Lithium Australia’s (ASX:LIT) wholly owned subsidiary Envirostream Australia has signed a new exclusive three-year recycling agreement with LG Energy Solution to recycle recalled lithium-ion batteries (LIBs) in Australia.
LG Energy Solution is one of the world’s leading battery manufacturers for electric vehicle (EV) and energy storage system (ESS) and is the largest producer of EV batteries outside of China, holding a global market share of ~14% as of 2023.
In addition to recycling revenues received under the Agreement, Envirostream has an opportunity to generate additional revenue from the sale of mixed metal dust back to LG Energy Solution (subject to certain collection volumes being met), and will otherwise share in the revenue derived from third party sales of mixed metal dust generated from LIBS supplied by LG Energy Solution.
During the term, Envirostream has the exclusive right to provide battery recycling services for LG Energy Solution’s LIBs in Australia which are subject to a recall.
The Agreement replaces the prior recycling agreement between the parties which was announced in September 20225. The Agreement is expected to significantly increase Envirostream’s large format LIB collection volumes, leading to greater recycling revenues. There are currently ~6,000 units of LG Energy Solution’s large-format LIBs ready for Envirostream to collect and process under the Agreement, and a further ~5,000 units anticipated6. In total, this represents ~770 tonnes of LIB batteries, or ~140% of Envirostream’s total LIB collection volumes in FY237, highlighting the significant LIB collection volume growth the new Agreement brings.
The agreement with LG Energy Solution also highlights Envirostream’s continued focus on accelerating growth in collection volumes of large format LIBs, such as those from EVs and ESS, due to their higher margin profile.
The total tonnage of ESS and EV batteries sold is projected to grow between 10% and 40% year on year until 20308, which in turn is expected to result in an increased demand for battery recycling services. This presents a significant market opportunity for Envirostream. Signing exclusive contracts with leading battery manufacturers is a core part of Envirostream’s national growth strategy, in line with the company’s previously identified key priorities of FY24. Envirostream looks forward to leveraging this momentum to win new market leading clients.
“The signing of this Agreement extends the already strong relationship with LG Energy Solution, who shares our vision for sustainable recycling of lithium-ion batteries,” Lithium Australia CEO and Managing Director, Simon Linge, said.
:\”Our strategic roadmap identified the importance of signing long term agreements with tier 1 EV and ESS manufacturers. We see agreements of this type as key to moving our recycling operations to being cash flow positive and allowing us to grow our capabilities nationally. We are pleased that the first of these agreements is with LG Energy Solution and look forward to announcing further agreements with other tier 1 manufacturers.”
