American Resources Corp Q4 FY2023 Earnings Call

Greetings and welcome to the American Resources Corporation Fourth Quarter and Year-End 2023 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark LaVerghetta, Vice President, Corporate Finance and Communications. Thank you. You may begin.

Thank you and good afternoon, everyone. On behalf of American Resources Corporation, I'd like to welcome everyone to our fourth quarter and full year 2023 conference call and business update. We always welcome this opportunity to provide an update on our businesses and discuss our accomplishments we made over the past several months and how we are uniquely positioned within the end markets that we serve for our American Carbon, American Metals, and ReElement Technologies divisions. On the call today is Mark Jensen, our CEO, Kirk Taylor, our Chief Financial Officer, and Tom Salve, our President. We will provide some prepared remarks today and then we'll go into some questions and answers. Before we kick it off, I'd like to remind everyone of our 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 risk uncertainties and other factors which could cause actual results to differ materially from the results discussed in the forward-looking statements. 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, 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 will need to dial in by phone to get into the queue. We're going to begin today with a few comments from our Chief Financial Officer, Kirk Taylor. Kirk?

Thank you, Mark, and thank you, everyone, for taking a few minutes out of your day to listen to our fourth quarter earnings call. Over the past several months, we've continued our execution on solidifying our strategic positioning within our adjustable markets, which we believe positions ourselves and our company for attractive long-term value creation. In doing so, and in conjunction with the directive of our Strategic Committee from our Board of Directors, we've embarked on several initiatives to unbundle our unique platform of assets to better unlock value for all of our shareholders and position each entity as a standalone company. Much of our focus over the past several months has been to position and prepare both American Carbon, as well as ReElement Technologies as standalone public companies. These efforts include securing growth capital, such as a $45 million tax industrial bond for our Wyoming County Coal Complex, and our recently announced, or as of today, announced securing a $150 million net-of-fees industrial development bond to develop what we believe is the nation's first of its kind lithium and critical mining mineral refinery in Kentucky. Both of these examples show that we have successfully capitalized near-term and intermediate-term growth plans for both American Carbon, as well as ReElement Technologies. Today's closing of our second tax-exempt bond is another tremendous milestone for our company, as we continue to put the necessary pieces in place to execute on our mission. This is another monumental moment for our ReElement Technologies division, and for our country. Our Kentucky lithium project is such a great example of how we can efficiently execute on our nation's energy transition goals. The planned transformation of our Knott County facility enables us to utilize controlled land, resources, and already-in-place infrastructure, and a tremendously skilled workforce to quickly meet the needs of the rapidly growing energy storage market, along with utilizing our groundbreaking refining process to produce ultra-pure battery-grade products in an environmentally safe and low-cost process. This region of the country is well-positioned geographically within the developing battery belt and comes with a long standing history of pride and know-how in the raw material commodity processing industry. We appreciate the leadership of Knott County, Kentucky in working with us and sharing in our vision, and again, working with Hilltop Securities in their exceptional execution throughout this process. We're also in the process of working to secure additional sources of project development and growth capital through the tax and bond market, government incentives, and grants, as well as bringing in strong equity partners, both strategic and financial, that span across both American Carbon, American Metals, and ReElement Technologies. I'll briefly go over year-end American Resources consolidated summary. Over the past year, we have showcased our operational flexibility while also prioritizing the most accretive use of the capital and securing additional non-dilutive capital to position our unique set of assets and execute on our value-creating initiatives. Our full year 2023 revenues of $16.7 million, which is a decline from 2022, are attributed to our decision to allocate capital to the most accretive uses throughout all of our businesses, ReElement, American Metals, and American Carbon. As such, our management and Board chose to aggressively advance the development of ReElement Technologies, which includes operating and expanding our Noblesville facility for customer qualification and validation, large-scale domestic project development, which includes the Marion Super Campus, as well as the Kentucky Lithium Project, international expansion, adding to what we feel is a world-class team, and procuring feedstock and off-take agreements. Now, additionally, while we've also been focusing on streamlining our balance sheet and continuing to reduce our bonding costs, our long-term environmental liability at the corporate level and at the operating subsidiary level. As such, we chose to keep our metallurgical carbon extraction processing activities idle and in the development stage while working aggressively to mitigate ongoing environmental liabilities attached to the permits that we acquired through previous bankruptcies of prior legacy producers. Throughout the year, we did not take on any meaningful new operational debt, and the only new project debt we took on was associated with the issuance of a tax-exempt bond for the development of our Wyoming County and West Virginia mining complex. As of today, our current shares outstanding are just over 79.1 million Class A common shares. Cash on hand at the end of 2023, including funds held for development of Wyoming County Coal Complex, is $37.3 million. And again, as a reminder, all of our excess cash is held in FDIC limits at a top-tier U.S.-based bank. Our unique platform of assets is in a tremendous position to deliver attractive returns and value to our shareholders. I'd like to now turn the call back over to Mark LaVerghetta for some additional comments. Mark?

Thanks, Kirk. I'm going to make a few comments on ReElement Technologies. As we frequently state, our ReElement Technologies division represents an incredibly exciting and very strategic opportunity for us. We've never been involved with an entity that, in our opinion, has as much upside than ReElement. Our mission has always been focused on how to most efficiently and effectively deploy critical mineral refining outside of China. And it had always been our belief that attempting to deploy legacy Chinese refining technologies in the U.S. or Europe, really any other part of the industrialized world, would pose real challenges. Those types of facilities and technologies are extremely expensive to build and operate due to the harsh chemicals, waste output, and maintenance at large scale, and are not sustainable outside of China. Given the projected growth and demand, the geopolitical landscape, the monopolistic position China has facilitated over the past couple of decades, and the rapid execution we've achieved to date, ReElement is uniquely positioned to solve complicated and pressing problems that exist today. As such, we sit at what I call the intersection of critical mineral supply chain health and resiliency and national security interests. As we continue to strategically position ourselves in the global supply chain for critical minerals, it is becoming more and more evident that we are separating ourselves from the pack as the preeminent refining solution outside of China, and the most efficient critical mineral refining platform in the world. Our ability to produce high purity lithium products, battery elements, rare earth oxides, and critical defense elements for both recycled feedstocks as well as from natural feedstocks showcases our platform's flexibility and certainly differentiates us from anyone else out there. While our platform's flexibility uniquely positions us across multiple supply chains, we also have to stay focused on our particular end markets we serve and as we continue to execute and scale. Those end markets are, the production of rare earth oxides that are predominantly used for the manufacturing of permanent magnets, which are critical components within high efficiency motors in applications such as electric vehicles, windmill turbines, power tools, as well as critical defense technologies. Also the production of either ultra-pure lithium carbonate or lithium hydroxide, which are precursors for battery cathodes that are used in a variety of lithium ion battery technologies. And then as well, another end market is critical defense elements. These are highly unique for certain defense or military applications. The feedstocks that we're currently most focused on are both primary ores as well as recycled feedstocks, which again, contributes to the unique aspect and our unique positioning throughout the global marketplace. These feedstocks include end-of-life rare earth permanent magnets, which can come to us as magnets themselves or part of decommissioned wind turbines, electric vehicle rotors and motors, or any other consumer goods such as power tools and other e-waste. This is really where we cut our teeth and how we began ReElement Technologies with our partners at Purdue University in extracting the rare earth elements from the magnets and refining them back into magnet-grade rare earth oxides. Another key feedstock for us is black mass, which is shredded cathode material from lithium, pardon me, lithium ion batteries and lithium ion battery waste or scrap. Not all black mass is the same. There is a very wide range of qualities and a variety of different battery chemistries that have different inherent elements and minerals. We've taken in black mass from well over a dozen producers worldwide and validated the efficacy of our technology. It is important to note that the battery recycling industry's competency is really in the collection and aggregation of batteries and shredding them to produce a black mass material. Black mass cannot be used in the manufacturing of new cathodes or batteries and requires further refinement of the material to produce battery grade precursor products. The competency of those platforms is not in separating the high-value elements in black mass and refining them back into battery grade precursor products. That is where we step in. Additionally, our ability to handle different types of black mass chemistries is another distinct differentiator of ours. Typically, battery shredders require NMC or nickel manganese cobalt type battery chemistries in order to monetize the inherent nickel cobalt value, while most, if not all, of the lithium is either lost or wasted. A lot of NMC black mass is sold today into China for refinement, which we believe will eventually be restricted or banned. And we are having success as a value-added partner to separate and refine NMC-based elements for certain recycling platforms all over the world. However, our ability to economically refine LFP or lithium iron phosphate black mass is extremely unique. We believe we are the only ones in the world that can economically extract the lithium and refine it back to battery grade products. LFP chemistry is the largest sub-segment of lithium ion battery chemistry today in the world and growing. It also sets us apart from any other critical mineral refining platform and showcases the value of our platform to the recycling industry. Our value-added position in the recycling market and our sustainable supply of critical minerals is strategically important as we move towards a highly mineral-dependent electrified economy. From our perspective, traditional solvent-based processing methods don't work efficiently within the recycling industry for a variety of reasons, including performance, CapEx, and OpEx fundamentals. Those challenges are beginning to manifest themselves in a big way across the recycling industry. Our powered by ReElement product offering, which is a collaborative and flexible refining service within the recycling industry, has tremendous growth opportunities to efficiently scale alongside the growth of the recycling industry while also being able to adapt to different and evolving battery chemistries. We are beginning to see the success with some early adopters and partners. While recycling feedstocks are important from a sustainability perspective and provide us a tremendous opportunity, natural ores will allow us to move the needle faster to meet the rapidly growing demand of the energy storage market. Our current focus is mainly hard rock lithium-bearing ores, given the efficiency of our process and technology to refine lithium very cost-effectively. However, we are also currently working on different ore types, including cobalt and nickel bearing ores, unique and specific critical mineral defense minerals. We are also in the early stages of incorporating rare earth ores into our development platform. Our commercial qualification plant in Noblesville, Indiana, has been extremely busy taking in these different feedstocks and validating our process and products with a variety of existing and potential partners in a variety of industries, including the renewable energy space, automobile OEMs, battery recycling, consumer power tools, and miners of minerals and ores from across the globe. These customer qualification and validation processes have sometimes been lengthy, sometimes taking over a year. But they have also been successful in showcasing our distinct advantages. Additionally, our Noblesville facility has been hard at work utilizing these feedstocks to validate and design our process at a larger commercial scale. For our two U.S.-based large-scale projects in Knott County, Kentucky, and Marion, Indiana, while also other co-located facilities in the United States and abroad. Our two large-scale U.S.-based critical mineral refining projects exemplify how we are leading the charge and are uniquely equipped to address arguably the largest choke point in the critical mineral supply chain, which we believe is midstream processing and refining. Our Kentucky Lithium project is upcycling one of our carbon processing facilities in eastern Kentucky and transforming it into a large-scale critical mineral refinery with initial focus on hard rock lithium ores as its primary feedstock. It is currently being designed with an initial capacity to produce 15,000 tons per year of battery-grade lithium and will have the ability to incrementally add modular capacity beyond that. As previously discussed, this project is now funded with the closing of our tax-exempt bond we announced today, and I cannot think of another project that defines energy transition better. Our Marion, Indiana, Supersite project is converting what was once a beacon of U.S. innovation in manufacturing, it was once the largest television manufacturing facility in the world and is transforming it into a first-of-its-kind critical and rare-earth mineral refining campus with a focus on recycled feedstocks. This facility has been undergoing renovations and is being designed with initial capacity to produce 5,000 metric tons of battery-grade lithium and 1,000 tons of rare-earth oxides per year. I cannot think of another project that defines the reshoring of U.S. manufacturing better than this project. Our innovative and advanced separation and purification methods using chromatography replace the guts within a typical hydrometallurgical process. In essence, we use a modified version of hydromet, but without the harsh solvents and acids that are typically used in the separation phase of refinement. This allows us to displace the toxic conventional methods used in China and what many are trying to attempt to deploy outside of China. We are lower cost and more efficient because we utilize a smaller footprint, we don't use harsh chemicals, meaning our OpEx is much lower and our environmental footprint is much cleaner. Our process is modularly scalable, contributing to a meaningfully lower CapEx. Also, our speed to market is faster than anyone else. Disruptive technologies come down, in my opinion, to cost and know-how, and we are in a unique and fortunate position to have both. Our intellectual property has been developed and commercialized with approximately 40 years and over $40 million invested across multiple industries. Our best-in-class team leverages the know-how from the research and development, the commercialization, and operational expertise coupled with our asset base and relationships to execute on our mission. We are able to produce high-demand products cost-competitively, if not lower than China. We believe our platform technology is an important linchpin in making the United States competitive within the electrified economy, as well as for national security objectives. The value proposition for ReElement is that the world needs advancements in refining these raw materials that power our modern-day technologies, and we believe we provide the most efficient solution while also being in the lead position to do so. We truly believe ReElement has the opportunity to create substantial and meaningful value for our shareholders, and the decisions we make and the time associated around the entire process, while sometimes certain things being out of our control, are based on maximizing that value the very best that we can. I'd like to now turn it over to Mark Jensen for some additional comments. Mark?

Thanks, Mark, and thanks, everyone, for joining. I would also like to applaud our entire team for their efforts, their diligent planning, and their positioning of all of our assets. We're a unique company. We have three platforms underneath one umbrella. Those assets aren't being fairly valued. And more importantly, we recognize that. So what we're focused on doing today is positioning our assets to unlock that value, to give our team members the tools that they need to execute upon that plan, to drive value for our shareholders through individualized entities upon the separation of what they're able to accomplish. The past several months have been highly focused on preparing for this positioning of these businesses for the separation and operation of stand-alone companies. That involves having board members in place for corporate governance, having the team members in place for execution, and giving them the tools that they need to take these businesses to the next level. Thankfully, we are very well suited to do that today. We have boards in place for each one of our divisions. We have teams in place for each one of our divisions. And we have the assets and technology in place to absolutely crush it. We have focused on driving the highest value aspects of our business forward for the long term. We have shared and communicated a number of very significant milestones that we've been able to achieve. And we have a number of significant milestones yet to come. But we are in a very favorable position within the marketplace, not only at the American Carbon Division where we have some nameplate assets that are some of the lowest cost mining operations that are getting ready to ramp up production aggressively between our Wyoming and McCoy complexes, as well as our ReElement Technologies Division, which Mark and Kirk had the luxury of sharing some of the opportunities that we have in front of ourselves. We're extremely excited about these entities, and we're extremely excited about where they can go upon the separation of the businesses so that they have their core focus and their ability to focus solely on their operations. Over the course of the last quarter, we have been investing heavily into the businesses. Wyoming has been developing from the tax-exempt bond. McCoy has been positioning the ramp up of our Carnegie mines. And ReElement has been focused on proving out and running production in our Noblesville facility, but developing our Kentucky Lithium site, our Marion site, as well as our international opportunities that we have made significant milestones on. The world of critical minerals, the supply chains are broken. We rely upon China for 95% of everything we do. Our military, our commercial enterprises. And the only thing they all care about is cost. We can provide products at the same cost, if not better than what China can do today. That's a game changer. We're going to break the monopoly, we're going to bring technology to the forefront, and we're going to execute upon our mission. We're going to do that in a very rewarding way to our shareholders. We've been laying the groundwork for that. We've put the assets in place. We've proven that the technology works and works extremely well. Our operational team has done a phenomenal job at that. Now we're putting the financing in place with the $150 million tax-exempt bond we closed today and another tax-exempt bond we're working on as we speak. We've applied for government grants, we'll see if we get them. We also have a significant number of international financing operations that are in place that can unlock our international efforts, especially in Africa. They need what we offer. We offer refining solutions that they can't get anywhere else other than China, and that product goes to China. It doesn't develop a manufacturing society. It's exploitation where we're focused on developing economic relationships. Our technology enables that, developed out of Purdue University here in Indiana. We're extremely proud of that. We're extremely proud of the efforts that our Purdue team has put in place and the support that they've given our operational team to drive our technology forward. Our team has worked countless hours to be where we're at today. Today it's about running production every day in our Noblesville facility and gearing up for our Kentucky site as well as our Marion site. Our team has been working countless hours over in Africa, and traveling numerous times over there to develop the relationships and share what we bring differently to the table to drive economic value for our shareholders. Turles Thompson has been leading our American Carbon Division to position these assets to light the fire of production at low cost. Everyone wants revenue on a daily basis. We care about long-term value. We care about making sure we turn these mines on to optimize them. We've reduced environmental liability significantly over the course of the last year, including over the last quarter. We'll showcase that here shortly. Our intent is to spin these assets off and ramp up production at all divisions. We're going to do that. We will share that news here very, very shortly. As Kirk mentioned, we have not taken our foot off the gas. We've been aggressively planning, working, positioning to execute upon the strategy. We've spun off our Nova Stare asset, a phenomenal business. We've gotten one contract with the Air Force and the Army through Kenai Defense. We're working on getting through their S-1 process to IPO later this year. We will very shortly here next week announce when we're spinning off our American Carbon Division so we can ramp our production there. The team can focus solely on being the lowest cost producer of MET coal to the steel industry. We will then shortly thereafter announce where we're spinning off ReElement into its own standalone platform so it has a clean focus on being the world supplier of refining solutions for critical minerals beyond China. I truly believe we will be the only solution that works economically in this country, as well as in others for that separation purification step, which is really the heart of what we do. We've also been focused on putting these non-dilutive capital financings in place to protect our shareholders. We can hit the easy button tomorrow easily. We can go out and raise equity capital and do what every other company does, but we actually care, our team truly cares. Our team is motivated by the shares in equity that we all own and that our families own. That's important to us. We don't hit the easy button. We fight the hard fight to put our businesses in place to be successful. We've closed a $45 million tax-exempt bond in one of the most challenging markets you could find with a phenomenal investor. That capital is being used to develop the Wyoming County complex to be an absolutely phenomenal complex. It's a focus on producing met coal and then a byproduct of producing concentrates of rare earth elements, of which we'll share those results very shortly, which are better than one of the largest mining operations that have announced rare earth elements to date on a parts per million basis. We've announced that we've had offers to sell the coal business. The numbers, the values were good. We're okay with them. The concern was around structure. We're not going to put our investors at risk of not getting paid the full consideration of what those assets are worth. So our focus next week will announce the record date and the payment date of when we're going to spin American Carbon Off. Now, we are focused on still monetizing the assets, and we're still going to evaluate opportunities to monetize those assets. We've signed agreements, binding agreements to sell the Deane Complex, but they didn't pay us. It's unfortunate. That being said, they owe us a lot of money, and we're pursuing that in court as we speak. I feel very confident about that. I feel very confident about our position to make sure we get that money for our shareholders. We also have other interests and other buyers that are interested in some of the non-core, non-focus assets for the quality of production that we're looking at targeting. Post-spinoff, we are looking at further expanding American Carbon, and the American Carbon executive team has presented a growth plan to the division organically, as well as acquisitions in the West Virginia region, as well as in other materials. During the course of the last short period of time, we acquired an iron ore asset, which is a phenomenal asset. We're doing a ton of work there right now on evaluating the reserve and sending a few team members out to that region here very shortly to further look at how we bring that into production and look at technologies to monetize that most economically. It's not only looking at the Met Carbon division but looking at the entire infrastructure landscape of how do we produce products to monetize that division and expand that division. The American Carbon Division, as I mentioned, we will announce next week the date. We'll provide clarity of when we're going to dividend it out to our underlying shareholders. Then we'll share the growth curve of how we anticipate that. We have equity interest. We have debt interest to further finance and expand that division. We're going to focus on growing that division to ensure shareholders receive the entire reward of what it's worth. ReElement, same thing. We filed a Form 10 for both of these divisions. We're going to push that through. We're working on closing the financing that was previously announced. We have great interest in it. We don't need a lot of that with the tax-exempt bonds we just closed. We are going to try to focus on minimizing dilution, but bringing in the necessary capital to continue to move the business forward as quickly as we can. The opportunity today at ReElement has had us focusing on allocating capital to make sure that we're allocating it in the most accretive way. Our Marion facility is going through the certificate of occupancy in the next few weeks, and we believe we'll get it. Our ability to finalize the renovations there over the next few months to start deploying equipment there will enable us to expand our production in Marion as well as expand our refining capacity in Noblesville. That's a beautiful thing for us. We are the only refining facility in the United States that can perform at the purity levels that are necessary to build a domestic battery industry. Internationally, we've made huge strides within our international footprint for ReElement. We've had conversations with groups out of Canada, Australia, and numerous groups out of Africa. Some of our largest sourcing of materials are coming out of Germany that we're refining; we will be refining in our Noblesville and Marion facilities. Establishing those international relationships takes time. That being said, we've been putting a lot of groundwork there, and I think we've collapsed that time significantly due to the efforts of our team members and the willingness and passion to travel to spend time away from their families to build a team and build a platform that can help us grow to that next level very, very quickly. Ultimately, it's about partnerships. We've announced numerous partnerships over the course of the last year. We've announced EDP. We have numerous partnerships we're not allowed to mention their names. That's unfortunate. That being said, they're great partners, and ultimately, we're getting calls from numerous other partners that need these solutions that we provide. Over the next year, we'll be able to talk much more openly about who these partners are, we hope, as we continue to expand the relationships with them, not only from feedstocks but also the sales side. We also look to continue to expand all of our platforms on the international footprint. In closing, we remain very confident in the positioning of all of our assets and the long-term value that they provide to our shareholders. We remain hyper-focused on unlocking that value. That's why we're focused on these distributions. That's why we're focused on spinning them off. A microcap conglomerate doesn't make sense. We're fortunate that we built a microcap conglomerate. We did it based on effort. We did it based on putting ourselves out there. The technologies worked, the platform worked. The platform is positioned, and now it's time to let them go off on their own and be successful. We have the teams to do that. These milestones were the distribution of Novusterra shares over the course of the last quarter, the closing of our tax-exempt bond to finance both our carbon division as well as our ReElement division, and our ability to showcase the results of what our technology can produce. We have ample liquidity on our balance sheet. We do not foresee us needing to issue equity at the AREC level to raise additional capital. We want to position the individual entities to do their finances on the American Carbon side and the ReElement side. American Resources post-distribution of these assets will expand aggressively into the critical mineral space on the mining front. We have numerous opportunities in front of us as well as the utilizations of the products that we produce through very good partnerships that we've been working on for numerous months, if not years now. Just to reiterate, the management and the families of our management are some of the largest shareholders of American Resources. Our management team is committed to maximizing the value of all of our businesses and believe our continued execution and unbundling of these assets will help us achieve this. I thank you for all your time and now I'd like to turn it back over to the moderator for some Q&A.

Our first question comes from Heiko Ihle with HC Wainwright. Please state your question.

Hey, Mark. Can you hear me all right?

I can.

Perfect. Excellent. Hey, you've got these executed MOUs with the German battery recycling platforms at Duesenfeld Deal and the Battery Damage Service MOU. Obviously, arguably a very big market opportunity there, but can you maybe give some figures of what you internally think how big of a market opportunity there might be in your collaboration going forward?

Yes, absolutely. Duesenfeld is an outstanding partner, just like Battery Damage Services. Currently, Duesenfeld is putting one of our containers on a boat, either a 53-foot or a 40-foot container filled with black mass. What makes these partnerships attractive is that we are among the few, if not the only, companies capable of profitably recycling LFP batteries, thanks to our technology and process for extracting lithium. The size and scale of our operations are significant. Duesenfeld is an excellent company with great technology, and their business model focuses on operating their existing recycling footprint while also licensing it out. This collaboration allows us to establish a productive relationship where they refer us to their partners who purchase their shredders. This could prove to be quite substantial. Currently, we have a small facility in Noblesville measuring 7,000 square feet, while our Marion facility is much larger at 400,000 square feet. Obtaining occupancy certification there is crucial for us to expand production quickly. Domestically, there is a considerable amount of black mass being exported from the U.S. to China, which I believe will soon come to an end, positioning us as the local solution for refining. We see similar opportunities in Europe, where we are developing relationships and assisting them in sourcing products. These partnerships could be quite significant for our revenue in the next 12 to 24 months.

That's very helpful. Also, your royalty income in 2023 was quite strong, just looking over the income statement. Can you provide some longer-term guidance on where we should model royalty income going forward in '24 and after that? And speaking of longer-term modeling, where should you think we should see G&A in 2024, please?

That's a good question. To clarify, our general and administrative expenses are at a transitional point in our platform. Regarding your last question, I expect significant changes as the divisions will become independent, each with its own G&A, which will be much lower than what the holding company incurs today. Overall, I anticipate our G&A will remain relatively stable and not increase significantly. With rising revenues, G&A might see some adjustments. We are preparing to expand our revenue on the ReElement side and, shortly, on the mining side with the upcoming spin-off announcement and production ramp-up. In general, the G&A across the entire platform is likely to remain consistent with its current levels, with minimal if any growth. Additionally, I believe our royalty income will also remain consistent moving forward, based on its current state.

Fair enough. Appreciate, I’ll get back in queue. Thanks, guys.

And our next question comes from Mike Niehuser with ROTH Capital Partners. Please state your question. Mike Niehuser, your line is open, go ahead.

Yes, you can hear me okay?

Yes, coming through, go ahead.

Yes, thank you. I apologize for the interruption. You made some strong statements about breaking the monopoly with China, and I would like you to elaborate on that further. I believe it relates to costs. When you make the comparison between your costs and those in China, are you referring to a currency basis or considering environmental savings as well? It seems like both you and China are at opposite ends of the spectrum regarding environmental impact, with China significantly affecting certain areas and your footprint being minimal. Is this environmental consideration part of breaking the monopoly, or are you focusing solely on direct costs?

That's a great question, Mike. In reality, nobody cares about non-cash costs. You could have the best environmental practices, but if your product is 50% more expensive, it won’t sell. Competing on cost is essential. Fortunately, we do that because of our strong environmental practices. Our technology is sound; we avoid harsh chemicals and use closed-loop systems, which means we don't discharge harmful elements into waterways. We utilize columns and resins instead of emulsions and chemicals, allowing us to compete on cost effectively. In the commodities market, cost is the only factor that truly matters. Critical minerals are commodities, and having been in this industry for over 20 years, we know that if you can't compete on cost, you won’t survive. When I mention that we could go head-to-head against China, it's not just a comparison; China is currently the dominant producer of rare earth elements and critical minerals, along with refining the other necessary products. For these products in the United States, we compete solely on price, ignoring logistics or non-cash metrics. In fact, we outperform on price. For example, lithium carbonate prices once dropped to around $13 per kilogram. We can produce hydroxide, but we focus on carbonate now. With our 5,000 metric tons of lithium carbonate from our Marion facility or Kentucky Lithium site, we remain profitable at rates significantly below that. As a result, China and other industry players began reducing production due to the high cost of legacy methods. This situation gives us a strong position, as our cost structure serves as a natural hedge. This success comes from our team's dedication and our focus on navigating commodity markets effectively. So yes, it is fundamentally about dollars, Mike.

Thank you for the excellent response. Regarding the American Carbon side, I'm uncertain about what is currently operational. It appears that the Carnegie mines that were in operation are no longer active. Is that accurate?

No, that is correct. Let me share where we're at. We're getting ready with development in Wyoming and have invested significant time and effort in Carnegie. We've also been engaging with some international customers, which would provide us with a long-term customer base beyond our traditional sales channels, adding more stability. The challenge with some of our existing customers is their inconsistent demand, which complicates running a mining business. Currently, we are in an excellent situation due to the quality of our products and our ability to produce a large volume at a very low cost. Our Wyoming Complex is a mid-vol complex with over $30 million allocated for its deployment, along with launching concentration technology that will allow us to focus on critical minerals, which we will disclose in the coming week or two. The results we've seen are remarkable. However, mining critical minerals or rare earth elements in coal deposits does not yield profit; it must be a byproduct. As for why we aren't operating today, it's primarily due to the fluctuating market and our strategy to synchronize the ramp-up of Wyoming and Carnegie within similar timelines, aiming for a very low cost structure. Carnegie 1 has been a single section mine for a long time, but we've just completed the development of its second section, allowing us to operate it as a two-section mine. Carnegie 2 is already developed as a two-section mine. Our goal is to ramp these mines up to reach a capacity of 60,000 tons per month, leveraging the low-cost framework we've established, given that we have not heavily invested in the McCoy Complex in the last six months. Tarlis and the operational team have done an outstanding job positioning that site for success. These are essentially untouched mines located less than five miles from our Bevins branch facility. Increasing production there, particularly with high-vol B and A products, alongside our mid-vol products at Wyoming, creates a remarkable blend that could achieve a combined output of 100,000 to 120,000 tons per month when fully ramped up. This is where we aimed to be at the time of the spin-off of American Carbon. Carnegie will likely be the first to resume operations, expected to start a few months ahead of Wyoming, which is imminent in the next 30 days, aligning with the spin-off plans. Carnegie will ramp up first, followed closely by Wyoming.

So when we look at the first quarter to be reported soon, we shouldn't be expecting a lot in the way of carbon sales, if any? And could I assume that we're going to start to see a little bit of a trickle of rare earth sales, product sales start to come in?

In the first quarter, you will not see a lot of revenue. In the second quarter, you'll start to see all that from both sides.

I imagine you're going to have a very, very, very busy second quarter. It’s going to be fun.

I believe our teams have worked tirelessly over the past couple of years. Managing the corporate structure and spinouts has been quite complex, except for the Novusterra spinout, which we have successfully completed. Shareholders should see their Novusterra shares reflected in their accounts without needing to contact brokers. We expect to announce the American Carbon spinout next week, which will help keep our teams focused and motivated on their success. Isolating these entities allows them to focus on growth and establishing a solid corporate structure. While we have laid much of the groundwork, our priority now is to ramp up production at our Noblesville facility. The ReElement team has done an outstanding job, and they are working daily to increase production. We are on track to operate almost three shifts at Noblesville, which is exciting, and I am keen to see the planning for that. On the mining side, Tarlis is eager to accelerate operations and maximize the capacities of the complexes. This is the first time we are in a position to fully expand our mines and solidify relationships with some international customers, which bodes well for our future.

If I could ask one more question. We are at a pivotal time in our nation's history regarding the economy and the establishment of a rare earth circular supply chain. This includes not only the ores but also the recent announcement about end-of-life materials from a certain auto manufacturer. Additionally, considering your relationships with several magnet manufacturers, could you provide insight on the progress of connecting the components of the circular economy? I believe we may not see a situation like this again. It is truly taking shape in various ways thanks to the efforts you have put in. That should conclude my questions.

Yes, we can discuss this topic extensively. Reflecting on the past two years, we have focused on communicating our capabilities, demonstrating what we can do, and partnering with those who have been slow to act. Currently, there seems to be a lack of concern about our supply chains, particularly since our military relies on China for certain products, which is alarming. I have two brothers in the military, and if they lack the necessary tools for defense, that would be concerning. We face significant waste in terms of recycling—there are billions of dollars worth of magnet waste in landfills in the U.S. each year. Most of the byproducts from shredded lithium-ion batteries go to China, which is unfortunate, especially since many of these companies were initially funded by the U.S. government. This trend needs to change, and fortunately, it appears to be starting to. We are beginning to secure a substantial amount of feedstock. Chris Moorman, our Chief Commercial Officer, has excelled in opening doors and sourcing products for us to produce. We're excited to move to three shifts due to the influx of material. This is a positive development as we turn our focus to scaling up the Marion facility, which boasts 400,000 square feet on 42 acres—a significant asset for our technology. The recycling market is an incredible opportunity for us, allowing us to refine materials and alleviate supply chain bottlenecks currently seen with Chinese operations. Although Lifecycle attempted to establish a traditional hydromet plant, they faced challenges in permitting and operation. Achieving efficient extraction in the U.S. is nearly impossible for the long term. There’s a rare earth producer in the U.S. currently engaged in this, and while they are making progress, I believe they will encounter difficulties. We can offer the necessary solutions and have an upcoming announcement on our ReElement side that will highlight our collaborative approach to assist partners in achieving separation and purification, ultimately enhancing their operations. It’s crucial to protect our supply chains, which not only benefits the country but also drives our business growth. Regarding our presence in Africa, it is one of the most resource-rich continents and has one of the fastest-growing populations. Our relationships there are strong, thanks to individuals like Shane Tragethon, Ben Kincaid, and Baba Kamara, who deeply understand the region and work within a partnership model to create local value while ensuring a reliable feedstock for processing domestically and in Africa. Securing those feedstocks does take time. Establishing relationships where we can acquire end-of-life magnets is not as straightforward as it may seem, especially if it isn’t a primary focus for those we are engaging with. However, we are now at a point where we are starting to see material flow in, which positions us well for aggressive scaling.

And how soon do you think you'll see product coming out of the Marion facility?

Lithium carbonate, we produce lithium carbonate every day now. So as Mark mentioned during the call, you have to go through the trial and getting through the qualification process, and I think we're in the qualification process with 7 different companies today, maybe more, that we ship them samples of lithium carbonate starting off like grams, then it goes to kilograms, and then it goes to tons. Obviously, now over the course of the next short period, we will start working on the magnet lines there for recycling end-of-life magnets and preprocessing those magnets and then start turning those into oxide as well.

And our next question comes from Steve Segal with KBB Asset Management. Please state your question.

Hey Mark, how are you? Great job on getting everything done. I have two questions. The first is regarding the spin-off of carbon; will Wyoming be included in that? That’s my question.

Yes. Wyoming will be included in the plan. When we spin off Carbon, it will involve the American Carbon Complex. This includes the capability to produce concentrate. Ramaco has announced the presence of billions of dollars’ worth of rare earth elements in Wyoming, and we believe we have a similar amount in Kentucky and West Virginia. We can invest in research and reports, but the American Carbon Complex comes with our Met Coal division, the iron ore platform we acquired, and we are currently pursuing another acquisition in the infrastructure market. We also have some mining assets in West Virginia that we will evaluate for acquisition after the spin-off. Additionally, the rare earth concentration aspect is part of this. As we produce met carbon, the waste material and iron ore will also contain rare earth elements, which we aim to extract, starting with Wyoming County and West Virginia.

Okay, understand. Thank you for explaining that. And then the bond that you announced today for that facility that could be on the ReElement side correct?

Yes. So that's ReElement. That's refining lithium ores from international sources. Predominantly from Africa, working on a partnership in Australia as well as Canada. The byproduct that comes out of that actually goes into the ceramic industry. There's really not a whole lot of waste that will come around there. That's part of ReElement. That's being built on our Knott County Complex. So we have a complex there has about $3.5 million of reclamation liability sitting on the American Carbon platform that we've assigned to ReElement that will be cleaned up here. Those bonds will be removed, less liability for Carbon, better platform for ReElement and phenomenal workforce in those how to process commodities. I mean our team and people we've been employing since in the region since 2015, '16, they know how to process commodities better than anybody in the world, and we're going to give them a long-term stable opportunity for employment to stay in their community.

Right. And that's not breaking as coal, right?

It's a less environmentally harmful process than coal. It's more contained within a warehouse, there's no water discharge, and we generate cleaner water than what enters our system. It creates a positive working environment and allows people to remain in their communities. That community is currently struggling. Knott County is in difficult shape with no businesses operating there and high levels of corruption, so we're committed to assisting them.

Is that from flooding?

In general, there is a lack of development. The judge executive has done an excellent job of recruiting us, but the rest of the community lacks opportunities. We are excited because we have a strong workforce there, although they leave the area for work each day. We are eager to help establish a business in that location to create jobs and address some of the corruption that exists.

And we have no further questions at this time, so I'll hand the floor back to management for closing remarks.

Thank you all for joining. I tend to be a bit long-winded, but I truly care about our business, our team, and our shareholders and stakeholders. I appreciate the time you’ve given us today and your interest in our company. I’m really excited about our future and looking forward to the upcoming earnings calls where you’ll hear from different voices as we separate these companies. I’m grateful for our current position and optimistic about what lies ahead.

Thank you. That concludes today's call. All parties may disconnect. Have a great day. Thanks.