Li-Cycle Holdings Corp., a North American leader in lithium-ion battery resource recovery, announced that it will proceed with the construction of its first commercial Hub facility, which is being developed within the Eastman Business Park near Rochester, New York.
In view of rapidly growing demand for lithium-ion battery recycling, Li-Cycle will increase the input processing capacity of the Hub by over 40%, from 25,000 tonnes to 35,000 tonnes of “black mass” annually (equivalent to approximately 90,000 tonnes of lithium-ion battery equivalent feed annually). With its increased capacity, the Hub will be able to process battery material that is equivalent to approximately 225,000 electric vehicles (“EVs”) per year.
The Company estimates that the Hub will require a total capital investment of approximately $485 million (+/-15%), which can be funded from existing balance sheet cash. Li-Cycle also expects to explore various opportunities to optimize its capital structure, for example, with potential credit from government-related institutions.
The Hub will be fully integrated with Li-Cycle’s existing network of Spoke facilities across North America. Li-Cycle’s Spoke facilities take in end-of-life batteries and battery manufacturing scrap to produce “black mass”, an intermediate product containing valuable metals such as nickel, cobalt and lithium. The Hub will transform that black mass into critical battery grade materials to be returned back to the lithium-ion battery supply chain. Li-Cycle’s Spoke facilities will be the primary suppliers of feedstock for the Hub. Once the Hub is fully operational, Li-Cycle expects to be the #1 or #2 domestic U.S. based supplier of battery grade advanced materials.
The total addressable market for lithium-ion battery recycling in North America continues to accelerate as battery manufacturers are investing to build the supply chain to support electrification. Megafactory investments are now projected to surpass 500 GWh capacity by 2025, approximately 11x the current capacity. Based on independent industry forecasts (including from Benchmark Mineral Intelligence) and Li-Cycle’s internal analysis, Li-Cycle estimates that there could be nearly 250,000 tonnes of lithium-ion batteries available for recycling from manufacturing scrap in North America alone by 2025. Upsizing the Hub enhances the Company’s ability to meet the increasing commercial needs of leading global customers within the lithium-ion battery supply chain.
“We believe the upsizing of our commercial Hub facility is timely, to capture growth from heightened demand with the mainstreaming of electrification in North America driving significant new battery megafactory deployments. Even with the increased capital investment, we expect the Hub project to deliver highly accretive returns,” said Li-Cycle’s President, CEO, and co-founder, Ajay Kochhar. “This is an exciting time for Li-Cycle as we advance the strategic execution on our integrated Spoke & Hub network and enable critical commercial solutions to the growing needs for domestic supply of battery materials in North America.”
Li-Cycle, LG Chem, Ltd. (“LGC”) and LG Energy Solution, Ltd. (“LGES”) entered into a manufacturing scrap supply and nickel sulphate off-take agreement non-binding letter of intent. With this proposed collaboration, LGES and Li-Cycle intend to cooperate on recycling nickel-bearing lithium-ion battery scrap and certain other lithium-ion battery materials to create a closed-loop ecosystem. Over a ten-year period, beginning in 2023, Li-Cycle will supply LGES and LGC with 20,000 tonnes of nickel contained in nickel sulphate from our Rochester Hub facility.
Concurrently with the entering into of definitive commercial agreements for such collaboration, LGC and LGES together will make a $50 million equity investment in Li-Cycle at a price of $11.32/per common share, upon completion of the commercial agreements by March 13, 2022. These proposed commercial arrangements and the investment represent a strong validation of Li-Cycle’s business model by one of the premier global strategic players in the lithium-ion battery space.
Through close collaboration with customers on their demand and product needs, Li-Cycle has finalized and approved the Definitive Feasibility Study for the Hub, including a fully-loaded estimated capital investment of approximately $485 million (+/-15%). The larger Hub optimizes project economics and capital intensity and includes best-in-class environmental improvements.
Key design and cost changes relative to a June 2020 preliminary feasibility study largely include, but are not limited to: 1) higher material costs due to increased size and supply chain inflationary impacts; 2) scope alterations responding to contracted feed supplies and implementing best-in-class environmental practices; and 3) up-sizing of nameplate output capacity of the Hub, resulting in1 ~250% higher Hub output capacity of nickel sulphate (~42,000 to 48,000 tonnes per annum), ~160% higher output capacity of lithium carbonate (~7,500 to 8,500 tonnes per annum), and ~65% lower output capacity of cobalt sulphate (~6,500 to 7,500 tonnes per annum).
The Company has engaged Hatch Ltd. as its engineering, procurement and construction management (EPCM) contractor for the project and is in the process of selecting its general contractor. Procurement has commenced on long-lead items and firm-price competitive quotes have been obtained for 80% of the required equipment for the Hub. Li-Cycle is on path to begin the Hub construction by year-end 2021 and to reach mechanical completion, commissioning and start-up in 2023, subject to receipt of remaining regulatory and other approvals.
