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Operator
Good day. My name is Brittany, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2022 Lifecycle Holdings call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you should need operator assistance, please press star 0. Thank you. I would now like to turn the call over to Nala Asmi, Head of Investor Relations.
Brittany
Please go ahead. Thank you, Brittany. Good morning and thank you everyone for joining us today for Life Cycles Review of our second quarter 2022 results ended April 30. We will start today with formal remarks from Ajay Kochhar, Co-Founder, President and Chief Executive Officer, Kim Johnston, Co-Founder and Executive Chairman, and Debbie Simpson, Chief Financial Officer. We will then follow with a Q&A session. Ahead of this call, Lifecycle issued a press release and a presentation, which can be found on the investor relations section of our website at investors.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 uncertainty. Actual results could differ materially from our forward-looking statements if any of our key 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.lifecycle.com. We do not undertake any duty to update any forward-looking statements, 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 to Ajay.
Brittany
Thank you, Nala, and good morning. We are pleased you could join us to discuss the significant achievements during the past quarter.
Nala
Strategically, we are positioning Lifecycle's Spoken Hub integrated network as a long-term preferred recycling partner and supplier of lithium-ion battery materials, particularly in North America and Europe. Beginning on slide three, with highlights which Tim, Debbie, and I will cover in more detail later. On the commercial front, we completed milestone long-term commercial contracts with Glencore, LG Chem, and LG Energy Solutions, together LG, leading participants in the global battery supply chain.
Brittany
On an operational level, we operationalized the Arizona Spoke and made advancements on the construction of the Rochester Hub. And on the financial part, we further strengthened our balance sheet through a total of $250 million in funding from the Glencore Note and the LG Investment. Before reviewing our progress and executing on our commercial strategy, on slides four through six,
Nala
I will discuss market trends, including the supply and demand fundamentals for critical battery materials and the growing need for domestic sources of supply. Turning to slide four, secular trends and geopolitical concerns are accelerating the movement to attain energy independence and to address global climate change, favoring faster electrification of our transportation system. As a result, global incumbent and emerging automotive OEMs are accelerating their production goals for electric vehicles, and many have announced they are phasing out internal combustion engine vehicles. On a global scale, this trend is driving a projected growing deficit in the supply of critical battery materials this decade. The pace of development of supply is being outstripped by the continued and rapid growth of EV demand,
Brittany
as an accelerating secular trend in this industry. This underscores the importance of incorporating recycled metals into the supply chain to help augment supply and increasingly localize production. Our total addressable market, or TAN, for lithium-ion batteries available for recycling continues to grow, even from our last quarter update.
Nala
The TAN for North America has increased by more than 170%, since year-end 2021 levels, and Europe by more than 330% for a combined increase for both regions of more than 200%. This meaningful step change is largely driven by increased battery manufacturer mega factory investments to keep pace with EDOEM anticipated demand.
Brittany
Turning to slide five.
Nala
Not only are key battery metals estimated to be in a growing supply deficit, but importantly, the top three regions that control primary and post-processing supply sources for these battery materials are outside of North America and Europe.
Brittany
Given these dynamics, the need to accelerate the domestic development of the battery supply chain to keep pace with demand is abundantly clear. Turning to slide six. A number of new public policy programs in the U.S.
Nala
support the development of domestic supply sources for these critical materials. Here, we highlight a couple of significant government programs designed to provide financial support to facilitate domestic expansion of the battery supply infrastructure, essentially deeming this to be a critical strategic industry. Now, let's shift to Lifecycle's commercial strategy and our recently completed global partnerships. bolstering our ability to capitalize on these market trends and accelerating our path to sustainable, regional, closed-loop battery supply chains.
Brittany
Turning to slide seven, for high-level background on our new partners in this critical and growing industry.
Nala
On the far left, Glencore is a leading provider of primary metals for lithium-ion batteries and electric vehicles.
Brittany
Importantly, they are a top producer of cobalt and a top three producer of class one nickel globally. For context, Class I nickel is used in lithium-ion battery production.
Nala
On the far right, LG Chem is a leading global chemical company with expertise in active battery materials manufacturing. LG Energy Solutions, who has battery production sites in the U.S., Poland, South Korea, and China, is one of the largest global lithium-ion battery manufacturers for electric vehicles. LG has announced multi-billion dollar investment commitments to grow the battery business and with plans to establish robust battery cell production capacity in North America and Europe. Both LG and Glencore have designated Lifecycle as a preferred recycling partner. Lifecycle will deliver a closed-loop solution for securing LG's growing battery material supply needs in North America, and Glencore has the ability to combine its global network as a leading primary producer in recyclable metals with Lifecycle's recycling capability.
Brittany
These partnerships are expected to accelerate a path to the circular economy for lithium ion batteries in North America and Europe.
Nala
With these strategic partners, Lifecycle has the opportunity to bring a direct and indirect vertically integrated solution to a broader and more diversified global customer base within the battery supply chain universe.
Brittany
Turning to slide eight.
Nala
The recently completed long-term intake and off-take commercial agreements with Glencore and LGD are expected to deliver significant economic value to Lifecycle. These new partnerships complement existing Lifecycle commercial agreements, such as with Tractus.
Brittany
I'll provide more color on the Glencore agreements first. These are long-term agreements with a 10-year-plus term beginning August 1st of this year.
Nala
Importantly, these agreements enable us to jointly develop feed opportunities for our spokes, secure incremental black mass supply to our hubs and optimizing black mass sales from our spokes, expand the market for our battery grade end products produced in our hubs, secure offtake for the main byproducts produced in our spoke and hub network, and finally, obtain a secure supply of sulfuric acid, one of the key reagent inputs for our hubs. Next, regarding LG, we completed long-term intake and off-take contracts for battery materials in North America. LG Energy Solutions will supply LifeCycle with lithium-ion battery scrap for recycling at our disposal, and LifeCycle will supply LG with off-take from the Rochester Hub. Turn to slide 9 to bring this all together. Partnering with Glencore as a leading primary metal source and LG as a leading battery manufacturing source, Lifecycle's spoken hub network is well positioned at the intersection of the battery material supply chain. As depicted here, metals mining is currently the primary source of battery materials to supply cell and auto OEMs. As noted earlier, those sources are largely outside of North America and Europe. and are expected to be in supply deficit over time. Through our partnership, combining LENCOR's gold primary mining network and LifeCycle's localized recycled sources, we are providing an integrated battery materials platform for global customers, predominantly focused on North America and Europe.
Brittany
Battery manufacturing is a key source for recycling feedstock to provide the secondary sources of battery-grade materials.
Nala
Our contractual arrangements with LG provide life cycle with a nickel-based feedstock for recycling back into battery-grade nickel sulfate for their battery cell production, hence the term closing the supply chain loop. In closing, with respect to our commercial execution, with the strategic partnerships we've announced today, I couldn't be more excited about our growth prospects with our differentiated recycling solution and unique position in the value chain. Our focus continues to be to expand and operationalize our Spoken Hub network to meet this increasing market demand.
Brittany
Now, I'll turn it over to Tim to provide an operational review. Thank you, RJ.
Tim
Beginning on slides 10 and 11, I'll provide an update on our Spoken Hub network. As we discussed on prior earnings calls, in order to be a reliable secondary source of battery-grade materials, it is important to secure sustainable intake of battery materials for recycling. To facilitate this, we are locating our spokes close to battery and automotive manufacturers, minimizing transportation risks and costs. And our innovative process is designed to be chemistry and form factor agnostic. In addition, we are positioning the spoke network to capture growing volumes of manufacturing scrap to provide a strong base load of materials for our operations. Supplementing this will be end of life battery volumes, which should continue to rise steadily in the coming decade. As you can see on slide 10, we now have three spokes in operation, including the Arizona spoke, which became operational at the end of April. The Arizona spoke is the next generation of our spoke innovation in terms of scale and processing capability. It is double the capacity of the earlier spokes and has first of its kind capability for processing full electric vehicle battery packs without having to discharge or dismantle. Arizona is quickly being followed by the Alabama spoke, built to the same specification. This spoke is coming online on schedule following the build and process learnings from Arizona. These spoke facilities have been constructed with our proven modular approach at Lifecycles Ontario's fabrication site for faster and more cost-effective deployment. As we optimize our spokes as a network of facilities, this second-generation innovation is expected to drive a step change in productivity. This will allow us to direct battery feedstock to specific spokesides for optimal processing based on feed fit. For example, manufacturing scrap and consumer electronic-derived batteries can be flexibly processed at all spokesides. 4EV battery packs processed throughout first-generation of spokesites, such as Ontario and New York, require manual disassembly by trained technicians before being processed. With expanded capacity and processing capability in Arizona and Alabama, 4EV battery packs can be processed without dismantling, driving to improved efficiency. This combination of different processing sites and capabilities allows LifeCycle to provide a fit-for-purpose solution for all lithium ion battery types and form factors driving to enhance safety and economics. A final note, with the upcoming commissioning of the Alabama SPO, we continue to expect a second half acceleration to our black mass tiger production for fiscal year 2022 to be between 6,500 to 7,500 tons, which is more than three times the level of last year.
Brittany
Turning to slide 11 for an update on the Rochester hub.
Tim
As we mentioned in the first quarter, we obtained the key environmental permit for the Rochester Hub, enabling us to move forward with the next stage of project development and construction. During this past quarter, we continued to make progress on several funds. Specifically, we have locked in the delivery schedule and pricing for the majority of our long-lead equipment. and purchasing of the construction materials has progress providing enhanced confidence in material pricing. We continue to monitor and manage material and labor costs and potential supply chain issues to maintain the stated capital cost target. We continue to expect commissioning as planned in 2023. In the coming quarters, we look forward to showing further exciting construction developments of the Rochester Hub. Turn to slide 12 for an update on our European build-out. Similar to North America's deployment strategy, Lifecycle is targeting spoke locations in close proximity to battery and electric vehicle manufacturers. Our development of the Norway and German spokes continues and both are expected to come online in 2023, with a total processing capacity of 20,000 tons per year of lithium-ion batteries. Summing it all up on slide 13, here we depict the current portfolio of spoken hub projects in North America and Europe that are expected to come online in 2022 and 2023. I would like to leave you with these key thoughts that underpin our competitive advantages and will drive continued successful rollout of our spoken hub network strategy. One. we continue to demonstrate the flexibility of our innovative, patent-protected, and time-tested processing technology that is chemistry and form factor agnostic with high recovery rates. Two, our innovative construction technology is scalable and uses standard equipment, allowing for expedited deployment in response to customer demand. Three, Our commercial partnerships are diversified with leading global participants in the battery supply chain, providing optionality for capturing market growth. By executing efficiently and growing our spoken hub integrated network, we anticipate continued commercial expansion, serving the market as a key regional partner for closing the battery material supply loop.
Brittany
That concludes my four remarks.
Tim
Debbie will now provide a financial update.
David
Thank you, Tim, and good morning, everyone. If I could turn your attention to slide 14 for a view of the second quarter results ended April 30, 2022. Revenues increased to $8.7 million compared to $300,000 in the same quarter last year, driven by increases in product sales volume and metal-based prices. Revenue reflected both in-quarter product sales of $4.3 million and a fair market value adjustment of $4 million relating to prior period sales. By way of background, aligning with our contracts and IFRS reporting requirements, we recognize revenues on product sales at the point of delivery to our customers based on black mass sales volume and prevailing market metal prices. Our customers take title of the materials and we retain pricing exposure until the related receivable is fully settled. As such, both our revenue and receivable balances are re-measured at each period end for movements in metal prices between the initial recognition of the sale and final settlement of the receivable. Hence, the fair market value adjustment in any reported period. Black mass produced in the quarter was more than two times higher than the same quarter last year and slightly higher sequentially. A significant portion of the battery feed supply for our spokes in the second quarter was large formats in nature, for example, from energy storage systems and a recent EV recall. As Tim noted, our Arizona Spoke has a first of its kind capability to process these larger packs without discharge or dismantling. In relation to this, we made a deliberate choice to build inventory of this large format battery feed supply during the quarter for optimal processing at our Arizona facility. As we expand our sources of supply and grow our spoke network, we will increasingly be able to optimize recovery rates and capacity utilization at our facility by matching our feed with the best suited spoke for processing. Operating expenses for the quarter increased to $30 million compared to $5.6 million during the same period last year. reflecting the ongoing expansion of operations in North America and the early build-out in Europe. The increase was primarily related to personnel costs for operational, corporate, commercial, and engineering resources, as well as public company costs. In addition, this reflected the higher costs from raw materials and supplies attributable to our increased black mass production. We are being deliberate and balanced in our operating spend, investing in corporate infrastructure that will support our expanded network in 2023 that will drive significant revenues and cash flow economics in years to come. Adjusted EBITDA loss was approximately $19 million compared to $5 million for the same period last year. This reflects increased costs associated with the planned expansion of our Spoken Hub network in North America and Europe, as well as becoming a public company, which we did not encourage this time last year given the timing of our listing in August 2021. I note that the quarter included stock-based compensation of $4.5 million versus $300,000 this time last year. This non-cash cost is primarily associated with the continued build-out of Lifecycle's operational, technical, and corporate ventures as the company progresses towards commissioning of the Rochester Hub. Moving to slide 15 to cover the balance sheet. At April end, we had more than $509 million of cash on hand. Subsequently, in May and June, we received a combined total of $250 million in investment proceeds from LG and Glencore, bringing our pro forma cash to approximately $760 million. As a result, we have sufficient liquidity for our capital and operating needs to fund the current pipeline of projects and developments. Having achieved this important strategic and financing milestone, we are continuing to be methodical in evaluating multiple sources of capital to optimize the balance sheet and provide future flexibility. As I mentioned before, these include debt-based financing alternatives such as traditional corporate debt, project financing, and government-related funding. Moving to slide 16, I'll discuss During our first quarter earnings call, I indicated that our financing plan will follow a modular step-based approach to growing our business. I would like to add additional context to what we mean by that. The current network consists of a total of seven spokes in North America and Europe and one hub in North America targeted to be operational in 2023. This phase of our goals is fully funded and is expected to lead to sustainable cash flows, particularly following commissioning of our Rochester Hub in 2023. As for future growth prospects, we anticipate a modular approach to capital investment and associated operating expenses. Hand in hand with this, we expect to take a modular rollout approach to the funding requirements that will support these growth prospects. To reiterate, there is a clear delineation between current project pipeline needs, which are fully funded, and incremental growth, which is optional, and the related financing requirements. The foundational growth I've seen through our current Spoken Hub pipeline is an important part of our operating journey. Executing on our operating plan will expand the breadth of financing alternatives available to us and enable us to take advantage of additional growth opportunities while optimizing our future cost of capital. Turning to slide 17, I would like to close with a recap. The market is anticipated to have a global supply deficit of critical battery materials in the coming decades. This is driving growing momentum for localized or domestic sources of production, accelerating growth in North America and Europe. Lifecycle is strategically anchoring its spoken hub network to customer demand. We have executed milestone commercial agreements with key strategic global partners that further enhance our leading position as a preferred partner for recycling and resource recovery of critical battery materials in North America and Europe. And we are fully funded with cash on hand that includes both the capital and operating needs to complete the portfolio of Spoken Hub Network projects and developments. That concludes our formal remarks.
Operator
Operator, we are ready to take questions. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing the pound key. We remind you to please pick up your handset to allow optimal sound quality. We'll take our first question from Robin Feeler with BMO Capital Markets. Your line is open.
Robin Feeler
Hey, good morning, everyone. I wanted to unpack the quarter a bit, really three quick but key questions. So obviously the black mass production surprisingly didn't improve much quarter over quarter. Revenue obviously more than doubled. I guess I'm a little bit surprised because the Kingston spoke still experiencing some issues there. Maybe talk about that a bit. And then obviously you're benefiting from the just stronger battery metal prices overall. But What was the black mass price specifically in the quarter? And then I'm trying to better understand, like, this fair market adjustment. Maybe you can help us understand how to think about that in the context of, like, Q1 and Q2. Was there some, like, how should we think about the shift there? Like, was some of this revenue, obviously, which was really strong, despite, like, the production issues seemingly still, like, is some of that borrowed from Q1 technically? Like, maybe just... trying to figure out how to model that a bit better going forward. Thanks.
Nala
Yeah, hey, Robin, good morning. So, and maybe we'll split it into two. So Tim can cover the production part and then you can speak to the financial part.
Tim
Okay, perfect.
Nala
And good morning, Robin.
Tim
So to answer your question in relation to production, one of the things that we've been guiding to is the weighting of the second half of the year in relation to production. So what we're expecting as now Arizona is ramping up and Alabama is due to come online shortly. This will be a significant step change in production. I would also highlight that what we've been doing is focusing on inventory and I'm talking about battery feed inventory that relates to larger format materials, so things like energy storage systems and we've had a recent PV recall that we've been working through. Rochester and Kingston are really our first generation plants which are better suited for processing small format material and so what we expect to report is now that we're increasing the capability and capacity of the network of spoke facilities that we'll have the ability to direct feed to optimal sites in order to improve both throughput, but also recoveries associated with different types of battery speeds. There's a long way of saying, Robin, in the Oxford at Kingston specifically, Kingston has been running a lot of large format feed, which in the future would be directed to one of our newer format plants, which will have increased ability to process that type of material. And we'll optimize Kingston and Rochester to focus on small format materials, so consumer electric-derived batteries and manufacturing scrap, in order to see a further increase in throughput. So no significant impediments to production, more focused on optimizing around battery feed types.
Brittany
And then maybe David can tackle the financial part of your question.
David
Robin, I will give you some descriptions, and then you tell me if I'm addressing your issue. I gave a little bit of an outline in my formal remarks to the makeup of operating resources. So let me just kind of walk through that a little bit for a minute and just keep that helpful. So in any one period, we boost revenue. When we boost our revenue, we boost it at basically current market price. And then each period as we code, we're required, if that revenue hasn't been settled, i.e., if we haven't received the receivable balance, if we haven't received that revenue, then we re-measure if the revenue is unreceivable to the market price at the time of code. And that's the fair market value in that. So you see in our disclosures this quarter that I actually pooled all that information together into one slot in our financial statements. It was in our financial statements before in different places. We had to go to the receipts to get fair market value impact. So I've now given you a little table of notes for you in the financial statements. It lists the revenue out by the value of the items that were sold in the period. And then the fair market value of the previous sales that are still to be settled. So in this quarter, our revenue in the period was $4.3 million. And then fair market value for sales from computers is $4 million, so a total revenue of $6.2 million.
Nala
Yeah, and just to flip it out on, I think it's page 14, and as Debbie referred to in her description or remark, that's where we actually provide the breakdown within the actual chart itself on the revenue.
Brittany
And then, as Debbie mentioned, there's one more detail in that. Okay, thanks.
David
And just to follow up. I'm sorry. I think it may be helpful just to reiterate what Tim said. So, like I've produced, you would have expected a bump in that based on our remarks from T1. This is actually an intentional choice for us to hold the inventory and produce it in the right facility versus putting it to at a higher cost and a less optimal rate in one of our other facilities. So we brought Arizona online towards the end of the quarter. We could have processed that inventory to either Rochester or Ontario, but that was not the best economic position. So we chose to move the inventory, and we will process it to Arizona and ultimately also to Alabama at some point.
Brittany
Okay, sounds good.
Robin Feeler
Maybe we can chat more about that in a follow-up call. But just if I can sneak a second question in. You know, it's been a couple quarters since you guys have actually specified what you used to call like a 2025 network targets, I guess like a next leg of growth. It seems like there's a bit more prudence around that now, you know, somewhat understandably so. But It almost sounded like that stage is even more optional now. I think, Debbie, you might have actually used that term specifically. So maybe if you're able to provide a bit more specificity on how you're thinking about the next leg of growth in terms of timelines and the size of those plans, it kind of seems like the old 2025 targets are unlikely at this stage. Thanks.
Nala
I can start, Rob, and then maybe Debbie or Tim can add. So, yeah, look, I think there are two parts to this. The first part is, I guess, elucidating, you know, how we think about financial investment decisions or FIT as part of our business. And that was really the purpose of page 16 when Debbie was talking through that. So, you know, on the one hand, we have a current network in development or operating today, which is the seven spokes and what help is coming. And, you know, as a first step, I mean, think of it as a set of stairs, right? So the first set of the stairs that's on that path and then on its own can be providing sustainable cash flows as Debbie talked about. So that's the one half of the equation when it comes to capital allocation and how we think about what's been approved per se from the financial investment decision. The other part of it is, and to your question, is, okay, what's happening in the market and how do we, our customers, How do we proceed with applying to that? And, you know, you heard it in my remarks, there has been no slowdown in the pace of development of our customers. In fact, it just continues to increase at a blazing pace. So on the other hand, you know, we have ample opportunity, and for us it's really going to be a decision of scale, siting, and continue to work through those work streams but really it becomes firm when that financial investment position is made. And a large part of that, and one of the work streams in there, of course, is financing. So we just really wanted to delineate between what is approved and need versus the incremental growth that we can take advantage of.
Brittany
Is that helpful?
David
Yeah, thank you. For me, there's a bunch of comments out there saying that we need significant dollars to fund the business. So, the purpose of my comments were to delineate between what we need in this current network that is actually going to be a very viable business, and then what we will use for growth opportunities beyond that.
Brittany
Understood. Thank you.
Operator
We will take our next question from PJ Cocart with Citi. Your line is open.
spk11
Hi, this is Patrick Cunningham on for PGA. Good morning, everyone. I had a question on the Rochester hub. So what are your current expectations for startup production and what can we expect that ramp up to look like? And, you know, if there's anything, any uncertainty there, what are the sort of drivers of, you know, the moving start date and is it equipment backlog? Is it hiring? Just any more detail on that would be appreciated.
Tim
I think Patrick, I'll turn it over to him and he can address it. Yeah, no problem. Thank you for your question, Patrick. So when it comes to the startup of the Rochester Hub, we're still guiding to completion and startup in 2023. That's what we're working towards. That's what we believe that we can achieve. Of course, we are remaining focused on the challenges in the world today in relation to, as you eliminated, to labor shortages, material cost rises, etc., How we've been able to address that, and we talked about this on the last Tony's call as well, and we've continued on this path, is to focus on early procurement wherever we can. And so, as I said in my remarks, we've procured the majority of the long-lead mechanical equipment now. We've also managed to progress bulk material purchasing over the last quarter. Why is this important? Because, Patrick, this really drives to schedule. And so we're less, I would say, concerned about material cost growth and more focused on making sure that we have those components and materials available for when they're needed. Our attention now is really turning to focus on the staffing requirements for the construction, and we're ramping up that team as we speak. But at this point in time, we're still guiding the position in 2023 as originally planned. In terms of ramp-up beyond that, Patrick, we haven't provided any public guidance in relation to this. I will just highlight that this is a hydromelodical plant using standard processing equipment, which is what I would consider industry normal for this type of application. And so I think that there's lots of great examples of, let's say, low-temperature atmospheric
Brittany
operations and their ability to map out relatively. Great. Thank you. And I just had a second – I had a follow-up.
spk11
And I saw as part of the Glencore agreement, it looks like there are some arrangements, you know, not only on the supply side, but for offtake of black mass and end products. Is this going to be a substantially large offtake partner, and are these volumes contracted through the current TRAX agreement, or does this involve some sort of other agreement?
Nala
Yeah, thanks, Patrick, and I can address that. I mean, maybe two parts to the answer. You know, one, taking a step back, I mean, this is a very transformative deal for the company, and, you know, we announced this in closing about two weeks ago. We essentially used today to talk about the strategic aspects No, and I just want to take the opportunity to answer your question. Look, I mean, we all know that raw materials, critical materials, are the linchpin and will be the rate-limiting step, to be frank, for electrification. And we see that. Now, some of the recycling space will say, oh, recycling can solve each and every need. Of course, recycling is a very important and critical aspect as time goes on. And we're already today starting to see that as part of our business. But we have to get there. And primary supply is a very important part of that. So this is what we've announced is a holistic, global, very strategic agreement with Glencore. Glencore is the top producer of cobalt, the top producer. They're a top three producer of Class I nickel, which is the nickel grade that goes into lithium-ion battery materials. Well, as time will go on, there'll be more that will come through as we continue to develop with Glencore. This is extremely exciting for the business, highly validating, and a great underpinning strategic partnership for the business. On your question, so just to describe, and maybe there were some questions about this, how this interplays between Traxxas and Glencore. So to be clear, Traxxas, that's Optic Brimmon, and they continue to be great partners, exists for the Rochester hub. which is for the 100% offtake of lithium, nickel, cobalt, manganese, and graphite. And then in North America today, for any black mass that we do sell, that is through tractors as well. The Glencore agreements are actually outside of that jurisdiction on a longer-term basis. So that pertains to the offtake for any hub products. That pertains to any black mass that we might sell. But there are a couple other very exciting aspects of that, including, very quickly, byproducts. Our main byproducts have now been fully spoken for by Optic with Linkor. Key reagent supply. And one of the really exciting parts is working together on feed supply. So, spoke supply as well as black mass to our house. So, again, I know it wasn't really your question, but I just want to take the opportunity to really emphasize how important and exciting this is for the business.
Operator
We'll take our next question from Brian Dobson with Charting Capital. Your line is open.
Brittany
Hi, good morning. Thanks for taking my question.
Nala
So let's talk about Europe a little bit, I guess. Given geopolitical issues there, have you found local governments are becoming more accommodative in terms of approvals in order to secure local battery recycling capabilities? Yeah, thanks, Brian, and thanks for joining.
Tim
I'll turn it over to Tim if you're not Yeah, good morning, Brian. And so I guess there's two countertrends that we're seeing around the world and including Europe. One is, of course, increased desire to regionalize material supply networks. And we've seen an increased focus on this, and that's part of our strategy for building out in Europe is to be able to support customers locally close to where the materials are generated, and we'll continue to update the market on that. The other thing that's happening at the same time is increased prudence around environmental regulations and sustainability, which is actually working in lifecycle's favor. So it's one of the benefits, obviously, of our processing technology is our minimal environmental footprint as it relates to wastewater, air emissions, etc., And so what we're seeing is strong support from government bodies who are looking to both regionalize supply chains as well as customers looking to regionalize supply chains. That's also coinciding with increased focus on how we're actually doing the work. And so we see both these things as being favorable to Lifecycle.
Brittany
Thanks very much for that.
Nala
And then my follow-up question has to do with expenses. Do you think you could give us a little bit of color on the expected cost cadence for the remainder of the year or certain expense line items you might want to call out as remaining elevated or having the potential to grow given the inflationary environment? Yeah, thanks, Brian. I think Debbie's good to answer. I think just to clarify, can you really ask me around how do you maybe are expecting so far to really pick up the year?
David
Hi, Brian. It's Debbie here. So I think none of what you've got, I think we're beginning to hit a bit of a strike, right? So I think none of what you've got to your benefit is our Q1 and our Q2. I think there is a reasonably good runway forming there that's indicative of what our year will look like. The one thing that I would say that I had in my remarks is just to take a turn at the fact that there is about $4.5 million of share-based comps, which is non-cash. in the quarter, and you would expect that to be a similar one rate for the balance of the year, too.
Brittany
Thank you very much.
Operator
We will take our next question from Ben Calo with Bay Area Deerland is open.
Ben Calo
Hey, good morning. Thanks for taking my questions. Maybe first, just going back to Europe, could you talk to us about the spokes there? Are they the newer version, similar to Arizona and Alabama?
Tim
Yeah, no problem. So, Ben, and good morning, first of all. So, you're right. So, the two spokes that we've announced, one in Norway, one in Germany, are both the same design. as the Arizona and Alabama spoke. So what we're forecasting is that they'll each have 10,000 tons per year of processing capacity and be able to process everything up to and including four electric vehicle battery packs. I should note that we are expecting to commission both of these facilities by next
Ben Calo
And then could you just talk to us more about, you know, the change that was made? Because that's good news for us, but to be able to process without the disassembly, you know, when that was developed and, you know, how much has been tested there.
Tim
Absolutely. And so this is, and I have to calm myself a little bit just because it is a very exciting development for the company. I actually believe this is a first-of-its-kind process that we've been able to successfully demonstrate now. So it's basically the same fundamental process. It's still the same submerged shredding process. But if you think about what we were trying to do previously is in a single stage, we were going from whatever form factor or material we were feeding. So you can imagine, and I'll try and talk illustrability here a little bit to help people understand But if you can imagine a module that is sort of three feet long, two feet wide, and six to 10 inches tall, and now we're taking that one single piece of material and we're breaking it down into material that's well less than an inch in size, that's a big step change in terms of size reduction. That's not how we would do it in traditional mining applications, for example. So what we've done using that same submerged process is actually drawn to multiple in-line size reduction steps. So we actually can go from these very large format battery packs. Now we can take everything up to, we've said multiple times, full electric vehicle battery packs. This process was designed around the concept that packs are essentially getting larger. They're getting more integrated into the vehicles with the in terms of, you know, we've seen things like structural packs being down, for example, which make it nearly impossible to disassemble. So we can now take everything up to those full packs, subframes of vehicles, et cetera, and then process it through the same process, but through multiple stages, in line, in series, in order to go from that large format to the same finished size that we're chasing, whilst we're liberating the black mass and doing all the other important things that we do as part of our core process.
Ben Calo
Thank you. And then my last one. Have you seen any change in your off-take agreements from cell producers or battery producers in terms of either length of contract or the details of the contract, how much you have to pay for the off-take or anything like that? Thank you, guys.
Nala
Thanks, Ben. I'll take that. Yeah, so I think it's interesting. I'd say a rewind five, six years ago in this business, you know, it was very common that we would sign, you know, a couple-year contract with the specific master services agreement. And we still do that in that form. But what I think has been interesting is the movement towards longer term. And our LG agreement, as an example, is a good case of that. So the intake agreement in that case is actually the same term as the off-take, which is 10 years. So So that, you know, rewinding a couple years ago wouldn't have been the case. So that's very encouraging and obviously for us it really helps with planning as time goes on. Vis-a-vis pricing and what's happening in the market, yeah, there's different segments and different things are priced in different ways. So, for example, manufacturing scrap has a tie to the contained materials, whereas other materials or other types of batteries may not offer as more of a service. So, Much the same, I think, in terms of the way our business has continued, but we continue to see multiple market segments and multiple pricing approaches.
Brittany
Thank you.
Operator
We will take our next question from Jeff Osborne with Cowan & Co. Your line is open.
Jeff Osborne
Hey, good morning. A couple questions on my side. I might have missed it, but did you give the average price of Black Mass in the quarter?
Brittany
Hey, Jeff. I think Debbie can speak to that.
David
We did not, Jeff. We actually don't disclose our black mass sold in the quarter, but I can tell you that the tons sold was greater than the tons produced. So we disclosed tons produced, and we did actually use an inventory as we went through from Q2. Actually, one started when we said we had carried over. So tons sold was greater than the tons produced in the quarter. And I think what you can do is you can use that disclosure in Note 14 now. And if you're calculating per tonne numbers, I would actually use the revenue in the period number. So the number X would be the bearable market value adjustment. And that would give you a good use of guidance.
Jeff Osborne
Got it. And when you answer the question of fair market value, your line, the speaker phone was tough to hear, but given the fair market value adjustments are half your revenue, I just want to understand that sector better. So can you give us a sense of how many metric tons were subject to fair market value adjustments? And I think in your disclosure, you talk about just under 2,600 metric tons. that are subject to future fair value pricing adjustments as of April 30th, when would you expect those adjustments to flow through the P&L?
David
So, Jeff, when we sell, I still don't have a separation for you in terms of how many terms are subject to the fair market value. But what happens is when we look through revenue, there's a long time to actually settle and fully settle in those people. And so if We are subject to repricing in that phase of time. And that window of time can be anything from about 9 to 12 months.
Jeff Osborne
Got it. And then maybe the last one is just there was a lot of discussion of larger form factors, which is great. I wanted to understand, are you seeing a more pronounced mix shift in scrap relative to the expectations at the time of the SPAC merger in regards to scrap versus, you know, say recalls?
Tim
No, I would say that it's still roughly online. We were always sort of forecasting a reduction in total consumer electronic batteries as a proportion of our overall feed mix. And I'd say that's been consistent. We've seen, you know, we're continuing to see more scrap come on the market. And you can follow the, I guess, the battery OEMs and what they're doing to give you an idea of how much scrap is coming to the market. We are seeing that to continue to accelerate, particularly in the early days of these new cell manufacturing plants coming online. I'd say the one thing that we probably didn't forecast as much was just in relation to the report applications. I would also say that we've seen more energy storage system retoolings in the last year six months than what we would have originally forecast 12 months ago. But this is all what I would consider upsides relative to what we were forecasting previously.
Brittany
Got it. I appreciate it, Tim. Thanks so much.
Operator
There appears to be no questions in the queue. I will turn the call back over to Ajay for his closing remarks.
Nala
Thank you. In closing, Lifecycle continues to accelerate its position as a leading preferred recycling the resource recovery partner, the global strategic partnerships, and the battery supply chain. We have sufficient liquidity for our capital and operating needs to fund the current pipeline of projects and developments in steady progress. And finally, our Spoken Hub Technologies integrated network is uniquely positioned to capitalize on accelerating electrification trends that will deliver significant earnings and cash flow in the years to come. So thank you.
Brittany
We appreciate your time and interest in Lifecycle, and we look forward to continuing to update you regarding our ongoing buildup and execution.
Operator
This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.
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