Glencore to supply Li-Cycle with black mass and end-of-life lithium-ion batteries in new partnership
Li-Cycle Holdings Corp. has partnered with Glencore plc, a provider of primary metals for the production of EV batteries. The strategic partnership will better serve the EV battery supply chain by providing customers with an integrated approach for their primary and recycled metal needs.
Li-Cycle and Glencore have executed a global feedstock supply agreement under which Glencore will supply all types of manufacturing scrap and end-of-life lithium-ion batteries to Li-Cycle. Li-Cycle and Glencore have also entered into a non-binding Term Sheet for global, long-term strategic contracts, which would complement Li-Cycle's existing off-take and marketing agreements, including:
- Supply of black mass to Li-Cycle's Hubs
- Off-take of black mass from Li-Cycle's Spokes
- Off-take of battery-grade end products produced by Li-Cycle's Hubs
- Off-take of by-products from Li-Cycle's Spokes and Hubs, and
- Supply of sulfuric acid, one of the key input reagents for Li-Cycle's Hubs
Upon execution of the commercial agreements, Glencore will make a $200 million investment in Li-Cycle and Glencore will have the right to nominate one board member to the Li-Cycle board. Li-Cycle has agreed to nominate Kunal Sinha, Glencore's head of recycling, to the Li-Cycle Board of Directors.
"We are thrilled to have Glencore as a long-term strategic investor and global commercial partner. Bringing our complementary capabilities together will accelerate the path to a circular economy for critical materials in the lithium-ion battery supply chain," said Ajay Kochhar, Li-Cycle co-founder and Chief Executive Officer. "These agreements further secure and diversify our lithium-ion battery supply and feedstock sources, competitively positioning our network expansion in North America and Europe."
Critical material supply has been recognized as a key success factor for enabling electrification around the world and localized supply sources are increasingly important to EV strategies. Glencore and Li-Cycle have a shared vision to enable sustainable, localized supply chains for electrification and recognize that both primary and secondary (or recycled) critical materials are required to deliver on this vision.
"As we continue to add to our recycling infrastructure of critical battery materials, we are pleased to work with Li-Cycle as a preferred global partner in the lithium-ion battery recycling space," said Kunal Sinha, head of recycling at Glencore. "This is a key step in establishing a strong long-term foundation for the vertical integration of the battery materials supply chain. Together, we will be expanding the spectrum of battery material supply solutions to a broader global customer base, particularly in Europe and North America."
"The $200 million investment by Glencore will enhance Li-Cycle's already strong balance sheet and will provide us with total cash greater than our anticipated capital needs for the completion of the Rochester Hub and the five Spokes currently in development and our operating needs for the next two years," said Debbie Simpson, Li-Cycle's Chief Financial Officer. "Once completed, the Glencore investment, together with the previously announced investments by LG Chem, Ltd. and LG Energy Solution, Ltd. and the investment made by an affiliate of Koch Strategic Platforms, will bring the total new capital we have raised since our August 2021 NYSE listing from key strategic global players in the battery material industry to $350 million."
Glencore financial investment
Glencore will purchase a convertible note in the aggregate principal amount of $200 million (the "note"). The note will mature on the fifth anniversary of closing and have an initial conversion price of $9.95 per Li-Cycle common share and Li-Cycle will be entitled to pay interest on the note in cash or payments in-kind ("PIK"), at its election. Cash interest payments will be based on the secured overnight financing rate (SOFR) plus five percent per year, and PIK payments will be based on SOFR plus six percent per year (with a SOFR floor of one percent per annum and cap of two percent per annum). In addition, Glencore has committed to a standstill agreement and Li-Cycle has granted certain registration rights to Glencore. If Glencore elects to convert during the conversion option period, Glencore would hold an approximate 10 percent equity stake in Li-Cycle (based on the current number of outstanding Common Shares).
The financial investment is subject to customary closing conditions and the execution of the commercial agreements described above. The commercial agreements are expected to be finalized and the financial investment is expected to close in the Company's third fiscal quarter of 2022.
