Greetings. And welcome to the REX American Resources Fiscal 2022 Fourth Quarter Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Mr. Doug Bruggeman, Chief Financial Officer. Please go ahead.

Good morning. And thank you for joining REX American Resources’ fiscal 2022 fourth quarter conference call. We will get to our presentation and comments momentarily, as well as your question-and-answer session, but first I will review the safe harbor disclosure. In addition to historical facts or statements of current conditions, today’s conference call contains forward-looking statements that involve risks and uncertainties within the meanings of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company’s current expectations and beliefs, but are not keys of future performance, as such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today’s news announcement and the company’s filings with the Securities and Exchange Commission, including the company’s reports on Form 10-K and 10-Q. REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I have joining me on the call today, Stuart Rose, Executive Chairman of the Board; and Zafar Rizvi, Chief Executive Officer. I will first review our financial performance and then turn the call over to Stuart for his comments. Sales for the fourth quarter declined by 5.6% as we experienced lower volume for ethanol and distillers grain. Ethanol sales for the quarter were based upon 63.7 million gallons this year versus 69.9 million last year, as we experienced some weather-related disruptions to their operations during the quarter. We reported gross profit of $14.9 million for this year’s fourth quarter versus a gross profit of $38.8 million in the prior year. In the current year quarter, we experienced lower ethanol pricing, as well as higher corn and natural gas pricing. Corn cost increased by 22% and natural gas pricing increased by 20 -- by 12% for this year’s quarter compared to the prior year,…

Thank you, Doug. Going forward, ethanol currently is running at roughly breakeven year-to-date. Zafar in his section will discuss that much further. Our cash is approximately $280 million at the end of the quarter -- at the end of the year consolidated and we have our uses of cash -- the cash over the next couple of years include carbon capture, which again, Zafar will discuss. Investing the cash go right now -- right now we are investing the cash and interest-bearing accounts, mostly treasuries and money market accounts and the banks that we are dealing with, and this is to the best of our knowledge, are very, very secure. We consider them top quality banks and we feel very comfortable that our cash is invested in a very, very good way. We are earning decent interest on that cash versus many companies that have debt. We do not have much -- we have virtually no debt. So that’s in our opinion it’s good a way to invest our cash at this time. We will buy back on dips. We have some plans for expansion of our ethanol plants, which Zafar Rizvi will talk about and we are always looking for additional ethanol plants to purchase at this time. We have nothing imminent, but if something were to come up, very good ethanol plant we would certainly look at it. I will now turn the call over to Zafar Rizvi, our Chief Executive Officer. Thank you.

Thank you, Stuart. Good morning, everyone. As I mentioned in our previous quarterly call, we continue to face challenging operations. Operating environment throughout of the year due to a number of factors that has affected the way the availability of corn created a strong basis, as Doug just mentioned, particularly at the Marian, South Korea [ph] location. And in addition, ethanol production is greater than the demand, which continue to negatively affect the crush margin. The high price of the natural gas during the last quarter and year also negatively affected the profit margin and positive news, we have seen natural gas price drop considerably recently. And according to EIA, yesterday’s weekly report shows ethanol production dropped under 1 million barrels a day, 10 weeks low retreated 17,000 barrels a day week-to-week. But the corn basis are still strong and expected to get positive for the harvest. We are pleased with the availability of corn in the Gibson City, Illinois. However, because of growth in domestic export from the state, the corn basis are beginning to strength. We have seen weakness in the price of corn oil and DDG, but they are -- these are still selling above the cost. Despite drought, the recent slowdown in export, the decline in the crush margin and other economic headwinds, we continue to source corn at reasonable price and don’t face any major logistical issue or shortage of corn at this early stage of the first quarter 2023. We expect to breakeven or slightly profitable at this time, as Stuart just mentioned. Let me give you some progress of our carbon sequestration project. These are the bullet points. The university successfully drilled a test well to a total depth of around 7,100 feet, in which almost 2,000 feet our Mount Simon sandstone was…

Thanks, Zafar. In conclusion, we have outperformed most of the industry competitors again. We have done this, again, we believe we have the best plants, great locations, great potential in carbon capture, which we think will be our future. And most importantly and the biggest difference between us and the rest of the industry, as Zafar mentioned, is our people. We feel we have the best people in the industry, and in the end, that’s what separates us from the competition and a lot of competition can have hopes and dreams, but if you don’t have good people to implement them, they just tend to never happen. We have proven in the past that we have good people and can run very, very good ethanol plants and we plan and hope to do that in carbon capture and we look at that as our future. I will now leave the call open to questions.

Thank you. [Operator Instructions] Our first question comes from Jordan Levy with Truist Securities. Please proceed.

Good morning, Stuart…

Hi, Jordan.

…Zafar and Doug. And…

Thanks.

…nice quarter against another challenging backdrop, I think, that’s worth recognizing for sure. Maybe to start out, you mentioned a plan for expanding One Earth’s capacity. Certainly seems like CCUS is moving forward in some of the initiatives this year. Maybe if you could just give us any commentary you might have around capital plans for 2023 and what we should expect there?

Zafar?

Jordan, we have -- as I said, we plan to expand to $175 million. We are in the process of evaluating all the cost and the return on investment. We hope to have all of those disclosed at the June our quarterly call other at the shareholders meeting that what exactly total cash will take to or the ethanol facility expansion and the carbon sequestration and we will have those numbers at that time.

And presumably would the expansion be throughout the course of this year?

Yes. Exactly. I think we have already had major evaluation has done, we are putting the financial models and we are looking all of those information and see what’s the return on investment. As I mentioned, that with the expansion from $150 million to if we go to $175 million and that’s about $25 million more ethanol production and if we look at the benefit of 45Z or if we are able to achieve all those carbon intensity, which we are working on carbon sequestration, and as I was -- what had mentioned, that a couple of years, even before the 45Z, we were trying to make sure that we reduce our carbon intensity. So we -- all of those projects are really coming out to be great benefit for us moving forward. So it looks like we are trying to evaluate all that return on investment and putting the packet together, and hopefully, we will have by that. That’s what it leads to saying spend $275 million, we could have considered to expand $200 million, but we want to make sure we do not create deficit of corn in that area.

Great. Thanks for that. And Zafar, I appreciate all the comments and updates you gave on carbon capture, maybe just to back up and look at this on a high level. Can you just lay out for us -- I know you mentioned, there are some targets for the end of the year moving into 2024. Can you just sort of lay out for us where you expect to be exiting 2023? What will be completed and what you expect to kind of be working on at the time?

I think the most of our items, as I mentioned that, we have ordered all the long lead items, equipment, some of those equipment takes as long -- as time leading is to year and a half and so we have taken out all those equipment. And also, as I mentioned, that we will expect to have our modular unit, which will be compressor facility will be delivered by the end of this year and then we will have -- construction will start around that modular unit because that will take also at the six months to seven months or longer, because there’s a lot of pipes that need to be connected, electric, building needs to be built around it. So the -- and so our goal is to have this -- to finish all this project by the end of 2024. Certainly, that’s our goal and it can happen some other uncertain things, which we do not come out and delay their project, but that’s what our goal is by the end of 2023.

Jordan, one other thing you should know and that people are -- a lot of people are announcing CO2 projects in the ethanol industry. But all they are really doing is tapping into pipelines and they are not getting the bulk of the economic benefits. The economic benefits are up to for the years 2026, 2027 and 2028, $0.5 a gallon. We hope that -- we expect to have 175 million gallon plant. So even if we get half of that, whatever we receive we will receive at all, whereas most of these companies happen into pipelines are dependent on the pipelines being built. They are announcing that they are doing CO2 capture, but they are really not doing their own CO2 capture. We are doing our own. We have been doing this, as Zafar mentioned, for four years and this is our project. This is our shareholders’ project. It’s not something where we have to share the bulk of the revenues with the pipeline company. And the pipeline company, of course, then has a captive and has the ability and they will take a good percentage of the profits. In our case, all profits come to our shareholders, and again, we are a small company, 18 million shares, but we think it can be very, very significant. That’s our plan and that’s what we hope and expect.

Exactly. Yes. That’s the major difference between us and others. So -- and also, I think, as Stuart mentioned, we were really trying to look at it four years ago when there was no 45Z at that time. 45Q was $50, now its $85. So all these benefits are really coming to see some productive.

They will accrue to our shareholders as Zafar is saying exactly.

Yeah.

I think that’s great commentary. I really appreciate it. I will leave it at that. Thanks.

Thanks, Jordan.

Our next question comes from Chris Sakai with Singular Research. Please proceed.

Hi. Good morning. Can you talk about…

Good morning.

… where you see the countries of largest export for 2023?

Export of ethanol, you mean?

Yes.

Okay. The Canada has exported -- imported 502 million gallons and I think -- and South Korea 156 million, Netherlands 99 million, total export for the -- for 2020 was 1.3 billion gallons, compared to 2021 was 1.2 billion gallons and that was 9% higher than 2021.

Okay. Thanks. Are you seeing any increased cost in your -- in rail due to all the recent train derailments?

Not really. I think the railroad always increase their rates, they basically it has monopoly on that track on the direction. So there’s really always increase their rates. But recently we have not seen it due to this situation, which is derailed and increase in the rate.

Okay. Thanks. Can you talk about the permitting process so far for the CCS?

I am sorry. Could you repeat your question, please?

How is the permitting processing -- process going?

The permitting process, we have submitted the permit, which all the requirements which they requested. We completed all the documents. Since that time, they have couple of questions, which we answered them and we -- they confirmed that they have received all the documents and it is under review. So from there, we cannot control, it depends on the government agency, how long they were going to take. But we expect that we should receive the permit sooner than anybody else, because we already have done previously, our test well and they know those area and we applied the test well permit previously and we received at that time. So we hope that we will receive sooner and we -- now rest is really depend on the agency.

Okay. Great. Thanks for your answers.

Thank you.

Our next question comes from Graham Price with Raymond James. Please proceed.

Hi. Thanks for taking the questions. First off, I was just wondering about your thoughts around the M&A landscape as it relates to producing assets. How valuations are looking versus a year or two ago?

We haven’t seen anything that I -- that’s anything up for sale to be honest, so I can’t tell you how valuations are. But I would assume that they up -- significant people would want significantly more for their plants than they did a year or two ago. For no other reason, everyone has -- had some type of carbon cap -- every public company leads to have some type of carbon capture plans and so they think their companies are worth more. Our contention is that the pipeline companies that they are dealing with will end up either; first of all, we think they will be delayed; second of all, we think that they will not contribute to the bottomline what some of these companies think. But in the meantime, they are valuing their companies more than they did a year or two ago, for sure, because of the opportunity, because of the legislation that just passed that, Zafar mentioned, we now can get up to $1 a gallon for 45Z, $85 a ton for 45Q, that’s a lot of money to be distributed to different people. In our case, we hope to keep the bulk of it.

Okay. Got it. Understood. And then, for my follow-up, I had a more macro policy question. So the EPA recently proposed allowing year round E15 blending in the Midwest. Just wondering, do you think this will happen and does that plan go far enough in your opinion?

Zafar, do you want to answer?

Yeah. It’s hard to say. I think the different -- as you can see, the different states are trying to implement and to -- that’s -- in Iowa and other location -- several other states are trying to all year around and they applied for the exemption from the EPA. I hope it’s all year around E15, because if it’s not all year around, it’s discourage the gas station to have six months -- eight months or nine months in a year and then they have to discontinue and then start over. So that’s what we hope and -- but we cannot predict what Congress or any EPA will probably will do that. There is already a legislation trying to introduce in Congress to allow all year around, and hopefully, that happened.

Got it. That’s clear. Thank you very much. I will pass it on.

Thank you.

Mr. Rose, there are no further questions at this time.

Okay. Well, we thank everyone for listening and we look forward to talking after the end of this quarter and talking to everyone again after the end of this quarter. Thank you. Bye.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day everyone.