Q1 2022 Aqua Metals Inc Earnings Call
Greetings and welcome to the Aqua Metals' Q1 Investor call.
At this time all participants are in a listen only mode <unk>.
A question and answer session will follow the formal presentation.
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I will now turn the conference over to spokesperson Glenn Axelrod. Thank you you may begin.
Thank you Alex and thank you and welcome to the Aqua metals first quarter 2022 results conference call earlier today Aqua metals released financial results for the quarter ended March 31, 2022. This release is available in the investors section of the company's website at Www Dot Aqua metals Dot com.
Joining us for today's call from management is Steve Cotton, President and CEO Judd Merrill the company's Chief Financial Officer, and Ben take or Chief Engineering and operating officer during.
During today's call management will be making forward looking statements. Please refer to the company's report on Form 10-Q filed today April 28 for a summary of the forward looking statements and the risks uncertainties and other factors 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.
Binder after management's formal remarks, we'll be taking questions questions will be accepted over the phone from analysts and all other investors can submit a question using the online webinar portal provided in todays in last week's press release, we will take as many questions as we can in our available time slot and with that I'd like to turn the call over to Steve Cotton.
Oh of Aqua metals, Steve. Please go ahead.
Thank you Glenn and thank you everybody for attending today.
For those of you that have access to the slide deck, you can follow along and we're going to refer to the slide numbers as we go through the slides for those of you that are looking at the slide deck, not synchronized but offline and for those of you that don't have access to the slide you can listen to law and refer to the deck at a later time, so I'm going to start with slide number one which has been.
Aqua metals as evidenced today by some announcements that we made earlier this morning as well as a further material we will be providing we are really leading a revolution in both led and lithium battery recycling move.
Moving on to the next slide Glenn read to you guys. The safe Harbor, so I'm not going to belabor that that's for your reference.
Slide number three is our mission statement.
That is to provide sustainable metal recycling for materials that are strategic to energy storage applications are proven breakthrough technology Aqua refining returns these raw materials to the manufacturing supply chain and both the clean way in an economical way reducing reliance on mining.
To meet the growing demand.
Slide number four.
Is a quote that shows two quotes really from the U S Secretary of energy, Jennifer Granholm as well as a general comment from the U S Department of energy and I won't read those quotes to you, but you can see that effectively the vision for the future of stored energy recycling and closed loop processes.
Is about air and water and clean energy as inputs and Aqua refining differentiate greatly from the other technologies that are out there because we uniquely use the renewable elektron versus fire that's used with smelting, which is the only commercially proven process to date, a recycle lithium ion batteries and lead batteries.
And also chemicals as the reagent. So it's it's really important differentiator for arc refining that we use that electron because it can be renewables and it makes it worthwhile to make whole energy transition and power that energy transition from cleaning processes.
The next slide number five is that our technologies are really aligned with the Dolby vision for these reasons, we use a room temperature closed loop fundamentally nonpolluting process, we've already commercially proven our lead recycling capabilities, which we'll talk about where we are with our lead deploying thats very soon here in this presentation.
We've got a cleaner and more cost efficient recovery and recycling process. So the economics are there as well as the environmental we produce a higher quality end product with flexibility that I'll talk about.
And we're expanding of course to the lithium recycling metals, which are inclusive of cobalt nickel manganese copper and lithium.
And in order to do all of this as an enabler as well as the technology partner, we are patent protected on a global basis.
Slide number six is a summary of our recent milestones and we've had a very busy year, so far and we're going to talk about that as well as what's coming up for the remainder of the year.
As you'll see in the Blue, which is our the past present and then we'll get into the Green, which is the present the future in March we already announced that we produced the high purity lithium hydroxide at our innovation Center, where Jud, Ben and I are sitting today.
Our high purity lithium hydroxide is unique and will talk about some of the attributes of that but that's quite a milestone and we believe that we are the first company that has produced high purity lithium hydroxide from black mass in the lithium ion recycling world in.
In March we also on March 22nd announced that we produced high purity copper at our innovation center in metal form and we'll show pictures of these materials by the way as we move through the deck on April 28, we are which is basically our announcements today, we announced that we produced high purity nickel.
At our innovation Center.
So we have one more metal to get the high purity production to go which is the cobalt as we prepare as we move towards to the Green line for Q2 Q3 deployment at Acme in Taiwan, our lead recycling, which we're very excited about we'll talk about more and we're also preparing by Q3 of 2022.
Our pilot scale operational testing of our end to end black mass to and product with pneumonia and Aqua refining system right here at the innovation Center at Tahoe, Reno Industrial center by.
By Q4 Q1 of 2022 getting into 2023, we can see the potential first full scale deployment of work refining for lithium ion batteries articulates AQR mess on NASDAQ. We are incorporated in 2014, we had 75 million shares outstanding as of March 31st cash on hand of 9 million as of March 31st in the comp.
He is debt free and has a very strong balance sheet Judd will be speaking to our financials a little bit later on in our presentation today moving on to slide number seven let's summarize the highlights of our accomplishments just in the past 90 days and to date in this quarter Q1 first off is that our lithium arc refining.
Here in the innovation center at the Black Master the critical metals production is nearly complete and we are as I referenced earlier produce the world's first lithium hydroxide. What we believe is the world's first high purity copper metal and metal form in the world's first high purity nickel metal and metal form from varied battery Chemistries and bear.
But black mass sources.
Like everybody to close their eyes for a second and envision a world that has the future of clean energy a closed loop that has a company that can produce these materials and then open them and look at the front of your eyes, what we've accomplished with our innovation center and nobody else has accomplished that.
Second our secured black mass feedstock is really critical for our pilot system through the year of 2023, you'll see in our press release that we put out today on our quarterly results that we secured that Blackberry feedstock and that ensures our supply to meet the pilot scale needs as we get through the year 2020, Three's two varied supply chain commit.
Once that we've made for that black mass so theres no more concern on supply through the year 2023 for the company for input feedstock to its processes.
Third we've added key organizational capability, we've added engineers to help them.
Our innovation proceed at a more rapid rate for.
For the Asia Pacific Region, we brought out a leader just in churn that we announced as you can see in our prior announcements to help us on the ground there in Taiwan with our let the deployment of arc refining in Taiwan as well as the business development related to that which we'll talk about and our overall Asia Pac strategy inclusive of lithium.
Justin It was the country manager for China for Agri Mall, which is the world's largest lithium company.
We also hired our chief strategist, Oh and add to the company as a really strong individual David Mercury, who is helping us drive forward pursuing government grants from the infrastructure Bill as well as working with silver State government relations to help us make sure that we are.
Local centers in Nevada, as well as governor and the folks in pay street are well aware of what Aqua metals is doing here.
Quite a bit of organizational capacity added for just this quarter next point, our patent portfolio continued to grow in quarter. We added one U S to international patents.
Which now totals 82 that have been issued and allowed matters nine in the U S 74, and issued patents and three allowed foreign applications are.
The main patent application this quarter progressed from a provisional two are pending status as.
As we continue to add to the IP portfolio next.
Next bullet point is that our Taiwan led arc refining equipment for Acme metals shipped and the instill installation and commissioning is really the next step that commissioning is slated to start in July instead of June and there's been about a 30 day delay.
Due to Covid restrictions, but we anticipate that that's the only delay that we should see.
Next bullet point is we've accelerated our research and development efforts and we did access in the quarter. The a T M for a total of $3 9 million as we said we would do before to achieve strategic steps. What we use those funds for was to invest in the equipment and people in that black mask that I referenced in the second bullet point here to.
Support our pilot and the potential future scaling of that pilot, which could turn a pilot line here at the innovation center into a revenue producing facility that will talk about shortly.
Moving on to the next slide slide number eight this is more detail on Acme in Taiwan, which is still on track for our Q2 and Q3 install commissioning and ramp up.
Tie a tie in Taiwan, Acme as our first partner in the largest and fastest growing.
Part of the lead acid battery market really the even the lithium battery market, which is in the Asia Pacific region as I mentioned before our leaders onboard an on the ground in Taipei working with Acme closely.
We will showcase the clean lead recycling technology, all walk refining in a market, where the environmental drivers are getting stronger and much more quickly growing in importance and in their nature of a clean processing with metals and Acme has those strong relationships in the third bullet point with glue.
Battery manufacturers to develop a methodology to produce oxide directly from the op refined material Youll see a couple of pictures from the quarter below of our team members I'm, saying goodbye to the equipment as it gets packed up and prepared for shipment to Acme in Taiwan, and we're very excited.
About moving forward with that installation and moving forward with the commercialized version of the first Aqua refining technologies for led.
Moving on to slide number nine this is.
Really a market opportunity that is staggeringly a quickly growing in the lithium space as well and the predicted volumes of used batteries make it imperative that recycling is done sustainably. So we can feed the growth for demand and do it in a sustainable way. So it was worth it to transition from fossil fuels to.
A clean energy source since clean stored energy for Aqua metals, we estimate our total addressable market to be quite interesting at 10 billion by mid decade, and up to 31 billion by 2030, and that's really based on Aqua refining recovery rates specific to our recovery and the value we can create from the materials. So.
We're quite excited about the market opportunity that we have as we move forward into the future moving.
Moving on to slide 10, this summarizes in three areas how.
Lithium demand.
Demand is rising at a very rapid rate and you can see in the upper left with the global demand for lithium ion batteries being over $3, one really terawatt hours by 2030.
And the second the graphic to the right of that talks about supply chain risks, you'll see the regions, where the various metals are coming from and you might notice that in North America, there's none when it comes to nickel and cobalt and lithium.
However, aqua metals and demonstrate that we can utilize our technology to generate nickel cobalt and lithium and do the nickel and cobalt and metal form in the lithium hydroxide form all of which are high value to feed that growth in demand. So recycling really does change the game.
And puts a great opportunity on a go forward basis on the bottom graph, you'll see that the lithium ion battery recycling can become a game changer in the supply of lithium ion battery material as we get towards the end of the decade.
So now lets do a comparison on slide 11 of smelting.
Standard hydro and off refining there's three basic processes that are out there today, 95% of lithium batteries today are unfortunately, not recycled and end up in a landfill and the 5% that are recycled go through our smelting process, which results with a high environmental impact and is not a viable long term solution as it does.
Not recover any of the lithium so smelting is not lithium recycling in fact really there's no commercial lithium recycler going on today in the world as we stand today, so there's great opportunity to improve upon the.
The old smelting processes and the first step towards that is hydro metallurgy, which we've seen multiple players that are out there in that hydro metallurgical world working on chemical precipitation.
First off the challenge with chemical precipitation is not proven at scale and it's expected to produce battery grade precursors. We think that's high risk. We think that's high risk because of the impurities that can get into those chemical precipitation processes and it all also using 200 times the chemical.
<unk> that we'll talk about compared to off refining can have great economic cost and great environmental costs and worker safety costs and there's challenges to those methodologies that have not been proven and we think arc refining frankly is a better way and what off refining differentiates as I mentioned earlier is that we create the high purity metals in metal for them.
And that is a low risk to get the precursors as you'll see in our press release that we put out today and I'll show you a picture of it in the next slide we not only produce nickel metal form we easily we're able to take that nickel and battle for them and make a nickel sulphate and that is a really important step in getting to battery precursors with a known process which is.
The way the primary metals are mined in today turned into those precursors from those pure metals, if youre, making to pure metals to begin and what you can not only sell them to the pure metals market. You can also get to those precursors without like the multi year prequalification processes that are very stringent that we know all about because we had to go through that with our lead.
Refining and it'll be even more complex in the lithium space going from metals to salt is that much straightforward more path.
Slide number 12 shows what materials, we produced from the Black mask that we've publicized it to date.
And you'll see in the left the picture of the Black mass and that's the amalgam of the ground up lithium ion batteries that have been discharged in ground and two material. They can then begin to be process. Today again that goes to a smelter in the future a in a commercial level, we believe arc refining won't be the best solution, because we've already produced that lithium hydroxide and.
Hydroxide as compared to lithium carbonate has some advantages in the way that that becomes a cathode precursor for batteries. We've also produced the copper and metal form for copper foil production for new batteries and today's announcement of the high purity nickel also easily be getting the nickel sulphate from that high purity nickel.
Is a great step forward and they are the full length of getting from Black Master. The end products. We're very proud of our accomplishments on this front and we like to sit around and look at those pictures all day long frankly.
Moving on to slide number 13. This is why the nickel one it's a nickel announcement is a major accomplishment.
First of all the high purity has been validated by an accredited third party lab the high purity nickel cells.
For over $30000 per tonne and the Oct refined nickel can easily be sold the global metal markets, because it's not just battery people buying nickel. It's it's the steel and Super alloys industry et cetera that has a high demand for nickel, we've seen quite a bit of news about nickel based upon the Washington invasion of Ukraine.
And the offline.
Offline the nickel that is on the global markets and driving up the cost of nickel.
And that's very interesting element funded as we go into the future. The high purity nickel enables the battery grade nickel sulphate and how that nickel sulphate is made today as I mentioned before in other hydro precipitation methods will be much more difficult to qualify and to manage those impurities, especially as they trickle through the system in a developed cyst.
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The only non smelting process to prove that we can recover these high value minerals and ultra pure form without multiple refining steps with them.
That equals is better economics, and better environmentally favorable results for everyone.
Moving on to slide 14, the extraction of all critical minerals is nearly proven the path to lithium revenue for Aqua metals could begin in 2023.
We are commencing orders of key lithium aqua refining pilot equipment for our innovation center, which is being prepared for commissioning of pilot operations to commence.
A months by August we have already secured as I mentioned earlier, the black mass input feedstock for multiple sources for pilot operations through the latter half of 2022 and all of our plans for 2023, and we have an upside opportunity. We believe that we can take the pilot operations at the innovation Center and scale to me.
Meaningful quantities to achieve revenue of significance in 2023.
We are also making significant progress working with politico and we'll be planning to deploy what lithium off refining and political facility just down the road from our pilot and demonstration facility also in 2023 judge that and I just.
<unk> the meeting with political team and they're very excited and proud of what they've been up to accomplish and it provide us that feedstock with black math. So we can begin that process. In addition to our own efforts.
Slide number 15, I will summarize lithium off refining.
The expected advantages are that the lowest operating costs that are possible. We believe we can achieve and the opex, which means the operating expense estimates for competing technologies as published with global reports are between 20 $205000 per metric ton of black mass and we expect to be.
Below the $2200 in our processing costs arc refining also uses one 200.
Of the chemicals of hydro processes, and we recycle the chemicals that we do use.
Our highest quality products that we produce has the highest percentage of the minerals recovered and the valued range depending upon the various types of feedstock are quite large numbers per metric ton as you can see 12500 to $32000 per metric ton. We think we've got the best business model, we have the option to sell products.
Tuned to the battery supply chain, where the metals industry.
We also have a geographically unbound capability to with our business model to do that through licensing as we intend to work through with Lin. It go right here at our own ZIP code, but anywhere in the world.
So we're not plant constrained we have the optionality to engage in joint ventures with all parties that are interested in a joint venture to build and operate a recycling plant utilizing arc refining technology and or be a recycler ourselves inclusive of our pilot line, which could become a meaningful demonstration plant that produces revenue for.
The company and this is a nascent industry and it's not replacing an incumbent technology, but rather setting the standards. So all lithium recycling facilities are being built from the ground up in other words, they're all greenfields and we want the greenfields to be green.
We want the lowest environmental impact we want the only way to get to net zero through our recycling it could be through off refining because we are the only ones that use that renewable electron as the region rather than the chemical rather than the fossil fuel based fires.
So we also improved the worker safety greatly because we're not doing hot work and we're not dealing with highly caustic large quantities of chemicals and waste streams.
It was a worker protection, particularly as we are in the United States and other regions that want to defend and support their critical minerals.
With the technologies, we also want to arm our workers with the safest way to work in these plants in places that people want to go work and that's a really critical element of our core plan is that workers' safety.
So I'm going to pass the presentation to on now to Judd Merrill our CFO to get the financial overview and Judd will begin now go ahead Chad.
Thank you Steve.
Your comments on each of our financial statement I'm going to start first on the balance sheet, which is on slide 17.
As of March 31st 2022, we had total cash of 9 million working capital of $7 9 million and this keeps us with our continued healthy cash and working capital balances.
The accounts receivable on.
A mountain includes money due from the sale of equipment.
The assets held for sale includes non core assets that are no longer necessary for your operating plans.
And in fact, I will note that there were some asset sold in Q1, including about $800000 worth of equipment to any co and $600000 of noncore equipment to other vendors.
Also during the quarter, we exercise our warrants with Venoco.
Which increased our ownership in the company.
Out of increase was $500000 payment that was made in Q1 and our current ownership is approximately 12%.
The lease receivable includes our lease to buy agreement with win at co which is accounted for as a sales type lease.
On the liability.
<unk> section there was very little change compared to year end and as the company continues to be debt free.
Now moving to the income statement on <unk>.
On slide 18.
During the first quarter of 2022 acre metals was focused on research and development activities to enhance our ability to recycle metals found in lithium ion batteries.
We commenced shipping equipment to actually met act metals.
So we were not in commercial production during the quarter of 2022 and as a result, we then it's generating revenues during this quarter.
Cost of product sales decreased by approximately 38% during the quarter to <unk> 9 million compared to $1 6 million in Q1 of 2000.
'twenty one.
The decrease in Q1 of 2022 is largely due to wrapping up the plant cleanup project.
Our research and development costs included expenditures related to improving the lithium ion batteries.
Green technology during.
During the three months ended March 31, 2022 research and development increased overall for the quarter by approximately 91% compared to the three months ended March 31 2021.
Research and development has allowed us to make significant improvements in our led processing.
And is rapidly advancing our lithium.
Battery recycling processes.
General and administrative expenses increased by approximately 20% for the three months ended March 31, 2022 compared to the three months ended March 31st 2021 increases in general and administrative expenses include changes in payroll and an increase in professional professionals.
Yes.
In the quarter with.
With a net loss of $4 4 million or a negative six cents per basic and diluted share.
That was compared to a net loss of $4 1 million or did you get a six cents per basic and diluted share for the first quarter of 2021.
Okay, and then finally I'm going to do to the statement of cash flows which is on slide 19.
Net cash used in operating activities for the three months ended March 31, 2022 was $3 6 million.
This covers our opex and G&A cash needs and was adjusted for noncash items.
This amount is partially driven by 2021 accrued plant cleanup costs that were paid in Q1.
This quarter's average monthly cash needs totaling a little over 800000 per month, which is higher than our average last year of approximately 700000 to 750000 a month.
The increase was also partially due to higher annual.
Compliance and audit costs.
We do expect our monthly base cash costs to be closer to $800000 a month.
Due to addition to more employees and consultants as we invest in more lithium ion battery cycling technologies.
The net cash provided by investing activities for the three months ended March 31, 2021 22.
It does.
$4 million, which was made up of the receipt of $1 1 million of proceeds from the sale of equipment offset.
Point 3 million.
Use towards the purchase of property and equipment and <unk> 5 million used towards the warrant exercise let it go.
The net cash provided by financing activities totaled a total of $4 1 million for the three months ended March 31 2022.
And consistent of $3 9 million in net proceeds from the sale of Aqua metals shares pursuant to the ATM.
For the last three quarters of 2021, we had minimal use of the ATM. However in Q1 of 2022, we did strategically and Opportunistically make use of the ATM to strengthen our lithium.
Saturday recycling efforts and this include.
Securing the black mast investing in equipment for the pilot plant at the innovation Center.
And adding optionality of scaling the plant with larger size core infrastructure, all with the intent to get through revenue sooner.
With that includes my remarks on the financial statements I will now turn it over to the operator to begin the question and answer portion of our call.
Thank you at this time will be conducting a question and answer session.
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Our first question comes from the line of Shawn Severson with water Tower Research. Please proceed with your question.
Alright, thanks, guys.
My first question is around lithium hydroxide, a pure form when you say that.
What does that mean to Aqua metals and I guess, what what are what is produced otherwise I'm just trying to understand the importance of that.
Yes, Sean Thanks for the question and it's unique to Aqua metals that we are the only company thats produce lithium hydroxide and I'm going to ask Ben to kind of talk about the meaning of that are and how that works as a precursor.
Yeah. Thanks.
So the advantage of it being very appear as it is Oh, Yeah go ahead.
It's able to meet an existing spec, which allows it to go directly into the precursor manufacturing many of the existing processes out there are resolved and like Steve said earlier, our carbonate that has to be converted into coffee manner to a hydroxide us going directly to the eye drop.
<unk> has multiple benefits and cost savings to the the precursor manufacturer.
Okay. Thanks for the explanation. My second question is regarding when you say you could generate some revenue what does that mean is there any scope or scale that we can get around that for a little perspective on the timing and actually how much revenue the pilot plant might generate.
Yeah. So we're excited about the innovation center, it's not a small facility. So it allows us the opportunity to not only build our first pilot, which will commence very soon in a matter of months, but the scaled up pilot to really effectively a small demonstration plant.
And those economics of that demonstration plant could be exciting for the company I'll ask John to comment on that.
Yeah, I mean the.
The size of the plant allows us with the even with the pilot to reach run rates of up to $20 million to $25 million a year.
And revenues.
And that's at current pricing for.
Metals, yeah that that would be occurring at current pricing.
Gotcha, Okay and then.
My last question is sort of a longer term economic model question for you guys.
When you look at securing I assume predictable long term supply of Black math right and then you look at you know.
Royalties or production on yearend I assume there'll be offtake agreements there as well. So my point is is over the long term do you end up with a very predictable consistent.
Fairly recurring cash flow, let's say I mean, minus obviously volatility in some of the prices of the metals and things, but trying to understand the supply demand.
Balanced in terms of supply and optics.
Yeah. So that's a great question and.
The predictability will probably be the biggest variable in the metals costs, which we probably will likely see more upward pressure the downwards pressure based upon the high demands and the lower availability of some of those critical minerals like we were talking about in the presentation, but our business model is also fairly predictable in the various models that we can approach.
<unk> with if we have a recurring revenue based licensing arrangement, we would gain a royalty that would still only really be impacted on the variability of the pricing of those metals and as long as the plant could produce that we're licensing to we can collect those running royalties and obviously the equipment sales and services that are related to those in our own black mass production.
<unk> capabilities, which we would be doing at our pilot plant that will turn into a demonstration plant we.
We believe that the predictability of those revenues as long as we're producing those materials will also be subject really the only to the variables of the metals markets and then the added element of our ability to operate if we can operate more efficiently and more of our improved conversion cost of our own operations that helps.
And if it costs us a little bit more to operate that would impact negatively on the margins, but the revenues would remain the same and then the third part of our business model, which is really what we're evaluating is in the form of joint ventures.
It's kind of a hybrid between those two and each one of those deals will be unique so I can't really comment exactly and how those will work out but ultimately we won't be solving for predictable revenues that we can stack on top with each deal that we work out with the various players inclusive of political.
Alright, Thanks that was very helpful. Thanks, Steve.
Yeah.
Our next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.
Thanks, So much as you know with these experiments that you're doing on the recovery with nickel and let Jim can you talk about the recovery levels that you came to us.
From a percentage of the base materials are coming from.
Sure. This is Ben I can take that one.
Right now all of our planning and our lab data suggests that we're gonna be able to achieve 90% recovery or better.
So that's what where you use that for all the metals at this point.
Okay. That's super helpful. And then when you look at the European market, obviously, there's an awful lot going on there in terms of wanting to move towards energy independence and materials independents circularity.
And you had a very strong European partner historically.
Can you talk a little bit about the opportunity for recycling in Europe , you know kind of where you're at from a sales perspective related to led opportunities.
Yeah. So so we're geographically bound with with our model and we're engaging in discussions with various entities that have operations and interest in Europe as well as the U S and Asia Pac and we see great opportunity and in fact from a legislative perspective, when you look at smelting as the incumbent methodology that has to come.
It closed in Europe , because certain percentages of metals need to be recovered based on the earlier question to the band just answered in terms of the percentage of the minerals that we can recover from the Black man certainly would meet those legislative needs smelting will not.
And earlier in our presentation, there's no lithium recovery with smelting. So today commercial lithium ion battery recycling produces a grand total of zero lithium recycling hard to believe but in Europe that legislation is more advanced than even the U S, which will probably catch up and Asia Pacific So we see great opportunity.
For interest in our technologies for for parties that are interested in recycling batteries and building that ecosystem in the European model.
But I think I was looking specifically for what was going on in the OLED market other than all the time. So I don't know if there's an update on a potential let's start now with the hurricane market. Yes. So in terms of the led side for the European market, we see more activity really in the Asia Pac region and in Mexico.
In South America, and I think that's because theres more growth and capacitors nation of facilities and Greenfield builds is where the the technology fits best at it checks all the boxes and those are the regions that you're seeing those types of projects being planned more than in the U S. A.
And more than in Europe , because those are more mature markets in terms of the lead acid battery industry that don't have as much of a need for the capacity position.
Perfect. Thanks, so much guys.
Thanks.
Our next question comes from the line of Amit Dayal with H C. Wainwright. Please proceed with your question.
Thank you good afternoon, everyone.
In terms of scaling the lithium ion recycling opportunity.
One of the catalysts that you sort of need to know you know deliver on to go from pilot to commercial.
So we're following a technology readiness level system that that's common in the chemical engineering World that allows us to meet certain metrics meet certain efficiencies through parts or are based on a defined test plan. Once those metrics are met then it's been a tipping.
[noise] about adding additional operational hours and adding additional capacity to reach those higher skills, that's where Steve mentioned, Steve and John mentioned earlier, the ability to scale, even less facility that were out she has the innovation center. Once we once we meet those metrics that would be.
The goal is to start adding unit operations and adding capacity.
Just on that T. R L love it.
One thing I'll add to that too I mean is that on the TRL levels as we progressed through them.
And having a facility.
We are much better positioned than I think a lot of players in the market that are applying for all these infrastructure opportunities. It's a once in a generation opportunity to be able to receive something like a 50 or 100 million dollar plus grants.
And that's the word grant non dilutive to be able to build and operate at very large facility and getting through those TRL levels as quickly as possible. It gives us the opportunity to unlock our grants like that which were again from an organizational capabilities perspective are actively working on.
So is this a like a 12 month timeline or a two three year time line.
So for the technology deployment part of it I'll, let them comment and then I'll add to Ben's comments on the.
Grant timeline okay.
So what what we've called our prototype here or pilot I think Steve referred to it earlier here at our innovation Center, we expect.
This year is still to get through the the scaling demonstration and proof, which would allow us to start scaling well well well under a 12 month timeline.
And that fits also well within the.
The timeline of these government grants.
There's there's multiple grants that are out there that are pursuing bolt and those do take time, and we're already underway and working on those and those are typically around a year plus or minus to get through the entire grant process. So we could be quarters away or a year and a quarter or two away from.
A very large grant, but possibly sooner because the U S government, there's particularly based upon what's happening in Ukraine is very focused on it and then I don't know if anybody else or but driving into the office. This morning, I heard our president of talking about the war in Ukraine, and then in the midst of that referenced in the discussion that the United States needs to sit.
Cure lithium and nickel in country.
And that is something that I think the government is very interested in working with parties that can help effect that goal and I showed that graph earlier that showed a grand total of zero mineral production in those areas in North America, and so the U S. Government is nothing more than motivated and interested in finding the right opportunities to make that happen.
I mean can these two processes going on with the government grants and one just with the technology itself can do run in parallel or does the technology you need to be ready first and then you are part of the grants.
So the technology needs to get through certain.
T R O L levels in order for the government to choose which entities that you had prioritized and stack ranks who it doles out the grants too. So it's not an unlimited supply of grants and so theres going to be a limited number of entities that are applying for those grants and we feel that with our announcements proving that we can extract these critical minerals that the president himself is referencing.
In the midst of a discussion on the biggest news in 50 years, the or Ukraine.
It gives us an opportunity to windows grants, there's no guarantees for any party blind for those grants, but we feel that we have a great opportunity based upon the progress that we've made.
Understood.
My other question is around just you know you you're able to extract sort of other metals from the black Mashreq Nicola comprehensive dry mouth.
How much complexity and costs you know come into play to do that versus just focusing on the lithium extracting or recently completed with him.
So as Steve mentioned earlier, our targeted conversion costs being well below $2200.
And each one of those metals has a certain amount of conversion cost with them.
The system works most efficiently has an entire system. So just going after the the lithium for example, leaving those those other metals won't be the most efficient process, but surely you can save money by not recovering the nickel and cobalt, which it sounds like it makes sense to do so.
Okay understood.
And my other questions were already discussed I'm, taking my.
Other questions I'll spend thank you.
Great. Thanks.
And I'm seeing no further questions over the phone I would like to turn the call over to Glenn Axelrod for web questions.
Alright, Thanks, Alex we do have quite a few questions in the queue. Steve. So we will try to get through them. All in the next 15 minutes first question, let's say you extract the nickel from black maths using the Aqua refining process can the remaining black mask.
Go through the process again to extract the different metals on the same block mess and if not why.
So if we were just able to go out or or if we did actually around the process, Jeff to recover Nicole surely you could take the rest of the materially and go back after it but the way our processes designed is to upfront setup to recover all of the metals.
So it won't be a problem to come back and get the others ladder it Jeff.
The way the process is designed to run at two <unk>.
Following a process flow individually go after each metal with.
With the initial path.
Okay. I think he may have partially answered. This next question, but I'll ask it anyway, maybe you could.
Follow on with getting the four metals out to acquire four separate steps.
So yeah, there's gotta be it's definitely a multi step process.
Hum.
For the most part each metal that we're going after when you're referring to for I would imagine you're talking about the cobalt nickel lithium in copper and those all individually require on their.
Their own stepping on on module, we also recover them agonies of fifth metal as well.
Okay. Thank you next question what is your capability to scale Equalizers speak to the capital inputs impossible number a normalization of production.
Okay. So more similar in both our Mod and our lithium program, we will design and typically lay out a new installation with a.
Upfront and downstream.
Scale, a little bit larger than required, which basically allows us to take and add modular.
Metal recovery units and what I call. It the middle of the process that that's where the Aqua refinery technology becomes very important so we look at the facility.
We look at the upfront process things of downstream processing and designed it also you can efficiently add an additional module without having too much capital involved.
And you can do that in a very modular form if you wanted to add on.
Modules on a quarter by quarter basis, that's something that can be done.
Okay. Thank you.
New E V and legacy OEM companies are looking to lithium battery recycling is orca metals planning to talk to these guys and see if there are opportunities there.
So we're not really planning to talk to those entities. We are and we have a commercial team that is engaging them as quickly as possible with the various entities that are out there those are some of the areas that could potentially include.
Include opportunities like in the joint venture category as well as feedstock supply for <unk> as one example, and tying together partnerships.
And eco network of supplier of lithium ion batteries, breaking and separation creation of black mass lineker will be producing a lot of black mass in the future and that gives us the opportunity for us to process those materials not only with the political but it isn't.
Even expand the black mass production.
As we go forward. So those types of discussions and relationships are a high priority for the company and they couldn't.
Okay. Thank you.
Well, the operational cost and capital cost of extracting nipple nickel copper and lithium will be the same as for led.
So no.
Operational and capital cost will be significantly different.
Dave match in the 'twenty $200 per ton that we expect to be below that that's more than the value of led historically, so there's a significant difference in operational cost, but what we're most excited about is the amount of margin that is available through lithium it recycling here.
The only higher than what we're currently experiencing in the led industry.
And your next question do you anticipate the royalty revenue to begin with the startup of operations in Taiwan.
The answer is yes, so it will be not a large sum of royalties that will connect collect royalties are really beginning with the first production of material off of those machines.
We'll enter into our first royalty collection and the next one to two quarters.
Okay. Thank you.
Next question, where does the block must come from political providing any black mess.
So black math comes from broken up.
Lithium ion back spent lithium ion batteries.
And yes, we have received and are working with black mass atlantica was providing them as they go through their own scaling operations.
Okay. Thank you next question when do you expect political to complete the purchase of the facility.
Yes politico.
When they when we did the lease to buy agreement had so has gelled March of 2023 to make the full payment.
They they are incentivized to pay that off.
In October they pay in October the purchase price was $1 million last so it's either October of this year or March of 2023.
Okay. Thank you and your last question and then I'll turn the call over to you, Steve How do you or how should we view the scale up is it similar to the led path, where you went from one small bench scale electrolyze or to a single full size unit to multiple full sized units.
So the scale up of the technology for the lithium is going to look different than we did it for the led we went from one full size Aqua wiser to 96 of them.
And that was a big jump and we see other players in the industry in the lithium space trying to make that same big jump and we probably learned a thing or two for making that big jump.
And what we're doing is more of a thoughtful approach with pilot to a demonstration plant to larger demonstration plant to large deployment of facilities. So it's gonna be a step by step process. The fortunate thing about that with the lithium recycling it does generate.
Mentioned earlier potentially significant meaningful enough amount of revenue that you could even carry the company but that allows.
Allows us to really take each step through that technology risk level reduction as we go through the process with a really eye on the large facility being paid for.
Substantially if not all by a government grant by the government is very interested in.
Entities that can produce these critical minerals right now in the U S.
In a safe environment for its workers.
Perfect. There's no further questions in the queue and I don't see any in the phone. So I'll ask Steve for some closing remarks, and then we'll end the call.
Well, great well. Thank you everybody for attending today, a lot of new information. If you have any need for follow up please feel free to reach out to us through Bristol, we'd be happy to engage and discuss with you and we will continue to keep everyone updated as we move forward and really appreciate everybody's interest in Aqua metals.
And thank you for attending again have a great day.
Thank you ladies and gentlemen, this does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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