Conference Call and Webcast on Tuesday,
March 19 at 8:15 a.m. Eastern Time to discuss business update and
2023 financial results
Highlights
- Announced $75 million strategic investment from Glencore and
amended existing convertible note, with expected closing on or
about March 25th, 2024;
- Continuing to work closely with the U.S. Department of Energy
(DOE) on the conditional commitment for a loan of up to $375
million;
- Executing on Cash Preservation Plan, including further
organization right-sizing and right-shaping, as well as
streamlining of operations;
- Delivered 6,825 tonnes of black mass & black mass
equivalents, exceeding the top end of the revised annual production
guidance; and
- Conducting an internal technical review to examine scope and
cost for the Rochester Hub project and confirmed technical
viability to produce lithium carbonate and mixed hydroxide
precipitate.
Li-Cycle Holdings Corp. (NYSE: LICY) ("Li-Cycle" or the
“Company"), a leading global lithium-ion battery resource recovery
company, today provided a business update.
“Since embarking on our comprehensive review, we are pleased to
report significant progress, including improving our current
liquidity position and conducting an internal technical review of
the Rochester Hub. We recently announced $75 million of strategic
financing from Glencore to enhance our liquidity position and
further build on our long-term strategic partnership,” said Ajay
Kochhar, Li-Cycle’s President and Chief Executive Officer.
“Additionally, as part of our internal technical review of the
Rochester Hub project, we confirmed the technical viability of
producing lithium carbonate and mixed hydroxide precipitate
(“MHP”). We also continue to work closely with the DOE on the
conditional commitment for a loan of up to $375 million. We believe
the strategic value of the Rochester Hub is underpinned by strong
industry fundamentals driving robust demand for domestic sources of
critical battery materials.”
Financing
Following the announcement by the Company in October 2023 of the
construction pause for the Rochester Hub project, the Company
formed a Special Committee solely composed of independent Board
directors (and which excluded Glencore’s Board representative) (the
“Special Committee”) and the Special Committee engaged Moelis &
Company LLC (“Moelis”) as its financial advisor to explore
financing options and to evaluate strategic alternatives. After a
robust process conducted by the Special Committee to review and
evaluate potential financial and strategic alternatives available
to the Company, Li-Cycle entered into an agreement on March 12,
2024 to issue a senior secured convertible note in an aggregate
principal amount of $75 million to an affiliate of Glencore plc
(LON: GLEN) (“Glencore”), with expected closing on or around March
25, 2024. This demonstrates Glencore’s continued endorsement of
Li-Cycle’s Spoke & Hub model, patented recycling technology,
and development plans for the Rochester Hub.
Glencore’s $75 million investment represents an interim step in
Li-Cycle’s funding strategy to support the Company’s future plans.
Li-Cycle continues to assess additional financing opportunities,
including continuing to work closely with the DOE Loan Programs
Office on the conditional commitment for a loan of up to $375
million under the DOE’s Advanced Technology Vehicles Manufacturing
program.
Cash Preservation Plan
As part of the pause in construction of the Rochester Hub
project, on November 1, 2023, Li-Cycle implemented a Cash
Preservation Plan (“CPP”) to reduce expenses and slow cash
outflows, while exploring both financing options and strategic
alternatives to increase liquidity. As a result of the CPP, the
Company has taken steps to significantly reduce its workforce and
curtail other non-operational spending.
Additionally, the Company has slowed operations at its Spoke
network, including pausing operations at its Ontario Spoke, slowing
operations at its New York, Arizona and Alabama Spokes on an
ongoing basis, and is currently re-evaluating the Company’s
strategy for its North American Spokes, which may include further
pauses or slowdowns. In 2023, Li-Cycle’s Spokes produced 6,825
tonnes of black mass, which exceeded the top end of its revised
annual guidance.
Based on the go-forward strategic objectives and the CPP,
Li-Cycle expects to further right-size and right-shape its
organization. The Company will continue to evaluate other measures
to reduce costs and expects the results from the CPP to deliver
lower cash outflows. As of December 31, 2023 and March 15, 2024,
Li-Cycle had cash and cash equivalents on hand of approximately $71
million and approximately $35 million respectively, excluding
restricted cash of approximately $10 million. This excludes
expected gross proceeds from the Glencore financing of $75 million
which is expected to close on or about March 25, 2024. Based on
cash on hand as of March 15, 2024 and the expected gross proceeds
from the Glencore financing, pro forma cash is estimated to be
approximately $110 million, excluding restricted cash of
approximately $10 million.
Rochester Hub Project
On October 23, 2023, the Company announced that it was pausing
construction on the Rochester Hub project, pending completion of a
comprehensive review of the project’s go-forward strategy. As of
December 31, 2023, the Company incurred total costs of
approximately $567 million on the project, comprised of total cash
spend of approximately $452 million, including $97 million of spend
for the construction of process buildings and warehouse and costs
incurred but not yet paid of approximately $115 million.
The Company has been conducting an internal technical and
economic review of the Rochester Hub project in order to assess a
possible change in the project development strategy. The internal
technical review has focused on constructing, commissioning and
operating only those process areas needed to produce two key
products: lithium carbonate and MHP, containing nickel, cobalt and
manganese. The construction, commissioning and operating costs for
process areas associated with production of nickel sulphate and
cobalt sulphate, as originally planned for the Rochester Hub, have
not been included in the internal technical review and there are no
current plans that include production of nickel sulphate and cobalt
sulphate. The internal technical review confirmed the technical
viability of the MHP process and allows the project to proceed on a
schedule aligned with the Company's current expectations regarding
the timing and evolution of the battery recycling and EV markets,
subject to obtaining any required permits, regulatory approvals, if
needed, and additional financing.
As part of the internal technical review, the Company has
conducted an engineering study internally and estimates the cost to
complete (“CTC”) the Rochester Hub project under the MHP scope at
approximately $508 million, including approximately $115 million of
costs incurred but not yet paid as of December 31, 2023. Taking
into account total cash spend of approximately $452 million as of
December 31, 2023, the revised estimated project cost of the
Rochester Hub Project is approximately $960 million for the MHP
scope. The increase in estimated project cost as compared to the
prior range from November 2023 of approximately $850 million to
approximately $1 billion, that included the expected production of
nickel sulphate and cobalt sulphate, is primarily due to further
refinement of the methodology used for estimating the project cost
based on an MHP scope and the cost required to complete the MHP
project.
The CTC estimate for the MHP scope is based solely upon the
internal technical review, is subject to a number of assumptions,
including refining detailed engineering, procurement, construction
activities, including the cost of labor and is likely to change.
The Company continues to complete its comprehensive review work,
including re-engaging and re-bidding construction subcontracts. In
addition to the CTC, the Company will incur costs during the
construction pause between October 23, 2023 to the potential
project re-start date, which the Company expects to fund with
current cash and required additional interim funding. The Company
will also incur other costs such as working capital, commissioning
and ramp-up costs and financing costs which will be included in the
full funding solution.
Key Glencore Investment Terms
The Glencore $75 million investment is expected to close on or
about March 25, 2024, subject to customary closing conditions.
Glencore will purchase from the Company a senior secured
convertible note that will mature on the fifth anniversary of
closing and will be convertible into common shares of the Company
at an initial conversion price of $0.53 per Li-Cycle common share.
Li-Cycle will have the option to pay interest on the Note in cash
or in-kind (“PIK”). Cash interest payments will be based on the
Secured Overnight Financing Rate (“SOFR”) plus 5.0% per year, and
PIK payments will be based on SOFR plus 6.0% per year.
In addition, Li-Cycle and Glencore have agreed to amend and
restate the terms of the existing Glencore convertible note, which
was issued on May 31, 2022 and has a current aggregate principal
amount outstanding of approximately $225 million in two tranches,
each of which will include new terms that come into effect upon the
occurrence of future events. For more information, refer to our
press release and Form 8-K dated March 12, 2024.
The issuance and sale of the senior secured convertible note to
Glencore is subject to customary closing conditions and the
expiration of the ten-day period for required notice to
shareholders informing them of the Company’s reliance on the New
York Stock Exchange (“NYSE”) financial viability exception to the
NYSE’s shareholder approval policy and is expected to close on or
about March 25, 2024.
Webcast and Conference Call Information
On Tuesday, March 19, 2024, at 8:15 a.m. Eastern Time, the
Company management will host a webcast and conference call to
provide a business update and a review of financial results for
full year 2023 as filed and reported on Friday March 15, 2024. The
related presentation materials for the webcast and conference call
will be made available on the investor section of the Li-Cycle
website: https://investors.li-cycle.com/overview/default.aspx
Investors may listen to the conference call live via audio-only
webcast or through the following dial-in numbers:
Domestic: (800) 579-2543 International: (203)
518-9814 Participant Code: LICYQ423 Webcast:
https://investors.li-cycle.com
A replay of the conference call/webcast will also be made
available on the Investor Relations section of the Company’s
website at https://investors.li-cycle.com.
About Li-Cycle Holdings Corp.
Li-Cycle (NYSE: LICY) is a leading global lithium-ion battery
resource recovery company. Established in 2016, and with major
customers and partners around the world, Li-Cycle’s mission is to
recover critical battery-grade materials to create a domestic
closed-loop battery supply chain for a clean energy future. The
Company leverages its innovative, sustainable and patent-protected
Spoke & Hub Technologies™ to recycle all different types of
lithium-ion batteries. At our Spokes, or pre-processing facilities,
we recycle battery manufacturing scrap and end-of-life batteries to
produce black mass, a powder-like substance which contains a number
of valuable metals, including lithium, nickel and cobalt. At our
future Hubs, or post-processing facilities, we plan to process
black mass to produce critical battery-grade materials, including
lithium carbonate, for the lithium-ion battery supply chain. For
more information, visit https://li-cycle.com/.
Cautionary Notes - Forward-Looking Statements and Unaudited
Results
Certain statements contained in this press release may be
considered “forward-looking statements” within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995, Section 27A
of the U.S. Securities Act of 1933, as amended, Section 21 of the
U.S. Securities Exchange Act of 1934, as amended, and applicable
Canadian securities laws. Forward-looking statements may generally
be identified by the use of words such as “believe”, “may”, “will”,
“continue”, “anticipate”, “intend”, “expect”, “should”, “would”,
“could”, “plan”, “potential”, “future”, “target” or other similar
expressions that predict or indicate future events or trends or
that are not statements of historical matters, although not all
forward-looking statements contain such identifying words.
Forward-looking statements in this press release include but are
not limited to statements about: the expected closing of the
Glencore investment and the Company’s expected pro forma cash
following the closing; the Company’s plans regarding the Cash
Preservation Plan including future cost reductions and workforce
reductions; the Company’s plans regarding the Rochester Hub,
including the project scope, the estimated project costs and
funding; the Company’s future funding strategy; the Company’s
financial and liquidity position; statements regarding the up to
$375 million conditional commitment for a loan by the U.S.
Department of Energy; statements regarding the development of
Li-Cycle’s Hub facilities, including the Rochester Hub; statements
regarding the growth of global demand for critical battery
materials and Li-Cycle’s position as a leading provider of critical
battery materials; and statements regarding the operations and
development of the North American Spokes. These statements are
based on various assumptions, whether or not identified in this
communication, including but not limited to assumptions regarding
the timing, scope and cost of Li-Cycle’s projects, including paused
projects; the processing capacity and production of Li-Cycle’s
facilities; Li-Cycle’s expectations regarding near-term significant
workforce reductions and the ability to right-size and right-shape
the organization; Li-Cycle's ability to source feedstock and manage
supply chain risk; Li-Cycle’s ability to increase recycling
capacity and efficiency; Li-Cycle’s ability to obtain financing on
acceptable terms or execute any strategic transactions; the
expected closing of the Glencore investment; Li-Cycle’s ability to
retain and hire key personnel and maintain relationships with
customers, suppliers and other business partners; the success of
the Cash Preservation Plan, the outcome of the review of the
go-forward strategy of the Rochester Hub, Li-Cycle’s ability to
attract new suppliers or expand its supply pipeline from existing
suppliers; general economic conditions; currency exchange and
interest rates; compensation costs; and inflation. There can be no
assurance that such estimates or assumptions will prove to be
correct and, as a result, actual results or events may differ
materially from expectations expressed in or implied by the
forward-looking statements.
These forward-looking statements are provided for the purpose of
assisting readers in understanding certain key elements of
Li-Cycle’s current objectives, goals, targets, strategic
priorities, expectations and plans, and in obtaining a better
understanding of Li-Cycle’s business and anticipated operating
environment. Readers are cautioned that such information may not be
appropriate for other purposes and is not intended to serve as, and
must not be relied on, by any investor as a guarantee, an
assurance, a prediction or a definitive statement of fact or
probability.
Forward-looking statements involve inherent risks and
uncertainties, most of which are difficult to predict and many of
which are beyond the control of Li-Cycle, and are not guarantees of
future performance. Li-Cycle believes that these risks and
uncertainties include, but are not limited to, the following:
Li-Cycle’s inability to economically and efficiently source,
recover and recycle lithium-ion batteries and lithium-ion battery
manufacturing scrap, as well as third party black mass, and to meet
the market demand for an environmentally sound, closed-loop
solution for manufacturing waste and end-of-life lithium-ion
batteries; Li-Cycle’s inability to successfully implement its
global growth strategy, on a timely basis or at all; Li-Cycle’s
inability to manage future global growth effectively; Li-Cycle’s
inability to develop the Rochester Hub as anticipated or at all,
and other future projects including its Spoke network expansion
projects in a timely manner or on budget or that those projects
will not meet expectations with respect to their productivity or
the specifications of their end products; Li-Cycle's history of
losses and expected significant expenses for the foreseeable future
as well as additional funds required to meet Li-Cycle’s liquidity
needs and capital requirements in the future not being available to
Li-Cycle on acceptable terms or at all when it needs them; risk and
uncertainties related to Li-Cycle’s ability to continue as a going
concern; uncertainty related to the success of Li-Cycle’s Cash
Preservation Plan and related past and expected near-term further
significant workforce reductions; Li-Cycle's inability to attract,
train and retain top talent who possess specialized knowledge and
technical skills; Li-Cycle’s failure to oversee and supervise
strategic review of all or any of Li-Cycle’s operations and capital
project and obtain financing and other strategic alternatives;
Li-Cycle’s ability to service its debt and the restrictive nature
of the terms of its debt; Li-Cycle's potential engagement in
strategic transactions, including acquisitions, that could disrupt
its business, cause dilution to its shareholders, reduce its
financial resources, result in incurrence of debt, or prove not to
be successful; one or more of Li-Cycle's current or future
facilities becoming inoperative, capacity constrained or disrupted,
or lacking sufficient feed streams to remain in operation; the
potential impact of the pause in construction of the Rochester Hub
on the authorizations and permits granted to Li-Cycle for the
operation of the Rochester Hub and the Spokes on pause; the risk
that the New York state and municipal authorities determine that
the permits granted to Li-Cycle for the production of metal
sulphates at the Rochester Hub will be impacted by the change to
MHP and the reduction in scope for the project; Li-Cycle's failure
to materially increase recycling capacity and efficiency; Li-Cycle
expects to continue to incur significant expenses and may not
achieve or sustain profitability; problems with the handling of
lithium-ion battery cells that result in less usage of lithium-ion
batteries or affect Li-Cycle’s operations; Li-Cycle’s inability to
maintain and increase feedstock supply commitments as well as
secure new customers and off-take agreements; a decline in the
adoption rate of EVs, or a decline in the support by governments
for “green” energy technologies; decreases in benchmark prices for
the metals contained in Li-Cycle’s products; changes in the volume
or composition of feedstock materials processed at Li-Cycle’s
facilities; the development of an alternative chemical make-up of
lithium-ion batteries or battery alternatives; Li-Cycle’s expected
revenues for the Rochester Hub are expected to be derived
significantly from a limited number of customers; uncertainty
regarding the sublease agreement with Pike Conductor Dev 1, LLC
related to the construction, financing and leasing of a warehouse
and administrative building for the Rochester Hub; Li-Cycle’s
insurance may not cover all liabilities and damages; Li-Cycle’s
heavy reliance on the experience and expertise of its management;
Li-Cycle’s reliance on third-party consultants for its regulatory
compliance; Li-Cycle’s inability to complete its recycling
processes as quickly as customers may require; Li-Cycle’s inability
to compete successfully; increases in income tax rates, changes in
income tax laws or disagreements with tax authorities; significant
variance in Li-Cycle’s operating and financial results from period
to period due to fluctuations in its operating costs and other
factors; fluctuations in foreign currency exchange rates which
could result in declines in reported sales and net earnings;
unfavorable economic conditions, such as consequences of the global
COVID-19 pandemic; natural disasters, unusually adverse weather,
epidemic or pandemic outbreaks, cyber incidents, boycotts and
geo-political events; failure to protect or enforce Li-Cycle’s
intellectual property; Li-Cycle may be subject to intellectual
property rights claims by third parties; Li-Cycle may be subject to
cybersecurity attacks, including, but not limited to, ransomware;
Li-Cycle’s failure to effectively remediate the material weaknesses
in its internal control over financial reporting that it has
identified or its failure to develop and maintain a proper and
effective internal control over financial reporting; the potential
for Li-Cycle’s directors and officers who hold Company common
shares to have interests that may differ from, or be in conflict
with, the interests of other shareholders; and risks related to
adoption of Li-Cycle’s shareholder rights plan and amendment to the
shareholder rights plan and the volatility of the price of
Li-Cycle’s common shares. These and other risks and uncertainties
related to Li-Cycle’s business are described in greater detail in
the section entitled "Item 1A. Risk Factors" and “Item 7.
Management’s Discussion and Analysis of Financial Condition and
Results of Operation—Key Factors Affecting Li-Cycle’s Performance”
in its Annual Report on Form 10-K filed with the U.S. Securities
and Exchange Commission and the Ontario Securities Commission in
Canada. Because of these risks, uncertainties and assumptions,
readers should not place undue reliance on these forward-looking
statements. Actual results could differ materially from those
contained in any forward-looking statement.
Li-Cycle assumes no obligation to update or revise any
forward-looking statements, except as required by applicable laws.
These forward-looking statements should not be relied upon as
representing Li-Cycle’s assessments as of any date subsequent to
the date of this press release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240318851351/en/
Investor Relations Nahla Azmy Sheldon D'souza Email:
investors@li-cycle.com Media Louie Diaz Email:
media@li-cycle.com
Li Cycle (NYSE:LICY)
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