Aqua Metals Inc (AQMS) 2021 Q3 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Aqua Metals announcement schedule for third quarter financial results conference call. (Operator Instructions) I would now like to hand over the conference to your speaker for today, Mr. Glen Akselrod. You may begin.

Thank you, operator, and welcome, everybody, to Aqua Metals Third Quarter 2021 Conference Call. Earlier today, Aqua Metals released financial results for the ended September 30, 2021. This release is available on the Investors section of the company's website at www.aquametals.com.

Joining us for today's call from management is Steve Cotton; President and CEO; as well as Judd Merrill, the company's Chief Financial Officer.

During today's call, management will be making forward-looking statements. Please refer to the company's report on the Form 10-Q filed today November 4. For a summary, 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 its statements to reflect new circumstances or unanticipated events as they occur except as required by law.

As a reminder, after Steve's and Judd's formal remarks, we will take questions. Questions will be accepted over the telephone from analysts. (Operator Instructions) We will take as many questions as we can in our available time slot.

And with that, I'd like just to turn the call over to Steve Cotton, CEO of Aqua Metals. Steve, please go ahead.

Thank you, Glen, and welcome, everybody, to today's quarterly call. I'm going to start off with the Slide #1, which is our title slide, which is Aqua Metals' truly leading revolution in lead and lithium battery recycling. And today, we're going to be talking about our third quarter results. If you would like a more in-depth view of Aqua Metals, you can refer to our investor website and play back -- register for and play back the presentation that we made last week, which has more in-depth information. Today's call is focused on our quarterly results.

Slide #2, you will see the safe harbor that Glen just read. And so I won't really read that to you, and that's there inviting for your reference.

Moving on to Slide 3, our mission. And our mission is to provide sustainable metal recycling for materials that are strategic for energy storage applications, be it lead or lithium. Our proven breakthrough technology, which we'll talk about today, AquaRefining, returned raw materials to the manufacturing supply chain in a clean way, in an economical way that will help vastly reduce the reliance on mining to meet the growing demand for both lead acid and the lithium-ion industries.

Moving on to Slide 4. Change is really imperative in the way that the industrial processes need to electrify and get away from fossil fuels and become clean processes to support the green initiatives. As you see on the right, the U.S. Department of Energy themselves has said that the vision is for global production of metals using just air, water and clean energy of inputs. That's the only way we're going to drive towards net new emissions, which is quite a topic these days as we talk about global climate change in the recent COP26 meetings.

So that change is imperative because today's smelting produces around 7% of global greenhouse gas emissions amongst other emissions. This is going to go up significantly if we don't change and if we don't make the way that we recycle and even build batteries powered through electrical processes that are powered through from renewable energy. So these recycling technologies need to be really be incorporated in order to complete that transition. So it's not just in the transportation sector and the energy storage sector, but in that close loop of recycling.

Moving on to Slide #5. Let's talk about Aqua Metals milestones. If you look at the left side, you'll see that the company was founded not too terribly long ago in August 2014. And that's when we made our first prototype of an Aqualyzer, which is our novel, room temperature, water-based, organic and biodegradable methodology with low emissions to recycle lead.

In July of 2016, we commenced operations after building about 135,000-square-foot facility in the Tahoe Reno Industrial Center. And after turning on that facility, by October 2018, we became a North American certified lead supplier in ingot form to one of the largest battery companies in the world. And we produced about 35,000 ingots of AquaRefining lead in 2018 and 2019. And during that period of time, we did reach 24 hours a day, 7 days a week, commercial, proving-ground technology, derisking operations with the commercial production of that capability to deliver those 35,000 ingots.

By February of 2021, as a part of our transition from a capital-heavy proving-ground mode to a capital-light mode of providing equipment and licensing, which we'll talk about, we made an investment in LiNiCo, which is a lithium-ion battery recycling company. We'll talk more about our relationship with LiNiCo today and our recent press announcement today. But at the time of February of 2021, we made that investment, and we also filed a provisional patent associated with taking the AquaRefining technologies and applying them towards the goal of recycling the modern batteries.

And also, LiNiCo purchased the plant, the AquaRefinery, in a lease-to-buy scenario, which we'll talk about an update on that front as that was progressive then. So in July of 2021, we established our first commercial agreement for AquaRefining with ACME Metals in Japan. And that is a big milestone for the company because we are in the process of preparing to ship as a product that is a licensable products to this client and partner to develop AquaRefining in the Asia Pacific region.

August of 2021, we did complete our third-generation Aqualyzer, which we were able to rapidly iterate and focus on innovation through the past year of 2020, which now triples the throughput over the first generation where we made those 35,000 ingots of 1,296 kilograms per day for Aqualyzer, amongst many other improvements that allow the product to be monitorable with our pure metric software suite as well as additional electrical efficiency and capabilities of that equipment.

Recently, now and today and moving forward basis, where you see the green arrows, September '21, we completed the lab-scale testing of our initial testing on the lithium-ion recycling technology. And by December of this year, we expected that we will be shipping the lead equipment in the form of Aqualyzer and other supporting equipment to our partner in Taiwan. So a very important milestone coming up this quarter as we continue to commercialize the lead recycling aspects while we continue to develop a lithium recycling applications.

In August, we expect to do operational testing of our full-size lithium-ion AquaRefining recycling units in circuit. And by January of 2023, we have the potential to deploy the first full-scale AquaRefining process for lithium batteries.

Our ticker on NASDAQ is AQMS. We're headquartered in Tahoe Reno, Nevada. And again, we were incorporated in 2014. We had about 69.8 million shares outstanding. And our cash in hand, which we just reported, $11.7 million as of September 30, and Judd will speak more about our financials, inclusive of the fact that the company has very a strong balance sheet and importantly, it got traded.

Moving on to Slide 6. AquaRefining is really a derisk to technology at its core because we did introduce those 35,000 ingots. And we expect to take the many principles from our AquaRefining to lead into lithium-ion recycling aspects and apply what you see on the right important aspects, which is room temperature, close loop, recycle the chemical that you're using to do the recycling with a fundamentally unpolluted process, as I was speaking about before, which is critical in order to make this transition to electrification not only transportation and energy storage, but the industrial processes that support the production of recycling of those materials.

We have a very strong patent portfolio, which we'll speak to. And we commercially derisked a lot of the aspects of the technology through the process the we have gone through to the state to produce our first product. Our solution is cleaner and more cost-efficient form of recovery as a recycling process. We also produce a higher-quality product, and we'll talk about how that applies to not only the ultra-pure lead that we produce as you see the background of this picture where we make the metal one atom at a time through a continuous process, but also apply that 99-plus percent, in the case of lead, 99.996-plus percent of purity, to expanding to other metals and plating those metals in the lithium space, such as cobalt, nickel and manganese and even other products.

Recent highlights from our quarter which we'll focus on today is that we did establish our Aqua Metals Innovation Center recently announced for the development of our lithium-ion battery recycling solution and utilizing that AquaRefining technology. That is just less than a mile away from the AquaRefinery, which is now the LiNiCo facility that is about to turn up as they migrate into next year with the lithium-ion adaptation of the AquaRefining facility that we had just down the street of their Tahoe Industrial Center.

So we're very excited about that innovation center and the capability for us rapidly innovate as we did with the Aqualyzer program over the past year with lead and get that lithium program where it needs to be. And we'll talk about how we're going to be doing that with the recent press release that we just issued this morning.

We completed the third generation of Aqualyzer as I mentioned before, and we achieved production at over 300% of the original model. We also finalized in the quarter a definitive agreement to deploy AquaRefining technology in Taiwan to ACME Metal, which will be shipping, as I mentioned earlier, later this quarter and partner with them to develop direct to oxide process. You can see that in the press release that we also issued about our direct to oxide capabilities where we can take what comes off of our AquaRefining machine, and bypass the whole ingotization process and take the briquettes that we make that we squish from the materials that come off with the Aqualyzer and put those directly into the battery manufacturing process.

So we're very excited about our partnership with ACME to take that technology and bring that to the largest battery manufacturers in Asia Pacific, whom they already have as clients.

We have a signed a collaboration agreement, we announced today, with LINICO towards the clean lithium-ion battery recycling technologies. We'll speak to that in the future slides, so I'll just point that out for now. We'd also received a $1.25 million payment recently from LINICO as part of the lease to own. And that is the nonrefundable deposit for the purchase of the McCarran, Nevada facility. And that is the facility within Tahoe Reno Industrial Center.

We also received a final insurance payment, a settlement of $5.25 million. And we achieved a total of $30.25 million collected exceeding the guidance that we originally provided on that process. We're glad to have that completed and done and behind us.

We also further advanced discussions with potential licensees and are very happy with our sales funnel as we continue to try to add additional AquaRefining applications for customers throughout the world.

Moving on to more details about the ACME Taiwan agreement on Slide #8. You'll see that they are our first partner and really located in the largest and fastest-growing global end market. The market for lead is mature and it's very large. It's around $65 billion for the asset value globally. But it's growing fastest in the Asia Pacific market, simply because there's more industrialization. There's more cars getting through in the road. And many of those cars have 2 batteries, including lead acid batteries and inclusive EVs that also have a lead acid battery, and we're seeing quite a bit of growth in that market.

This deployment will showcase our AquaRefining clean lead recycling in that market where these environmental drivers were not only building new facilities by retrofitting existing facilities -- have been moving at a very rapid clip and we see a very strong bend towards the need to have environmentally clean capability to fuel this rapid growth in that marketplace and capacitization, et cetera.

This also unlocks an opportunity for future partnerships with the global battery manufacturers that are partners and clients of ACME Metal to develop that direct-to-oxide methodology and really take AquaRefining towards a much tighter link between battery recycling and battery manufacturing. So stay tuned for more updates as we continue to make that deployment come alive in the coming months.

Moving on to Slide 9, we'll talk about the collaboration agreement that we just announced today with LINICO. And Phase 1 and Phase 2 were defined here. Really, Phase 1, the focus is immediately beginning to have LINICO process used lithium-only batteries what's called black mass, and take that black mass into the Aqua Metals innovation center and process black mass into those high-value metals that I was describing earlier. And we will be doing that in our innovation mode with not large amounts of material, but meaningful amounts of material to derisk, improve the technologies and support Phase 2, which is the goal for both parties where LINICO licenses AquaRefining equipment and technology.

And LINICO has announced that they have a potential to process up to 100,000 metric tons of feedstock annually of lithium-ion batteries. So it would be one of the largest, if not the largest, battery recycling facility in the world. And we're very pleased that we've established this collaboration agreement to get the lithium capabilities for AquaRefining mature enough to deploy into that Phase 2, as I mentioned earlier on the time line in an earlier slide.

So moving on to Slide 10. In order to support all these activities, we have and continue to prosecute a very robust, strategic intellectual property portfolio. And we feel that we are well protected in our equipment, supply and global licensing efforts throughout the globe. Where you see blue, you see where we have issued and allowed patents that they're not pending. And you'll see in the light blue and blue that we have additional pending patents. We've now achieved 71 total patents that have been issued and allowed with 44 additional applications that are pending, inclusive of lithium-ion adaptation of AquaRefining-related IP that I mentioned earlier that we follow that key provisional patent for just a couple of months ago.

So with that, I'm going to turn it over to Judd Merrill, our CFO, to talk through the financial overview. Go ahead, Judd.

Thank you, Steve. I will share a few comments related to each of our financial statements. First, on Slide 12, on the balance sheet. As of September 30, 2021, cash and working capital balances were $11.7 million and $10.3 million, respectively. Over the last 3 quarters, we have consistently maintained cash balances over $10 million. Visibility for us to maintain the stable cash balance is partly due to the sale of the building insurance proceeds and our reduced cash spends.

We have accounted for certain items, asset items with a net book value of $3.2 million as assets held for sale. These are noncore assets and are no longer necessary for future operating plans. As mentioned in the prior quarter, we accounted for the lead to buy agreement with LINICO as a sale type lease. As the component of the accounting for this agreement, we recognized the estimated fair value in the land and plans as of approximately $17 million as a lease receivable. Subsequent to the quarter end, LINICO made their first required deposit of $1.25 million. The deposit is nonrefundable. However, it will be applied to the purchase price of the building at the time we now paid in full.

Lastly, accrued liabilities include approximately $2.3 million in remaining costs to repair the plant from the fire damage. We're getting very close to completing the restoration of the plant from the damage. And it's looking very good and we're pleased with the progress. Most of the building is ready for LINICO to start moving equipment in, and we anticipate that by the end of the year, the whole building will be available for their use.

Moving on to the next slide, the income statement. Costs and product sales increased approximately 2% and 23% for the 3 and 9 months ended September 30, 2021, respectively, as compared to the 3 and 9 months ended September 30, 2020. The increase in cost of product sales for the 9 months was the result of planned cleanup costs in preparation for the lease and the eventual sale of the facility.

Research and development costs include expenditures related to the improvement of the AquaRefining technology related to our lead recycling process as well as initial development of our lithium-ion battery recycling process, which we are focused on and expect additional spend in the coming months.

General and administrative expenses increased approximately 62%, 13% for the 3 and 9 months ended September 30, 2021, respectively, compared to the 3 and 9 months ended September 30, 2020. G&A increase in Q3 2021 as compared to Q3 2020 is due to a noncash stock-based compensation credit that we recorded in Q3 of 2020. Overall, our G&A expense has been fairly consistent over the last 2 years, averaging approximately $2.3 million per quarter, which this number does include both cash and noncash items.

During the quarter, we recorded other income of insurance proceeds, net of related expenses. This is related to the final insurance payment that we received, the $5.25 million, during the third quarter. We also recorded a $1.4 million of a loss on the disposal of certain fixed assets. And net loans for the quarter was a negative $1.386 million. And the basic and diluted net loss per share was a negative $0.02.

My final comment on the cash flow payment. Net cash used in operating activities for the 9 months ended September 30, 2021, was $3.8 million. That is compared to $9 million for the 9 months ending September 30, 2020. Cash used in operation was positively impacted by cash inflows from insurance proceeds, offest by cash G&A, cash offering expenses and costs related to clean up our plant. However, our big monthly cash needs for basic G&A and basic operating costs continue to be approximately $700,000 per month. We don't see that growing in the near future. Even with adding new hires and strategic consulting, which will add bench strength to our team, we believe that those costs will be partially offset by reduced costs elsewhere, such as reduced cost as we move out of the plants.

Net cash. We've been investing actively for the 9 months ended September 30, 2021, was $1.45 million. And that consisted mainly of $1.7 million for the purchase of property, plant and equipment, $0.3 million proceeds from the sales of equipment and $0.2 million realized towards the investments in LINICO earlier this year.

Net cash provided by financing activities of $10.4 million for the 9 months ended September 30, 2021, consisted of $9.3 million net proceeds from the sale of Aqua Metal shares pursuant to the ATM and $0.7 million of proceeds from stock options exercised. The majority of the ATM proceeds happened in Q1 with a smaller portion of just over $1.5 million collected in Q2. I will report that there are no use on the ATM in Q3 more subsequent to the end of the quarter-to-date.

Those were my final comments on the financial statement. I will now turn it over to the moderator to begin our question-and-answer question.

(Operator Instructions) Your first question comes from the line of Amit Dayal from H.C. Wainwright.

So Steve, with respect to your shipments and deployments of ACME, are you guys getting the third-generation solution? Or are they getting a prior version of the Aqualyzer?

So ACME in Taiwan will get the latest incarnation of the technology, and we'll continue to work with them to even further improve the technology over time.

Okay. And you -- should we expect that Aqua Metals to receive something from this shipment of deployment in the fourth quarter of '21?

The materials are going to be shipping by the end of the fourth quarter and need to get across -- et cetera, and get there and get installed. And we're working towards what I've characterized before as a modest amount of payment ultimately for the equipment as well as we will be -- once we get the equipment installed and commissioned receiving payments for the material that is produced. But again, to guide on that, it's not going to be a material amount of revenue for the company in the early phase. The key is to get the material coming off the equipment and the large battery manufacturers to work on that direct to oxide facility.

Understood. And with respect to other potential customers, do you have any updates in terms of any pilots or any other progress you have made in terms of securing new contracts with new customers for this?

Yes. So we, as I mentioned on the call, have a good sales funnel. And we are very pleased with the global nature of the sales funnel and are intending to add 1 to 2 additional licensees in the coming year, and Aqua Metals is going to be certain that we select and a licensee that select us where it's a good match for both parties. And that is what we're really solving for as we work through and would ask everybody to stay tuned for updates on that.

Okay. And with respect to the LINICO partnership, are there any major milestones that we should be looking for? Or -- and then maybe just a GSM question to that is what kind of resources do we now have to commit? It looks like it's becoming a more serious effort compared to the announcement earlier in the year. Do we need to allocate more resources as this picks up? How should we think about the CapEx or the investment requirements to bring this to market?

Yes. So as Judd mentioned, we're shifting our cost structure from the transition of the AquaRefinery to LINICO that's taken over the AquaRefinery and applying some of those towards the organization capability enhancements from what we've already enhanced within the organization from an engineering, science, design, process engineering, et cetera, perspective as well as getting commercial resources and other consultative resources that we're working with to develop the lithium space.

But as Judd characterized, not really a real amount of uptick in our burn rate to do so because we're transitioning those costs. And last, also about the milestones expected in the near term, as we continue to develop our technology now with the sourcing of the black mass material, which is post broken and separated with used lithium-ion batteries because of black mass, which has those high-grade metals in that, we'll be receiving that material soon. And we'll be able to process that material through our pilot cells and begin to share with the marketplace in summary what we've been able to create and what kind of purity of what metals we've played it, show that and, obviously, get into more detail with LINICO in terms of the specifications, evaluation of those materials that come off of our machines.

And that will happen -- if you look at the time line on our website, as we round the bend into the next couple of quarters, you'll see more and more evidence of that progress, of that technology. I'd like to remind everybody that nobody has really shown in hydrometallurgical processing for lithium-ion batteries a substantial amount of material to date. And we think that with our partnership with LINICO, together, we are going to be ahead of the general curve of the industry because there's a building, there's plant and equipment going in. And we have our innovation center, we can begin moving materials practically upon the commencement of the signing of our agreement. So we're very excited about that.

And then as you look at our time line on the website, you'll see through the process of the year, we'll have further full-sized pilot cells running towards the end of the year with the intent to begin deploying them to be around the bend into 2023 for production scale.

Your next question comes from the line of Colin Rusch from Oppenheimer.

This is Brendan on for Colin. First one for me, $11.7 million of cash on hand. Can you just walk us through your plans to fund the business through the end of '22?

Yes. So we did have $11.7 million in the quarter. We did receive another $1.25 million through the building sale. There's another deposit of $2 million that's due next year. So there's some additional funds from the building sale that's coming in. LINICO doesn't have the option to pay that off sooner.

So there's another $12 million plus, $13 million or so that we could receive next year that you have the option to wait till the first quarter of 2023. So there's some additional funds coming in from that. A little bit of funds we have on hand and some of the revenue that we expect towards the later part of next year. And the current spend rate that were on our needs for G&A and for the operating and R&D costs that we have in front of us. We probably have enough funds to take us through into 2022.

Great. Just as a follow-up, I know you touched on it just a second ago, if you could provide just maybe a little bit more color on pace of the lithium recycling property development and then maybe kind of a target in terms of what we expect to have a proven commercial process on that front?

So yes, the pace is rapid with the lithium recycling technology. One thing we really learned in 2020 was without the distractions of operating the plant of the full size of refinery to demonstrate in the proven grounds of our technology, we were able to focus practically 100% of our engineering efforts towards innovating and as evidenced by iterating our Aqualyzer product twice for doubling and tripling of capability, let alone the Pure Metrics software and monitoring and connectivity and automation controls.

So we've taken that towards our capital-light model of a rapidly innovating application of AquaRefining technologies towards multi-metal recovery for lithium. And that's why we're doing that in the innovation, which is a relatively much lower capital risk for us to focus on innovation and then work with LINICO and other industry to take our technologies and evaluate the output and the integration with their processes and put them into more capital-heavy throughput plays of taking business model, of taking on feedstock and producing metals and selling those metals where we monetize, really, unbound geographically through our equipment supplier services and licensing business where we can work with multiple parties.

But we're very, very pleased with our evolving partnership with LINICO that we can hit the ground running and really make 2022 a banner year for the progress, not only for Aqua Metals, but for lithium-ion recycling in general. So that's a real strong innovation. We focus on that innovation side. The business solutions what our business model is really because of our capital-light model.

(Operator Instructions) Your next question comes from the line of Shawn Severson from Water Tower Research.

Steve, are there any real technology hurdles left in lithium-ion recycling fiber technology? And if we're looking at kind of getting from where you are today to really implementation and commercial scale, what has left to be done from a technology standpoint?

Yes. Shawn, so really kind of what we've done before with AquaRefining for lead, the extraction of lead through our AquaRefining technologies where you have to derisk the technology by operating smaller units and then going to a full-sized unit and then getting those operating in a full-scale facility.

One thing that we learned from our settlement of Aqua Metals is we spent $200 million building a full-sized plant and getting that scaled and having no distraction. We think that by removing some of that distraction and capital-heavy focus, we can continue to derisk the technology as we go forward.

The process engineering and design is there. We're very confident in our ability to extract the metals that we've named that we would be extracting. We've done some very significant level of separation and an extraction already. And also taking that and getting that in the pilot cells and getting those operating and getting everybody comfortable with the process flow and going towards the whole-sized scale. So there's still derisking to do as the lead technology has been derisked because we commercially produced 35,000 ingots. That is further along. And that's really our workhorse or licensing deployments, but we really do see a rapid path for us to do our own core and do it much more quickly things that we've learned in the past.

So the next question, if you can look at crystal ball, maybe a little bit here, and I know it's a tough question. But when you look at lithium battery industry relative to the lead battery industry and look at adoption rates and focus on the carbon reduction and things like that, do you think that -- how do you think it will unfold the lithium-ion relative to how it did and given is doing, I should say, in the lead side. I mean does your intuition say you should go much faster or kind of go through the same process? Or what ar eyour thoughts?

Yes. It's 2 very, very different industries, Shawn. So one is the existing lead acid industry where we're working with the industry players that are meeting in that space to upgrade from a pyrometallurgical, fossil fuel-based method recycle, but a mature recycle close loop which is a great thing that the industry has accomplished, but it's really taking that towards an electrified clean process to protect workers, the environment creates ultra-pure products.

In the lithium space, it's a nascent industry. And it's growing at a very much more quick cumulative annual growth rate by mid- to late decade, it will certainly become a larger industry than the lead recycling industry. But there's a lot of work to be done between now and we're looking forward to working with everybody in the lithium recycling industry to make sure that we build together the best possible solution side because, as I mentioned in our presentation, if we don't get this right as an industry and really as a global effort to electrify our processes throughout the world, we're not going to succeed in addressing global climate change at a fundamental level.

That's why we're doing EV. That's why we're electrifying industrial processes, which is exactly what we're trying to do with our methodology and techniques. So it's really a difference where you see an industry that is looking at an upgrade in the lead space and an industry that's getting built, really, from the ground up in the lithium recycling space. Hopefully, that answers your question.

Yes, it does. And when you look at these customers and working in my space, obviously, in electric vehicles and the sort of related products. But if you're looking at the carbon footprint focus, I think, it will be very high there. So my question is if you -- how -- what would somebody do think couldn't to adopt this AquaRefining technology for this? What else would be other solutions are that they're really looking at? Is this something we want to adopt it, everybody has to adapt it to kind of keep pace keeping carbon reduction on track?

Yes. So in order to reduce carbon output and decarbonize, you can't burn things. And so the smelting methodologies will likely yield to the hydrometallurgical methodologies. There are some standard hydro as we characterize it that's available, which is precipitation based. And ours is more about metals plating and recycling the chemical that you used to do the recycling, which also has a decarbonization benefit in and of itself.

And so we do see that the less things that we burn, better fossil fuels, equals better. And we see that our application of AquaRefining in our methodologies of the hydrometallurgical can really be an enabler for everyone that's in the industry, whether you're recycling today through a hydrometallurgic technology that could complemented through ours or a hydro technology or smelting that we could literally attach in bolt-on and ultimately replace the smelting capabilities with a much cleaner way of doing this as we go into the future.

There are no further questions over the phone at this time. I would like to turn the call over back to Mr. Glen Akselrod. Go ahead, sir.

Thank you, Erica. Steve, we've got some questions that are coming online. So I know much of them have already been addressed in this call but I'll ask some which you can comment on. Has BASF added Aqua with other potential global prospects for that refining?

Yes. So our work with BASF has, in fact, built up our sales funnel and helped us with engagements. And so we're enjoying working with BASF to continue to promote AquaRefining into the lead acid industry. We'll, obviously, be also working with BASF for the system fill of the key chemical in our AquaRefining electrolyte, which is the other aspect of our agreement as we ship and deploy and get the Taiwan operation up and running. So we'll begin to transact with the BASF in that front.

And then lastly, we're constantly exploring the technological opportunities, which is the third element of our partnership with BASF, not only to improve AquaRefining for lead, but even to potentially explore AquaRefining applications for other things. And obviously, BASF has interest in working in recycling and so is Aqua Metals. And there in lies the opportunities for the companies to discuss additional possibility of ways to work together. So all in all, we're very pleased with our relationship thus far with BASF and our partnership with them.

Super. Thank you. One more question here. How is AquaRefining a more nontargeted metals in the field?

So what we do with AquaRefining as we go for lead, for example, is that there are some metals that will drop out from that and then end up in the residue with very small amounts because lead acid batteries, for example, are very much lead-centric in terms of the minerals in those batteries. But there are things like silver and bismuth and a couple of other items that we don't plate and it's because we don't plate them. And it will apply the -- when same look at what we do plate in the lithium multi-metal recovery is that we will plate in a pure form the metals that we're going after. And any metals that we're not going after will ultimately invest in residue. But that will be a very small percentage when you look at the added or effect of the metals that we are going after.

Thank you. One more question here. I guess in 2022, when do you first expect to start to receive licensing payments? Is it a quarterly, annual basis?

So we expect to receive the first running royalties on the Taiwan installation relatively soon after we turn the equipment on. Again, the volumes won't be a large amount. But the binary did Aqua Metals collect running royalties or not. Answer would be yes, and we'll begin collecting those revenues in that form. So we definitely expect in the first half of '22 certainly will be receiving those payments and be able to report that we have received those payments.

Super. Thank you. I have no further questions in the online queue, Steve. So maybe some closing comments and then we'll end the call.

Yes. I appreciate everybody's time here, and I'll reemphasize that the Aqua Metals business model is really to enable all the battery recyclers, whether it's lead or lithium-ion battery recyclers were key and core technologies. And as we demonstrated with our lead efforts forward to date and our first licensee in Taiwan, that gives us a good opportunity to enhance that further as we've evidenced today with our relationship with LINICO, which the both parties intend to lead towards the licensee and enable for LINICO to be successful.

And we want to be the suppliers of the best-in-class and best available technologies for all battery recycling. And we feel that we are at a great business model, great cash position, great organizational capability to achieve these goals and really work with the industry to make the world a better place through the electrification and decarbonization efforts that we're all trying to do here. So I appreciate everybody's time and support, and look forward to further updates in the near future.

This concludes today's conference call. Thank you all for joining. You may now disconnect.