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American Resources(AREC) - 2024 Q3 - Quarterly Report
ARECAmerican Resources(AREC)2024-11-19 21:20
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Coal Production and Mining Operations - The company has not mined or sold thermal coal since mid-2019, focusing solely on metallurgical coal for steel and specialty markets[64] - The Carnegie 2 Mine has an estimated capacity to produce approximately 10,000 tons of coal per month[68] - The Bevins 1 Preparation Plant has a processing capacity of 800 tons per hour and a clean coal stockpile storage of 100,000 tons[70] - The Bevins 2 Preparation Plant has a processing capacity of 500 tons per hour and a clean coal stockpile storage of 45,000 tons[70] - The company holds 11 additional coal mining permits that are idled or in various stages of reclamation, with no current plans to bring them into production[70] - Wyoming County Coal holds two idled underground mining permits and three permits associated with the idled Pioneer Preparation Plant, with no current production[77] - The Pioneer Preparation Plant has a capacity of 350 tons per hour, but no cost estimates for upgrades have been received yet[78] - The E4-2 mine has an estimated capacity to produce approximately 80,000 tons per month of coal, but was idled due to the COVID-19 pandemic and regional flooding[82] - The Davidson Branch Preparation Plant has a capacity of 1,300 tons per hour, but currently utilizes less than 10% of its available processing capacity[82] - Perry County Resources holds four additional coal mining permits that are idled or in development, requiring significant upfront capital investment for production[82] Financial Performance - Total revenue decreased by 5,721,840forthethreemonthsendedSeptember30,2024,primarilyduetoareductionincoalsales[93]−Totalrevenuedecreasedby5,721,840 for the three months ended September 30, 2024, primarily due to a reduction in coal sales[93] - Total revenue decreased by 16,120,841 for the nine months ended September 30, 2024, with coal sales being the main contributor to this decline[93] - Total operating expenses increased by 835,050forthethreemonthsendingSeptember30,2024,drivenmainlybygeneralandadministrativeexpenses[95]−Totaloperatingexpensesdecreasedby835,050 for the three months ending September 30, 2024, driven mainly by general and administrative expenses[95] - Total operating expenses decreased by 9,456,053 for the nine months ending September 30, 2024, primarily due to a reduction in coal production and holdings costs[95] - Net loss attributable to AREC shareholders was 9,206,768forthethreemonthsendedSeptember30,2024,comparedtoalossof9,206,768 for the three months ended September 30, 2024, compared to a loss of 2,360,828 in the same period of 2023[93] - The company reported a net loss of 21,909,367fortheninemonthsendedSeptember30,2024,whichwaspartiallyoffsetbyadjustmentstotaling21,909,367 for the nine months ended September 30, 2024, which was partially offset by adjustments totaling 6,415,477[97] Cash Flow and Liquidity - As of September 30, 2024, available cash was 161,651,732,withfutureliquidityneedsexpectedtobemetthroughcashonhandandfutureborrowings[96]−CashusedinoperatingactivitiesfortheninemonthsendedSeptember30,2024,was161,651,732, with future liquidity needs expected to be met through cash on hand and future borrowings[96] - Cash used in operating activities for the nine months ended September 30, 2024, was 16,317,031, compared to 15,908,173forthesameperiodin2023,reflectinganincreaseinnetlossfrom15,908,173 for the same period in 2023, reflecting an increase in net loss from 13,791,277 to 21,909,367[97]−Cashusedininvestingactivitiesdecreasedfrom21,909,367[97] - Cash used in investing activities decreased from 3,862,383 in the nine months ended September 30, 2023, to 1,757,837in2024,primarilyduetoareductioninpurchasesofinvestments[98]−Cashprovidedbyfinancingactivitiessignificantlyincreasedto1,757,837 in 2024, primarily due to a reduction in purchases of investments[98] - Cash provided by financing activities significantly increased to 145,336,288 for the nine months ended September 30, 2024, compared to 45,671,490in2023,drivenbyproceedsfromtax−exemptbondsof45,671,490 in 2023, driven by proceeds from tax-exempt bonds of 149,719,203[98] - The company anticipates monthly compliance costs of approximately 35,000asapubliccompany,whichwillbecoveredbyacombinationofcashfromoperationsandfinancingactivities[99]ComplianceandInternalControls−Thecompanyhasunabatedand/oruncorrectedviolationslistedontheApplicatorViolatorList,whichmayaffecttheissuanceofnewpermits[79]−Managementconcludedthatthecompany′sdisclosurecontrolsandprocedureswerenoteffectiveasofSeptember30,2024,duetoinsufficientstaffingandlackoftimelyreconciliations[103]−Therewerenochangesinthecompany′sinternalcontroloverfinancialreportingduringtheperiodendedSeptember30,2024,thatmateriallyaffectedthecontrols[104]CompanyStructureandEmployment−Thecompanyemploysapproximately26directemployeesandutilizescontractlaborforvariousoperations[92]−Thecompanyhasestablishedsubsidiariesfocusedontherecoveryandsaleofmetalsandmonetizationofcriticalandrareearthelementdeposits[64]−Thecompanydoesnothaveany"proven"or"probable"reservesandisclassifiedasbeingintheexplorationstage[64]IndustryContext−Thecoalindustryisintenselycompetitive,withprincipalcompetitorsincludingCorsaCoalCorporationandArchResources,amongothers[85]−TheallocatedcostofthepropertyatMcCoyElkhornCoalis35,000 as a public company, which will be covered by a combination of cash from operations and financing activities[99] Compliance and Internal Controls - The company has unabated and/or uncorrected violations listed on the Applicator Violator List, which may affect the issuance of new permits[79] - Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2024, due to insufficient staffing and lack of timely reconciliations[103] - There were no changes in the company's internal control over financial reporting during the period ended September 30, 2024, that materially affected the controls[104] Company Structure and Employment - The company employs approximately 26 direct employees and utilizes contract labor for various operations[92] - The company has established subsidiaries focused on the recovery and sale of metals and monetization of critical and rare earth element deposits[64] - The company does not have any "proven" or "probable" reserves and is classified as being in the exploration stage[64] Industry Context - The coal industry is intensely competitive, with principal competitors including Corsa Coal Corporation and Arch Resources, among others[85] - The allocated cost of the property at McCoy Elkhorn Coal is 95,210[70] - The allocated cost of the property at Knott County Coal is 286,046[74]−TheallocatedcostforthepropertyatDeaneMiningis286,046[74] - The allocated cost for the property at Deane Mining is 1,569,641[76] - The allocated cost for the property at Wyoming County Coal is 22,326,101,with22,326,101, with 22,091,688 paid in shares of Class A Common stock[78] - Interest expense increased by 253,039forthethreemonthsendedSeptember30,2024,comparedtothesameperiodin2023[95]−Earningsfromequitymethodinvesteesdecreasedby253,039 for the three months ended September 30, 2024, compared to the same period in 2023[95] - Earnings from equity method investees decreased by 72,881 for the three months ended September 30, 2024, compared to the same period in 2023[95] - General and administrative expenses rose by $2,216,846 for the three months ended September 30, 2024, compared to the same period in 2023[95] - The company does not have any credit lines currently available to fund liquidity requirements, indicating uncertainty regarding future financial strategies[96] - The company had no off-balance sheet arrangements that required disclosure, and all transactions are recognized in accordance with generally accepted accounting principles[100]