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LITHIUM AUSTRALIA LIMITED (LIT) - Pioneering Sustainable Energy: Managing Director & CEO Simon Linge on Revolutionary Battery Recycling, Strategic Partnerships, and Future Growth Initiatives

August 11, 2024 • Andrew Musgrave

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What if the future of energy relied on turning yesterday's waste into tomorrow's power? In our latest episode, we welcome Simon Linge, CEO and Managing Director of Lithium Australia Limited, who shares the company's remarkable journey from mining exploration to a pioneering force in lithium processing and battery recycling. You'll hear how strategic partnerships with industry giants like LG Energy Solution, Volvo, and Hyundai Glovis have not only strengthened their business model but also underscored the critical role of sustainability in today's economy. Discover the transformative technologies driving their recent cash profit and the key milestones that lie ahead.

Simon dives deep into the operational strides Lithium Australia has made, such as increased battery collection volumes and the lucrative sale of mixed metal dust. Long-term exclusive agreements with major OEMs and battery producers have been game-changers, propelling collection volumes to new heights. We also touch on their latest investment in safety and sustainability, which has significantly improved their processing capabilities. Learn about the exciting placement agreement and share purchase plan with The Lind Group, which aims to fuel future growth and drive their ambitious goals for FY25. Tune in to get the full scoop on the advancements in battery materials technology and lithium chemicals that could redefine the industry.

Andrew Musgrave:

Welcome back to ASX Briefs, and joining me today is Simon Linge, the CEO and Managing Director of Lithium Australia Limited, a company that's at the forefront of innovative lithium processing and battery recycling technologies. They have been making significant strides in ensuring sustainable lithium production and advancing the circular economy. Simon, thanks for joining me today and welcome to the podcast.

Simon Linge:

Thanks

Andrew Musgrave:

Okay, can you just give us a start or just a brief overview of the company's primary operations and your strategic focus areas?

Simon Linge:

areas, bsolutely. Let me start, though, with what we're not. Lithium Australia, as ASX Securities L, is not a mining company. That's often what people first associate with the name. We're not a mining explorer. It was part of our history, but very much now w e're a technology company providing critical materials to the battery industry, and we do that through a few platforms.

Simon Linge:

Since I've come into the business about 18 months ago, we've decided to focus on three technologies that we think are ripe for scale-up and commercialisation.

Simon Linge:

Two of those are in the patented space, as we'll describe them, and one is applied technology. Applied technology is around battery recycling, and so we're the leading lithium-ion battery recycler in Australia today, and we can explore more about that through the podcast. And in terms of our patented technologies, we have two. One it's which we refer to as lithium chemicals. It's part of a joint venture with a joint development agreement with Mineral Resources, and it works on improving yield at hard rock spodumene mines by up to 50%, and that's in a piloting program right now that's funded by Mineral Resources.

Simon Linge:

And then we have battery materials, so we're one of the few people outside of China who have the capability to make what's known as a cathode active material, which is the material that goes inside the battery, the positive end of the battery, and we make a chemistry there that's called LFP or lithium ion phosphate, which is one of the two leading chemistries for cathode active material in the world and there's certainly quite a few outside of China with that capability. We have a pilot plant in Brisbane. We're looking to scale up into a demonstration facility later this year.

Andrew Musgrave:

Okay, and the company's achieved its maiden operating cash flow profit in Q4, FY24, primarily driven by the recycling operation. So what are the key factors that contributed to that milestone?

Simon Linge:

Yeah, well, really the company as a whole is yet to hit that milestone, but our recycling operations did. A key factor there is numerous, really a pivot in our strategic focus to really say as a battery recycling business. We just want to focus on lithium-ion batteries we're not quite there yet, but that is our key focus and in particular, what is described as large-format lithium-ion batteries. So that's anything from five kilos and above anything that might go into an e-scooter through to a car, into a bus or particularly as well right now, energy storage residential, commercial or grid-scale energy storage batteries. But we also deal with home appliances and power tool batteries as well, and that's our key focus. We find that lends itself to a service model and we've pivoted our commercial model around those larger format batteries as well and that's really been what's driven our operating cash profit in our recycling business in Q4.

Andrew Musgrave:

Okay, and you've also secured exclusive recycling agreements with major OEMs like LG Energy Solution, Volvo and Hyundai Glovis. So how do these agreements enhance your business model and the revenue streams?

Simon Linge:

Great question.

Simon Linge:

We spent some time last year really working on where the market would grow.

Simon Linge:

We saw great opportunities in large format batteries to grow significantly in volume from 100,000 tonnes today to over a million tonnes of batteries into the future a decade plus away, but still a significant uptick in volume.

Simon Linge:

And we felt that to service those clients we needed to really invest in providing them with safe, sustainable and ethical solutions so that they had confidence in the safe, sustainable destruction of their batteries and that they could look at circularity of the materials that came out of the battery.

Simon Linge:

So what we've done is positioned a service offer to the large OEMs it's a reserve of those value propositions and signing them up to long-term agreements so they know that that service is in place for a long period of time. Long-term for us is anything from three years to eight years, and what that is doing is providing more volume into our recycling business. It's allowing us to make sure that we charge for a service around those recycled batteries which covers our cost and margins, and then it allows us to have surety of our revenue at the front end of the business and not be reliant just on commodity prices that might be coming in terms of the value streams that are collected, so it's really been an important shift for us. Our clients are liking the model that we're putting forward. They can see the value that we have in terms of our service offer and that's really driven a fair amount of the profitability into our recycling business over the last six months plus.

Andrew Musgrave:

You touched on the agreement that you have with Mineral Resources, so can you provide an update on the progress of that collaboration?

Simon Linge:

Yeah, so we entered into a joint development agreement with Mineral Resources in August last year. They are fully funding the piloting of this technology called LieNA and they're also paying for an engineering study to be undertaken around building demonstration facility. The piloting program is ostensibly complete at this point. We completed that in July. There's a few mop-up things to do the engineering study that's now forming the engineering study, which should be complete before the end of this calendar year.

Simon Linge:

When all of that is done we'll actually formalise a joint venture around the technology with Mineral Resources a 50-50 joint venture and then look to move to building a demonstration facility which, again, Mineral Resources will build in and around servicing the current lithium hard rock mines in Western Australia. That'll be done under a licence from the joint venture as the demonstration plants up and running and we start to move to commercial facilities. The joint venture is very much charged with issuing licences to hard rock miners around the world. So there's plenty of those, not only in Western Australia but in Canada, Brazil, Africa, and we think many of those miners would benefit from this extraction technology which really does work on waste material effectively non-commercial materials and brings that up to a commercial grade of material and we see it improving the yield in lithium mines by 50%. So it's a significant upside for the miners and we see strong loyalty revenue streams coming from a licensed regime for that technology.

Andrew Musgrave:

You've also signed an MOU with Sung Eel Hi Tech for MMD offtake and potential joint development. So what are the expected outcomes of that partnership?

Simon Linge:

We've had a long relationship with Sung Eel Hi Tech since really the recycling business was signed and we acquired that recycling business in 2019. We've continued to build on that relationship. As you rightly pointed out, we signed a binding offtake agreement with SungEel HiTech for 60% of our mixed metal dust. As we refer to it, the industry calls it black mass. That's the key value and majority volume that comes out of recycled batteries in its raw form. SungEel Hitech are a leading Korean recycler with a global footprint both in Europe and the US so what they do, they take that black mass and they convert it back into the battery chemicals that ultimately go back inside a battery.

Simon Linge:

We don't have the scale yet in Australia to invest in that technology, so they're a key partner for us and certainly having that relationship and that partnership with SungEel Hi Tech is key for us. We now know we've got the battery feed coming in from the LG Energy Solutions, the Volvos. We know that we can process that, but then having a key off-take partner with SungEel who are taking the key product that we produce out of that away from us and adding value is important. The other thing that that's allowed us to do is now start to talk about a joint development agreement with SungEel Hi Tech and then looking to invest into the recycling business to help us scale and produce more volume and better quality volume of black mass mixed metal dust into the future.

Andrew Musgrave:

Okay, and you've also reported significant increases in lithium ion battery collection volumes and also mixed metal dust sales. So can you share more details about these operational improvements and the implications for future growth?

Simon Linge:

Look, it's a multitude of things. It's certainly signing up those long-term exclusive agreements with the large OEMs and battery producers, as we've mentioned earlier. That's given us more volume that we're able to collect. Those batteries can be away from anywhere from an LG Energy Solution battery might be anywhere from 60 kilos to 80 kilos. An EV battery or a bus battery could be, you know, 800 kilos. So just by dint of the size of the battery we get more volume going through our facility and therefore more mixed metal dust or black mass sales.

Simon Linge:

But we have invested heavily into our recycling business. That was the opportunity we saw was to provide a blue chip service offering to blue chip clients and so we've been able to process those volumes at a faster rate by investing in the safety and sustainability angles in our business. So I think if you walk through, most people are surprised when they walk through two Victorian operations just the investment that has gone on, the thinking that's gone on to be able to safely manage the safe disposal and destruction of batteries. So that's from fire systems through to sustainability, immune water management systems and new extraction systems. So we're really pleased with what those operational improvements have done and the pivot that the recycling business has made, particularly over the last 12 months.

Andrew Musgrave:

Okay, and just to wrap things up. Firstly, the company recently announced the launch of a placement agreement and share purchase plan. Can you please provide an overview of the capital raising and how it will drive future growth for the company, and also what are some of the key milestones shareholders can look forward to in the next 12 months?

Simon Linge:

Sure. So, yes, we recently announced an agreement with The Lind Group out of New York for some financing around a strategic placement of shares with them, that has provided us with a clarity of our funding pathway over the balance of this year into next year and as part of that we wanted to make sure that our shareholders, who've been with us through the journey of competing in mining and small, are now very much a technology business to also be able to participate in the next, I would say, growth for the business. We think we're really well positioned with our various technologies. Lithium chemicals with Mineral Resources, has a really clear pathway. Our recycling business is scaling to profitability. We've seen, and we think that's, given the nascent industry that we're in today, that gives us a lot of positivity about recycling into the future. And battery materials. We're also seeing some pivot points coming up into the future, in the near future, that we think will be really good for Australian shareholders. So we wanted to make sure that our shareholders also have the opportunity to participate in that future outlook. In terms of what we should see through the balance of the year.

Simon Linge:

On the recycling side, I think you'll continue to see agreements getting signed with large battery producers in the OEM space, particularly out of the EV space, but also energy storage. I think you'll start to see us continue to report quarter on quarter, how the financials of the business continue to improve. On battery materials, we're working on the scale up of that technology, from its pilot plant in Brisbane to a demonstration facility. We're working heavily with the Australian government on an option to do that in Australia, but we're also working with strategic partners outside to potentially do that outside of Australia. And then on lithium chemicals, it'll be announcements around the conclusion of the engineering study and the joint development agreement turning into a JV with Mineral Resources. So there's a lot going on in Lithium Australia, but it's really a lot of good things that we're continuing to pursue. I'm very excited about FY25 and the prospects that has for us as a company.

Andrew Musgrave:

All right. Well, that's a great update, Simon. So thanks for your time today and we look forward to further updates from Lithium Australia in the upcoming months.

Simon Linge:

Thanks, Andrew. Always a pleasure to be with you.

Andrew Musgrave:

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.