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Li-Cycle seeks to steady cash position after tumultuous 2023

Closes Glencore investment, continues progress on DoE loan that 'dovetails' with Rochester Hub planning

Li-Cycle's Rochester Hub as of mid-October 2023, construction paused. (Courtesy Li-Cycle Holdings Corp.)

Li-Cycle Holdings Corp. (LICY-N) has taken steps to steady its finances and increase cash on hand by cutting its workforce and progressing on its loan with the U.S. Department of Energy (DoE), the company announced in its Q1 results.

The Toronto-based battery recycler is seeking a reset after a challenging 2023, when its Rochester Hub was delayed and the company incurred an impairment charge, on top of laying off 17 per cent of its global headcount to cut costs.

As of March 2024, Li-Cycle has $148.7 million in cash compared to $96.3 million in December 2023. The closing of its $102-million investment from miner Glencore drove this improvement, the company noted in its conference call Friday.

“We remain committed to diligently exploring strategic alternatives and financing options to enhance our liquidity. Second, we are strategically managing our cash to support our liquidity needs as part of the cash preservation plan,” Ajay Kochhar, Li-Cycle’s president and CEO, said in the call.

Li-Cycle also gave a cost estimate for its phased approach to the Rochester Hub, and its progress on signing deals with original equipment manufacturers (OEMs) in North America and Europe.

Status of the Rochester Hub

The comprehensive review of the Rochester Hub is underway, with Li-Cycle in talks with the Rochester market for a revised cost estimate for its mixed hydroxide precipitate (MHP) phase.

Due to the delay in construction, Li-Cycle has been exploring the option to build its Rochester Hub in phases, producing battery-grade lithium carbonate and MHP – a mix of nickel, cobalt, and manganese – in the interim to its goal of processing up to 35,000 tonnes of black mass (shredded batteries) per year.

The MHP portion of the Rochester Hub is estimated at $687.6 million, including cash spent as of March 2024, a portion of the projected $1.34-billion estimate for the project as a whole as of March 2024.

Kochhar said Li-Cycle is working to close its Department of Energy loan for the Rochester Hub that would be up to $511.5-million. In response to an analyst’s question about the schedule of the review, Kochhar said the timing “dovetails with the DoE process.”

“The key thing we’re working on right now is working with the local market to refine the capital cost estimate.” The top priority is to close the DoE loan, he continued, which is “the enabler to restart.”

Steps to steady its finances

Other than its Glencore investment, Li-Cycle has also received $7.9 million out of $9.4 million in a grant from the German state of Saxony-Anhalt in April 2024 for its Spoke facility in Germany.

Laying off 17 per cent of its work force — approximately 60 people — as well as centralizing its business structure is expected to generate approximately $13.6 million in cost savings per year.

Li-Cycle’s revenue rose to $5.7 million in Q1 compared to $4.9 million in Q1 2023. The 17 per cent increase was attributed to “higher recycling service revenue” and “reduced market prices of cobalt and nickel.”

But its net loss soared to $186.4 million compared to $49.8 million in Q1 2023, mostly due to other income expenses and selling, general and administrative expenses.

Its adjusted EBITDA loss in Q1 stood at $37.4 million, against $51.7 million in the same period last year. Craig Cunningham, Li-Cycle’s interim CFO, attributed this to higher revenue, lower cost of sales, and higher selling, general and administrative expenses.

Signing more OEM agreements

Despite Li-Cycle’s woes in 2023, the company continued to sign or extend agreements with large electric vehicle (EV) OEMs in North America and Europe, it announced.

In North America, Li-Cycle inked new recycling agreements with two EV OEMs for full-pack batteries, and extended an agreement with a battery cell maker to recycle manufacturing scrap and battery packs.

Across the Atlantic in Europe, new recycling agreements were signed or expanded with three of the largest EV OEMs on the continent, a “leading” battery cell manufacturer, and a “major” EV battery supplier.

Li-Cycle's projects on hold

Li-Cycle also provided an update on the status of its Spoke and Hub network – its Spoke facilities where the batteries are recycled and shredded to produce black mass, and its Hubs where the black mass is processed to produce critical battery materials.

Li-Cycle says its planned Portovesme Hub project in Sardinia, Italy, Line 2 expansion in Germany, third-generation Spoke facilities in France and Norway, and operations in its Kingston, Ont. facility are paused.

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