8-K: Li-Cycle Resumes Collaboration with Glencore for European Recycling Hub, Modifies Convertible Notes

Li-Cycle and Glencore are resuming their collaboration to assess a new Hub facility in Italy, while also modifying the terms of Glencore's convertible notes following the closing of a $475 million loan facility with the U.S. Department of Energy.

Summary

• Li-Cycle and Glencore are restarting their collaboration to evaluate the feasibility of a new battery recycling Hub in Portovesme, Italy.
• Glencore will lead and fund the study, with Li-Cycle providing technical support.
• The project aims to use Glencore's existing infrastructure and Li-Cycle's technology to produce battery materials.
• The Portovesme Hub is expected to process black mass from Glencore's network and Li-Cycle's German facility.
• The project is intended to support the European battery supply chain and meet EU recycling targets.
• The closing of a $475 million loan facility with the U.S. Department of Energy has triggered an automatic modification of Glencore's convertible notes.
• The modification, effective December 9, 2024, will adjust the maturity date, interest rate, and conversion price of the notes.
• Glencore's ownership in Li-Cycle is expected to increase to approximately 66% on a fully diluted basis due to the conversion price adjustment.
• Li-Cycle is also focused on securing full funding to restart construction of the Rochester Hub project.

Sentiment

Score: 6

Explanation: The news is mixed, with positive developments like the Glencore collaboration and DOE loan, but also concerns about increased Glencore ownership and the need for further funding. The sentiment is cautiously optimistic.

Positives

• The collaboration with Glencore for the Portovesme Hub project has the potential to address the lack of post-processing recycling capacity in Europe.
• The project is expected to support the European battery supply chain and meet EU recycling targets.
• The use of Glencore's existing infrastructure could reduce capital expenditure.
• The $475 million DOE loan facility is a major milestone in funding efforts for the Rochester Hub project.
• The modification of Glencore's convertible notes provides additional financial flexibility.

Negatives

• The increased ownership of Glencore to 66% may dilute existing shareholders.
• The company is still reliant on securing a full funding package to restart the Rochester Hub project.
• The company is still working to optimize its Spoke business.

Risks

• The success of the Portovesme Hub project depends on the outcome of the pre-feasibility study.
• Li-Cycle's ability to secure the remaining funding for the Rochester Hub is not guaranteed.
• The company faces risks related to its ability to continue as a going concern.
• There are risks associated with the company's reliance on a limited number of commercial partners.
• The company has identified material weaknesses in its internal control over financial reporting.

Future Outlook

Li-Cycle is focused on securing a complete funding package to restart the Rochester Hub project and is continuing efforts to strengthen its Spoke business. The company is also assessing the viability of the Portovesme Hub project with Glencore.

Management Comments

• We are pleased to continue our assessment and study of the Portovesme Hub project with Glencore, said Ajay Kochhar, Li-Cycles President and CEO.
• We believe the project has significant potential and can address the lack of post-processing recycling capacity in Europe needed for a localized closed-loop battery supply chain and provide a sustainable secondary source of critical battery materials.

Industry Context

This announcement highlights the growing importance of battery recycling in the context of the increasing demand for electric vehicles and the need for a sustainable supply chain. The collaboration with Glencore, a major player in the battery materials market, is a significant step for Li-Cycle. The project also aligns with the EU's push for recycled content in new batteries and the recycling of strategic raw materials.

Comparison to Industry Standards

• Li-Cycle's approach of using a Spoke & Hub model is similar to other battery recycling companies, but their patented technology is a differentiator.
• The collaboration with Glencore is a significant advantage, providing access to feedstock and infrastructure.
• The focus on the European market aligns with the increasing demand for battery materials in the region.
• The 66% ownership by Glencore is a significant level of control, which is not typical in the industry and may be a concern for other investors.
• Compared to other companies like Redwood Materials, Li-Cycle is more focused on the hydrometallurgical process, while Redwood is also exploring pyrometallurgical methods.

Related Party Transactions

• The modification of the convertible notes issued to Glencore is a related party transaction.

Stakeholder Impact

• Shareholders may experience dilution due to the increased ownership of Glencore.
• The project has the potential to create jobs in Europe.
• The project could provide a more sustainable supply chain for battery manufacturers.
• The project could benefit Glencore by providing a source of recycled battery materials.

Next Steps

• Li-Cycle and Glencore will conduct a concept and pre-feasibility study for the Portovesme Hub project.
• Li-Cycle will continue to seek a full funding package to restart the Rochester Hub project.
• Li-Cycle will continue to optimize its Spoke business.
• A Current Report on Form 8-K will be filed after the completion of the modification of the Glencore convertible notes.

Key Dates

Keywords

Li-Cycle, Glencore, Battery Recycling, Lithium-ion Batteries, Portovesme, Hub Facility, Convertible Notes, DOE Loan, Black Mass, European Battery Supply Chain