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Aqua Metals’ DeepDive Ep. 3: State of the Industry

Russell: Welcome to Aqua Metals DeepDive, where we take a closer look at tech updates, recent news, and announcements from Aqua Metals Inc. Today I’m once again talking to President and CEO Steve Cotton! Steve, thanks again for joining us.

Steve: Thanks for having me, Russell! 

Russell: Today’s conversation will focus on the current state of the EV industry while looking at how Aqua Metals plans to move forward in this rapidly developing landscape. With that being said, let’s dive into the discussion.

Question 1: In recent years, we’ve seen a significant increase in the adoption of electric vehicles (EVs) and a growing reliance on lithium batteries. I’m wondering, where do you see the EV market trending, especially considering some of the challenges and uncertainties it faces?

Steve: Well, that’s an important topic, Russell.  Let me start with thisElectric vehicles, and the lithium batteries that power them, are robust and growing sectors. Every day we are seeing more and more EV on the roads, and that trend is being mirrored globally as well.

But there are some schools of thought that say that that hockey stick is going to go up a little bit less to the right, but inevitably it’s happening and it’s about the speed of the growth more than it’s about whether it’s going to stop growing.

And there are certainly some headwinds, whether that be from scaling challenges with new technologies or elevated interest rates, that have caused the global exuberance to cool slightly, but the EV and battery markets are strong. 

In fact, according to the registration data from Experian (via Automotive News), the total number of battery electric vehicle registrations during the first nine months of 2023 amounted to 852,904, and that’s about 61 percent more than a year ago and about 7.4 percent of the total market – that’s up from 5.2 percent at this same time just a year ago in 2022.

So, the electric vehicle sector is thriving, and growth undulations don’t seem to be foretelling of major disruptions to the continued speed of growth in the future.

Question 2: So, overall, it seems things are still progressing rapidly despite some recent reports of delays in other battery factory projects. I’m wondering, has anything changed in the expansion of battery production capacity in the US, particularly in relation to the Inflation Reduction Act?

Steve : While 1 or 2 battery factories and projects have announced delays or changes in plans, overall the pace of change and growth is still meteoric.

A total of 436 gigawatt hours (GWh) of battery capacity has been added to the US pipeline just since the IRA, or Inflation Reduction Act was passed – and that’s a jump of 57.9%, according to Benchmark’s Gigafactory Assessment. Also, the USA’s battery capacity pipeline to 2031 now sits at 1,190 GWh, and that pushes the USA into terrawatt production.

And this, of course, from a starting point of almost no capacity just 5 or 6 years ago.

To feed all these gigafactories will require billions of dollars’ worth of critical metals like lithium, and cobalt, and nickel, which are indeed in short supply globally. And the voracious appetite of the industry will need to be fed from a number of different sources, highlighting again how important recycling is to our future plans. I’d say it’s also important to note that all of these battery factories will be producing scrap material which will drive the need quickly for greater recycling capacity in the USA.

Question 3: So, mining alone cannot meet these high demands, and while recycling these materials will help to suffice, there have been some challenges in this part of the industry for sure. Could you share your perspective on Aqua Metals’ approach to growth and technology development in this industry?

Steve: Sure, Russell – So, we’ve seen some challenging announcements from others in the recycling space – due to problems with scaling their underlying technology. 

This is something that is core to Aqua Metals and how we are building our company and the future of the industry. We are taking a much more measured approach – instead of moonshot methods that will inevitably lead to challenges.

First and foremost, is that you have to Pilot the technology, and we’ve seen recent entrants into the space forego the pilot step of proving out their technology – attempting to leap from lab and bench scale straight to multiple 1000’s of tonnes capacity, and this is a recipe for problems. 


Question 4: That process does sound truly unique in the industry! Very interesting… For my final question, I’m wondering if you can speak a little more on Aqua Metals’ unique scaling strategy, known as the ’30x scale’ approach, and how does that help with developing technology and managing risks in this environment. 

Steve: So, Aqua Metals is taking a different approach. Rather than making a moonshot to an enormous first commercial facility, kind of like sprinting all out in a marathon risking falling in your face, we chose a different approach. Our approach was informed by our own learnings coupled with consulting with some of the world’s pre-eminent process plant builders – and we chose to focus on truly proving out our tech at pilot scale, and then scaling about 30x from pilot to the first commercial plant.

With this approach, the cost to implement and test learnings from the pilot is far less expensive in dollars and in time which can then inform the final design of the commercial plant. And this is exactly what we have already successfully done with our pilot operations in our Innovation Center and we know we have already reaped many of these benefits as we are well underway with our own first commercial plant, being the phase 1 buildout underway at our Sierra ARC, right here in Tahoe Reno Industrial Center.  

We have seen many other players in the industry attempt the moonshot approach and end up with massive cost overruns and delays – and we are reminded that taking the disciplined and methodical and many industries proven approach which ultimately gives us what we believe is a much more capital efficient and ultimately, faster time to market with high value end products we originally set out to create.  Which in our case, is battery grade lithium carbonate, lithium hydroxide, pure nickel in metal form, pure cobalt and copper in metal form to name a few.  I’d say our approach is sort of like the runners in a long race that win by surging towards the end of the race with the energy and confidence and initial strategic thinking that is required to get that win.  

As we just reported in our quarterly update call, our balance sheet is strong for the next stage of our growth, particularly with our recent raise of $25 million of gross proceeds.  Next, we would like to lever rational debt financing including government backed loan options but if those don’t work out to our liking, we can also choose a reasonable private debt financing instrument to see through the Sierra ARC phase 1 and get to $50M+ in revenues just from that first phase in today’s metals markets.  Then, with that momentum built, our next phases of the Sierra ARC can get us to up to $200M in revenues.  

We also believe that our strong prosecution of our IP portfolio is beginning to pay off, as evidenced by our recent announcement with our strategic partner Yulho Materials in South Korea the intent to license Lithium AquaRefining to add to their large black mass production facility coming online in early 2024.  We aim to get our technologies into the hands of our growing partner network in a licensed form which is another way we can expand our business also through low capital cost for Aqua Metals.  We believe that propagating the best technology for safe jobs, environmentally clean and economically efficient lithium battery recycling is also the best chance we have to rapidly grow our revenues and diversity of revenues while at the same time helping to make sure that the right technologies are deployed the first time around with this critical battery minerals closed loop the world is racing to build.

Russell: Well thanks again Steve for coming in and answering a few questions that we had about the state of the EV industry and where Aqua Metals falls into all of it.

Steve: Thanks again, Russell for having me, and see everyone again next time.

DISCLAIMER: This podcast is as of the date of recording and may contain forward-looking statements that are based on Aqua Metals’ management’s current expectations and beliefs. We encourage you to review our Investor Relations website at ir.aquametals.com for a more detailed discussion of the risks and uncertainties associated with forward-looking statements, and for the most current information about the company.