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Lithium Australia’s Envirostream reports maiden profit on back of improved recycling business model

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By Imelda Cotton - 
Lithium Australia ASX LIT recycling division maiden profit
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Lithium Australia (ASX: LIT) recycling subsidiary Envirostream Australia has achieved a maiden operating cash profit of $520,000 for the final quarter of financial year 2024.

This achievement was driven by the transition towards an upstream “fee for service” battery recycling model, which has helped to increase overall revenues and reduce its dependence on downstream commodity sales.

A higher proportion of revenues can now be received upfront through battery recycling fees.

Sustainable model

The new business model aims to increase “fee for service” as a proportion of the recycling revenue mix while reducing exposure to market and pricing volatility related to the sales of mixed metal dust (MMD) comprising cobalt, nickel, lithium and graphite.

Higher average revenue unit rates – coupled with effective cost management and increasing volumes under exclusive recycling agreements with leading original equipment manufacturers including LG Energy Solution, Hyundai Glovis and Volvo – are expected to allow for a sustainable recycling economic model.

Quarterly financials

During the quarter, Envirostream achieved overall battery collection volumes of 445 tonnes, revenue of $2.5 million, and a gross profit of $1.56m.

Lithium-ion battery (LIB) collections totalled 307t (representing a 74% increase over the prior quarter), with large-format batteries accounting for 241t and small-format collections 66t.

As a result of the growth in LIB collections, the proportion of LIB batteries in the mix reached a record 69%.

The company’s enhanced performance has been attributed to an improved commercial focus where the new recycling agreements consist of upstream gate fees and a downstream MMD revenue share scheme, allowing for the majority of revenue to be received upfront and providing lower exposure to volatile MMD prices.

LIB collections

During the period, Envirostream opted to focus on large-format LIB collections and ceased collection contracts for other battery types due to the uncommercial nature of non-LIB batteries.

The company also implemented a copper, aluminium and plastics separation plant and upgraded the battery shredder, which is reported to have significantly improved processing throughput and the recovery of MMD.

Recycling agreement

Envirostream is currently in discussions with Korean recycling company SungEel HiTech regarding a joint development agreement to further upgrade its recycling equipment and expand total processing capacity.

Any deal, if completed, would build on an MMD offtake agreement signed between the two companies in 2019.

SungEel is one of the world’s largest battery recycling companies and the biggest in South Korea.