AQMS Plant Tour – August 8, 2017

  • These notes are from Brian Conrad, an individual investor who toured the Aqua Metals facility on a company-led investor tour on August 8th. Brian is not an investment professional and these are just his notes from the tour, and not to be considered investment advise.

I was fortunate to secure a spot for the afternoon tour at AQMS on August 8, 2017 hosted by Selwyn Mould and Thomas Murphy.  The visit started with a safety meeting explaining why we needed to wear hard hats, safety glasses, shoe covers, gloves, coats and respirators. Once properly attired we proceeded to the plant tour which would be followed by a Q&A session.  The questions started promptly and continued throughout the tour.

General Observation

As we moved through the plant Selwyn Mould was careful to point out each aspect of the operation.  While we were looking at what appeared to be an operating plant (other than ingoting) Selwyn was quick to mention planned process improvements, potential paybacks and possible implementation months as we moved through the operation.  September and October seemed to be common timelines for upgrades with much of it dependent on equipment arrival dates.  Management seemed proud of what they built but intimately aware of additional potential.  The plant appeared to be operating at commercial speed.  The Team members seemed focused, on task and seemed familiar with the equipment with no visible direct oversight.  Each team member carried a radio.

What’s a Battery– first stop was a testing lab where we were shown pieces of a batteries and instructed on how the various components fit together, worked and ultimately had to come apart.

Feedstock –  Batteries arrive packed according to DOT regulated fashion on pallets weighing 2.5 tons.  Quick estimates suggested between 600 and 800 tons of batteries available to be processed. Several shipments a day are received, most likely only on days of operation.

Battery Breaking – Two team members were loading batteries on the conveyor belt at a rate of about 7 Ton an hour.  2 – 10 hour shifts and their feeding 140 tons a day into the breaker.  Selwyn mentioned equipment upgrades to speed loading and reducing team member lifting requirements but pointed out flow through was sufficient for now.  Batteries rode toward the ceiling into the breaker box described in the recent earnings call.

Separation – separation process below the battery breaker included liquid batteries moving through a separator, troughs and augers and at the end plastic chips falling into bags to be shipped to recyclers.  Lead went in a different direction into tanks and continues through the process.  The OEM is upgrading the separator to a larger version at their expense and will be installed in the near term.

Aqua Refining – Is in a separate room.  The modules have a see through panel which allowed us to observe the process in action.  Not knowing what is proprietary, I’ll skip explanation.   Module 5 was partially assembled and there were open spaces for 6 through 16.  Most who follow AQMS struggle with the time requirement of installing what, by appearances, should be a drop in self- contained unit.  Finalizing the design is the primary stated reason.  Under and around each module is a significant infrastructure of tanks, wiring and plumbing that deliver the appropriate solutions and mixes to allow the module to do its magic. The large equipment is in place with wiring and plumbing parts on site and able to be largely completed prior to module arrival. The presence of the “Module Infrastructure” (my term) supports the reasonableness of meeting the October installation schedule even with 11 to go.

Extrusion – Lead falling from the modules drops onto the conveyor belt.  At the end of the belt the lead is dumped into a machine the compresses and then extrudes the lead into tubular shape.  The output looks like playdough coming out of a playdough machine, albeit much heavier. The weight causes it to break into sections similar to a soup can although fatter.

Ingoting – We inspected the ingoting machine although it was not operating.  It is a series of molds forming one big conveyor belt.  Each mold has the AQMS initials in it.  Pour lead in the mold the conveyor moves slowly with the lead hardening before it is removed at the end.  A few ingots were sitting at the end.  I understand they were from a test run and would likely be re-melted and run through again until properly calibrated.  You can find youtube videos of similar (but not as polished) machines.  The most complicated part appeared to be the arm that is supposed to mechanically unload and stack ingots to be moved by forklift.  Commissioning is expected in the near term.

Shifts – Most would have liked to hear that the plant was operating more shifts to maximize revenue and management has indicated on calls that by now they would be.  For now management has chosen the path of two, ten hour shifts.  Team members are becoming familiar with plant performance and refining Standard Operating Procedures (SOP).  When transitioning to full operations the trained team members will be allocated across all shifts so that SOPs are followed in a uniform manner.  It was indicated that higher staffing levels would be used prior to splitting the shifts.  I’m not sure if that higher staffing is in place now or not. The reasoning is sound.  AQMS believes that they are able to compete effectively in the job market.  Since AQMS positions are high value add they can justify better pay than nearby alternatives can offer.

Q & A – Management was forthcoming in the Q&A session, understanding they needed to be careful about subjects that were best answered on the upcoming conference call.  What seemed clear in discussion and supported by the viewing the plant operations, was their confidence in having the plant operational in the 4th quarter.

Obtaining full operation and following with stated production goals is a steep hill to climb but it is a hill, not a cliff.

The foregoing are my observations as I recall them and could contain inaccuracies. The statements should not be considered investment advice or endorsement of Aqua Metals.