Given the trajectory of the electric vehicle industry and the expected lifespan of an EV’s lithium-ion battery, the US is only a few years out from needing large-scale, cost-effective, decarbonized ways to recycle batteries. In this episode, Steve Cotton, CEO of Aqua Metals, describes regenerative electro-hydrometallurgy — the new battery recycling method that’s not only fun to say, but run on clean, cheap renewable electricity too.
Text transcript:
David Roberts
We are just now entering the S-curve of exponential electric vehicle (EV) adoption, which — given that EV batteries tend to last 10 to 15 years — means we have not yet experienced a huge wave of retired lithium-ion batteries. Analysts expect that wave to show up in earnest around 2030, which leaves us just enough time to scale up, drive down the cost, and perhaps most importantly, decarbonize the technologies needed to recycle all those batteries.
That, after all, is the sustainable vision: a circular economy in which the minerals and metals in these batteries are fully recovered and reused for new batteries, minimizing the amount of new mining needed.
The most common extant forms of battery recycling are pyrometallurgy (burning the batteries) and hydrometallurgy (shredding the batteries and soaking them in a liquid solution). Both capture only a limited set of the metals in the batteries and produce environmentally unpleasant byproducts of their own, including CO2 emissions.
A Nevada-based company called Aqua Metals has developed a new method, called — brace yourself — regenerative electro-hydrometallurgy. Like so many of the technologies I cover on this podcast, and to my great delight, it effectively replaces fire and chemicals with clean, cheap renewable electricity. I will leave a fuller explanation to Aqua Metals CEO Steve Cotton, who I have invited on to discuss the process, its benefits over existing battery recycling options, the company's plans to scale, and the battery recycling industry in general.
So, with no further ado, Aqua Metals CEO Steve Cotton, welcome to Volts. Thank you so much for coming.
Steve Cotton
Thanks for having me, David. It's a pleasure to be here.
David Roberts
Let's start, maybe, with the nitty-gritty details of the recycling itself. So today, as I understand it, the dominant form of battery recycling — in fact, as far as I know, the only form that sort of exists at any kind of commercial scale — is pyrometallurgy. So maybe just start here, explain what pyrometallurgy is, how that works, and sort of what it produces on the back end.
Steve Cotton
Sure. Happy to talk about that, yeah. Pyrometallurgy, also known as smelting, has really been around since the Bronze Age. So it's not really a new technology. It's an existing technology that's being leveraged for the recovery of some of the minerals, the critical minerals that are in these lithium-ion batteries. And just a review of those critical minerals that everybody would be looking for is things like cobalt, lithium of course, nickel and a little bit of copper and manganese in the mix as well. The challenge with pyro and smelting is, you're effectively chucking some batteries into a furnace.
David Roberts
I feel like there must be something more complicated behind the scenes. Are they really just chucking them into a furnace and burning them? Is that what it sounds like?
Steve Cotton
There's different forms, but that's definitely the most commonly utilized form is batteries directly into a furnance in the smelting of lithium batteries, yes. You can also preprocess that with a slightly lower temperature, non-smelting furnace that creates an interim material called matte material that then does ultimately get put into a furnace. But the most common is putting those batteries right into the furnace. And what ends up happening is you don't recover really any of the lithium. So the lithium either volatilizes and oxidizes and goes right up to smokestacks — along with the particulate matter material — and you recover some of the nickel in the cobalt in an interim status material that then needs to go downstream to specialized refineries that then try to separate out that nickel and cobalt.
So, those high temperatures also create, from an environmental perspective, some real challenges, particularly if you're looking at it with the lens of sustainability, let alone economics.
David Roberts
These are fossil fuel furnaces today, I assume?
Steve Cotton
Yes, for the most part. There are some players that are talking about putting in electric furnaces, but that still would not stop things like CO2 emissions and sodium sulfate on the solid waste streams and things along those lines.
David Roberts
Well, when I just think of burning an industrial product, I mean, it just sounds gross. I'm assuming it is, in fact, gross.
Steve Cotton
It is. It's a place that is a difficult environment to work in. You have to wear hot suits. There's lots of recordable injuries and even deaths in smelting around the world, inclusive of even in the US, that have happened. And so, it's a dangerous working environment on top of the environmental and the economic impact. So that economic impact, of course, is you're recovering less yield of the nickel and the cobalt compared to more modern techniques, and you're recovering pretty much none of the lithium. And you have multiple stages and steps in the process, so the transportation costs and of course, then the environmental footprint of that gets to be significant.
And so, if you look at it from the two big environmental waste streams, one is gas that goes into the air. And when, in the context of lithium-ion batteries, you're putting 4x-plus times the weight of the material to be recycled into the air in the form of CO2.
David Roberts
Yeah, and as someone said, I was reading one of the articles. As someone said in one of the articles, if your process, if the main output is CO2, it's almost like the metals are a side product here. The main product is CO2.
Steve Cotton
Right. So you almost have a pollution factory with a side stream of critical battery minerals. And it's not just the gases. And by the way, gas doesn't weigh nearly as much as the solid material. So you can imagine 4x of thousands and thousands of tons of gas, what that would look like if you were able to contain it all. Of course, we just kind of see that go into the thin blue line, our little atmosphere that we have.
David Roberts
So to the extent that battery recycling is happening today, is that mostly what's happening?
Steve Cotton
Yeah. So really, the incumbent technology being smelting and pyro is the way that most of the materials that are processed today are processed. There are also hydrometallurgical, which we can talk about the contrast there. It came along and has been scaled a little bit in China, but certainly not in North America.
David Roberts
It's an effort to find something more modern. I mean, it's sort of a step past pyrometallurgy, as I understand it.
Steve Cotton
Right. So the hydro processes that are out there today, the concept there is, let's not chuck these batteries into furnaces and high temperature — that's a great idea, we like that. Let's shred these batteries in a clean way and get them ready for some processing. And that processing in the typical hydro operations contrasts a little bit differently because they take the material, which is called black mass, which is almost becoming a household name, or certainly an industry well-known name.
David Roberts
Yeah. So this is like you take a battery, you take sort of the frame and the plastic parts off, just leave the metal bits, basically, and then shred it. That's black mass.
Steve Cotton
Correct. So, it goes into a very sophisticated version of a wood chipper, and you keep it from catching on fire and all those things. Some of the metallic pieces can be recovered, but most of those critical minerals end up in what looks like a black, powdery, sandy mass, hence the name black mass. That's where the lithium, nickel, and cobalt sit to then be recovered. Those hydro processes then bring in one-time-use caustic chemicals of various types and leach those — kind of like from the mining industry, this is also technology that's been around for 100 plus years — and one-time leach that set of chemicals that you have to bring in by truckloads or train loads at any level of scale, and then get to a sulfate product in the terms of things like nickel in the form of nickel sulfate.
So, these metals like nickel and cobalt go into salt forms, and then the outstream of that, the unfortunate byproduct, is a material called sodium sulfate. That sodium sulfate can be nearly as much, if not more, than the weight of the material processed as well. So, you've got that CO2 impact like we were talking about with pyro, or smelting being about 4x on the gas side. Well, in the hydro world, it's better, but it's still 3x the weight of the materials. The hydro side creates more sodium sulfate, about triple the amount of what you see in pyro.
Both of those gaseous and solid waste streams, from an environmental perspective, are a challenge.
David Roberts
And sodium sulfate is not toxic or anything, right? It's just the mass. You just got a bunch of stuff to get rid of, right?
Steve Cotton
So, it is, for the most part, not a hazardous waste item. It would go into the landfill, but we're seeing some hydro operators contemplate and actually perform dumping of sodium sulfate into the oceans. That's not really a good place to put it, but certainly the landfill or the oceans. What that means is you have not only the economic cost, because it's not free to create and truck all these materials to their final resting place, but it's highly impactful to the environment.
David Roberts
This will come up later, but it's worth putting a marker here. Those caustic chemicals that you bring in to leach the metals you want out of this kind of slurry are just single use. So then next round, you're importing more of these caustic chemicals, which means your operation involves importing and storing large amounts of these pretty nasty chemicals.
Steve Cotton
Exactly. So, there's a capital expense to build a facility that can handle things like rail spurs or lots of trucking and dock capacity to bring in all those one-time-use chemicals. Then lots of tanks holding Olympic size pool quantities of these things are larger in any sizable facility. On the back end, a sodium sulfate crystallizer kind of looks like a stood-up intercontinental ballistic missile. It costs maybe ten or tens of millions of dollars for the equipment, let alone the cost to operate that, which is basically nothing more than really a trash dryer.
It's crystallizing a liquid slurry of sodium sulfate and getting that into a crystallized form that's less expensive to transport to its final waste landfill, or even ocean destination.
David Roberts
Right. So, you got these caustic chemicals coming in on the front end and on the back end, you get a bunch of sodium sulfate, which you have to dispose of somehow at some expense. Then you get sort of nickel sulfate, cobalt sulfate, salt forms of these metals, which then presumably you have to process in some additional way to get the actual nickel and cobalt that you want out of it.
Steve Cotton
Right. So, those are called — in the sulfates — that's really PCAM: so that's Pre-Cathode Active Material. Then those salts get blended into, let's, for sake of a layman's term, like a Duncan Hines recipe for the specific battery manufacturer that wants their cathode active material. The challenge with a hydro process at a high quantity of material is whether you end up in those salts with impurities like iron and aluminum and even copper, getting into those that then don't qualify them as materials that can go into the battery supply chain. So that's not proven very well at scale yet either, to be able to qualify into cathode accretive materials.
We'll talk a little bit more about our process, which looks more like going from metals into those pre-cathode and then ultimately cathode materials. So you can be more certain of a defined method that is used today to get from metals to the cathode active materials.
David Roberts
But just to wrap it up on the hydro side in the US, for instance, is there a hydrometallurgical battery recycling facility commercially operating?
Steve Cotton
Not really. There's been a facility here and there that has been built or is in the process of being built, but we're not seeing as of yet any meaningful commercial quantities of capacity coming out of standard hydro facilities.
David Roberts
And what does the cost comparison there look like, just between pyro and hydro?
Steve Cotton
So, pyro can be a little less expensive because it's a little bit more brute force, because you're using a furnace and you're not using all the chemicals. But the pyro, remember, loses that lithium. The advantage of standard hydro is you can recover some of that lithium, if not a pretty high percentage of it, at the cost of the CO2 and the sodium sulfate. So it costs a little bit more to run the hydro, but you can get more value out of those materials if you're able to scale — and if you would be able to qualify those materials, sans impurities back into the very particular battery manufacturer specifications.
David Roberts
And it seems like if you're scaling up — I mean, all these things are sort of, we're talking about things at the pilot level, it's one thing — but if you're scaling up to millions or billions of batteries and you're producing more sodium sulfate on the back end by weight than you have coming in as batteries, that's just going to be a lot of sodium sulfate if that scales up to any reasonable size.
Steve Cotton
It is. So those quantities of materials are just massive. In fact, we have a blog entry if anybody's interested, you can go to the Aqua Metal site and read all about in details of the sodium sulfate challenge.
David Roberts
Okay, so that's pyro, that's hydro. So then explain what electrohydrometallurgy is. The Aqua Metals process.
Steve Cotton
Yeah, so the Aqua Metals process, which we call Aqua Refining, really solves for a few critical areas. It's a very unique technology that uses electricity, which can be renewable electricity, and then can drive us towards a net zero world to recover these critical battery minerals. We do that from the spent batteries in a total closed loop within the recycling process. How do we do that? Well, we regenerate the chemicals rather than buy the chemicals. We pipe in electricity to regenerate the chemicals and we reuse them over and over and over again in the recycling process.
The chemicals that we are regenerating and using have much more favorable to human life pH levels. So, you do not have to wear personal protection equipment, also known as PPE, like chemical suits and things along those lines. So, it's a safe and sustainable way to recycle. That eliminates these waste streams like CO2. We don't produce really any meaningful CO2 as compared to these other processes. We produce low two-digit kilogram quantities per ton of material produced, compared to 4000 kg, for example. And then we can really get those metals infinitely back into the loop to be used over and over again on the offtake side.
But the actual recycling process is now a closed loop. And we use, let's say the electron as the reagent as compared to pyro, which uses fire and heat, or hydro, which uses chemical reactions of one-time use.
David Roberts
So you start with the black mass, just like the hydro, and you're soaking the black mass in a liquid solution, as you say, much lower pH. I think I saw it compared on your website, to the pH of like Coca Cola. But then you say, rather than having to buy more of those chemicals and add them, you regenerate them with electricity. And to me, that just sounds like magic. How do you regenerate chemicals with electricity? What does that even mean?
Steve Cotton
Yeah, so the electricity can drive molecules apart back into atoms, or maybe reassemble atoms back into molecules, and that's how you can create your own chemicals. And we drive that process through an electrical process. And that is what gives us that opportunity to use renewable electricity to do that. And that electricity is really that reagent that drives the process. We also use electricity to then selectively plate the metals. Once we've extracted the nickel into a highly nickel concentrated liquid form, we send that over to our aqualizers, which is part of the tail end of the aquafining process.
And that's where we actually electrolytically plate the nickel and the cobalt, for example, into metal form.
David Roberts
So you start with the black mass, you soak it. The first thing that happens is it goes into a press and you squeeze the aluminum and graphite out.
Steve Cotton
So the interesting thing that happens in that first step that you're getting at is that instead of creating the carbon in the form of CO2 that you'll find in those batteries in the black mass — what makes the black mass black? A lot of carbon is in there. We'll get that carbon out in the early stage of the process, and again, not in CO2 gas, but think of us almost as a carbon sequestration process, a carbon recapture process. And then that carbon can go, at the most basic level into cement or, believe it or not, pencils and things like that.
David Roberts
It's graphite, right?
Steve Cotton
Yeah, it's really a low-grade carbon, carbon graphite. And then there's opportunities to upcycle that.
David Roberts
Right. I was going to ask about this later, too, but there's tons of graphite used in batteries. That's what the anodes are made of. So is the graphite that you're squeezing out of this solution usable for that purpose, or is it too low grade?
Steve Cotton
To get it to battery grade is going to require more R&D, which we're well on our way towards. And that not only goes from a reuse story of, "oh, let's take that carbon, and since it's not battery grade, put it in cement or pencils," but let's actually get that to a graphite and ultimately a graphene, which could be high value, and get that back into the battery stream. But for now, instead of putting that carbon into the atmosphere, like the pyro and the hydro processes do, which make them really effectively unsustainable, we capture that and then get that from going into the atmosphere in a reuse and have that opportunity to upcycle it and create better economics and a better closed-loop story of the overall recycling mass balance.
David Roberts
Right. Is the graphite a meaningful revenue stream at this point, or is it — ?
Steve Cotton
We don't model that out as a meaningful revenue stream. We probably get some revenue, but that's not part of our base level economic model, which is really oriented towards the lithium. And for us, in the form of lithium hydroxide or lithium carbonate, we can make either. And then there's nickel and cobalt.
David Roberts
Right. So, the first step is squeezing out the metals, the aluminum, iron, and the graphite. Then it goes to — what's the second thing you're pulling out?
Steve Cotton
So, ultimately, after we get some of those impurities out, we then go into solvent extraction, which is a very common hydrometallurgical process. That's where there's a little bit of a Venn diagram where we're doing that solvent extraction. But we're using chemicals that we've made and are reusing them over and over again. And then that's where we produce, ultimately — through that electroprocess of ours that's regenerative — we generate the concentrates that then get sent through tanks, pipes, pumps, over to the aqualizers, which then begin to do the electroplating.
David Roberts
I see. So you take the solution, you sort of concentrate it, and then it goes through, as I understand it, sort of a series of modules?
Steve Cotton
Yes, it's very Lego module-like. So think of it as a tank farm with anodes and cathodes that are in, you know, the positive and the negative.
David Roberts
Right. This is all electrolysis. The Volts audience, I think, is very familiar with electrolysis.
Steve Cotton
Yeah. And we have a special form of electrolyzing, but it's not the most critical part of our IP. And that's in other areas of the way we digest, the way we use electricity, the way that we regenerate. And so, we're using fairly proven technologies to plate those metals.
David Roberts
So they go into one unit, and you pull out the nickel, go into another unit, you pull out the cobalt with a special electrolyzer.
Steve Cotton
Yes. And we have another electrolyzer that will also allow us to get manganese as an example, which does have, certainly reuse, but obviously recycle battery-grade manganese, which we can even put back into alkaline batteries, let alone lithium batteries.
David Roberts
And then lithium hydroxide. Is that just another unit, another electrolyzer that pulls that out?
Steve Cotton
So we don't use aqualizers to generate the lithium hydroxide that comes out of another part of our process, and that is in a slurry form. So to make lithium hydroxide, you crystallize it. So the difference between lithium carbonate and lithium hydroxide, visually, is the lithium hydroxide will have more of a crystalline form, but we can also turn the lithium hydroxide into lithium carbonate, and that is more of a powder form.
David Roberts
Lithium hydroxide is sort of the higher form, like, is more suitable for reentering the battery stream, is it not?
Steve Cotton
You know, it's interesting because I'm sure you've talked in prior podcasts about LFP, which is another soon-to-be household word, and that's lithium iron phosphate as a reminder to everybody, and cobalt and nickel-free. So there are a lot of LFP battery manufacturers that are now putting in things like solid-state silicon anodes and using the lithium iron phosphate material. And those efforts are really telling us in our downstream chain that they want lithium carbonate more than they want lithium hydroxide.
David Roberts
Interesting. But you can produce either.
Steve Cotton
We can make both uniquely to our process.
David Roberts
You're getting the lithium out is the long and short of it.
Steve Cotton
Exactly. So we're recovering very high, ninety percent of the lithium, and we can kind of meet our customers' demands in the form of lithium hydroxide and/or lithium carbonate.
David Roberts
Right. So over time — I've been getting press releases from your extremely persistent PR people —
Steve Cotton
We've got a great communications team.
David Roberts
I looked back: since mid-2022. So I went back and kind of read through them all going through. So over time, you have sort of successively, you showed you could get copper, then you showed you could get lithium hydroxide, then nickel, then cobalt, then manganese, which is pretty much, at this point the whole suite. So what percentage of those are you getting out of the black mass?
Steve Cotton
Very high 90s.
David Roberts
That's for all of them.
Steve Cotton
Yeah. So one way of looking at it is if you take a $10,000 or so value of input black mass feedstock, we're extracting all but about $20 worth of minerals.
David Roberts
Wow. So once you've pulled all those things out of the black mass, what's left?
Steve Cotton
So what's really left are some of those impurities, like that iron and aluminum and copper we really view as an impurity. But we can capture that copper and get that back into the world's copper supply chain to the extent that we can — most of the copper comes from the crushing because those are the physical connectors within the battery and things like that. And so, that material goes in that direction. But really, it's the carbon is the bulk of the material that doesn't, today go right back into that battery supply chain until we figure out the best ways, rather than reuse it in cement and pencils and things like that, and get that into a carbon graphite form that is suitable for battery grade.
And that does require a little bit more research and development.
David Roberts
So I just want to get clear here. You take the black mass, you get copper, lithium, nickel, cobalt, manganese out of it. You got carbon left over. You use the carbon in cement, then what's the remainder?
Steve Cotton
Not much.
David Roberts
Is there any waste product? I guess, is what I'm after here. Like, at the end of it, is there anything you have to dispose of?
Steve Cotton
Yeah, so, not really very much at all. And so, that's the real beauty of our process, is that we don't create large quantities of waste streams that come off of the process. The chemicals, really, in that hydro process, as I was describing you earlier, that you're bringing these one-time chemicals in, you leach it through, and then you create all this sodium sulfate, we completely avoid that. So we don't have these copious quantities of solid waste streams that come off of the process. We're really creating the streams of the materials that we want back into the ecosystem.
David Roberts
And then you're regenerating your own chemicals to do so. Right. So the significance of all this, just to back out a little bit, is there's no high temperatures, there's no heat required, and so there's no furnaces required, and there's no massive influx of chemicals needed. You're regenerating most of the chemicals you need. And those are the two big flaws of pyro and hydro are the need for those things. So pyro obviously produces a lot of CO2 emissions, for obvious reasons. Hydro produces a little bit, and you produce a tiny bit. I'm wondering, where does that tiny bit come from?
What is left over there that's still producing CO2? If you're not burning anything, where is it sneaking in?
Steve Cotton
Yes. So what happens with the hydroprocess is more than a little: they make, in typical hydro processes, about 3x the weight of the black mass in the form of CO2 gas.
David Roberts
Yikes.
Steve Cotton
As compared to pyro, which is about 4.2x.
David Roberts
Also yikes.
Steve Cotton
So the 3x is still pretty bad. And the way that that happens is through just chemical reactions. If you're using the chemicals as the reagent, you assemble CO2 molecules that escape, and they go out in the form of gas. We don't do that. And so, because of that, the carbon and CO2 aspects of our operation are very, very low. But particularly, like, the only CO2 that you could say is generated in our process is if we're not using renewable electricity.
David Roberts
Right, right, right. I've been sort of assuming that the electricity is renewable, but obviously, in the real world, you got to make sure that happens.
Steve Cotton
And by the way, these numbers that I'm referring to, the 4.2x and the 3x with the pyro and the hydro, respectively, what those comparisons are given credit for is that assumes that those operations, what electricity they do use, is also 100% renewable electricity. In reality —
David Roberts
Just not a big chunk of their emissions.
Steve Cotton
Some of them aren't as focused on using renewable electricity, perhaps, as we are.
David Roberts
Right.
Steve Cotton
Could be worse.
David Roberts
So, out of these metals you're pulling out today, my understanding is that nickel and cobalt are sort of the highest value. Is that right? How would you rank these sort of, by just what you can get for them on the market if you're selling them?
Steve Cotton
Yeah, sure. So, as of today, I can give you some numbers here. Really, the cobalt today is probably worth the most. Then you've got the lithium and the nickel coming in, but the cobalt is worth about today, $28,000, $29,000 per metric ton or per thousand kilograms. And then the lithium carbonate, or lithium hydroxide, is between $13,000 and $15,000 per ton today. And the nickel is today worth about $15,000 to $16,000 per ton.
David Roberts
Interesting.
Steve Cotton
So those are the big high-value metals that come out in quantities, and that's where those battery minerals numbers get interesting in terms of a conversation, is: where's that going? Are they going to go up or are they going to go down? Or are they going to stay the same?
David Roberts
I'm wondering how chemistry agnostic your process is. Or may I put another way, how chemistry agnostic your economic plan is. In other words, is this funded by the cobalt, such that if batteries evolve away from cobalt, as they seem to be doing, we seem to be in the midst of that. Is that a big blow to — I mean, not just you, but battery recycling in general? Is that going to hurt the industry if their most valuable metal sort of disappears from the batteries?
Steve Cotton
Well, that is an interesting question in the context of what we were talking about earlier. LFP batteries, there's not as much value to the F and the P, the iron phosphate, and what you're after there is the lithium. But we can't any of us imagine a world where we switch to LFP batteries and don't recycle them. Now, fortunately, there are economic opportunities to recycle the lithium and capture the iron and phosphate in the form of a battery-grade iron phosphate, and then get that carbon upcycled like that research and development I was telling you about — that'll take a little bit more time.
So there is an opportunity to do LFP only recycling, that's cobalt and nickel-free, and we have the technology to do that. It's a matter of making the economics work.
David Roberts
So the F and the P are abundant and not worthless, but very common and not worth a ton. So the economics of LFP recycling are going to be entirely down to how much you can get for the lithium. And maybe if you can figure out some way to upcycle the carbon.
Steve Cotton
Yeah, I think the key with LFP recycling is getting that carbon into — certainly not putting into the air like these other processes — but capturing that carbon like we already do, and then upcycling that to a carbon graphite or even graphene, and that is of high value. So, that's going to be a key part of economically successful LFP recycling.
David Roberts
And do we know what that upcycling looks like? What would that mean?
Steve Cotton
Well, that's taking the non-battery-grade carbon and then getting that material into the right particle size and purity levels to get into a battery-grade version of graphite. And then the next generation from graphite is taking that, getting into graphene, which is all these nanostructures. And there are battery manufacturers that are starting to develop graphene batteries, and that's going to be a very important material and product. And what better way to do that than extract it from not only LFP, but any lithium battery, because they have their fair quantities of carbon that are in them.
David Roberts
I was also going to ask about sodium-ion because there's a little, it seems like a little, movement in that direction.
Steve Cotton
Sure.
David Roberts
Which would take the lithium out of the equation. What would you do with sodium-ion?
Steve Cotton
Sodium-ion batteries are certainly less applicable. I don't think we're going to see sodium-ion iPhones and Android phones and tablets and PCs or even EVs, because —
David Roberts
You just can't get the density and —
Steve Cotton
The density and performance and size, kilowatt-hours per kilogram, and all that great calculative stuff. But what sodium-ion batteries can do really well in is things like renewable energy, battery energy storage. So solar farms, wind farms, they don't care as much about the weight and the volume of where you're putting these batteries. And so, that's a great way to help get the world's renewable energy to the percentages of net zero is through sodium-ion. And there's lots of opportunities there. Now, lithium-ion batteries are still competitive in that environment, and it's great to see more chemistries coming along.
There is going to be a little bit more of a challenge in economically recycling sodium-ion batteries.
David Roberts
Because sodium is flat worthless, right? I mean, it's so abundant as to be worthless.
Steve Cotton
But getting a battery-grade sodium might have value and things like that. So there's going to be opportunity that's downstream there. And if you can't close the loop, then we have to ask the question, is sodium-ion batteries the right sustainable, long-term thing that we'll be proud to tell our kids and grandkids about? Maybe, maybe not, unless you can figure out how to recycle those. And that's certainly on our path, but not in our current horizon of our particular recycling interests.
David Roberts
It's kind of an interesting irony, because one of the things sodium-ion proponents sort of say is one of its benefits is that it doesn't require valuable metals. Right. But then sort of like, the flip side of that is that makes it almost worthless to recycle.
Steve Cotton
Product design for recyclability is important.
David Roberts
Yes, I want to talk about that later, too. But so, another frequent theme of this podcast is learning curves, and which technologies do and don't get on learning curves and reduce their costs as they scale up. And just sort of intuitively, I look at this, and it seems extremely modular. And one of the characteristics of technologies that do get on learning curves is that they are modular, meaning, so you can take pieces out and improve them and plug them back in. So where do you anticipate cost reductions as you scale up?
Steve Cotton
So that's why a lot of our approach has been to start with — way back when we started our lithium aqua refining program, a feasibility study, and then doing some lab scale testing and then moving to bench scale.
David Roberts
Oh, we should just note for listeners' benefit, you guys started in lead-acid battery recycling.
Steve Cotton
We did, yeah. And so, we actually developed aquafining for lead originally. And the lithium is kind of the second act of the company and leverages a lot of the learnings from the lead world. And in the lead world, one of the things that we could have done better is going from lab to bench to pilot, running the pilot for upwards of a year, and then going on to a commercial scale facility, which is exactly what we are doing in the lithium program. And right now, we've run our successful pilot right in Tahoe, Reno, industrial center at our innovation center for a little bit over a year as we go to the commercial facility.
David Roberts
Right. So right now, you have basically one small pilot facility that is producing these metals and selling them. It's commercially active, but it's a pilot.
Steve Cotton
Yes, exactly. So what the pilot solves for is derisking the scaling of that technology, and it also allows us to get the materials that aren't in truckload quantities but in very samplable quantities for our downstream offtake partners. One of which, for example, is a company called 6K Energy, that's a cathode active material manufacturer.
David Roberts
You have offtakers buying all of the materials you're producing or something?
Steve Cotton
So those materials that we produce of value are definitely going to those offtakers, but not as much for an economic purchase, because they're not truckload quantities. It's really more for getting those materials into the hands of the downstream parties to get the cathode active materials generated and then to build the test cells to prove that. And so, for one example, we have a partner called Dragonfly Energy, which is a very innovative lithium-ion phosphate silicon anode dry deposition they use to build gigafactories at a fraction of the cost. As other solid-state fireproof lithium-ion battery producers that make LFP, they have taken lithium from our pilot process and demonstrated that they can build lithium cells from recycled and the world's first, we believe, together, decarbonized recycled lithium-ion product that actually, they cycled, tested, and proved that those cells performed.
And they even shared with us that they felt that the lithium that we provided from our recycling operations, even at the pilot level, had purities and attributes that exceeded what they've seen from the mining industry.
David Roberts
Interesting. So the main point of these offtake contracts you've got with the pilot facility is just to demonstrate these things work. These things can be absorbed into the supply chain.
Steve Cotton
Exactly. Connecting the processes, validating all the technical process flows, and giving us a great degree of confidence in our next stage commercial facility, which we call for our facility, the Sierra ARC, which is the Sierra AquaRefining Recycling Center, which is just about a mile and a half down the road from the innovation center and the pilot.
David Roberts
This is all out in sort of the Reno area of Nevada, the really the battery hub.
Steve Cotton
Yeah, Nevada, I always like to point out, is then the Silver State and always will be the Silver State, but it's also the Lithium State, the only state in the union that has every aspect.
David Roberts
A lot going on there. So what is 6K doing? What are you giving them and what are they doing with it?
Steve Cotton
Yes. So, 6K is a very interesting company, and 6K Energy has taken their core technology called UniMelt, and is creating cathode active materials through an electric process. And what that looks like is a slurry gets put into what looks kind of like almost like a lunar landing capsule, very high tech looking, with some pipes coming off of it. They use microwave pyrolisis, powered by electricity, which can be renewable, and that generates the cathode active material powders from the input. So they are interested, of course, in taking the offtake from our Sierra ARC and then ultimately an ARC that we would build alongside their planned and being built today, PlusCAM facility in Jackson, Tennessee.
And so, those metals like the nickel and the cobalt, as well as even the lithium, get put into a slurry form that's specialized for them, that they hit with their UniMelt process and create those cathode active materials. So what we've been working with 6K on is the connecting of our offtake to their input, and then validating that process through their generation of those cathode active materials. Getting those in turn into the hands of very sophisticated global battery manufacturers, as well as EV manufacturers that have verticalized into their own battery manufacturing, because that is a qualification process that takes some time. And our pilot and their ability to take the offtake at a pilot level and get that downstream ecosystem built is a really critical part of our partnership is being successful, in that we've announced already that we do believe that the 6K Energy and Aqua Metals partnership equals the first decarbonized path to net zero cathode active material production process in the world right here in the US.
And the other benefit of their process is that it's less expensive and game changing compared to how most of the cathode active materials are made in China.
David Roberts
And as I reiterate, to my great delight, all of this — this is a theme that comes up over and over and over again on this podcast — all of this is basically unlocked by super cheap, abundant, carbon-free electricity, correct?
Steve Cotton
That's where the world needs to go. The electrified world of renewable energy, with battery energy storage supporting that renewable energy, powering an electrified world of transportation and keeping the lights on, and all the things that we do with electricity, data centers being a huge and growing part of it. The Internet uses a lot of electricity too.
David Roberts
So people will yell at me for not asking this yet: so let's just talk about costs. Right now you got a pilot facility. This big commercial scale, give us a sense of the scale here, how much is the pilot facility producing versus how much the commercial scale facility will produce and when is the commercial scale facility going to be up and running?
Steve Cotton
So size wise, and then I'll get into cost and timing. But on the size of it, the pilot is putting out at its total capacity — as it's this quarter, we'll be operating 24 hours a day, seven days a week. Right now we're operating 24 hours a day, five days a week. So the weekends are off. But getting it to 24 by seven would get it to about 30 tons per year of output. And so, doing a 30x expansion gets us to the 3000 tons. So I think I've did my math wrong. 3000 divided by 30 is what the capacity of the pilot is.
David Roberts
You'll never find me fact checking math live.
Steve Cotton
Yeah. So they're not truckload quantities is the point from the pilot. But we're scaling the pilot to the first phase of commercial production by 30x and there's no coincidence, to the 30x scale, which is the important number. And that'll get us to the 3000 tons. And that is because in history, when you look at chemical plants, whether you scale them from pilot to production at small levels versus large levels, there's an optimized maximum level. And we talked with Worley, which is a global engineering firm, as well as the former president of Chevron global manufacturing and other parties to design what that scaling would look like.
And getting from a pilot operation to that first commercial production facility in that 30x or so is the sweet spot. And that's what we designed for and that's what we're doing. And again, the pilot being probably the only facility in the US that's operating 24 hours a day producing critical battery minerals today at those lower volumes that get into the samples hands of all the battery manufacturers and big auto and EV manufacturers. But that allows us to scale with a high degree of confidence in timing and budget. And so, the cost to do that first level of scaling to the 3000 tons, which you can think of also as let's say about 30,000 electric vehicle battery packs worth.
So it's real commercial production at an albeit modest level, but it's giga level productions ultimately as it scales in terms of gigawatt hours of capacity of batteries that can be made with these recycled materials. That facility, the Sierra ARC, is currently being upfitted as we speak and we expect to introduce the first black mass input into that facility by the end of Q2 of this year. So we're several weeks a few months away from really bringing that facility online, then that will go through a commissioning phase and get towards its full capacity in the rest of 2024, commencing 2025 and beyond with that first phase of that campus environment, building number one, we'll go build the other buildings to get to 10,000 tons. The cost factors to get that first facility up and running sound like a lot, but it's a lot less than pyro and hydro, from a capex perspective.
And for us, it's about $25 million to get that facility up and running. But it can generate into even today's metal prices more than that per year in revenues and ultimately in EBITDA. And so, the payback is still, at a plant level that size, pretty reasonably good. And as a contrast, you compare that to some hydro facilities where numbers have been put out in the public domain, that is more like a billion dollars to get to 35,000 tons. We think we can do 35,000 tons for about $150,000,000.
David Roberts
So you think, ultimately, when you scale up to commercial production, you are going to be economically competitive with pyro and hydro?
Steve Cotton
Very economically advantageous and competitive from a capital expenditure perspective, as well as from a conversion cost perspective.
David Roberts
And what about operating costs? Like, do you have to have guys in lab coats standing next to all these modules, or how much labor is involved in this thing?
Steve Cotton
So, we're also a software company. And so, our pure metrics, software, and control systems that we write all ourselves, automate much of the processes. So if and when you tour our lithium aquafining pilot, or commercial facility, you would see a lot of control panels and equipment and computerized control systems that are looking at things like flow rates and temperatures and valve actuation, and all those types of things. But there's still people that are required to wander around. So it's not all robots yet, but fortunately, our labor that we bring in can be really wearing nothing more than a lab coat and —
David Roberts
Hard hat?
Steve Cotton
safety glasses.
Not even a hard hat. Once construction is complete.
David Roberts
It's better for the picture, in my mind, if they have hard hats on.
Steve Cotton
Yeah. So you'd rather show up to work in that environment than you would in more of like, a hellscape fire and brimstone smelting operation in a hot suit, or a non-breathable chemical suit that you would see in a hydro facility. And that's a big important part of our growth, is we need and want to create good jobs that people actually want. It's a competitive job environment that's out there and people would certainly want to work in our facilities as compared to some of these alternative technologies, plus drawing employees from things like warehouses and distribution centers and things like that.
It's an upgrade of a job to be able to work in an aquafining facility.
David Roberts
Let me ask you this. Obviously, one advantage you are touting relative to pyro and hydro is your environmental performance is basically like unlike any other extant process. You can recycle batteries in an effectively carbon-free way or very low carbon way. When you say you're going to be economically competitive with pyro and hydro, are you factoring into that already some remuneration for those environmental benefits? Or would that be true even without?
Steve Cotton
That's really an upside opportunity that we do believe that we have, because we are driving with the core of our technology towards net zero. And by being able to be net zero, the way net zero is defined is, you know, Scope 1 emissions is what the supply chain is that goes into battery manufacturing, EV manufacturing. So we're accretive to that supply chain. So we believe that there is a possibility ultimately for us and our partners to achieve potentially even a premium to have minerals that are made in the US, add the second layer of them being recycled content, for which there's tax benefits and incentives to have recycled content in batteries more and more.
The US and the EU certainly, and I think the rest of the world is following. And then on top of that, to have that accretive net zero value is going to make this kind of a hot commodity. And we think that that hot commodity could command ultimately a premium in the marketplace.
David Roberts
Right, because you would be part of lots of other companies' Scope 3. Right, because there's lots of different companies need minerals and metals.
Steve Cotton
Exactly. And all the big companies in the world that are big consumers or producers, or whether it's an auto manufacturer, a battery cell manufacturer, a big data center, operators, you name it, they're all driving towards announced net zero goals. They cannot look at their supply chain and say, "well, wait a minute, look at all this carbon that's being created from our lithium-ion battery supply chain." That doesn't look good. And the public disclosures begin this year and beyond of what the carbon footprint of facilities are. So it'll become more and more important with that transparency to source materials from carbon-free producers, which we believe we're the one.
David Roberts
You expect demand pull for clean materials —
Steve Cotton
Correct.
David Roberts
to show up. But I guess my question is, are you relying on that?
Steve Cotton
We're not.
David Roberts
Do you think you would be competitive even without it?
Steve Cotton
We model our business to LME London Metals Exchange rates. So those numbers I was giving you earlier are LME numbers for those various metals. And we model our business to LME and we view a premium to LME that we can potentially share with our partners all the way through the supply chain downstream as potential premium values that we can get. And there's hard dollar premium values and there's of course, soft dollar premium values, like marketing and saying our cars or our cell phones or our data centers are utilizing stored energy that's derived from carbon-free recycled materials.
David Roberts
A couple of other straight questions that occurred to me as I was thinking about all this. One is, which I ask everyone now, is the current atmosphere of high interest rates which sort of came upon us relatively suddenly, are they complicating matters for you?
Steve Cotton
They certainly complicate matters for everybody. I wish that I could say that we're the only company that's figured out how to not be impacted by high interest rates. And what that means is that the cost of capital typically is higher to do capital intensive activities and service debt and things along those lines. Now, fortunately, we've done very well in the past as a company with debt. And that's important when you're a publicly listed company, because you want to be as non-dilutive to the shareholders as possible when you do your capital projects. And we've done some successful projects with some government support, so in the past.
And we've publicly announced that we're pursuing another USDA loan guarantee, you'd wonder, "why does the US Department of Agriculture care about lithium battery recycling?" It's because they have the rural business development fund that funds job creation in rural America. Well, it just so happens that Tahoe Reno Industrial Center in Storey county is a rural area. And that allows us to get low interest rate compared to private lenders. And that's one way to kind of hedge with those interest rates. But yeah, interest rates and debt servicing and the ability to manage through and navigate is a challenge for all companies.
And we're acutely aware of that and focusing our impacts, minimizing those impacts through strategies like that and government grants and other ways to really lever that effective debt rate down. Now, the good news, I think, macroeconomically, is we are seeing some early indications that the federal funds rate is stabilized and it might even be starting being stepped down this year. But there's a latency effect, right? And so, there's a lot of businesses and consumers that are now paying the price for these couple of years of higher interest. And it'll take some time for that to propagate back into the ecosystem.
But rosier outlook ahead, I think for most people's viewpoints on lower interest rates.
David Roberts
So you've got a process that's got lower capex than the competitors. It's got environmental benefits that we think buyers are looking for. You've produced the materials and they have been used in the supply chain, so they're tested out. It all sounds pretty rosy. What is the risk? What do you think? What keeps you awake at night? What's your biggest risk as you are attempting to make this fraught leap from pilot to actual commercial entity?
Steve Cotton
We feel that we've de-risked the technology aspect certainly. There's always financial risks when you're in a capital-intensive phase of development. And we feel that we've mitigated those risks through a recent raise of funds that we did in the middle to late part of last year. In coupling that with some of these lower debt programs, we feel like we've mitigated those risks. And then it really comes down to execution risk. A lot of things can go wrong when you're building and scaling a facility, but we've been around the block as a company and we've done this before and we've learned from that.
And we feel very confident that, as evidenced to date, we are on time and on budget with what our expected expenditures were going to be to build even the first phase of the commercial facility. But there's always that execution risk. There's risk in any business, and I'd say we've transitioned from that technology risk to an execution risk, and that puts us in a pretty good place, I think.
David Roberts
And when do you expect to be net profitable?
Steve Cotton
So the plant economics will generate cash even with the phase one plant, but that will not generate enough EBITDA for the company at today's metal prices. Now, when they were higher, that would have, even a demonstration commercial plant would have been an EBITDA generator for our company at a corporate level. But as we scale the Sierra ARC to its 10,000-ton capacity from the 3000-ton capacity in 2025 and six and begin operating, we believe even at today's metal prices that we'll be generating positive EBITDA. Now, that could happen sooner. The other really neat and unique aspect of our business is that we're not only build, own and operate, our IP is all in house.
And so, we are licensing our technology to partners and partner opportunities. And so, that's earlier in the stages, but we do have a partner in Korea that we've agreed to license the technology to, and those licensing fees can generate income.
David Roberts
Would the partner be a battery manufacturer that wants to recycle its own batteries on the back end?
Steve Cotton
There are battery manufacturers that are looking to verticalize and recapture even their plant scrap and put that back into the process, because that's where a lot of the recycled inputs coming from today is not only spent some EVs, consumer electronics, etc., but all these gigafactories that are being built.
David Roberts
Yeah, this is notable. I think actual end-of-life batteries are not yet even the majority of what's going into the black mass.
Steve Cotton
That'll take till 2030 or so for the spent batteries to be the majority. Today, the majority is the gigafactory plant scrap, for which there is a lot of. And there's ample materials for scaling of recycling today that we're not going to run out of feedstock.
David Roberts
That was my very next question, because right now they say sort of like recycling capacity has got all these new companies starting and competing, and recycling capacity is sort of weirdly, temporarily ahead of actual dead batteries.
Steve Cotton
The qualifier there, I would say, is stated intended capacities, when you add it all up, might exceed the actual materials, but a lot of entities aren't going to be breaching those stated intended capacities. We feel we have the best chance because we've gone through this very mature-minded process of that lab, bench, pilot, commercial demonstration, and then full-scale facility, that we're going to reach those targets. But on a macro level, you could make the argument that, boy, if all these ventures that are out there succeed and get to their capacities — for which they won't — if that did happen, then you might see some sort of a deficit. But I don't think that's going to happen personally.
David Roberts
So you don't have any long-term worry about finding enough supply?
Steve Cotton
No, no. In fact, our partnerships for supply of black mass have not only secured our feedstock, let alone our offtake partnership with 6K Energy and others, but it's also given us the opportunity to say, "Well, hey, black mass producer, maybe we could work together for you to consider licensing some or all of our technology or joint ventures or partnerships and things along those lines." So our business model is really flexible and multidimensional because of the intrinsic nature of our business, which is we're all in-house IP. We didn't license this from someone else. We didn't outsource the development of our core IP.
It's all in-house, all patents, 75 global and 41, I think, more pending.
David Roberts
Would you expect licensing to be the bulk of your revenue at some point? Like, how do you see the balance of building your own stuff versus licensing?
Steve Cotton
So, one company can't build it all and do it all. So we think that initially, as we prove to the world to scale, that begets more licensing opportunities, and then we can really accelerate. And that's actually part of, frankly, our altruistic goal, in addition to our economic goal, which is licensing can be very lucrative once you gain momentum, and you can move very quickly and have multiple projects and things like that, and other people's capital summates to the deployment. But the altruistic aspect of it, in addition to those economic benefits, is that we get the right technology into the hands of players that might otherwise consider inferior hydro or pyro technologies.
Because what we don't want to have happen is for this new loop closing infrastructure for recycling to be built in a way that we have to apologize to our kids and grandkids, "sorry we made this lasting infrastructure that's going to —"
David Roberts
Right, because we're right on the verge of a bunch of dead batteries.
Steve Cotton
Yes. Now's the time.
David Roberts
Right on the verge of a bunch of facilities to deal with dead batteries. If we've learned anything from energy history, it's that once you build big stuff, it has a lot of inertia.
Steve Cotton
It does. It's very difficult to displace.
David Roberts
So it would be nice to get on the zero carbon or low carbon path early before a lot of that stuff gets built.
Steve Cotton
Exactly. And ask us how we know the lead aquafining technologies is more difficult to get into the hands of existing smelters that resist making the change.
David Roberts
Oh, no kidding. Is pyro the most common in lead acid?
Steve Cotton
It's the only technology that's deployed commercially other than what we deployed to prove the technology. But it's still a great opportunity. We do believe that in the long run, there won't be lead smelters, and there's opportunity that's there. But it's a lot easier to build the green fields green to begin with. So you're not building brown fields or black fields, you're building green fields, because once those brown and black fields are built and have that embedded capital, it's very difficult to displace.
David Roberts
Yeah, speaking of LNG export terminals. So final question then. So you're sort of really on the verge of scaling up and showing that this can work commercially, and you think you're competitive on a price and cost basis with existing technologies, even absent extra revenue for being low carbon. That said, what sort of policies would you like to see at the federal level? Maybe not just to help you, but to help the battery recycling industry sort of in terms of the overall industry where it's at, its health, its growth trajectory, what could the government do to help both bulk it up and put it on a good path?
Steve Cotton
Yeah, boy, there's a few things. First of all, I'm really grateful — I know many of us in the industry that I'm in and that we're all building together, very grateful that the government has stepped up in the US and even in other countries to stimulate and fund and provide loans at better interest rates and grants and things like that to support the standing up of this industry. I think that that is a great first huge step that was made that kind of put us where we are today in standing up 200x the gigafactory production that we just saw in 2020 by 2030, which is astoundingly amazing.
But what about enhancing those to incenting decarbonized technologies of recycling, for example? Because that's really the goal. And if we build a new problem, we've just kind of moved a problem from fossil fuels to electrification. So I'd like to see more incentives around, boy, you're going to get more likely to win awards and things like that if you can prove that your process is decarbonized and safer for workers and creates the jobs, the future that we want our kids and grandkids to go and have. So that'd be one thing. Another thing, just for kind of more of the fun of it, is people have range anxiety, of course, when it comes to the adaptation of electric vehicles, for which I chuckle because my 2015 Tesla Model S that started off with a max 250 miles range has got 112,000 miles on it.
And I've never had a range problem driving all over the western United States. But people are worried about range. So more stimulus, which we've recently seen even this week, is going into EV charging infrastructure. And I think that's really important for people to feel comfortable with it. But the thing that's kind of missing is where's all the signs that the government is responsible for posting at a city, state, county level, "Gas next right", "Fuel next exit", "No gas for 28 miles." Where's all the "EV charging next right" signs? Because it all exists. The signage just isn't there.
So people drive around their gas cars saying, "Well, there's no EV charging infrastructure. All I see are signs for gas." That's a simple thing that we could literally do in stimulation to get people over this really unfounded EV range anxiety.
David Roberts
Yeah, it's funny, I was coming back, driving my kid to college a couple of weeks ago, and it looked like I wasn't going to have enough range in my Bolt to make it. And I had a little moment of panic and I pulled off and pulled up the app, and it turned out there was a level three charger, like literally less than a mile from where I had pulled off. It was a real object lesson.
Steve Cotton
Exactly.
David Roberts
Some of it's already there. It's not very —
Steve Cotton
And it's great for the EV users that have the apps and the integrated navigation and the cars that tell you all the thousands of places you can stop and charge your vehicle that nobody really notices if you're in a gas car.
David Roberts
Right.
Steve Cotton
So the signage might help a little bit. Sounds a little trivial, but I think it's actually important.
David Roberts
Yeah, these little signals are important. So, yeah, I mean, just the broader point that obviously your business success is in some sense symbiotic with the success of EVs.
Steve Cotton
For which over a million were sold for the first time in 2023.
David Roberts
Pretty safe ground betting on EVs. Well, this has been delightful. As I said in my intro, this is just like a nice little nexus of many of the themes of this podcast, replacing nasty stuff with clean electricity. It's just like clean electricity is just marching through industries. It is one after the other, transforming them, and it's delightful. So it's awesome that it's hit battery recycling, too. So thank you so much for coming on and walking us through this. This is super fascinating.
Steve Cotton
Yeah, really appreciate it and enjoyed chatting with you, David, anytime.
David Roberts
Thank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf. So that I can continue doing this work. Thank you so much and I'll see you next time.
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