The Lithium Australia NL [ASX:LIT] has filed two patent applications concerning recycled lithium-ion batteries in its strategy to shore up IP.
LIT share price rose as much as 10.3% in early trade before pulling back a bit at noon. At time of writing, the LIT stock was up 3.5%.
Today’s patent news comes a week after the lithium stock’s subsidiary secured a grant for producing cathode powder that is free of nickel and cobalt.
Lithium Australia coming for more battery recycling IP protection
LIT today announced it filed two International Patent Applications with the Australia Patent Office.
The patents relate to LIT’s 90% owned subsidiary Envirostream’s selective separation of metal values from recycled lithium-ion batteries and recovery of electrode materials.
Lithium Australia Managing Director Adrian Griffin offered his comments:
‘The Lithium Australia group is acutely aware of its environmental footprint and that of the society within which we live and operate.
‘We can no longer afford to discard any products to landfill, let alone those that have a high embedded energy footprint, contain critical materials, or — in the case of lithium-ion batteries — both.
‘We have developed unique processes to deal with battery waste and invite like-minded industry participants to work with us in improving the sustainability of our consumer-based society.’
LIT shares outlook: How important is IP?
Now, while enough investors were pleased by LIT’s patent developments to send LIT stock 20% higher this week, there was one warier party.
Why? The ASX thought Lithium Australia’s recent IP announcements blitz skirted close to what the ASX calls ‘ramping’ announcements. The body defines ramping announcements as:
‘An announcement that has no substance but seeks to ride on the back of strong market sentiment in a particular sector.’
The particular sector — lithium — is enjoying strong market sentiment this year.
For instance, the ASX-listed lithium battery and energy-storage themed ETF ACDC was the best performing ETF in 2021 to 31 March.
And as Argonaut Funds Chief Investment Officer David Franklyn told the AFR:
‘The US, EU and China are all strongly pushing the shift to electric vehicles, whilst renewable energy production continues to build market share.
‘Investors are now actively looking to build exposure to what will be a major driver of the resource sector over the next decade.’
Dangling the possibility of imposing a trading halt, the ASX asked LIT whether its recent patent announcements were information a reasonable person would expect to have a material effect on the value or price of its securities.
LIT obliged and argued that ‘it is reasonable that persons who commonly invest in securities may speculate on the grant of a patent – very similar to announcing the commencement of drilling for a listed exploration company.’
But LIT also made interesting comments on the wider question of IP in the lithium sector.
The company said acquiring IP was ‘critical’ to its ongoing success, especially because its industry is ‘very competitive and fast moving.’
Not only that, LIT said failure to properly protect IP could leave a ‘significantly detrimental effect’ on a firm in the industry LIT operates.
While it deals with a commodity, LIT’s core business focuses on the technology to extract and recycle it.
So it’s not an unreasonable position to argue intellectual property protection is important and, therefore, material for investors and shareholders.
At the end of the day, however, the most important thing for investors is likely to be LIT’s ability to turn its patents and IP into sales and a strong market position.
Will LIT’s patented technologies stack up well against emerging competition? Will they generate enough sales and for how many years?
While today’s patent news is positive, the value of LIT’s stock could well lie in how the market appraises the answers to the questions above.
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