Aqua Metals Inc
NASDAQ:AQMS
Earnings Call Analysis
Q4-2023 Analysis
Aqua Metals Inc
Aqua Metals ended the year with a strong cash position of approximately $16.5 million, which will cover various costs including operating the pilot plant, general working capital, and the commissioning of Phase 1 of the Sierra ARC commercial facility. The company prides itself on accurately forecasting capital needs for their planned phased growth, and their Phase 1 facility build is both on schedule and under budget.
Operational costs for the company totaled $6.3 million for the year, offset by modest service fees revenue from a nonrecurring engineering agreement with 6K Energy. Although general and administrative expenses rose by 19%, this was anticipated and aligns with the company’s growth strategy. A noncash impairment charge of $4.8 million was recognized, relating to investments in Linaco and Acme Metals but keeping net loss in line with expectations once these one-time charges are factored out.
The firm used $3.2 million in cash for operating activities, while increases in cash flows from financing activities were primarily due to an equity raise and a strategic investment. Looking ahead, Aqua Metals sees 2024 as a pivotal year as they aim to complete construction and begin production at Sierra ARC. They are expecting cash generation at the plant level by 2025 and are exploring various funding options, including USDA government-guaranteed loans and grants from the DOE, to support their full-scale commercial operations.
The company forecasts an additional $18 million to $20 million in CapEx required to finish the Sierra ARC plant, with a quarterly operational burn rate around $5 million. These figures are integral for investors to understand the near-term capital requirements and cash flow management.
The company’s strategy to create jobs in a rural area aligns well with the USDA’s goals, which could favorably position it for a $25 million loan guarantee. This approach, along with positive feasibility and engineering studies, might fulfill USDA requirements and provide the company with a significant non-dilutive funding source.
Aqua Metals has reached a significant partnership with 6K Energy to supply 30% of their plus camp facility's requirement, which could equate to around $50 million yearly as the facility reaches full capacity. The deal exemplifies a symbiotic relationship allowing both entities to remain independent while fulfilling their mutual supply and offtake requirements. Moreover, the partnership represents a key step in revenue generation and solidifying the company’s presence in the recycling industry.
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Good afternoon, and welcome to the Aqua Metals Fourth Quarter Financial Results Conference Call. [Operator Instructions]. Please note, this conference is being recorded. I'll now turn the call over to our host, Bob Myers with FNK IR. Bob, please go ahead.
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 fourth quarter and full year ended December 31, 2023. This release is available in the Investor Relations section on the company's website at aquametals.com. Hosting the call today are Steve Cotton, President and Chief Executive Officer; and 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 today, March 27, 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 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. Questions will be accepted over the phone from analysts and all other investors can submit a question using the online webcast portal provided in today's and earlier 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 those that have dialed in, you will be able to hear the narration and replays will be available on the website. Steve will lead the call from there. (Video playing)
Thank you, Bob, and thank you to everyone who joined us today. This was an important year for Aqua Metals as we successfully transitioned from proof-of-concept to initiating commercialization, and we enter 2024 advancing our commercial activities. First, our pilot plant now has over a full year of operations and learnings and is currently operating 24 hours a day and 5 days a week. The pilot has been producing nickel, cobalt, lithium hydroxide, lithium carbonate and other valuable materials that we have been using to validate our capabilities and for providing representative materials shipments to an expanding list of existing and potential customers and partners. Unlike other moonshot approaches with cost overruns and delays, our commitment to pilot has served to derisk our process, capitalization and projected operating costs for our commercial-sized Sierra ARC facility. The Sierra ARC campus is located right here in Tahoe-Reno Industrial Center and Phase 1 of the ARC scales our production from the pilot to 3,000 metric tons of black mass processing, which is an engineering best practice, 30x increase over our pilot production. Importantly, development of the Sierra ARC remains on time and under budget. Judd will speak more on the budgeting side, but our ability to upfit the existing building design, build, commission, equip and calibrate a state-of-the-art commercial scale facility in a short time frame with prudent spending is a testament to the hard work and accuracy with which we planned the growth strategy of the company. We continue to add key personnel to manage this facility and to expand our industry presence. Simultaneously, we have secured our input feedstock supply at Black Mass. We expect Phase 1 of the Sierra ARC at its full nameplate capacity to generate approximately 30,000 average EV battery packs worth of critical battery minerals on an annual basis or roughly $30 million of revenues at today's metal prices. Because of the inherent economic advantages of Aqua Refining, including full recovery of all valuable minerals, the elimination of onetime use chemical purchases and expensive waste streams, we believe that even at today's lower metal prices, Phase 1 of the ARC still has favorable economics. With input feedstock established, we also now have the clear line of sight to our processing capabilities with the commissioning beginning this summer at the Sierra ARC. For our output, we have just finalized our first key offtake agreement announced yesterday with 6K Energy. This is our first marquee offtake agreement. The supply agreement with 6K establishes a first-of-its-kind sustainable circular supply chain for minerals essential for manufacturing lithium-ion batteries. Beginning in 2024, Aqua Metals will supply 6K energy with sustainably recycled critical minerals, ramping up to provide up to 30% of the nickel and lithium carbonate needed for 6K plus can facility. This is a pivotal collaboration for both companies and the industry as we together define industry standards for low-cost, low-carbon domestically produced materials. With our input processing and output solidified, we believe that we are moving towards significant revenues and cash flow while revolutionizing the lithium-ion industry. Risk mitigation is also key to our strategy. Others attempted to ramp production rapidly, requiring massive capital commitments and challenging deadlines without systematically scaling and derisking technology along the way. In contrast, we are moving methodically, proving our technology step-by-step, advancing in a phased approach to reasonable but still meaningful production levels and building our partner ecosystem. As we look towards the next stages of our growth, we are pursuing a variety of funding options, including nondilutive government grants, debt as well as traditional financing. We will, however, continue to move methodically, recognizing that this industry is still maturing. And as we have said before, our strategy is also based on self sustainability. Flexibility is also a big part of our strategy and based on multiple revenue streams, starting with build, own, operate, but then adding licensing, joint venture, colocation and other structures all of which we can consider given that our IP is all developed in-house. With our unique technology and engineering design, our commercial plans are expected to require less than half of the CapEx per ton as compared to traditional hydrometallurgical players, along with an operating cost per tonne advantage due to low chemical usage and a lack of waste streams like sodium sulfate, which our unique process eliminates. This efficiency and our measured approach gives us significant optionality and serves as a durable competitive advantage. In fact, we believe that the inherent environmental and economic challenges of both pyro and Standard Hydro effectively disqualify those processes as viable long-term solutions for the industry. In an environment where commodity prices have shifted, this serves us well. As part of a nascent industry, we are facing some of the typical ebbs and flows in a rapidly evolving industry. Expanding our partner ecosystem is a critical component of our commercialization strategy, and we have made significant progress in this area. Beyond our just announced supply agreement with 6K Energy, we continue to make progress on our partnership as we expect to complete by April the 6K Energy funded development agreement for a specialized nitration process. As you may recall that in October, we signed a multipart memorandum of understanding that is the basis for our collaboration that is expected to extend for many years to come. We have taken significant steps towards our common vision of deploying the nitration process as well as a new arc adjacent to their Plus CAMI facility in Jackson, Tennessee. Our partnership with Yulho continues to progress. Yulho's first black mass production facility build-out is nearly completed and operations will commence pending environmental approvals. Discussions are ongoing as we negotiate our first licensing agreement. We work with Dragonfly Energy to supply them with what we believe is the first sustainably recycled lithium hydroxide, which they then used to produce and successfully cycle lithium-ion cells with their unique dry deposition solid-state technology. We believe that this is the first time sustainably recycled battery minerals have actually been tested in new batteries. As Dragonfly Energy successfully build their production capacity, we expect them to be a buyer of our lithium products right here in Tahoe-Reno, Nevada. Turning our attention now to overall industry dynamics, I would like to make a comment on where we see the industry going. Despite some recent negative headlines, the energy transition is alive and well, as evidenced by 30% year-over-year growth in North American EV sales. Despite some bumps in that growth curve and the deployment of over 1 terawatt hour of battery production capacity in the U.S. by the decade's end, which is literally 200x capacity of [indiscernible], just a few short years ago. This represents hundreds of billions of dollars being invested in just a decade to build one of the country's largest industries from the ground up. These new Gigafactories will ramp scrap production rapidly for driving the need for sustainable recycling to close the loop and to help qualify domestically produced EVs for the IRA tax incentives. As evidenced in our meetings and discussions with several Gigafactory operators and auto manufacturers, we see an enormous opportunity to be a market maker and assist them in closing the loop. Stay tuned. We also strongly believe that the word recycling could be mistaken and conflated with the word sustainable. Competing technologies produced 2x to 7x the weight of the batteries to be recycled in greenhouse gases and 1x to 2x the weight of the batteries and sodium sulfate waste streams, destined for landfills or even oceans. In addition to environmental impacts, Akrefining allows for safe, clean jobs. Our employees do not have to work smelting ops or uncomfortable chemical suits. So in summary, we believe that these partnerships, strategic investments and achieve them serve as powerful validation for our technology, our strategy and our growing position in the marketplace. I look forward to sharing further updates with all of you soon. And for now, I'll turn it over to our Chief Financial Officer, Judd Merrill, to discuss the results for the year ended 2023.
Thanks, Steve. Our 10-K report is finishing up some final reviews with the auditors as we made a switch from one audit firm, Armanino who is no longer doing public accounting company audits to 4 of us a top 10 accounting firm with extensive public company experience. These final reviews will be completed shortly, and we expect to file the 10-K on time before the April 1 deadline. Since the 10-K hasn't been filed yet, I'm not able to share as many financial metrics on today's call as I normally do. However, I am able to share some key financial information today. Let me start with the balance sheet. As of December 31, 2023, we ended the year with total cash of approximately $16.5 million. Cash on hand will support costs related to operating the pilot plant, general working capital and the ongoing outfitting and commissioning of the Phase 1 of the Sierra ARC. As Steve discussed, this build-out of our Phase 1 commercial facility is on schedule and under budget. It has been a priority for Aqua Metals to accurately forecast the capital needs of our phased growth plan. There were no other significant changes in our balance sheet since our last report, so I'll move to the income statement. For 2023, we were focused on executing our operations at our pilot plant and the build-out of our commercial facility. The costs related to plant operations were approximately $6.3 million for the year. During the year, we did record modest revenue service fees from the successful completion of the NRE or the nonrecurring engineering agreement with 6K Energy. Research and development costs decreased approximately 4% compared to the year ended December 31, 2022. General and administrative expenses increased approximately 19% for the year ended December 31, 2023, compared to the year ended December 31, 2022, which was in line with our expectations and our growth plans. For the year ended December 31, 2023, we recognized a noncash impairment charge of approximately $4.8 million. This is related to our investment in Linaco and Acme Metals. For Linaco, we wrote off $1.4 million, and this is a result of the sale of our Linaco common stock to Linaco's parent Comstock Inc. for $600,000. In addition, we recognized a loss of $3.5 million related to the Acme construction and progress -- process as a result of the pause of the development of recycling operations. This loss is accounted for to comply with GAAP standards, but the showcase facility remains a place at Acme Taiwan, and can still be operated for various prospective opportunities that Steve outlined earlier. Net loss for the year was approximately $23.9 million or negative $0.25 per basic and diluted share compared to a net loss of $15.4 million or a negative $0.20 per basic and diluted share for 2022. When we remove the onetime noncash-related impairment charge, our non-GAAP net loss for the year was $19.1 million or a negative $0.20 per basic and diluted share, which is in line with expectations for the year. Cash used in operating activities for the year ended December 31, 2023, was $3.2 million. Our cash flows from financing activities increased related mainly from a 2023 equity raise and a strategic investment from our partnership with Yulho. We believe 2024 is an important year as we finish construction to begin production at our first commercial demonstration plant with Sierra ARC, which we believe will begin to generate cash at a plant level in 2025. Construction, installation and equipment reliable is on time and currently under budget. We will need additional capital to fund our proposed business plan beyond the next 12 months, including the completion of the Phase I build-out of our Sierra ARC recycling campus and the start of our full-scale commercial operations. We are actively pursuing nondilutive options such as the USDA government-guaranteed loans for $25 million, which we should have an answer from the USDA in the coming weeks. In addition to the USDA loan, as we have been -- we have also been working on securing funds from other sources such as conventional lenders, the DOE, strategic partners and possible dilutive options. We have filed with the DOE for a sizable grant and expect to hear back this summer. Our access to cash is key to ensuring our funding success and greatest to positive cash generation that we expect from our first commercial demonstration plan. That concludes my remarks on the company's financials. I will now turn it back over to the moderator for Q&A.
[Operator Instructions]. Our first question today is coming from Michael Legg from the Benchmark Company.
Congrats on all the accomplishments to date. I wanted to touch base on how much CapEx is left on Phase 1. And let's start with that and the cash needs I want to get into.
Yes. Thanks, Mike. So we are... from year-end through the rest of this year, there's about $18 million to $20 million left on the CapEx need to finish up the plant, which we've already spent some of that in Q1.
Okay. And then when you -- and then operational from the G&A burn, how much more do we expect to burn over the quarterly?
So on a quarterly basis, about $5 million per quarter.
Okay. And we expect to hear back from the USDA. Can you give me a little more detail on the requirements to get approved by the USDA and why you think you have a good shot of getting it?
Yes. One of the biggest things that the USDA wants is to see that we can create jobs in rural area, and that's exactly where we're at. We've actually got USDA loan guarantee when we started the lead recycling back in 2018. So they like this type of area. They like the type of company that's creating jobs and bringing more industry to these areas. And so that is an important step. And then we went through all the process that they require, which is completing a feasibility study, which we did, which was positive. It was done by a third party. We've completed an engineering study by a third party, which we made and turn those in. They'd like to see some operations. And so our pilot plant operated all last year, and so that's positive. So there's a lot of positives there to check the boxes for the USDA requirement.
Okay. Great. That's good to hear. And then as you get closer to commercial production and the pilot plant has proved out, what type of inbound requests are you getting from possible clients? And then long term, how much of the production you want to have contracted out towards lost [indiscernible]?
Yes. So this is Steve answering your question. Good to see -- good to hear you Mike. So for the makeup of our offtake, we announced yesterday the partnership -- in partnership with 6K Energy that we're going to supply 30% of their plus camp facility. And that is equal to around $50 million a year as that facility gets up to its full capacity at today's mineral prices. And then in our full campus environment, that would be a portion of our output because it will produce more than that. That allows us to continue to find other offtake partners, and we are having a lot of meetings to develop those relationships. And it also allows for us to work with 6K Energy to have them incorporate 30% recycled materials into their processes through the technology that we develop for them through the nonrecurring engineering project that nitrates the metals that they can get from us and they can get from other sources, mined or otherwise, so they can fulfill their needs. So it's a really good symbiotic relationship where neither party is totally 100% dependent upon each other for our offtake for them for their supply. And then we also have optionality and the ability to continue to develop our relationships with other offtake partners for which we're meeting with a lot.
Great Congrats on your accomplishments. I look forward to seeing the rest of the year pan out.
Your next question is coming from Sameer Joshi from H.C. Wainright.
Just a clarification on the previous answer. The $50 million potential is once you ramp up to the total 30% of their capacity, right?
Correct. Yes, Samir. So their capacity of the Plus camp facility that will be in Jackson, Tennessee, it's being built as we speak and turned on later this year. They will reach a capacity that will -- in order for us to fulfill 30% of that capacity will be in the Phase II by then of our Sierra ARC development. And Phase 1 is in today's metal price is worth about $30 million of revenue. Phase 2 pretty much triples the capacity or more of the Phase 1 facility. So that's how those numbers work. We'll need to get Phase II built ultimately to fulfill them as they ramp to their full capacity.
Yes. Understood. That's what I was trying to get to. On the cash burn front, the $5 million per quarter, does that include the category of like cost of plant operations. Is that also included in it in addition to SG&A and R&D?
Yes, that's correct, includes production ramp-up and G&A and R&D.
Okay. On the Dragonfly energy, I know you briefly touched on it, but what are the next steps? And are there any milestones that we should expect next year, I mean during 2024 and 2025.
Yes. So it's really exciting what we've already done together with Dragonfly where we provided them the lithium hydroxide right out of our pilot plant processes. And they've taken that lithium hydroxide and incorporated that into their advanced dry deposition, LFP battery technology, which has all of state silicon anode, et cetera. And that gives them the opportunity to take our lithium, produce cells and cyclos cells and prove it out, which they've already done. And the next steps are as they continue to develop their pilot line for ultimately their Gigafactory production capabilities right here in Tahoe-Reno, they're going to need more and more lithium. And that's another offtake partnership that we're working out with them much like we've already worked out with 6K, and that's a local partner right here in the State of Nevada that we're really excited about continuing to develop that relationship as they develop their gigafactory operations over time.
Understood. And then the last one, the equipment that is with Acme. Is that -- where is it located? And like it has been written off as of now, but I think you mentioned that it can still be used for demonstrations. Who is in control of that equipment? And where is it currently?
Yes. So that installation is sitting near type A. So it's really Type A, Type 1. And our partner Acme that there has that equipment on the ground and runs it from time to time. We actually still have quite a few interested parties that we're engaging with that are very interested in the lead technology. And that is more of our licensing only solution for the lead technology to focus our capital efforts on the build, own and operate in the lithium. But that still serves as a showcase display. And well, for example, we're planning currently to visit that with one of the prospects from Southeast Asia that we're engaged with to talk about licensing, lead recycling to in the coming month or so. And so that is a great showcase facility that just happens to have an accounting rule that required us to do what we had to do to comply with the GAAP accounting. It doesn't mean that the investment made and the showcase effect of the facility is any different. And our partner at Acme is very excited about continuing to work with us and show that technology to other parties and participate in potential business dealings.
I'd like to turn the floor back over to Bob Myers for further Q&A.
Thank you, operator. The first question is on 6K. What does the supply agreement with 6K mean for the company? And how long do you have? And do you need to start sending them recycled materials?
Yes, great question. So we're really excited about getting the supply agreement finalized, which is the first above some more agreements that will come down the line that our Memorandum of Understanding outlined. And that's a real pivotal event for the company and really the industry because together, we're establishing the first sustainable circular supply chain for all these critical battery minerals right here in the U.S. We think between our technology and 6K decarbonized technology, we really are that first. And then it's really another validation of our openrefining technology with the partners that can absorb large quantities of our processing capacity. And we'll be sending them some initial amounts of recycled lithium carbonate this year in 2024, and that's going to start ramping up to larger quantities of all the various battery minerals as we get into 2025 and beyond when we get to see our art fully up and running in Phase I. And again, that's really a foundation for additional agreements with 6K that we're working on now, which includes things like colocating another ARC that's right next to their Jackson, Tennessee facility, for which we've sent teams out to look at workforce development and engineering and land allocation and all the things associated with the colocation type of an agreement. So there's more to come with 6K, and this is a really foundationally established first big step in the partnership and both companies are really excited about it.
Thank you, Steve. Next question. You mentioned the Fiera ARC is currently on time and budget. Can you share a bit more detail?
Sure. The fact that this year, ARC is on time and on budget, I think is really truly a validation of our phased growth strategy. Unlike others in the industry, we took a painstaking detail of time and effort resources to go with a pilot and pilot the technology first and outfit the new plant ultimately with lower and more predictable overall capital spend, which helps us to stay on time and on budget because we took that disciplined approach. It also took a lot of financial discipline to work with the various suppliers and any expected delays and unknowns that are in the supply chain because we had already gone through that supply chain a bit to get the pilot. And so it's more of an established mature supply chain for us now that gives us that confidence in time and schedule and cost and all those things. And then as we showed in our opening video, for those of you that are called in, you can also see that video on our Aqua Metals site, just click on media and the in going to the blog, and it will be the first entry that they're under the log area. But that video shows the significant progress we've made and our current future offtake partners are really eager to see us get to that production stage. A lot of the folks that we're engaged with beyond who we've already announced are really supporting our efforts and working with us to take those sample materials and then get that and then those sample materials are coming from the pilot and get that to the stage where they can sign up their offtake agreements for the Sierra ARC as well. So the upfitting of that plant is really being finalized, and the video shows the inside of the plant ready with the equipment platform and the brand-new base floor. We now have epoxy in the floors even subsequent to the toning of that video is the equipment is ready to get staged and put in, and we'll be turning that plant on this summer. And again, on time and on budget really driven by our disciplined modular approach where we took the pilot and really had that informed the build of the plant.
Great. The next question, can you elaborate a bit more on the path to revenue generation?
Yes, absolutely. Aside from the nonrecurring engineering receipts that we've already received from 6K Energy to develop the nitration technology, which we're going to be finalizing that whole project in a matter of a few weeks. The pilot plant output really serves more strategic purposes as providing samples to our partners. And that has been really going well where we provided the lithium and the nickel and the cobalt to various partners that are out there. And some of that material, of course, has gone through 6K where they've taken that material and produced cathode [indiscernible] material to get that into the hands of cell manufacturers and automakers and the like. So the Sierra ARC is really what's commercially focused to grow revenues and drive profitability for the company, starting with that Phase I at that 3,000 tonnes per year. We expect we'll be able to produce materials from Black mass that we introduced this summer in 2024 and the production ramp to salable quantities late 2024, but certainly, as we get into Q1 of 2025 and work through revenue recognition, but production is slated to commence as we get into the latter part of the year after the commissioning is complete.
Now the next question on the funding side. Can you offer an update on your capital needs and funding and the status of the USDA in particular, and other options, as you talked about on the prepared remarks.
Bob, I'll take that question. As we've discussed, the USDA or another lending mechanism is important for us to finish the build-out of the Phase 1 Sierra ARC. On the USDA, the application that's been filed and submitted and from our understanding has gone through the initial review process on their side. And so I think there's a final committee that has to still meet and review. And so we should be hearing back soon on that. Now the government kind of takes longer than we'd like it to, but I think we're very close hearing back. And we like the USDA loan because the debt service is pretty good, just the terms makes the debt service good. Cost of capital is a little better than some of the other options out there. But we have been talking to other lenders because the USDA is really kind of met for funding that Phase 1. And there's this opportunity to not only face -- fund Phase 1, but think about how we contemplate Phase I and Phase II to a funding mechanism through additional debt lending. And so those discussions are ongoing. We're having some meaningful discussions with some potential partners that we really, really like and think will be a good fit. So if we didn't get USDA, we could use those guys to fund Phase I, potentially Phase II. If we do get the USDA in place, we could use these guys to fund Phase 2 starting next year. So there's a lot of groundwork being done, to make sure that we protect our ability to move forward.
Moving back to some partners on Yulho, when do we expect to get closer to an agreement and more updates on that partnership?
Yes. So I'll take that one, Bob. So the productive trip we had late last year to South Korea, seeing Yulho's Black Mass facility really made a lot of proof to us that they're on the precipice of turning that facility on. And in fact, it was materially complete at the end of last year and initial commissioning and things like that have been happening subsequently, and it's an impressive brand-new facility with state-of-the-art technology where the crushing technology, et cetera, is actually developed and designed and developed in South Korea. So they're not importing stuff to do that. They're developing that technology right there. And they're currently working on permits, the final environmental permits to operate and start putting batteries through. And one of our team members is actually over there right now witnessing some of the initial activities associated with preparing to do that. And then we'll be working with Hanyang University there to evaluate those materials and provide assays and things like that. So that's really the setup for us to continue our conversations in the coming months where we work out what the licensing agreement looks like with them on a final negotiation. And pending the success of those final negotiations, they would begin building what looks a lot like the Sierra ARC Phase I. So the engineering package is already complete and they can move very quickly to put up a process that looks awful lot like Sierra ARC Phase 1. So as we have those conversations and material items develop, we'll continue to provide updates, but we're very excited about the opportunity that we have still with our partner and investor with Yulho Materials.
Great. Related to Acme metals, you indicated earlier there were some noncash impairment charges. Can you review that in a bit more detail?
Yes. So it's really a GAAP accounting exercise when you look at assets. It's no -- it's -- we've been pretty clear that our focus and our -- a lot of our capacity and time and efforts related to the lithium side of the business. And that doesn't mean that things aren't going on on the lead side. But when you look at the assets specifically sitting over there in Taiwan that we had listed on our balance sheet, we kind of went through that GAAP checklist of items and just concluded that it would be better off to -- and more appropriate for the accounting to just write those down. But at the same time, the statement that we made that is still available, so operational, it's still a showcase it's still optional to advance the lead side of the business is still intact.
Great. There was another question here about cash burn. And if you could talk a little bit about what you see going forward.
Yes. As we stated, I think with a couple of questions from before, we have additional CapEx related to the plant was one piece. And the other piece is just the ongoing cash needs for OpEx and G&A of about $5 million per quarter.
Next question. How many tons of black mass is the pilot plant currently processing per week?
So the pilot plant is scaled to be 130 of the size of the production plant. So that allows us to really operate around 50 to 100 tons per year of processing capacity. And that capacity is black mass input, and we'll take -- continue to take those materials that we're already producing from the pilot and using that first samples and sample quantities, which are significant. They're not in grams or kilograms but more than that to the various folks in the industry. So that's really the purpose of the pilot is to produce those materials and get those into the hands of all the various announced and then ultimately unannounced partners so they can evaluate and qualify the materials that will be coming out of Sierra ARC when that comes online.
Great. What is the typical lithium yield from 1 ton of Black mass?
Yes. The easy but confusing answer is it depends, and it depends upon the makeup of the material. What's really great about our technology is that we've been able to process lithium maybe with a 5% composition in the black mass to maybe a little bit more than that, all the way to a much higher percentage in things like cathode powder. So we're very flexible in the types of recipes that come. It's a whole alphabet of letters, NMC or LFP or LMP and other mixes of the materials. So we're very flexible with the way we do it. But the important aspect of what we do is we extract very high 90s percent of the lithium right out of whatever those sources are from those various battery recipes. That's really important because if you compare that to pyro or smelting that recovers 0% of the lithium, that is a great economic advantage that we have compared to those types of incumbent applications that are out there, much better economics. And of course, it's probably a good idea not to burn lithium and put it into the air, but rather to capture it and reuse it over and over intimately.
Next question. How many times can you recycle the precious metals in a typical lithium-ion battery without losing their efficacy?
Yes. So that's the beauty of this critical minerals recovery is all of these various critical minerals can be used over and over and over again infinitely. So once you reuse it once, you're certainly ahead of oil and gas where you can't recycle gasoline and oil, but you can recycle these minerals. And you can't recycle plastics more than multiple times and then it starts to degrade the very complex molecules in the plastics, but these are atoms, and we're recovering them one atom at a time in a very pure form, and that allows for an infinite recycling and closing of the loop with the idea broadly of digging things up once processing them, getting them into batteries and then reusing them over and over and over again. As students of history, as we look at the lead market in the lead battery market, if you buy a brand-new lead battery today, it's going to have 80%, 90% or so of recycled lead and even other materials like copper and plastics that are in it. Lithium batteries today are close to 0% to 1%. And over time, as the recycling begins to close the loop and build that supply chain, it's going to migrate from that 0% to 1% up towards ultimately as the market matures in probably a couple of more decades to those high percentages of recycled material that's infinitely recycled over and over.
Next question. Despite some of the progress and opportunities that you've outlined, there still have been some headwinds in the market and the way the stock trades a little bit. What do you believe to be the disconnect? And what milestones can we look for in the coming year to further investor confidence in the company?
Sure. So there's investor confidence generally in the industry and then in the company, I'll do it in that order. So if you look at investor confidence in the industry, we have seen metals prices come down. We have seen some misleading articles about EVs being a fab, and this really isn't going to grow and hold of production and things like that. But when you look at the facts and you look at the data, we've seen 30% year-over-year growth in EVs just in 2023. We've seen in the January report for 2024, continued growth. We've seen the first time that well over 1 million EVs were sold in the U.S. which has a lower market penetration percentage of other places throughout the world, like EU and certainly in China with higher EV penetrations. The EV manufacturers would be it big auto or emerging EVs know that by 2030, it's going to cost them less to make electric vehicles and it's going to cost them to make internal combustion engine vehicles because of the cost of managing the supply chain and the cost of goods sold. So for the consumer, the performance to price ratio is already pretty much equalized, and we expect it will continue to grow. So all evidence and real data points towards an inevitability in this industry. And I keep talking about auto, but then there's also energy storage like solar and wind and all the Gigafactories that we talked about on the call earlier today in the U.S. expanding by 200x over what 2020 was. That is a whole industry needs that are very quickly leads to recycling and need the loop to be closed. So we see over time the inevitability of this industry despite some folks that may say it's not growing or not growing as fast as it could or should. Now when you switch gears to the company and the views of the company is because of the nascent industry, the ability to close the loop and do recycling of lithium ion batteries, it's not easy. And there are some companies that have made these new shots and have had some challenges, and that's cast a little bit of a shadow over the industry as a whole, but that's actually created opportunities for Aqua Metals that are unlocked in terms of what the share price looks like. And those opportunities are from commercial parties realizing that they need to consider working with a recycler that actually develop a pilot and operate a pilot. We think that as we make the progress and start to produce minerals and materials, that we will see a great opportunity to increase the value in the company and the share price if the investor community decides to reward us. That's our plan and our intent to keep the nose to the grindstone. We do what we said we were going to do and keep doing what we say we're going to do in the future. And we believe that the valuation of the company will be commensurate with that.
Great. Next question, are there any active discussions that you can expand upon with U.S. auto OEMs or battery manufacturers?
As I've said before, we can't name names, but we have them coming through and visiting all the time, and we're providing samples all the time either directly to the OEMs, be it an auto manufacturer that's a big auto or auto manufacturer just came through this emerging auto manufacturer looking for a way to close this loop and providing these materials directly in through 6K energy in the form of the cathode-active materials to even sell manufacturers, et cetera. So there are a lot of those meetings and conversations and getting to know each other and developing the relationships and it takes time. But we think that our funnel and level of engagement that's driving our commercial and engineering team to spend quite a bit of time each week on those projects and activities will ultimately yield a exciting further announcements beyond what we've already announced yesterday with 6K.
Great. And you touched upon this a little bit in the earlier question, but another question about the market. And your perspective on Aqua Metals not getting as much credit with the carbon friendly process versus some of the other companies out there that have hydro and Pyro.
Yes. So it's not only the CO2 and the fact that alternative hydro and pyro processes generate a heck of a lot more CO2 greenhouse gas by weight than what's being recycled to begin with, and we create de minimis amounts. But what's also attracted folks in the industry to us and people are quite taking note. Believe me, we're well noted within the DOE, within the industry, within the industry trade groups for our lack of sodium sulfate production. We produce no sodium sulfate waste streams, and we hear more and more folks in the industry saying that it is absolutely unsustainable for processes that generate sodium sulfate. And that's not only from an environmental perspective, but it's just from a cost perspective. The cost to build tens of millions of dollars of crystallizers that are nothing more than trash dryers that produce sodium sulfate that you then have to transport to landfill or the ocean. We don't have any of those costs. We just have our plant with the electricity coming in, driving the process, and we don't bring in a bunch of onetime use chemicals that create those waste streams or the fossil fuels that go into a smelter that burns the materials. So we see a lot of recognition and a lot of notice and a lot of engagement within industry, and we're still waiting for the world to catch up a little bit in noticing the fact of our sustainability that also has great economic comparative benefits compared to any other process that's out there.
Thank you. This is all the time we have for questions. I'd like to turn the floor back over to management for any further or closing comments.
Thank you again, everyone, for your time and attention. We are rapidly advancing our operational and commercial initiatives on a global scale, and it's an exciting time for Aqua Metals, and we look forward to providing updates on our continued progress. And in the meantime, if anyone has any questions, feel free to contact us or FNK IR. Thanks again.
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