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Li-Cycle on cusp of revenue jump as Hub plant nears completion

Battery materials recycler expects to close US$375M U.S. Department of Energy loan in September

IMAGE: Li-Cycle's Spoke facility in Magdeburg, Germany
Li-Cycle's recently opened Spoke facility in Magdeburg, Germany. (Courtesy Li-Cycle Holdings Corp.)

Li-Cycle Holdings Corp. (LICY-N) has reported revenues of approximately $4.8 million in Q2 2023, a figure it expects to begin increasing significantly when a major facility starts to come online late this year.

“As a result of our continued execution, we have further solidified Li-Cycle’s leadership role as a sustainable and pure-play domestic solutions provider for key battery-grade materials in North America and Europe,” Ajay Kochhar, Li-Cycle’s president and CEO, said in a statement.

“When both the Rochester (N.Y.) and Portovesme (Italy) Hubs are in full operation, Li-Cycle is expected to have total lithium carbonate production capacity of up to 25,000 tonnes per year, making Li-Cycle a top global and sustainable producer of lithium carbonate and key battery-grade materials."

Toronto-based Li-Cycle’s Spoke facilities convert waste battery material into three main product streams: plastics, copper/aluminum, and “black mass” containing metals essential to battery production including lithium carbonate, nickel sulphate and cobalt sulphate. Other marketable metals in black mass include graphite, copper and aluminum.

Its Hub facilities will process these products and turn them into reusable materials.

Li-Cycle’s Q2

The company expects to close a US$375 million loan from the U.S. Department of Energy via the Advanced Technology Vehicles Manufacturing Program in September to support the development of its Hub in Rochester. The Hub is scheduled to start commissioning in late 2023.

Li-Cycle’s operating expenses increased to $62.3 million versus approximately $45 million in the same period of 2022, driven primarily by what it states were higher raw material and supply costs coupled with higher average material costs.

Its losses were higher as well – with a net loss of $47.7 million, compared to $38 million in the same period last year. Its adjusted EBITDA loss was $53.7 million, compared to a loss of $41.3 million the year prior.

This was impacted by a non-cash fair market value decline of $2.5 million driven by lower cobalt and nickel prices, versus an unfavourable fair market value impact of $6.3 million last year.

Revenues from product sales and recycling services before non-cash fair market value adjustments were $7.4 million, which increased from $6.3 million in the same period of 2022. The $4.8 million in revenues, which included fair market value adjustments and product revenues, was an increase from nil recorded in the same period in 2022.

Li-Cycle ended June with $390.6 million of cash in hand.

“The main purpose of our black mass production is to utilize it as feedstock for Hubs, which produce lithium cobalt and nickel products, unlocking significant incremental value. The sale of black mass is an interim strategy in the lead-up to the start of operations at our Hubs,” Debbie Simpson, Li-Cycle’s chief financial officer, said during the investors call.

“The operationalization of a Rochester Hub will represent a significant inflection point in Li-Cycle’s revenue and financial profile.”

Li-Cycle’s progress

The company continues to expand its reach in the industry.

On July 11, Li-Cycle and EVE Energy, a Huizhou, China-based global lithium-ion battery technology company, signed a memorandum of understanding (MOU) to collaborate and explore lithium-ion battery recycling solutions for EVE battery materials.

The MOU includes a framework to explore global sustainable recycling solutions for EVE's lithium-ion battery materials in the North American market, as well as battery manufacturing scrap generated at EVE’s planned lithium-ion battery cell manufacturing facilities in Hungary and Malaysia. Because of this, Li-Cycle is undertaking a site selection process for a potential new Spoke location in Hungary, with a decision expected in early 2024.

“Additionally, we expect to add OEM (original equipment manufacturers) customers in the region,” Kochhar explained during the investor call, “given Hungary is projected to be one of the largest battery cell manufacturing markets in Europe by the end of the decade.”

There is also Li-Cycle’s Magdeburg, Germany Spoke facility, which recently began operations. Once all its processing lines are running, it will have a recycling capacity of 30,000 tonnes annually, making it the largest facility in the company’s portfolio.

“Germany represents the largest market for both battery manufacturing scrap and end-of-life lithium-ion batteries in Europe,” Tim Johnston, Li-Cycle’s executive chairman and co-founder, said during the call.

Its Portovesme, Italy Hub with partner Glencore is expected to commence construction in late 2026 to early 2027. A definitive feasibility study is expected to be complete by mid-2024.

The Portovesme Hub would have a processing capacity of up to 70,000 tonnes per year of black mass, producing approximately 15,000 to 16,500 tonnes of lithium carbonate, up to 18,000 tonnes of nickel and up to 2,250 tonnes of cobalt.

“Regarding capital investments, we expect to allocate a total of $285 to $345 million for the development of the Spoke and Hub network,” Simpson said.

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