By Christiana Sciaudone — It's early days, but with electric vehicle production and demand set to boom, we're going to need a lot of lithium. And recycling it has become a U.S. priority.

That's good news for lithium-ion battery recycler Li-Cycle, which is going public by merging with a special purpose acquisition company in the coming weeks.

While the recycling pickings are relatively light for now — including scrap manufacturing and cell phone batteries — Li-Cycle is preparing to become a leader in the space, distinguishing itself by employing environmentally-friendly processes that generate no waste water.

"It's going to be a large, core part of the ecosystem for EVs," said Chief Executive Officer Ajay Kochhar, also a co-founder alongside Tim Johnston, who is the chairman of the company, in a video interview earlier this month.

Lithium is a critical component of the batteries that power electric vehicles, and mining it comes with a high environmental cost. To meet the coming need, we're going to need copious amounts to reduce reliance on fossil fuels.

In the near-term, passenger electric vehicle sales are expected to rise from 2.1 million in 2020 to 14 million in 2025, according to Bloomberg New Energy Finance. The long-term should be even more favorable as carmakers increasingly turn away from internal combustion engines. And the environmental toll associated with mining lithium is leading governments and companies to focus on recycling. Mines in the U.S. face regulatory hurdles and environmental opposition, and President Joe Biden has made it a priority to focus on domestic recycling, including the possibility of direct investment in projects and government funds, Reuters reported earlier this month.

Li-Cycle processes battery manufacturing scrap and end-of-life batteries to recover raw materials, including lithium carbonate, cobalt sulfate and nickel sulfate, that can be delivered back to the battery production supply chain. Unlike the traditional revenue model for recycling that relies primarily on waste or tipping fees, Li-Cycle generates revenue from sales of the raw materials it produces. The company recovers up to 95% of the mass of raw materials found in lithium-ion batteries and battery scrap, compared to what it believes to be a 50% traditional industry average.

The Canadian company is set to reverse merge with Peridot Acquisition Corp (NYSE:PDAC_u), itself sponsored by Carnelian Energy Capital, in a deal that is likely to close in July. Proceeds of about $300 million will go to fund expansion. Eventually, they plan to have 20 strategically located global facilities and four hubs.

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Johnston and Kochhar met at Hatch Consulting where they worked on lithium projects, and noted the difficulty in sustaining growth without a solid recycling scheme. That prompted them to establish Li-Cycle about five years ago.

The company has 118 employees and is growing by the week, Kochhar said. It has 51 battery supply customers, and says its costs are lower than in the traditional process, driving margins higher. He said there are 211 battery mega factories in the pipeline today, versus three in 2013.

Li-Cycle's process recovers more material and ends up with almost zero solid waste, Johnston said.

Among the challenges is to correctly prioritize as the market evolves, to scale up amid growing demand with the right people in the right places, Kochhar said.

"It's all around execution at this point in time," Johnston said.

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