Executive Summary / Key Takeaways

• American Resources Corporation ($AREC) is undergoing a significant transformation, pivoting from a legacy metallurgical coal business to a diversified critical minerals and recycling platform, driven by market shifts and environmental stewardship efforts.
• The core of this pivot is the ReElements segment, which utilizes a proprietary chromatographic separation technology offering quantifiable advantages in cost, efficiency, purity, and environmental impact compared to traditional refining methods, positioning it uniquely against global competitors, particularly China.
• A central strategic initiative is the unbundling of assets through planned spin-offs of American Infrastructure (coal/iron ore), ReElements (critical minerals refining), and American Metals (recycling/preprocessing) to unlock perceived undervalued asset value and create focused, standalone entities.
• While recent financial performance reflects the transition with declining coal revenue and development-stage losses, significant investments in new facilities (Marion, Kentucky Lithium) and non-dilutive financing efforts (bonds, grants, private capital) are underway to fund future revenue growth expected in 2025.
• Key risks include the company's current working capital deficit and dependence on external financing, operational execution challenges in ramping up new facilities and restarting coal production, and market price volatility for both coal and critical minerals.

From Coal Legacy to a New Resource Frontier

American Resources Corporation, once primarily focused on metallurgical coal extraction, has embarked on a profound strategic transformation. Born from a history of acquiring coal mining and processing operations, a journey that began significantly with the 2017 Quest Energy merger, the company inherited not only valuable assets but also substantial environmental liabilities. A proactive approach to addressing these legacy issues, including remediating over 7,000 acres and securing over $20 million in environmental bond releases, inadvertently paved the way for a new direction: the recovery and purification of critical minerals.

This pivot gained urgency as adverse market conditions led to the suspension of coal production operations in 2023, causing consolidated revenues to plummet from approximately $39 million in 2022 to $383,000 in 2024. Capital allocation shifted decisively towards developing the ReElements and Electrified Materials segments. This historical trajectory underscores AREC's adaptability and willingness to redefine its core business in response to both challenges and emerging opportunities in the evolving resource landscape.

ReElements: A Differentiated Refining Platform

At the heart of AREC's transformation is ReElements Technologies, a segment focused on the purification and monetization of critical and rare earth elements. This business emerged from the company's environmental cleanup efforts and was significantly bolstered by a partnership with Purdue University, leading to the development of a versatile, multi-mineral, multi-feedstock platform technology based on chromatographic separation.

This technology offers distinct advantages over traditional solvent-based or hydrometallurgical methods prevalent globally, particularly those used by China, which dominates 95% of the refining market. AREC's process is described as chemical light, energy light, and water light, contributing to a lower environmental footprint. Crucially, management asserts it can achieve processing costs competitive with or lower than China's, targeting approximately $5 per kilogram for lithium carbonate and sub-$12 per kilogram for rare earth oxides at scale. The technology demonstrates high recovery rates, exceeding 95%, and the capability to produce ultra-high purity materials required for demanding applications, including 99.5%+ for magnet grade rare earth oxides and 99.9%+ for battery grade lithium products. Recent achievements highlight its versatility, including successful separation and refining of defense-critical elements like gallium and terbium to 99.7%-99.999% purity and antimony ore to over 99.7% purity. This technological edge forms a significant competitive moat, enabling AREC to pursue markets requiring high purity and sustainable processing, differentiating it from competitors relying on legacy or less efficient methods.

The strategic build-out of ReElements is progressing with key facilities. The Noblesville, Indiana, plant serves as a commercial qualification facility, currently producing lithium carbonate and rare earth oxides daily, with planned capacity expansions. The larger Marion Advanced Technology Center, a 400,000 square foot facility, is under development with temporary occupancy secured for a portion, and equipment ordering underway. This site is envisioned to become a major US producer of separated rare earth oxides and lithium carbonate equivalent. The Kentucky Lithium Project is repurposing a former coal processing site to develop a lithium refining facility targeting 15,000 metric tons per annum capacity, funded in part by a $150 million tax-exempt bond. Furthermore, the "Powered by ReElement" offering aims to deploy this technology as a service at other industry sites, providing an asset-light growth path.

American Infrastructure: Shifting to a Royalty Model

The American Infrastructure segment, encompassing the company's coal and iron ore assets, is undergoing its own strategic shift. Following the suspension of production due to adverse market conditions, the focus is transitioning from direct operation to a royalty-based model. This involves engaging contractors to restart production on high-value metallurgical coal assets like the McCoy Elkhorn and Wyoming County complexes.

This strategy aims to reduce AREC's direct operational risk and capital expenditure requirements while generating top-line royalty revenue streams for the American Infrastructure entity. Development continues at the Wyoming County Complex, supported by a $45 million tax-exempt bond, which is also exploring the potential for rare earth concentration as a byproduct from coal waste, with promising initial characterization results exceeding 500 parts per million. Management anticipates production restart "imminently" post-spin-off, which is expected to contribute to American Infrastructure's profitability and provide cash flow to the American Resources holding company.

Electrified Materials and Other Ventures

The Electrified Materials segment focuses on metal recovery and preprocessing for the critical minerals supply chain. Leveraging activities from legacy coal reclamation, this segment is developing capabilities in recycling end-of-life batteries and rare earth magnets. A partnership with LOHUM Cleantech for battery preprocessing and a recent $911,519 grant from the State of Indiana, along with an RCRA permit, underscore efforts to build out this part of the business. The planned SPAC merger with AI Transportation Acquisition Corp (AIYA) aims to establish Electrified Materials as a standalone public entity.

Beyond these core segments, AREC holds interests in other ventures, including Royalty Management Holding Corporation and Novusterra Inc., which focuses on graphene and carbon nanostructures for defense applications. AREC distributed a majority ownership in Novusterra to its shareholders in March 2024, with plans for a national exchange listing underway. These holdings represent potential additional avenues for value creation.

Financial Performance and Liquidity Challenges

The company's recent financial performance reflects the ongoing transition. For the three months ended March 31, 2025, consolidated revenue was $31,927, a significant decrease from $94,019 in the prior-year period, primarily due to reduced royalty income as coal operations remained idled. However, operating expenses saw a notable decrease, falling to $5.02 million from $6.82 million, driven by lower coal production costs, reduced holding costs, and decreased professional fees. Despite these cost controls, the net loss increased slightly to $6.66 million compared to $7.02 million in the prior year, primarily impacted by a substantial increase in interest expense ($1.75M vs $662k) and a decrease in interest income ($4k vs $489k), reflecting financing activities and changes in restricted cash balances.

Liquidity remains a key challenge. As of March 31, 2025, AREC reported a cash balance of $24,623 and a working capital deficit of $75.84 million. The company's ability to continue as a going concern is subject to obtaining additional financing and generating revenue. Management expects to fund operations and development over the next 12 months through existing cash and further debt/equity financing, primarily at the subsidiary level.

While cash used in operating activities decreased significantly in Q1 2025 ($1.43M vs $4.73M), reflecting some improvements in working capital and lower net loss, the overall financial position necessitates successful execution of financing and operational ramp-up plans.

The company also faced the challenge of its previous auditor being suspended, requiring restatements of prior financials and potentially impacting the timing of planned spin-offs. Furthermore, non-compliance with certain bond provisions as of March 31, 2025, resulted in the classification of bonds as a current liability, adding pressure.

Strategic Unbundling and Future Outlook

The overarching strategic narrative for AREC is the unbundling of its diverse assets to unlock value. Management believes the current consolidated structure obscures the intrinsic value of the individual segments, particularly ReElements' disruptive technology and the asset base of American Infrastructure. The plan is to spin off majority stakes in American Infrastructure and ReElements into standalone public companies and complete the American Metals SPAC merger. This strategy aims to simplify the investment story for the market, allow dedicated management teams to focus on their respective business lines, and potentially achieve higher valuations for the individual entities.

Outlook for 2025 centers on revenue acceleration, primarily driven by the ReElements segment as the Marion facility scales up production, expected to contribute significantly in the middle to later part of the year. The restart of metallurgical coal production under the royalty model is also anticipated to generate cash flow for American Infrastructure and, subsequently, for the American Resources holding company. Post-spin-offs, American Resources is expected to operate with minimal overhead, utilizing cash flow from royalties and equity holdings to potentially buy back stock and make new investments, focusing on critical mineral mining and commodity trading. International expansion, particularly in Africa, is also a key part of the growth strategy for ReElements.

Competitive Landscape and Risks

In the metallurgical coal market, AREC competes with larger, more established players like Peabody Energy (BTU), Arch Resources (ARCH), and CONSOL Energy (CEIX). While these competitors benefit from greater scale, higher production volumes, and often stronger financial metrics (e.g., higher margins, better cash flow, lower debt ratios), AREC's strategic shift to a low-cost, royalty-based model aims to position American Infrastructure for profitability with reduced direct operational exposure. The focus on high-quality met coal assets like McCoy Elkhorn and Wyoming County provides a niche focus, though market share remains significantly smaller than major players.

In the critical minerals refining space, the primary competitor is China, which dominates global refining capacity using traditional, less environmentally friendly, and potentially higher-cost methods. ReElements' chromatographic separation technology is positioned as a direct disruptive alternative, offering quantifiable advantages in cost, purity, and environmental impact. While other companies are entering the recycling and refining space (some focusing on hydrometallurgy), ReElements differentiates itself through its unique technology's versatility across feedstocks (including economically refining LFP black mass) and its ability to produce ultra-high purity materials for defense and advanced manufacturing, positioning it as a potential leader in efficient, environmentally conscious refining outside of China.

Key risks to the investment thesis include the significant working capital deficit and ongoing need for external financing to fund operations and development, particularly for the large-scale Marion and Kentucky Lithium projects. Operational execution risk is substantial, involving successfully commissioning new facilities, scaling production, and restarting idled coal mines with contractors. Market price volatility for both metallurgical coal and critical minerals could impact future revenue and profitability. Regulatory and environmental risks, including permit compliance and managing reclamation liabilities, remain pertinent. Litigation related to past transactions also poses a risk. The successful and timely execution of the planned spin-offs and the American Metals SPAC merger are critical catalysts, and delays or unfavorable terms could impact value realization.

Conclusion

American Resources Corporation is navigating a complex but potentially transformative period, pivoting from its coal roots towards a future centered on critical minerals and recycling. The core investment thesis hinges on the successful execution of its strategic unbundling plan and the commercialization of ReElements' differentiated refining technology. While the company faces significant financial and operational challenges, including a strained liquidity position and the inherent risks of scaling new technologies and restarting idled assets, recent progress in securing non-dilutive financing and advancing facility development provides tangible steps forward. If AREC can effectively leverage its technological advantages to ramp up production at ReElements' facilities, transition American Infrastructure to a profitable royalty model, and successfully spin off its segments, it has the potential to unlock substantial value currently not reflected in its consolidated structure, positioning itself as a key player in the burgeoning domestic critical minerals supply chain.