Aqua Metals Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 7 speakers on the call.

Operator

Afternoon, and welcome to the Aqua Metals Second Quarter Financial Results Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. You can submit a question via the web at any time by typing them into the ask a question field. Please note that this conference is being recorded.

Operator

It's now my pleasure to turn the conference over to your host, Bob Myers at 11 ks Investor Relations. Bob, please begin.

Speaker 1

Thank you, operator, and thank you everybody for joining. Earlier today, Aqua Metals issued a press release providing an operational update and discussing financial results for the Q2 ended June 30, 2023. This release is available in the Investor Relations section on the company's website at aquometals.com. Hosting the call today are Steve Cotton, President and Chief Executive Officer and Judd Merrill, Chief Financial Officer. Before we begin, I would like to remind participants that during the call, Management will be making forward looking statements.

Speaker 1

Please refer to the company's report on Form 10 ks filed March 9th or Form 10 Q filed today, August 9 for a summary of the forward looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward looking statements. Aqua Metals cautions investors not to place undue reliance on any forward looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will be taking questions. Questions will be accepted over the phone from analysts and all other investors can submit a question And with that, I'd like to turn the call over to Steve Cotton, CEO of Aqua Metals.

Speaker 1

Steve, the call is yours.

Speaker 2

Thank you, Bob, and thank you to everyone who joined us today. Aqua Metals continues to make significant progress and has recently marked a number of major milestones Future of the company is coming into clearer focus. In recent months, we've advanced our core recycling technology, Announced innovative new partnerships, secured a multiyear diverse supply of raw materials, started inking our first global licensing deal and raised $25,000,000 in new operating capital. Though each of these milestones is substantial on its own and taken all together, we are painting What we believe is the 1st operational sustainable lithium battery recycling facility in the United States. Our patented and patent pending low carbon technology is now further demonstrated as both readily scalable and cost effective Many companies in this sector are currently building material preprocessing or shredding capacity And beginning to make black mass at scale.

Speaker 2

Aqua Metals is the first among peers to be taking black mass and actually recycling it into critical materials and high value products without using polluting furnaces or train loads of one time use chemicals. This achievement is the foundation of our future success and is attracting interest from industry leaders and strategic investors around the world. We are actively shaping that future by establishing key partnerships, supply agreements, customer relationships across the battery and EV value chain, Capitalize on our demonstrated and continuously operating pilot facility, and that begins with our own supply of materials. In the Q2, we contracted for an additional 3,000 tons of lithium battery black mass, which is the ground up mixture of valuable metals from spent batteries that we This is enough to supply our commercial scale operations and meet customer demand well into 2025. And we continue to build a diverse array of black mass processing partners to ensure a steady supply

Speaker 3

to fuel our growth And

Speaker 2

to create deeper partnering opportunities with these key suppliers. While metals prices continue to fluctuate, each ton of black mass is worth roughly $20,000 in the recycle So this confirmed supply represents an estimated $60,000,000 in revenue once we recycle it. With our proven capability to produce high purity metals from Black Mass, next is our growing ecosystem of off takers and customers for the critical minerals we deliver. During the quarter, we announced a first of kind partnership with 6 ks Energy to develop the next generation of sustainable materials for domestic battery manufacturing. We are executing on our non recurring engineering agreement to jointly develop and commercialize a low carbon battery metal conversion process.

Speaker 2

We are on schedule to complete that work this year and the company's plan to jointly pilot this conversion technology in Tennessee next year. More importantly though, 6 ks plans to use recycled materials from Aqua Metals to feed its 13,000 ton per year Pluscan manufacturing facility in Jackson, Tennessee, which uses their low carbon Unimelt plasma technology. We are currently finalizing that long term agreement Supply thousands of tons of high valuable critical minerals each year starting in 2025. This is a big deal And central to our commercial growth domestically, West Ham is a massive manufacturing facility that will produce cathode materials to power millions of electric vehicles, Many gigawatt hours per year and the ability to use our recycled content is essential to their operations. Meeting demand for Plustan alone We'll represent the lion's share of recycled material that we produce in Phase 1 of our commercial scale facility and will be key revenue driver as we ultimately scale Our own Tahoe Reno campus to 10,000 tons per year.

Speaker 2

But our growth as a company is not limited to recycling at More recently, we announced a new strategic investment in global partnership with South Korea based Yulho Materials. Yulho is already established as a leading black mass producer in South Korea and is currently building the nation's largest black mass processing facility. South Korea is one of the biggest global markets for critical battery minerals and is home to some of the world's leading electric vehicle and battery companies You already supply Yulho with both end of life batteries and manufacturing scrap to convert into black mass. Yulho Materials has made a $5,000,000 equity investment to help accelerate our commercial growth in the U. S, underscoring their confidence in Aqua Metals' transformative technology and demonstrated results at our pilot scale facility.

Speaker 2

That in itself is great news. But in addition, Newho Will be our first licensing agreement for our AquaRefining technology for use in their own facilities in South Korea. This is a realization of our strategy for future global expansion and will deliver immense benefits for our company and for all of our shareholders. We are negotiating final terms and expect the initial licensing agreement to cover up to 100,000 tons of material processed each year in South Korea. At an average value of $20,000 a ton, that represents a $2,000,000,000 market opportunity annually that the companies will share in.

Speaker 2

We expect Yuho will commence with their 1st Aqua Refinery in South Korea in 2024 2025 and they plan to embed part of their technical team with Aqua Metals to accelerate the commissioning of their own facility. With their growing partnerships in global EV and battery Together, further expansion in Asia and the European Union as those markets continue to build out global battery EV manufacturing hubs To meet the rapid demand for electrification of the transportation sector. With our innovative recycling process proven at scale and an We're securing the funding need for our accelerating growth. In addition to the $5,000,000 investment from Yulho last month, We completed a public offering which raised an additional $20,000,000 in operating capital for the company. This offering was quickly oversubscribed, demonstrating the confidence expressed by investors in our fundamentals and our strategy for Aqua Metals growth going forward.

Speaker 2

First, this capital will be used in part to continue building our 1st commercial scale facility and 5 Acre Recycling Campus right here in Tahoe Reno, a short distance from our innovation center. 2nd, this capital is also a necessary component of other non dilutive funding sources that Aqua Metals is pursuing. As we have previously discussed, Aqua Bells is applying for a loan with very favorable terms guaranteed by the USDA. And one of the requirements of these types of loans is necessary capital on hand, which we now have. And similarly, Many of the grant and loan application programs managed by the Department of Energy and Federal Agencies would also have cost share and capital requirements.

Speaker 2

By raising these funds today, we not only get necessary capital for equipment and operations, but we are also able to access larger funding opportunities in the future, even including traditional debt financing. Our company now has a more robust balance sheet, cash position and overall value And we are confident this makes Aqua Metals an even stronger company going forward. In short, we've made tremendous progress in a short period of time. With the necessary capital in hand to reach commercial scale, new innovative partnerships that span the globe and a growing list of industry first We believe there is no stopping our vision of transforming the critical minerals and battery materials industry. In the coming months and the remainder of 2023, you can expect Aqua Metals to continue to make strides, including and not limited to Finalizing a multi year supply agreement with 6 ks and a G4, their Plus TAM facility, signing the first licensing deal with Yulho for AquaRefining Technology in South Korea, generating initial revenues from sales of recycled materials at our pilot facility, Providing updates on Department of Energy Grant and USDA Loan Funding Applications and we will continue to advance construction and commissioning of Phase 1 At our new commercial scale facility, the plans to be operational by mid-twenty 24 and reach our target of 3,000 ton per year run rate by the end of 2024.

Speaker 2

The future of Aqua Metals as a global leader in sustainable battery recycling is coming into clear focus, and we expect to Finish 2023 as a commercial company selling the valuable battery minerals that we recover. We are solving difficult challenges in building a truly sustainable Energy storage industry that is destined to become as large as oil and gas and ultimately eclipse it as electrification and decarbonization take hold and capitalizing on our unique opportunities to pass our peers before they are even up and running. I look forward to sharing Further updates with you all soon, and I'll turn it over to Chief Financial Officer, Judd Merrill to discuss the results for the Q2.

Speaker 4

Thanks, Steve. Let me start my comments with our balance sheet. As of June 30, 2023, we had total assets of $22,000,000 And working capital of $4,000,000 We ended the quarter with total cash of approximately 6,200,000 On July 21, 2023, we completed a public offering of approximately 18,000,000 shares resulting in 20,000,000 In addition to the capital investment, the company entered into an agreement to execute a license agreement with Youlehole. Yulehold invested $5,000,000 into Aqua Metals and that money was received last week. Cash on hand and cash received from these transactions Total is approximately $30,000,000 of cash available to the company to fortify our balance sheet, enabling the company to fund and pursue debt For the first phase of development of our 10,000 ton per year campus facility, Also changes on the balance sheet include a reduction in both the lease receivable assets and the building purchase deposit liability.

Speaker 4

Both of these went away as we completed the sale of the 2,500 Peru asset, which netted approximately $6,000,000 after paying off the $6,000,000 bridge note with Alvin Morrison. There are no other significant changes to our balance sheet since our last quarterly report, so I'll move to the income statement. In Q2, we were focused on advancing and executing on our operations at our pilot facility. The costs related to operating this facility were approximately $1,500,000 for the quarter. Although no revenues were Recognize during the quarter, we did record modest service fees from our development agreement with 6 ks and those fees are recorded in other income.

Speaker 4

Research and development costs were consistent compared to the quarter ended June 30, 2022. Included in R and D expenses are costs related to our agreement with 6 Okay. General and administrative expenses increased approximately 19% for the quarter ended June 30, 2023, Compared to the quarter ended June 30, 2022, this was in line with expectations and guidance. Non cash Charges included in G and A, includes dotcom, were approximately 600,000 For the Q2 2023, we had an operating loss of $4,900,000 compared to an operating loss $4,000,000 for the same period in 2022. Our net loss for the quarter ended June 30, 2023 was $4,800,000 or a negative 0.06 dollars per basic and diluted share compared to a net loss of $3,200,000 or a negative $0.04 per basic and diluted Moving to the cash flow statement.

Speaker 4

Cash provided by Operating activities for the 6 months ended June 30, 2023 was $5,500,000 and includes Approximately $12,300,000 cash received related to our lease receivable offset by operating expenses. Net cash used in investing activities for the quarter was $5,500,000 This consisted mainly of $4,300,000 Net cash used in financing activities was $800,000 for the quarter. This consisted of $2,800,000 net proceeds from the sale of Aqua Metals shares pursuant to the market offering And $2,900,000 in proceeds from the loan agreement secured with Summit Investment, offset by 6,000,000 We have bolstered our balance sheet and have managed our operations responsibly. When we include our cash balance And $25,000,000 from the capital raised in the direct investment by UHOLD that we completed subsequent to quarter end, We believe that we have sufficient capital to fund our proposed operating plans through 2024. This would include the commencement of the Phase 1 build out of our recently acquired 5 Acre Recycling Campus at the Tri Center.

Speaker 4

And with that, that concludes my remarks on the financials. I will now turn it back over to the moderator for Q and A.

Operator

Thank you. We will now be conducting a question and answer session. As a question via the webcast, please type it into the ask a question feature on the left side of your screen. One moment please while we poll for questions. Our first question today is coming from Sameer Joshi from H.

Operator

C. Wainwright. Your line is now live.

Speaker 3

Hey Steve, hey Jeff, thanks for taking my questions.

Operator

It's for

Speaker 3

the Yulo agreement, is there any revenue sharing once the Plant is up and running.

Speaker 2

So for Yulho, the licensing agreement, we will share in the revenue from that Production facility. So as it scales, we will share with them a percentage of that revenue.

Speaker 3

So it's like a royalty kind of payment or?

Speaker 2

Exactly. Yes, in the form of licensing royalty. Correct.

Speaker 3

Okay. Is there any That's in addition to

Speaker 2

the $5,000,000 equity investment they made in the company?

Speaker 3

That they already made, yes. Is there any commitment for Aqua Metals to Spend a certain amount to make sure that, your low does what it says it will do.

Speaker 2

So the beauty of this arrangement is that the $5,000,000 they've invested is earmarked to help us Ensure that we continue to quickly build our facility Phase 1 of our campus environment here, they're going to be sending Technical and management folks here to embed with us to help us stand that up and effectively Put together the plans for the twin of that in their facility where they're going to have an AquaRefining operation There. So there's really no capital cost to Aqua Metals. And in fact, the $5,000,000 investment really helps support what it is that we're doing here. So That's why that deal was attractive to both parties is that we could both move as quickly as we could and they could spend the capital in South Korea while we focus our capital spend here in The U. S.

Speaker 2

And the Tahoe Reno Industrial Center.

Speaker 3

Understood. And just another clarification on that. Is this a license for development within a certain region or up to a certain Extend, like is it up to 100,000 tons and then beyond that, it doesn't apply Or is it applicable to South Korea and maybe Asia? What is the scope?

Speaker 2

Yes. So the tonnage is up to 100,000 tons. They're going to start with 8,000 tons, and then go to 24,000 tons in that first So, but the 100,000 tons is kind of the overall licensing umbrella that we've agreed to with them. We're going to be exploring opportunities even beyond South Korea together because some of their partners that are in South Korea have global But the licensing arrangement in South Korea really is for the up to 100,000 tons. And that would equate by the way to about $2,000,000,000 worth of material being processed with the company's good share.

Speaker 1

Right, right.

Speaker 3

Yes. On the 6 ks energy front, again, similar questions. Is there any commitment From Aqua Metals, just the underserved amount of money?

Speaker 2

So on the 6 ks Energy deal to date, What we've agreed to is that 6 ks Energy has been paying Aqua Metals on non recurring engineering or NRE dollars towards our Development of this connector technology that allows us to take our pure metals and get them into a specialized slurry concentrate for them, So then they can deploy that technology in their Jackson, Tennessee Pluscan facility that they recently broke ground on. And so that is really the money that's exchanged hands so far as 6 Scan Energy is sending money to Aqua Metals to develop that technology. That program is On budget and on time and going very well, expected to wrap up by the end of the year and then move forward with a pilot of that connector technology in their facility as its next step as well as considering offtake Arrangements for what we produce in the campus environment Phase 1 and beyond out here in Tahoe Reno as well as considering how we get our process closer to their process in Jackson, Tennessee and working out what that might look like in the longer run. So there's no Real capital cost dollars for Aqua Metals.

Speaker 2

In fact, if anything, we're getting money.

Speaker 3

Understood. And then just two quick ones. Should we expect initial revenue dollars in 3Q or 4Q? And then the second question is, what is the expected burn over the next two quarters? Is it around the $5,000,000 range or

Speaker 5

Yes. So we believe we will have some small revenues From the pilot plant in this quarter and in the last quarter of this year, so the 3rd Q4, the purpose of the pilot plant is to get us ready for They'll have demonstration commercial size 3,010 facility that will generate a lot better revenues. And so we've done that. And so we're We're starting to build that out, but so we'll see some revenues there. The burn has remained consistent.

Speaker 5

We've been about On a cash basis for our base G and A and operating, it's been about $900,000 a month. So we're kind of saying budget wise about $1,000,000 a month for kind of maintaining that cash needs.

Speaker 3

Understood. Thanks for taking my questions and congrats on all the progress. Thank you.

Operator

Thank you. Next question is coming from Colin Rusch from Oppenheimer. Your line is now live.

Speaker 6

Thanks so much guys. Can you remind us of the CapEx plans for the balance This year and 2024 to get to the commercial ramp.

Speaker 5

Yes. Thanks, Collin. So that's pilot that commercial sorry, commercial demonstration facility is going to be about $30,000,000 CapEx needs. We started spending a little bit on that already, orders on the long lead time equipment. We're getting We're already in there doing some of that work getting ready for it.

Speaker 5

But in total, between now and the 1st part of next year, It will be about $30,000,000 CapEx spend.

Speaker 6

Okay. That's helpful. And then with this debt facility that you're looking at, can you give us a sense of how big A facility you're looking at and kind of what the spread is kind of penciling out in a rough way versus Any of the benchmarks that you may be back to?

Speaker 5

So with what? Can you just repeat that with

Speaker 6

The size of the debt facility that you're looking at doing and where you think interest rates shake out on that facility?

Speaker 5

Yes. So this is the debt facility we're looking at with the USDA guaranteed note. We're Getting very close to applying for that and we think that's probably interest rates below 10% is probably closer to 8% on that. And that the size of that is $25,000,000 and then that would be used To fund the $30,000,000 CapEx.

Speaker 6

Okay. And then the final one is just how far along you are And customer conversations and starting to qualify any product that might get used in a battery?

Speaker 2

So, we've definitely been going through share of materials to battery manufacturers. We one of our announced battery manufacturer partners Dragonfly Energy, which is actually right here in Tahoe Reno, developing silicon anode solid state Next generation LFP lithium iron phosphate batteries and others that we've shared our materials with and we've gotten great feedback So far on the high purity and high quality that people are seeing from the products that we're producing, particularly that lithium in the form of lithium hydroxide. So we've already validated some great progress on customer receptivity To the materials that we're producing, which is quite heartening. In fact, we've been told by one partner that, the lithium hydroxide that we provide is the purest lithium hydroxide they've

Operator

Thank you. I'd like to turn the floor back over to Bob for any web questions.

Speaker 1

Yes, thank you. A few questions from the webcast. First, why did Aqua Metals decide to raise equity capital now?

Speaker 2

Okay, great. So, well, 1st and foremost, our decision to initiate an equity offering for the first time in really 4 years over 4 years was made from a position of strength. The timing aligned seamlessly with our long term strategy And that ensures that Aqua Metals remains really at the forefront of our advancement as a company and in the industry. And this capital injection really empowers us to accelerate the phased development plan of our commercial scale campus. It also strategically positions us to seize these imminent growth opportunities.

Speaker 2

And one of the pivotal benefits of this move Is the enhancement of our creditworthiness as we continue the process that Jud was just talking about to apply for the government programs, including the USDA loan, let alone the grants. This capital really serves as a robust financial backstop. And as we all know, that's really a prerequisite that all funding departments mandate, you need to show that you have money in order to borrow money. So the confidence level in our financial stability is really now quite bolstered and that sets us up for success in gaining access to these non dilutive types of funding sources. And I'll add when viewed in conjunction with our recent This equity raise is also a testament to our commitment to really being prudent stewards of our balance sheet And keeping it strong and unlocking the opportunities to have access to these additional financing opportunities, but also just be a company with a strong balance as it talks to partners and potential partners.

Speaker 2

So really it's helped. And one more thing I would add is that our recent partnerships Combined with our strength and balance sheet, it really do create

Speaker 5

a potent formula.

Speaker 2

We're not just optimistic, but Confident that this sets us up on a continued trajectory of success.

Speaker 1

Perfect. Thank you. Next question. Can you discuss the evolving strategy around both owning and operating a recycling plant And the opportunity around licensing agreements and potential JVs the company is exploring with current and potential partners.

Speaker 2

Absolutely. Yes. This is critical to understanding the future of Aqua Metals and how we'll grow and evolve in the coming years. And the Main highlight here is the flexibility of our strategy and our ability to adapt to the rapidly growing and evolving market And capitalize on those kinds of opportunities. Our core business is owning and operating our own commercial scale sustainable recycling facilities They're going to be central to our growth, as evidenced by our 10,000 ton per year campus that we're currently developing and building Tahoe Reno Spain Lithium Loop right here in Reno, Nevada.

Speaker 2

But at the same time, we don't want to be limited to sole ownership. So for future AquaRefining Campuses and other facilities, we can also develop these alongside partners, black mass supplier partners or even off Take partners, EV manufacturers, cell manufacturers and look at creating joint ventures or even other arrangements. We have previously shared that we are in discussions with 6 ks Energy to jointly develop and operate a pilot on our Innovative low carbon battery materials conversion process, and this structure can work in a number of scenarios, especially in co located So these with large battery and CAM or cathode active material or pre CAM, pre cathode active material manufacturers. And of course, our exciting announcement with Yulho embodies our licensing strategy, because with Our technology proven out and demonstrated the ability to scale, the licensing enables us to rapidly and capital efficiently scale the AquaRefining technology globally And sooner rather than later, there's obviously a distinct financial advantage to licensing arrangements And that creates another revenue stream for Aqua Metals in the future in addition to our own operations. Aqua Metals can support multiple licensing projects simultaneously, yet still keep our core focus allowing us to expand rapidly in markets that's really otherwise inaccessible to us at this time.

Speaker 2

And I'll add each of these pathways to future growth is equally viable because our groundbreaking technology and demonstrated Success to date, has gone very well. And so for Aqua Metals, it comes down to identifying the right partners to work with and our And we've lost our industry leading partners that will really reflects our multifaceted growth strategy. So it's not just A singular strategy and it allows us to propagate our technology as quickly as possible. So the right infrastructure gets built, rather than putting in smelters and Hydro facilities with consumer train modes of toxic chemicals.

Speaker 1

Perfect. Thank you. And regarding our commercial plant, Can you provide an update on the production timeline of the new facility at the Waltham site?

Speaker 2

Sure, happy to. So things are really going great over at our commercial campus and progressing so far on time and on budget. We recently started this week concrete demolition for some of the internal structures that we're building to put in a mezzanine level to get more And we've upgraded the electrical and other systems and even put on a nice new paint job in the outside That looks just like the picture that we put out of what the facility would look like as well as the inside. And we also outfitted brand new office space, Which is now already housing several of our engineers project management function to oversee The build while they're on the site, and equipment is being purchased and moved into the location. And that includes our state of the art R and D lab, which already lives and operates on the campus as well.

Speaker 2

We moved that from the Innovation Center, so we would have that R and D lab Right there at the campus environment also supporting the innovation center just down the street. We also expect that we'll complete the and upfitting of the current building really early in 2024 and begin commissioning and then introducing Black Mass Input and ramping up the operations in that point in time. Our plan is to ramp to the commercial scale through the second half of twenty twenty four, which in this building is projected to get to that 3,000 tons of run rate of black mask being processed As we get towards the end of 2024, which is that $60,000,000 a year revenue run rate. With the recent announcement of the completion of our pilot. I'll also add that we're able to dedicate our senior engineering team and the senior operations team to the build out As they've handed over the operations of the Innovation Center pilot and they can focus on operating the pilot 24 hours a day, Seem to be 7 days a week from 5 days a week, while the engineers and senior operations team did focus on the completion of the first commercial campus.

Speaker 1

Great. Thank you. And speaking of the pilot plant, there's a few questions around that. Can you talk a little bit about what we're doing With the material that we produce there beyond some of the comments we made in the prepared remarks.

Speaker 2

Yes. So The initial materials that we are producing at the pilot really do have a few purposes. And I've already kind of mentioned that we're already using some The material for our own testing as well as providing to partners, but we're also stockpiling some of the material to help us commission our commercial scale facility. And that helps to kind of prime the pumps over down the street as we Bring that equipment online soon. And there's, as I mentioned before, significant demand for samples that we're Seeing from all these leading companies across the battery and electric vehicle supply chains, because it is the 1st non smelting or Chemical intensive recycler and really the only technology that's currently operating at scale that is an alternative to those.

Speaker 2

We believe that we're the only company Share represented samples of these recycled materials with these types of manufacturers, which we have been doing. And they're obviously in a rush To secure supplies of critical minerals that are U. S. Based, but also that are sustainably produced, so it's a double landing. And there's been a lot of demand for those high purity samples.

Speaker 2

So that's what we're spending a lot of the efforts on with that pilot is bringing those folks through, getting them samples and working towards building lasting relationships. And as we build up lastly, the supplies in sight, we will sell some of those recovered materials. Judd mentioned that earlier in the call today. And we'll make those materials and sell them and we'll also build up enough supply To justify some of the shipping costs from the pilot because it is lower quantities of production, but still get some actual first revenues from the first Sales of sustainably recycled materials beginning in this current quarter. So that's a really exciting thing as well for us.

Speaker 2

But this is, of course, a pilot scale facility and we expect to generate pilot scale revenues, as Judd mentioned, in the near term. But our unique ability to deliver these samples to these Our strategic partners today, to further develop those relationships gives us a real distinct advantage, we believe, in the marketplace. So All the materials that are being produced at our pilot facility are being put to good use. Anyone can come and see them if they'd like. We've had people come through and see it with their own two eyes, The metals and the lithium products that we're generating and we're using the pilot to not only get ready for the Commercial plans, but to advance those commercial interests and partnerships and generate some additional revenues for the company while we're at it.

Speaker 1

Great. Thank you. Moving on, can you provide some granularity On the differences between Aqua Metals Technology as compared to some of our competitors who have been afforded much higher valuations.

Speaker 2

So, Opera Refining is very differentiated and that we've decarbonized the process Because we generate a tiny fraction order of magnitude amount of CO2. And that's because If you're smelting and burning the batteries, you're creating massive quantities of CO2 greenhouse gas. In fact, by weight, believe it or not, more Greenhouse gas and black mass processed. The hydro gets a little bit better with the hydrometallurgical processes, But they still generate nearly triple the amount in weight of CO2 in the form of CO2 gas. We capture The carbon and don't create CO2 gas with our process.

Speaker 2

And that carbon can get actually put into a reuse scenario like with cement and things like that. But the key portion of that is that it doesn't go into the air. And that's the gas side and the greenhouse gas side of the equation. We regenerate The chemicals in our process using electricity that's very unique to Aqua Metals as compared to the other folks that are out there. And what that means is that we don't have to bring in trainloads of caustic chemicals on the front end to go through more like traditional mining process Leaching that then create a back end challenge of a waste stream of sodium sulfate.

Speaker 2

And the sodium sulfate as a percentage of the weight of the materials that come in, whether it's pyro or hydro is very high, if not equal to The amount of material that's being processed to begin with and our process because we use the electricity as the reagent to divide the process Rather than chemicals and fire, we regenerate the chemicals that we use and we create 0 sodium sulfate. So that's advantageous to us as a planet and as a species and multiple species because we're not wasting the You're creating a bunch of solid waste streams, but we also have improved economics because we don't have to spend all that money in all those chemicals. We don't have to buy a bunch of fossil fuels. We don't 1,000,000 of dollars on crystallization systems to create sodium sulfate crystals that just get thrown into the landfill of the ocean, let alone the transport costs, So it's a very different approach and that is our differentiator. And why These other companies have disparate valuations to us, is up to the market.

Speaker 2

And we do believe that as we Are steadily trotting along and producing materials that we're going to see a little bit of adjustments in those tides of valuations. It can't be It's just there as it is for much longer in our opinion.

Speaker 1

Great. Thank you. And then we have a 2 part question on partnerships. Do the partnerships announced to date preclude you from doing licensing deals with other companies? And what does the landscape look like for additional partners?

Speaker 2

So the landscape is really exciting because we're talking to players From every aspect of the ecosystem ranging from black mass suppliers to offtake partners that are Making cathode active materials like a 6 ks energy to cell manufacturers discussions directly to EV manufacturers that are verticalizing that want to have control of those minerals and close their own loop on that. So, we are evaluating each partnership and making sure that we set up our, I would call it our dance card, so we have the right mix of partnerships. So we're taking the time While we have the pilot operating and while we're meeting with all these folks to make sure that we allocate the best result of Partnering for us and for our shareholders really, and also ensure that we don't get tied up in any sort of a scenario where we Can't operate one function of our business if we partner too strongly with one particular entity. Our goal Both economically and altruistically is to propagate AquaRefining Technology as quickly as possible and get it in the hands of not only our own selves, but in the hands of partners that can help capitalize and deploy that far environmentally Superior suite of technologies, which by the way is far better for worker safety because you don't walk into work every day To the hellscape of smelting or with a hot suit or of a chemical suit to do the standard hydro processes.

Speaker 2

And so we want to create those kinds of jobs from our process as well and get that technology into the hands of others, yet not constrain ourselves.

Speaker 1

Great. Thank you. A little bit of an extension. What are the prospects Aqua Metals becoming a contracted recycling provider for the large automobile manufacturers. And are we talking to Tesla and other brands?

Speaker 2

So, there what that question is about is kind of like a what I would call tolling. So Emergent businesses where you're buying the black mass feedstock, your input supply and then processing at your own cost and then selling that off take to others. What this question is about is our willingness and ability to do tolling arrangements. And particularly EV manufacturers, it certainly may make Because they get that material back and that they want to close their loop and are looking for some of them are looking for suppliers that can help them do that. And that's something that we see great opportunity with our existing Black Mass And even offtake partners such as a 6 ks Energy that together we can toll that for those EV manufacturers And show that chain of custody of when those batteries come back, they get cleanly crushed and converted to black mass, Go to a process which is looking at refining process instead of a smelting or a hydro process that makes that environmental mess.

Speaker 2

They get the benefit of those materials On the back end going through a cathode active material manufacturers such as the 6 ks Energy and then back into There's stream. So we see that type of opportunity and those are the very types of things that we're talking to some of these folks about. I can say that each Significant major deal that we anticipate doing is going to have its own unique aspects. And that goes back to the prior question, to where we got to make sure that, when we do one deal, we don't constrain ourselves from doing other deals, so we can continue to propagate

Speaker 1

Thank you. A couple more here, a couple related to grants. And just to And just to clarify for folks, do you expect to be eligible for other sources of government grants through the DOE And maybe we could just provide an update to clarify a few questions.

Speaker 5

Yes. So we not only expect to be eligible, we've read some of the language That's coming out in some of the bullets for both

Speaker 4

the Aira and the Build Back Better plan. And we believe that we're like very good fits

Speaker 5

For the DOE next round,

Speaker 4

and we actually believe that that's very, very soon that we'll be seeing

Speaker 5

that come out To the point where our Chief Business Officer, David Mercury and others of our team are spending significant amount of their time I'm working on making sure that we are ready and able to apply for these grants. We've hired a consulting firm out of Washington, D. C. That's Done these grants before for other companies. They're very familiar with the process.

Speaker 5

They are working for us, consulting with us and getting us prepared to apply for those grants. So we're going to be very, very aggressive. We think that right now there's an opportunity there that hasn't been there before. And so we're going to take advantage of that and work to get these grants. In addition to that, we did apply for These grants are like in the $50,000,000 plus range.

Speaker 5

So these are very significant dollar amounts. In addition to that, We did apply for a grant related to our recycling process, mainly around the lithium side earlier this year to $5,000,000 in. And so we'll be waiting to hear back on that one as well. So that's an important piece. But we're also familiar with As we talked about the USDA, the programs they have, there's some other programs that we think we're eligible for.

Speaker 5

We're also looking at tax Credit, there's a production credit and a capitalization credit that we think we qualify for and we'll apply for in 2024. We think that's a good timing. With that changes, we'll look at what that looks like, but those are coming up. We applied for tax abatements that are specific to The state of Nevada. So we're very spending a lot of time trying to make sure that those are things that are available to Aqua Metals as well.

Speaker 1

Perfect. Thank you. Kind of a new question here. How does your cost of recycling compare to mining? And what do you see in the future?

Speaker 2

So, it's quite interesting because the cost per ton of material produced When you're mining high grade materials such as black mass is significantly less. So that puts us at a really interesting cost advantageous perspective of being able to urban mine that high grade ore of that black mass material. So that is an advantage that we have over the mining in terms of our cost envelope That will obviously very much help us. And in the longer run, as students have history of The battery industry, if you take a lead acid battery today that you bought and analyze what percentage of that Material came out of old batteries, it's about 90% in the U. S, 80% to 90% globally.

Speaker 2

And the rest of it came from mined materials. Right now in the lithium world, it's close to 0% of that material is recycled. Certainly, the lithium hasn't been recycled And so that gives us a vision in the future where What we want the world to get to is the point where we dug this stuff out of the earth once, and now we're using it Actually over and over and over again and then now you're only mining to feed the growth. And then overall, you're reducing the cost Per kilowatt hour of storage of battery energy storage because you can continuously recycle and reuse That material on a more cost effective basis than mining. So it will take some time for the industry to get there, but recycling It is really the linchpin for us to get from where we are today, as a society to a closed loop battery age Society that's infinitely recycling all these critical minerals.

Speaker 1

Perfect. Thank you. And I know we're running out of time, but one Quick question here that's a little different. Will your clients be able to apply for renewable energy credits for using your products versus other more hazardous or polluting product processes?

Speaker 2

So that is really interesting question. We are looking into that. Tesla, for example, got paid by the other auto manufacturers They got subsidies basically from the other manufacturers for some years. We see opportunity there as we are Fully decarbonize and we might have the ability to monetize that, but we haven't confirmed that as of yet, but we certainly have

Speaker 5

our eyes on that opportunity.

Speaker 2

I will add one other comment there is that because We are net 0 in our approach to get to a net 0 capability with Getting to that 100% renewable energy, 100% carbon free, we're that part of the supply chain for all these players. And so By working the materials through an Aqua Metals process and the partners that we work with that are also electrically based and clean On the Black Mass production and on the Catheteract material production, together we can be the Scope 1, AKA, the supply chain Accretive benefit to EV manufacturers and cell manufacturers, etcetera. So that is a real advantage that we can bring to the table from that perspective.

Operator

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Steve for any further or closing comments.

Speaker 2

Well, thanks again everyone for your time and attention today. And we're rapidly advancing our operational and commercial initiatives, as you heard today, on a global And it's really an exciting time for Aqua Metals and we look forward to providing continued updates and our continued progress. And in the meantime, If anybody has questions, you can always go to our website and see in the media section, we have a blog And that has a lot of up to date information and videos and things like that. You can also contact us directly as well as of course as FNK

Operator

you for your participation

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Key Takeaways

  • Raised $25 million via a public offering and a $5 million equity investment from Yuho to fund its first commercial recycling campus and qualify for USDA and DOE financing.
  • Low-carbon AquaRefining technology recycles battery black mass into high-purity critical minerals using electricity, eliminating smelting and one-time-use chemical waste.
  • Contracted 3,000 tons of lithium battery black mass—enough feedstock into 2025—representing an estimated $60 million in potential recycle revenue.
  • Partnered with 6K Energy to develop a low-carbon converter process and supply recycled metals to its 13,000-ton-per-year Unimelt facility in Tennessee starting in 2025.
  • Signed a licensing framework with South Korea’s Yuho Materials for up to 100,000 tons per year of processing capacity, a potential $2 billion annual market opportunity.
AI Generated. May Contain Errors.
Earnings Conference Call
Aqua Metals Q2 2023
00:00 / 00:00