Li-Cycle: Material recovery plant investment might exceed $1Bn – pre-processing plant closed

In the Canadian battery recycling company Li-Cycle’s presentation of the its Q3 report an update was provided on the halted construction of its material recovery plant as well as the measures the company is taking to secure liquidity. In the update it became clear that:

• Finalising the construction of its Rochester plant will require a total investment between $850M $1,100M. By November the company had invested a total of $394M in the plant that as late as in June was budgeted to $560M.

• To reach production faster the company suggested an amended flowsheet with production of MHP (mixed hydroxide precipitate) as an intermediate step to a product with higher value than black mass. This still requires further investment in the plant as a leaching plant is still not built.

• The $375M loan commitment from US Department of Energy still on the table but short term financing needs to be in place before any further proceedings.

• Cash and cash equivalents the 30th September amounted to $132M and was estimated to around $100 the 10th November.

• To minimise cash flow Li-Cycle has made its staff redundant in Kingston where it operates its first pre-processing plant, and significantly lowered production in its Rochester pre-processing plant (according to local media). Planned plants in Norway, France, Hungary and additional lines in Germany are put on hold.

• The Portovesme plant on Sardinia, in joint venture with Glencore, with a potential to have Glencore financing Li-Cycle’s share of the company.

Taken together the situation is very challenging with additional cash requirements potentially exceeding the entire amount Li-Cycle raised by the the time of the SPAC agreement. The company’s share further plummeted to only 64 cents at the time of the report, a market cap close the company’s cash in September.

That the company is closing down and slow down activities in its pre-processing plants is obviously a cashflow saving measure but also means that these operations, which should be where revenue should be generated in the company today, are not cash flow positive. This is further emphasised with a production of only 1,190 tonnes of black mass in the third quarter a slight decrease compared to the same period in 2022 although the company’s capacity and geographical footprint has grown significantly.