Greetings and welcome to the American Resources Corporation First Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark LaVerghetta, Vice President of 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 first quarter of 2024 conference call and business update. We always welcome these opportunities to provide an update on our business and discuss our accomplishments we've made over the past several months and how we are uniquely positioned within the markets that we serve for our American carbon, our American metals and ReElement Technologies division. Also on the call today with me is Mark Jensen, our Chairman and CEO, Kirk Taylor, our Chief Financial Officer, and Tom Sauve, our President. We'll provide some prepared remarks today, and then we'll get into some Q&A at the end for that part of the call. First, before we start, 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 risks, uncertainties, and other factors which could cause actual results to differ materially from the results discussed in the forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors, uncertainties, and other cautionary statements which are laid out in our press releases and SEC filings. We also do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Lastly, for anyone wanting to ask any questions today, I believe you'll need to dial in by phone to get into the queue. We're also going to slightly modify the cadence of the call today, because it's been just about seven weeks since our last call and update. With that, I would like to first address and recognize our Chief Financial Officer, Kirk Taylor’s efforts in…

Thanks, Mark. And thank you all for joining. I'm going to keep my remarks relatively short today, but feel free to ask any questions as we've just heard what we said and we try to be as transparent as we can with our public communication. From a corporate level, I couldn't be more pleased with the positioning of our various divisions and the efforts that our team is putting forth in this transitionary period of time as you recall our strategic committee from our board headset a game plan of spinning off the various divisions. We accomplished that with our Nova Stare interest which all shareholders should have those shares in their account. If they do not, check with your broker. We understand that there could be some short interest out there that is still holding shares that haven't been delivered to certain accounts. It takes a lot of effort to prepare these positions as stand-alone entities, setting up the agreements, setting up the positioning of these assets to be stand-alone companies and the management teams of them. So we're excited about the position of where we're at and the efforts that our team is taking forth to accomplish this in short order. American Carbon, we've announced our record date and our distribution date. The nice thing about American Carbon, we have a phenomenal CEO in place of Charles Thompson, born and raised in Pikeville, Kentucky, in the heart of our mining assets, which is where American Carbon really is a permit holder. So, spinning off those permits to be in a position to operate very lean and efficient is a very, puts it in a very strong position with the equipment that was then leased to it from American Resources, makes it a very streamlined operation, as well as…

Thank you. And at this time, we'll conduct our question-and-answer session. [Operator Instructions] Our first question comes from Heiko Ihle with H.C. Wainwright. Please, do your question.

Hi, Mark. Thanks for taking my questions. I assume you can hear me okay?

Yep, I can. How are you doing, Heiko?

Hey, American Carbon at the Wyoming County Coal Project there. You've got this $45 million tax exempt bond that funds some of your expenditures. Any idea of how much of these funds have been spent?

Yes, so roughly around $20 million of them have been spent to-date. And so that's buying the equipment, developing the property, positioning the prep plant, securing additional components to expand that prep plant. So we have quite a bit of liquidity still on that project.

Okay. And conceptually, how should we expect the spending of the other $25 million?

Yes, so here in the next few months, finishing the development of it and then putting the mine into production. So our goal, and I'm just being transparent, I mean, Wyoming is a different beast with the taxes on bond it's focused in getting that in production as soon as possible working through some nuances around the permits and some new regulations that came in around permits of salamanders, which is a new thing for us. The -- in the streams around there, which we don't have, so it's a good thing for us. But Wyoming is focused on going into production as soon as possible. We've been focusing on getting American Carbons spun out before we ramp up the balance of the carbon operation. So in the meantime, we've been doing a lot of development and cost reductions, reducing bonds outstanding, positioning the assets, focusing on the most highest value assets as we bring these back on post-spin out.

Fair enough. Speaking of spin-off, great lead over to my next question. Any idea what the cash costs for the ReElement technologies in the American Carbon spin are going to be? In other words, how much of a check do you have to write for legal expenses, consultants, I have no idea, all the people that got their hands out?

That's a good question. We try to reduce those expenses. We're a pretty experienced team. We have great lawyers that work for us. We have great auditors that work for us. We had to push back the American Carbon distribution, because we do have to do some audit work on that because of the B.F. Borger situations, which we are evaluating options there of what we do from a damages perspective. To make sure we protect our shareholders in the best way. But we don't think it's going to be overly expensive. I mean, we work with our transfer agents. We work with the different exchanges and/or the relisting of these companies if they do spin out in the private environment. But the -- it's not an overly expensive process. There's just a lot of boxes you've got to check. And so it's working through the nuances of that. We've obviously just did it with Novusterra so we're very familiar with the process and we're working through that as we speak with American Carbon and working with our transfer agent on that, as well as the ReElement Technologies Division.

Well, you wouldn't be willing or able to give me a number?

I mean, sub a quarter of a $1 million.

Oh, okay. Got it. Okay perfect. That makes sense, go ahead?

Yes, I would say sub-$1 million. I mean, so there's a little bit more that has to go into it with the new audit work, but other than that, it's a pretty low-cost process.

Oh, more in my head, I had a number that was a multiple of that. So that's actually very helpful and quite reassuring. And with that, I'll get back in queue. Thank you so much.

Yes, absolutely. And well, I'll say that one add on to that, Heiko is that, I mean, we're equity owners. The management team, the majority, the executives of the company are some of the largest owners of the company or are the largest owners of the company. So we look at it as it's our own money and that's how we treat this business from day one is that we try to protect it for all of our shareholders so we all win together. So we don't like to pay fees if you don't have to, but we like to do things the right way as well and make sure we're following, I mean, like with this region audit stuff, bringing in the new auditor, I mean, just a phenomenal group to work with, extremely professional. And so we're excited about that change, but excited about making sure that when we're spending money, it's being spent in a way that tries to maximize the value for all of us.

Thank you. [Operator Instructions] And our next question comes from [Mark Stone] (ph). Please go ahead with your question.

I'd like to inquire about the trading status of the Novusterra stock that was dividended out a little over two months ago. I have no evidence. The shares were placed in my account right away, but I have no evidence, if any actual trading symbol or that there's actually any trading available? Can you comment on that?

Yes. As of now, there is not. So it's not a public company. It's a private company. But you are an owner of that company. The company is as filed on S1 and is now responding to those comments on the S1 with the goal of listing on the public environment. Obviously, there's a separate management team in place there, separate board, and they're working through that process. We're excited about the developments on the operational level of Novusterra with the Army and Air Force contracts through Canai Defense and the development of the technology. But they're working through the public listing process. And I anticipate here in the next few months them refiling the comments to their S1 to expeditiously pursue the public listing.

So can you comment on what that process is going to be for American Carbon and ReElements? Will those be traded right away after the dividend or some others can go happen?

We are working on that. So we're working on -- working with different exchanges, working on getting the financials re-audited from the B.F. Borgers situation. I can't give 100% clarity on it, but the intent is for them to be publicly listed.

Okay, so is it actually prudent to make a dividend prior to the actual availability to go immediately into a trading status?

Yes, I believe so because I believe it maximizes the value of the companies. I mean, at the end of the day, it’s -- the focus is on maximizing shareholder value and that puts the businesses in the best operational position for success. So we do believe it does and the board does.

I guess I'm really asking because of the Novusterra situation. So I guess what I don't want to see is significant value of American Resources is spun out and now those kind of stocks are kind of owned, but not traded that has implications for the liquidity of the stockholders of American resources?

It does, well I mean American resources obviously is still on your stock there so you have liquidity within your position that you have. The board believes it's an investment to separate these companies and do it as expeditiously as we can. So you still have liquidity, but you also own interest in the individual entities as well that are there. I think the Novusterra situation was a great situation for our investors. We own something that was a non-core asset. We weren't running the business. It was an asset held. We feel that it puts the individual shareholders in a position to make a decision on what they want to do with it once it's listed. But I believe also it simplifies the story of what American Resources is doing. So as we distribute these underlying divisions, it simplifies the public markets for American resources, which should drive value. We believe, post the distribution, American resources as well, and are valued still based on where it's going as a business and what it has in place. And the royalties that are received back from American Carbon as well, which we believe will generate significant value for the American resources shareholders. But we believe separating these businesses streamlines the businesses positions and businesses for growth. And then also will in the short to medium to long-term will provide that additional liquidity of the individual security that you held. But obviously right now we don't believe -- we're getting value for an American Resource level. We don't believe we're anybody's valuing the underlying securities of ReElement. We don't believe they're valuing the assets that American Resources owns on the equipment side. We don't believe it's valuing the permits on the carbon side. And so together, clearly there's a disconnect of what we believe the fundamental value is and the asset value of the businesses versus what the market is. And so the board made the determination that we believe we need to simplify the messaging and simplify the corporate structure of the individual entities.

Well, my comment on the liquidity was from the perspective of the shareholder that if we look forward to say American carbon and ReElement, if those basically now constitute a significant portion of the value of American resource of stock, when they go ex-dividend, then one should anticipate a significant reduction in the stock price of American resources based on some of the value being dividended out. And if that now all that significant value now is not actually liquid, that has now reduced liquidity of the shareholders. So that is what my comment was about. And I guess I have a concern that you be more transparent with regard to the future stock dividends split off, then has been the case in Novusterra.

Yes, I don't know how we could be any more transparent, because we shared exactly what we're doing with the investors, but -- and I'm not saying that the investors won't be, that the companies won't be public post-distribution. I can't give you clarity on that today as we're working through the audits given the B.F. Borgers situation and working with the different exchanges based on that. But I don't also believe that the American Resources will, that those, that they should trade down. I believe that the fundamental value of the American Resources, the royalties it's going to get off the carbon division and the assets that it holds in the direction of American Resources as a whole, even post-distribution, well, I think it's trading at a discount to the cops within the marketplace. And ultimately, our goal with Carbon and ReElement is for them to be public companies. And so we're working expeditiously to that as no different than Novusterra is. But from day one, we said that we're distributing Novusterra as a privately held company. It didn't have any effect on the stock price post distribution, because it was not being reflected within the market value of the company.

Thank you. And our next question comes from Mike Niehuser with Roth Capital Partners. Please, state your question.

Hi, Mark. Can you hear me okay?

Yes. Can you hear me?

Great. How soon or what would -- how soon do you think we'll see some meaningful production coming out of Marion? Because I'm imagining that the way things are going and how quickly this can be deployed, at least on paper, could be at a substantial step up by the end of the year, but I don't want to get ahead of myself. Can you give any thoughts about scale, rate, commencement dates, commissioning, anything as it's being fleshed out on Marion?

Yes. So, we just got a certificate of occupancy. We have to install fire suppression up there, but I will say that we are continuing expanding our capacity also in Noblesville in the meantime. And so the way that we look at it as Noblesville, we will continue to expand our refining capacity there. And the first step would probably be moving our pre-processing up to Marion and/or to our river property that we have to further expand production out of Noblesville. But the Marion crew, the team up there is doing an absolutely phenomenal job on the renovations on the development. We just got the industrial natural gas line installed, or it's being installed this week, started on last week, which enables the kilns to be fired and some of the pre-processing steps to be done very efficiently. But our goal is to have operations up and running there this year, within the calendar year, and but also furthermore, to continue to expand our production capacity in Noblesville to further handle the demand that we see and the qualifications that we're getting through with our customer base.

And I think that the technology's modular enough that it seems like you can just start replicating a noble fill size operation to meet demand or whatever the needs of the customers are, that's kind of the whole powered by ReElement thing, isn't it?

Yes, well, powered by ReElement is working with, offering the separation purification step to other industry partners, other recyclers out there that are shredding batteries, but they can't refine them and/or they can't maybe extract the nickel out of their process or they can't extract the cobalt or they can't extract the lithium out of their process. Or we can help streamline like a DLE process, direct lithium extraction. We can help streamline their flow sheets by offering it. That's really powered by ReElement as a partnership-based model with existing other, call them competitors, call them what you want. We view them as industry partners. But yes, I mean Marion, the first production line we have at Marion will be multiples above the current production line in Noblesville. Just because it makes sense to, there's demand for it. Feed stocks are flowing both on the ore side as well as the recycled products. And so Marion will be, production will be significantly larger in scale and scope. We've hired a phenomenal engineering firm, which we'll talk about here publicly very soon, that's helping us on our, call it a FEL2/FEL3 study, but it's really designing the equipment line, designing the production and sourcing the big volume equipment that we're currently in the midst of doing. And Jeff Peterson and Bill Smith on our team, who's just a phenomenal team member, doing a great job at that.

Is -- I was thinking, yes, I got it. I was thinking more just from the flexibility of the technology, how you'd be able to accommodate whatever kind of schedule you're doing at Marion to match demand and the feedstocks coming in. So I think that answers my question to some degree. But also my second question to follow-on is, you mentioned brines, lithium brines, and it seems like a lot of lithium projects, they have their own proprietary science experiment, you know, unique or approaches to trying to make their projects economic. And I'm kind of sensing that your technology could come in and displace a lot of that to simplify it and this is probably a direct kind of powered by a ReElement thing where you're actually able to unlock the economic potential of these various lithium deposits and operations. Is that fair?

Without a doubt. I mean, that's -- and you're right on the Marion side as well. I mean, obviously the ability to expand production, expand capacity, modularly scale it, modularly grow it to meet the demands. Especially, you're seeing a lot of talk on the rare earth element side. That's going to get really interesting really quickly. On the DLE side, we're working with a DLE company right now on the direct lithium extraction. A lot of these players can't get to battery grade. So they can get it to technical grade. They can get it to a 95% purity, a 97% purity. But they can't get to that 99.9% purity. So we can help them do that. We're working with a group today. They sent us a sample to ask us if we can help them. And they said within their flow sheet, our one step removes four steps of their process. And so we can help streamline not only their OpEx, significantly to make it affordable, but we can also get them to the purity that they need to get to, and we significantly reduce their CapEx and space required to do what we do. So that's, it's an exciting, I mean, we -- I'll be honest, we haven't looked a lot at Brines until recently, but it's really, really interesting to see where our technology flows in within that process to help them be more efficient and help their projects move faster.

Well, that's why it caught my eye, and the fact that you're now able to move beyond end-of-life products into ores just opens up the world to you. But it is exciting and there's only been a short time since the last call, but I'm looking forward to the next couple months, because it seems like you're going to have quite a few releases coming out. So I'll shut up and get off the call. Thanks a lot, Mark.

Yes. Well, Mike, appreciate you. Absolutely. We're from partnerships in Africa to developments here domestically to expansion and products that we're producing. There's going to be quite a bit of information flow and transparency that we continue to provide our investors and from a corporate level to an operational level, so we're super excited about that and appreciate you being…

Well your first mention of Canada too by the way kind of long overdue, but a real good positive sign of penetration, so I will be quiet. Thanks a lot Mark.

Yes, we love our Canadian partner. We just can't quite talk about it. Companies are sensitive about what you talk about just because they're also, a lot of these companies are doing financing or they're big, huge companies that are going through turmoil in the EV industry right now a little bit and just they're reshuffling and making their business inefficient. So they're sometimes a little sensitive about talking about it in the public markets, but they're phenomenal partners. I mean, we could be just -- we'll get soon in a position where we can start hopefully mentioning more of their names.

Thank you. And our next question comes from Keith Goodman with Maxim Group. Please state your question.

Hi, guys. I read a lot about different companies that are suggesting they could do refining, processing, lithium, cobalt, whatever it may be, the different elements. How do we know that their technologies are not, you know, life cycle as an example, not to disparage a potential competition, but they had some troubles. I mean, can they process end-to-life and you help pick up the pieces or explain to me why 2Q materials gets a lot of media coverage life cycle which turned out to have some trouble. But how do you differentiate from all of these potential competition or other companies in the industry that claim to be able to process stuff to end the life?

Keith, that's a great question. 95% of the recyclers in this industry don't recycle, they just shred stuff and produce a product that can be sold. They don't refine the battery or magna grade. And so the easiest way we've seen it from a customer perspective and why we're going through all these validations now is because people can come into our facility and they can watch us produce product. And that's been, I mean, and don't get me wrong, like I said, we're relatively early within this sector. I mean, especially on the refining side, the government hasn't awarded really any capital to any refining projects. Typically it's always been on the pre-processing or shredding side and stuff of that nature. But seeing is believing, and we're starting to get quite, I mean, we've had an immense amount of traffic. We have a huge company coming in tomorrow to see our facility again. And when people see us producing product out of there and see what we can do in the footprint that we're in, it opens their eyes, and all of a sudden they recognize it. We had one of the probably one of the more renowned rare earth guys in the space come by our facility about two months ago and since then he's introduced us to companies that are well north of $80 billion market caps that are looking for rare earth oxides. And he was skeptical until he saw it and so he came in he saw what we do and he walked out of this thing I'm going to introduce you every customer I know and so that's I mean the industry is going to see that though I mean it's going to take a little bit of time to flush out who can do what they say they can do and who's just talking their book. And the good thing about it with us is most of these companies that have come by said, the other companies wouldn't let us see it or we showed up and there was just a green field. With you guys, we get to see what you're doing. And we take pride in that. We give complete transparency to our customer base. Let us not only watch us run, but also watch their product being run.

Got it, got it, thank you. And then obviously you've -- a couple questions have come in as far as the spin-off and being public. Obviously, you can't answer on that, but do you have an expectation of if you get approval to be public on the ReElement side, what does the path look like to that? I mean, does it range just based upon what is the valuation? How do we determine what that valuation would be if and when and where to go public?

Yes, so I mean that's part of what we're also doing in this private financing of which that we're putting together, which we announced previously, is to set that valuation of ReElement. I mean, that's part of the complication is under the current market cap, values aren't being recognized. So we have to separate the companies and by doing that we can help, and I apologize I've got a little wind here, but we can help streamline businesses and set those valuations. So we're in the midst of working on that at ReElement, as well as American Carbon, but to set that initial valuation for the exchanges. But that's what the unequivocal goal is for them to be public, and that's where we believe American Carbon has made its value.

Okay. And then lastly, as long as you mentioned American Carbon, obviously you didn't do any revenue in American carbon this last quarter. It sounds like, to me, and correct me if I'm wrong, when you split up the entities, when it finally does become a standalone, maybe at that point we'll start to see production at American Carbon?

Yes. I mean, outside of Wyoming, 100% of our capital is being either gone to reduce cost structure of American Carbon for when we do bring it online or to develop ReElement. ReElement, we believe we're multiple of American Carbon and we're allocating our cash. That's the best way to nominate. Now, post-separation, that enables the companies to focus on the maximum value for those individual business and then we'll absolutely focus on ramping up carbon. And we're super excited about where the mines are set up to do that. Obviously, Wyoming's working on it.

Okay. All right. And obviously, just because you're splitting off American Carbon from the other entities doesn't prevent you from continuing to try to monetize it in the form of a sale? American Carbon, I mean.

That's correct. Yep, yep. American Carbon on the iron ore side. We're focused on man-made. We are always evaluating opportunities [Technical Difficulty] non-core to us. But we're going to make [Technical Difficulty] dump it [Technical Difficulty] partner relationships and those shared agreements between entities to recognize the value of all of it.

Okay. All right. Thank you very much.

Thank you. And our next question comes from [Tim Tesh] (ph). Please state your question.

Hey, Mark. Thanks to you and the team for getting so much done. Thank you for defining DLE for us. That was really good. Question for you on product, there's a spectrum from ore, brine, concentrate, can we say higher purity? We're looking at parts per million of 550 to 2,000, which indicates you have to really go through a lot of material. So the words I keep seeing in the press releases and so on is concentrate and pre-processing. So can you tell us how that happens? Like we have mine waste, which seems to be in some kind of liquid slurry type of situation versus all these things? I realize it's a spectrum, I guess, just some clarification on how you see it?

[Technical Difficulty] the lithium ores have about a 6% concentrate to them. The DOE is parts per million. And then they pre-process and concentrate for us to get it to the 1% to 2%. Then we take it over from there. The black mass, LSP black mass, has about a 3.5% lithium concentrate to it. LSP black mass obviously has lithium, cobalt, manganese, and nickel as well. In which nickel is about 20%, cobalt about 4.5%, and lithium at about 3%. And so each one of them have different concentrates and different percentages of concentrates. Mine waste is really hard. I mean, if Ramico is worth a $1 billion, if they have mines of rare earth and parts per million at $500, that's phenomenal. I mean, that's great. I love that value And I hope everybody gets that recognition value, because we are higher parts per million than they do. But it's hard to make money in coal waste when you're dealing in parts per million unless you can do byproduct economics and reduce your extraction costs. So we're not extracting it. We're extracting the carbon or from already extracted material and then concentrating that using our other technologies inside Texas Tech and Ohio University. But you have to look at the entire spectrum to see how do you design a process to actually make money on that? And that's what's, I mean, led by Jeff Peterson and [Eding] (ph), phenomenal guys that have been able to test all these products and then define the profitability of each one of these feedstocks for commercial enterprises for ourselves.

Great, thank you. That helps.

Excellent, thank you. Feel free to reach out if you ever got sort of the questions on that.

Thank you. And our next question comes from Michael Lary with TGI. Please, state your question.

Yes, hi, Mark. Thanks so much for, you know, filling us in on a bunch of, you know, moving parts that are going on. I know you guys must be, you know, doing a lot of work over there. I jumped off the Webex and onto the conference call, so I could ask the question. So you may have already answered this, but I'm going to ask it anyway. Can you unpack the recent headline about American Resources, ReElement Technologies is being approved and accepted by the member of the Defense Industrial Base Consortium and what that represents to the, you know, ReElement Technologies as a whole?

Yes. So we applied for it. We got accepted as part of the defense industrial base. We believe our technology solves major problems for national security. You can work with the DOE or you can work with the DOD. We very much like working with the DOD. I have two brothers that are in the military. The military desperately needs a product that we can produce. What that enables us to do is have access to contracts and bid on contracts for supplying these critical materials to that supply chain. So it's a good membership. It puts us in with other customers. We're testing products for defense contractors as we speak, from -- that are any from high heat applications for Zettonium or Niobium and some of these other products that we've been testing for and that puts us not only in conversations with the defense base, the national security, the DOD, but also the contractors and put this into visibility of showcasing what we really do and what we can do for them. And so that's, it's good to be in the same room as them to be able to offer those solutions to them for what they need.

Got it. Thanks. Appreciate it.

Yes, absolutely. Thank you.

Thank you. There are no further questions at this time. I'll hand the floor back to management for close remarks.

Well, one, thank you guys all for your great questions. Thank you guys for taking your time out of your day here on a Tuesday to listen to what we're doing. Please stay in touch, follow what we're doing on a daily basis. We as a team pride ourselves on being transparent and trying to maximize the transparency that we can offer our shareholders, but also create that value to unlock it for all the shareholders, including management, which are fully aligned with our shareholder base from an equity ownership position. We're super excited about where we're at. We're excited about the individual assets we own. We believe they need to be on a separated basis. We're putting our effort forth to accomplish that and to do it in a way that is creating liquidity for our investors as well. So we thank you all for your interest. Thank you for joining and excited about the future.

Thank you. And this concludes today's conference. All parties may disconnect. Have a good day.