American Resources supplying high-quality raw materials to the new infrastructure market

Produces and sells metallurgical coal, which is used for steel making Currently owns a variety of complexes where metallurgical coal can be processed and transported, mostly by rail Recycling waste magnets and lithium-ion batteries for their critical and rare earth minerals (REEs)   What American Resources does: American Resources Corporation has spent the past several years consolidating assets to build out its metallurgical carbon platform. It is staffed by a team of former private equity executives and consultants with a sentimental attachment to Appalachia and its coal, who are keen to stage a turnaround in how business is done there. American Resources operates five complexes located primarily within Pike, Perry, Knott, and Letcher Counties in Kentucky and Wyoming County in West Virginia. The company’s primary focus is on supplying steel mills and electric arc furnaces with metallurgical Carbon, PCI, and specialty alloy metals along with metal products. The company has gobbled up a number of struggling coal operations across Central Appalachia. Its takeovers include McCoy Elkhorn Coal, Dean Mining LLC, ICG Knott County, Wyoming County Coal, Empire Kentucky Land, the PointRock Mine, and Perry County Resources.  The company also has two licenses for rare earth mineral processing and graphene patents from Ohio University, expanding its patent and technology base to be used for rare earth element (REE) and critical mineral separation as well as the future production of graphene and advanced carbon products.   American Resources also has technology license agreements with Penn State University’s Department of Energy and Mineral Engineering to separate and extract pre-concentrate critical and REE minerals from carbon-based resources, like coal ash from coal-fired power plants. How is it doing: Halfway through 2021, it's been an active time for American Resources.  On the financial front, the company in June closed a $30.1 million registered direct offering, boosting its balance sheet to near $40 million. In the same month, its stock also joined the Russell Microcap Index, giving the company exposure to more investors. The offering builds on its sponsorship of a $100 million special purpose acquisition company (SPAC) -- American Acquisition Opportunity Inc, whose initial public offering in March consisted of 10 million units at $10 each. The SPAC is a blank check company targeting acquisitions in the landholding and resource industry. On the technology front, American Resources achieved another milestone in June when it successfully recovered neodymium (REE) with a 99.5% purity from waste magnets, a standard required for high-quality permanent magnet manufacturing. Neodymium magnets are considered the strongest type of permanent magnet available commercially. Such magnets have replaced other types of magnets in many applications that require strong permanent magnets, such as electric motors, hard disk drives, and magnetic fasteners. Meanwhile, the company is ramping up the development of its supply chain for waste magnets and lithium-ion batteries that can be recycled for their critical and REEs.   It has recently picked up its first waste wind turbine motors and generators to be processed and recycled using its environmentally safe ligand-assisted displacement (LAD) chromatography, which was recently licensed in partnership with Hasler Ventures and Purdue University. That said, the company is staffing up as it aggressively advances its Capture-Process-Purify process chain for critical and REEs to commercialization and to further develop its aftermarket distribution channels and strategic partnerships for certain waste products to be processed and recycled for their high-value raw materials. Even President Joe Biden is behind such initiatives.  These end-of-life products would include electric/hybrid vehicles such as the Toyota Prius, e-bikes, wind turbines, NMR machines, MRI machines, and certain industrial motors. In July, the company also announced that it is progressing towards the commercialization of its REE electrolysis processing technology. The company said it has procured supplemental equipment to enhance the functionality of the 2kW mobile electrolytic cell REE processing plant currently in the build phase in conjunction with its sponsored research partner Texas Tech University.   American Resources noted that its electrolytic cell REE processing facility represents a novel approach for the revalorization of coal, coal waste, and coal byproducts such as fly ash, utilizing Coal Electrolytic Cell (CEC) technology for the production of REE concentrate, carbon, purified fly ash, and hydrogen. The company is initially targeting fly ash deposits rich in REEs such as dysprosium, neodymium, and praseodymium, among others. In a related development, the company has engaged ex-Eli Lilly executive William Smith III to design and build its rare earth and critical mineral purification facilities. It said the facilities will utilize LAD chromatography technology. The company has also hired Jeff Peterson as a senior member of its American Rare Earth division to help with the development and commercialization of its technology. With nearly 20 years of experience in operations, engineering, sales, and product development, Peterson began his career as a Commissioned Officer in the US Navy onboard nuclear-powered submarines. What the broker says: In February 2021, Roth Capital initiated coverage on American Resources with a 'Buy' rating and a $7.50 per share target price, calling the company a “growing metallurgical coal producer with a rare earths kicker." “The company’s three near-term mining projects, Perry County, McCoy Elkhorn, and Wyoming, are in the process of ramping up production and, according to our projections will begin to generate cash flow in 2021,” Roth Capital analysts wrote in a note to clients. “Investments in American Rare Earth's metals processing technologies also hold potential to add a high-multiple business line focused on sustainable materials for electric vehicles and other clean technologies,” they added. The analysts noted that over the past five years American Resources has assembled a portfolio of semi-distressed assets through bankruptcy auctions and private sales and implemented cost-cutting and restructuring efforts at each operation. They expect the company to grow its metallurgical coal production, which is used in steelmaking, to more than 3.5 million tons by 2023. As well, the analysts noted that the company’s investment in American Rare Earth has the potential to form a valuable new business line with Environment, Social and Governance (ESG) appeal, as American Resources has announced technology partnerships with major universities directed at recycling rare earth elements (REEs) from coal and other waste. “While the subsidiary won’t generate revenue in 2021, we view it as a high-multiple, ESG-focused initiative that could transform the American Resources story in coming years,” they said. “ESG investor focus will place greater scrutiny on supply-chain sustainability, and the company could be one of the first in the world to develop technology to recycle rare earth elements from coal waste."   Inflection points: Deploy mobile electrolysis facility into the field by early 2022 Commercialize process to turn samples quickly and efficiently when evaluating fly ash deposits Ramp up development of supply chain for waste magnets and lithium-ion batteries for recycling What the boss says: "The advancement and evolution of our rare earth element Capture - Process - Purify process chain is extremely exciting for us and we feel it's at the forefront of rare earth element innovation, which is critical for creating a resilient national supply chain,” said American Resources CEO Mark Jensen in a recent statement.  “This supplemental equipment we are adding to our electrolysis process and analysis is key as we progress with our mobile electrolysis facility and more directly, where we send our mobile facility for further analysis post our initial analysis of feedstock samples sent to our technical partners through our fly ash sampling program.”  Jensen added: “A key for the commercialization of this process is being able to turn samples quickly and efficiently when evaluating fly ash deposits. Having a microwave digestor in combination with an ICP-OES machine enables real-time lab analysis of REE and critical element concentrates of fly ash, versus having to send off to an external lab. This functionality selected by our team in Texas is a strong step forward in our process." Contact the author: patrick@proactiveinvestors.com Follow him on Twitter @PatrickMGraham