Q4 2024 Aqua Metals Inc Earnings Call
Speaker Change: Greetings and welcome to the AquaMetals Q4 and full year investor conference call.
Speaker Change: Aqua metals cautions investors not to place undue reliance on any forward looking statements.
Speaker Change: 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.
As a reminder, after the formal remarks, we will be taking questions.
Speaker Change: <unk> will be accepted over the phone from analysts and all other investors can submit a question using the online webcast portal provided in todays in earlier press releases.
Speaker Change: We'll take as many questions as we can in our available time slot.
Speaker Change: And with that I'd like to turn the call over to Steve Cotton CEO of Aqua metals.
Speaker Change: The call is yours.
Speaker Change: Thank you Bob and good afternoon, everyone. I appreciate you joining aqua metals fourth quarter and full year 2024 earnings call I'm, Steve Cotton, President and CEO of Aqua metals.
Speaker Change: I will provide a detailed update on our operations strategic progress and how we are positioning aqua metals for meaningful advancement in 2025. These remarks will cover our technology validation project milestones commercialization strategy financial positioning and our broader vision for scaling critical battery material production right here.
Speaker Change: In the U S.
Speaker Change: 2024 was a year marked by resilience focus and adaptation in a macroeconomic environment challenged by falling battery metal prices and tight capital markets. We took proactive steps to conserve cash validate our technology engage potential partners and refine our strategy for scalable capital efficient deployment.
Speaker Change: We set out with three primary goals. This year first to prove the repeat ability and reliability of our lithium Aqua refining technology second deepen and expand commercial partnerships that will support long term operations and third laid the groundwork for scaling operations through flexible partner centric models that minimize our cap.
Speaker Change: Intensity, while maximizing impact.
Speaker Change: We successfully operated our lithium aqua refining pilot plant for over the whole year, including a three week continuous 24 by seven endurance run completed in December this operational milestone further demonstrated the reliability and efficiency of our process at the pilot scale. The system was consistently delivering impressive.
Speaker Change: Recovery rates and high purity for lithium cobalt and nickel for which we've provided the samples to potential partners and customers globally. In addition, independent analysts have shown that our patented aqua refining process produces 83% less.
Speaker Change: To the traditional hydro metallurgical recycling methods.
Speaker Change: During our December endurance run, we produce more than 600 pounds of battery grade lithium carbonate at purity levels exceeding 99, 5%. That's not just lab scale production. Its representative product at a scale and quality that few if any others in the U S are matching today, we've delivered these samples to multiple cathode active.
Speaker Change: <unk> or Cam producers and we're encouraged by the positive feedback and engaging feedback and the ongoing testing of our material for use in NMC lithium iron phosphate.
Speaker Change: And other battery Chemistries in another major achievement, we worked with the downstream can partner to convert recycled domestic nickel into cathode active material a significant milestone for the domestic industry.
That material is now under validation with several leading battery manufacturers in the U S and in Asia. This is a major proof point for our vision of a closed loop battery materials supply chain. We're end of life batteries feed directly back into the creation of new ones as.
Speaker Change: As we look to scale our impact we've evolved our commercial commercialization strategy to reflect both the opportunities and the realities of today's market, while our Sierra arc facility remains a well prepared and valuable asset. Its completion remains on hold pending further financing we continue to actively.
Speaker Change: Engage with potential capital partners and strategic partners to bring it online wind conditions align but we're not waiting for that singular project to move forward. We are executing a nimble diversified strategy to bring alker finding to commercial scale. We're also prioritizing co location opportunities, where we can deploy our technology.
Speaker Change: G alongside existing recycling or battery manufacturing operations to reduce logistics costs and accelerate time to revenue toll processing models, where we process feedstock on behalf of partners, who already control materials, but need a clean efficient way to recover the critical metals.
Speaker Change: Licensing and joint ventures. These allow partners to deploy our proven arc refining technologies within their own facilities, expanding our reach without heavy capital outlays.
Speaker Change: We're currently in active discussions with multiple parties across these models each model represents in and of itself a direct path to commercial deployment that aligns with our mission and technology advantages our partnership with 6K energy remains a flagship example of our ability to form commercial alliances that support closed loop bag.
Speaker Change: Very material supply chains under our agreement Aqua metals will provide up to 30% of the recycled content for six case domestic cathode manufacturing facility a major achievement for U S. Clean energy infrastructure disagreement is helping to define how domestic circularity for battery materials can become a reality.
We are actively working with 6K as both companies progressed their strategic objectives and plans for commercial scale facilities in parallel we've continued advancing negotiations on feedstock and offtake agreements that will support operations in any commercial deployment, whether at sea or art or elsewhere. These conversations are.
Speaker Change: Integral to Derisking, the ramp of future facilities, and ensuring a stable revenue model as we scale.
Speaker Change: We strengthened our financial position in 2024 with a mix of insider supported equity and strategic cost management, we raised approximately $15 million during the year with over two thirds of the funding coming from Aqua metals leadership and board in our $1 5 billion dollar Bridge note. This internal direct financial investment underscore.
Speaker Change: As our individual and collective confidence in the direction were heading we also secured an up to $2 $2 million tax abatement from the state of Nevada based on the projected economic and employment impacts of our recycling operations. This recognition reflects our contribution to Nevada is emerging ecosystem and broader clean energy <unk>.
Speaker Change: Additionally, we arranged interim bridge financing again with strong insider participation to maintain momentum across our development and partnership initiatives. While we pursue long term project financing and strategic capital options are technology and execution continued to earn validation.
Speaker Change: From government and industry partners, we were honored to be selected by the U S Department of energy for the AC any revised program a national initiative to support domestic critical mineral recovery and circular supply chain environment, plus energy leader also named our Aqua refining process at quote top.
Speaker Change: Project of 2024, unquote, citing its environmental benefits innovation and scalability potential closer to home. We were also recognized as a finalist for the best places to work in Northern Nevada, notably.
Speaker Change: Notably the only lithium focused company in the lithium state to earned that distinction. We also expanded our board of directors, adding experienced leaders from the battery and finance sectors, who bring valuable insight and relationships that are already informing our strategies and our tactics.
Speaker Change: As we move into 2025 Aqua metals is focused on translating technology success into commercial deployment that means advancing co location in licensing opportunities.
Speaker Change: Financing feedstock and off take agreements that underpin all commercial operations, securing strategic funding that enables execution, while preserving shareholder value continuing to produce and supply battery grade recycled materials from our pilot facility as part of customer validation and partnership development, we believe.
Speaker Change: This approach allows us to scale smartly partner effectively and meet a growing in critical need in the U S. For a domestically produced low carbon battery materials in state of the art facilities that can create desirable and lasting jobs for the communities they operate in.
Speaker Change: I want to close by thanking the Aqua metals team.
Speaker Change: Their determination and creativity and commitment made this year's accomplishments possible I also want to thank our partners our board and our shareholders for their ongoing support and continued belief in our mission, we have the technology the talent and the partnerships to lead in clean battery metal recovery with a flex.
Speaker Change: <unk> capital efficient plan in motion, we're positioned to make 2025, a breakout year with that I'll turn it over to Judd for a discussion of our financials.
Judd: Thanks, Steve Let me start my comments with our balance sheet.
Judd: We ended the quarter with total cash of approximately $4 1 million higher than the previous quarter and an indication of management's focus on maintaining our cash position.
Judd: Subsequent to year end, we received the remaining $100000 from when it co related to the year end receivable.
Judd: Capex was largely unchanged unchanged from the prior quarter.
Judd: Towards the end of 2024, we shifted our strategic focus to <unk> lithium carbonate production alongside mixed hydroxide precipitate.
Judd: This decision aimed to reduce capital and operational intensity, while enabling a larger scale facility with higher revenue and improved margins.
Judd: In the previous design.
Judd: As a result of this strategic shift at December 31, 2024, the company recognized an impairment of approximately $2 6 million related to vendor equipment deposits for equipment that was initially required for phase one of the recycling campus atmosphere arc, but is no longer needed under the revised plan.
Judd: Finally on the balance sheet, we recognize the warrant liability related to warrants issued last year.
Judd: The warrant liability was initially recorded at a fair value of 986000, and subsequently re measure to $1.5 million as of December 31, 2024.
Judd: The change in fair value of 507000 was recognized as a noncash expense within interest expense in the income statement.
Judd: For the year ended December 31 2024.
I will now move on to the income statement.
Judd: Plant operations increased approximately 931000 or 15% for the 12 months ended December 31, 2024 as compared to the 12 months ended December 31 2023.
Judd: This increase was primarily driven by.
Judd: Approximately <unk>.
Judd: 758000 rise in payroll and related fees as we hired additional staff to operate the pilot facility process black mass and build out our commercial facility during the first.
Judd: Seven months of the year.
Judd: Subsequent to this and by the fourth quarter, our payroll and related fees expense were significantly lower our 2025 expenses will also be lower.
Judd: General and administrative expense increased approximately 329000 or 3% for the three months ended December 31 2024.
Judd: Compared to the 12 months ended December 31 2023.
Judd: So expect 2025, G&A expenses to be lower than the prior year.
Judd: We recognized interest expense of $1 1 million for the year ended December 31, 2024, and 621000 for the year ended December 31 2023.
Judd: The increase in interest expense is primarily due to the 507000 change in fair value of the warrant liability, which I have just previously explained.
Judd: Our net loss for the 12 months ended December 31, 2024 was approximately $24 6 million or a negative $3.83 per basic and diluted share compared to a net loss of $24 million or a negative $5 10 per basic and diluted share for 2023.
Judd: Now moving onto the cash flow statement.
Judd: Net cash used in operating activities during each of these periods consisted primarily of our net loss adjusted for noncash items, such as such as depreciation amortization and stock based compensation charges as well as changes in working capital.
Judd: Our net cash used in investing.
Judd: Operations.
Judd: Primarily included fixed assets acquisitions deposits for.
Judd: Net fixed asset purchases and proceeds received from the note receivable.
Judd: Net cash provided by financing activities for the year in December.
Judd: Ended December 31, 2024 consisted of approximately $5 million in net proceeds from the sale of Aqua metals shares pursuant to the ATM one.
Judd: $1 $5 billion in net proceeds from the loan agreement entered into on December 18th 2024, and.
Judd: And approximately $7 3 million in net proceeds from our May 2020 for public offering offset by other miscellaneous financing items.
Judd: Our primary financing options remain the same project finance and debt based financing.
Judd: These structures will support our expansion and strategic initiatives and we continue to see them as the best pathways for funding our growth.
Judd: However, we now have even greater confidence as we pursue these options thanks to enhanced economics.
Judd: Resulting from our revised plant architecture and streamlined product set.
Judd: By refining our plant architecture, we have reduced capital expenditure requirements, while maintaining efficiency and scalability.
Judd: This coupled with a simplified project product portfolio has led to improved contribution margins and a key factor in increasing the attractiveness of our financial moderate model to lenders and investors.
Judd: These changes not only strengthen our cash flow, but also position us for more favorable financing terms.
Judd: We are actively engaged with our financing partners to capitalize these improvements ensuring that our funding strategy aligns with our goals, while maintaining financial discipline really remain committed to prudent capital allocation and optimizing our cost structure as.
Judd: As we move forward, we will continue to assess market conditions and evaluate additional financing opportunities as they arise.
Judd: That concludes my remarks on the company financials, I will now turn it back over to the moderator for Q&A.
Judd: Thank you and at this time, we will conduct our question and answer session. If.
Judd: If you'd like to ask a question on the phone press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Judd: As a reminder, you can submit your questions also via the web by typing them in the ask a question feature on the left side of your screen. One moment. Please while we poll for questions.
Judd:
Speaker Change: Our first question comes from Mickey <unk> with the benchmark company. Please state your question.
Mickey: Hey, guys. Thanks for taking my questions.
Speaker Change: I know you were just giving some color on those jobs, but if there's any other you know additional comments or color you could provide on your plans for long term financing in the options you're considering.
Speaker Change: Is there anything you could tell us just about how those discussions are progressing or what stage. They are in but that would be helpful. Thanks.
Speaker Change: Yeah no. Thanks Nikki for your question.
Speaker Change: As I said kind of in my prepared remarks.
Speaker Change: We are focused on what we think the best for Aqua metals and what we're trying to do is to build out the CRE art facility, which is project financing.
Speaker Change: And debt financing, we do have.
Speaker Change: We do have.
Speaker Change: Lenders, who fit that criteria that were.
Speaker Change: Engaged with and talking with.
Speaker Change: In terms of been discussed there are certain things that we need to do.
Speaker Change: To bring those funds in.
Speaker Change: And we're working towards those I can't really give a timeline on it or.
Speaker Change: Just yet, but but those discussions are happening.
Speaker Change: Okay. Okay, Yeah, that's helpful. Yes.
Speaker Change: Not going to ask you for your time on that and I understand you.
Speaker Change: Can't give that out and then yeah. You know so that that's all really related to that you know updated plans for the Sierra facility.
Speaker Change: So I just wanted to check in on that if you could you know unpack the updated plan a little bit and just remind us.
Speaker Change: If you are still able you know.
Speaker Change: Reach let's say commissioning point for phase one with a you know a couple of quarters I think on the last call you mentioned two to three quarters.
Speaker Change: Subject to receiving financing of course, if you could just get into that a little bit. Thanks.
Speaker Change: Yes good.
Speaker Change: Good question. This is Steve so yeah, the Sierra arc is definitely.
Speaker Change: It's the lands there the building there the updated simply think of it as basically move in ready there are a lot of the equipment is already ordered.
Speaker Change: And we just decided to be careful to spend that remaining capital until we have that capital financed.
Speaker Change: And think of it as like a move in ready facility for the main building now with our recent change to <unk>.
Speaker Change: Prove our value proposition as we talk to these project finance and debt debtors that are out there.
Speaker Change: We will put together an additional building that will take care of the feedstock processing as well as the lithium carbonation and some things along those lines. So there is now a building that would get built while we completed the move in of the existing building that is kind of like what we characterize as.
Speaker Change: In our building and it's not going to be that complex of the build but it will allow us to get to from the 3000 tons of black mass processing up to the 7000 tons. So with our kind of industry, what we believe industry low cost conversion cost low cost leading.
Speaker Change: Process, coupled with the high value product of battery grade lithium carbonate.
Speaker Change: And the MH P. As the two primary products at that higher volume that's what we've been talking to these various project finance of debtors about is that value proposition. It's about the same amount of remaining capex that we need to.
Speaker Change: To complete it but it does throw off some plant level EBITDA that we believe sets the company up to be able to service that already project financing arrangements. So.
Speaker Change: That's hopefully answering your question yeah, Yeah, no definitely that that's very helpful. Yes, It seems like Youre being smart with this reevaluation of how youre scaling up that plant to make sure you're allocating capital as efficiently as possible.
The next one I have is you know you've mentioned a lot of discussions with customers for offtake agreements co locations or potential licensing opportunities.
Speaker Change: Just curious if you could give us any more details on those discussions and how they're trending given everything that's been going on in the macro are you know people still still hungry for.
Speaker Change: Some of its domestically produced product.
Speaker Change: Yeah for sure. So Fortunately because we have the pilot plant that's been operating for <unk>.
Speaker Change: Well over a year.
Speaker Change: Two years now.
Speaker Change: We've been able to produce representative battery grade examples of those materials and engage with those off takers and Oems that are out there.
Speaker Change: There is a little bit of a chicken in the egg factor which is.
Speaker Change: Build it and then they will come or get them to come. So you can build it and that's what we're balancing that those in stock at an offtake agreements.
Speaker Change: Particularly with the way that the metals markets are gyrating not.
Speaker Change: Not even gyrating they've come down and they are expected to go up as.
Speaker Change: And as we get towards the end of this year and into next year with a little bit of analysts' consensus, it's they're not going to shoot to the moon, but theyre going to get to more reasonable levels and so those feedstock and offtake agreements go hand in glove with the financing of the build out of that facility and because we've got that pilot that's produced as I mentioned 600 power.
Speaker Change: And just in December of battery grade lithium carbonate.
Speaker Change: It gets the most.
Speaker Change: Recycled battery grade lithium carbonate that's been ever produced in North America, let alone the U S.
Speaker Change: That is what's really enabling these conversations to continue to mature. So these things take time and we're just being very careful with our cash on hand, and management of Capex and not get out over our skis by investing further.
Speaker Change: Into the completion of that fear arc and that outbuilding until we have all these contracts locked and loaded.
Speaker Change: Right got it okay, Yeah, that's helpful and sounds smart.
Speaker Change: Last one I have here is you mentioned previously some visits frog from industry leaders and government agencies with just curious you know if theres anything else you could tell us there how are they have you know those discussions have been ongoing.
Speaker Change: If they buy it anywhere meaningful.
Speaker Change: Yes, so we hosted a quite a few.
Speaker Change: U S government folks last year as well as international you can look at our social feed and see some of that inclusive of a big Dutch contingent that came out.
Speaker Change: <unk>.
Speaker Change: Those conversations continue of course, there's been a change in administration and the interesting news is of late is that Theres been an executive order written regarding the urgency of producing critical minerals in the U S that we believe that we obviously believe that we are a perfect fit for.
Speaker Change: And so we're engaging with the new administration officials on how to have Aqua metals participate.
Speaker Change: And.
Speaker Change: Trying to get funds through that mechanism. So that would be in addition to our project finance or a debt based deal is that we still see a great opportunity on government dollars, but with the change of administration. These things take time, and we think thats about one to two quarters for us to really get to some level of resolution we're encouraged that.
Speaker Change: The tone of the executive order seems to.
Speaker Change: Park urgency.
Speaker Change: And we.
Speaker Change: Were pleased to see that because we think it's urgent as well that the U S begins to be able to produce these.
Speaker Change: Materials, and not only aqua metals, but many companies could certainly use.
Speaker Change: Some additional help from the government to affect that and.
Speaker Change: Great Yeah, I agree and I think that that's all very understandable, but that's all I have thanks guys.
Speaker Change: Thanks.
Speaker Change: Hey.
Speaker Change: Thank you and we will now transition over to Bob Myers for some additional remarks. Thank you.
Speaker Change: Yes. Thank you.
Speaker Change: There's a few questions first question as a recap of the last year, how would you summarize the current state of Aqua metals and the potential of the company has.
Speaker Change: Okay. Thanks, that's a good broad question so I'll just.
Speaker Change: Do my best to summarize.
Speaker Change: My view on the current state of affairs for Aqua metals.
Speaker Change: We've had an interesting and very productive year in the past year. We've made really good progress across key strategic priorities that we outlined on our technology and our processes and our commercial partnerships.
Speaker Change: And partnership developments as well as.
Speaker Change: Ongoing initiatives overall for the company, we've achieved milestones that we think strengthens the company's future.
Speaker Change: That includes demonstrating those high recovery rates and purity levels that meet <unk> exceed the needs of potential partners for battery grade materials.
Speaker Change: And also and this is really important to emphasize at what we believe is to be the lowest cost.
Speaker Change: For processing those materials.
Speaker Change: Oftentimes in the commodities market low cost leader wins, we think because of our process doesn't consume all of these one time use chemicals and have all these waste streams that have to be managed in additional labor.
Speaker Change: We don't need because of the automation and controls with really clean energy jobs for those that are working there we have that cost advantage and we've confirmed that we have.
Speaker Change: The data to back that from the operations of our actual pilot plant.
Speaker Change: We converted recycled domestic nickel into cathode active material.
Speaker Change: With a downstream partner in that material is literally being tested by top tier battery manufacturers and the vehicle Oems.
Speaker Change: These are large global organizations that are also looking to create a domestic supply chain.
Speaker Change: We continue to strengthen and expand our partnership opportunities and collaborate with other organizations to find new ways to work together on.
Speaker Change: This industry is certainly in a consolidation phase, we see opportunities out in the marketplace for us to partner in different ways than we might've, even seen a year before.
Speaker Change: We can't control.
Speaker Change: This uncertainty in the current market dynamics and overall uncertainty.
Speaker Change: As the administration has changed or what folks might or might not be missing when it comes to aqua metals value proposition, but we can control is that we can adapt and optimize the company's strategy and that's why we chose to simplify our product set to the battery grade lithium carbonate in the MH fee to get a quicker time to market.
Speaker Change: But at a lower cost at a higher volume and better.
Speaker Change: EBITDA margins at the plant level and for those corners that we turned that things change we made.
Speaker Change: Be adept and make more adjustments.
Speaker Change: We are a dynamic and case hardened.
Speaker Change: A company that has.
Speaker Change: Survival and growth instinct incorporate it into our own DNA.
Speaker Change: Okay.
Speaker Change: Great. Thank you the next question Yuri.
Speaker Change: Your recent announcement discuss the change in production and you talked a little bit about this in your prepared remarks focused on lithium carbonate and MH P. Can you expand on that a bit.
Speaker Change: Yes, sure. So I'll expand further on that happily so our competitive advantage is our technology and our knowhow.
Speaker Change: Inclusive of which is our IP, which as a reminder to everybody. We have over 70 global patents issued 40 plus Pat.
Speaker Change: Patents pending and we continue to expand what we see is this really strong advantage there.
Speaker Change: Our focus on the battery grade lithium carbonate, which is truly unique to us to not just make tactical grade, but actual battery grade lithium carbonate as well as a really nickel rich and clean and HP.
Speaker Change: We see a faster path to get to revenue with less capital requirements higher profitability as I was mentioning at the plant level, and particularly by being able to upsize the amount of black bass material input by more than doubled from 3000 tonnes to a planned 7000 tons in the Sierra arc configuration.
Speaker Change: We view.
Speaker Change: It's much more of it as a step approach as the production as part of our technical process.
Speaker Change: And we were essentially already doing all this and we also.
Speaker Change: Are pursuing full metals recycling ultimately is a phase two as the market grows. So it's really an adjustment to the near term approach for the company and giving the market what the market needs and wants today, which is that battery grade lithium carbonate as well is that MH P, which trades globally kind of as a.
Speaker Change: Class one Nichols.
Speaker Change: Material.
Speaker Change: Great. Thank you.
Speaker Change: Next question the company added two new Board members recently can you offer some insights and how those executives have helped with strategic objectives.
Speaker Change: Yes, certainly so so both of the leaders are talented experienced executives with great track records of strengthening organizations and growing them with emerging technologies Eric.
Speaker Change: Eric Gangloff has really strong financing background. He was in the financing business and that business.
Speaker Change: For most of his career and he has brought a lot of new perspectives and opportunities for the company.
Speaker Change: And Steve Henderson as the industry connections are really helping to open doors and <unk>.
Speaker Change: Certainly adds further credibility to our value proposition as we engage with automotive.
Speaker Change: And battery related Oems for which he has relationships with many of them at a very high level.
Speaker Change: With his track record and both Eric and Steve have already been extremely helpful. In supporting some of the recent innovations and.
Speaker Change: The strategic plans for the company and even the tactical plan. So we're really glad to have them.
Speaker Change: Thank you.
Speaker Change: And that's all the time, we have for questions I will now hand, the floor over to Steve cotton for closing remarks.
Steve Cotton: Great well I really appreciate everybody's time and.
Steve Cotton: Continued interest in Aqua metals, and we will continue to keep you guys updated.
Steve Cotton: Hey tuned for updates on our social and other developments between our calls and if you have any questions. Please contact our IR partner F N K and or US directly we look forward to continued engagement and everybody have a great rest of the day, we will talk soon.
Steve Cotton: Thank you and with that we conclude today's conference all parties may disconnect.