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Li-Cycle seeks restart on Rochester Hub after 2023 woes

Battery recycler outlines strategy for construction on 'cornerstone asset'

Li-Cycle detailed its strategy to restart construction on its Rochester Hub after a challenging 2023. (Courtesy Li-Cycle Holdings Corp.)

Li-Cycle Holdings Corp.’s management believes the company is back on track thanks to a $101-million investment from Glencore, progress on the strategic review of its beleaguered Rochester Hub, and strong production of recycled battery materials.

The Toronto-based battery recycler outlined its 2023 financial results and plans for major projects following a challenging 2023 beset with financial concerns, delays, postponements and cancellations.

While its net loss in 2023 hit $187.2 million (all figures Cdn unless noted), Li-Cycle also secured the additional funding from Swiss miner Glencore. The company’s president and CEO Ajay Kochhar also said conversations for a loan of up to $508.8 million from the U.S Department of Energy (DOE) to support the Rochester Hub are continuing.

“We are excited to work with Glencore to close the interim financing. Additionally, we continue to work closely with the DOE on progressing the conditional commitment for a loan of up to (US)$375 million. Second, we are evaluating our Spoke production to drive down costs and focusing on our Gen 3 Spokes to support key customers. And finally we remain focused on completing our analysis of our go-forward approach for the Rochester Hub,” Kochhar said in an investor call on Tuesday.

Li-Cycle's (LICY-N) shares were up $2.21 in early afternoon trading, rising by almost 50 per cent. 

Update on the Rochester Hub

A significant portion of the call focused on the company’s Rochester Hub in New York. Planned as a facility that could process up to 35,000 tonnes of black mass (recycled battery materials) per year, it was previously referred to as a “cornerstone asset” by Kochhar.

But rising expenses forced the company to pause construction and implement a strategic review to search for options. The Glencore investment arose from the setback.

Kochhar said Li-Cycle is looking to restart construction on the Rochester Hub with the Glencore investment representing an “interim step in our funding strategy for our future plans.”

When asked by an analyst if conversations with the DOE had changed since the strategic review, Kochhar said engagement with the DOE over the loan is continuing.

Costs incurred but not paid for the Rochester Hub reached $156.3 million, with cash spend at $614.4 million as of Dec. 31, 2023. Total incurred costs were at $770.7 million, Li-Cycle’s executive chairman Tim Johnston said.

A revised estimate of the Rochester Hub is $1.34 billion, based on potential expansion into producing mixed hydroxide precipitate, a combination of nickel, cobalt and manganese, according to Johnston.

More funding is required to restart construction on the Rochester Hub, and Li-Cycle was unable to disclose a construction timeline as it needs to hear from its contractors first, Kochhar said.

Increased production of black mass

Despite a rocky financial situation, Johnston depicted Li-Cycle’s production as a bright spot. In 2023, the company exceeded its top line guidance for black mass recycling of 5,500 tonnes to 6,500 tonnes by producing over 6,800 tonnes of black mass, more than 1.5 times its production in 2022.

Revenue in 2023 was $24.8 million, an 11 per cent increase from $22.4 million in 2022.

Debbie Simpson, Li-Cycle’s CFO, said black mass and other product sales rose compared to 2022 because of higher-value sales mix and recycling services revenue, but offset by reduced cobalt and nickel prices. The cost of sales, and production costs and workforce expenses from pre-emptive hiring for the Rochester Hub also incurred costs in 2023, she explained.

The $187.2 million net loss in 2023 compares to a $91.2 million net loss in 2022.

In response, Li-Cycle is working to manage cash to support its liquidity needs, has paused construction on the Rochester Hub, slowed global Spoke production to focus on key customers and paused development of Spoke capacity, Simpson said.

Its strategy involves engaging with contractors and suppliers for extended payment plans, extending payment cycles for the Rochester Hub to control losses, and by making cost reductions at its Spoke facilities through cutting non-core selling, general and administrative expenses.

Kochhar said Li-Cycle is seeing “favourable secular industry demand trends in North America and Europe,” based on increased demand for electric vehicles.

“These growth dynamics support the robust demand for expanding the market for recycling of all forms of lithium-ion batteries,” he added.

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