Li-Cycle to receive $75M investment from Glencore

Lithium-ion battery (LIB) recycler Li-Cycle Holdings Corp., Toronto, has secured a $75 million investment from longtime strategic partner Glencore via a senior secured convertible note. Glencore is a Switzerland-based mining and metals conglomerate and a producer, recycler and marketer of nickel and cobalt for the production of LIBs.

The investment is Glencore’s second in Li-Cycle following a $200 million investment made through the purchase of a five-year convertible note in June 2022. The new capital infusion, which is expected to close by the end of March, comes as Li-Cycle continues a comprehensive review of its operations, including the paused construction of its “hub” facility in Rochester, New York.

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Li-Cycle says although the issuance of the note would generally require approval of the company’s shareholders under New York Stock Exchange (NYSE) policy, the company requested and received a waiver from the NYSE to proceed with the agreement with Glencore. Li-Cycle's audit committee of the board of directors, composed solely of independent and disinterested members of the board, determined that the delay associated with obtaining a shareholder vote prior to issuance of the note would “seriously jeopardize the financial viability of Li-Cycle,” and, on that basis, the audit committee approved the company’s reliance on the NYSE’s financial viability exception to the shareholder approval requirement.

Per NYSE requirements, the company will mail a letter to shareholders no later than 10 days prior to the anticipated closing of the note notifying them of the Glencore agreement, among other items.

“We are pleased to secure an additional $75 million investment from Glencore, following Glencore’s June 2022 investment, to improve our liquidity position while we continue our ongoing comprehensive review process,” Li-Cycle co-founder and CEO Ajay Kochhar says in a news release. “This financing enhances Li-Cycle and Glencore’s existing long-term strategic partnership and represents an interim step in our funding strategy to support Li-Cycle’s future plans.”

Glencore’s convertible note will mature on the fifth anniversary of closing and will be convertible into common shares of Li-Cycle stock at an initial price of 53 cents per share. The company will be entitled, at its election, to pay interest on the note in cash or in-kind (PIK).

Among a number of conditions outlined by the companies, Glencore will seat two additional nominees on Li-Cycle’s board of directors, for a total of three members. The first additional nominee will be identified by Glencore and will be subject to customary approvals by Li-Cycle and will be proposed for election at Li-Cycle’s annual shareholder meeting this year. The second nominee will be proposed for election at Li-Cycle’s annual shareholder meeting in 2025, or sooner in the occurrence of a vacancy, and must be approved by both companies.

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Glencore is a battery feedstock partner for Li-Cycle’s “spoke” facilities, as well as a future supplier of both black mass and key reagents for Li-Cycle’s future “hub” facilities. According to Li-Cycle, Glencore complements its existing partners through offtake and marketing of Li-Cycle’s end products and certain byproducts produced and expected to be produced at its “spokes and hubs.”

Li-Cycle uses a “spoke-and-hub” business model, where end-of-life batteries are processed into black mass at a spoke site, then the black mass is turned into battery-grade lithium carbonate, cobalt sulfate, nickel sulfate and other critical materials at a hub site.

In regard to additional funding, Kochhar says the company is continuing to work closely with the U.S. Department of Energy (DOE) on the conditional commitment for a loan of up to $375 million that was first announced in February 2023. Also, Tim Johnston, Li-Cycle’s co-founder and executive chairman, says the company is reviewing its global recycling network, as well as its go-forward strategy for the Rochester site, including analyzing potential end-product mix options and construction strategy.

“We believe the demand for critical battery materials continues to accelerate, and Li-Cycle continues to work to position itself as a future leader in the production of critical battery materials through our sustainable, safe and patented recycling technology,” Johnston says.

Citing ballooning construction costs, the company halted construction on its Rochester hub in October 2023. What was initially estimated as a $485 million project is now expected to cost between $850 million and $1 billion to complete, company officials said during their 2023 third quarter earnings call in November. At the close of the third quarter, the company reported that $301 million already had been spent on construction.

The company reported a $130.5 million loss in the third quarter of 2023 compared with a $20.6 million loss in the same quarter of 2022, and Kochhar said the company had taken steps to save money including staffing cuts, implementing working-capital initiatives and eliminating nonessential operational spending. He said at the time that the company also planned to slow its black mass production at its other North American spoke facilities located in Rochester, Alabama, Arizona and Ontario.

Li-Cycle's 2023 annual report will be filed on or before March 15.

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The company also announced Glencore’s investment in its Rochester Hub Newsletter, with Kochhar and Johnston affirming their belief that demand for critical battery materials will continue to grow, and that Li-Cycle will continue to work to position itself as a future leader in the production of critical battery materials through its recycling technology.

“We expect that our future Rochester Hub project will be a key part of our ability to help build a localized and circular battery material supply chain in North America,” the newsletter states. “We deeply appreciate the Rochester community’s continued support, and we thank you for your patience.”

When the Rochester project was announced, the company said the facility would be capable of processing up to 35,000 tons of black mass per year and deliver yearly production of up to 8,500 tons of lithium carbonate, 48,000 tons of nickel sulfate and 7,500 tons of cobalt sulfate while creating 270 jobs. The project already has secured several supply agreements for recycled LIB feedstock across the U.S. and Canada.