American Battery Technology Company: Finally Starting Production (NASDAQ:ABAT)

Potential has a shelf life.”― Margaret Atwood,

Today, we put American Battery Technology Company (NASDAQ:ABAT) in the spotlight. The company came public late in 2020. Like most IPOs/SPACs that debuted in 2020/2021 in this space when interest rates were basically zero, the stock has destroyed a massive amount of shareholder value to date. Competitor Li-Cycle Holdings Corp. (LICY) is in the same boat. With the company just now ramping up actual production, will 2024 bring a change of fortunes for the company? An analysis follows below.

Company Overview:

This battery materials company is headquartered Reno, NV. This company explores for resources of battery metals. These materials include lithium, nickel, cobalt, and manganese. American Battery Technology also develops and commercializes technologies for the extraction of battery metals, as well as commercializes integrated process for the recycling of lithium-ion batteries. The stock trades for just over $3.50 a share and sports an approximate market capitalization of $175 million. The company fiscal year starts on July 1st.

American Battery Technology controls lithium-bearing claystone lode claims encompassing just over 10,000 acres near Tonopah, Nevada. Based on its mapping, sampling and site surveys, management believes this acreage contains just under 16 million tons of lithium carbonate equivalent. This makes this asset one of the largest lithium sources in the United States. ABAT recently completed the third drill program to provide more confidence in those estimates. The company’s processes and facilities will be designed to capture, process and recycle nearly every component needed to manufacture a new lithium-ion battery cell. The company has received several Department of Energy grants that have provided nearly $70 million of funding in these efforts.

American Battery is just ramping up operations. In October, management announced it had just started its first commercial-scale, lithium-ion battery recycling facility just outside of its headquarters in Reno in McCarran, Nevada. When fully ramped and operational, the facility will have the capacity to process over 20,000 metric tonnes of battery feedstock materials annually. The initial phase of this project will focus on processing these battery feedstock materials into recycled products. These include copper, aluminum, steel, a lithium intermediate. This site will also produce a black mass intermediate material. This material will be sold through an already executed marketing agreement with TechMet-Mercuria, a global metals trader.

To put in perspective, a single battery Gigafactory with a manufacturing capacity of 30-40 GWhr/yr of batteries can produce 20,000 – 30,000 metric tonnes per year of waste battery materials. American Battery Technology reported its Q3 numbers on November 15th.

Analyst Commentary & Balance Sheet:

Alliance Global Partners reissued a Buy rating and $41.25 a share price target on ABAT back in March of last year. That is the only analyst firm rating I can find on this stock over the past 12 months. Approximately seven percent of the outstanding float in the shares is currently held short. There hasn’t been any insider activity in this equity in many years.

The company burned through some $4.8 million in cash during the first quarter of its fiscal 2024 year. It ended the quarter with just $5.4 million in cash and marketable securities on its balance sheet. Management filed for a $150 million mixed shelf offering at the end of 2023. Given the company’s burn rate and this action, a large capital raise seems very likely in the short term.

Verdict:

The company lost 49 cents a share in FY2022 on no revenues. The one analyst firm that has posted projections for FY2024 has the company breaking even on just under $45 million in revenue.

The company is targeting a massive potential market that is projected to have huge growth in the coming years. That said, the company is just in the initial stages of ramping up and producing revenues. American Battery Technology is also likely to execute a large and likely dilutive capital raise shortly. The stock obviously has destroyed a huge amount of shareholder value since going public and gets remarkably little analyst firm coverage despite at one time having a market capitalization of several billion dollars a few years ago.

Therefore, I would stay on the sidelines until American Battery Technology Company executes its capital raise and provides a few quarters of actual revenues before circling back on this story.

All we are not stares back at what we are.”― W.H. Auden.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.