Investors after diversified lithium exposure with a technology focus need to consider Full Circle Lithium (TSXV:FCLI), a microcap value stock whose short trading history is obscuring its palpable potential for outsized returns.
Trading on the TSXV as of May 2023, Full Circle is a lithium processor backed by management with 32 per cent insider ownership and more than 70 years of tailor-made experience, including significant involvement in the public listings of Lithium Americas (TSX:LAC) and NEO Lithium, as well as a business plan true to its name that’s poised to capitalize on underinvestment in lithium supply for the US$56.8 billion global lithium-ion battery (LIB) market, which has pushed lithium prices up by more than 3x since November 2020.
Full Circle owns a fully operational, 2,000 tonnes per annum (tpa) lithium carbonate (LC) plant in Georgia, a state that ranks sixth in the United States for public EV charging stations with more than 1,500, and is in the midst of a giga factory buildout of over 100 GWh, including Hyundai and Rivian.
Besides its strategic location, the plant boasts expansion capacity up to 10,000 tpa, historical production of more than two decades, and a proprietary front-end lithium extraction process (LEP) amenable to lithium sulfate and lithium chloride, as well as numerous industrial and mining streams, while using limited water and reagents.
From this base, Full Circle is focused on developing four modular and complementary business segments across the entire lithium battery supply chain, granting it flexibility in the face of market uncertainty, and a leg up on pure-play competitors (slide 17) focused exclusively on recycling:
1. Downstream electric battery recycling
In line with its closed-loop moniker, Full Circle Lithium is focused on recycling end-of-life lithium-ion batteries (LIBs). The company concentrates its efforts on lithium iron phosphate (LFP) batteries because of their growing popularity thanks to a longer life cycle, lower cost and improved safety profile compared with other classes of LIBs.
LFP batteries commanded a more than 30 per cent share of the EV market in 2022, count Ford and Tesla working on projects in the space, and are projected to grow at a CAGR of 25.6 per cent into a US$50 billion market by 2028 across a diversity of applications in battery energy storage systems.
The company has produced battery grade LC from spent lithium-ion batteries (LIB) at pilot scale and is currently working on a large-scale, 40,000-pound demonstration project to prove a path to market for a range of LIBs, while also evaluating the production of additional strategic battery metals.
2. Midstream lithium feedstock recycling
The microcap value stock also partners with chemical and industrial companies to recycle lithium from their lithium-bearing waste.
The company installs modular plants at client sites, extracts lithium compounds, and can either generate revenue by selling them back to a client, or by processing them at its Georgia plant.
The first of these modular plants has been in operation for multiple weeks with a multinational chemical company and yielded more than 99 per cent lithium recovery. A ramp up to full continuous processing capacity is underway to meet client specifications, which should pave the way for a definitive agreement for a commercial-scale plant.
Full Circle is in discussions with a number of other specialty chemical companies as it analyzes and pilot tests other lithium streams.
3. Upstream lithium feedstock refining
Full Circle is hard at work closing the loop on its lithium processing operations with material sourced from upstream developers, which extract lithium from the ground, but may lack the expertise required to monetize it through further processing.
The company is also in active discussions with numerous miners to transform their raw materials into lithium compounds ready for the market.
4. Innovating toward a stronger supply chain
Instead of helping to meet rising lithium demand while reducing waste and calling it a day, Full Circle’s seasoned management emphasizes a culture of continuous innovation to strengthen shareholder value and expedite global electrification.
Full Circle’s latest industry innovation, a lithium fire suppressant solution, came in January 2023, granting the company a first-mover advantage to solve a growing problem amid exponential EV adoption.
Lithium battery fires emit highly toxic substances, can cause explosions, and may re-ignite with the use of water alone because of their high energy density and additional battery material components. These risks apply not only to a damaged battery in an EV or storage device, but also to the disassembly of these batteries for recycling purposes.
Full Circle’s patent-pending solution, the first based on lithium chemistry to the company’s knowledge, represents a value-added opportunity in the US$66 billion fire-fighting and US$6.5 billion LIB recycling markets. To date, the company has conducted more than 500 successful demonstrations with no incident or environmental impact and at an effective cost.
Recent third-party testing further strengthens the solution’s commercial viability, confirming the need for only 0.5 liters to put out a 19 lithium-ion battery fire in less than 5 seconds with no re-ignition, and 0.75 litres to put out a large e-bike battery fire in less than 5 seconds with no re-ignition, compared with unsuccessful efforts in each case with three water applications.
The last test will pit the solution against water to tackle a fire composed of 50 kWh EV LIBs. Contingent on results, management will then formulate a commercialization plan for the solution to strengthen Full Circle’s recycling operations and benefit the lithium battery industry as a whole.
A wealth of unacknowledged value
Full Circle offers investors exposure to a growing business that touches every part of the lithium battery supply chain, including leading-edge technologies that support industry longevity through environmental sustainability. In this way, the microcap value stock has all the elements to achieve the long-term stability of an index fund, with future weakness in certain segments offset by strength in those remaining.
As of Tuesday, this stability is available at a considerable discount, with shares having fallen by approximately 40 per cent since inception, despite clear value having been created through:
- The fully operational LC plant in Georgia
- Successful LC production from spent LIBs at pilot scale
- More than 99 per cent lithium recovery from the company’s first modular midstream feedstock processing plant
- A clear synergy between Full Circle’s management team, which has produced saleable lithium and lithium precursor from brines, clays, hard rock and petro-brines for decades, and mining teams without a lithium processing background looking for timely conversion services or to license the company’s intellectual property
When we add that Full Circle expects to generate revenue and significant EBITDA over the next 12 months, and is currently well-capitalized to do so with C$7 million in cash and no debt as of September 2023, the performance of FCLI shares can only seem irrational in the face of so much potential to generate shareholder value.
While microcap stocks tend to entail higher risk, given their generally early stage operations, they have an established reputation for earning life-changing returns thanks to underlying businesses such as Full Circle Lithium, where capable management, macro tailwinds and an all-weather business plan combine into a firm foundation for long-term growth.
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