Earnings Call Transcript - AREC Q2 2024

Operator, Operator

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. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host Mark LaVerghetta, Executive Vice President. Thank you, Mark. You may begin.

Mark LaVerghetta, Executive Vice President

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 ReElement 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 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 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 in the 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 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 and 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 ReElement Technology division only about 3.5 years ago. And we tried 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. ReElement 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 that 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 than 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, demand for critical minerals is increasing significantly to meet the needs of our energy transition, national security, and more advanced consumer technology applications. ReElement has put the pillars in place and is leading the world in a more diversified supply of ultrapure 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 ReElement offering. Our ability to produce ultrapure critical mineral products solves probably the most complex part of the supply chain challenges and is bolstered by our great team, our extensive asset base, and our breakthrough technology. That is the value proposition of ReElement Technologies. However, we believe our current stock price does not properly reflect the value of ReElement or the sum of all 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 directives and continue to spin off the majority of both American Infrastructure Corporation and ReElement Technologies Corporation into standalone companies and execute on the de-SPAC 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?

Mark Jensen, Chairman and CEO

Thanks, Mark. I appreciate it. And thank you all for joining today. We'll go through this pretty quickly here, but I'm 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 have stated several times, we are extremely well positioned within the divisions to create value for our shareholders and ultimately unlocking that value through the separation of these divisions. The management teams and the shareholders can drive value from their respective divisions. Over the course of the last six months, we have been putting the puzzle pieces together to capitalize on the opportunities and the momentum across each of these divisions with the respective management teams. 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 reiterate that as we continue to undergo growth from a consolidator and restructure of carbon operations to focusing on monetizing and deploying that asset base for growth and 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 at a cost structure that is lower than China. The stock price today does not reflect what we believe the value of the company is. We also understand that it's probably confusing in the public market today 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 aim to unlock that this year. Our goal is for American Infrastructure and ReElement Technology to be separate companies by the end of this year. Our team, our financial team, our audit team is putting the puzzle pieces in place to enable that to happen, as well as getting American Metals to be its own standalone company through the SPAC merger, which was valued through a fairness opinion at $170 million valuation. Our focus is on preparing and positioning this business for growth, and building out the management teams to drive these businesses forward to unlock that value and provide a clear, concise message to the market about what each 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 dividend to our investor base so that American Infrastructure can focus on its growth division of the business. Similarly, ReElement Technologies, our goal ultimately is for this to be a standalone entity. ReElement Technologies is having a phenomenal start this year and the beginning of the second half of this year, where it has positioned itself as a premier refining technology company in the critical and rare earth element space. I'll talk a little bit further about that here shortly. Ultimately, the de-SPAC merger with American Metals and AITR has a lot going on behind the scenes, which I'll share a little of today particularly about its positioning around preprocessing and recycling of critical minerals as well as ferrous metals and other highly important electrified metals. Let me dive a little 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. For our McCoy Elkhorn complex, we have signed a lease with an operator and our goal is to restart the mine this year, hopefully very shortly in the near term. This is positioned as one of the lowest cost metallurgical carbon, high-vol metallurgical carbon assets in the country. The efforts we have 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 reducing the CapEx required from us as well as operational risk. Our Wyoming County complex is probably one of the most exciting complexes and has undergone tremendous off-site development to prepare the equipment to unlock this mine here in the near term. This is a mid-vol metallurgical carbon operation, one of the few, if not the only greenfield mid-vol mines in the country that can be deployed in a 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 will be in town to our offices here this week to further those discussions with the hopes of finalizing the deal as well as 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, we create a premier met carbon product for the steel mills across not only our country but also the world. Furthermore, in the American Infrastructure division, we have our rare earth element component of the business. The Wyoming County complex has undergone third-party verified characterization of rare earth elements of over 550 parts per million from unconventional resources, which is by far the highest rare earth concentrate we have seen from any carbon-based feedstock in the country. Other players within our industry have announced levels closer to 400 but 550 parts per million tied in the back end of an existing mining complex is the most economical resource we've seen, and being a byproduct, we will be able to generate cash flow because we're not solely developing it for that; we're developing it to produce mid-vol met carbon for the steel industry and generating value from the rare earth elements as a byproduct from the back end of that processing plant. We anticipate positive announcements coming out of Wyoming County and McCoy Elkhorn soon. We are also entertaining leases for our Perry County complex as well as our Dean complex once we get through the litigation we are pursuing against our former lessee. Let me dive into ReElement Technology. We started off many years ago focused on the ability to produce rare earth elements from carbon-based materials. When we secured the technologies from Purdue University, we expanded that footprint significantly to the highest value denominator within the industry. 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 ore-based resources. What we have proven is that we can go head-to-head against China to produce rare earth oxides and battery-grade materials at a lower cost structure than they can in a competitive environment over the long term. We will continue to develop that technology and optimize it to stay ahead of that curve. We've also proven efficacy on concentrated brines. Lithium brines from DLE, we can dramatically simplify their flow sheets. We are working with a couple of members within the industry to help them achieve that and make DLE work economically. What I'm super excited about is the direction that the business is going. We are running a hybrid model at ReElement. This hybrid model is driven by the fact of building out our core facilities, our Marion facility, which can produce rare earth oxides as well as battery materials, and our Kentucky lithium facility that will process lithium spodumene from lithium carbonate to battery materials. Those facilities are set to drive cash flows for our investors, but also to demonstrate our technology to the world at highly commercial scale. Over 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've completed that with several parties. On rare earth oxides, we've also been shipping oxides to our customers with whom we are now either signing contracts or negotiating with. Further, developing our Powered by ReElement division 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. It's exciting because it's asset-light. By asset-light, I mean our customers will CapEx the facility and pay us a service fee additionally to deploy our technology for them, which enables us to grow rapidly and become the technology of choice across critical and aerospace separation and purification steps—the most complex and typically the most expensive steps within this industry. We simplify that and deploy it, ultimately replacing those flow sheets permanently for the future. Our Noblesville facility continues to operate daily, producing lithium carbonate from LFP batteries. We are doubling the capacity of that facility very shortly, if not tripling it based on some minor investments we can make. And that’s the exciting part of our technology—either increasing our production trains or expanding them at very low CapEx expansion points to significantly boost our production. Our Marion facility is at a point now where we're scoping equipment, ordering equipment, and deploying assets to the facility to be able to start production for both, starting off initially with rare earth oxides. We have crews on-site in Kentucky, delivering equipment this weekend to begin the teardown of the former coal mining complex and laying the foundation for our Kentucky lithium refinery. We're excited about the infrastructure we can utilize there and the attributes this site offers us and the team we have in place to handle this facility. Our feedstock focus is broad. We are the only player in the space that can produce both heavy and light rare earth elements in refined formats, and we're going to maintain that edge to be the largest producer in the United States from our Marion facility, being able to process natural ores from hard rock lithium to rare earth ores from around the world to deploy here in the local environment. Internationally, we have signed an MOU with Jupiter Project, probably the largest lithium mine in the world, currently in the development phase of that project, with hopes to bring it online next year. We are also in discussions throughout Europe, having numerous discussions on both the rare earth and lithium sides, as well as South America, Canada, Japan, and Australia. Our team is focused on deploying our technologies through joint ventures via Powered by ReElement or through our existing facilities. The 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 worldwide in a collaborative manner to meet energy storage market needs is abundant. The market is looking to us to provide solutions. Stranded capital, both strategically and financially is seeking ways to unlock, and that comes down to the bottleneck within the world, which is refining. We are confident that our technology and our suite of technologies will enable that to happen in the near term. ReElement's value proposition is unique. Our goal is to build a multibillion-dollar business, and we believe we are well-positioned within our assets and our team to do so in a low CapEx and low OpEx manner. American Metals, as we announced, is preprocessing for ReElement. It does the work of ReElement in a safe, secure way and helps break down end-of-life motors, power tools, and batteries while establishing partnerships in battery recycling through agreements. We have signed the definitive agreements with the SPAC merger, AI Transportation Acquisition Corp, AITR, which will enable us to execute upon separating this division and growing it. Prior to and after signing of the definitive agreements, we have engaged in numerous joint venture relationships throughout the US and globally, including Europe and India and are looking to execute upon those joint venture agreements soon, which we hope to share with you. The value of our individual divisions is substantially undervalued. At American Metals, with the fairness opinion we received of $170 million, it would value the company at over five times the current market cap. We are pursuing growth and the capital we're pursuing at ReElement would value the company at over five times the current market cap. Numerous Patriotic Capital Funds have expressed their desire to invest in the company and in this funding round. American Infrastructure has equipment we've acquired with a replacement value of over $270 million, from coal processing plants to underground and surface equipment. The royalty model we are deploying will enable substantial cash flow and allow our operational team to focus on our Wyoming County division, which presents a highly attractive market to operate in today with the price of mid-vol coal versus our extraction costs. We deem the current market does not reflect the value of our divisions. Our focus is on getting these separated so we can unlock that value for all of our shareholders. We remain very confident in the positioning of all 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 puzzle pieces in place, including re-auditing our numbers due to the replacement of our auditor as well as positioning within 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 is positioning all our American Resources divisions for growth. We have ample liquidity and do not foresee needing to issue equity at the AREC level for capital. We will pursue subsidiary-based financing being offered today should we need additional capital to unlock this value. We also continue to explore and work through the capital raise we mentioned at ReElement, working with numerous Patriotic Capital Funds and understanding the significance of our Department of Defense and Department of Energy in sourcing critical minerals produced locally in the US. As the only refining company nationwide that can refine both rare earth elements as well as battery materials, we are exceptionally well-suited to protect and build our national security supply chain. Thank you for joining today. I am highly confident in our ability to execute on our business plan and am excited about the progress made in recent weeks and months to position these assets and drive cash flow to unlock the revenue potential of all our assets. We look forward to future communication and transparency about our business objectives and execution. I’ll now turn it back to the moderator for a Q&A session.

Operator, Operator

Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question comes from the line of Jesse Sobelson with EF Hutton. Please proceed with your question.

Jesse Sobelson, Analyst

Hi, everyone. A lot going on, but very interesting story here. I just wanted to focus on the ReElement piece of the business. Firstly, in the press release, you mentioned demonstrating the purification of rare earth ores at 99.5% or magnet grade. Can you explain how this grade for rare earth ores is different from refining lithium to be battery grade? Secondly, can you elaborate on this demonstration conducted, and was it at a commercial scale? And if not, what was the scale demonstrated? What is the timeline to build this out and prove this technology at a commercial scale? Thanks.

Mark Jensen, Chairman and CEO

Yeah. Thanks, Jesse. I appreciate that. So, what we've seen within our technology, and I'll work my way backward on that. Hopefully, if I miss a point, please jump in and correct me or re-ask the question again. The uniqueness of our technology and what we've seen so far is we scaled it up over 1000x from lab scale originally developed out of Purdue University and further developed by us. The efficacy of our technology improves at higher volumes due to the interface surface area of our resins that we utilize. We demonstrated at commercial scale, having been through the qualification process on the battery side. The quality produced on the magnet side for rare earth oxides at 99.5% purity aligns with what battery manufacturers require as well, targeting certain impurities. For our customer, they sent us a sample—a lab-scale process we performed based on their material—where they were very pleased with the results exceeding 99.5% for the light and heavy rare earths. This addresses a major shortfall in our country, where heavy rare earth production is virtually nonexistent, and we can certainly resolve that. The attractiveness of our technology on CapEx is that producing rare earth ores is a lower CapEx model even than the rare earth magnet side which also has a low CapEx model, which excites us about the results. On battery side, producing at 99.5 quality essentially is what most companies produce. Achieving 99.9 is an easy task for our team to produce from lithium carbonate. If customers want 99.5, we can accommodate that. Did I address all your questions?

Jesse Sobelson, Analyst

Yes, essentially it sounds like the production was based on their sample. In terms of scaling, it seems like there's no timeline, and you guys are ready to move forward once partnerships are in place to build the facilities needed. Is that fair to say?

Mark Jensen, Chairman and CEO

So, we're starting! I was actually just at our facility today giving a lithium spodumene customer a tour of our facility. We're currently identifying the equipment with the goal of, in the next 30 to 60 days, to pull the trigger on the first equipment going into the Marion facility specifically for rare earth oxide production. We have arrangements for end-of-life magnet feedstock with large Detroit Automotive, and multiple wind turbine companies such as EDP Renewables, as well as power tool manufacturers, to recycle those rare earth oxides from end-of-life magnets. We are moving forward as we speak to procure that equipment and get producing. The margins on rare earth oxides are extremely attractive right now in the market, and we are pursuing it as aggressively as we possibly can.

Jesse Sobelson, Analyst

Great. Just one quick follow-up on the technology itself; this is more of a bigger picture thing. We talked about recycling and refining there, but there is a big push to start working with brine lithium. Is your technology equally applicable there as it is to the recycling side of the business?

Mark Jensen, Chairman and CEO

Absolutely. We've actually worked with two DLE companies today that operate in direct lithium extraction for the brines. We managed to simplify their flow sheets dramatically, removing six steps to achieve battery-grade materials. That's where Powered by ReElement comes in, right? That DLE segment will become predominantly a Powered by ReElement business for us, where they leverage our separation purification equipment in their facilities. We charge them a service fee for that, which dramatically reduces their production costs. Very excited about that.

Jesse Sobelson, Analyst

Thanks for the details! I appreciate you taking the time today. I'll let you guys take some more questions.

Mark Jensen, Chairman and CEO

Excellent. Great questions. I appreciate it.

Operator, Operator

Thank you. Our next question comes from the line of Heiko Ihle with H.C. Wainwright. Please proceed with your question.

Heiko Ihle, Analyst

Hey, there. Thanks for taking my questions. I assume you can hear me okay?

Mark Jensen, Chairman and CEO

Yes, I can. Good to hear from you.

Heiko Ihle, Analyst

Awesome, perfect. Hey, about the fairness opinion you talked about earlier—essentially 6x the value. Can you give us some input factors used to derive that value and perhaps a little more color on the fairness opinion?

Mark Jensen, Chairman and CEO

I wish I could. It was a fairness opinion that we did not pay for. It was conducted by the SPAC itself. We obviously provided them full data room access to the business, opportunities, and partnerships we have in place under American Metals, and they conducted that opinion without our involvement, which is as it should be. We don't have much detail around it. Just that we've seen the language that will be included in the S-4, which we hope to file once we complete the quarterly numbers for American Metals shortly.

Heiko Ihle, Analyst

Fair enough.

Mark Jensen, Chairman and CEO

If we get access to it, we will obviously put that out in an 8-K if we can.

Heiko Ihle, Analyst

Yes, I think you should. I believe it will make you look good if the numbers you're discussing come to fruition and if the input factors make sense.

Mark Jensen, Chairman and CEO

I will work with our lawyers. If we can, we will. I assume there will be language surrounding that in the S-4, but that's a lawyer question.

Heiko Ihle, Analyst

I'm not one of those either. Fair enough. So, through all this spin-offs and corporate M&A, can you walk us through item by item how much cash has actually come in the door and how much more you assume to get between now and the end of the year?

Mark Jensen, Chairman and CEO

Yes, I'll do my best. At ReElement, we have credit facilities we've been operating on, and we’ve received some revenues from customers such as our Japanese partner. The ReElement division is in talks with Patriotic Capital Funds about a raise between $10 million to $20 million, most of which is soft circled already at a significant premium to current prices. ReElement’s uniqueness, combining tax-exempt bonds or debt financing along with customer prepays could be the final capital needed for us, with the business turning to Powered by ReElement. The capital we are pursuing at ReElement would value the company at over five times the current market cap, and we have numerous Patriotic Capital Funds expressing their interest in investing in the company in this capital round. American Carbon division is set to develop our complex into a state-of-the-art facility at Wyoming County, and we are negotiating with a customer today for a large order with potential for prepayment. The credit facilities we've had on equipment leasing and the ability to draw additional capital based on that are significant. We have an extensive asset base that is relatively unleveraged at American Infrastructure, enough to expand to meet demands. A key point is, apart from getting the Wyoming setup, there isn't much need for major capital investments. Based on current market conditions, our approach is one of the very few mining companies in metallurgical carbon space being CapEx-light and focusing purely on cash flow.

Heiko Ihle, Analyst

That’s pretty comprehensive. Thank you very much.

Mark Jensen, Chairman and CEO

Awesome. Thank you.

Operator, Operator

Thank you. Our next question comes from Bobby Genovese with BG Capital Group. Please proceed with your question.

Bobby Genovese, Analyst

Thank you, Mark. Thanks for the time today. Just to follow-up on Michael's line of questioning. If you added up and I'm glad you have your accountant on the line too. Adding the value of the equipment, what you believe American Element's fairness of opinion is and other properties minus the debt, could you give the shareholders on this call a rough idea of that asset base and when the next audited financials will be available?

Mark Jensen, Chairman and CEO

I'll take a stab at it and if Kirk wants to interrupt me he can. Thanks for the question, Bobby. Our equipment doesn’t show up on our GAAP financials, but I would be happy to give anyone a tour of our operations. The assets, acquired during 363 bankruptcy sales long ago, do not show on our balance sheet. The replacement value of those assets would approximately be $300 million, considering new equipment we have acquired and the large setup at Wyoming County division. We have around $55 million counting the tax-exempt bond, which we still have significant cash under, along with $8 million on equipment leases that we actively oversee. So that's roughly $300 million in replacement value, with $170 million being the fairness opinion under American Metals. We believe the capital raising efforts at ReElement would value it at over five times the current market cap, leading to a total around $600 million minus the $50 million current liabilities. With about 80 million shares outstanding, those values suggest the assets are worth significantly more than current share price. We firmly believe all businesses can be unlocked for public access and that separations will manifest their unique merits for full visibility to our investors.

Bobby Genovese, Analyst

Thank you.

Mark Jensen, Chairman and CEO

Does that help? Is that clear enough or do you need further clarification?

Bobby Genovese, Analyst

No, I think that's it. I'm sure the rest of the shareholders are shocked with the asset base alone of the company, where the stock is trading. I think once the next research report comes out, clarity and your nextsets financials surface, it should reflect that undervaluation if shareholders wait until that point.

Mark Jensen, Chairman and CEO

Yes, absolutely. If you look at ReElement, we didn't anticipate generating revenues from Powered by ReElement this year. Yet, we're already bidding on several projects where revenue could arise quickly. The downturn in lithium prices is a huge opportunity since everyone realizes that our technology is the required solution. We are also signing leases with our mining customers to get them producing and working on projects expected to produce substantial revenue.

Operator, Operator

Thank you. Our next question comes from the line of Kyle Gallagher with Merrill Lynch. Please proceed with your question.

Kyle Gallagher, Analyst

Hey, Mark. Good to talk to you again. I want to continue down that path of revenues on the rare earth side. You mentioned you are through the qualification process with some customers and entering into contracts for purchases, correct? Is expanding the Noblesville location aimed at fulfilling orders and realizing revenue? Or is Noblesville only for qualification and handling will be through Marion?

Mark Jensen, Chairman and CEO

Good question, Kyle, and I appreciate it. Correct. We're expanding Noblesville due to the volume of materials we’re getting asked to test and because we’re receiving purchase orders from our customers. We are expanding that to deliver products faster to expand our revenue base. Noblesville will not serve as the focal point for revenue generation for us, as the big returns on capital will originate primarily from our Marion facility. However, considering how CapEx plays into lithium refinery and rare earth refinery models, most costs are directed toward separation purification, while a majority shares focus on the building and infrastructure. Our appeal in Marion today is that we have natural gas, water, and utilities installed, which are long lead time items for most facilities. We're finishing the roof in the coming weeks but that doesn’t hold us back from ordering equipment and that is where revenue generation will primarily happen. For the rare earth oxide line, we contemplate building a 2,000 metric ton a year production line with a frosty payback period post-startup of about two years—given average price, this could result in approximately $160 million in revenue in terms of profit margin. We’re the only domestic producer capable of producing dysprosium and terbium, which are in strong demand, alongside neodymium and praseodymium sourced from both ores and the magnet material. Revenue will unfold mainly through Powered by ReElement. As companies realize HydroMet hasn’t delivered, they seek us to design a compliant process that ultimately brings us near-term revenue.

Kyle Gallagher, Analyst

Can you provide information on purchase order sizes and how they are structured generally? Do they say, ‘hey, we’ll pay x per ton up to 1,000 tons’, or something of that nature?

Mark Jensen, Chairman and CEO

Good point! I would also clarify that we do expect the Marion facility to not come online until after 2024. However, we plan to begin producing products out of Noblesville soon. As we integrate preprocessing operations into Marion, there will be operational synergy that eventually feeds Noblesville in the meantime. We’re quickly building this out and will continue to coordinate with our operational teams to determine a precise timeline.

Kyle Gallagher, Analyst

Great! Thanks a lot, Mark. I’ll jump back into the queue.

Mark Jensen, Chairman and CEO

Excellent. Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Mark Sloan, a Private Investor. Please proceed with your question.

Mark Sloan, Private Investor

Thank you. How does American Metals back deal flow through to American Resources shareholders?

Mark Jensen, Chairman and CEO

American Metals is 100% owned by American Resources today. Once further down the S-4 path, we will distribute shares to our underlying investors, which will allow them to own a standout public company. The majority of what’s being held today is currently retained by American Resources.

Mark Sloan, Private Investor

What percentage do you expect to distribute to shareholders?

Mark Jensen, Chairman and CEO

Not sure yet, I don't believe the Board has finalized the amount as of now. I expect the determination will come up with the Board as we proceed, and then we’ll communicate how much will be distributed through public release and an 8-K.

Mark Sloan, Private Investor

What is the timeline on completing your 10-Q?

Mark Jensen, Chairman and CEO

We filed it today! Our audit chair was traveling overseas and was unable to sign the document. Unfortunately, we had to submit the notice until his return.

Mark Sloan, Private Investor

Thank you for clarifying!

Mark Jensen, Chairman and CEO

Excellent. Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Keith Goodman with Maxim Group. Please proceed with your question.

Keith Goodman, Analyst

Hi, guys. Most of my questions are answered. I just had a question about the Patriotic Capital as you called it or the potential of raising some money from Patriotic Capital Funds. What will the capital be used for? Directly for ReElement?

Mark Jensen, Chairman and CEO

Yes, that capital will be for private efforts. We’re not diluting investors at the American Resources level. If we pursue capital, it would be through subsidiary financing. The Patriotic Capital funds have overall expressed interest in structuring that would value the business substantially higher than present. We are in negotiations for this presently. Patriotic Capital Funds are specifically intent on supporting national security supply chains being fostered along that route. This capital will directly benefit ReElement, helping get the Marion facility equipment and serving as extra working capital to balance the funding needed for the pending spin-off.

Keith Goodman, Analyst

So right now you're conducting testing in Noblesville, and shipping. At some point, you'll ship and charge for testing, right? If I am not mistaken, you indicated that you produce in Noblesville, but you aspire to get everything running through Marion.

Mark Jensen, Chairman and CEO

Yes. We're still building out. So when we initially developed the concept, we transitioned towards the Powered by ReElement offering, which we believe holds immense promise. Why replicate flow sheets within different facilities when we can supplement? Through this approach, we lower our CapEx requirement, and ultimately, minimize the number of people we need to hire. If others are already constructing front-end processing from lithium spodumene, rare earth ores or oxides, we can assist with flow sheets and charge a service fee to facilitate their operations within their facility. The focus is on building these out, generating revenue, while not incurring significant CapEx risks ourselves. We’ve never charged for testing, now we are in a financially favorable position, and a collaboration with partners allows us to monetize our lab and Noblesville facility for profitable cash flow.

Keith Goodman, Analyst

Do you have confirmations from partners and customers that this is on their radar?

Mark Jensen, Chairman and CEO

Yes, indeed. That’s the great part. We're aiding companies in their transitions and they approach us knowing we can save them money. The strategies ranks highly unobtainable and their partners respect that. Everyone is looking to us – we're excited about these positions and the technology that comes with it. It's a proving point for us.

Keith Goodman, Analyst

Does this not hinge on the political party outcome at elections this November?

Mark Jensen, Chairman and CEO

No, severely. We’re based on commercial viability outside of reliance on any political developments—the IRAs or changes therein don’t alter our future prospects. It’s vital that we develop a robust national security supply chain, which will remain paramount regardless of administration. Every party conveys importance on this front.

Keith Goodman, Analyst

This is not just about electric vehicles and that demand but also essential for defense equipment?

Mark Jensen, Chairman and CEO

Absolutely. We stress energy storage which relies heavily on rare earth extraction; restoring balance through this aspect is significantly pivotal. Modernizing our grid requires substantial energy storage. The growth of energy storage is significant and critical. We are likely the only player in the space that can recycle LFP batteries profitably, even in the current environment.

Keith Goodman, Analyst

Thank you for that clarification! That’s all for me.

Mark Jensen, Chairman and CEO

Excellent. Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Steven Segal with KBB Asset Management. Please proceed with your question.

Steven Segal, Analyst

Hi, Mark. Thanks for taking the call. You've explained ReElement extensively. I had one other question about it. Should we view ReElement as more of an asset-light venture? It seems like it would operate using your employees and going to different sites globally, licensing ReElement chemical processes while reaping returns; will there be upfront fees and or royalties for produced products?

Mark Jensen, Chairman and CEO

Yes. If asked two years ago when we first started commercializing ReElement Technology, we expressed ambitions about becoming the world's largest refinery for critical minerals. Nowadays, it’s evident we aim to move towards Powered by ReElement initiatives, minimizing the need to replicate flow sheets on site when we can supplement existing infrastructure. By doing this we tighten our CapEx burden, significantly reducing personnel recruitment. The focus is on the technologies we possess which allow others to build; therefore, our model is to deploy the uniqueness of our technologies and allow customers to handle CapEx costs while we supply through service fees, which will supplement to monetize our business efforts.

Steven Segal, Analyst

Are there any competing materials expected for Kentucky facility and Marion or will they focus on different capacities?

Mark Jensen, Chairman and CEO

Kentucky focuses on lithium spodumene, from a variety of partnerships, while our Marion facility prioritizes rare earth ores, magnets, and recycled battery materials. They’ll both produce lithium carbonate streams from different feedstocks, and we have significant contributions to Kentucky’s assets through tax-exempt bonds. The infrastructure we've built will facilitate these expansions efficiently and leverage our existing assets to minimize redevelopment costs.

Steven Segal, Analyst

Great! Thank you for your insights.

Mark Jensen, Chairman and CEO

Excellent. Thank you, Steve.

Operator, Operator

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Mark for closing comments.

Mark Jensen, Chairman and CEO

Excellent. I want to thank all of you for joining today. I understand we have many moving parts within the business. We hope to streamline and clarify the objectives of unlocking value through the separation of the divisions. Ultimately, we are very appreciative of the efforts from our teams and external partners that have positioned our assets to unlock value and drive near-term revenue generation. We're dedicated to creating business models that can thrive in any economic environment, regardless of recessions. Please stay tuned as we continue to keep you updated as we work towards these objectives. Thank you all for being here today.

Operator, Operator

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