Q4 2021 Li-Cycle Holdings Corp Earnings Call
Good day my name is Britney and I'll be your conference operator today at this time I would like to welcome everyone to the fourth quarter and full year 2021 lifecycle holdings earnings earnings call and webcast all lines have been placed on mute to prevent any background noise.
The speaker's remarks, there will be a question and answer session.
That's a good question at that time, Please press star one on your telephone keypad.
He sent me operator assistance, Please press star zero.
Thank you I would now like to turn the call over to Mel to ask me head of Investor Relations. Please go ahead.
Thank you Britney good morning, and thank you everyone for joining us today for lifecycle review of our fourth quarter and full year 'twenty 'twenty. One results ended October 31.
First we will start today with a brief video then we will follow with formal remarks from Tim Johnson co founder and executive Chairman.
Jay culture.
Co founder President and Bruce Mckinnon, Chief Financial Officer.
Debbie Simpson, our CFO effective February one.
Also joining us for the Q&A session to follow.
This call lifecycle issue press releases a video in a presentation, which can be found on the Investor Relations section of our website at investors got lifecycle dotcom.
On this call management will be making statements based on current expectations plans estimates and assumptions, which are subject to significant risks and uncertainty.
Actual results could differ materially from our forward looking statements.
If any of our assumptions are incorrect, including because of factors discussed in today's press releases. During this conference call and in our past reports and filings with the U S Securities and Exchange Commission and the Ontario Securities Commission in Canada.
These documents can be found on our website at investors felt lifecycle dot com.
We do not undertake any duty to update any forward looking statement, whether written or oral made during this call or from time to time to reflect new information future events or otherwise, except as required with that.
I'm pleased to turn the call at the time.
Lifecycle has made significant strides towards achieving its strategic objective to be an industry leader in lithium ion battery resource recovery Act of leading a lithium ion battery recycler in North America.
$100 million investment by Coke strategic platforms.
$50 million investment by lithium ion battery industry leaders, LG, Chem and LG energy solution upon execution of a 10 year closed loop commercial arrangement with lifecycle and a partnership with arrival by utilizing lifecycle breakthrough commercial lithium ion battery recycling technologies end of life batteries from arrives.
Phebe fleets in the USA and Europe can be transformed into battery grade materials.
The company was recognized in SaaS companies. The next Big thing is intact and received the distinction award from the automotive sector core demonstrating environmental innovation in the manufacturing process, the one or 2021, yeah lifecycle warfarin.
Phoenix, Arizona focus nearing completion and will process up to 10000 tons of manufacturing scrap and spent batteries annually as well as full electric vehicle battery pack shredding work is also on track for the Tuscaloosa, Alabama spoke to be operational in 2022 to meet the demand for battery grade materials lifecycle announced.
Sizing of the input capacity of its North America hub, and Rochester by 40%, our Rochester hub will process the equivalent of over 225000 Tvs worth of material or approximately 18 gigawatt hours equivalent of lithium ion batteries last and importantly, lifecycle mobilized to site, where the Rochester hub, which is <unk>.
On track to ramp up starting in 2023 all of these achievements solidify lifecycle is the leading battery recycler in North America and sets the stage for the company's expansion globally.
Thanks, Noah and good morning.
We hope you enjoyed the video and came away with.
Megawatt rather we are about lifecycle.
Yes.
As you can see we are positioning the company to be the leading innovative and environmental was blackhawk of lithium ion batteries.
Key secondary school critical matters.
Through these two role we are effectively quality.
Expanding battery materials.
Please go ahead Marc.
2021 was a landmark beautiful lifecycle.
Significantly and successfully ramped up the implementation.
We can help them network strategy.
North America addressing a growing market.
And the need to secure supply domestically.
Before I review the highlights of the year I would like to take the opportunity to welcome Debbie.
Who is taking over as CFO .
Some time ago, we announced that Bruce.
Kind of plan to acquire in January we want to thank him for his contribution.
Roland thinking lifecycle public and we wish him well in his requirement.
Beginning on slide three for a review of our progress in key areas.
On strategy.
Starting off with a strong balance sheet, we made significant strides in long term strategic partnership arrangements with two leading global participants validating lifecycle gives us more.
The first is with <unk>.
Music platforms, which invested $100 million through the purchase of a convertible note.
Hi, ESP has been rapidly growing investment related to the energy transformation.
Typically within the electrification ecosystem.
In addition to the capital investment.
This partnership provides lifecycle, a strategic opportunity to deploy Cogs engineering prowess.
Fabrication quantum.
Appointment and operational readiness.
Second meaningful alliance with LG, Chem and LNG solution.
LG is a leading global chemical company with expertise in active battery materials manufacturer.
As the largest global lithium ion battery manufacturer.
Let's move vehicles outside of China.
By mid March.
Plans to invest a total of $50 million in lifecycle upon completion of a commercial agreement.
Battery supply and.
And offtake or nickel sulfide while mouthful.
In addition to the development of these key external stakeholder relationships, we have been building and aligning the internal leadership team.
We have made in recent years in business and finance leadership hires and realigned to a regional structure to more effectively support the acceleration of the company.
Yeah.
Under the new structure regional Presidents will obviously recycling operations commercial activities and business development activities.
<unk> Europe Middle East and Africa.
Asia Pacific.
Total lifecycle operations is healthy.
50 environment and quality, we are setting the foundation.
Kumar then HSBC driven culture.
All levels of the organization as we grow rapidly.
On health and safety, we implemented an institutionalized.
Management system, providing an organizational wide.
Jason.
Which enables continuous improvement.
Four environments and quality, we retained key registration for ISO 45001.
<unk> nine.
9001 pertaining to quality management system.
14001.
So effective environmental management systems.
Turning to responsible recycling.
But kingstone in Rochester operation maintained.
And our two registration with zero non components.
We completed all required environmental permits for the Arizona scarred keeping that facility on track for operational start up.
Also schedule, we have been advancing the permitting from Alabama spark.
Regarding operational performance the change to a broad set of sports continues.
We'll wrap up during the fourth quarter, bringing the full year Black mass production ahead of our original target for fiscal year 2021.
In terms of projects in construction as we went from a video both Alabama and Arizona.
And on track to start up in 2020.
Accordingly, we also broke ground on the Rochester Buffalo.
Finally on the commercial.
We have made meaningful progress in both battery supply and product offering.
On the supply side, we entered into a multiyear agreement with opium sells a joint venture of General Motors and LNG energy solution to recycle the battery materials scrap generated by the planned Ohio itself.
As part of this collaboration we have plans to car, let's say.
American sport.
Scott.
We entered a major supply agreement through our partnership with Univar solutions, a leader in waste management, while leveraging <unk> expertise in collecting and.
Managing waste multiple Oems slides, and we will be the solution provider for lithium iron battery weighs coming from North American electric vehicle producers such as Mercedes Benz.
By mid March we expect to finalize long term agreements with LTC.
And LG, yes, we.
We'll take that nickel bearing lithium ion battery materials and supply them with nickel sulphate will now Rochester facility closing the loop on the battery materials.
Turning to slide four for a few additional commercial comments.
On the supply side, we increased and diversify the number of battery supply customers.
Ultimately 85 this year.
One of lifecycle as competitive advantages.
IP protected processing technology, which is agnostic lithium ion battery recycling sources.
For example, the cycling and take that out spud facilities has shifted predominantly both consumer electronics and fiscal year 2020, So transportation Oems batteries manufacturing described an end of life battery customers, including EV battery recall in fiscal year 2021.
We are equipped to continue to be flexible in our pre processing of recycled materials through our sports as we approached mid decade, we anticipate this intake mix.
More heavily to battery manufacturer scrapped.
On the offtake side.
Black mass production capacity was sold beginning in 2022, all black mass production capacity will be sold under an off take agreement and soon as required by law.
Turning to slide five for operational highlights.
As depicted on the left side for the fourth quarter and full fiscal year, we saw an acceleration in black mass production year on year due to the ramp up of the Kingston and workshops with sports.
On the right side, we are providing an example of how much battery material needs because in order to generate an equivalent amount of black box.
We have extended this to shorten the amount of high value critical battery that.
It can be produced somewhat maths using chemical conversion rates.
That concludes my formal remarks, let me turn to Bruce for his financial review.
Thanks, Tim.
Turning to slide six I will review results for the fourth quarter and full year. Please note that both periods reflect our fiscal year ending October 31 2021.
For the quarter and year revenues increased to over $4 million and $7 million versus prior periods point $5 million and $8 million respectively.
This was driven by an increase in product sales, primarily as a result of increasing quantities of batteries and battery scrap processed at the Rochester spoke as it ramps up.
The continued onboarding of new battery supply customers as well as higher recycling services.
Adjusted EBITDA loss was nearly $12 million and $25 million versus prior period loss up to $4 million and $8 million respectively.
This was largely driven by higher personnel costs professional fees costs associated with running a public company and the increased network development costs, such as raw materials and supplies related to the continued growth and expansion of the business.
Finally, we ended with cash and cash equivalents of nearly $596 million at the end of the period.
With that let me turn it over to RJ.
Thanks, Bruce I will cover some recent strategic network developments in more detail and also discuss market trends and our business outlook.
Turning to slide seven on our strategy.
There are really two key takeaways here that I would like to highlight.
First we are focusing our near to medium term network growth investments.
In North America, and Europe , aligning with the market and customer needs.
We will also be Opportunistically exploring Asia Pacific.
Okay.
Second manufacturing shop continues to provide a strong base load for our existing and future spoke operations.
And the wife battery volumes continue to rise steadily with anticipated acceleration as early generation electric vehicles reached the end of their useful life.
Turning to slide eight for reminder of our stated 2025 integrated spoken hub network targets.
We are reiterating that lifecycle is targeting annual processing capacity at.
At our spokes of at least 100000 annual tons of lithium ion battery equivalent.
Which equates to approximately 20 gigawatt hours of battery materials.
After the hub reiterating that we are planning on a centralized networks.
Please join your 20000 <unk>.
<unk> tons of lithium ion battery KOL input.
Equivalent to approximately 45 gigawatt hours of battery materials.
Next I will discuss some of the trends we are seeing as depicted on slides nine and 10.
Significant growth in battery Mega factory supply chain investments in both North America, and Europe has continued and accelerated pace.
As consumer adoption of Evs as and flooding.
Global automotive Oems are expanding manufacturing subtypes.
To ensure market share of EV sales.
Lifecycle is strategically and expeditiously positioning it spoken hub network focusing on customer needs in North America and Europe .
Alongside an opportunistic approach in Asia Pacific.
We are locating our facilities close to centers, where demand is clustered <unk>.
While also securing baseload key commercial customer partnerships that will underpin returns on our capital investment.
The acceleration of cell module and pack manufacturing is driving increasing needs for scrap recycling.
Approximately and at least 5% to 10% of lithium ion battery manufacturing volumes are typically lost as scrap.
In North America as seen on slide nine Mega factory investments are now expected to surpass 500 gigawatt hours of capacity.
2025.
That suggests a addressable market prescribed is expected to be between 125000.
The 250000 tons of manufacturing scrap by 2025.
In Europe as shown on slide 10.
This market is further along in terms of EV penetration and battery manufacturing relative to North America.
And as expected by 2030, Europe will be two times the size of the North American market.
As is our strategy in North America, we are strategically developing sites close to demand centers, while also securing key commercial contracts for battery supply and offtake agreements.
Moving to slide 11 to discuss our spoke expansion pipeline.
Our spoke IP protected technology is capital light.
As a low environmental footprint and size.
As you saw in the video we are able to largely replicate each folks in a modular Lego build fashion.
Thereby is scaling up both with pace and cost efficiently as the battery supply chain is rapidly growing.
Further we are able to accommodate changing battery chemistries and varying form factors.
With our recently announced both in Ohio, and Alright, we will have approximately 55000 tons per year of lithium ion battery processing capacity.
Underpinned by strong commercial partnerships.
Further we are in advanced planning stages for a second spoke in Europe , specifically in Germany.
Consistent with our strategy, we anticipate updating on the site upon additional progress.
Turning to slide 12 for a review of our newly announced Ohio spoke site.
This book site will be co located on the same site as with Altium cells battery cell manufacturing Mega factory.
Currently under construction and Warren, Ohio.
By way of background when fully operational in 2022 to $2 3 billion altium cells plant.
We will spend 3 million square feet.
With annual capacity of approximately 35 gigawatt hours.
Also himself will construct a new building for the Companys recycling facility.
And lifecycle will install and operate as proprietary silk technology Anthony facility.
And you spoke will have an annual processing capacity of approximately 15000 tons.
And is expected to be operational in early 2023.
The colocation will substantially reduce the cost associated with inbound logistics, given our facilities cross sell location relative to LTM selves Mega factory.
Turning to slide 13 for a discussion of our recently announced first Stoke launch into Europe .
This bulk will be located in Norway through.
Through joint venture with Veeco store and borrow of batteries.
Costar is a leading second life energy storage business.
Focused on Repurposing lithium ion batteries into stationary energy storage systems.
More batteries is building a state of the art battery cell manufacturing plants with an annual capacity of over 40 gigawatt hours.
We foresee Norway strategically data with nearly 75%.
The penetration rate, which is the highest EV penetration rate in the world.
It is projected that EV sales in Norway will reach 100% as early as spring of this year.
We won't be the majority owner of the joint venture with equal store and Morrow being minority owners.
We won't be responsible for the construction and operation of facility, which.
Which is expected to come online by early 2023.
With processing capacity of 10000 tons per year of lithium ion batteries.
Yeah.
We've also engaged took engineered solutions to construct test and ship the modular spoke facility, which is an extension of coax strategic relationship with lifecycle.
The facility will have the capability to process battery manufacturing scrap.
Fully the packs and energy storage systems.
Echostar will provide the joint venture with end of life lithium ion batteries, and Morro will provide battery manufacturing scrap.
Briefly to recap our Rochester hub project on slide 14.
Utilizing lifecycle with IP protected hydro metallurgical technology and a centralized location.
Leveraging historic infrastructure.
We're able to achieve a number of key competitive advantages.
These include higher resource recovery.
Lower capital intensity.
Lower environmental footprint.
Greater employee safety.
While the project is based on uniquely designed processing technology. It does not require first of a kind equipment.
In addition to breaking ground on the project, we have frozen our process engineering design.
And consequently pulled forward or orders for long lead equipment.
We are securing construction equipment and materials to maintain schedule and costs.
We contracted hatch as the EPC contractor and.
And are finalizing our general contractor selection in the next few weeks.
As we approach the mechanical completion and commissioning in 2023, we intend to continue seeking opportunities to engage with Coke engineered solutions as part of our operational readiness strategy.
Over the course of 2022 and 2023, we will provide updates on the development of the Rochester up.
Turning to slide 15 to address our key objectives and business outlook for 2022.
The leadership team is directly aligned with shareholders based on these key objectives.
First we expect to continue to build on our balance sheet, which is part of our growth to provide us with a strong base and optionality.
And I'll also manage operating expenses as we build our business towards the path to profitability.
Second as mentioned in Tim's remarks.
Safety environment and quality are core to lifecycle culture values and operating disciplines.
We are establishing a strong foundation early at all of our locations that we can continue to implement and refine for new sites from development through operation.
Yeah.
Third we will continue to execute on the Rochester hub.
On time and on budget.
To support startup in 2023.
Fourth we expect to deliver on our black mass production target range.
6500 to 7500 tonnes in fiscal year 2022.
One key item to note on this metrics.
Similar to this past year, we would anticipate production to ramp in the second half of fiscal 2022 with.
With an acceleration into early 2023.
That would include continued optimization of the Kingston, and Rochester, spokes, and wrapping up the Arizona and Alabama facilities.
We will continue to make progress on development of spokes, and Ohio, Norway and Germany.
Before Q&A I would like to conclude on some key points on slide 16.
We are experiencing a growth inflection point for the battery materials supply chain.
We are moving strategically and expeditiously with our customers and the market demand.
And have significantly advanced our spoken hub network, particularly in North America and Europe .
We executed on a number of partnerships with leading commercial partners.
And we had a strong balance sheet to support our pipeline of growth projects.
Tim and I are extremely thankful and proud of the team's achievements and continued focus on execution.
This concludes our formal remarks, and we are looking forward to your questions.
At this time, if you would like to ask a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue. You may do so by pressing the pound key.
Mind, you that please pick up your handset to allow optimal sound quality and we will take our first question from Brian Dobson with Chardan capital markets. Your line is now open.
Hi, Good morning, maybe we can take it up to 30000 feet per minute would you mind elaborating.
And what you see as the key Mega trends shaping the sector over the next few years.
And how you position <unk> to benefit from that evolving landscape.
Yes, Hi, Brian It's Sanjay here and I'll start and then Tim.
I can add on as needed.
Yeah. So look it's an extremely extremely exciting time.
And the electrification market, we're seeing unprecedented.
<unk> and acceleration and deployment of our facilities and capital from our customers.
Given example, this week we of course today announced our Colocation with Altium.
On Tuesday folks would have likely picked up what they announced a third.
A mega factory beyond, Ohio, which will be in Michigan.
Which is going to be bigger than the one in Ohio.
So I think as folks look at EV targets the acceleration of.
Our customers are trying to meet customer demand.
The pace continues to grow.
And so we're being prudent thoughtful how we continue to match up with that but the really exciting thing about that the megatrend is it provides contracted base load for us along with those tier one partners for us to drive our network and ultimately financial returns so.
That's one large mega trend I would say is dominating from our perspective.
Second is on the flip side.
And it's related is of course critical materials.
So we've seen continued tightness in the supply of critical materials to meet that demand.
That of course bodes well for lifecycle sitting at the intersection of those Mega trends, our products, our lithium and nickel and cobalt operationally that go back into lithium ion batteries. So that also bodes very well for us. So we're seeing the demand and the macro from the market benefits on both sides.
Question.
And then just to add onto that I think the other thing that we're seeing is increased focus on how these materials are pictures I mean, we've seen all sorts of geopolitical instability in the supply of lithium in particular over the last couple of weeks.
In Europe , and in South America, and so as we continue to work closely with our partners in a benefit position because of our technology and when we look at our sport facilities, we don't generate any waste water start generating meaningful air emissions, we move forward through our hub facilities once again with zero liquid discharge we are in.
Our thermal processes and so this is closely aligned with what our customers want to see but communities and governments around the world.
Highly confident that we'll be able to continue to benefit from this general trend.
The other two factors that I would add on is the domestic supply.
And we talked about Europe , and we talked about South America, just now but of course here in North America.
Need to be able to produce materials domestically is growing in terms of critical consciousness Gulf.
Government levels.
Customer level of our groups is actually make the batteries and need the materials the highly aware of the need for domestic supply.
And then the final thing is one thing that we're really seeing a move towards soon particularly in Europe as the need for recycled materials. So you overlay. All these things that you have on top of that a push with the backup battery directive to include.
Recycled material a minimum amount and the batteries that are produced and go into vehicles and other and product uses so we see a whole range of type items that are highly beneficial for our industry.
And we'll continue to leverage that as we build out our network.
Great. Thank you that's very helpful and just as a brief follow up.
So your two new spoke facilities announced in the past 24 hours one as co located the other stand along I'm sorry Standalone.
As you continue to rollout new locations do you think that youll favor one strategy versus the other what should we expect.
Thanks, Brian I'll start then Tim should add ons so.
I think it's a mix of both and as we articulated in the presentation. We have co located and merchant. However, one thing that doesn't change amongst all that is we're always looking for the contracted base load to feed the facility to drive the ultimate Black mass production, so that of course coming to our facility so weather.
Approximately located as we're calling merchant quote unquote, taking supply from different suppliers.
Our co located as a captive.
For example, co located with Mega factories.
That first principle doesn't change associated with contracted Facebook.
I'd just add to that I mean, having an existing network of facilities, where we can actually bring customers to our facility to show them, what they're doing right will to give the confidence and we went through this process with <unk>, whereby we had to demonstrate that we actually do what we say that.
Effectively read through what we can say that we do and that confidence is one of the critical aspects of course.
The additional operational onto an existing.
<unk> with an existing.
<unk> business is something that they take extremely seriously and.
So as I said it'll be continue to be a mix.
And the benefit of our technology as we have that flexibility to be able to directly onto the site with minimal impact and be able to do it in a safe and efficient way.
All we can be a standalone facility and service range of customers.
For example in shakes in Rochester.
Great. Thank you. Thank you very much.
Thank you.
We will take our next question from P. J <unk> with Citi. Your line is now open.
Good morning, guys.
<unk>.
Yes, just a couple of questions first on the Rochester hub, you upsize that to 35000 tons of black mass and you talked about being within budget for capital.
We are seeing labor shortages.
Being sort of raw material inflation, the fairly stocking about it are you seeing any of that and all the construction that youre doing is labor an issue can you just talk about what youre seeing out there in the real conditions there.
General problems, Peter we're happy to answer that.
So let me address it in two parts in relation through materials and equipment. We identified this early in the process and I think that was really a very critical step for the organization and so what we did was we actually drove a lot of our procurement activities.
The front end of the project in order to guarantee pricing and supply.
The traditional way of building a project like this would be just in time delivery of these materials and equipment.
Because of those risks that you identify that P. J, we went against that.
We secured a warehouse for example, we're able to.
Dress that through our procurement strategy.
Labor is another very important one as we've been going through the process of selecting a general contractor.
We expect as RJ said in his earlier remarks to finalize that process in the next few weeks, we've actually gone through the process.
Quite detailed labor studies, but we're also looking to work with a contractor that has the ability.
In part what we call self perform the work which provides.
Certain level of reassurance in relation to.
That labor supply.
We are fortunate to be in Rochester Rochester.
The basin for the surrounding area in the northeast of the ability to pull labor from Buffalo Syracuse in other proximal cities to Rochester. So at this point in time, we don't see an issue.
With that P. J, we have.
Gone through we've done the work we understand what the cost side, we understand what the expected increase in inflation cost of labor a lot of debates for the project.
All of that is budgeted in our plan.
Great. Thanks, Tim and then the Ohio plant is co located with Aldi themselves.
Is that under a long term take or pay contract because it is co located is that sort of a strategy different than your other spokes and then as you expand into Europe and go into Germany would you look for similar partners as you did in Norway. Thank you.
Thanks P J I'll take that one it's Ajay.
So this co location is basically an augmentation of our existing contract that was announced last year with our team and and just elucidate a little bit.
Let me let me do this of course as I articulated we want contracted Baseload fleet.
So we want the access to the manufacturing rejects yield loss thats being kicked off.
And and that's a critical part of our overall equation in December we announced of course the.
Forthcoming transaction with LG that is extremely transformative for the business and so these are the the anchor partners that we're growing with whether it be broadly speaking from a high level North America, Europe and around the world.
So the outstanding Colocation at not quite different in that regard I would just say, it's an augmentation and a very exciting augmentation of us being a captive.
Complicated recycler for Europe .
In general again as I said same strategy, we have to have a mix of different supply sources in Norway for example.
At both end of life.
Largest EV market in the world from a penetration perspective.
And manufacturing scrap so whenever we make these decisions to site will always be looking to who are those anchor partners that Jim <unk> from our perspective, the reason to go there and that doesn't change the.
Co located or if its merchants are on a standalone basis.
Great. Thank you.
P J.
We will take our next question from Robin Fiedler with BMO capital markets. Your line is now open.
Hey, good morning, everyone.
My first question is from geographic expansion plans.
Clearly, there's a shift to North America and Europe now is it fair to assume that if the feedstock can be secure that the vast majority or even all of the 2025 capacity targets can be met with North America and Europe .
I'll start on that and perhaps can can start on yes. So we were very conscious today I think both sort of ticked up to very clearly reiterate our 2025 targets. One thing we've been saying as I think folks have been attuned to in the past quarters or months.
Is the market is shifting and our customers are shifting demand is shifting and they're being nimble and a lot of that has to do with pronounced and.
Accelerated growth in North America, and Europe as everybody has seen.
Ultimately for US what are we doing we're processing battery materials to generate and products and returning to the economy.
The battery supply chain to drive ultimate financial return it.
So I didn't change, it's a little bit agnostic of location.
And so our articulation of Dave was very again intentional obviously to focus on the near term investments being focused and prioritized in North America and Europe again, just following our customers that's all right.
But not at the same time, you need a balanced approach.
You cannot ignore.
That the battery Epicenters of the World are in Asia Pacific.
They are important customers and those that are driving a lot of what's happening in the world are all financial Pacific. So theres a balance approach, but there is a focus on where we put steel on the ground per se with assets following our customers and we do see a pronounced shift more in North America and Europe .
Okay, Great and then maybe just as a follow up.
Can I ask a bit on near term earnings.
Maybe you can address some of the expected incremental costs year over year and 22, you know with respect to.
Hub development construction and also speak to how much of the black mass production will actually actually be attributed to sales and how much will be inventory build ahead of the.
Commission next year, and then with all that in mind do you expect 2022, EBITDA to be better or worse in 'twenty one.
Yes, so I'll start with the first one.
And then as needed Debbie and Tim can add on.
Let me start with the the Black bass question, so as articulated in this.
Webcast, we will actually continued itself.
Black Master fiscal 2022.
And folks you're thinking at a high level, when we switched that black Knight's in defeating the hub just diversion right from when we do do that from selling it to third parties versus being diverted to feed our hub to capture value.
So in 2022 fiscal 2022 we do not see.
Doing that and they will continue to sell but of course as we approach. The hub will continue to assess that diversion and the associated value capture vis vis the fee to the hub.
In terms of capital spend and high level commentary on the year.
For the hub I can start and Tim can perhaps add onto that.
So we qualitatively commented in the webcast or the script that.
We will see an acceleration in the back half of 2022 much like what we saw in 2021.
So that goes for capital spending that goes for hub and spokes, rather blackmun's for producing some of course peanut butter spread it is a back half loading with a further further acceleration into early 2023, so from a high level. If you think about the profile of the spend and the profile of what we're doing.
It is again accelerating or back half loaded in the latter half of the year.
And Robert maybe just to add onto that I think there's a couple of things.
In terms of capital spend we ended the fiscal year with almost $600 million of cash and cash equivalents on hand.
We're well financed for the capital projects that we've outlaid the capital spend for the hub is accelerated in terms of the early procurement strategy, but it is a spend over effectively two years.
And we're very conscious of that.
On the Opex side that the key thing in terms of fiscal year 2022, we are in another build yet.
One of the key things as we continue to add people in order to support the product.
That's needed within the organization and the operations that will be coming online in <unk>, particularly around the hall.
So today, we stand at about 200 people just over 200 people within the organization, we expect that to grow to approximately 400 by the end of the year.
We continue to prepare to.
The scale of the operations.
Yeah, and I'll just frame that together back to your question Robin on EBITDA look I think we've provided the key building blocks.
Yes, Sir.
Including production, including a lot of our dollar spend is tenants articulated is going to be heavily on capex.
So folks think about this year something key to pay attention to.
And then as Tim just articulated together pieces what are the drivers of the Opex as well.
Divided the building blocks.
From our perspective too.
Get to that color.
And we will take our next question from David <unk> with Wedbush. Your line is now open.
Yes. Thanks.
So target could you just.
Hey, Don.
We think about some of the conversations you're having with Oems specifically in the U S. Can you just compare and contrast, where that is today to maybe even a year ago.
<unk> seen what we're watching from an EV perspective.
Thanks, Dan and I appreciate the question.
Yes, I think the tone has shifted to further and further proactive further and further pulling investments forward activity for care about recycling because of all the things we actually spoke about at the beginning of the call or the Q&A here rather.
And so it's a big shift I mean last year, you say, even two years ago.
Recycling was important I think as they were thinking through electrification strategy end to end. It was always part of the thinking.
But in some ways until you start making batteries in generating scrapping referred some of our customers, saying that they realize that getting into battery, making.
As a result makes scrap and you actually get factor getting the recycling business.
In terms of recycling themselves, but the need for recycling.
That's all been actually physically realized.
There's been an acceleration and the desire and the tone.
You need to be very proactive on that front and.
Then what happens is <unk>.
You scan the market and you say well who is doing this.
Alright, who actually has assets in the ground.
<unk> technology combined with strong commercial partnerships and validated and that all takes time right you can't just.
The recycler sale, you're going to do this and then sorting of batteries.
The market is not necessarily very broad for the parties that can actually fulfill it out.
So we continue to see strong benefit we are in the right place with the <unk>.
<unk> technology and the right commercial partnerships that are taking time to get there to benefit from that tone change and that mindset changed it's evolved over the last year plus.
And Sean you can have a competitive process like just how important is it.
Tim and hub and spoke and obviously the Rochester build out it seems like on target for 'twenty three like how big is that.
When there is so many other.
Pat or going after some of the same opportunities maybe you can just.
Hey easier view can you just give us a name the customer.
For example, a competitive process.
Yes.
With that I mean, I think one of the great. Examples there is what we announced with LNG I mean.
We've talked before a lot about the tail winds that are driving this industry, what's the major headwind against this industry at the moment is security of raw materials.
And so what we're seeing is our ability and the fact that we're now in construction and we're moving forward with the fulfill our hub in Rochester.
That has become a key factor for us to be able to negotiate these contracts.
I see the holes in their supply chains coming orders they continue to announce new plants and want to bring on more cell manufacturing capacity and they see us as a way of filling and plugged that gap.
So I would say it's critical people often ask us Daniel what's more important is historical or the hub. It's really bored you need the funnel you need to be able to receive and process. Those battery materials on the Fontana with the hub is the enabler that ensures that they're able to impart.
That gap in terms of the critical materials.
Great. Thanks.
Thank you.
And we will take our next question from Ben <unk> with Baird. Your line is open.
Hey, guys. Thank you very much for taking my question and good morning.
I just wanted to know BBB fallen on Dan's question there just.
Just about.
Discussions with customers and it's not.
And they may names, but Joe how has that evolved.
As you saw in several different ones, but all of the terms on that evolved if any if you can talk about like fixed volumes or.
Or pricing.
The same or has it changed over time, that's my first question. Thanks.
Thanks, and happy to address that subject. So I would say as Tim just said, we just continue to find ourselves in.
Better and better position vis vis the steps we've taken on the technology now being commercially operational.
<unk> preparing to take that volume and so that bodes extremely well when you have a lot more material in the market than there is actually homes for it to go to.
And that's frankly, what's happening now in some ways and it will continue.
We're seeing us needing to keep up and continue our build out associated with that ongoing cell manufacturing base, which is a lot of our material of course of the coming years. So we have not seen to be clearer and address the question for now we've not seen it.
Deterioration in terms of getting worse.
A great position.
What I would say.
On the back of that I think as we go forward.
For the economics of the business one thing to remind folks of is we also have an inherent hedge.
On the specialty materials, sometimes when we're getting for example manufacturing scrap.
It is priced typically.
Depending on the material form.
Based on the content of those materials at a fixed interval discount typically.
And then we're making and then reproducing ultimately those materials to go back to the supply chain. So it sounds, though we are a high fixed cost base that is going to be in.
Big trouble if prices go to a different place of course, we're in a very <unk>.
Bullish market for critical materials.
But we have an inherent hedge in the business no matter what that we benefit ultimately.
It can move.
As those critical material trends evolve.
And just to add onto that in terms of.
The trend that we're seeing on the cost side, we're definitely seeing an increase in sophistication and a move towards this model, which is much more favorable from our perspective.
Objects set to provide that natural hedge.
Page.
And just on that front, what type of well.
Contract lengths or people willing to sign in.
That changed.
Yes, it's a multi year I'd say actually keeps getting even better closer to see it in December Thats, a 10 year contract.
And we're in process of finalizing with LG.
So the lengths of actually.
Broadly speaking either stay the same or continue to grow.
And I think that speaks to what they are trying to get at which is the security of supply.
Back and also security of a home for the material to go to be done whether they continue to ramp.
And sorry, if I missed this but the LG I think focus on nickel.
Wanted to understand.
This is different than other stuff. So what you do with yield.
With the other.
And with the hub and Rochester.
It's only Nicole.
So all that to lithium and <unk>.
Cobalt and other materials to other people are.
Or is it just youre just using those.
The offtake too.
<unk>.
Produce lithium they produce nickel policies.
So are you guys. So just a great questions just to clarify so 100% of our volume from the Rochester hub will be going to track. This for our lithium nickel cobalt manganese in graphite.
So that's contracted.
We produced will be bought.
This agreement with LG and then any other downstream where it goes and then comes back to supply chain to.
To be clear is actually downstream practice however.
However, we have the ability and work closer access to allocate product with us.
That's just a little bit of the flow in terms of wide nickel for LG a lot of their chemistries and their production base is high nickel.
And since there is a focus on nickel that said it does not preclude us from exploring other opportunities broadly speaking on other materials.
And we will create juicing.
Cereals.
Sorry, Brett I'll, just add so we will be producing all those other material. There's nothing special about the LG material that precludes us from producing.
Respective amounts of cobalt and lithium and the luck.
Great and my phone was just on the Coke relationship you called that out for them, helping with the.
Our procurement and maybe engineering.
In Europe .
Is that going to be status quo going forward or is that because of the location.
Does that have any impact on your current operations. So I think you had a kind of a build and ship facility.
<unk> spoken before.
No. It's a it's an add on basically been so so as we see it in Kingston throughout our Unbilled facility that youre, referring to we have the ability to produce approximately six facilities.
Sure.
From that facility.
The benefit of working with Richard Clark is a they have a large engineering team we had to update some of the engineering aspects to make a compliance with European standards, which that helping us with our continuing to work with them as a <unk>.
Secondary outlet to take some of that pressure off.
A lot of plans to build in the years to come.
And having that.
Additional bandwidth from a build capacity.
Uh huh.
Highly valuable.
Great. Thank you guys.
Okay.
And we will take our next question from Jeff Osborne with Cowen <unk> Company. Your line is now open.
Hey, Good morning, guys. Just a couple quick ones on my end a lot of content on the call here circling back to the Capex commentary I think on prior calls with the LG.
Contract you had mentioned the total Capex was 485 for the hub facility can you give us a sense of maybe a third of that is in 'twenty, two and two thirds in 'twenty three or any type of scope.
Yes, so at all.
I'll start maybe Jeff maybe Tim can add on.
So I would say for sure. This is a big build here.
Broadly speaking back half loaded in the latter half of <unk>.
Of 22, we have cited first that the facility is targeted to be commissioned our commissioning in 2023.
So that is unchanged, but as a general comment this is a builder.
And I'd say most data, yes, so I think that it's reasonable to assume that.
The majority of the materials will be an equivalent will be bought in FY 'twenty is food.
One of the things that we will be providing in the future as more detailed updates in terms of our progressing on spend and completion.
But as we look at the breakdown I would say the focus on the materials and equipment in FY 'twenty two of course will be.
The general contractor will be well underway here in the next couple of months.
It is definitely front loaded 2022.
Got it that's helpful.
That same call last month, you had referenced pursuing government funding have you submitted any applications or had any discussion with the American government about funding for the facility.
Doug if that yet so I can't comment on specific opportunities but.
Maybe Debbie can add if she wants just on broader balance sheet strategy, but VW for example.
We would potentially fit well or something like that but I won't comment on any specific programs.
And Debbie may add here, a little bit to the broader strategy.
Jesse intentions to take care of it so we're working on multiple options for funding.
Well it will be important for us is to.
Prioritizing <unk>.
Non dilutive options so in.
In the end, what we really need to see is their flexible balance sheet.
So in the future. So we have a balance sheet.
Yes, yes, all the capex in other lines, including Germany.
Maybe just talk.
Right.
With our current balance sheet and what we do we really need to do based on what was that insurance.
It was beyond that how do we build the structure flexibility supports it.
Great opportunity that's ahead of what we've already committed to.
Got it makes perfect sense. The last one I had is just.
The commentary around 2022, and the production relative to the time of the spec is the delta. There. So we just the pace of spoke additions and what's operational versus under construction.
Or are there any other aspects that we should be aware of.
I would highlight that number that we put out in everything we do now it's all fiscal year.
It's all in the October 31.
So I would say that that I think.
Yeah. So it's going to go back and see of course focused on what's moving forward, but there was a different time basis, Sir I believe calendar year originally.
Got it thank you.
Okay.
And we will take our final question from Evan Silverberg with Morgan Stanley . Your line is now open.
Good morning, guys I've been on behalf of Adam Jonas.
When we think about the newly announced spokes or you're kind of seeing the same type of cost inflation that you're seeing with the announcement of the Upsized Rochester hub.
Back couple of months ago. When you talked about spoke cost I believe like incremental spoke was like $6 million to $10 million total any commentary there would be helpful. Thank you.
I'll start and Tim can add I think the short answer is no not not as pronounced in.
It is of course very different plants, they're lump sum turnkey Lego village style attempt.
And Tim can add here, but no insurance I would say the other aspect is that we have made technical improvements to the plant to be able to bring down the capital intensity.
I'll give you a direct example, and that is the <unk>.
Traditionally we refocused on 5000 tons.
Per year of battery materials as being a single while moving towards single one processing facility.
Being able to make advancements and we're now moving forward with a 10000 tonne via a single line.
So and that really helped to bring down capital intensity, even lower than where it was before we.
We expect to be able to continue to benefit from economies of scale on the sports side as the industry continues to expand and we can deploy larger facilities in larger assets.
We expect to be able to make further improvements.
Thank you.
Okay.
And there are no further questions can you.
This concludes today's lifecycle holdings fourth quarter and full year 2021 earnings call and webcast. Please disconnect. Your line at this time and have a wonderful day.
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