While the batteries that smooth out renewable energy production and power electric vehicles are a potent weapon in combating climate change, they have their own sustainability and ethical challenges.
The reality is that producing lithium ion battery (LIB) material involves messy mining and chemical processes, with the requisite elements such as lithium, nickel and cobalt often sourced from less undesirable geographies.
By the time an electric vehicle (EV) gets to the showroom, it’s generated emissions twice that of a traditional vehicle when extraction and chemical processes are taken into account.
The battery materials, while abundant, are also finite. So there’s an increasing imperative to ensure that as much of it is as possible is recovered and recycled with the best techniques available.
According to the Battery Stewardship Council (BSC), 22,000 tonnes per annum of end-of-life batteries were available for recycling as of June 2020, less than 10 per cent of batteries consumed in Australia.
But this supply is expected to surge to 106,000 tonnes by 2035 and 218,000 tonnes by 2040. Put another way, the available stock is expected to contain $3 billion of recoverable material by 2036.
A key driver is the BSC’s industry-led voluntary national collection scheme, which has just become effective.
Authorised by the Australian Competition and Consumer Commission, the scheme creates a national network of battery collection points.
The scheme also imposes a levy on imported batteries, but at a rate of two cents to four cents per battery consumers would barely notice the difference.
The scheme has already attracted the participation of parties including Bunnings, Canon, Coles, Duracell, Energiser, Honda and Envirostream, the battery recycler 90 per cent owned by the listed Lithium Australia (ASX: LIT).
For Envirostream, the scheme will greatly increase the volume of end-of-life batteries available to recycle, as well as significantly increase margins on its collection and recycling operations.
“As far as we are aware, we are the only specifically licensed lithium-ion battery recycler in the country,” says Lithium Australia CEO Adrian Griffin. “so there’s no prizes for guessing where much of that material will go.”
In December last year, Envirostream opened its second recycling facility, at Laverton in western Melbourne following local council land use assent.
Combined with its existing recycling plant at Campbellfield in northern Melbourne, the facility quadruples Envirostream’s overall storage capacity and doubles its sorting capabilities.
The company has developed an extensive collection network with 800 drop off sites, including in Bunnings and Officeworks stores.
More broadly, Lithium Australia’s vertically integrated business model is unique in that it’s involved at all stages of battery production, from lithium exploration and mining to the aforementioned recycling.
Upstream, the company retains a 19.9 per cent of the demerged Charger Metals which demerged and successfully listed on the ASX in July last year under the ticker CHM.
Lithium Australia has a circa 40 per cent free-carried diluted interest in most of Charger’s projects, which include nickel, copper cobalt and platinum prospects in WA and 70 per cent of the Bynoe lithium and gold project in the Northern territory.
The company has a similar arrangement with Galan Lithium (ASX code GLN), in relation to the Greenbushes South lithium project in WA.
The project is approximately three kilometres from Greenbushes, which has been in operation since the 1880s and is Australia’s oldest continuously producing mine.
Griffin says management is happy to leave the grass-roots exploration to its JV partners. “We have no exposure to exploration risk, but plenty of exposure to the upside should they get into production.”
If anything, Lithium Australia’s strongest long-term prospects hinge on developing and commercialising more efficient cathode materials for lithium-based batteries.
Aided by federal government grants, Lithium Australia’s VSPC subsidiary is working on lithium ferrophosphate (LFP) batteries. Relative to LIBs, they are safer, cheaper and more efficient and don’t require nickel or cobalt that is often sourced from ‘conflict’ countries where human rights abuses are rife.
Along with recycling, Griffin says optimising the efficiency of battery materials is key to reducing carbon emissions in the process of making electric vehicles or energy storage batteries.
LFPs also offer faster charging and discharge: minutes instead of hours. This raises the prospect of smaller, longer-life batteries.
Meanwhile, the industry is turning to LFPs, with supply dominated by Chinese producers. According to Argus Media, LIBs accounted for 52 per cent of LIB production in the first eight months of 2021 – the first time LFPs have accounted for a majority of battery production.
As well as using more environmentally friendly techniques, LFPs only require 80 per cent of the lithium as a traditional LIB for the same amount of power output.
Elon Musk’s Tesla has stipulated LFPs for its next generation of Megapack grid power storage, while Volkswagen says its entry-level EVs will be powered by LFPs
“The biggest attribute is they are incredibly safe, battery fires are eliminated with LFPs,” Griffin says. “As a consequence there’s this insatiable demand,” he says.
“The market is growing so rapidly China is consuming all the LFP produced domestically and outside of China you just can’t get the stuff.”
VSPC is also researching lithium manganese ferrophosphate LMFP as a lower cost and safer cathode material for applications requiring higher energy density batteries such as EVs and grid power.
In conjunction with the CSIRO, the company has federal Cooperative Research Centres funding to further this. Separately, the company has applied for a grant under Canberra’s Modern Manufacturing Initiative to build a LFP cathode plant in Australia.
With a modest $128 million market cap, Lithium Australia has approximately $12 million of cash and no debt as it seeks to surf the battery era in a way that no other ASX-listed entity can (it’s the only ASX-listed LFP exposure).
Meanwhile, lithium prices surged in calendar 2021, with lithium hydroxide up nearly 300 per cent and spodumene (hard rock lithium concentrate) soaring almost 500 per cent.
This momentum has continued into 2022, as battery makers stock up ahead of the Chinese New Year and possible disruptions over the Beijing Winter Olympics in February.
