Imagine a world without smartphones, laptops, cars, wind turbines, and even military weapon systems. It may sound like a dystopian future, but the reality is, all of these modern-day necessities rely on a group of minerals known as rare earth metals. These critical minerals are essential not only for high-tech products but also to power a significant portion of the economy. They play a crucial role in the production of electronics and are key to the growth of the electric vehicle market.
However, despite their crucial role, our supply of rare earth metals is in short supply and the vast majority of the market is controlled by China. This domination poses a significant risk to our technology-driven economy and highlights the urgent need for alternative sources of these essential minerals.
ReElement Technologies, a subsidiary of American Resources Corporation (NASDAQ: AREC), is on a mission to help the rest of the world diversify its rare earth reliance away from China. By leveraging its innovative technology, ReElement can capture, process and purify rare earth metals from end-of-life products like magnets and lithium batteries. Let's further break down ReElement, its technology, and how it is a potential solution to a serious threat to our national security.
What are Rare Earth Metals and Understanding China’s Role
Rare earth metals are a group of 17 elements that are critical components in high-tech products such as smartphones, wind turbines, electric vehicles, and military equipment. China dominates the global supply of rare earth metals, producing more than 80% of the world's supply.
There are a few reasons for China's dominance in rare earth metals:
- Abundant resources: China has abundant reserves of rare earth elements, which has enabled it to dominate the market for these materials.
- Refining: China’s low environmental standards has allowed them dominate the separation and purification of rare earth metals without much innovation while polluting the planet.
- Cost advantage: China's labor costs and production costs are lower than in other countries, which has made it easier for China to produce rare earth metals at a lower cost.
- Government support: The Chinese government has invested heavily in the rare earth metals industry, providing subsidies and other support to Chinese companies.
This dominance of the rare earth metals market by China is dangerous for the United States and the rest of the world because it creates a single point of failure in the supply chain. If China were to cut off the supply of rare earth metals to the rest of the world, it could disrupt the production of high-tech products, cause widespread economic disruption, and present a major threat to U.S. national security. Additionally, China's control of the market gives it significant leverage over other countries, allowing it to manipulate prices and restrict supply as it sees fit. This can lead to increased costs for consumers and can harm industries that rely on these materials.
Overall, reducing reliance on China for rare earth metals will require a concerted effort from the United States government, the private sector, and academia to develop domestic production, alternative sources, advanced refining methods and new materials. Reusing & recycling are key factors that could drive alternative sourcing and provide an opportunity to obtain rare earth metals outside of a mining environment.
Key Benefits of Recycling & Reusing Rare Earth Metals
"Reduce, reuse, and recycle" are important concepts that are consistently promoted by the government to help conserve resources and prevent excess landfill use. While we may initially think of aluminum and paper products when "recycling" comes to mind, it could be critical in maintaining a more efficient ecosystem for rare earths.
Recycling and reusing rare earth metals is important for several reasons:
- Conservation of resources: Rare earth metals are finite resources, and recycling and reusing these materials can help to conserve these resources for future generations.
- Environmental protection: The mining, refining, and production of rare earth metals can have significant environmental impacts, including deforestation, soil degradation, and water pollution. Recycling and reusing these materials can help to reduce these impacts and promote sustainability.
- Cost savings: Recycling rare earth metals can be less expensive than mining and refining new materials, which can help to reduce the cost of production for high-tech products.
- Reduced dependence on imports: A significant portion of the world's rare earth metals are supplied by China, and recycling and reusing these materials can help to reduce dependence on foreign sources, promoting energy security.
- Waste reduction: Recycling rare earth metals can help to reduce the amount of waste generated by the production and disposal of high-tech products, promoting a circular economy.
Recycling and reusing rare earth metals are becoming increasingly important as demand for these materials continues to grow, and as concerns about the environmental impact of mining and the potential for supply disruptions grow. By recycling and reusing these materials, we can help to conserve resources, protect the environment, reduce costs, reduce dependence on imports, and promote a sustainable and circular economy.
Overview: American Resources Corp
American Resources Corporation is an Indiana-based company that is focused on the mining, processing, transportation, and sale of metallurgical coal used to make steel. The company maintains a portfolio covering operations across Kentucky and West Virginia. The company has three main subsidiaries: ReElement Technologies LLC, American Carbon LLC, and American Metals LLC.
ReElement Technologies LLC is a subsidiary that's changing the game in the production of rare earth elements and lithium-based battery metals. And here's the best part – their flexible refining methods are able do it all using 100% recycled materials or newly mined mineral in a much safer and low-cost process. They're leading the way in environmentally-friendly processing and refining technology and are all about creating a circular economy. With their innovative critical metal recovery technology, they're making sure the world has access to the rare earth elements and critical minerals it needs for the next generation of infrastructure, electronics, and national security hardware - all while being cost-effective and sustainable.
The American Carbon LLC subsidiary houses American Resources’ metallurgical coal mining extraction and supply business. The company has established a network of five restructured processing and logistic complexes, which help to eliminate the old legacy costs and create a more effective, lower-cost business model. Since its inception, American Carbon and American Resources have restored over 7,000 acres of irrational thermal coal land, which collectively represents over $20 million in liabilities.
American Metals LLC is American Resources’ aggregator and processor of used metals for recycling into new steel-based products. The subsidiary operates within the U.S. coal country where there is often an abundance of used metal reserves from former thermal coal mines that have since been shut down. By leveraging its regional logistics and infrastructure, American Metals LLC can expand its presence in the high-growth market of used steel while also cleaning up old infrastructure left behind from the mining industry.
Further Breaking Down the ReElement Subsidiary
The United States and other countries around the world have a waste problem and rare earths are wrapped right up in the mess. Every year, an estimated $3 billion worth of critical and rare earth metals are thrown away or lost. With demand for these critical metals heating up at a brisk pace, countries need to work on solutions to the waste issue.
This is exactly where ReElement comes into play. The subsidiary's technology provides an economical solution to help isolate, purify, and recycle these critical metals. To make matters even more enticing, ReElement's technology is the most environmentally safe method of rare earth metal recycling and refining.
ReElement uses an electrolysis process to help extract rare earths and critical metals from feedstock carbon waste, acid mine drainage, and magnets. Low pH water combined with high levels of iron and carbon found in acid mine drainage and carbon slurries that leach rare earth and battery metals enables faster hydrogen production compared to traditional water-based electrolysis. Through this process, ReElement is focused on monetizing carbon production, hydrogen production, graphene slurry, and rare earth and battery metal concentrates.
Once the extraction process has been completed, the next step is purification. ReElement uses the most environmentally-safe purification methods for creating isolated and pure rare earth metals. The purification process uses highly specialized chromatography methods, which leads to more pure rare earth metals, rather than just a concentrate. In addition, ReElement’s patented and proprietary processes separates and isolates each element. Their exclusive chromatography technology is a viable solution to recycling both permanent magnets and batteries by bringing those constituent elements back to magnet and battery-grade forms. This is something that the industry struggles with and where ReElement differentiates itself. Additionally, ReElement’s ability to efficiently refine lithium from end-of-life batteries as well as their planned application of chromatography to refine spodumene is unique and demonstrates the value they bring to our domestic supply chain.
The current industry standard, solvent extraction, is extremely outdated and toxic to the environment. Solvent extraction relies heavily on using toxic extractants, harsh chemicals, and flammable solvents. This process also takes longer than chromatography and does not produce the same output yield as ReElement's ESG-focused process. In short, ReElement’s chromatography process is not only better for the environment, but also more efficient in extracting and purifying critical metals at a more cost-effective level.
ReElement currently can process over 137,500 kilograms of critical battery and rare-earth magnet materials into ultra-high pure minerals and compounds at its Noblesville, Indiana facility. Among the initial rare earth and battery metal products, ReElement will focus on: neodymium, praseodymium, dysprosium, cobalt, lithium, nickel, manganese, and more. Management says they have identified additional sites to build facilities as scalability and are currently in the design and engineering phase for their next larger scale facility to increase capacity by 100-times.
Another key advantage ReElement holds is a robust IP portfolio and partnerships with world-renowned organizations. ReElement's process is covered by 16 patents and was developed in partnership with the likes of Purdue University, Texas Tech University, Ohio University, CMID, and more.
ReElement Spin-Off and Strong Insider & Investor Backing
American Resources Corp has previously stated its intent to spin off the ReElement Technologies business into a standalone company. The spin-off allows investors to own a pure-play standalone, ESG-focused refiner of critical minerals. This will give ReElement a better posture to realize the opportunity. In addition, it will allow ESG-focused investors to take part in the opportunity without any allocation to metallurgical coal.
Under the current guidelines, American Resources Corp will retain a 9% ownership of ReElement post-spin-off, which will be issued as a dividend to shareholders. Existing shareholders will receive half a share of the "spinco" for each common share held of American Resources Corp.
American Resources filed a Form 10 with the U.S. SEC in late January 2023, which effectively begins the official process to spin-off ReElement. While it will still take some time for the Form 10 and other regulatory paperwork to be finalized, shareholders should be encouraged by the strong backing of the company by its insiders and even institutional investors.
Insiders of American Resources Corp believe in their mission and are putting their money on the line to prove their bullish beliefs. As of February 2023, just under 30% of American Resources Corp is currently owned by insiders. This is an incredibly bullish indicator because it shows management believes in the company enough to risk their own money. While there is no fully-certain outcome, stocks with higher insider ownership tend to be more favorable with investors.
On February 6, 2023, American Resources Corp received a major boost of confidence from its largest debt holder, Golden Properties Ltd. The institutional investor owned convertible debt amounting to $9.9 million. Golden Properties, who was an early investor in American Resources Corp, chose to convert its note into stock.
This is a major deal because the company's biggest debt holder is now its largest equity holder after converting the $9.9 million note into 9.4 million shares of common stock. This means Golden Properties Ltd. waived its right to $1.2 million in interest payments in exchange for AREC shares and the ReElement dividend post-spin-off. For American Resources, this helps clean up the balance sheet and serves as the latest example of bullish support for the company.
Overall, the modern world relies heavily on a group of minerals known as rare earth metals, which are critical components in high-tech products such as smartphones, wind turbines, electric vehicles, and military equipment. China dominates the global supply of these metals, producing over 80% of the world's supply. This creates a single point of failure in the supply chain and gives China significant leverage over other countries. To reduce reliance on China, efforts are needed to develop domestic production, alternative sources, advanced refining methods and new materials. ReElement Technologies, a subsidiary of American Resources Corporation, is focused on capturing, processing, and purifying rare earth metals from end-of-life products like magnets and lithium batteries, to help diversify the world's rare earth reliance away from China. Recycling and reusing rare earth metals is becoming increasingly important due to the growing demand and environmental concerns. By recycling and reusing these materials, we can help conserve resources, protect the environment, reduce costs, reduce dependence on imports, and promote a sustainable and circular economy.
With all the exciting developments over at ReElement, its strong insider & institutional investor backing, and solutions to a very serious global issue that cannot continue to be ignored. ReElement's refining capabilities are exactly what the United States and the rest of the world need to diversify their rare earth and battery mineral reliance away from Asia.
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