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American Resources Corporation Reports Second Quarter 2022 Financial Results and Provides Business Outlook

Monday, August 15, 2022 4:05 PM
American Resources Corporation
Topic:
Earnings

Record quarterly revenues of $16.2 million represents the best in Company's history with significant expansion opportunities over the balance of the year

Company boasts 78% quarter-over-quarter revenue growth; adjusted EBITDA for the 2Q 2022 of $11.5 million

The first domestic, commercial producer of separated and high-purity REEs from recycled permanent magnets

On track to commercially produce separated and high-purity battery elements from recycled lithium-based batteries in 4Q 2022

Company's patented chromatographic separation and purification process defining itself as the only complete recycling solution for all the critical and REEs in the EV powertrain

Company's carbon platform well positioned to capitalize on continued market strength and opportunities over the next several years

Company to host update conference call today at 4:30 PM ET

FISHERS, IN / ACCESSWIRE / August 15, 2022 / American Resources Corporation (NASDAQ:AREC) ("American Resources" or the "Company"), a next generation and socially responsible supplier of rare earth and critical elements, carbon and advanced carbon materials to the new infrastructure and electrification marketplace, today announced financial results for the second quarter of 2022 and provided a corporate update. The Company will host a conference call and webcast, today, August 15, 2022, at 4:30 PM ET (details below).

Mark Jensen, Chairman and CEO of American Resources Corporation commented, "The second quarter of 2022 continued to showcase the steady progression of our carbon business resulting in 78% quarter-over-quarter revenue growth. Today, we continue to see the fruits of our investments and have our carbon platform in position to drive continued carbon production growth forward. We continue to see constrained supply throughout the industry and as a result, we find ourselves as one of the few sources of needed supply growth. Additionally, our newly rebranded ReElement Technologies ("ReElement") division recently achieved a major milestone of being the first domestic, commercial producer of isolated and high-purity rare-earth elements. While we are confident in our team, process and technology, our results from our first commercial runs exceeded our expectations by achieving greater than 99.5% pure neodymium, dysprosium and praseodymium. We fully believe our chromatography technology will reset the standard of how critical and rare earth elements are separated and purified around the world as well as providing the most efficient recycling solution for these critical raw materials. This is not only a huge accomplishment for our Company, but for our country and domestic supply chain as well. American Carbon and ReElement's unique positioning are a clear differentiator for our Company and we believe also provides a unique investment opportunity for our shareholders."

Second Quarter 2022 Key Highlights

ReElement Technologies

  • Secured the exclusive worldwide rights for a new provisional patent filed by the Company's technology and research partner, Purdue University, for the isolation and purification of battery-grade materials using multi-mode chromatography for all feedstocks
  • Joined the global Rare Earth Industry Association (REIA), an international non-profit organization representing the global rare earth element (REE) industry.
  • Rebranded American Rare Earth division as ReElement Technologies to better reflect its mandate of producing and supplying high-purity magnet and battery grade rare earth and critical elements to the domestic supply chain while also focusing on the sustainability of these raw materials.

American Carbon

  • Entered into a multi-year lease of its Deane Mining complex to a high quality, local, third-party operator named Bluegrass Resources which allows the Company to continue to capitalize on the current strong carbon environment by monetize noncore assets, help keep the community working and brings additional value to its shareholders.
  • Signed a carbon offtake agreement along with a non-dilutive financial commitment of $2.5 million with a long-standing customer and premier supplier of metallurgical carbon to the global steel and alloy metal marketplace, Integrity Coal Sales ("Integrity"), to start its Carnegie 2 mine.
  • Expanded its sales commitments for a portion of its specialty carbon stoker products by approximately 15,000 tons at a record average price realization in the mid $200 per ton.

Corporate

  • Signed a binding letter of intent to acquire all of the outstanding stock of Energy Technologies Inc. ("ETI"), a rare earth element and carbon technology company with a focus on analyzing and separating materials for the recovery and concentration of high-value products.
  • Announced that the special purpose acquisition vehicle the Company has sponsored, American Acquisition Opportunity Inc. (AMAO), successfully entered into a definitive agreement that will result in Royalty Management Corporation becoming a publicly listed company.

"Looking forward to the remainder of 2022 and beyond, the excitement over the opportunities we have in front of us continues to reach new levels. Now that we have achieved unprecedented success with our patented, chromatographic separation and purification technology for rare-earth elements from recycled permanent magnets, we're confident that attractive opportunities will continue to manifest for ReElement Technologies. We believe we offer current and future partners a very unique value in not only being the only commercial producer of premium, high-purity critical and rare-earth elements, but our products are also sustainable. By first establishing recycling solutions that are flexible, scalable, low cost and environmentally safe, we are bringing the circular economy for these elements online. Furthermore, with the upcoming commencement of our battery element production train, we are providing a complete recycling solution for all of the critical and rare earth elements in the EV powertrain for both motors and batteries. This is a clear distinction of ours that is probably being overlooked, and our lower cost structure enables us to be creative with partners," continued Mr. Jensen.

Mr. Jensen concluded, "Our specialty and metallurgical carbon platform continued to ramp throughout the second quarter of 2022 which was reflected in our 77% quarter-over-quarter increase in carbon sales. Our asset base, reserves, permits and extensive restructuring have put us in a unique position to capitalize in these strong markets and provide supply growth to our customer base. We believe these results showcase the early stages of a significant inflection point in our carbon business that our platform has been set up to deliver. Our team continues to put forth significant effort to grow production in this challenging supply chain environment and we're confident our mine plans and overall platform allows us to do so."

Expected Near-Term Catalysts

  • Closing of $45 million West Virginia tax-exempt industrial development bonds and $4.9 million of New Market Tax Credits for the Company's Wyoming County advanced carbon and rare earth processing facility.
  • Additional ReElement upstream and downstream partnerships to bolster feedstocks of end-of-life products for critical and REEs and offtake customers of the Company sustainable and domestically-produced, high-purity battery and magnet elements.
  • Commencement of its multi-mode, chromatography battery production train for the production of separated and high purity battery elements (Li, Co, Ni, Mn) from end-of-life lithium-based batteries.

Conference Call Information

American Resources management will host a conference call for investors, analysts and other interested parties today, Monday, August 15, 2022 at 4:30 PM ET.

Interested participants and investors may access the conference call by dialing (877) 407-4019 and referencing American Resources Corporation's Second Quarter 2022 Conference Call, or by the webcast link here.

Financial Results for Second Quarter 2022

For the second quarter of 2022, American Resources reported a net income loss of $2.44 million, or a loss of $0.04 per share for the three months ended June 30, 2022, as compared with a net income loss of $6.65 million, or $0.13 per share in the prior-year period. The Company earned adjusted earnings before interest, taxes, depreciation, amortization, equity-based compensation, warrant expense and development and restructuring costs ("Adjusted EBITDA") of a $11.5 million in the second quarter of 2022, as compared with an Adjusted EBITDA loss of $537,078 for the second quarter of 2021.

Second Quarter 2022 Summary

Total revenues were $16.2 million for the second quarter of 2022 compared to revenues of $393,210 during the second quarter of 2021. General and administrative expenses for the second quarter of 2022 were $903,045 compared to $593,621 in the prior year period. American Resources incurred interest expense of $260,807 during the second quarter of 2022 compared to $$674,829 during the second quarter of 2021. Development costs during the quarter were $11.5 million largely attributed to the Company's new Carnegie 2 metallurgical mine, compared to $6.8 million in the first quarter of 2022.

The Company did not incur any income tax expense in in the second quarter of 2022 as it was able to utilize its available net operating losses ("NOL") carried forward from prior periods of approximately $24.2 million as of December 31, 2021.

AMERICAN RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED

For the three months ended
June 30,
2022
For the three
months ended
June 30,
2021
For the six
months ended
June 30,
2022
For the six
months ended
June 30,
2021
Coal Sales
$15,969,787 $339,314 $25,001,047 $342,588
Metal Aggregating, Processing and Sales
3,292 27,875 40,519 27,875
Royalty Income
226,125 26,021 238,262 33,394
Total Revenue
16,199,204 393,210 25,279,828 403,857
Cost of Coal Sales and Processing
(5,569,133) (944,327) (8,459,992) (1,744,842)
Accretion Expense
(363,820) (305,636) (631,442) (611,273)
Depreciation
(630,341) (475,014) (1,256,383) (868,544)
Amortization of Mining Rights
(311,685) (311,685) (615,079) (623,370)
General and Administrative
(903,046) (593,621) (1,923,861) (1,675,068)
Professional Fees
(235,487) (193,951) (586,425) (903,984)
Production Taxes and Royalties
(786,008) (99,475) (1,605,485) (667,658)
Development Costs
(11,532,406) (3,055,603) (18,316,594) (4,867,554)
Total Operating Expenses
(20,331,926) (5,979,312) (33,395,261) (11,962,293)
Net Loss from Operations
(4,132,722) (5,586,102) (8,115,433) (11,558,436)
Other Income (loss)
76,000 (446,884) 158,156 (411,588)
Unrealized loss on trading securities
(7,602) - (7,602) -
Gain on cancelation of debt
1,891,848 - 3,413,152 -
Amortization of debt discount and issuance costs
- (2,579) - (5,458)
Interest Income
3,282 60,220 13,327 101,392
Interest expense
(274,640) (674,829) (658,336) (1,165,942)
Total Other income (expense)
1,688,888 1,064,072) 2,918,697 (1,481,596)
Net Income (Loss)
$(2,443,834) $(6,650,174) $(5,196,736) $(13,040,032)
Less: Non-Controlling interest
12,666 - 20,550 -
Net loss attributable to American Resources Corporation shareholders
(2,431,168) - (5,176,186) -
Net loss per common share - basic and diluted
$(.04) $(.13) $(.08) $(.26)
Weighted average common shares outstanding
66,377,788 52,133,268 65,846,220 49,539,996

AMERICAN RESOURCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED

June 30,
2022
December 31,
2021
ASSETS
CURRENT ASSETS
Cash
$3,807,783 $11,492,702
Accounts Receivable
5,354,770 3,175,636
Prepaid fees
816,053 624,605
Total Current Assets
9,978,606 15,292,943
LONG-TERM ASSETS
Cash - restricted
1,086,971 1,095,411
Property and Equipment, Net
22,883,868 22,903,154
Right of use assets, net
1,799,769 726,194
Investment in LLC - Related Party
3,242,398 2,500,000
Note Receivable
685,000 350,000
Total Long-Term Assets
27,698,006 27,574,759
TOTAL ASSETS
$37,676,612 $42,872,702
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable
$2,982,208 $3,245,566
Non-Trade payables
1,984,399 1,950,567
Accounts payable - related party
3,940,317 3,932,716
Accrued interest
38,194 1,325,286
Due to affiliate
69,000 69,000
Current portion of debt
410,417 5,283,647
Current portion of convertible debt, (net of unamortized discount of $0 and $40,655)
- 571,618
Current portion of operating lease liabilities, net
85,218 151,806
Current portion of finance lease liabilities, net
341,771 -
Total Current Liabilities
9,851,524 16,530,206
LONG-TERM LIABILITIES
Notes payable
2,500,000 548,477
Convertible note payables
9,192,731 8,620,412
Reclamation liability
19,583,029 18,951,587
Operating lease liabilities, net
591,127 562,428
Finance lease liabilities, net
655,468 -
Total Long-Term Liabilities
32,522,355 28,682,904
Total Liabilities
42,373,879 45,213,110
STOCKHOLDERS' EQUITY (DEFICIT)
AREC - Class A Common stock: $.0001 par value; 230,000,000 shares authorized, 66,613,085 and 65,084,992 shares issued and outstanding
6,661 6,508
Additional paid-in capital
166,286,379 163,441,655
Accumulated deficit
(170,969,757) (165,793,571)
Total American Resources Corporation Stockholders' Equity (Deficit)
(4,676,717) (2,345,408)
Non controlling interest
(20,550) -
Total stockholders' deficit
(4,697,267) (2,345,408)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$37,676,612 $42,872,702

AMERICAN RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED

For the six
months ended
For the six
months ended
June 30,
2022
June 30,
2021
Cash Flows from Operating activities:
Net loss
$(5,196,736) $13,040,032)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on debt forgiveness
(3,413,152) -
Depreciation expense
1,256,383 868,544
Amortization of mining rights
615,079 623,370
Accretion expense
631,442 611,273
Amortization expense of right to use assets
(15,021) -
Amortization of issuance costs and debt discount
- 3,560,019
Options expense
389,867 230,050
Warrant expense
673,455 -
Issuance of common shares for service
- 10,000
Change in current assets and liabilities:
Accounts receivable
(2,179,134) (103,673)
Inventory
- (488,376)
Prepaid expenses and other assets
(191,448) (93,333)
Accounts payable
(229,526) (2,246,713)
Accrued interest
(299,700) (711,104)
Accounts payable - related party
7,601 334,167
Net cash (used in)/generated from operations
(7,950,890) (10,445,808)
Cash Flows from Investing activities:
Cash used in investments in LLCs
(742,398) (2,250,000)
Cash invested in note receivable
(335,000) -
Cash received (paid) for PPE, net
147,824 (676,601)
Net cash (used in)/generated from investing activities
(929,574) (2,926,601)
Cash Flows from Financing activities:
Principal payments on finance lease
(99,204) -
Principal payments on debt
(1,276,691) (787,849)
Proceeds from convertible note
- 600,000
Proceeds from the sale of common stock, net
- 29,218,000
Proceeds from debt
2,563,000 -
Proceeds from warrant conversions
- 2,269,428
Net cash (used in)/generated from financing activities
1,187,105 31,299,579
Increase(decrease) in cash and restricted cash
(7,693,359) 17,927,170
Cash and restricted cash, beginning of period
12,588,113 11,201,203
Cash and restricted cash, end of period
$4,894,754 $29,128,373
Supplemental Information
Cash paid for interest
$64,094 $42,426
Conversion of debt and interest to common shares
$1,822,210 $10,757,260
Acquisition of right of use assets for lease obligations
$1,117,219 $-

Reconciliation of Non-GAAP Measures
Reconciliation of Adjusted EBITDA to Amounts Reported Under U.S. GAAP

For the three months ended June 30, 2022 For the three months ended June 30, 2021
Net Income
(2,443,834) (6,650,174)
Interest & Other Expenses
260,807 674,829
Income Tax Expense
- -
Accretion Expense
363,820 305,636
Depreciation
630,341 475,014
Amortization of Mining Rights
311,685 311,685
Amortization of Debt Discount & Issuance
- -
Non-Cash Stock, Warrant & Option Comp. Expense
863,479 262,025
Development Costs
11,532,406 3,055,603
PCR Restructuring Expenses
- 1,028,304
Total Adjustments
13,962,538 6,113,096
Adjusted EBITDA
11,518,704 (537,078)

About American Resources Corporation

American Resources Corporation is a next-generation, environmentally and socially responsible supplier of high-quality raw materials to the new infrastructure market. The Company is focused on the extraction and processing of metallurgical carbon, an essential ingredient used in steelmaking, critical and rare earth minerals for the electrification market, and reprocessed metal to be recycled. American Resources has a growing portfolio of operations located in the Central Appalachian basin of eastern Kentucky and southern West Virginia where premium quality metallurgical carbon and rare earth mineral deposits are concentrated.

American Resources has established a nimble, low-cost business model centered on growth, which provides a significant opportunity to scale its portfolio of assets to meet the growing global infrastructure and electrification markets while also continuing to acquire operations and significantly reduce their legacy industry risks. Its streamlined and efficient operations are able to maximize margins while reducing costs. For more information visit americanresourcescorp.com or connect with the Company on Facebook, Twitter, and LinkedIn.

About ReElement Technologies LLC

ReElement Technologies LLC is redefining how critical and rare earth elements are both sourced and processed while focusing on the recycling of end-of-life products such as rare earth permanent magnets and lithium-ion batteries, as well as coal-based waste streams and byproducts to create a low-cost and environmentally-safe, circular supply chain. American Rare Earth has developed its innovative and scalable "Capture-Process-Purify" process chain in conjunction with its licensed intellectual property including 16 patents and technologies and sponsored research partnerships with three leading universities to support the domestic supply chain's growing demand for magnet and battery metals. For more information visit reelementtech.com or connect with the Company on Facebook, Twitter, and LinkedIn.

Special Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties, and other important factors that could cause the Company's actual results, performance, or achievements or industry results to differ materially from any future results, performance, or achievements expressed or implied by these forward-looking statements. These statements are subject to a number of risks and uncertainties, many of which are beyond American Resources Corporation's control. The words "believes", "may", "will", "should", "would", "could", "continue", "seeks", "anticipates", "plans", "expects", "intends", "estimates", or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Any forward-looking statements included in this press release are made only as of the date of this release. The Company does not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances. The Company cannot assure you that the projected results or events will be achieved.

PR Contact

Precision Public Relations
Matt Sheldon
917-280-7329
[email protected]

Investor Contact:

JTC Team, LLC
Jenene Thomas
833-475-8247
[email protected]

RedChip Companies Inc.
Todd McKnight
1-800-RED-CHIP (733-2447)
[email protected]

Company Contact:

Mark LaVerghetta
Vice President of Corporate Finance and Communications
317-855-9926 ext. 0
[email protected]

SOURCE: American Resources Corporation

Topic:
Earnings
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