AREC - American Resources Corp's (NASDAQ: AREC) ReElement to Transform Rare Earth and Battery Metals Industry and Help the World Counter China's Dominance
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Imagine a worldwithout smartphones, laptops, cars, wind turbines, and even militaryweapon systems. It may sound like a dystopian future, but the realityis, all of these modern-day necessities rely on a group of mineralsknown as rare earth metals. These critical minerals are essential notonly for high-tech products but also to power a significant portion ofthe economy. They play a crucial role in the production of electronicsand are key to the growth of the electric vehicle market.
However, despite theircrucial role, our supply of rare earth metals is in short supply andthe vast majority of the market is controlled by China. Thisdomination poses a significant risk to our technology-driven economyand highlights the urgent need for alternative sources of theseessential minerals.
ReElement Technologies, a subsidiary of American ResourcesCorporation (NASDAQ: AREC) , is on a mission to help the rest ofthe world diversify its rare earth reliance away from China. Byleveraging its innovative technology, ReElement can capture,process and purify rare earth metals from end-of-life products likemagnets and lithium batteries. Let's further break down ReElement,its technology, and how it is a potential solution to a serious threatto our national security.
What are Rare Earth Metals andUnderstanding China’s Role
Rare earth metals are a group of 17 elements thatare critical components in high-tech products such as smartphones,wind turbines, electric vehicles, and military equipment. China dominates the global supply of rare earth metals, producing more than80% of the world's supply.
There are a few reasons for China's dominancein rare earth metals:
- Abundant resources: China hasabundant reserves of rare earth elements, which has enabled it todominate the market for these materials.
- Refining: China’slow environmental standards has allowed them dominate the separationand purification of rare earth metals without much innovation whilepolluting the planet.
- Cost advantage: China's labor costsand production costs are lower than in other countries, which has madeit easier for China to produce rare earth metals at a lowercost.
- Government support: The Chinese government has investedheavily in the rare earth metals industry, providing subsidies andother support to Chinese companies.
This dominance of the rare earth metals marketby China is dangerous for the United States and the rest of the worldbecause it creates a single point of failure in the supply chain. IfChina were to cut off the supply of rare earth metals to the rest ofthe world, it could disrupt the production of high-tech products,cause widespread economic disruption, and present a major threat toU.S. national security. Additionally, China's control of themarket gives it significant leverage over other countries, allowing itto manipulate prices and restrict supply as it sees fit. This can leadto increased costs for consumers and can harm industries that rely onthese materials.
Overall,reducing reliance on China for rare earth metals will require aconcerted effort from the United States government, the privatesector, and academia to develop domestic production, alternativesources, advanced refining methods and new materials. Reusing &recycling are key factors that could drive alternative sourcing andprovide an opportunity to obtain rare earth metals outside of a miningenvironment.
Key Benefits of Recycling & Reusing RareEarth Metals
"Reduce, reuse, and recycle" are important conceptsthat are consistently promoted by the government to help conserveresources and prevent excess landfill use. While we may initiallythink of aluminum and paper products when "recycling" comes tomind, it could be critical in maintaining a more efficient ecosystemfor rare earths.
Recycling and reusing rare earth metals is important forseveral reasons:
- Conservation of resources: Rare earthmetals are finite resources, and recycling and reusing these materialscan help to conserve these resources for futuregenerations.
- Environmental protection: The mining, refining,and production of rare earth metals can have significant environmentalimpacts, including deforestation, soil degradation, and waterpollution. Recycling and reusing these materials can help to reducethese impacts and promote sustainability.
- Cost savings:Recycling rare earth metals can be less expensive than mining andrefining new materials, which can help to reduce the cost ofproduction for high-tech products.
- Reduced dependence onimports: A significant portion of the world's rare earth metalsare supplied by China, and recycling and reusing these materials canhelp to reduce dependence on foreign sources, promoting energysecurity.
- Waste reduction: Recycling rare earth metals canhelp to reduce the amount of waste generated by the production anddisposal of high-tech products, promoting a circulareconomy.
Recycling and reusing rare earth metals are becomingincreasingly important as demand for these materials continues togrow, and as concerns about the environmental impact of mining and thepotential for supply disruptions grow. By recycling and reusing thesematerials, we can help to conserve resources, protect the environment,reduce costs, reduce dependence on imports, and promote a sustainableand circular economy.
Overview: American ResourcesCorp
AmericanResources Corporation is an Indiana-based company that isfocused on the mining, processing, transportation, and sale ofmetallurgical coal used to make steel. The company maintains aportfolio covering operations across Kentucky and West Virginia. Thecompany has three main subsidiaries: ReElement Technologies LLC,American Carbon LLC, and American Metals LLC.
ReElement TechnologiesLLC is a subsidiary that's changing the game in the production ofrare earth elements and lithium-based battery metals. And here'sthe best part – their flexible refining methods are able do it allusing 100% recycled materials or newly mined mineral in a much safer and low-cost process.They're leading the way in environmentally-friendly processing andrefining technology and are all about creating a circular economy.With their innovative critical metal recovery technology, they'remaking sure the world has access to the rare earth elements andcritical minerals it needs for the next generation of infrastructure,electronics, and national security hardware - all while beingcost-effective and sustainable.
The American Carbon LLC subsidiary houses AmericanResources’ metallurgical coal mining extraction and supply business. The company has established a networkof five restructured processing and logistic complexes, which help toeliminate the old legacy costs and create a more effective, lower-costbusiness model. Since its inception, American Carbon and AmericanResources have restored over 7,000 acres of irrational thermal coalland, which collectively represents over $20 million inliabilities.
American Metals LLC is American Resources’ aggregator andprocessor of used metals for recycling into new steel-based products.The subsidiary operates within the U.S. coal country where there isoften an abundance of used metal reserves from former thermal coalmines that have since been shut down. By leveraging its regionallogistics and infrastructure, American Metals LLC can expand itspresence in the high-growth market of used steel while also cleaningup old infrastructure left behind from the miningindustry.
Further Breaking Down the ReElementSubsidiary
The United States and other countries around the world have awaste problem and rare earths are wrapped right up in the mess. Everyyear, an estimated $3 billion worth of critical and rare earth metalsare thrown away or lost. With demand for these critical metals heatingup at a brisk pace, countries need to work on solutions to the wasteissue.
This isexactly where ReElement comes into play. The subsidiary's technology provides aneconomical solution to help isolate, purify, and recycle thesecritical metals. To make matters even more enticing, ReElement'stechnology is the most environmentally safe method of rare earth metalrecycling and refining.
ReElement uses an electrolysis process to help extract rareearths and critical metals from feedstock carbon waste, acid minedrainage, and magnets. Low pH water combined with high levels of ironand carbon found in acid mine drainage and carbon slurries that leachrare earth and battery metals enables faster hydrogen productioncompared to traditional water-based electrolysis. Through thisprocess, ReElement is focused on monetizing carbon production,hydrogen production, graphene slurry, and rare earth and battery metalconcentrates.
Oncethe extraction process has been completed, the next step ispurification. ReElement uses the most environmentally-safepurification methods for creating isolated and pure rare earth metals.The purification process uses highly specialized chromatographymethods, which leads to more pure rare earth metals, rather than justa concentrate. In addition, ReElement’s patented and proprietaryprocesses separates and isolates each element. Their exclusivechromatography technology is a viable solution to recycling bothpermanent magnets and batteries by bringing those constituent elementsback to magnet and battery-grade forms. This is something that theindustry struggles with and where ReElement differentiates itself. Additionally, ReElement’s ability to efficiently refine lithium fromend-of-life batteries as well as their planned application ofchromatography to refine spodumene is unique and demonstrates thevalue they bring to our domestic supply chain.
The current industrystandard, solvent extraction, is extremely outdated and toxic to theenvironment. Solvent extraction relies heavily on using toxicextractants, harsh chemicals, and flammable solvents. This processalso takes longer than chromatography and does not produce the sameoutput yield as ReElement's ESG-focused process. In short,ReElement’s chromatography process is not only better for theenvironment, but also more efficient in extracting and purifyingcritical metals at a more cost-effective level.
ReElement currently canprocess over 137,500 kilograms of critical battery and rare-earthmagnet materials into ultra-high pure minerals and compounds at its Noblesville,Indiana facility. Among the initial rare earth and battery metalproducts, ReElement will focus on: neodymium, praseodymium,dysprosium, cobalt, lithium, nickel, manganese, and more. Managementsays they have identified additional sites to build facilities asscalability and are currently in the design and engineering phase fortheir next larger scale facility to increase capacity by 100-times.
Another keyadvantage ReElement holds is a robust IP portfolio and partnershipswith world-renowned organizations. ReElement's process is coveredby 16 patents and was developed in partnership with the likes ofPurdue University, Texas Tech University, Ohio University, CMID, andmore.
ReElement Spin-Off and Strong Insider & InvestorBacking
American Resources Corp has previously stated its intent tospin off the ReElement Technologies business into a standalonecompany. The spin-off allows investors to own a pure-play standalone,ESG-focused refiner of critical minerals. This will give ReElement abetter posture to realize the opportunity. In addition, it will allowESG-focused investors to take part in the opportunity without anyallocation to metallurgical coal.
Under the current guidelines, American ResourcesCorp will retain a 9% ownership of ReElement post-spin-off, which willbe issued as a dividend to shareholders. Existing shareholders willreceive half a share of the "spinco" for each common shareheld of American Resources Corp.
American Resources filed a Form10 with the U.S. SEC in late January 2023, which effectivelybegins the official process to spin-off ReElement. While it will stilltake some time for the Form 10 and other regulatory paperwork to befinalized, shareholders should be encouraged by the strong backing ofthe company by its insiders and even institutional investors.
Insiders of AmericanResources Corp believe in their mission and are putting their money onthe line to prove their bullish beliefs. As of February 2023, justunder 30% of American Resources Corp is currently owned by insiders . Thisis an incredibly bullish indicator because it shows managementbelieves in the company enough to risk their own money. While there isno fully-certain outcome, stocks with higher insider ownership tend tobe more favorable with investors.
On February 6, 2023, American Resources Corpreceived a major boost of confidence from its largest debt holder, GoldenProperties Ltd. The institutional investor owned convertible debtamounting to $9.9 million. Golden Properties, who was an earlyinvestor in American Resources Corp, chose to convert its note intostock.
This is amajor deal because the company's biggest debt holder is now itslargest equity holder after converting the $9.9 million note into 9.4million shares of common stock. This means Golden Properties Ltd.waived its right to $1.2 million in interest payments in exchange forAREC shares and the ReElement dividend post-spin-off. For AmericanResources, this helps clean up the balance sheet and serves as thelatest example of bullish support for the company.
Overall, the modernworld relies heavily on a group of minerals known as rare earthmetals, which are critical components in high-tech products such assmartphones, wind turbines, electric vehicles, and military equipment.China dominates the global supply of these metals, producing over 80%of the world's supply. This creates a single point of failure inthe supply chain and gives China significant leverage over othercountries. To reduce reliance on China, efforts are needed to developdomestic production, alternative sources, advanced refining methodsand new materials. ReElement Technologies, a subsidiary of AmericanResources Corporation, is focused on capturing, processing, andpurifying rare earth metals from end-of-life products like magnets andlithium batteries, to help diversify the world's rare earthreliance away from China. Recycling and reusing rare earth metals isbecoming increasingly important due to the growing demand andenvironmental concerns. By recycling and reusing these materials, wecan help conserve resources, protect the environment, reduce costs,reduce dependence on imports, and promote a sustainable and circulareconomy.
With allthe exciting developments over at ReElement, its strong insider &institutional investor backing, and solutions to a very serious globalissue that cannot continue to be ignored. ReElement's refiningcapabilities are exactly what the United States and the rest of theworld need to diversify their rare earth and battery mineral relianceaway from Asia.
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