Speciale Invest invests in Metastable Materials in their seed round as they leverage their philosophy of treating battery waste as ores to extract valuable metals through their novel low CapEx and OpEx process.

At Speciale Invest, we have ‌a strong focus on supporting technologies that aid the energy transition from those that use fossil fuels. As our understanding of the EV value chain broadened through our investments in electric mobility (Ultraviolette Automotive and The ePlane Company) and cell technology (e-TRNL Energy), one of the missing pieces was the state of batteries post their usage. It prompted us to learn more about the battery recycling space.

The shift to renewables has largely hinged on battery technologies and prominently on ‌the Lithium Ion battery chemistry. As the use of Lithium-Ion batteries increases in electric vehicles, portable electronics, and renewable energy storage systems, so does the need for the raw materials that go into making them. However, these raw materials, such as lithium, cobalt, nickel, and copper, are restricted by limited availability, linked to complex supply chains and are marked by unsustainable (and sometimes unethical) mining practices. They are also traded commodities that have seen historical price volatility.

With Li-ion batteries being a critical part of the energy transition, countries are increasingly looking to secure the supply chains of the ‌raw materials that go into making the batteries. One of the more sustainable ways of doing this is to recycle the spent Li-Ion batteries, extract the metals and reuse them in new batteries or in other applications.

The current techniques of lithium ion battery recycling — pyrometallurgy, hydrometallurgy and direct recycling — have their own limitations as outlined in the chart below. Today’s processes are lacking in the high CapEx and OpEx required to setup these plants, the yield and the purity of the recovered metals and the waste generated thereof.

A consequence of this is that a number of ‘recyclers’ only extract the black mass (an intermediate product (powder) which contains the battery metals pre-extraction), and not the final metals.

How does Metastable Materials solve for these inadequacies?

Metastable Materials’ fundamental philosophy is to approach the metal extraction process as a mining exercise and not as a recycling one. This means that spent LiBs are treated as ores of these metals and the principles of mining are applied to the metal extraction process.

Their proprietary process moves away from ‌traditional battery recycling methods — relying largely on the physical properties of the constituent metals and separating them by mechanical methods. While this reduces ‌operational costs by 40%, the use of non-sophisticated, high tolerance designed equipment allows for a reduction in ‌initial capital requirements by about 60% as well.

The six step metal extraction process requires minimal use of input heat and chemicals. The liquid waste output is non-toxic, can be recycled back and output solids can be used as fertilizer feed, making it an almost zero waste process.
The yield is high — upwards of 95%. While the purity levels of the final extracted metals are lower in the first run, the low OpEx and no molecular change enables cheaper multiple runs, resulting in higher purity levels.

The economics of metal extraction — the Metastable way

Recycling is a unique business in which the cost of the input raw materials (spent Lithium ion batteries) and the price of the extracted metals are both fixed. In India, the input batteries are largely traded in local unorganized markets where the prices are largely determined by open bidding. The extracted metals are then traded as commodities with the London Metal Exchange (LME) / Fastmarkets prices primarily used as the index. Higher the purity, greater is the price that it is sold at.

Since all recyclers buy and sell in the same markets, the pricing offers minimal competitive advantage. So it boils down to how much the company can make in between the two fixed price points. Metastable’s lower CapEx and OpEx processes, combined with higher purity levels, allows it to have a greater margin than their competitors. At a fundamental level, more money per tonne of recycled batteries means they can quickly put this back to scale faster

Why now?

Global and local tailwinds are largely in favour of recycling:

• large quantities of used consumer electronics batteries are already available in the ecosystem,
• the first generation of EV batteries are coming to end of life,
• a number of partnerships between auto OEMs and LiB recyclers have been forged at a global level
• under the revised Battery Management Rules 2022 released by the Government of India, battery producers are responsible for the collection and recycling/refurbishment of waste batteries (while dumping and incineration are prohibited). Targets have also been prescribed for the recovery of metals from spent batteries and minimum percentage of use of recycled metals in new batteries.

Our thesis on investing in Metastable Materials

• Cost of recycling metals is cheaper than sourcing virgin metals.
• There is a clear need for battery grade input metals and India does not have resources (the recent Lithium deposits discovered in the Kashmir region are at least half a decade away from commercial usage).
• Even though batteries are getting better, the sheer volumes of EVs coming into the market will ensure supply of spent batteries is sorted in the mid to long term.
• With EPR regulations coming in auto OEMs are open to partner with recyclers. OEMs also want to have visibility on what is happening to their batteries.
• Low OpEx and low process costs ensures that Metastable can stay in the market and make better margins.

Three factors that made us dig deeper -

• India’s cell manufacturing ecosystem is almost non-existent. So who would be the buyers of these metals? Two answers came up — one, there are international mining companies and cell manufacturers who will buy these. Two, there are other industries which use these metals such as aerospace, steel, ceramics, polymers, etc
• Will batteries go through a second-life use case before entering the recycling chain? It is quite likely that a certain portion of the batteries will end up having a second-life. But our belief is that the business and economics of second-life pack making and reselling are not attractive enough for a sustainable business to be run for the long-term.
• Will auto OEMs partner with new recyclers or choose to go with the established ones? With EPR regulations coming in auto OEMs are open to partnering with recyclers. OEMs too want to have visibility on what is happening to their batteries sent for recycling. As they branch out to map their scope 3 emissions, a less energy intensive recycler such as Metastable stands a greater chance

In our conversations with battery recyclers, we understood that there is enough input batteries coming in from imported battery scrap (the rejects from the battery manufacturing process) and from recalled battery packs from pack manufacturers in India. Key metrics that they focused on included high purity levels, increasing input EV batteries and establishing partnerships with OEMs. These conversations helped drive more conviction in the trajectory that Metastable is on.

In our conversations with Shubham, Saurav and Manikumar — the founders of Metastable Materials, it became apparent that their clear philosophical foundation in treating waste as ores guided their process engineering. With their pre-seed round of $150K in 2022, they had worked frugally and demonstrated their technology at 200kg per batch scale and were in the process of setting up a pilot plant at 2 MT per day capacity. They had all shown incredible grit to come down to one of Bengaluru’s hardcore industrial areas, dealt with the local suppliers and authorities and setup their pilot plant.

The seed-round fundraise, led by Sequoia Surge, and participated in by Speciale Invest, Theia Ventures, Climate9ers and angels, will help the team expand the facility to 5 MT per day capacity, prove their unit economics and tie up auto OEMs for battery supplies.

We are excited to have a front-row seat to their journey and wish the Metastable Materials team the best of luck.

To join the Metastable team, check out open roles here

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We at Speciale Invest believe in supporting breakthrough technologies that have the potential to solve global problems.

As early stage investors, we like to get our hands dirty early on and support founders in their zero to one journey with patient capital, business development opportunities and hiring. We enjoy and thrive in the risk that comes with backing deep-tech startups at the pre-product stage and help through product-market fit, early customers and scale-up.

Climate Tech is a major investment theme across our $40M fund as we look to support the ‌‌global decarbonization effort. Having made investments across Water, Green Hydrogen, Batteries, we are constantly on the lookout for stellar founders building solutions for Carbon Capture, HVAC, Motors, Sustainable Materials, Bio Fuels and many more.

If you are building something exciting in deeptech, please do write to us at info@specialeinvest.com

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