Business Overview

Aqua Metals (NASDAQ: AQMS) is a pioneering company in the field of sustainable battery recycling, leveraging its innovative AquaRefining technology to revolutionize the way we recover and reuse critical minerals. With a focus on lithium-ion battery recycling, Aqua Metals is poised to play a pivotal role in addressing the growing demand for recycled materials in the rapidly expanding energy storage economy.

Aqua Metals' core technology, AquaRefining, is a patented hydro- and electrometallurgical process that offers a clean, water-based alternative to traditional smelting and chemical-intensive recycling methods. This breakthrough approach allows the company to recover valuable metals, such as lithium, cobalt, nickel, and copper, from spent batteries with higher purity, lower emissions, and minimal waste.

The company's strategic decision to apply its proven AquaRefining expertise to the lithium-ion battery recycling market aligns with the global transition towards electric vehicles, the growth in internet data centers, and the increasing adoption of alternative energy applications, including solar, wind, and grid-scale storage. Aqua Metals estimates the total addressable market for lithium-ion battery recycling will be approximately $9 billion by 2025 and grow to exceed lead battery recycling by the end of the decade.

Financials

In the fiscal year 2023, Aqua Metals reported annual revenue of $25,000 and a net loss of $23,938,000. The company's annual operating cash flow was -$3,193,000, and its annual free cash flow was -$13,076,000. These financial results reflect Aqua Metals' continued focus on developing and commercializing its lithium-ion battery recycling technology, rather than generating significant revenue from commercial operations.

During the first quarter of 2024, Aqua Metals reported a net loss of $5,752,000, compared to a net loss of $4,606,000 in the same period of the previous year. The company's operating cash flow for the quarter was -$4,251,000, and its free cash flow was -$5,579,000. These quarterly results demonstrate Aqua Metals' ongoing investment in the construction and commissioning of its first-of-a-kind lithium-ion battery recycling facility, the Sierra ARC.

Liquidity

To fund its growth initiatives, Aqua Metals has taken several steps to strengthen its balance sheet and secure additional capital. In May 2024, the company announced a non-binding term sheet for an up to $33 million loan facility with a strategic lender focused on decarbonization initiatives. This loan, along with a recent $7 million equity raise, will provide the necessary funding to complete the Phase 1 development of the Sierra ARC facility.

The Sierra ARC, located in the Tahoe-Reno Industrial Center, is designed to process up to 10,000 tonnes of lithium-ion battery material each year using Aqua Metals' proprietary Li AquaRefining technology. The company expects to complete the Phase 1 development, including all equipment installation, by mid-2024 and commence commissioning and operation in the second half of the year.

Partnerships and Offtake Agreements

Aqua Metals has established key partnerships and offtake agreements to support its growth strategy. In the first quarter of 2024, the company announced a strategic offtake agreement with 6K Energy, a first-of-its-kind collaboration to address the escalating demand for recycling lithium-ion batteries and support the manufacturing of new, low-cost recycled batteries.

The partnership with 6K Energy is a clear validation of Aqua Metals' technology and strategy. The combination of the innovative technologies of both companies provides cost and environmental advantages, as their processes are electrified and more efficient than traditional pyro- and hydro-metallurgical methods. The agreement also includes the potential for co-location of Aqua Metals' facilities with 6K Energy's battery material production facilities, further strengthening the circular supply chain.

In addition to the 6K Energy partnership, Aqua Metals is pursuing potential licensing agreements and other strategic collaborations to expand its reach and leverage its unique capabilities in the rapidly growing lithium-ion battery recycling market.

Competitive Advantages and Sustainability

Aqua Metals' AquaRefining technology offers several key competitive advantages over traditional recycling methods. The process is fundamentally non-polluting, generating far less CO2 and waste streams compared to smelting or chemical-driven hydrometallurgical processes. Additionally, the AquaRefining process regenerates and repeatedly recycles the necessary chemicals for reuse, a feature not found in other industry participants.

These environmental and economic benefits position Aqua Metals as a leader in the sustainable recycling of lithium-ion batteries. The company's commitment to responsible, low-emission solutions has been recognized, with Aqua Metals being named a Top Project Winner in the Environment Plus Energy Leader Awards Program for 2024.

Outlook

Aqua Metals remains focused on achieving several key milestones in the coming months and quarters. These include the scaling and commissioning of Phase 1 of the Sierra ARC to enable the company to provide recycled materials to its offtake partners, the signing of a licensing agreement with Yulho Materials, the development of additional commercial partnerships, and securing future growth capital, including government-backed loans and grants.

With the support of its investors, partners, and dedicated team, Aqua Metals is well-positioned to accelerate its growth and continue making meaningful strides in creating a domestic, closed-loop supply of critical battery materials. The company's unique technology, cost advantages, and superior environmental outcomes are expected to drive its success in the rapidly evolving energy storage economy.

Conclusion

Aqua Metals' pioneering approach to sustainable battery recycling positions the company at the forefront of the lithium-ion battery recycling industry. By leveraging its innovative AquaRefining technology, the company is poised to play a crucial role in addressing the growing demand for recycled materials and supporting the global transition towards a more sustainable energy future. With strategic partnerships, a strong liquidity position, and a clear roadmap for growth, Aqua Metals is well-equipped to capitalize on the significant opportunities in the rapidly expanding energy storage market.