxide department, we've also been shipping out our oxides to our customers, which we are now either signing contracts with, have signed contracts with, or negotiating with. From there, further than that, is developing our powered by re-element division. Powered by re-element is effectively refining as a service. where we provide our technology and our team locally at other company sites to reduce their CapEx, reduce their OpEx, supplement their flow sheet, or replace their flow sheet. The amount of interest we're having in this division is substantial. What's exciting about it is it's asset light. By asset light, meaning our customers will CapEx the facility and pay us a services fee on top of that to deploy our technology for them. which enables us to grow rapidly and become the technology of choice across the critical inner airspace on the separation and purification step, the most complex step within this industry as a whole, and typically the most expensive step within this industry. We simplify that and we deploy it and ultimately replace those flow sheets permanently for the future. Our Noblesville facility continues to operate on a daily basis, producing lithium carbonate from LFP batteries. We are doubling the size of that facility and capacity of that facility here very shortly, if not tripling it, based on some minor investments that we can make. And that's the exciting aspect of our technology, either increasing our production trains or expanding our production trains at very low capex expansion points to increase our production significantly. Our varying facility, we are at the point now where we're scoping equipment, ordering equipment, deploying assets to the facility to be able to start production here in the future, starting off initially for rare earth oxides. Our Kentucky lithium site, we actually have our crews on site. They're delivering equipment this weekend to start the teardown of the former coal mining complex and start laying the foundation for our Kentucky lithium refinery. We're excited about the infrastructure that we're able to utilize there and the current attributes that that site offers to us and the team that we have in place to be able to handle this facility. Our feedstock focus today is pretty broad. We are the only player in the space that can produce both heavy rare earths as well as light rare earths in a refined basis, and we're going to stay ahead of that curve and be the largest producer of those in the United States from our Marion facility. Being able to process natural ores from hard rock lithium to rare earth ores from all over the world and be able to deploy those here in the local environment. Internationally, we have signed our MOU with Jupiter Project, probably the largest lithium mine in the world, and they are currently in the development phase of that project with the goal of bringing that project on next year. Also in discussions all throughout Europe, having numerous discussions on both the rare earth and lithium side, as well as South America, Canada, Japan, and Australia. Our team is working on deployment of our technologies into joint ventures through Powered by Re-Element or through our existing facilities. but the sole focus is to get the facilities generating cash flows and deploying our technology quickly this year. The opportunity to provide low cost and environmentally safe critical and rare earth element refining around the world in a collaborative manner to meet the needs of the energy storage markets are abundant. The market is looking to us and more and more to provide solutions. Stranded capital both on the strategic and finance side is looking for ways to unlock their capital, and that comes down to the bottleneck within the world, which is refining. And we are highly confident that our technology and our suite of technologies will enable that to happen here in the near term. Realment's value proposition is unique. Our goal is to build into a multi-billion dollar business, and we believe we are well positioned within our assets and our team to be able to do that in a low capex, low opex manner. American Metals. as we have announced, is doing pre-processing for re-element. It does the dirty work of re-element in a safe, secure way. It helps break down end-of-life motors, power tools. It helps break down batteries. It helps establish the partnerships within the battery recycling space and partnerships. We have currently signed the definitive agreements with the SPAC merger, AI Transportation Acquisition Corp, AITR, that will enable us to execute upon the separation of this division and grow this division. Prior and after the signing of the definitive agreements, we have been in numerous joint venture relationships throughout not only the U.S., but also the world, including Europe, as well as in India, and looking to execute upon those joint venture agreements here in the near term, which we hope to be able to share with you. The value of our individual divisions, we believe, is substantially undervalued. At American Metals, with a fairness opinion that was brought to us, of $170 million would value the company at over five times the current market cap. We are currently pursuing growth, and the capital we're pursuing at ReElement would value the company at over five times the current market cap, and we have numerous patriotic capital funds. that have stepped up stating their desire to invest in the company and to invest in this round of capital that we're pursuing. American infrastructure has equipment that we've acquired that has a replacement value of over $270 million from coal processing plants to underground equipment to surface equipment. The royalty model that we're deploying there is us to generate substantial cash flow and put the focus of our operating team on our Wyoming County division, which has a significantly attractive market to operate into today with the price of mid-vol coal versus our extraction costs. We believe that the current market does not reflect the value of our divisions and ultimately our focus is on getting these separated so we can unlock that value for all of our shareholders. We remain very confident in our positioning of all of our assets and the long-term value they provide to our shareholders. We remain hyper-focused on unlocking that value and working behind the scenes to get all those puzzle pieces put in place, including the re-audit of our numbers due to the replacement of our auditor, as well as the positioning within the regulatory agencies to get these businesses separated. The evolution of our company and the transition of our technology-centric business and approach is well underway and better positions all of our American resources divisions for growth. We have ample liquidity and we do not foresee us needing to issue equity at the AREC level to raise capital. We will pursue subsidiary-based financing that is being offered to us today should we need additional capital to unlock this value. We also continue to explore and work through the capital raise, which we mentioned at re-element, and are working with numerous patriotic capital funds that understand the importance of our Department of Defense as well as our Department of Energy to source critical minerals produced locally in the US. And as the only refining company in the country that can refine both rare earth elements as well as battery materials, we are very well suited to protect and build our national security supply chain.