Here’s the lead-in to the teaser pitch about “infinite lithium” that’s generating some questions from Gumshoe readers:

“Inside one of the world’s most advanced facilities, a small 65-member team has perfected:

‘Infinite Lithium’

“Scientists have developed a technology for creating an infinite supply of super-rich lithium right here in America WITHOUT having to mine a single ounce.

“Major billion-dollar automakers have already signed huge deals with this little-known firm…

“And it could turn every $500 into $39,915 for early movers…”

And he proceeds to lay it on pretty thick…

“A small 65-person team of engineers just changed the course of America’s energy history…

“And it could have a MASSIVE impact on you and your family’s financial future…

“One that could ignite an epic stock run capable of turning every $500 into $39,915 for early investors.

“In fact, I wouldn’t be surprised if this elite team won the Nobel Prize….

“Currently, this firm can create enough material to power a whopping 20,000 electric cars a year.”

So what’s the story? Well, it’s a teaser pitch for Energy Investor, Keith Kohl’s energy-focused newsletter over at Angel Publishing ($99/yr) — and the general push is that lithium is going to soon run into a supply-demand imbalance, as the major producers in Australia, China and South America just aren’t making enough to meet the demand that the EV industry is expected to have over the next decade.

That has crept into lithium prices, of course, so buying lithium now will cost you 3-4X what it cost 18 months ago, and that’s sending the stock prices of most lithium-related stocks, primarily the mining companies, soaring higher. The ad’s undated, though seems quite new — we started to see it make the rounds last week.

But it’s not a mining stock that’s being teased, it’s something a bit different — here’s some more of the tease:

“Lithium mining stocks are white hot.

“But this company I’ve been telling you about, with its “Infinite Lithium” technology, is about to blow all of these gains out of the water.

“Because this stock is unlike ANY other in the lithium space. It’s groundbreaking….

“… this firm has just built the largest “Infinite Lithium” factory in North America.

“It’s a $175 million state-of-the-art facility, and it’s right here in the good ol’ USA…

“With construction underway for several more of these unique facilities across the country in places like Arizona and Alabama.

“And the more labs this company has, the more lithium it can produce.

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“As the company’s CEO said in an interview with Financial Post, ‘The need to mine new lithium will start to taper off.'”

So what’s this all about? Not lithium mining, but lithium-ion battery recycling — and the company being hinted at here, sez the Mighty, Mighty Thinkolator, is Li-Cycle, which merged with the Peridot SPAC to come public last year. The transaction was announced about a year ago and closed back in August, so they’ve been publicly traded at ticker LICY for almost six months… time enough, these days, for a little boom to $14 a share and a bust back down to $7, where it trades right now, looking as disappointed as a lot of the other once-hot SPAC mergers.

In case you’re one of the warrant enthusiasts out there, note that the SPAC warrants for LICY have been called for redemption, so will be redeemed tomorrow — I didn’t read the details in their filings, but that redemption could potentially be at a huge loss for shareholders who didn’t elect to exercise or do a cashless exercise of the shares. Clearing out those warrants is likely to be good for LICY in the long run, but depending on what investors choose to do it could also lift the share count a bit.

Here’s how the company describes itself:

“Founded in Toronto in 2016, Li-Cycle is an industry-leading lithium-ion battery resource recovery company and the largest lithium-ion battery recycler in North America. Li-Cycle is on a mission to leverage its innovative Spoke & Hub technologies to provide a customer-centric, end-of-life solution for lithium-ion batteries, while creating a secondary supply of critical battery materials. Lithium-ion rechargeable batteries are increasingly powering our world in automotive, energy storage, consumer electronics, and other industrial and household applications. The world needs improved technology and supply chain innovations to better manage the end-of-life of these batteries–and to meet the rapidly growing demand for critical and scarce battery-grade materials through a closed-loop solution.”

So… the plan is to take the scrap from the battery manufacturers (they say waste is 5-10% at battery manufacturing plants), and they take rejects and “end of life” batteries that are discarded, they tear that stuff apart (literally, shredding the batteries), and create a “sludge” of the chemicals at their spoke locations, and they ship that sludge to their “hub” location(s) to refine it and create new battery-grade materials (mostly lithium carbonate, cobalt sulfate and nickel sulfate). There are other companies that recycle lithium batteries, but they say theirs stands apart by being more efficient and less environmentally troublesome (most of the others use high-temperature refining, so emissions are much higher). The immediate high-volume opportunity is in processing waste from battery manufacturers, with battery plants sprouting up like weeds these days, but the expected “tsunami” of business in the future will come from EVs reaching “end of life” and being recycled.

The ad includes quite a bit of hyperbole, as you might imagine — Kohl says that the company can “currently” produce enough lithium for 20,000 EVs a year, and that they’ve “just built” their $175 million “infinite lithium” factory — and that’s jumping the gun a bit. The preliminary locations they have built now, their “spokes” in New York and Ontario, cost far less than that, and they have barely begun to shred batteries and produce the raw material (black mass) that can be refined back into battery metals, but they’re only doing that first shredding step right now — they have to build their larger processing plant in Rochester before they can actually move up the value chain and sell battery metals instead of selling that “black mass” to other refiners. That big plant is the expensive refinery “hub”, it was indeed announced as a $175 million project, but is now likely to cost 2-3X that amount (more on that in a minute).

LiCycle is building its “hub” location in Rochester, NY, and they say they’re on track to have that operational at some point in 2023, and that will be fed by several “spoke” locations, starting with those near battery manufacturers, who can process that waste and also be near collection points for scrapped EVs in the future. They’d like to go global in the future, with several more major hubs and spokes in important parts of the world… and they see demand increasing dramatically as governments push for more efficient recycling of EV batteries. The photos that Kohl shows in his “presentation” are of one of the spokes, a mechanical operation that shreds the material to create the sludge that is sent to the (not yet built) hub, so it’s still very early days, but they do say that they have “onboarded” 14 new customers in the last quarter, and added a fourth planned “spoke” location in Alabama to accompany their planned spoke in Arizona and the existing Ontario and Rochester, NY locations (they also have a shredding “spoke” in Rochester, in addition to the planned hub, which is actually where those presentation photos come from).

Until the big project in Rochester is built, it sounds like they’re doing their shredding and primary processing and then selling the “black mass” to third parties for refining, and that things are ramping up as they expected, with their Rochester and Ontario facilities generating net revenue of $1.6 million in the third quarter last year (they processed a total of 524 tonnes of “black mass” in those facilities to get started that quarter, so that number is roughly 1% of what each of those spokes is planning to be able to process in a year), and the first phases of their Alabama and Arizona spoke locations should be completed sometime in 2022 and start generating revenue.

And I mentioned that it’s not really a $175 million project anymore — the Rochester recycling facility was simultaneously upsized and delayed a bit by a new deal with battery manufacturer LG, announced and detailed in this presentation in mid-December , so the completion of that facility and the beginning of their “ramp up” to full capacity are now expected to happen sometime in 2023, which should probably push of that original SPAC deal projection that they’ll be cash-flow positive in 2024 by at least a little bit…. but with the LG financing added to their cash, they say the plant is fully funded, so that’s good. Permitting and construction are the order of the day right now.

I love the story, it’s good that they have deals with several battery manufacturers, and it’s clear there is a need for more and better battery recycling capacity to go along with this boom in electric vehicles… I just don’t really have a handle on the economics of the business, beyond the probably-too-rosy high-margin illustrations provided in the original SPAC presentation. The whole thing strikes me as pretty risky, at least until they can prove that their Rochester hub facility for refining valuable battery metals can be effective and profitable at scale (the spokes are important too, but they’re trivial in comparison — according to their various presentations, a “spoke” facility for shredding might only cost $4 million in initial capital expenditures, but as I read it this first hub now has a planned capital investment of $485 million). There’s clearly a big potential market, and therefore a big opportunity, but they’re also taking a big swing with this new facility, since they also depend on the cash flow from that facility helping to finance their expansion going out a few years from now… and I don’t know enough yet to make a reasonable guess at whether or not they’ll hit a home run.

This week could be a big one for them, they report their earnings on January 27th… so the story could certainly change a bit by then, this will be their first full quarter since the deal formally closed, and it will include their projections for 2022, which I assume will be different than the plans outlined in their original SPAC presentation. They should have closed that SPAC merger with about $530 million in cash after redemptions (only about 15% of the SPAC shares were redeemed for cash before the deal closed, which isn’t bad for a deal that closed in mid-2021, when SPAC shares were being redeemed right and left), so they’re in decent shape and have some big partners as they begin their key construction project. For now, color me intrigued… but not invested. We’ll see how it goes. If you’ve looked into this one, or have any other experience with the notion of recycling battery materials, please do jump in and share your thoughts with a comment below.

P.S. In case you’re curious about the “extra” special reports Keith Kohl offers as bait for his subscription offer, the “undiscovered tech company behind the coming Trifuel-238 Revolution” pitch is about Lightbridge, we covered that back in August here… and the “Apex Charger” pitch about life-changing gains from the EV revolution hints at the company with leading market share in the US charging business, with “more than 14,000 locations” — I haven’t written about that one lately, but it pretty well has to be Chargepoint (CHPT), one of the early leaders among publicly traded EV charging companies (I wrote about a bunch of those a year ago when they were all being teased and most were in the midst of SPAC mergers, they’ve all come down quite dramatically since then).