Aqua Metals Inc. Q1 2023 Earnings Call
Good afternoon, and welcome to the Aqua metals first quarter financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Submit a question via the web at any time by type typing them into the ask a question field.
Please note this conference is being recorded.
I will now turn the call over to your host Bob Myers.
F N K Investor Relations. Please go ahead Bob thank.
Thank you operator, and thank you everybody for joining earlier today Aqua metals issued a press release, providing an operational update and discussing financial results for the first quarter ended March 31 2023.
This release is available in the Investor Relations section on the company's website at Aqua metals dotcom.
Hosting the call today are Steve Cotton, President and Chief Executive Officer.
Judd Merrill Chief Financial Officer.
Before we begin I would like to remind participants that during the call management will be making forward looking statements.
Please refer to the company's report on Form 10-K filed March 9th.
Our Form 10-Q filed today may 4th for a summary of the forward looking statements and the risks uncertainties and other factors that 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.
Collect new circumstances or unanticipated events as they occur.
Except as required by law.
As a reminder, after the formal remarks, we will be taking questions.
Questions will be accepted over the phone from analysts.
All other investors can submit a question using the online webcast portal.
In today's in last week's press releases.
We will take as many questions as we can in our available time slot.
To start the call we will show a brief video that highlights our progress for.
For those that have dialed in.
You will be able to hear the narration and the replays will be available on our website.
He will lead the call from there.
Aqua metals is taking lithium ion battery recycling them, taking the pure metals out of them and using that to create new batteries. So it's a closed loop system clean system powered by electricity and they're the only company that is.
And able to produce a commercial process like this senator Cortez Master says what Theyre doing here is an opportunity for the silver state to leave the country when it comes to clean energy yesterday.
I was at trick.
Visiting Aqua metals Aqua metals has pioneered a process to recycle lithium ion batteries and recover the valuable metals and lithium hydroxide, creating this circular supply of critical minerals for domestic battery manufacturing.
During the first quarter, our lithium Aqua refining pilot became fully operational becoming the first sustainable lithium battery recycling facility in North America. We are actively recovering critical battery metals like copper and nickel in their pure form and recently announced we became the first battery recycler to natively produce.
Lithium hydroxide without the need for additional and costly refining with samples of these high quality products in hand, Aqua metals continues to advance partnership and supply agreements with key companies across the supply chain and we are very excited about our recently announced partnership with <unk> energy a global leader in sustainable.
Manufacturing of battery cathode materials, our commitment to pioneering low carbon close loop battery recycling powered by electricity aligns perfectly with 6K energy sustainable manufacturing and our partnership signifies a major step towards U S leadership in the next generation of net zero battery material.
And technologies.
Okay.
Everyone, who joined US today, though it's only been a short time since we last year on a quarterly update Aqua metals is already making major progress. This year as you just saw in our highlight video Aqua metals has made operational progress by all measures in the first quarter of <unk>.
23 building upon the many milestones achieved last year, we are rapidly demonstrating the capabilities and expertise to drive toward full commercialization. We are proving our innovative sustainable and closed loop technology in our lithium Aqua refining pilot facility and after securing property for our commercial growth we are.
Already well underway in upgrading the existing building number one the first phase of our five acre clean metals campus into a 3000 input tons per year recycling facility, which we will expect to begin the commissioning by Q1 of next year as we previously announced we plan to expand our first campus to a target of 10.
Input tons per year, which could generate $200 billion or more of revenue.
Perhaps most importantly today, though is that we are now fully operational at our revolutionary lithium Agra refining pilot in Q1, Aqua metals became the first sustainable lithium ion battery recycling facility in operation that does not use polluting smelters to recover valuable materials from black mass we are now producing high.
Quality metals like copper nickel and lithium hydroxide from spent lithium batteries and operating our innovative pilot facility 24 hours a day five days a week, we couldnt be more excited for our continued operational progress and we continue to share samples of our high purity sustainably recycled battery material.
As with manufacturers and Oems across the supply chain, who have also been here visiting our operation.
And those ongoing supply agreements and partnership discussions are bearing fruit on the supply side, we have recently announced agreements for all of the lithium battery black mass we need for 2023 and now into 2024, meaning that the raw materials needed to reach commercial scale production at our new recycling campus are secured.
We continue to work with and identify a diverse array of black mass suppliers and are now placing orders for material at scale.
And on the Offtake side, we announced earlier this week that Aqua metals has initiated a development partnership with 6K energy and signed a letter of intent to supply their first of kind plus cam cathode manufacturing facility in Jackson, Tennessee, where 6K plans to produce 13000 tons of cathode material each year.
<unk>, which would equate to approximately 100 to 200000, the average EV battery packs, depending upon battery chemistry and size.
<unk> energy is an ideal off take partner to announce for Aqua metals, both Aqua metals and <unk> share the vision of creating a low carbon and circular supply chain for critical battery materials domestically, while at the same time advancing cost effective production methods for sustainable lithium ion batteries and our partnership signifies a may.
Roger step towards U S leadership in the next generation of net zero battery materials and technologies.
Led by our development partnership with 6K, Aqua metals will be building on our patented and patent pending state of the art offer refining technology to commercialize a sustainable P. Cam production process that replaces chemical catalysts with clean electricity pecan or cathode precursor materials.
<unk> is an essential input for <unk> high performance low carbon cathode materials that will power the future of American made lithium ion batteries Aqua metals has already filed VIP for the suite of technology earlier. This year and this development project was 6K upon completion will allow us to license our innovative metal to P. Chem Tech.
<unk> to take battery metals and metal form sourced from us and even the open metals markets to a 6K specific process that 6K will operate to create input ready material.
The initial engineering agreement will also generate modest revenues under $1 billion for Aqua metals during the remainder of this year.
And our jointly anticipated development success expected later this year will pave the way for a supply agreement that the companies are currently negotiating based on 6K as expected manufacturing volume at plus Cam as it comes online in 2020 for 2025.
This supply agreement would be for thousands of tons of material each year and represents hundreds of millions of dollars in potential revenue for aqua metals throughout the contract term not.
Not only does this partnership build on Aqua metals intellectual property and cutting edge engineering capabilities, but it also reinforces the value of our inherent flexibility in the battery metals marketplace.
Because we produce high purity metals instead of alloys are sulfates when recycling, we believe that Aqua refining offers greater certainty and flexibility in meeting the exacting standards of tier one battery and cathode manufacturers by starting with pure inputs. Each manufacturer has a specific recipe for exactly what theyre looking for and in our ongoing part.
<unk> discussions are pure metals inputs stands out as a key selling point.
The process of turning peer metals into battery metals is well understood and that fundamentally de risks Aqua metals as a supplier. We are also currently negotiating agreements with traditional metals buyers based on <unk> value impurity, meaning we plan to always have an off taker for any metals, we produce not assigned to a specific off taker.
Or OEM in the near term, we expect to sell limited quantities of recycled materials to metals buyers. While also reserving finished materials for testing product samples and of course future R&D work.
This flexible business strategy and demonstrated success is bolstered by our steadily improving financial position just.
Just a few days ago, we received the final $12 million payment from Comstock, Inc. As part of the previously announced industrial lease agreement and sale of our previous property. This transaction resulted in net proceeds of approximately $6 million after paying off our interim loan this amount combined with our quarter end cash balance totals more than nine.
And cash an amount sufficient to execute our 2023 plans.
Our continued progress is garnering significant attention not just from partners and potential customers, but from politicians as well in April U S. Senator Catherine Cortez Masco and her staff visited and toward our pilot facility in Tahoe Reno as you saw in the highlighted real the next day. The Senator took our message of building a circuit.
Domestic supply chain for critical minerals to the floor of the Nevada legislature.
The senators enthusiasm appraise were welcomed by the entire team and we are glad that Aqua metals vision is resonating with political leaders. She is a tremendous advocate for Nevada businesses and is offered great Council and our ongoing discussions with other government offices and agencies as you can see Aqua metals is progressing on all fronts.
Our technology is being proven out every day as we reached new operational milestones, we have secured the necessary supply of black mass feedstocks to reach commercial scale. We are generating revenues and we now have announced two planned offtake agreements for 6K and for Dragonfly energy for our sustainably recycled.
<unk> with more anticipated to come.
<unk> is accelerating and this is just the beginning.
So now I'll turn the call over to Judd Merrill our CFO to discuss the results.
Thanks, Steve.
I'll start my comments with our balance sheet.
As of March 31, 2023.
We had total assets of $34 million and working capital of $7 4 million. We ended the quarter with total cash of approximately $3 4 million.
After the quarter close we collected the remaining balance of $12 billion for the 2500, Peru property sell.
Part of the proceeds were used to retire the $6 million note with alpine we secured in 2022.
Cash on hand cash received from this asset sale.
<unk> cover costs related to operating the pilot plant.
So outfitting up R Walton campus facility.
General corporate needs for the remainder of 2023.
Property plant and equipment increased approximately $4 $5 million during the quarter.
Largely driven by the purchase of our new campus processing site located in the Tahoe, Reno Industrial Center, which we secured with a $3 million note.
There were no other significant changes on our balance sheet since our last quarterly report so I'll move to the income statements.
In Q1, we were focused on advancing and executing our operations at our pilot facility and began the initial work to build out our commercial facility.
We had limited commercial scale production during the first quarter and as a result, no revenues were generated during the quarter.
Plant operating costs related to operating our pilot facility in Q1 2023.
Q1, 2022 plant operating costs included clean up costs related to the recently sold 2500, Peru plants.
Research and development costs decreased by approximately 19% compared to the quarter ended March 31 2022.
As we expected our Q1 2023, R&D expenses were lower than last year as we focus in Q1 more on plant operation.
We will see R&D expenses related to our agreement with 6K in the next two quarters.
General and administrative expenses increased approximately eight 7% for the quarter ended March 31, 2023 compared to the quarter ended March 31 2022.
This was in line with expectations and guidance.
Non cash charges included in G&A, including stock comps were approximately <unk> 7 million.
The first quarter 2023, we had an operating loss of $4 5 million compared to an operating loss of $4 3 million for the same period in 2022.
Our net loss for the quarter ended March 31, 2023 was $4 6 million or a negative <unk> <unk> per basic and diluted share compared to a net loss of $4 4 million or a negative <unk> <unk> per basic and diluted share for the same period in 2022.
Okay.
We continued to manage our cash utilization sufficiently.
Cash used in operating activities for the quarter ended March 31, 2023 was $2 9 million.
Q1 cash needs were approximately 900000 per month as expected largely due to the addition of more employees and consultants as we invest more in lithium ion battery recycling technology.
Net cash used in investing activities for the quarter was $5 2 million. This consisted mainly of $4 3 million utilized towards the purchase of the campus building and property.
Net cash provided by financing activities was $4 4 million for the quarter.
This consisted mainly of $3 million from the note received.
<unk> of net proceeds from the sale of incremental shares pursuant to the ATM.
We have maintained a healthy balance sheet and have grown our company responsibly.
Our current cash balance, including the sale of the 2500, Peru asset.
And our expected revenues later this year support our base company costs needed to operate our pilot plant throughout the year.
Expansion of our campus property and equipment needed will require additional investments we are actively pursuing non dilutive options, including debt USDA back no government grants and strategic partnership investments.
We are confident in our technology partnerships and keen to be able to deliver on our plans this year.
And with that that concludes my remarks on the financials I will now turn it back over to the moderator for Q&A.
Thank you, we'll now conduct a question and answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad. You also have the option to type your question via the webcast using the ask a question feature one moment. Please pull for questions. Once again Thats star one to replacement question queue and we ask you.
These limit yourselves to two questions and one follow up our first question is coming from Colin Rusch from Oppenheimer. Your line is now live.
Thanks, So much you guys could you talk just remind us the contributions at 6K is going to make to this to this partnership both financial and otherwise.
Hey, Colin yes so.
6K is exciting because it's not only a.
Nonrecurring engineering source of revenue for Aqua metals this year.
Really finish out the development of the ability to go straight from metal to the materials that they need to do their cathode active material production, but it's also in contemplation of a supply agreement, where we would provide to 6K the output from our first campus facility and potentially even in co located operation.
<unk>.
The cobalt and nickel and copper in lithium hydroxide in.
In the form that helps them to develop their cathode active materials. So it's really an engineering.
And technology Cooperative agreement that also contemplates completing very soon the supply agreement, which could be worth as I said earlier, one hundreds of millions of dollars to aqua metals over the term of the contract.
Great and then in terms of the USDA loan and grant funding can you just give us a sense of where youre at in terms of maturity of those conversations and those processes.
Yes.
USDA is moving along nicely.
That kind of the pre application phase, we expect to submit something by the end of June early July .
And Bill this year back shortly after that so.
We're very active in that area. We've got some different consultants that are working with we're doing the feasibility study we're doing the engineering study.
And putting together all the models that are required so.
Moving forward on that.
On I don't know if you asked about it but just on the grants.
Right.
<unk>.
There is one grants I think that we talked about that we applied for it was $5 million.
And we will hear back probably late summer on that.
A significant portion of it would come to us and we have some partners on that as well.
So we're optimistic but we don't know until probably August September timeframe on that.
We expect the next.
Big round of grants and the department of energy to come out.
This summer.
We are preparing to apply it to those as well.
Okay. Thanks, so much and the final one for me is just I know it's early days with this pilot facility, but could you give us a sense of what youre seeing from a yield standpoint at this point in terms of a material and material out.
And the range of quality that youre getting off that process.
Yes, so that's a great question in terms of the yield that we're getting in terms of the value of the metals that we talked about we're getting pretty much all but like $20 a ton of black mass worth of value out of that material. So the yield is very high and we're seeing great.
Process flow and.
Throughput is beginning to kick in as we mentioned on the call. We've gone to 24 hours a day by five days a week operations that means.
People working at the pilot facility and the pilot is operating for 24 hours a day during the Monday to Friday timeframe. So.
We expect it will beginning begin to produce enough quantity of material that we're not only using that material for our own testing and samples to our offtake partners and things along those lines, but also to sell that material in the metals market you need to get to probably a minimum of a ton of each type of.
Metal and we expect that we will be there.
Matter of weeks that we have the opportunity to begin selling those materials.
And that takes time when you make your first sale to get through the whole qualification and payments and things like that but we do expect to begin selling those materials relatively soon.
Great. Thanks, so much guys.
Thanks.
Thank you. Our next question is coming from <unk> Joshi from H C. Wainwright. Your line is now live.
Hey, guys. Thanks for taking my question.
Congratulations on the targeted.
Just a few questions on the six key.
What are the financial commitment requirement.
<unk>.
Limited.
Okay.
So what we've disclosed publicly is that they.
<unk> portion, which I think is what youre, asking about which is a non recurring engineering.
Fees. The 6K, we will be paying the aqua metals will be less.
But a significant amount.
And the exact amount will depend upon how everything goes throughout the remainder of this year, but we expect that we will book lets say several hundred thousand dollars of revenues from 6K or the nonrecurring engineering portion.
That is to connect our process, where we get to the pure metals production as well as lithium hydroxide and be able to take that material and get it through our IP through some customization of our IP to fit their process by the end of the year in the meantime, we are working on our.
<unk> for a long term supply contract that was mentioning earlier it could be worth hundreds of millions of dollars.
Aqua metals over the term of the contract.
And that's really to fulfill their facility plans for their Jackson, Tennessee, plus Cam facility and that is slated about 13000 tons per year of cathode active material production.
It will be a significant portion of that that supply was also really cool about this relationship with 6K is not just sustainable battery recycled materials from the metals that we extract but this technology that we're working on a 6K will also allow for the ability to retrieve.
Metals from the mining world, such as nickel and cobalt as examples or even lithium and get those converted into the form that they need in order to make those cathode active materials, but they are really innovative process that matches well with our carbon.
Free solution.
Understood.
So my question to understand it.
The development agreement you were getting speed.
Falling by six to fund development.
This new accounting question on that will just be considered revenues or will it be R&D or some other line item.
Yes, so it won't be considered.
Revenues from our pilot operation, but it would be a revenue line item offset by some R&D expense.
Understood.
And then in terms of your capacity.
<unk> goal for clothing.
Don.
No.
Facility take all your capacity or how should we think about that.
Yes, so we don't.
Tend to sell out the entire capacity of our campus to one partner, but 6K, we'll certainly achieve a significant portion of that capacity as we've already announced we have a relationship with dragonfly energy for example for the lithium.
<unk> side, so there is.
A growing number of clients that we will and partners that will be working with from the output of that facility, but we do say in that announcement that we're contemplating co location and the ability to add to the capacity of our additional campus as we develop our partner network.
In the longer term, we will see some additional projects.
Potentially coming to light that is aqua refining lithium arc refining technology in locations beyond our own campus facility.
Understood.
In terms of.
Just if I look at us and view that uses operational now.
What kind of revenues should we expect from this during 2023.
<unk>.
Sam.
On.
Not significant revenues.
Yeah no. Thanks for the question so.
2023, adult all about getting our pilot tested and running in which we're doing been successful so far.
24 is about operating the demonstration plant and Thats and.
And that's where all the work we're doing now.
We are producing metal.
And there will be some revenue there will be a modest amount of revenue in 2023.
But the focus.
Last one revenues this year more on on it next year as we operate the bigger plants.
But there will still be some revenue that we'll see from that and from six gig.
Yes, yes, yes.
Understand that.
This will be mostly.
I'm picking up on.
Getting traction on the commercial side.
Just a last clarification.
Thank you.
Our cash balance as of now is around $90 million or about $9 million.
Right. So so.
In the quarter with a little over 3 million $3 3 million.
We successfully closed on the sale of 2500, Peru asset that was $12 million that we brought in how we use six of that to pay off that bridge note significantly reduce the debt.
Yes, we had so the fixed plus the three.
It was where we came up with the nine.
Got it understood thanks for that.
And good luck with your next month.
Thank you. Thank you we reached in the <unk> portion of our Q&A session I'd like to turn the floor back over to Bob Myers for the web portion.
Thank you, yes, we have a few questions.
<unk> K.
What were the most important factors for Aqua metals that made 6K, the right partner at this time.
What influenced 6K, if you're able to expand on that.
Yeah. Thanks, Bob.
For asking that question so.
There's a number of factors that really makes it a great fit for Aqua metals.
Starts were really at a fundamental level with the companys mutual and shared vision.
Building that domestic and sustainable supply chain for critical battery materials. So it's a really natural fit their processes powered by electricity in our process as we talked about quite a bit is powered by electricity not powered by fossil fuels or intensive use of chemicals with waste stream. So that's really.
The big part of the fit was and for our fit into the ecosystem.
Yes.
<unk>.
Really good at generating the critical battery minerals in pure form and was 6K is a pioneer at is creating cathode material production in their plasma technology really is truly next level. They are scaling operations rapidly in line really with our strategic growth plan as well.
And there are a prime example of the types of offtake or partnerships I would say that we are working to develop and the expected demand for raw materials that we all think we're going to see.
Would be significant in the coming years, we believe that the combination of our domestic supplies of the recycled critical minerals.
Metals and their domestic manufacturing also makes batteries manufactured from our joint products fully eligible for the IRA initiatives and tax credits.
So really all of this combined with the low emissions benefits.
For our combined technologies, we think and we know they think makes for an enduring partnership.
Climate constrained world, that's going to be powered by lithium batteries as wed like to refine.
Great. Thank you.
You talked a little bit about the.
On the existing material.
And the question is how far along are you with cobalt and manganese plating.
So far.
Far along in Finn.
Finishing out the suite of minerals from the pilot facility and I guess I would say, we expect to hear from US very soon on the cobalt at the manganese dioxide.
Okay, great. Thank you.
This might be the last question.
And we've talked a little bit about it but when will you be at your.
Target.
Capacity of 6% to 10 metric tons per month at the pilot facility.
We're ramping quickly towards those numbers and again that 6% to 10 months of input materials. So it's actually more tonnes of the output material.
Ultimately as we build molecule that way more than that.
So.
We expect because we have now achieved that we talked about today. The 24 hours a day by five days a week operation, while we're all sleeping at night on a Tuesday night, we're out there, making metals and minerals and we expect that we will achieve that ramp I would say by as we get into the summer.
<unk> complete the achievement of that ramp and in the meantime, we're already as I mentioned earlier, beginning to make stuff at the level of tonnage.
The very near future, we expect that we'll get to that debt capacity of the pilot plant and then really that.
Is.
It's going to be constrained in terms of our revenue opportunity, but as Jeff said earlier the pilot plant isn't about revenue as much as it's about forming.
Correct Lee take the next phase, which is our commercial demonstration plant at our campus facility and build it once and build it right.
We want to be really good stewards to our capital and we've learned a lot from the pilot already and Thats already informed our design.
For the next phase facility. So that's a lot of what the pilot is about of course partner development with partners like 6K and dragonfly.
Looked at samples of our materials and others that were not about able to talk about today, that's really more of a function of that pilot.
Okay perfect. Thank you.
We reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Great.
Thank you operator, I'd also like to point out and highlight that we have some really great content on our website for anyone that wants to learn more you can always see.
Right on our homepage in the what's new summary.
What's going on of late and then check out our media tab. In addition to press releases and in the news that you see in most websites. We also have comprehensive materials in our block that we called the current with video and other information, we recently announced our battery Recycler, Pds, which has great content and great information on battery recycling.
<unk> anybody up speed quite quickly and all the things they are battery and battery recycling related so with that I'd like to thank everybody for listening in today.
Or on the replay if youre listening to the replay and please make it a great rest of the day. Thanks, everyone.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Okay.