Remember safety first. Despite the fact that all of us are pyromaniacs at heart, we still do not want to burn ourselves, our toys, our homes or our family and friends.
My friend Mr Google got me a few hits with similar instructions.
LiPo battery disposal
In order to properly dispose of a LiPo battery, you must first discharge it as low as possible. Please, if the battery has been damaged DO NOT discharge it, just proceed with the next step
Fill a bucket or some plastic container (NO METAL) with water, and add salt. Add approximately 1/4 cup of salt for every litre of water. The container may have a lid but must not be air tight
Immerse the battery in the salt water fully. Make sure that even the power connectors are submerged. Leave the battery for at least 2 weeks.
After 2 weeks, remove the battery, wrap in newspaper and dispose of in rubbish bin like normal rubbish.