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Glencore Canada Corporation said it is exploring a potential acquisition of Toronto-based battery recycling company Li-Cycle Holdings Corp. (LICYF), a company it has previously backed with hundreds of millions of dollars in investment.
The Canadian branch of the Switzerland-based mining company announced its intent in an early warning notification, saying it is in discussions with Li-Cycle’s management and board of directors for a complete or majority acquisition.
Glencore has invested over $300 million (all figures U.S. unless otherwise noted) into Li-Cycle, and if its convertible notes are turned into shares, Glencore would hold approximately 66.7 per cent of Li-Cycle’s common shares.
In a publicized letter to Jacqueline Dedo, independent board chair of Li-Cycle, Glencore said, “We believe that such a potential transaction could maximize the value of the business and enable (Li-Cycle) to address the issues impacting its operations and capital structure.”
Since the announcement of the possible acquisition, Li-Cycle’s stock on the OTCQX rose over 20 per cent to $0.36 as of afternoon trading on March 17.
Glencore has metal recycling facilities around the world, including sites in Rouyn-Noranda, Que., Montreal and Sudbury.
Li-Cycle’s troubles and Glencore’s involvement
Li-Cycle has patented a model for lithium-ion battery resource recovery known as Spoke & Hub. At its Spoke sites, batteries are recycled to produce a material called black mass that contains metals such as lithium and nickel. The black mass is processed at the Hubs into battery-grade materials that can be reused in new batteries.
Li-Cycle and Glencore have been partners since May 2022, with Glencore first making a $200-million investment into Li-Cycle. Between the two investments, however, Li-Cycle has encountered a string of setbacks that put the company on the wrong foot.
Construction on its Rochester Hub in New York state, which was called a “cornerstone asset” by Li-Cycle’s CEO and president Ajay Kochhar, was delayed in October 2023 as costs ballooned. Li-Cycle suffered a $96.5-million impairment charge on its Q3 2023 earnings, adding to its increasing losses.
After the blow, Li-Cycle received an injection of $101 million in March 2024 by Glencore to support its plans.
To save cash, the company axed 17 per cent of its global headcount later that month and changed from a regional management model to a centralized form to find efficiencies.
After further cost-cutting measures including closing its first commercial recycling site in Kingston, Ont. and pausing plans for Spoke facilities in France and Germany, Li-Cycle showed some more positive signs with the U.S. Department of Energy (DoE) closing a $475-million loan facility for the Rochester Hub in November 2024 - $100 million more than initially negotiated.
Li-Cycle also signed an offtake agreement with Glencore to supply thousands of tonnes of lithium-ion battery materials from the Rochester Hub when it begins operations. Glencore will receive battery-grade lithium carbonate and a blend of metals called mixed hydroxide precipitate from Li-Cycle, with the nickel and cobalt in the precipitate sold to Glencore on market terms.
Glencore and Li-Cycle also announced they would reassess the feasibility of a Hub in southern Italy. It had been held back because of Li-Cycle’s financial issues and the government denying fast-track approval of the project.
There, the companies plan a joint venture to convert Glencore’s metallurgical complex in Sardinia into a facility that can process 50,000 to 70,000 tonnes of black mass and produce up to 16,500 tonnes of lithium carbonate in Phase 2.
Complications in the battery sector
The problems faced by Li-Cycle are not unique to the company. The sector in Canada has hit major snags, including both Umicore and E-One Moli pausing plans for their battery factories and Ford withdrawing from its partnership with SK and EcoPro on a C$1.2-billion battery plant in Becancour, Que.
Reasons include the challenges of building up a new industry, and an electric vehicle market that has not been growing at the rapid pace some companies expected. Other obstacles could be the U.S. government that has acted on its opposition to clean energy projects and the shift to protectionism in global trade.
But some projects have stayed the course, including General Motors Co.’s joint venture with South Korean battery materials and chemicals company POSCO Future M. They are constructing a battery materials facility in Becancour.
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