Aqua Metals, Inc.
Q1 2016 Earnings Call Transcript

Published: 24 May 2016

[Operator:]

Good morning ladies and gentlemen and thank you for standing by. Welcome to the Aqua Metals’ First Quarter 2016 Corporate Update Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. [Operator Instructions]. This conference is being recorded today May 16, 2016 (sic). Before we get started, I’d like to turn the call over to Greg Falesnik who will read a disclaimer about forward-looking statements.

[Greg Falesnik:]

Thank you, operator. This conference call may contain, in addition to historical information, forward-looking statements within the meaning of the Federal Securities Laws regarding Aqua Metals. Forward-looking statements include statements about plans, objectives, goals, strategies, future events and performance and underlying assumptions and other statements that are different than historical fact. In the forward-looking statements during this conference call include statements concerning our intentions, expectations and believes regarding anticipated growth; market penetration and trends in our business; the timing and success of our plan of commercialization; our ability to operate our AquaRefining process on a commercial scale; our ability to maintain our competitive technological advances against competitors in our industry; our ability to have our technology solutions gain market acceptance; our ability to maintain, protect and enhance our intellectual property; and our expectations concerning our relationships with suppliers, partners and other third parties. These forward-looking statements are based on current management expectations and are subject to risks and uncertainties and may result in expectation not being realized, and may cause actual outcomes to differ materially from expectations reflected in those forward-looking statements. Potential risks and uncertainties include the fact that the company has not yet commenced revenue producing operations or developed its initial commercial recycling facility, thus subjecting the company to all of the risks inherent in a pre-revenue start-up; risk related to Aqua Metals’ ability to raise sufficient capital as when needed; to develop and operate its recycling facilities; changes in the federal, state and foreign laws regulating the recycling of lead-acid batteries to company’s ability to protect its proprietary technology, trade secrets and know-how and other risks disclosed in the “Risk Factors” included in the Annual Report on Form 10-K filed with the SEC on March 28, 2016. All such forward-looking statements whether written or oral made on behalf of the company are expressly qualified by the cautionary statements and such forward-looking statements are subject to risks and uncertainties, and we caution you not to place undue reliance on these. At this time, I’d like to turn the call over to Dr. Stephen Clarke, the company’s Chairman and CEO. Steve, the floor is yours.

[Stephen Clarke:]

Thank you, Greg and welcome everybody to today’s first quarter 2016 update. Before I go any further, I and my team would just like to take a moment to acknowledge the sad passing of Stan Kimmel, a dear friend of the executive team and one of the independent directors. It was a very painful loss and he is very sadly missed. Despite this loss, we’re excited to be commercializing the first - lead recycling technology ever and today we will cover the progress that we’ve made to that end. A press release accompanying this conference call went – early this morning and joining me today is Chief Financial Officer, Thomas Murphy who will walk through the financials later in the call. The brief agenda of what we intend to cover today is an overview of the company to the luxury of new investors joining today, so first few slide is a repetition somewhat of previous presentations we’ve given. And then we’re going to move on to the value proposition, our market, business model and our growth plans. And as you may be aware, we made an announcement last week covering the strategic relationships with Interstate Batteries and we’re going to talk a little bit about that, it’s a pretty significant event and a pretty good endorsement of our business and what we’re trying to achieve here. Then we’ll review the financial results for the first quarter ended March 31, 2016, I’ll summarize the management and the board and then we’ll round up with some media coverage, not least of which was the happy event last week in which Aqua Metals was awarded the prize for the Rising Star in the metals industry at the Platts Global Metals Awards in London last Thursday and we’re very proud of that endorsement of what we’re trying to do. And then I’ll round up that with a summary and takeaways. So moving on to the Safe Harbor, I’m moving fast let’s go back, just take a moment to recall, this is a pre-revenue business and recall the statements that Greg read out earlier. So, into the meat of the presentation and I’ll start up with a summary for those who are recent investors and friends of the company. Lead is a growing $22 billion market opportunity which pretty much entirely supports the $60 billion global lead-acid battery industry. And there’s some really interesting features about lead and lead-acid that is concrete to a lot of popular understanding. The first one is that lead-acid batteries are 100% recycled, I mean I may be wrong by 0.2 of a percent but essentially, lead-acid batteries are recycled actively because they are valuable. It’s effectively less expensive to make lead from batteries than to mine it out of the ground. And North America, about 80% of the lead goes into new battery production comes from recycled lead which is an incredible thing, lead-acid batteries and lead are by far and away the most recycled material in existence. The downside is that conventional lead-acid recycling uses smelting which is an antiquated and by antiquated we trace it back to 6,000 years ago. It’s a thermal technology which by its very nature is difficult to maintain environmental impact, it’s somewhat inefficient and it’s an expensive process. So a few years ago, we set out to develop an alternative and Aqua Metals plants handles pretty much every aspect of lead production, lead recycling and lead use through the technology that we’ve developed which we’ve trademarked as AquaRefining. AquaRefining makes high purity lead at a lower cost with an inherently non-polluting process, I’ll say more about that as we go through this. One of the other interesting points about our technology is that we don’t need large scale. This is a technology that can downscale which is important because it means that we can place AquaRefining facilities closer to the source of lead -- source of used batteries and the need for lead and that feature is something that fits extremely well with the strategic relationship that we’ve announced with Interstate. So, the other point that I’m going to cover is that Interstate is growing rapidly and it’s almost right to say that we’re securing the important strategic relationships [indiscernible]. Our first recycling facility is scheduled to start and produce 80 tons a day by the end of this year, and we plan to expand that to 160 tons a day in 2018, or by 2018. And we’re now starting to plan multiple additional locations across the U.S. with strategic partners. And those of you who’ve been with us and followed the story for a year or more heard me say that and today it’s been a somewhat vague statement about we want to build more facilities and we’re going to be able to say more about that, really the fact that we secured the strategic relationship with Interstate allows us to put a lot more surety into that statement. So, there’s growing interest in addition to that from conventional recyclers to access our equipment though[ph] now actively evaluating sales licensing and other equipment business models. So that’s the summary. Just logistics, we’re headquartered in the San Francisco Bay Area. This is where our corporate office, engineering and laboratories are located, it’s central to the people and vendors that we work with, it’s close to Oakland International Airport and even [indiscernible] there’s a shot there of -- taken a few months ago the front of our facility. If you were to look at that today, you would see the parking lot is completely jammed. And the map below shows roughly where we are in the San Francisco Bay Area. And co-located, the corporate offices AquaRefining module assembling test facility where assembly of first commercial ready AquaRefining module started in January of this year and continues and that facility has the capacity to manufacture 160 modules a year with room to expand and I’ll show you what that means in a few minutes. But first I just want to go back to the point about lead and I’m showing you two charts on this slide. The one on the left shows the relative importance of the various battery technologies and many have seen similar charts of these but actually expresses in dollars. What we chose to do we expressed in gigawatts hour per year of battery capacity produced, because I think that makes an important difference given that lead-acid battery are up to 20 times less expensive than lithium-ion, charts based on values tend to overrate the importance of lithium-ion production. What this chart shows is that today in 2016, 96% of the world’s recent rechargeable batteries produced per year are actually lead-acid batteries. So it’s still by far and away the dominant technology. And despite billions of dollars of investment, lithium-ion currently rates at about 4% of the world’s battery capacity produced per year. The chart on the right shows the growth of lead in use which is almost entirely the batter production. It splits it out into the dark blue band which is mined lead and the red band and the green band which is recycled lead. And the important point there is you can see one, the amount of lead in the last 20 years has doubled and that’s indicative of the doubling capacity of lead-acid production over the two years; and there’s also couple of subtle features here. One is that the amount of new lead mine has – and that means that now by far and away the most important material for lead-acid battery production is recycled batteries not new mined lead. And there’s a difference between recycled lead and that is recycled lead using smelting and mined lead and that is -- if you use smelting to produce secondary lead, it’s not quite as pure as mined lead and there is a requirement for high purity lead in new battery production. So currently that’s being met by what’s shown on the chart as the red band which is lead that has been recycled using smelting and then further refined to equivalent purity as mined lead. So that’s the background why we believe that this is an important market. Okay, so the next slide really summarizes the challenges with smelting based recycling. And as I mentioned earlier, it’s a technology that’s approximately 6,000 years old. It starts by heating lead compounds to at least 1400 degrees Fahrenheit more typically 1600 to 2000 degrees but technically it’s what’s known as an endothermic reaction which means unlike steels melting which generated when you start the reactor, lead’s melting actually absorbs heat. So it needs a huge amount of energy to continue the reaction. And in doing so, it generates high amounts of carbon-dioxide and other greenhouse gas emissions. Because of the temperature that they operate, it’s varied – than melting point of lead which is 450. There is a technical issue with the volatilization of lead particles which generate a very, very fine lead dust which is exceptionally difficult to remove from the gas stream that comes out of the smelter. It’s not something that will be captured by even a HEPA filter and it’s pretty sophisticated and capital expensive equipment is required to capture that lead dust and stopping from reaching in the environment which in well run facilities in the - actually the case but sadly but in many parts of the world there’s little to no attempt to capture those some of the toxins that come out of the smelting process. Separately, in general slagging of the solid waste and it needs very large scale operation to be buyable and when you build a process that can only be economic in very large scale, it actually challenges you because you then have to transport to get back - lead produced over very large distances to get them back to the places where the batteries or where the lead is required. And as I mentioned earlier, it doesn’t produce all pure lead. It’s difficult to achieve ISO 14000 certification with this process. And as probably you’re well aware, three large U.S. smelters have been shut down due to pollution and non-compliance in the last few years. So that state of affairs is really what started us down the path to develop this technology. So against that, we set out after couple of decades in the battery world in both lead batteries and advanced lead-acid batteries, we saw this opportunity and we set out with a clean sheet of paper to develop a process that would use – of smelting that would be scalable and down-scalable, it would be automated and a continuous process. But more importantly to be entirely [indiscernible] with and operate at ambient temperature, and essentially that’s what we’ve done. And the illustration on the right is a bank of three electrolysis mounted from a skid, two of those banks form a module and our whole process is developing a factory assembled and tested, shippable plug-and-play module that will support clean recycling of lead-acid batteries using an ambient temperature process that does not produce gas, doesn’t product slag, doesn’t produce solid waste but does produce very high purity lead and is a -- process that also supports ISO 14000. And the key point in this is and we spend a lot of time thinking this through, with that module shippable product, it actually supports multiple business models. And what we chose to do was demonstrate our technology’s effectiveness by building our own lead recycling facility first. Against that, we are big believers in intellectual property, I’ve been developing, inventing and commercializing for the better part of my life and we understand the importance of intellectual property and we have a reason with sophisticated approach to it. So currently, we have 22 patent applications in play. We’ve invested in a very robust patent strategy. Our research has shown that we have IP Greenfield opportunity in front of us. We’re absolutely not the first people to look at electroplating the lead. It’s been looked at a numerous times. But what we’re able to do is bring some technology to bear on the lead industry that comes from vastly different backgrounds. So what we came up with is an approach that is fundamentally different to that which have been tried by other parties in the lead-acid industry. So we believe in building a strong patent portfolio. We believe in defending it rigorously but also we look to protect our IP in other ways and one of the reasons why we gravitated towards a shippable modular product is that it allows us to control key equipment, key electrolyte formulations and lastly but certainly not least, key process parameters. And we also plan to have a stage roll-out of technology updates. So, looking at this feature about technology and the feature that supports multiple business models, what’s it got to do with the charts on the screen in front of you is to look at the entire $22 billion lead market, what that means in terms of capacity in tons per day, what that means in terms of – AquaRefining and what that means in terms of percentage of lead use worldwide. So, - we’re currently building it, we’ll produce 80 tons a day of lead, that will require 16 AquaRefining modules and it represents just 0.2% of the lead used worldwide. That’s what we’re building right now, plan is to build up to the equivalent capacity of 10 Renos[ph]. When we build 10 Renos, that will give us a combined production capacity of 800 tons a day, that will require 160 modules and that will get us to just 2.1% of the lead used worldwide. If we attempt to supplant all of the world smelting, we’d be looking at 38,000 tons per day and requirement to supply and install 7,500 modules to get to 100% of the lead. So against that backdrop, we’ve actually developed a commercialization strategy, we’ll start us off with what we call Phase 1, which is all about build and operate our own AquaRefining facilities. I’m a great believer that if you are going to commercialize a technology, you really need to use it yourself first and demonstrate that it’s commercially viable and profitable before you tend to providing to third parties. So we chose to take that groundbreaking prospect of building our own facility. So Phase 1 is about early Reno, it’s about expanding it to 160 tons a day and then building the equivalent of 8-9 additional Reno. And that really establishes as a player but still only producing 2.1% of the world’s lead. In parallel to that, as we start to roll out additional facilities, planning to provide our equipments and services to the third party, so allow other people who currently smelt, to replace that smelting without process. And then the final phase, Phase 3 is to add higher value materials and services that leverage some of the unique capabilities of our technology, but today I’m going to talk about Phase 1 and Phase 2, we’re not really going to get into Phase 3. So, to be able to really deliver Phase 1 and Phase 2, we’ve formed a couple of strategic relationships. The first one was formed nearly two years ago now with Wirtz Manufacturing, leading supplier of battery breaking and battery recycling and actually battery manufacturing equipment. And their relationship with us is going from strength to strength and the key element of what they supply for us are the [indiscernible] battery collection systems, battery breaking and separation systems, they –systems and then the treatment and leading of these systems. All of these are proven pieces of equipment that you’ll find in any conventional recycling facility. But what’s certainly different is that the process that we’re implementing with Wirtz is actually an all wet process, so although many of these things will sound similar to that which is used in a conventional smelter, one dramatic difference is that in our process, we do not dry anything. We do not have any dry powder. If you’re operating a smelter of 1400 to 2000 degrees Fahrenheit, it’s imperative that anything that goes into there is dry, otherwise you have a significant explosion. And dry powders are difficult to manage, toxic dry powders are exceptionally difficult to manage. So our processes are entirely wet, all our -- so handling those eliminates wet that makes the process far safer. So now I’ll talk to – address some of our first strategic relationships and I’m going to talk to the recently announced strategic partnership with Interstate Batteries, and the whole point of this relationship is to accelerate growth. For those of you who don’t know, Interstate Batteries is the number one recycling battery brand in the U.S. It’s the largest independent battery distribution system in North America and the country’s leading battery recycler. So they’ve got a network of 200,000 dealers. They recycle or collect all recycling 24.9 million automotive batteries in 2015 and sold 17 million automotive batteries in the same period. So they actually collect than return more than they actually sell. So Interstate have agreed to supply more than a million automotive another lead-acid batteries as feedstock for our AquaRefining. They are making a strategic investment of approximately $10 million into the company and the details of that have been provided in the press release and in our filings. But the important thing is this could buy – in which we can plan on detail on with the high level of surety to those additional recycled facilities. And one of the big things that goes for us is that it removes the sourcing rigs that’s inherent in expanding into an industry that is based on a number of pre-established relationships. So, what Interstate brings to us is importantly is the supply of used batteries. We believe it also brings us a huge amount of credibility to what we’re trying to build. We’re absolutely thrilled to work with them. We started these discussions several weeks ago and as our executive team and Interstate’s executive team have worked together and worked through often challenging issues on what our strategic relationship is going to look like and how we’re going to move together, our relationship got stronger and stronger and stronger and we’re thrilled to be working with them. So, now back to where we are, so we’re currently building the world’s first AquaRefinery, for those of you who have just joined, I’m just going to recap on this, many of you may have seen these points before. It’s basically the Tahoe Reno Industrial Center which is McCarran Nevada otherwise known as 20 miles east of Reno on Highway 18. It’s the location of the switch data center, it’s the location of multiple distribution centers and it’s also the location of Tesla’s Gigafactory. We have a 12 acre site, 138,000 square foot building. We plan to take in 150 tons of scrap batteries a day and produce 8 tons of lead. 50% of that would be refined alloys, specific alloys for specific customers, 50% of that will be pure lead, and I’ll say more about that in a moment. It is and what’s planning to be a lower mission facility and we’ll operate 24 hours a day seven days a week. So in terms of business development, Phase 1 is about expanding our own lead production, so the – the demand is there, 800 tons a day would get us to 2.1% of world production and make us a credible player and that we believe is important if we want to build a platform to soothe the supply of equipment to third parties. With the strategic relationships that we have in place, we now believe we can expand quickly, we’ve developed some low risks whilst we control and IP and quality. And in parallel to that, we’re working to develop our [indiscernible] for our process. So the scope for that is to expand the Tahoe Reno facility to 160 tons a day during 2017 and 2018. We’ve got the supply to that now and then we – goal of multiple additional facilities co-located with our strategic partners. So right now we are doing the evaluation of multiple locations across the U.S. with our strategic partners. We are not announcing where they are going to be yet, it will be probably a few months before we do that, but it’s a serious ongoing exercise with a great partner. So looking at Phase 2 of our development, that’s really about tackling a major part of the market which is expanding our process into what is currently supplied by smelting. And we’re looking at equipment supply on a licensing or these facilities spaces, the rationale for is that the larger lead-acid battery can typically produce 50% of their own lead, examples of that are in North America are JC and Exide, and we believe that these service model delivers our [indiscernible] support. It’s also a model that’s been embraced by capital asset businesses. I spent my early career at Rolls Royce, aerospace, I spent nine years and these days nobody sells there, passenger gas turbine and all provides on fee to service basis with online support and spare parts to the rest of them. And I think that’s an appropriate model for what we are planning to do. So our strong – to replace the world’s smelting capacity, that would require 7,500 AquaRefining modules and we currently have the capacity to produce 160 modules a year, which is equivalent to 10 Renos. So the next steps in these are to work with additional strategic partners both inside and outside the U.S. as customers – that equipment, and also to work with regulators and policy influencers on two key messages; the first one is that many people don’t understand that lithium mine cannot actually be recycled and even more importantly, the chemicals present inside a lithium mine is actually as every bit as toxic as the materials that are found with lead-acid and other batteries. And the fact that they are not recycled presents a very major long-term threat to the environment against which the lead-acid batteries are the only commercially recycled energy storage technology. And we think it’s important that we help to get that message out. So now I’m going to round up with a couple of updates on where we are on our module supply and the facility update and I’ll hand you over to Tom to go through the financials. So module assembly update, we built a dedicated 10,000 square foot facility, next door to where – it’s established and it’s essentially able to produce 800 tons a day or equipment that will make 800 tons a day of pure lead production, I know it [indiscernible] it means day. But we control the assembly and our equipment allows us to ensure quality and control cost and protect know-how we’ve invested quite heavily in excellent management for the leadership of that technology bringing six sigma expertise from very high profile industries. And it also supports an incremental ramp up of reclining capacity, what we’ve added to that is a new full sized electrolyzed test facility which allows us to demonstrate our process to third party licenses without having to take them to Reno to show that process also enhances our ability to develop tests and approve future releases of that technology. So that was a pretty significant additional investment on our part. Now an update on the facilities, so the building is largely completed now, sitting out inside is on the way. This week we skid, what we call our first test skid, this is basically one-half of the module specifically adapted to be a - to make sure that when all of our other modules are shipped onsite with everything fits. So it’s fit test skid, it’s just two trials today. We have the coal operations team, recruited and on-site, we’ve finalized key commercial relationships with additional supply and off-take partners. All of our permits are now in possession or on track, certain permits can’t be delivered until the site is actually operational, but we’re in tremendous positioning in getting all of our permitting in place. And then we’ve got – system in working with Interstate and recognizing that we have additional -, but we’ve taken the decision to use some of those additional – to implement several upgrades of the facility prior to start-up. And I’m not going to go into full listing of that but two important features is that with increasing our harrowing and refining capability which will allow us to move to higher value products rapidly and we’ve also invested quite heavily in additional involuntary online real-time monitoring. We believe that it’s important that we prove to the world beyond a doubt that this indeed a zero emission facility. So we’ve put quite a lot of effort in putting the additional monitoring systems in there. This was the impact of marginally delaying the time of which we can turn on our first module at the Tahoe Reno facility because some of these things were installed before we turn on. But we don’t believe it is going to have any material impact in our ability to be at full scale at the end of this year. I mean it really doesn’t impact the ramp profile of revenue that we’re projecting in our cash flow model. So we still remain on track to achieve 80 metric tons of lead per day output by the end of 2016 and on track to expand that to 160 metric tons per day by 2018. So with that, I’m going to hand over to Tom, who will walk you through the financials.

[Thomas Murphy:]

Thank you, Steve and good morning. I’m going to start with a brief recap of the first quarter 2016 results. For the three months ended March 31, 2016, we had an operating loss of $2.2 million. The net loss for the first quarter of 2016 was also $2.2 million. We had $23.1 million in cash and cash equivalents as of March 31, 2016 compared to $31.8 million as of December 31, 2015. I’d like at this time to point out a few key highlights since our IPO which was in July 31, 2015, less than a year ago. On that date, we listed on the NASDAQ and sold a total of 7.24 million shares at $5 per share for $36.2 million gross proceeds. In conjunction with the IPO, our convertible notes were redeemed for $2.5 million shares of our stock. On August 17th of last year, we broke ground on the construction of our 138,000 square foot McCarran recycling plant as today we continue to complete the building and equipment installation as Steve just explained. In November of last year, we received $10 million loan from Green Bank in Houston, Texas. This loan was made in conjunction with the 90% loan guarantee from the Rural Business Cooperatives Service of the U.S. Department of Agriculture. We signed a lease for 20,697 square foot of mixed office and manufacturing space in Alameda, California. Tenant approvements were begun in 2016 and removed in February of this year. And the big announcement we had last week, on May 18th we signed a strategic partnership with Interstate Batteries. In addition to the supply contract Steve just talked about, Interstate Batteries has agreed to purchased 702,247 shares of the company at $7.12 per share for gross proceeds of approximately $5 million. Interstate Batteries has also agreed to loan the company $5 million pursuant to a secured convertible promissory note. The note will bear interest at an 11% and the loan will mature on May 18, 2019. We also granted Interstate Batteries two warrants to purchase common stock; the first wholly vested warrant to purchase 702,247 shares expiring on May 18, 2018. The second warrant vesting on November 18, 2016 is a warrant to purchase 1,605,131 shares and expiring on May 18, 2019. The average exercise price is $8.43 for both warrants. The company has also entered into a definitive agreement with certain accredited investors to sell 719,333 shares for gross proceeds of $5.1 million. Liquid venture partners through National Securities Corporation acted as our placement agents. Additional information on both of these transactions can be found on our recent 10-Q that was filed last week and we will be filing an 8-K later today. As of March 31, 2016, we’ve spent $9.7 million on the construction McCarran construction, and $8.5 million for its equipment for the plant. Staff, including full time consultants increased from 7 at the beginning of 2015 to 38 currently. Outstanding common shares as of March 31, was 14.1 million. After the closing of the sale to Interstate Batteries and private placement, our outstanding shares will be 15.6 million. With that, I’ll turn the call back over to Steve.

[Stephen Clarke:]

Thank you, Tom. So now I’m just going to wrap up with couple of points may be a repeat for people who have followed us, but just to those who are new to the company. Just going to talk about the management and the board, so this is not a company that was developed by some – management team had guns brought in, this is a company that’s developed by its management who are founders. So the executive team here is myself, Selwyn Mould, Tom Murphy and Steve Cotton. I started like working with Rolls Royce aerospace in the UK, I spent nine there and I left with a degree in engineering and MBA, and the position running the entirety of Rolls Royce’s engineering group worldwide, - to consulting spent several years in doing corporate turnaround work and mergers and acquisitions and de-acquisitions and 20 years got back into technology which has always been a passion of mine and operate in developing materials, electrical chemical base, businesses overseas and proud to be working with Selwyn Mould who’s our Chief Operating Office, self-started out in the industry. In his case, it – under UK with a degree from Cambridge in Chemistry, I actually worked with him in the consulting company but he also has a background in manufacturing and logistics with time spent at Pilkington Glass and Lotus manufacturing and supply. We – consulting and joined Tom and myself 10 years ago now in technology development and commercialization. Tom Murphy CFO who’s been talking is now the somewhat considerable expertise in IPOs for international finance, and he’s a CEO/CFO somebody absolutely closer – on the numbers and finance their business. And last but absolutely not least is Steve Cotton, our Chief Commercial Officer. Selwyn, Tom and I have known Steve for a number of years in our battery development and then in – mostly CEO of Canara leader in package, lead acid battery and UPS systems. He sold this to company and essentially approached and said hey, I love what you’re doing, I think you need a Chief Commercial Officer and I’m your man and we agreed. So we brought Steve on board over a year ago and he’s made a tremendous contribution to the commercial aspect of the business. We’ve put a lot of work into assembling the board, as I mentioned at the beginning, one of the key members were Stan Kimmel who passed away. And we are actively looking for replacement for Stan, but that doesn’t belittle the work that both Mark Slade and Vinnie DeVito has brought to this company. Mark was a former lead trader and a board member of London Metal Exchange. He was the CEO of Marex Financial which he co-founded with Marathon Asset Management and he’s been a former board member of Futures and Options Association. So, he brings a wealth of experience on the board in metals trading and some of the art of metals trading that he’s -. And in the similar way, Vincent DeVito has got 30 years of financial reporting expertise in the chemical industry and production companies and companies that are quite similar to Aqua Metals in many regards and how to – growth trajectory. He’s the chair of our audit committee, and he’s former Chairman of Riviera Holdings Corporation. So we’re very pleased and proud of the team that we’ve put together. So moving on to wrapping this up now. We’re starting to get some pretty good media coverage and this slide shows the more recent things we’ve had and I don’t know how we managed to – it’s probably my fault, but the glaring on mission is the fact that we were awarded the Rising Star award at the Platts Global Metals Awards in London last Thursday attended by myself, Steve Cotton, Vinnie DeVito, Mark Slade – John our two strategic partners were stoked to receive that award and it was quite a humbling experience sharing the stage with some of the high – in the world’s metals industry. So wrapping this up, just trying to pull together some of the takeaways here. AquaRefining is tended to make lead recycling clean, efficient, scalable and cost effective and I think we’re well on our way to proving that. We’re ready to compete in the $22 billion lead market. We’re generating strong positive interest that – generating massive interest with supplies and customers as evidenced by our recent announcement but it’s also evidenced by things we’re not going to talk about just yet but there’s a lot of interest in what we’re doing and it’s quite thrilling. Market scale and technological flexibility for both multiple business models, we’re building our own and operate to demonstrate it. If you look at game changing technologies in commodities industry, as evidenced by especially in steel, glass, you’ve seen – fabrication what you see is the guys who really deliver the game changing technologies, take that difficult first step of build own and operate and showing commercial viability before ruling out the technology, that’s exactly what we are in the process of doing. We’re well funded. The recycled facility is on track, module production is on track, and in the future we’ll be talk a bit more about how we can leverage our technology into more than just the – of lead. So final slide really just the contact details for our follow up call. So with that, I’ll hand back to the operator.

[Operator:]

Thank you, sir. We’ll now begin the question-and-answer session. [Operator Instructions]. And we’ll go first to Collin Rusch with OPC.

[Collin Rusch:]

Thanks so much. It’s Oppenheimer & Company. Guys, could you talk a little bit about how much equipment has been installed and when you expect the equipment set to be fully installed?

[Stephen Clarke:]

Right now we are in the process of installing battery breaking and separation equipment. We haven’t got modules assembled but we haven’t the shipped the – what we have shipped is the test that – to make sure that when we do the supply the modules that it can line up and the electrical equipment lines up and – as I said earlier, we are on schedule to have the plan, installed, running at main capacity by the end of this year.

[Collin Rusch:]

And when do you expect the first start up to happen when the first test runs?

[Stephen Clarke:]

Well some of them have already been completed, there isn’t a first test run, it’s a continuing operation. So, in one sense we’ve already done it. In the sense of when will the first module will be running in base in Reno, we’re projecting late July may be early August. The timings of first runs aren’t that critical, the more critical items are getting the much larger scale equipment installed and getting to the battery breakers and get all the support equipment. So there’s little risk associated with the actual – themselves, the important point is just the scale of the operation. Once you start processing 160 tons of batteries per day, you better make sure that all the support processes are there and operating. So we’re spending the time making sure that everything – all the support stuff is working as it should before we attempt to ramp up the lead production.

[Collin Rusch:]

I think that point is well taken on my questions around the amount of time you have for problem solving which sounds like there is ample time for problem solving as these things get put into place. And then the last question for me is really about the application of the lead that’s going to become – facility, is your understanding that this lead has been used in pace or is it really primarily focused on – and how much visibility do you have into battery, you’re supplying the raw material or how so you move into this alloy opportunity, are you looking at the further applications for the metal and any sort of detail [indiscernible]?

[Stephen Clarke:]

So the amount – there’s two types of lead, specific grid alloys for specific battery customers and we make pure lead which is more typically used as an active material, although some modern batteries use relatively pure lead in one of the plates. The amount of lead that we produce in terms of active material to the plate lead will vary somewhat depending on the mix of batteries that have come in. But we specifically are making or plan to make specific alloy grades for specific customers and pure lead for specific customer and for the auto market. The auto will be outside of what we are making – it’s equivalent to – I’m not really getting into who or what our commercial relationships are with.

[Collin Rusch:]

Okay, great. I’ll probe into that for couple of directions offline. But thanks a lot guys and congratulations on the progress.

[Stephen Clarke:]

Thank you.

[Operator:]

And we’ll take our next question from Jeff [indiscernible] Capital Markets.

[Unidentified Analyst:]

Good morning. Question one the Interstate Batteries agreement, can you guys talk about how you’re thinking about tolling versus merchanting and how many initial conversations you guys have had internally in that regard?

[Stephen Clarke:]

What I can tell you it has been very detailed discussions are ongoing, what I’m not going to be doing is revealing the commercial nature of those. What we’ve got is a very open dialog of what is optimal for them and what is optimal for us, our policy is not to disclose commercial contracts, pricing and ratios.

[Unidentified Analyst:]

Sure, fair enough. Okay. And then just in terms of that agreement with them, obviously these guys have a broad footprint across the country. Does that kind of give you lease in terms of markets for a future AquaRefinery predicated on finding other partners or how are you guys thinking about broadening the footprint?

[Stephen Clarke:]

The former, we are focused on building out additional facilities with Interstate has the strategic partner, that doesn’t preclude us building facilities elsewhere but our focus right now is that we have a strategic partner who is essentially walking towards to expand rapidly sort of that can take advantage of lead produced that isn’t subject to a smelter. So at that time focus -- what it gives us is the surety of we’ll not only supply a battery of locations so it allows us to accelerate. And as I said earlier, we talked a lot about with – 10 facilities a year which was a great statement and how do you validate and move towards it and this relationship provides us the pathway to do that. That’s exactly what we’re focusing on.

[Thomas Murphy:]

And just to expand a little bit on Interstate Batteries reach, they have customers in every single county of the United States. So they are everywhere.

[Unidentified Analyst:]

Yeah, obviously, given you guys have tremendous amount of flexibility there. And then a last one from me is you kind of touched on it during the presentation on looking to develop your own brand on the LME. Could you guys just talk about the strategic benefits of progressing on that front, is that a marketability standpoint of your product or kind of what’s the I guess strategic benefit that you expect to gain from that going forward?

[Stephen Clarke:]

Yeah, there’s – to it, the first one is that if you’ve got a hell of a brand, you’ve got a – product which would essentially liquid cash at the – reduce the [indiscernible] your inventory holding cost dropped to the minimum because you’ve got a – you’re essentially in the same place as the people who produce crude oil. So it’s important from a trading standpoint, but we actually think it’s more important than that in the sense that we are very keen and humble to differentiate our products, but wasn’t produced in a smelter. Some that were produced with next to zero environmental impact and every – refined lead is a ton of lead that was produced at a lead mine and wasn’t produced at the smelter, we think that’s a good thing.

[Unidentified Analyst:]

I absolutely agree. Great. Appreciate the time guys.

[Operator:]

[Operator Instructions]. We’ll go next to Robert Romero with Connective Capital.

[Robert Romero:]

Hi Steve. Congratulations I’m really I know that shareholders are very, very happy that you’ve made a progress here with the Interstate, it’s great to see I mean I can’t imagine a better partner worth the company to help rule out the business beyond this year. So yeah congratulations.

[Stephen Clarke:]

Thank you.

[Robert Romero:]

So the question I had is really obviously there is key proof points obviously continuing to roll out successfully this year and ramping up to the initial production of 80 tons a year which you’ve committed to this year I’m sorry 80 tons per day. And then as far as you’ve put out there, as far as the benchmark is 160 tons per day in 2018 which is two years later, my question to you is I mean obviously it’s going to be conservative with the goals but just want to understand that to the extent that they rule out continuous well and you’re able to ramp up 80 tons per day at the end of this year, since your Alameda plant can make 800 tons per day per year of equipment, would it make sense if things go well to expand faster? I mean certainly I’d imagine if you roll out successfully and if things are going well at the facility you’d go to 160 may be next year and certainly with the Interstate agreement, there’s a lot of other places that you could do, small facilities to refine lead. So again, I’m not looking for commitment, if things go well, is it reasonable for you to roll out faster?

[Stephen Clarke:]

Absolutely. I’m a firm believer on planning on what you know and what we know is what – the thing that’s been fascinating to us is we had ongoing discussions with numerous battery company and recycling companies. Battery companies do their own recycling and recycling companies operate smelters in North America, pretty much everywhere in the world. And the intensity of those conversations takes up pretty enormously since we made the announcement, it’s been surprising and both very pleasing impact on the seriousness of the conversations around supplying equipment to third parties. What we don’t want to do is over-accelerate, I mean we took a very serious look and a very serious decision to build own and operate first before we roll out, very specific reasons and advantages in doing that. So we’re mindful that we want to execute on that plan and it might not dramatically impact the starting point of we should be supplying the equipment but I think we may be able to accelerate how many customers and how quickly we will supply equipments.

[Robert Romero:]

Okay. Thanks for that. I obviously I’m looking forward to the ramp up going well and things do go well, you’ll be able to move up quicker next year.

[Stephen Clarke:]

Okay. Thanks, Rob. So I think at this point, we’ll conclude the call. Thank you very much, appreciate the interest in the company. Thank you very much.

[Operator:]

That does conclude today’s call. Thank you for your participation.