When American Resources Corp. (NASDAQ: AREC) reported quarterly results in late July, the company said it created a wholly-owned subsidiary, American Rare Earth, to explore and monetize rare earth mineral deposits. Founded as a coal company, American Resources said it mined no coal in the quarter because it shut down its mines due to the COVID-19 pandemic. As a result, the company reported no revenues for the quarter.

Wednesday morning the company announced that its American Rare Earth subsidiary has begun “exploring strategic options to unlock the value of its rare earth assets.” The subsidiary plans to begin exploration at 10 former coal mine sites in eastern Kentucky. Coal, rare earth elements, what gives?

It turns out that many of the 17 rare earth elements exist in coal processing refuse and ash residue and that the concentration of heavy rare earth elements (the lowest in supply and among the highest in price) makes coal byproducts a particularly promising place to search for the elements.

In Wednesday’s announcement, American Resources said it had already made discoveries at some of its beneficiation ponds (which separate existing minerals from one another) and had captured rare earth elements. Now, Chairperson and CEO Mark Jensen said, American Rare Earth is moving swiftly to choose a “path that best unlocks the value of these assets for our shareholders while we continue to focus on growing our business.”

Initial analysis of American Rare Earth’s first project suggests the capability “to produce rare earth oxides having a mix of approximately 20% Neodymium, Praseodymium, and Dysprosium, in addition to healthy levels of Cobalt and Lithium, all important elements used in the production of permanent magnets, widely used in electric vehicles (EV’s) and other technologies.”

The attraction of the American Resources approach is that mining for rare earth elements in coal byproducts does not require the miner to employ environmentally damaging excavation. The old coal companies already have accomplished that part of the work. The company’s process uses “existing hydro-based extraction methods to capture and extract rare earth concentrates.” The company noted in a presentation that the hydro-extraction process improves the pH balance of the water, enabling its “environmentally safe discharge.”

The company also is looking for a site in central Appalachia to build its first commercial processing facility. Once the rare earth elements are extracted and concentrated, they need to be refined into oxides before being shipped off for use in making magnets and other products.

American Resource stock traded up by about 200% at one point Wednesday morning, setting a new 52-week high of $4.93. Shares traded at around $3.50 in the noon hour. The stock’s 52-week low is $0.32, and the consensus price target is $2.00.

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