At Li-Cycle’s Q3 earning on the 13th of November, the company disclosed that its Rochester recycling Hub, is now anticipated to cost up to USD1 billion, almost double the initial USD560 million budget. Consequently, Li-Cycle is adjusting the project to include a phased recycling approach. Additionally, the company will slow black mass sales from its North American Spoke plants.

The Rochester Recycling Hub

After starting construction on the Rochester Recycling Hub in June 2022, Li-Cycle paused the project in October 2023. It cited concerns over spiralling construction costs and announced a project strategy review. Based on initial analysis, the company has revised the cost to between USD850 million and USD1 billion. This is dependent on how it chooses to progress with the project. This range is subject to assumptions and is likely to change as Li-Cycle decides which options to pursue.

The pause in construction allows the company to strategically align the project with present dynamics and progression in the battery recycling and EV markets. It creates an opportunity to optimise construction and contracting plans, possibly allowing the adoption of a phased approach. A phased approach could involve the production of intermediate battery metal products such as mixed hydroxide precipitate. This would be aimed at enhancing the overall project economics.

Additional Financial Points

In February 2023, Li-cycle signed an agreement with the Department of Energy (DOE). It is aiming to secure gross proceeds of up to USD375 million under the DOE’s Advanced Technology Vehicles Manufacturing program. As the company reviews its strategy going forward for the Rochester plant, it is engaged closely with the DOE to ensure it covers pre-agreed conditions. Moreover, Li-Cycle is still yet to fulfil conditions before the initial imbursement. It is required secure extra funding to meet a base equity requirement.

Li-Cycle is also implementing cost saving measures including staffing cuts, introducing working capital initiatives, and reducing nonessential operational expenditures. Additionally, the company plans to decelerate black mass production at its North American Spoke facilities, located in Rochester, Alabama, and Arizona. Furthermore, it paused production at the Ontario Spoke due to the low black mass sales in North America and the fall of nickel and cobalt prices.

Rho’s Evaluation

These recent developments highlight…


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Sources: Li-CycleLi-Cycle Earnings Call