A $38 Billion Global Opportunity in The Lithium-ion Recycling Industry
Let’s start out this article with the primary reason for our bullish opinion on the Lithium-Ion battery recycling industry and American Manganese (OTCQB:AMYZF).
Our History of Finding Mega-Trends & Micro-Caps in the Early Stages
Most of our micro-cap investment ideas begin with the early discovery of a mega-trend; one with a long runway ahead of it, offering many years to build and gain momentum while, at the same time, providing some very exciting growth prospects for micro-cap companies looking to capture market share within that mega-trend.
For Celsius Holdings, (CELH) it was following a well-timed trend of shifting consumer sentiment away from traditional sodas, loaded with unhealthy high-fructose corn syrup, and towards more functional and healthy beverage alternatives.
In the case of Glucose Health, (OTCPK:GLUC) it was the frightening growth in the trend of worldwide obesity (cause) and the accompanying rise in the number of cases of Type-2 diabetes (effect). Following the global diabetes epidemic is of particular interest to us, since our GLUC investment thesis is dependent on that trend continuing higher, or at least leveling off.
Of course, it should be understood that investing very early in a micro-cap company, that is just starting to build a business within a new mega-trend, generally means that they are at the high-risk developmental stage of their lifecycle.
We believe that we are somewhat unique in our approach to investing in two ways. First, we find micro-cap special situations that provide exceptional returns, and second, we have the conviction to take extremely large positions in them.
The Next Mega-Trend and How We Are Participating in its Growth
The next mega trend that we envision, with a very long runway, is the shift from continued emphasis on fossil fuels, as a primary source of energy, to one of finding more environmentally friendly ways of providing power and energy without the accompanying negative impact to the environment.
Some call it the green energy, or alternative energy movement, but whatever you want to call it, this sector of the stock market has attracted billions of dollars in capital.
It includes things like EV’s, fuel cell technology, whether it be hydrogen-based or Ethanol-based, SAF’s also known as Sustainable Aviation Fuel for air travel, and a host of other applications that are being worked on and funded with the aid of the U.S. government, through the awarding of federal research grants and appropriations.
We have made a major equity investment, representing over 5% of the outstanding shares, in a company which we featured last year on Seeking Alpha as our #1 best micro-cap idea for 2021; Blue Biofuels (OTCPK:BIOF).
We believe that given the exponential growth being forecast for the Lithium-ion recycling industry, we needed to have exposure to this mega-trend. Our investment choice in this sector is a Canadian company; American Manganese, Inc.
Electric Vehicles Are The Main Driver Of Demand (no pun intended)
Before we dive into the nuts and bolts of the company, let’s first explore the big picture for Lithium-ion recycling.
It’s no secret that the Electric Vehicle market continues to grow and expand its environmental footprint, thanks to the modern evolution of Lithium-ion battery technology.
Forecasts made by Bloomberg New Energy Finance, show the increase in Electric Vehicles sales are expected to rise at a rather dramatic rate through the year 2040. By then, Bloomberg NEF estimates that 2/3rds of all passenger vehicle sales will be EV’s.
It is difficult to measure the volume of Lithium-ion batteries entering the global market but research and consulting company Circular Energy Storage estimated in a 2021 report that the market had grown by 720% since 2009.
Source: Investment Monitor
However, Lithium-ion batteries can be found in many places other than EV’s.
They are used in a whole host of today’s electronic devices and have broad applications among numerous technologies, some of which include:
- Bluetooth Headsets and Headphones
- Cellular Phones
- Computer Peripherals
- Digital Cameras
- E-Readers & Tablets
- Game Controllers
- Smoke/Fire/Carbon Monoxide Detectors
- Uninterrupted Power Supplies & Emergency Backup Units
- Solar Energy Storage
- Wireless Security Cameras and Systems
- Electronic Toys
- Handheld Portable Power Tools
- Small & Large Appliances
Battery technology has evolved to a point where a Lithium-ion battery not only makes it possible for cars to travel longer distances, on a full-charge, but the cost to produce these massive battery packs have come down substantially over the years; over 89% from 2010 through 2020, according to research firm Bloomberg New Energy Finance, and prices are expected to continue declining even further in the years ahead.
These advances in modern battery technology have not come without their share of associated challenges.
These include the somewhat limited availability of many of the rare critical components which go into manufacturing these highly-prized power sources, along with the environmental considerations regarding the safe and secure disposal of Lithium-ion batteries once they have outlived their usefulness and are no longer needed.
Some of these raw materials, used in the production of Li-ion batteries may include lithium, copper, mercury, cadmium, hexavalent chromium Cr6+, nickel, graphite, lead, cobalt, and manganese. A few of these critical materials are not necessarily among earth’s most abundant resources.
Here is a breakdown of Li-ion battery components and their associated costs in percentage terms.
Combine that with the ever increasing demand to produce a new supply of Li-ion batteries, and you can imagine how it could place a strain on both battery suppliers and end-users, thus exacerbating what is fast-becoming a growing worldwide global supply chain problem.
The Environmental Impact of Producing Lithium-ion Batteries
Aside from the obvious problem of disposing of the massive amount of spent, Li-ion batteries into landfills, where they can eventually find their way into contaminating the groundwater, there are other, more serious environmental issues when it comes to the mining of critical component materials such as lithium and cobalt, as it pertains to the potential depletion of these natural resources.
Batteries can have negative environmental effects not just at the end of their lives but also long before they are manufactured. As Argonne’s Gaines points out, more recycling means less mining of virgin material and less of the associated environmental harm. For example, mining for some battery metals requires processing metal-sulfide ore, which is energy intensive and emits SOx that can lead to acid rain.
Less reliance on mining for battery materials could also slow the depletion of these raw materials. Gaines and Argonne coworkers studied this issue using computational methods to model how growing battery production could affect the geological reserves of a number of metals through 2050. Acknowledging that these predictions are “complicated and uncertain,” the researchers found that world reserves of lithium and nickel are adequate to sustain rapid growth of battery production. But battery manufacturing could decrease global cobalt reserves by more than 10%.
Source: Chemical & Engineering News
There also are other environmental factors to consider when it comes to the mining of critical components and the materials used to build Li-ion batteries.
According to a report by Friends of the Earth, lithium extraction inevitably harms the soil and causes air contamination. In Argentina’s Salar de Hombre Muerto, locals claim that lithium operations have contaminated streams used by humans and livestock, and for crop irrigation. In Chile, there have been clashes between mining companies and local communities, who say that lithium mining is leaving the landscape marred by mountains of discarded salt and canals filled with contaminated water with an unnatural blue hue.
Two other key ingredients, cobalt and nickel, are more in danger of creating a bottleneck in the move towards electric vehicles, and at a potentially huge environmental cost.
Unlike most metals, which are not toxic when they’re pulled from the ground as metal ores, cobalt is “uniquely terrible,” according to Gleb Yushin, chief technical officer and founder of battery materials company Sila Nanotechnologies.
Source: Wired Magazine
The soaring popularity of electric vehicles is generating enormous numbers of spent lithium-ion batteries and pushing manufacturers to make new ones. Industry analysts predict that more than 10 million metric tons of these batteries will reach the end of their service life by 2030. Due to technical and economic barriers, less than 5% of them are recycled today.
Source: Chemical & Engineering News
There are also humanitarian issues associated with the mining of certain materials, and the associated labor challenges.
A series of stories published in the Washington Post focused attention on the humanitarian and environmental fallout from the manufacturing of lithium-ion batteries. They found links to human rights abuses and environmental pollution in cobalt mines in the Congo, the negative effects of lithium mining on indigenous communities near lithium deposits in South America, and tracking the environmental pollution coming from graphite factories in China.
This is where the recycling of these critical components becomes so vitally important; not only for the reclamation of these natural resources, for use in the future manufacturing of new batteries, but also as a way of providing solutions towards mitigating many of the environmental and humanitarian issues facing he world’s mining consortiums.
The Scope of Planned Battery Production Globally is Staggering
The number of planned global giga-factories to produce Lithium-ion batteries, in order meet the projected industrial and consumer demand by year 2025, is shown on the map below. There is over 800 giga-watts of planned production on a worldwide scale, and all of these factories are going to need to obtain the critical materials that go into the assembly of these Li-ion batteries.
At some point, given the growth projections for EV passenger vehicle sales, and the number of Lithium-ion batteries that will need to be produced for OEM’s (Original Equipment Manufacturers) to power those vehicles, we anticipate that the demand for manufacturing and production of these Li-ion power sources will rise exponentially.
The giga-factory map above, which shows the planned global Li-ion battery production going out to 2025, should give you some idea as to the magnitude and strength of the expected demand, not only for the batteries themselves, as finished products, but also for the materials that go into the assembly of these units.
Remember, also, that as older batteries outlive their usefulness, and begin to deteriorate, they will need to be replaced with fresh new batteries.
But what happens to these older, spent Lithium-ion power packs?
The obvious answer is that they can be recycled, the critical materials extracted, and re-used to produce new Li-ion battery inventory for OEM’s.
American Manganese’s RecycLiCo™ Process is Poised to Capture a Large Share of the Market
Just as there are different types of batteries, that use different materials in their production, there are also different methods and processes for recycling.
We are looking for the processing method that will result in the lowest cost and most efficient way of recycling these Li-ion batteries and their critical components.
Depending on battery chemistry, the lithium-manganese oxide segment held highest position in lithium-ion battery recycling market share of about 32.2% in 2020, and is expected to maintain its dominance during the forecast period. This is attributed to rise in demand for lithium-manganese oxide battery from applications including electricity, gas & water meters, fire & smoke alarms, security devices, and other energy storage applications. In addition, it possesses advantages such as long-term reliability, high life span, high temperature handling capacity and others is anticipated to fuel the growth of the market during the analyzed time frame.
Source: Big News Network
On the basis of recycling process, the hydrometallurgical process segment held the largest share, in terms of revenue, and is expected to grow at a CAGR of 39.7%. This is attributed to advantages associated with hydrometallurgical recycling process such as treatment of low-grade materials, easy control of waste, low energy consumption, and lithium & aluminum recyclability compared to other battery recycling processes.
Source: Big News Network
In 2020, the lithium-manganese oxide segment accounted for majority of share of the global lithium-ion battery recycling market, and is expected to maintain its lead during the forecast period. In 2020, the electronics segment accounted for about 67.5%, and is expected to maintain its dominance till the end of the forecast period. The hydrometallurgical process segment accounted for 64.8% in 2020, and is anticipated to grow at a rate of 39.7% in terms of revenue, increasing its share in the global lithium-ion battery recycling market. Electric vehicle is the fastest-growing source segment in the lithium-ion battery recycling market, and is expected to grow at a CAGR of 46.1%.Asia-Pacific is expected to grow at the fastest rate, registering a CAGR of 40.8% during the lithium-ion battery recycling forecast period, In 2020, Europe dominated the global lithium-ion battery recycling market with more than 35.7% of the market share, in terms of revenue.
Source: Big News Network
The Three Primary Reasons We Are Bullish On American Manganese
Our favorite company for investing in the promising future of Lithium-ion battery recycling is American Manganese.
We have chosen AMYZF as our way to play this mega-trend for three primary reasons:
1. The company’s patented RecycLiCo™ method of Li-ion battery recycling offers the potential advantage of being able to take the current traditional lithium-ion battery supply chain platform and transform it into one, simple closed-loop process.
American Manganese’s patent portfolio, represents a formidable challenge to other companies, who are looking to compete with AMYZF. The patents create a global moat around the company’s intellectual property.
Most recently, in early November of 2021, the company received a Notice of Allowance from the Canadian patent office for approval of the company’s proprietary RecycLiCo™ Lithium-ion battery recycling process.
This Canadian patent now joins patents already issued in the United States, Korea, Japan and India. The company has also submitted applications, which are currently pending, for patent approval in China, the EU and Australia.
It took a total of only 81 days from the initial filing date with the USPTO to approve AMYZF’s patent application on June 5, 2019.
We should note that American Magnesium announced in May of last year that Dan McGroarty, a member of the company’s Advisory Board was appointed as one of only three private-sector members of the U.S. Department of Energy’s Critical Materials Institute Advisory Board.
2. The RecycLiCo™ process offers the flexibility to adjust the ratio of cathode metals in the pregnant leach solution to the desired composition.
Today’s lithium-ion battery cathode chemistries typically contain less concentrations of cobalt and more nickel or manganese materials. This ratio does reflect the older cathode chemistries found in previous generation Lithium-ion batteries.
The RecycLiCo™ process, offers the flexibility to adjust this concentration ratio of the leached metals in older batteries, thus allowing the direct up-cycling of older cathode chemistries, into today’s more modern electric vehicle cathode chemistries.
3. Competing recycling technologies may require multiple, additional refining steps before they can produce cathode materials. These may include complex processing and purification steps, large consumption or reactants and energy, extensive liquid and waste production and low lithium recovery resulting in low-value and intermediate-grade products.
The tremendous opportunity that lies in front of the Lithium-ion recycling industry is plain to see. The question now becomes, how does American Manganese take advantage of that opportunity?
The Technical Picture Comes Into Focus
American Manganese and its predecessor company, Rocher Deboule Minerals Corporation have been around for over 10 years.
As you can see from the chart, like most micro-caps, AMYZF plodded along, without much fanfare until late 2020, and early 2021.
In late December 2020, the price of AMYZF took off in price, with a massive increase in daily trading volume.
The company indicated that they were unaware of any material change that would suddenly attract investor’s attention. However, experienced traders and investors know that a volume spike and an huge increase in price doesn’t just happen without a good reason.
The unusually large volume and the subsequent increase in price continued until February 17, 2021.
A few days ago we wrote a piece on our Google blog which discussed the current technical picture, along with the recent development of a bullish Cup and Handle pattern.
The Road to Commercialization and Related Business Opportunities
An investor presentation found on the American Manganese website provides a good overview of the growing Lithium-ion battery market, the company, the recycling business, the patented RecycLiCo™ process and, most importantly, the revenue opportunities that are in front of this decade old company.
We have reproduced a few of those pages already in this article. We now ask that indulge us to use a few more of them to discuss the company’s future prospects regarding the commercialization of the RecycLiCo™ process and the business opportunities that await AMYZF.
In terms of American Manganese’s commercialization path, the bulk of the R&D to develop and refine the RecycLiCo™ process has already taken place, resulting in multiple global patents issued by the United States, Korea, Japan, Canada, China and India.
Preliminary testing results for the company’s patented RecycLiCo™ process have demonstrated the successful production of lithium sulfate (Li2SO4) with 99.99% purity.
More importantly, these results were validated by an independent third party; a company that is also an international lithium producer.
The company’s 6,700 square foot pilot program demonstration plant is nearing its anticipated February 2022 operational start-up date.
During calendar year 2021, the company successfully raised $C20 million in capital through a private placement. This capital raise resulted in the company issuing up to 20,000,000 additional common shares, at a price of $C1.00 along with warrants exercisable at a price of $C1.25. The company also…