Li-Cycle Holdings Corp.’s (LICY-N) loan facility with the U.S. Department of Energy (DoE) has closed at up to $475 million (all figures US), $100 million more than originally announced in February 2023.

The upsized funding revealed Thursday afternoon is a major step to supporting and restarting construction at the Toronto-based company’s beleaguered Rochester Hub, which has been paused since October 2023 due to financial troubles.

“Our loan agreement is a strong vote of confidence for our recycling technology, and underscores the importance of our role as a critical battery materials supplier in the U.S. battery supply chain,” Ajay Kochhar, president and CEO of Li-Cycle, said in a financial call.

The New York State facility was described as a “cornerstone asset” by Kochhar. It is designed to process up to 35,000 tonnes of recycled battery materials, called black mass, per year.

After the pause on construction, Li-Cycle switched tracks to developing the Rochester Hub in stages, planning to produce lithium carbonate and a mix of nickel, cobalt and manganese called mixed hydroxide precipitate (MHP) in the interim. The facility is expected to output approximately 8,250 tonnes of lithium carbonate and up to 72,000 tonnes of MHP per year.

Unveiled simultaneously with its Q3 financials, the battery recycling company saw a spike in year-over-year revenue and net profit. Quarterly revenue was $8.4 million compared to $4.7 million in Q3 2023; net profit was $56.5 million compared to a net loss of $30.7 million the year prior.

Li-Cycle’s upgraded DoE loan

The loan facility agreement with the U.S. federal agency consists of up to $445 million in principal and up to $30 million in capitalized interest through the DoE's Advanced Technology Vehicles Manufacturing (ATVM) program.

It is the first DoE loan finalized for a sustainable lithium-ion battery materials company, Kochhar said. Li-Cycle is the fifth company to close a loan under the ATVM program.

The first advance under the facility must occur on or before Nov. 7, 2025, and is subject to conditions such as completing Li-Cycle’s base equity contribution for the Rochester Hub.

Such a contribution includes settling approximately $92 million in commitments for costs incurred but not yet paid, and funding approximately $173 million in reserve account requirements under the first advance.

The cost to reach mechanical completion at the Rochester Hub (excluding commissioning, working capital, financing) is pegged at approximately $960 million, with the remaining cost to complete at $487 million.

Li-Cycle is exploring more financing and strategic alternatives for a “full funding package” to restart construction of the Rochester Hub, Kochhar said. The package would help meet the conditions for the first advance, he added.

Li-Cycle’s Q3 2024 finances

Li-Cycle’s Q3 revenue was identical from Q2, but rose 79 per cent from Q3 2023. The increase was attributed to higher recycling service revenue, higher metal prices, a favourable mix of metals and a fair pricing adjustment of $0.1 million which did not occur the year prior.

Other income surged to $81.7 million compared to $13.3 million in Q3 2023 and $18.7 million in Q2. The leap is explained as a result of fair value adjustments to Li-Cycle’s financial instruments.

The company’s restructuring efforts announced in March showed further progress, as selling, general and administrative expenses fell to $12.9 million. The figure was $25.9 million in Q3 2023 and $15.3 million in Q2.

Though a net profit of $56.5 million was made in Q3, the company has recorded a net loss of $88.4 million for the nine months ended Sept. 30.

Cash and cash equivalents on hand as of Sept. 30 stood at $32.2 million.

Li-Cycle’s Spoke optimizations

The next steps for Li-Cycle are to secure a full funding package to restart construction of the Rochester Hub and complete the comprehensive review for the MHP scope of the facility, the company’s CEO said.

Additionally, optimizing its Spoke network, where batteries are shredded, will be a priority. The plan will focus on improving cash flow at its third-generation Spoke facilities in Alabama, Arizona and Germany toward self-sufficiency, Kochhar said.

To improve performance at its Spokes, Li-Cycle is continuing efforts to close its Kingston, Ont. Spoke facility and has curtailed operations at its second-generation Spoke in New York.

“In the U.S., battery recycling continues to be a strong bipartisan topic, as there is a clear understanding that building a battery supply chain domestically is in both the economic and national security interest of the country,” Kochhar said.