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Thursday 25 July 2024

Lithium Australia (ASX: LIT): Recycling operations achieve positive operating profit

Lithium Australia Ltd (ASX: LIT)  is pleased to announce that its subsidiary, Envirostream Australia Pty Ltd (“Envirostream”), has recently achieved a significant milestone of delivering positive operating profit during Q4 FY24. The achievement was driven by the Company’s transition towards an upstream service model, which has increased revenues with a higher proportion of revenues to now received upfront through recycling fees.

The Company’s strategic shift towards an upstream-focused operational model is aimed at increasing ‘fee for service’ as a proportion of the recycling revenue mix, while also reducing exposure to market and pricing volatility related to the sales of Mixed Metal Dust (MMD) and other commodities. Higher average revenue unit rates, coupled with effective cost management and increasing volumes under exclusive recycling agreements allow for a sustainable recycling economic model.

The positive operating cash profit performance of Envirostream is a strong achievement for the Company and compliments ongoing LieNA® piloting and study activities, which are funded via the joint development agreement with Mineral Resources Ltd 13. The Company notes that it is continuing to seek growth partners to accelerate the pathway towards sustainable operating cashflows at the Group level.

Lastly, the Company is currently progressing discussions with SungEel HiTech regarding a joint development agreement14 (JDA), which includes investment focused on upgrading recycling equipment and expanding total processing capacity. Lithium Australia notes that the JDA is subject to negotiation and relevant approvals. The Company will keep the market informed in the event of any material developments.

Highlights:

▪Lithium Australia’s recycling operations has achieved maiden Operating Cash Profit1 in Q4 FY24 and the Company is focused on growing operating profit on a sustainable basis

▪ The result was driven by the growth in our upstream ‘Fee for Service’ recycling model, increasing overall revenues and lowering dependence on downstream commodity sales

▪ The strategic shift to large-format lithium-ion battery (LIB) collections, combined with safety and operational improvements, underpins the Company’s enhanced unit economics

▪ Upstream battery feedstock and revenues secured through new exclusive commercial agreements with customers including, LG Energy Solution, Volvo and Hyundai Glovis2

▪ Recent downstream off-take agreement with SungEel HiTech underpins downstream sales and current joint development discussions, which are on track for completion in CY24

Commentary:

Comment from Lithium Australia CEO and Managing Director, Simon Linge

“We are very excited to have achieved a significant milestone of maiden positive operating cash profit during Q4 FY24 within our recycling business. This outcome, delivered in a period of low commodity prices, was driven by our growth in our fee for service model for battery recycling with all customers over the last year, which enables us to receive the majority of revenue upfront on improved terms. Our revised commercial model supports our ongoing joint development discussions with SungEel HiTech, which seek to scale up our operations in line with expected growth in LIB collection volumes.”

ASX announcement:

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