What Investors are Forgetting about the EV Revolution.

The Electric Vehicle (EV) revolution narrative is as rapturous as ever. Macro conscious investors have had their attention, and therefore the contents of their wallets, drawn to ‘statistically’ predicted leaps in demand in nickel, copper and lithium, amongst numerous other battery metals. In other words, every Tom, Dick and Harry have been pushing their green investment credentials and telling us how they are going to make money by selling materials to put into batteries.

The current EV macro story has been digested by a flock of vulture-like investors for many years. However, such scrutiny has oddly failed to explore one of the fundamental stages of the process: the end; just what happens once EV batteries reach the end of their lives?

Each year, millions of pounds of Lithium-ion batteries are landfilled or stock-piled instead of being recycled, which depletes natural resources and causes environmental issues. This has severe environmental and safety issues.

To be ‘greener’ or more eco-friendly, surely we should be trying to retrieve as much of the constituent battery metals as possible in order to make the EV cycle even more economically viable? Recycling Li-ion batteries is not yet profitable and must be subsidised by the government. There is an incentive to recover costly cobalt, but no recycling technology exists today that is capable of producing pure enough lithium for a second use in batteries, or so we thought…

One current method of treating spent batteries is pyro-metallurgy: using high temperatures of up to 1,300°C to process battery waste with the aim of reclaiming the target metals.

Batteries

During heat treatment of battery waste, several reactions may take place such as decomposition of compounds, reduction and evaporation of metals or compounds.

A screenshot of a table containing details of pyrometallurgy, hydrometallurgy and electrometallurgy.
Pyrometallurgy: an outdated practice?

While the present day’s most prevalent solution is pyro-metallurgy, it is wasteful, environmentally harmful and, if you really think about it, completely contradicts the EV macro story. For EV to fulfil its promise of a greener environment, every stage of a battery’s life needs to deliver on this promise. The EV macro story’s strength is in the totality of its energy solutions. If one stage is inherently flawed, the whole concept becomes a half-baked mess that struggles both societally and economically. Either it all works, or none of it really does.

One of the current largest players in pyrometallurgical battery recycling is Umicore SA, and their process is as follows:

A screenshot of Umicore SA's pyrometallurgic battery recycling flowsheet.
Umicore’s pyrometallurgical process

It produces huge quantities of CO2, is costly, and burns many of the metals intended to be recovered in the first place. While this process allows Umicore to recycle ‘all types and all sizes of Li-ion and NiMH batteries,(1)’ it is an outdated, primitive solution and is on its last legs.

According to the Financial Times, c. 11 million tons of spent lithium-ion batteries will flood our markets by 2025 (2). The current recycling infrastructure is nowhere near prepared to process this volume.

The Solution

Neometals, an ASX-listed Australian-based mineral/material development company, may just provide a solution to our battery recycling headache. With such a solution comes enormous growth potential for shrewd, well-informed investors with a penchant for profit.

Neometals utilises a hydro-metallurgical process that has Australian and EU provisional and now an international PCT patent application. Let’s try to break down how it works and why it could be a game changer.

Neometals’ Process

A screenshot of Neometals' proprietary battery recycling process.

Here it is in simple stages:

  1. Neometals takes EV and consumer electronic batteries (end of life) as scrap from cell production sites and shreds them as close to origination as possible. Neometals can take whole battery packs, smaller modules from within them and individual cells. Once these are compiled, they are shredded as part of Stage 1 feed preparation.
  2. Once the shredding process reaches completion, Neometals takes out metal casings, and aluminium and copper foil for recycling. The ‘black mass’ that remains has now become safe for potential transport, completely eliminating any fire risk.
  3. This black powder is processed via acid leaching chemistry as part of Stage 2. As the powder is leached, Neometals pulls out the remaining valuable electrode materials, which are upgraded where possible into high purity chemicals.
  4. Upon conclusion of this process, Neometals’ immediate aim is to sell chemicals straight back into battery supply chain, ensuring stable, robust supply to an increasingly hungry market.

This process is superior in every regard to the pyro-metallurgical process. It recovers >90% of the constituent elements before the process begins, keeps dangerous chemicals out of the environment and has a considerably smaller CO2 footprint than mining the minerals from scratch. Neometals has answered the question as to how to recycle batteries more efficiently and, most importantly, economically. Their eco-system of experts and strategic partners have also put into place the supply (feedstock) and demand (selling back in gigafactories) side of things, resulting in an exciting upside potential for investors.

The Competition

While most (if not all) investors will be impressed by Neometals’ highly-effective procedures, there will always remain a cynical, scrutinous few, who will likely ask a perfectly reasonable question before getting involved: Neometals’ process may well be superior to pyro-metallurgy, but what about rival hydro-metallurgical companies? What does the competition look like?

There are alternative companies out there with similar technologies. One such company is Canada-based private battery recycling play, Li-Cycle. However, once you’ve compared the processes side by side, Neometals’ idiosyncrasy becomes even more pronounced. There are three key differences:

  1. Product: Neometals’ patent-pending process recovers high-purity, complete chemicals, which can be place immediately back into the battery supply chain. Li-Cycle produces mixed metal intermediates as their product that must be sold to a refiner, rather than to the market, with a smaller margin.
  2. Process: Neometals’ processing flowsheet will have subtle differences that impact efficiency of process and economics (CAPEX and OPEX). The flowsheet is a genuinely closed loop, with no environmentally related contradictions of the EV macro story. Furthermore, the process accepts a broad range of battery chemistries and has a flexible modular approach that allows for differentiation of shredding and refining locations. Lastly, the flowsheet ensures Neometals by-passes most transport complications related to the movement of hazardous substances.
  3. Business Model: Neometals has a unique partnership with a global metallurgical plant manufacturer, €5Bn SGS Group, that I will be writing an investigative article about in the near future. Their partner manufacturer is comfortably able to operate and maintain sites and has the brand to remove possible barriers with large original equipment manufacturers (OEMs). Interestingly, the company does not factor revenues from feed collection into their overall numbers; there is an assumption that Neometals will need to pay for feed or, alternatively, share the project economics with a sizeable OEM in exchange for free feed.
A screenshot of a table comparing battery recycling technologies against Neometals.

The Market

A screenshot of Neometals' share price performance for the year.

I already know what all my readers are going to say in response to this statement, but I’ll make it regardless, because it is entirely, incontrovertibly true: the market hasn’t clocked the true value of Neometals… yet. I know you hear this about every company on the face of the planet. You hear it in the quixotic conference ramblings of overpaid and underperforming CEOs, and you hear it from people like me. It’s an awful lot of rhetoric, but on this occasion, it’s well justified.

Neometals has a market capitalisation equivalent to the cash in their bank. That tells me three things:

  1. Investors are not looking at them.
  2. Those who are looking do not yet understand the potential of this one project (Neometals has 5 projects)
  3. Neometals needs to start telling this story.

I like their business model and the team. I like that they are fully funded to develop all their existing projects and more. I like the strength of their strategic partners. And above all I like the scale of the opportunity that they have built within the EV investment thematic. It feels like a market of one: a very nice place to be.

Neometals provides the unique benefit of having the reward profile of a junior, with the risk profile of an established producer. The company also mitigates risk in a way that would be impossible for mining: they are sourcing their supply materials from above ground and the quantities are pre-existent and guaranteed; they are not drilling into the unknown. Mining derivatives is an investment category that provides a truly unique situation, similar to the treatment of tailings, where investors can enjoy all of the upside with much less of the down. Look out for an article in the near future on just why this is so significant for making you more money.

To conclude, Neometals can cement its status as the frontrunning candidate for EV battery macro completion. It will be interesting to delve into specific details regarding management and the numbers in the near future, but for now, I need a stern cup of coffee and some light-hearted, terrible daytime TV.

(1) https://csm.umicore.com/en/recycling/battery-recycling/our-recycling-process
(2) https://www.ft.com/content/c489382e-6b06-11e7-bfeb-33fe0c5b7eaa

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

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