American Resources CEO discusses the company’s recent SPAC filing for accretive land acquisitions

Hi Mark, thanks for taking the time to sit down and discuss with our audience. First tell me a bit about American Resources Corporation (NASDAQ: AREC). Thanks! American Resources is a company built and run by its founders with the goal of efficiently supplying raw materials to the infrastructure and electrification marketplace by utilizing modern technologies and innovations. Our goal is simple streamline operations and maximize the return from all of our assets. The result is a model that can actually improve the environment and bring new industry and models to communities that need jobs. Today we really want to talk about your Special Purpose Acquisition Company (SPAC) filing as that’s an innovative move for a public company. Tell us what first piqued your interest in the SPAC process? We have been following the SPAC structure since its surge in popularity in the early 2000’s and have invested $100’s of millions of dollars in similar type public structures. My background over the last 20 years has been pretty firmly rooted in M&A and repositioning the acquired assets/companies to unlock the value post acquisition. This structure offers the ability to accomplish just that. Over the years we have had to make do with a lot less capital to accomplish the success we have had at American Resources. The SPAC structure provides us the flexibility and capital to really exploit the market opportunities we see in a much abbreviated time frame. READ: American Resources initiated with a 'Buy' rating and $7.50 target price at Roth Capital Why did you file a SPAC? First and foremost, it didn’t really have anything to do with the hype recently but more the real opportunity it provides and how it plays into our skill sets as a team. Even though there have been some groundbreaking mergers between SPACs and some innovative companies, for us, it was more of expanding what our management team has been doing for years and a function of maximizing shareholder value while also leveraging our capital. It’s widely known that operator-run SPACs widely outperform financial partner run SPACs. It’s very apparent why to us, and why we launched a SPAC that we concretely see a long-term fundamental arbitrage value. Our merger criteria is focused on acquiring land that can be acquired accretively but can also be significantly expanded by adapting to the growth of electrification, social impact opportunities etc. What led you to focus on a value asset like land companies? This is a great question. We think it’s about value and growth. We think land, specifically rural resources driven land, is undervalued and underutilized and have been slow to adapt to the changing world.  We have substantial interaction with land companies on a daily basis in our companies and we feel that they at times are operating with blinders on or just have been whipsawed by the changing marketplace. Or it may be that they just lack the capital needed internally to adapt in the way that they should.  We believe with the capital available to us through the structure that we can lead the innovation and pull forward more future focused revenue streams from the acquired land/assets enhancing the current revenue streams they have historically focused on.  Why acquire land at the SPAC level versus at the American Resources level? Specifically, at American Resources Corporation we had an opportunity to buy land assets that we believe are worth substantially more than what we can buy it for, purely based on one of its monetizable resources. That being said, at American Resources Corporation we have a very focused mandate to drive value from our infrastructure and rare earth assets at operational level above and below the ground that could be acquired. Being operationally focused is in line with our model as American Resources very seldom holds land and instead leases land from land companies such as those the SPAC would acquire. For American Resources to tie up substantial cash off our balance sheet to acquire the land itself it would be prohibitive to what we believe to be very accretive growth opportunities we have in front of us.  That being said, based on our ramp up of operations and available cash on hand our board felt that we did have available liquidity to be the sponsor and maximize the benefit to our shareholders in that role.  What was it that was so appealing? The ability to leverage our capital on our balance sheet effectively 30 to 1 of capital invested internally versus capital available to invest as a whole at the SPAC level. The idea of acquiring access to 100,000 acres of land with our internal capital is attractive proposition especially with the technology we have acquired pertaining to rare earth elements, energy storage, recycling and so on. However, through the SPAC, having the ability to buy millions of acres gets really exciting. Two questions. What security is being evaluated at the target level and secondly what is the risk of closing on a target acquisition in the slated time frame. The security value of the target is what we feel is really appealing and differentiates our focus here. We are targeting real estate, mineral, etc. at a time when real estate is predicted to stay very well in demand for many years. An electrification and green infrastructure economy requires physical land to be successful.  We believe land itself is a good acquisition especially when we are leveraging our capital base. We also believe that the natural resources regions where we are focused offer substantial incentives for capital to develop royalty streams and cash flow streams (ie opportunity zones, new market tax credits, etc.). Elon Musk understood how to leverage private capital with subsidized capital.  Regions we are targeting have not adapted, which in essence offers a huge opportunity for us to take the lead given our experience in such structures.  The second question of our ability to acquire a target acquisition in time is what makes our team unique.  Our board is obviously confident in our ability to do so given our track record of understanding how M&A works, how to identify targets, how to due diligence the risk return of an opportunity, how to structure transactions and how to maximize the post acquired asset.  As a team, we have invested in, advised on and acquired well over a $1 billion of asset value over our careers. At American Resources we have closed on over 8 acquisition representing over $500 million in replacement value assets, without valuing our critical element and rare earth opportunities. Evaluating potential acquisition targets is not outside of our teams’ normal business activities.  Having a SPAC to now consider as a home for these opportunities enhances our teams’ efficiencies and broadens the opportunities for our investors. Your team has some exciting internal opportunities with American Rare Earth and your infrastructure assets. Does this spread your team thin? Great question. It all comes down to processes, team and culture. Since acquiring the assets at American Resources, our focus is on establishing detailed and scalable processes and efficiencies. The members of our executive team took over duties of well over 200 people from the acquired assets. A majority of our time and effort historically was about restructuring these assets for the future. This process is complete and in place today.  Furthermore, as we scale at American Resources we are evaluating some high value additions to our team that understand and fit our culture very well. Our processes will, and need to, remain streamlined to position us for our growth we are kicking off this year. Our team is very focused, and we pride ourselves on our work ethic to find opportunities and solutions to drive value. We believe our team is more than capable of handling the workload especially as we have wrapped up the restructuring of our acquired assets and now focused on the streamlined operational ramp up. I will say that all of our team appreciates the patience and support we have from our spouses at home as they are the pillars of strength behind our team. Investor equality is a big topic lately. Does this SPAC benefit all your investors equally or more weighted to institutions? Great question and very easy to answer. We are a public company trading on the NASDAQ, a nationally listed exchange. To our knowledge, American Resources Corporation is the only way that retail investors can participate in the sponsor economics from the SPAC process. By sponsoring it through our public company, we are leveling the playing field between institutional and retail investors. By the nature of being an investor in our company, American Resources Corporation, all investors big and small are able to benefit from the SPAC sponsor economics. At the American Resources level nobody gets better economics from the SPAC including management – we all benefit equally as shareholders of the sponsor through our ownership of American Resources Corporation. Will American Resources Corporation sponsor additional SPACs in the future?   We would not rule anything out. We do want to showcase our ability to execute here to our investors first though. As a company, our forecasts over the next few years show our cash flow increasing well beyond our needed capex to continually expand our revenue base from all of our current divisions. As a company we are focused on staying in our lane but investing aggressively in our core competencies and leveraging our understanding and innovation within our industries. Will the board approve a second SPAC filing or even a third? We will have to take that opportunity to them for consideration, and we are hopeful.  We believe down the road an infrastructure SPAC, a critical elements technology SPAC or battery storage asset SPAC would be squarely in our lane and could potentially make a lot of sense.  With these focuses, we could build upon what we have already been able to put together over the last five years. The ability to leverage our capital in a low risk manner and benefit our investors from institution to retail equally is a big deal for us.   While I have you here, let me end with a couple of questions about your current business lines. For you, what is the most exciting aspect of your business today? This is the hardest question you have asked all day! We have worked really hard as a team on all of our divisions. Personally, I would have to say the final two stages of our “Capture. Process. Purify.” Technology Chain given what they do for the world and how they work together.  Electrolysis = “Process.” and Chromotography = “Purify.” These two technologies work together extremely well within our Rare Earth Technology Process Chain.  What excites me about them is their ability to go in and clean up waste products within the environment and create value-added products cost effectively. We exclusively licensed these patents and technology from Ohio University (and further expanding it with our sponsored research at Texas Tech) and Purdue University based on the substantial research and efficacy showcased during our evaluation.  One particular area of the market that is particularly appealing to us is the ability to reprocess waste fly ash and segregate out the metals, the carbon and the fly ash itself while producing hydrogen as a byproduct.  In its combined form fly ash is viewed negatively for the environment, but by using our patented technology to separate and purify the product we are able to create multipole monetizable products while also cleaning up the environment.  Fly ash itself is a high value additive to the concrete market that is essential to the infrastructure marketplace, which we predict will be in shortage over the next few years. In fact, by purifying fly ash we can reduce the environmental impact of concrete given it acts as a replacement to newly-mined products by using it as an additive. I could talk about this technology for days, but I will leave it at this for now. The technology and application is an absolute environmental game changer that results in infrastructure (concrete) and electrification product (rare earth elements) from one application.  We may have to follow up on that last question with a separate interview as you caught my attention with how interesting that technology is.  Final question on innovation in the markets. What industry or product do you think will be the next worldwide game changer? I think this is an easy one. Battery storage technology. But it has to be efficient, replicable and not dependent on landscape, terrain, etc. If this equation is solved, the world will be changed forever as it would essentially enable green energy to become an efficient base load energy source and unlock the electrification market for all users. Personally, I am biased on where it’s going to come from and I would not be surprised if the solution is not that complicated. We licensed from Ohio University, developed by Dr. Botte on our board of directors, the ability to take our electrolysis technology to the next level in the production of Graphene from carbon sources. We believe carbon has been under utilized as a product over the years, which is not surprising as the companies in the space haven’t put forth any effort to drive innovation. Revenue generation wise we will focus on our initial value chains in the infrastructure and electrification market but we will absolutely be incubating this technology to be refined as well as Graphene becomes more accepted in commercial applications.  Thanks Mark, you have provided a lot of insight into how your business has grown, innovated and leveraged your existing asset base. Its pretty fascinating. Let’s agree to get back together shortly.  What would you like to leave our audience with? As a company we want to solve real world problems while also maximizing the return to our shareholders while creating jobs in the community. Our model is about leveraging our assets and balance sheet to accomplish this goal. The SPAC enables us to accomplish exactly that while also leaning heavily on the skill sets of our team when it comes to M&A and identifying under utilized assets in the market. We are excited about the next few months and excited to put forth the time and effort to ensure success for all of our stakeholders.