Glencore injects $75 million into battery recycler Li-Cycle

Ontario-based battery recycling company Li-Cycle announced that the company had received a $75 million investment from Glencore, building on previous investments and their existing long-term partnership

The strategic partnership between Li-Cycle and Glencore was first announced in 2022, when Glencore said it would subscribe for $200 million of convertible debt in Li-Cycle and the company would become Glencore’s preferred partner in the lithium-ion battery recycling sector.

As part of that agreement, Glencore is a battery feedstock partner for Li-Cycle’s Spoke facilities – which shred lithium-ion batteries and produce black mass – and will be a future supplier of both black mass and key reagents for Li-Cycle’s future Hub facilities – which will be designed to extract recycled battery raw materials from black mass.

“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 chief executive officer Ajay Kochhar said.

Kochhar added that the financing represents an interim step in the company’s funding strategy to support Li-Cycle’s future plans.

Challenging financial situation

The new investment comes in a financially unstable period for Li-Cycle, which last year sent shivers through companies engaged in lithium-ion battery recycling.

Li-Cycle suffered a sharp drop in net profits in the third quarter of 2023 following the decision to pause the construction of its major processing hub in Rochester, New York, partially due to spiraling costs linked to the project.

In December, the company was also informed by written notice from the New York Stock Exchange (NYSE) that it was not in compliance with continued listing standards because the average closing price of Li-Cycle’s common stock was less than $1.00 over a period of 30 consecutive trading days.

Now, in addition to Glencore’s investment, Kochhar added that the company continues to work closely with the US Department of Energy (DOE) on the conditional commitment for a loan of up to $375 million.

Li-Cycle had received a conditional loan agreement for $375 million for the Rochester Hub from the DOE in February 2023, but said in its third-quarter earnings call that additional funding would likely be needed before the company could restart construction and gain access to the loan.

Following the announcement that the company would pause construction work on its Rochester Hub project, Li-Cycle announced in November that the company had engaged Moelis & Company – a global independent investment bank – as a financial advisor to assist in evaluating the company’s financing and strategic alternatives.

The new investment also comes at a challenging time for black mass prices and demand, with market participants reporting a global oversupply of the material amid limited offtake to Asia and higher generation volumes in the West.

Fastmarkets’ daily price assessment for black mass, NCM/NCA, inferred, cif South Korea was $4,294.30 per tonne on March 12, down from a high of $6,590.16 per tonne on August 1, 2023.

Although the price fell sharply from August to February – when it hit a low of $4,033.53 per tonne on February 16 – recent increases to LME nickel prices have moved the value up gradually over recent weeks.

New investment in recycling network

In the March 12 announcement, Li-Cycle said that it had formed a special committee (SC) – composed solely of independent and disinterested members of the Board – and excluded Glencore’s board representative, with Moelis as financial advisor and placement agent.

The SC, with assistance from Moelis, reviewed and evaluated potential financial and strategic alternatives for Li-Cycle.

“After a careful review and assessment of the alternatives identified by the SC through this process, the company entered into the agreement with Glencore,” the announcement said.

“As part of our previously announced comprehensive review, Li-Cycle is continuing to review our global recycling network,” co-founder and executive chairman Tim Johnston said of the March 12 announcement. “We are also reviewing our go-forward strategy for the paused Rochester Hub, including analyzing potential end-product mix options and construction strategy.”

Li-Cycle will appoint two additional nominees of Glencore to its Board of Directors – bringing the total to three – as part of the investment agreement.

The first nominee will be proposed for election at the company’s annual general meeting of shareholders held in 2024, and the second in 2025 – or earlier, in the event of a vacancy on the Board.

The new board nominees are not to be related parties of Glencore and its affiliates, and are to be independent under applicable Ontario securities law, as well as US Securities and Exchange Commission and NYSE rules.

Glencore pledges responsible growth

Glencore has also committed to not acquire beneficial ownership of additional common shares of Li-Cycle above 5% or to seek to take the Li-Cycle private without the approval of a committee of disinterested directors of the company and, in the case of a take-private transaction, the approval of a majority of the disinterested shareholders of the company.

“Glencore is committed to bringing scalable and sustainable circularity into the supply chain of battery materials,” Kunal Sinha, Glencore’s global head of recycling and non-executive director of Li-Cycle’s Board of Directors, said in the March 12 announcement. “Our original investment in Li-Cycle, alongside key commercial agreements, formed part of this strategy.”

The announcement also stated that this agreement would generally require approval of Li-Cycle’s shareholders under the shareholder approval policy of the NYSE.

But the delay associated with obtaining a shareholder vote before consummating the investment “would seriously jeopardize the financial viability of Li-Cycle, and, on that basis, the Audit Committee expressly approved Li-Cycle’s reliance on the financial viability exception to the requirement to seek shareholder approval,” the audit committee of Li-Cycle’s Board of Directors determined.

Li-Cycle received confirmation from the NYSE on March 1 that the NYSE would not object to the Company’s reliance on the financial viability exception.

Li-Cycle said in the March 12 announcement that it expects to provide its full year 2023 financial and operations results on or before March 15. The company had filed a notification on February 29 that the annual report would be submitted late.

The agreement is subject to customary closing conditions and the expiration of the ten-day period for required notice to shareholders informing them of Li-Cycle’s reliance on the NYSE financial viability exception.

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