UK’s first merchant lithium refinery in final phase of EIS fundraising

Green Lithium, a pioneer in constructing the UK’s first low-carbon merchant hard-rock lithium refinery, is set to disrupt the market as an alternative supplier to China for European battery supply chains.  The company has partnered with Prospedia Capital, an emerging automotive sector fundraising specialist, to raise up to £2.6 million of seed and venture capital covered under the UK’s Enterprise Investment Scheme (EIS).  This well-established scheme, designed to attract early-stage investment, offers efficient income, capital gains, and inheritance tax breaks for UK angel investors and taxpayers investing in venture capital funds.

Green Lithium has taken significant steps to derisk its business model, having secured over £14 million of private investment and UK government grants for various crucial aspects of its business model, such as bench-scale and pilot trials, engineering studies, independent life cycle analysis, and capital expenditure reports.  It has also strategically chosen a Teesside site, brought on board critical partners and appointed an experienced high-calibre management team and board of directors.

With over £1 million already pledged, this penultimate round of early-stage investment precedes an institutional funding round, enabling the construction of a scale-up plant, with further capital to be raised for a full-scale plant.  The construction of the UK’s first merchant hard-rock lithium refinery is a strategic move to meet the projected surge in demand for battery-grade lithium chemicals by 2030, driven by the transition of European carmakers to full-scale electric vehicle production.  It presents a unique investment opportunity with the potential for high returns as the European market currently relies on China for its lithium chemicals supply.

“There’s a mountain for Europe to climb if it’s to compete,” says chief executive officer Sean Sargent.  “The bottleneck is in the refining.  Even with all existing potential European suppliers being successful, there will still be a 43 per cent deficit in the supply of this crucial battery-grade material. It’s a pressing issue requiring sustained government involvement alongside private investment.”

Green Lithium’s commitment to the environment is not just a promise but a tangible reality.  Its environmental credentials include its adoption of an alkali leach rather than acid roast process, using renewable electrical energy and hydrogen when available instead of natural gas, and other carbon-reducing strategies.  This means it can aim for a 75 per cent reduction in carbon emissions compared to existing Chinese refineries, according to a life cycle assessment by Minviro, a science-based consultancy focused on measuring environmental impacts.

Green Lithium is also working with the University of Sheffield to develop a patented process to commercialise its primary byproduct.  This strong environmental stance should further instil confidence in potential investors.

“We’re delighted at this opportunity to help Green Lithium with its fundraising efforts,” says Isobel Sheldon OBE, chief strategy and investment officer at Prospedia Capital, who also serves as a member of the Board of Trustees at The Faraday Institution.  Renowned for her experience in electric vehicle battery technology and supply chains, she added, “Green Lithium’s refinery is much needed in Europe.  It will help carmakers localise their supply chains while scaling up battery production and reducing emissions from refining lithium hard rock to produce lithium hydroxide and carbonate.”

Teesside is a prime location in Europe for such a facility due to its industrial skills, sea, rail and road access, and strategic access to Net Zero Teesside – a globally significant carbon capture and storage scheme.  The proposed development will include office and warehouse buildings, enclosed plants and structures across approximately 60 acres.

The first step for the company is to build a demonstration scale-up plant to derisk the business model even further.  Producing 1,250 tonnes of high-quality lithium chemicals annually, which has the potential to generate revenues of £28 million before the completion of the full-scale plant, which comprises two lines capable of producing 50,000 tonnes of lithium chemicals, sufficient for 1.2 million battery electric vehicles.

This £1.4 million (up to a maximum of £2.6 million) funding round will see the completion of the front-end engineering design for the scale-up plant, finalising operational readiness and planning permissions, and closing contracts with key suppliers while preparing for the high-level readiness demanded by institutional fundraising.  This means the scale-up plant will be shovel-ready ahead of initial institutional investment supporting construction during 2024.

“This round is targeting an investment return of 15x,” says chief financial officer Jo Charles. “We anticipate achieving this once the scale-up plant is operational and at a point in time following the full-scale plant’s final investment decision on construction.  While these returns are not guaranteed, the UK’s generous EIS scheme significantly mitigates the risk for early-stage investors with income tax liabilities.  At the same time, on the upside, it protects investors from capital gains and inheritance tax liabilities.”

Recognised by HMRC as a knowledge-intensive company, Green Lithium can raise £10 million each financial year, capped at £20 million overall, using the EIS tax relief.

“We will work closely with our external advisers to ensure our future institutional equity fundraising aligns with the EIS status of our early-stage investors,” says Charles.  “Thus far, we have raised almost £10 million under this tax-efficient scheme from angel and retail investors, including a crowdfunding campaign in 2023 and an additional £4 million from government grants.”

EIS investors can access the Green Lithium deal room on Prospedia’s FCA-compliant investment platform, which is part of the Envestors’ Envestry network, providing a secure and regulated environment for investment.  A video recording of Sean Sargent and Jo Charles pitching online to the Envestry network is available on the platform.

Aside from the EIS tax breaks for UK investors, the standard FCA caveat applies.  Investment in startups carries high risks alongside the possibility of high rewards.  The risks include the lack of liquidity in terms of being able to sell shares, the loss of the value of the investment, and the dilution of a shareholding.   .