This CEO made $250m in lithium. Here’s where he’s investing next

“I thought, ‘Oh, okay. The good Lord has given me quite a few shake up moments’, and I figured, well, this was one of them.”

Reed seized on his lucky break, making very early and very prescient investments in Australian lithium mining close to his home town of Kalgoorlie.

Those investments in the Mt Marion mine, now run by Chinese giant Ganfeng and Chris Ellison’s Mineral Resources, were followed by well-timed exits to bestow a small fortune on Neometals and its shareholders. He made nearly a quarter of a billion dollars on those mines from a $2 million investment.

After some generous dividends, the remaining fortune has since been pumped into several clean energy processing projects, most notably the creation of a patented process for recycling lithium-ion batteries with a low carbon footprint.

Mercedes-Benz delivered Reed an early 50th birthday gift this year, when they came knocking on his door wanting to get their hands on that patented battery recycling process.

Mercedes-Benz struck a preliminary agreement with Neometals and its construction partner SMS Group in May, which envisages the construction of a recycling plant in the German town of Kuppenheim.

The urge to recycle is being driven by a desire to secure supply chains of the critical minerals that are required for batteries; lithium, cobalt, nickel, copper, aluminium, graphite and sometimes manganese.

The International Energy Agency (IEA) declared last year that there was a real “hazard” that the world would not have enough critical minerals to deliver the batteries and other infrastructure needed to achieve climate goals.

“Today’s supply and investment plans for many critical minerals fall well short of what is needed to support an accelerated deployment of solar panels, wind turbines and electric vehicles,” said the IEA in a May 2021 report on the role of critical minerals in global decarbonisation.

Recovering those minerals from old and used batteries should eventually be cheaper and less carbon intensive than mining new mineral resources out of increasingly marginal geology.

Recycling should also be a more reliable and predictable source of battery minerals than some of the developing nations that dominate mine production of critical minerals; most notably the Democratic Republic of Congo which produces more than half the world’s cobalt.

Neometals’ patented process uses acids and other fluids to recover the minerals in a wet or “hydrometallurgical” system.

The wet system distinguishes it from the mainstream “pyrometallurgical” recycling method, where batteries are cooked at high temperature in giant furnaces.

Mr Reed said his hydrometallurgical process was more expensive than the traditional method on face value, but recovered dramatically more of the valuable minerals, used far less energy and therefore had a much lower carbon footprint.

PwC Australia’s director of energy transition Conrad Mulherin agreed that hydrometallurgy could be become an increasingly common method of recycling in future.

“Currently most recycling companies use pyrometallurgical processing due to comparatively lower cost. However, pyrometallurgy requires high temperature (which also means high-energy consumption) and typically lower recovery rates (which means higher metal loss),” he said.

“There are some other environmental concerns with this approach; burning plastics and other materials can release hazardous pollution.

“The industry appears to be shifting towards hydrometallurgical processing.

“There are lesser energy requirements, lesser impacts from by-products, and higher metal recovery rates with hydrometallurgy. The higher metal recovery rates and higher prevailing metals prices can make the business case of hydrometallurgy more attractive.”

New battery recycling rules

Recovery rates and the carbon footprint will likely matter much more once the full impact of the new battery recycling rules adopted by the European parliament in March is felt.

The rules require 75 per cent of light vehicle batteries on the Continent to be recycled by 2025 and 85 per cent by the end of the decade.

Batteries will need to contain minimum levels of recycled cobalt, lead, lithium and nickel and the batteries will have to carry a label that reveals their carbon footprint.

The IEA estimates global battery recycling capacity is currently about 180,000 tonnes per year with almost half of that in China.

“We think there’ll be about a quarter-of-a-million tonnes of batteries that need to be recycled in 2025 in Europe. The total installed capacity in Europe at the moment would be about 70,000 tonnes,” said Mr Reed.

“It’s going to be hard for them [recyclers using pyrometallurgy] to grow and to get license in the new world.

“When the new battery regulations in Europe come in, effective sort of mid-decade, to achieve their recycling efficiency rates or recovery rates, all roads lead to the hydromet process.”

The IEA projected that recycling would provide up to 12 per cent of global cobalt supply by 2040 under a scenario where the world acted to keep temperature rises well below 2 degrees.

Under the same scenario 7 per cent of global nickel demand and 5 per cent of lithium and copper demand would be met by recycling batteries.

“The recycling of end-of-life lithium-ion batteries to recover the valuable minerals, and to a smaller extent their reuse as second-life batteries, can relieve a proportion of the burden from mining them from virgin ores. Although this does not eliminate the need for continued investment in primary supply of minerals,” said the IEA in the report.

The IEA warned that the wide range of different battery chemistries and designs for electric vehicles could hamper efforts to develop an efficient and economically viable recycling industry.

“Technology bottlenecks include the lack of standardisation of designs for battery packs, modules and cells. Different vehicle manufacturers have adopted different battery chemistries, especially for the cathode, and they tend not to disclose information on their cell designs and chemistries,” said the IEA in its May 2021 report.

“This wide variety of cell types and chemistries in the market poses a major challenge to recycling, and especially to the automation of recycling processes, as each battery pack and module type requires different approaches for disassembly.”

Neometals’ agreement with Mercedes-Benz will become legally binding when the carmaker sends through an official purchase order, and Reed told Tech Zero he expected it to be formalised.

“That is certainly being well advanced and is on target,” he said.

“We will embed staff with them and be able to test the latest and greatest [battery] cells and compositions of batteries and formats and co-own the improvements.

“It is great for us, it was a 16-month process, a global process as you can imagine so, yeah, we are very happy to have been picked as Mercedes technology partner.”

‘Very strong pipeline of people who are very interested’

The Mercedes-Benz deal came after similar agreements with a Canadian steelmaker and Japanese trading house Itochu.

“We’ve got a very, very strong pipeline of people who are very interested in using it, obviously, once you announced that Mercedes have picked you as a technology partner, that certainly sped up and crystallised a lot of commercial negotiations because they’ve done arguably the deepest technical dive,” said Reed.

“These guys [Mercedes] invented the first modern automobile, anti-lock braking, the safety cell, they’re pretty innovative.”

But while the Mercedes-Benz deal and new European regulations should provide a boost this decade, Reed believes the battery recycling industry’s salad days could lie in the decades beyond, given the volume of batteries requiring recycling remains small at the moment.

“It’s been a great journey, we’re six years into it, and we’re only just starting. The tsunami of batteries doesn’t really start to get interesting until the second half of the decade,” he said.

“In 2030, even if we recycle every battery in the world we will only supply 10 per cent of [the battery minerals] what’s required for that year’s new production.

“It’s not until 2040 that you get to probably 40 per cent to 50 per cent. So, it’s a fantastic business with a very, very long life for us.

“Even if they stopped making lithium batteries today, you’re still going to have yesterday’s production to recycle in 10 years time. So, the fundamentals for us were just too compelling not to apply all of our resources.”