Li-Cycle Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 14, 2023

There are 8 speakers on the call.

Operator

Good day, everyone. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2023 Lifecycle Holdings Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you.

Operator

I will now turn the call over to Nala Asmi, Head of Investor Relations. Please go ahead.

Speaker 1

Thank you. Good morning and thank you everyone for joining us today for Lifecycle's review of our business and financial results ended June 30, 2023. We will start today with formal remarks from Ajay Kochar, Co Founder, President and Chief Executive Officer Tim Johnston, Co Founder and Executive Chairman and Debbie Simpson, Chief Financial Officer. We will then follow with a Q and A session. Ahead of this call, Life Cycle issued a press release and a presentation, which can be found on the Investor Relations section of our website at investors.

Speaker 1

Lifecycle.com. On this call, management will be making statements based on current expectations, plans, estimates and assumptions, which are subject to significant risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of life cycle. Actual results could differ materially from our forward looking statements. If any of our key assumptions are incorrect, including the pivotal factors discussed in today's press release, during this conference call and in our past reports and filings with the U. S.

Speaker 1

Securities and Exchange Commission of the Ontario Securities Commission in Canada. These documents can be found on our website at investors. Lifecycle.com. We do not undertake any duty to update any forward looking statements, whether written or oral, made during this call from time to time to reflect new information, future events or otherwise, except as required. With that, I'm pleased to turn the call to Ajay.

Speaker 2

Thank you, Nala, and good morning, everyone. I'm excited to discuss the progress our team has made during the Q2 as we continue to advance the implementation of our Spoken Hub network strategy. Blackbaud continues to capitalize on strong secular trends and supportive government policy. Our plans to grow our network will position Life Cycle to become the top global recycling producer of lithium carbonate and key battery grade materials, establishing Lifecycle in a leading role in the electrification ecosystem. Beginning with Slide 3, I would like to cover some of the key highlights of our progress, which we'll discuss in greater detail in this call.

Speaker 2

On the commercial front. We signed a Memorandum of Understanding to collaborate and explore lithium ion battery recycling solutions with EBE Energy, one of the world's largest lithium ion battery cell manufacturers. From an operational perspective, we continue to build strong momentum for our Spoken Hub business. At our Rochester Hub in North America, we significantly advanced construction with continued expectation of the start of commissioning in late 2023. For the development of the Port of SME Hub, our first in Europe.

Speaker 2

We progressed to work on the definitive feasibility study with Glencore and and expected to be completed by mid-twenty 24. And our first European spoke began operations with the start up of Line 1 in August with line 2 expected to follow in late 2023. Finally, on the financial front. We're also pleased to report that we are at the final stages of completing our process with the DOE Loan Programs Office or LPO and expect to close the 3 $75,000,000 loan in September 2023. Turning to Slide 4, I'll discuss Lifecycle's global Spoken Hub portfolio and our continued progress in executing on our global network growth strategy.

Speaker 2

As illustrated on the left of this slide, With significant Gigafactory capacity projected to come online, we expect to see meaningful demand growth for recycling of all forms of lithium batteries in both North America in Europe. Aligning with key battery supply chain customers, we're expanding our global commercial footprint by strategically localizing our network close to demand centers and customers. Given this current portfolio, We expect to achieve pre processing capacity in excess of 100,000 tons of lithium ion battery equivalent and post processing capacity of 85,000 105,000 tons of black mass per year. Importantly, and to put it into context, Once the Rochester and Port of Esme hubs are in full operation, these facilities will have total lithium carbonate production capacity of up to 25,000 tons per year. With this 1st mover advantage, Lifecycle is uniquely positioned to become a leading global and sustainable producer of lithium carbonate and other key battery grade materials.

Speaker 2

Turning to Slide 5 for a discussion on the EVE MOU and hungry spoke site selection. EVE is one of the world's largest lithium ion battery cell manufacturers with global facilities and customers that include major OEMs such as BMW and Bosch. In July, we entered into an MOU for global sustainable recycling solutions for EVE's Liquide Battery Materials. Consistent with our Spok strategy, capital investments are underpinned by multi year commercial contracting, combined with accelerating local market demand. Accordingly, we're excited to be exploring site selection in Hungary with expected scope, scale and timing to be completed by early 2024.

Speaker 2

EV with its recently announced plans to build its 1st European battery cell manufacturing facility in Hungary will serve as an anchor customer. Additionally, we expect to add OEM customers in the region, given Hungary is projected to be one of the largest battery cell manufacturing markets in Europe by the end of the decade. Let me now turn it over to Tim for more detailed update on our Spok and Hub network.

Speaker 3

Thanks, Ajay. Turning to Slide 6, we are thrilled to share an updated aerial view of the Rochester Hub. This image illustrates a significant construction progress that has been made since our Q1 call in May. Our continued execution on the Rochester Hub project is a testament to the talent, expertise and commitment of the lifecycle team. I'll provide a more detailed perspective on the next few slides.

Speaker 3

Turn to Slide 7. We are nearing completion of our major process buildings for nickel, cobalt and manganese. Within the Cobalt building, mechanical equipment has now started to be set. The warehouse building, which was completed in May, has received the certificate of occupancy. Our operations team have moved into the building and we are prepping their storage area to to discuss our major construction achievements.

Speaker 3

As displayed in the photos going clockwise, we are pouring concrete foundations for tanks, Installing the main pipe rack, which is a critical activity for the plant commissioning as it is the main artery of the plant. Building the finished products building where we will bag key end products before moving them to the warehouse for Transport to Customers. And finally and importantly, the lithium building foundations are now well underway. Turning to Slide 9 to cover the procurement of our long lead process equipment and bulk materials. To recap, Early on, we indicated that a key aspect of our construction strategy was to accelerate the procurement of long lead equipment and Construction Materials such that they would arrive on-site well ahead of when they were needed.

Speaker 3

Ultimately, this has proven to be a significant advantage in terms of our ability to execute on major construction milestones and maintain our project schedule. Displayed on this slide going clockwise, our solvent extraction equipment and crystallizers are now on-site at the Rochester Hub. Additional key equipment and bulk materials are also on-site and ready for installation. And finally, you see an impressive image of the largest piece of equipment being installed. Critical for the hub operations.

Speaker 3

The crystallizer is part of the sodium sulfate production process, critical for the recovery of lithium carbonate. Turning to Slide 10 for closing comments on the Rochester Hub. With detailed engineering and procurement activities near complete, Our main near term priority is the continued ramping up of the construction labor to support the remaining inflation activities. As we stated on prior calls, we are focused on actively managing the construction labor in order to continue to execute relative to production budget of $560,000,000 With expected annual production of 7.5 to 8,500 tons of lithium carbonate, 42,000 tons to 48,000 tons of nickel sulfate and 6,500 to 7,500 tons of cobalt sulfate, the Rochester hub will be a leading source of battery grade materials in North America. Turning to Slide 11, I'll provide an update on the Port of SMA Hub.

Speaker 3

Together with our partner Glencore, we are repurposing part of Glencore's existing hydrometallurgical site in Port of Esme, Italy. Once operational, this facility is expected to be one of the largest producers of battery grade lithium carbonate in Europe. We are actively progressing the scope on the DFS, which is anticipated to be completed by mid-twenty 24. Portobesme site is a strong fit with LifeCycle's proprietary black mass refining process for the recovery of lithium and battery grade materials. There are a number of benefits for executing this project at this site, including the use of existing infrastructure and equipment that can be repurposed for Black Mass Processing, optimization of an existing workforce with experience in metallurgical operations and access to logistics infrastructure that will facilitate the movement of large volumes of black mass end end products.

Speaker 3

As shown on the left of the slide, I'll touch briefly on the proposed process at the Portobeste HUB site. We have an expedited flow sheet that requires fewer processing steps to produce lithium carbonate and a mixed metal product of nickel and cobalt. At a high level, at the beginning of the process, we start with black mass leaching to dissolve metals into solution. Following impurity removal for iron and aluminum, the next step is the removal of manganese, followed by the production of a mixed hydroxide product or MHP containing nickel and cobalt. The final key step involves the recovery of battery grade lithium carbonate.

Speaker 3

This flow sheet differs from our processing approach at the Rochester hub, where we will produce battery grade nickel and cobalt products, I. E. Nickel and cobalt sulfates, which attract a higher value for battery manufacturing. The MHP process for the PortAvestment hub allows an accelerated path to production and provides additional flexibility for use within Glencore's existing refining assets or precursor producers for battery manufacturing. The Port of Esme hub is expected to have an annual processing capacity of up to 70,000 tons of black mass, producing up to 15,000 tons of lithium carbonate, 18,000 tons of nickel and 2,250 tons of cobalt contained in MHP.

Speaker 3

To reiterate, once both the Rochester and Port of Esme hubs Fully operational, these facilities will have a total combined lithium carbonate production capacity of up to 25,000 tons per year, making us a top global and sustainable producer of lithium carbonate and other key battery grade materials. Turning to Slide 12 for an update on our European Spok. In early August, we announced the start off of Line 1 at our Germany Spok. This Spok utilizes LifeCycle's patented and environmentally friendly Generation 3 technology to directly process all forms of lithium ion battery materials, including full electric vehicle battery packs without the need for discharging, dismantling or thermal processing. Once all lines are complete, Bespoke will be one of the largest pre processing facilities in Europe and the largest within life cycle network, having an annual total processing capacity of 30,000 Tons.

Speaker 3

As a reminder, Germany represents the largest market for both battery manufacturing scrap and end of life lithium ion batteries in Europe. Supported by multiple commercial contracts with battery and EV manufacturers, We are targeting commissioning of Line 2 in late 2023. I would like now to hand it over to Debbie for a financial review.

Speaker 4

Thank you, Tim. Turning to Slide 13 for a discussion on our 2nd quarter results. As seen on the top left of the chart, we produced 17 19 tonnes of black mass, more than double the level achieved in the prior year, driven by the start up of operations at our Arizona and Alabama spooks and the upgrades to our New York spook. Sales of Black Mass were 2093 tonnes, 2.5 times more than the 832 tonnes in the prior year. Moving to revenue for the period.

Speaker 4

As a reminder, our revenues are influenced by market prices of metals contained in our products, notably cobalt and nickel, with no value attributed to lithium content at this time as we continue to sell black mass as an intermediate product. Revenue from product sales and recycling services before non cash fair market value adjustments increased to 5 $5,000,000 from $4,700,000 in the prior year. While we deliver higher product sales volume from our expanding base of operations. These results were impacted by a decline in metal prices, namely cobalt and nickel. Total revenue was $3,600,000 compared to nil in the prior year.

Speaker 4

Total revenue included an unfavorable noncash fair market value adjustment of $1,900,000 in the quarter compared to $4,700,000 in the prior year period, which took the total sales value for Q2 2022 to nil. The main purpose of our Black Mass production is to utilize it as feedstock for our hubs, which produce lithium, cobalt and nickel products, unlocking significant incremental value. As such, the sale of Black Mass is an interim strategy in the read up to the start of operations at our hubs. The operationalization of our Rochester hub will represent a significant inflection point and Lifecycle's revenue and financial profile. Turning to Slide 14 for an update on our progress on the DOE loan.

Speaker 4

We continue to build on our track record of timing strategic and competitive financing in support of our network expansion plans. As you know, In late February, we announced a conditional loan commitment of $375,000,000 from the Department of Energy, further validating our position as a domestic supplier of battery grade materials in the U. S. The loan will be for a term of 12 years and will be based on the applicable 10 year treasury rate with no spread. As Ajay noted earlier, we made great strides and advanced the loan documentation to final stages.

Speaker 4

Depicted here at Stage 5 in the DOE LPO process. We are excited to share that our loan agreement is now working its way through the DOE's interagency process. We're expecting to close the transaction in September 2023. Turning to Slide 15 for an update on our cash flow and a review of the strength of our balance sheet. During the Q2, we invested $78,000,000 in our network growth focused on the Rochester Hub, ending the period with nearly $290,000,000 of cash on hand.

Speaker 4

Adding the loan commitment of $375,000,000 from the Department of Energy will take our current pro form a cash balance to more than $650,000,000 Turning to Slide 16 to reaffirm our 2023 business outlook book metrics. For our production at Black Mass, with our year to date results, we are well on track for our targeted annual production, pacing with market and customer needs. To reiterate, we are looking to optimize their future Black Mass production to meet peak stock needs for the start up of our Rochester hubs, unlocking future value of lithium carbonate and other battery grade materials. As a result, we intend to start building Black Mass inventory in the second half of twenty twenty three. Regarding capital investment.

Speaker 4

We expect to allocate a total of $285,000,000 to $345,000,000 for the development of the Spoken Hub network. Due to the timing on construction of the Rochester Hub, This will be more heavily weighted to the second half of twenty twenty three. And finally, we are working closely with the DOE LPO deal team for a targeted close of $375,000,000 loan this September. Turning to Slide 17 for closing. We remain focused on continued optimization of our Spoken Hub strategy, prudently aligning with commercial demand.

Speaker 4

We remain focused on continued execution, completing the Rochester Hub with commission commencing late 2023, growing our global Spoken Hub network, specifically exploring a new box site in Hungary and progressing the Portuguese meat hub, setting us up to be a leading global and sustainable lithium carbonate producer with capacity of up to 25,000 tonnes per year, expanding and diversifying commercial relationships with key global battery supply chain participants, such as with EBE Energy and increasing financial flexibility for our network growth plans with the DOE room expected to close this September. That concludes our formal remarks. Operator, we are ready to take questions.

Speaker 1

And we'll take our first question from Brian Dodson with Chardan Capital Markets.

Speaker 2

Hi, good morning. Hey, Brian, good morning. Hey, good morning. So As we near the completion of the Rochester Hub

Speaker 5

facility, do you think you could give us a little bit

Speaker 2

of color on what that build up ramp Yes. So I think there's a couple of phases here, and we've communicated a couple of these things. So the first is commissioning. So Well, the good news today and as we continue is reiterating the start of commissioning end of this year. And certainly, as we get through that and close to that, it's going to be an important topic, The commissioning phase and the ramp up phase.

Speaker 2

So suffice to say more to come. I will say that it's something that we can chat about. There are industry benchmarks for the style of facilities, for metallurgical facilities. Just one thing to keep in mind is obviously we're resource recovery reflecting facility, Leveraging a lot of those off the shelf unit operations, we extensively piloted, but also at a much smaller scale versus mining. So a lot of those benchmarks are for mining projects.

Speaker 2

That's the only caution associated with taking it verbatim. But in any terms, there are these benchmarks that you can look at to get a sense of directionally, the ramp up style. So I'm happy to chat about that more, but just as a general reference. Yes, very good. And And as you're thinking about Italy, certainly in Rochester, you had a lot of positive local and national government support about developing a facility in the region.

Speaker 2

How's your relationship with local authorities in Italy and do you see similar support? Yes, at a high level, yes, I mean, this is in collaboration with Zancorp. So they've also been operating in Sardinia location and For a long time, and probably for the background, they more on a track to transition the site. And this is a great transition. This is really turning an old asset, recycling an old asset into a new one, parts of it into

Speaker 6

Our next hub, which is going to be

Speaker 2

in Europe. And that strikes a couple of key high notes for both locally and also broadly for Europe. 1, locally, And this is important. They have a very skilled workforce that exists there. And this is an opportunity to transition that workforce.

Speaker 2

And that's the metallurgical workforce. So it's not very often that you get that opportunity. And for us, it's also much more efficient, faster, capital efficient, more operational efficient. So that's the local view. And then from a broader European view, What's very strategic here and we were very intentional with this statement around us being on a track to produce Up to 25,000 tons per year of lithium carbon.

Speaker 2

I don't think folks have really taken that in, in terms of our significance over time. And from that angle, domestically And broadly for Europe, this is very strategic, right down the fairway from the angle of the European battery regulation, from the angle of minimum recycled content and really being first to market there with larger scale resource recovery for Black Mass to produce refined head products. So yes, it's true, yes, but that's the color behind it. Excellent. Thanks for the color.

Speaker 2

Appreciate that. Thanks very much. Thanks, Brian.

Operator

Thank you. We'll take our next question from Ben Kallo with Baird. Please go ahead.

Speaker 5

Hey, guys. Good morning and congratulations on the progress. Maybe if you could just talk about I know you did in your prepared remarks about the differences in the hub and why you're making those differences. I heard time to market, but anything else from Europe to Rochester. And then just how do we think about how many spokes you want to match With the hub, because you guys have announced a lot and built a lot and made a lot of progress on the spoke part.

Speaker 5

So I'm just wondering if that's More to come after Hungary or how we should think about that. Thank you.

Speaker 2

Yes, for sure. Hey, Ben. Yes, on the first part around the flow sheet And the way to think about this, we wanted to start to introduce this. To explain, it's interesting and I'll back up a little bit for our Rochester plant. So Rochester, of course, It's going to be pretty same looking, carbonate, nickel sulfate, cobalt sulfate.

Speaker 2

And the core difference here is really around the nickel and the cobalt. So So at Rochester, we're going to sulfates which go into precursor, so in the right factory manufacturing industry and the Garner higher value. You can imagine because it's added form of the product for safe and the metal. We actually have looked at This other path, there's this common intermediate, which we've shown here on Page 11, which is called mixed hydroxide precipitate, NHP. So it's a common product from primary, meaning mining and refining.

Speaker 2

And why we didn't go that path for Rochester is actually in North America, there's no real captive refining asset to take that product. So technically, economically, it made a lot more sense for us to go the pathos, the sulfates and Ramster. In the case of Europe, Glencore actually has a refining facility in Norway, Nickelberg. So that facility can take in intermediate and then refine it further. So it's a bit of a case by case choice.

Speaker 2

In this case, that's a very efficient path, both in terms of the speed, but also building off one of the point on that is lastly, we actually piloted both this flow sheet that you see for Fortive Esme and the flow sheet for Rochester extensively, getting back 5 years ago. So, technically, we're just leveraging the work that we've already done in the collaboration with Glencore. So, that's the first part around the hot flow sheet. And then on the Spok side, yes, you saw today that we indicated and announced that we are looking at site selection for a Spok in Hungary. Hungary is a rising star in terms of the profile of battery manufacturing in Europe.

Speaker 2

It has been That's on the back of also our collaboration with EVE, the top 5, 10 lithium battery manufacturer. In terms of the growth from there and how I'd say a good roadmap is, for example, what we've done in Germany. So our mode here is really looking to 1st and foremost ideally double up lines where we already have a presence Investments can be much more capital efficient, faster, operationally efficient right from the people perspective. That'd be probably a first approach for some of our existing sites, but then second and alongside that is where we have the need to be closer to our customers, that's the whole spoke model obviously, then we'll look at new additional sites as well, for example, like Hanbury. So it's a bit of both as you think about how we're going to continue to expand and lockstep with customers.

Speaker 5

Thank you. And if I could just add one more. Just how do we think about the You're building up a Black Mass inventory just going forward since you're getting close to commissioning in Rochester.

Speaker 6

How should

Speaker 5

we think about that affecting sales?

Speaker 2

For sure. And I'll start and then David can add on and say that. So Yes, I'd reiterate to say that we're on track to start that inventory build in the second half here. And also you've also reiterated the start of commissioning about towards the end of this year. So those really go together, right, at the end of the day.

Speaker 2

And vis a vis how it affects our For following sales and what's to come, I'll turn it over to Stephanie. Yes.

Speaker 4

So, Ben, it's something we are super keen to get underway And it's just a question of timing. Our warehouse is ready. So we've got space to set down the inventory. And it's just a case of working through our business plan, but you should expect that somewhere in this back half that we would begin to set down some inventory in preparation for the commissioning and ramp up of the Hub. So what you see once we do that is we will still continue to report around our Black Mass production, which will be a good indication of you as to how we're operating in our Spok network.

Speaker 4

But clearly, that will have some kind of impact as we start to ramp up of inventory to our revenue line as we won't be selling it anymore. And we won't go to 100% right out of the gate. It will be a gradual build out of this inventory. So there will be a mix of inventory build and revenue, but there are implications first for the revenue line. But just as a reminder, This makes great economic sense for us because right now we do not capture any lithium value in In selling this Black Mass product, feel better to set it down in inventory with the opportunity to capture that value once we've got the Hub operating.

Speaker 5

Thank you.

Speaker 2

Thanks, Ben.

Speaker 4

Thank you.

Operator

We'll take our next question from Matthew O'Keefe with Cantor Fitzgerald.

Speaker 6

Hi. Good morning. Just a question for me on the DOE loans, start with What kind of covenants are around that? And when you do get that specifically, when you do get that approved, Will it be applicable to your build out in Europe or would it have to be only in domestic build out in the United States?

Speaker 2

Hey, Matthew. Good morning. I'll start and then maybe can add on as needed. So, yes, so vis a vis, I'll pluck with these proceeds. So it does have to be for the build out in actually our U.

Speaker 2

S. Business. So and the key to process there is actually the hub. Now a bit of a dynamic there at a high level is the eligible cost in this program is really the capital cost and obviously folks are tracking where you Thanks. A lot of that capital costs and more to come.

Speaker 2

So the way it's going to work is we can actually draw against And then there's more to come and we can continue to draw essentially against that. And then that can go towards As you can imagine as we get through the next bit, of course, there's non capital cost too, right? So there's ramp up of working capital, etcetera. So that's what that can be used for, but it's being drawn against eligible AKA capital costs. But what that does for us is obviously at the Taco level, That would have been money that we'd use from the Taco level to fund that build at the U.

Speaker 2

S. Levels, it opens up that funding to go do. The next thing and obviously we've alluded to the It's really around Europe. And our side, Debbie can also add anything to the covenants in general.

Speaker 4

Yes. Good morning, Matt.

Speaker 6

Good morning.

Speaker 4

So I think my preference would be to get this phone fully closed And then we can talk about the structure around it versus now before we've finalized the documentation, albeit that From our perspective, we've pretty much signed off on all the documentation. But I think if you're looking for a guide, you can really think along a typical project financing structure. Those are the types of covenants that go with that type of structure that you can expect in this arrangement, albeit it is with the U. S. Government.

Speaker 4

And the one beautiful thing that is very different from that and the commercial bank project financing structure is with its price to U. S. Treasuries and there's no surprise. So there's a degree of It has a long life for paying back, which gives us a lot of flexibility. And then the other piece that I think we've mentioned this before, What I would share right now is it is secured around those assets that we're building, right?

Speaker 4

So it is secured against that hub asset, but not the entire company.

Speaker 6

Right. Okay. No, thanks. I just wanted to that's great, because it just does seem like it provides you with a great deal of flexibility. I guess The takeaway on this and the mechanics around it, you've explained, I appreciate that.

Speaker 6

If I could just ask one more question on the technical side. We've seen an Taking LFP battery chemistry going into EVs, there's either LFP plants being built up and down of the U. S. You guys can accept LFP, correct?

Speaker 2

Correct, Matt, yes.

Speaker 6

Yes. Okay. So that doesn't really affect any I guess there's plenty of nickel based batteries as well to satisfy for the or at least for the next decade.

Speaker 2

Yes. So for sure, this is something very close to our hearts. So We say, as you said and I just sent you briefly, we accept lithium iron phosphate batteries, LFP batteries commercially. So I'll walk through it on the way in and the way out. So on the way in, from our spokes, you can imagine there are mechanical processing facilities, so they're agnostic to the chemistry.

Speaker 2

And as for our hub, of course, we have nickel and cobalt manganese production capability, but also looking for the hubs in the Rochester Can'take LSP. And we're looking at a similar thing for our part of Esme hub. One other aspect there on the way out is this whole discussion on lithium carbonate versus lithium hydroxide. So we obviously gone the path of producing lithium carbonate, which was a technical and risk adjusted choice, not adding too much complexity, but going to be a lithium hydroxide off the path. But if there were to be and we do continue to see growth in LSP in North America and Europe, then that's good too from the angle of less than carbonate demand.

Speaker 2

Blocking to that is as we look at the Gigafactories that are online, coming online and in the pipeline for North America and Europe. It is still dominated by higher nickel chemistries. So we see LMP coming in, but It's gradual and even when we sensitize that to a very aggressive case, there is still quite a bit of high nickel chemistry. So that's from the aspect of our customers and the feed for our hubs. We don't see that as a concern, but our key franchise is going to continue to be able to take better capture.

Speaker 6

Great. Thanks so much. Appreciate it.

Speaker 2

Thanks, Matt.

Operator

We'll take our next question from Jeff Osborne with TD Cowen.

Speaker 7

Good morning. A couple of questions on my side. Debbie, I was wondering if you Just to pine on the operating expense level, it seems like it's crept up and I was thinking it would be a bit more flattish. If you could just talk about what the outlook is for the second half of the year as you move into commissioning would be helpful.

Speaker 4

Yes, no problem. Yes, I'm not really sure that I Follow your math on it creeping up. It is a little bit complicated in the income statement and what you really need to do is back out some non cash expenses. I think Q1 and Q2 of this year are a good indicator for the balance of the year for 2023, And you should expect it to be on or around that same level.

Speaker 7

Got it. And then for Ajay, maybe on the Italy So with the different scope, which you touched on, if we were stuck in an elevator and you were trying to pitch me this ahead The feasibility study, is there sort of a rule of thumb in terms of time to market, you could do it X percent faster? And then what the financial ramifications are in terms of EBITDA per ton as well as CapEx per ton, just in terms of The difference in scope would be helpful if you could just articulate that with a bit more precision.

Speaker 2

Sure. Hey, Jeff. And I'll have a question in the back I guess that's probably a good time to elaborate on that. I'd say, look, the bottom line is faster, It's a more streamlined flow sheet. Of course, the impact of that is you're making a higher value nickel cobalt sulfate, but at the same time, we've provided To contain a nickel and cobalt to get a bit of sense of the rough revenue range.

Speaker 2

MHP by the way is a Pretty common intermediate has indices actually from numerous reporting agencies. So you have a sense of the payables on the nickel and cobalt. Just keep in mind, again, it's not exactly the same as mining product. So, Model Mine is faster. It's tailored for Europe in terms of the collaboration with that person I talked about around the refining facility in Norway and then the capital intensity, we'd expect a lower capital intensity versus Rochester.

Speaker 2

So that's Qualitatively, I'll see the full update. Elevator Mitchell will be able to be enabled on the back of the full DFS results, which we're looking forward to sharing.

Speaker 7

Got it. And then, I didn't see any reference to the production tax credit in the presentation. Have you been able to confirm that you'll be eligible for the 10% PTC here and what the expectation is, the timing of that. Yes. So we

Speaker 2

do think continue to think and based on engagement that we are eligible for the 10 It does seem like the guidance that continues to get pushed out a bit. The latest that we have on that is likely to fall Understand specific guidance, but based on our engagement today, yes, we do look to be eligible for the 10% BPC.

Operator

Great. Thank you.

Speaker 2

Thanks, Jeff.

Operator

Thank you. At this time, it appears we have no further questions. I'll now turn the call back to Ajay Kochar for any additional or closing remarks.

Speaker 2

Thank you, Todd. So looking back, it's actually down the 2 year anniversary since LifeCycle became a public company. And during that time, we delivered on our strategic plan to become the leading innovative and sustainable pure play lithium ion battery materials recycler and supplier of key battery grade materials. By closing loop for the domestic supply chains in North America and Europe, we're enabling the electrification ecosystem. And to recap our significant achievements, which validate our 1st mover fiscal 2019.

Speaker 2

We have built an unparalleled global integrated pre and post processing network or spoken hub network that positions Lifecycle to be a leading supplier of battery grade materials, including lithium carbonate. We've entered into strategic long term commercial arrangements with leading global players in the battery supply chain, including Glencore, Traxxas, Keyon, Vinesse, EVE, LG, in addition to other OEMs. And Since being public, we've achieved competitive financings totaling $725,000,000 with strategic partners and government including Coke, LG, Glencore and the Dewey. So in summary, we're extremely proud of our team with industry leading expertise, continued successful execution and focus on driving significant value for our shareholders. And we look forward to demonstrating further progress in the coming quarters that puts Lifecycle on a path to become a top global producer of key battery grade materials with the leading sustainable technology and strategic partnerships.

Speaker 2

So thanks for your time, interest and support for Life Cycle.

Operator

This does conclude today's lifecycle 2nd quarter 2023 earnings call and webcast.

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Key Takeaways

  • Lifecycle signed a Memorandum of Understanding with EVE Energy to develop global sustainable recycling solutions and is evaluating a new spoke site in Hungary to serve anchor battery-cell manufacturing customers.
  • Construction at the Rochester Hub in North America is substantially advanced, with commissioning expected in late 2023 and designed annual output of up to 8,500 tons of lithium carbonate plus 42,000–48,000 tons of nickel sulfate and 6,500–7,500 tons of cobalt sulfate.
  • The Port of Esme Hub in Italy, being developed with Glencore, will repurpose existing hydrometallurgical assets and is targeted to complete its definitive feasibility study by mid-2024, aiming for up to 15,000 tons of lithium carbonate and associated nickel-cobalt mixed hydroxide per year.
  • Lifecycle’s first European Germany Spoke began processing on Line 1 in August, with Line 2 expected online in late 2023, together providing up to 30,000 tons of annual pre-processing capacity for lithium-ion batteries.
  • The company is in the final stages of closing a $375 million DOE loan this September, which will lift pro forma cash resources to over $650 million and support continued network expansion.
A.I. generated. May contain errors.
Earnings Conference Call
Li-Cycle Q2 2023
00:00 / 00:00