(Reuters) - Lithium Australia Ltd said on Wednesday its battery recycling unit signed a deal with South Korea's LG Energy Solution Ltd to process at least 250 tonnes of its lithium-ion batteries over the next year.

As per the agreement, LG Energy will deliver the batteries to Envirostream's facilities in Melbourne, Lithium Australia said, adding that the volumes are nearly a quarter of the collection in fiscal 2022.

Recycling of batteries allows for its parts or metals to be reused, which potentially tackles major criticism and obstacles faced by automakers over heavy carbon footprint associated with the mined materials. (https://reut.rs/3BisUnL)

Lithium Australia-owned Envirostream recovers around 95% of the materials from an exhausted battery, according to its website, and it has recycled more than 85 tonnes of LG Energy's batteries since 2018.

"The company expects a significant increase in processing volumes for FY2023 relative to FY2022 as a result of this agreement," the battery metals supplier said. For fiscal 2022, Envirostream's battery collection volumes were about 1.09 thousand tonnes.

The agreement is for an initial term ending on Aug. 31 next year, and will continue on a rolling six-month basis, the Perth-based company said.

(Reporting by Echha Jain in Bengaluru; editing by Uttaresh.V)