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spk07: Hey, everyone. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter 2022 Lifecycle Holdings earnings 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 zero. Thank you. I will now turn the call over to Nala Azmi, Head of Investor Relations. Please go ahead.
spk00: Thank you. Good morning, and thank you, everyone, for joining us today for Lifecycles review of our fourth quarter and year 2022 results ended October 31. We will start today with formal remarks from Ajay Kochhar, co-founder, president, and chief executive officer, Debbie Simpson, chief financial officer, and Tim Johnston, co-founder and executive chairman. 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 release, 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.
spk06: Thank you, Nala, and good morning, everyone. It has been a phenomenal year for Lifecycle and our team. we continue to be very excited by the growth opportunities we see ahead and remain laser-focused on the execution of our spoke and hub network. Beginning on slide three, covering key achievements from the past year that positioned Lifecycle as a preferred global battery recycling partner. In North America, with four spokes in operation, we grew our total processing capacity by nearly three times versus the prior year, In Europe, we made strategic strides, having advanced development at key commercial sites. At our Rochester hub, we made significant progress on engineering, procurement, and construction, keeping us in line with our targeted budget and schedule. We are reiterating that we expect commissioning to commence in late calendar 2023. Continuing to expand and diversify our customer base, within the battery material supply chain, including notable multi-year commercial arrangements with strategic global participants, LG and Glencore. And we further strengthened our balance sheet with the receipt of $250 million from strategic partners and have significantly progressed meaningful debt financing alternatives in support of our future network growth. Moving to slide four for our fourth quarter highlights. We continue to enhance the company's foundation on the financial, commercial, and operational fronts. Financially, we ended the quarter with approximately $578 million cash on hand. We continue to time our capital investing needs with advancing the development of key projects. Importantly, we made significant progress towards securing meaningful debt financing and expect to provide more details in the first calendar quarter. We continue to expand our sources of battery materials through meaningful multi-year commercial relationships with key global customers, including a global strategic recycling partnership with VinES, a leading Vietnamese battery manufacturer. And more recently, we entered into multi-year agreements with top-tier global EV and battery OEMs to recycle battery materials in Europe and North America. Operationally, Our fourth quarter black match production exceeded 1,600 tons, reflecting a sequential increase of more than 70%. Arizona and Alabama are ranking to target throughput. Importantly, we've advanced construction at the Rochester Hub on key engineering, procurement, and construction milestones. Turning to slide five for a review of our strategy. To be the preferred global recycling partner with a leading domestic supply position in North America and Europe, with strong commercial connectivity to Asia. We continue to align our network expansion plans with the highest growing demand centers, mirroring customer timing. We remain highly disciplined on capital allocation, with our investment in each project underpinned by multi-year and diverse commercial contracting. And we maintain a strong project pipeline, providing us with the flexibility to shift with market and customer demand. Turning to slide six for a look at our total addressable market, or 10, for lithium-ion batteries available for recycling in our focus regions, as well as Lifecycle's progress in capturing this growth. As mentioned earlier, we continue to add to our portfolio of customers across the entire battery supply chain, including battery, EV, energy storage OEMs, as well as traditional recyclers. As we've noted on previous calls, we are battery chemistry and form factor agnostic. This advantage, combined with growing operational capacity in North America, has enabled us to meet customer demand for recycling needs, which has driven both volume and mix of supply. Specifically, as illustrated on the left, in fiscal 2022, we saw an increase in recycling needs for energy storage batteries for material and EV battery packs from recalls. Depicted on the right are the TAM trends for our current focus regions for 2025 and 2030, which reflect accelerating growth potential for manufacturing scrap and end-of-life EV batteries. In summary, we are very well positioned to capitalize on these strong market fundamentals. I'd now like to hand it off to Debbie for a discussion of our financial results.
spk02: Thank you, Ajay. I will provide a more detailed discussion of our quarterly and social results, specifically regarding black mass production, revenues, adjusted EBITDA, and cash flow. Additionally, I will provide an overview of future reporting and timing on iBook. Turning to slide seven for black mass production. We continue to generate higher product sales volumes due to the ramp-up of operations in our spoke facilities, with the Arizona spoke coming online in the latter half of the year and the Alabama spoke right at the end of the year. As a result, production of black mass was 1,640 tons in the fourth quarter and a total of 4,023 tons for the year, which came in higher than the top ends of the revised 12-month guidance. Having completed scheduled maintenance and processing upgrades, which Tim will discuss later, we are estimating a range of 850 to 900 tons of black mass production for the two months November and December 22 stock period. Turning to slide eight, our revenues are impacted by market prices of metal contained in our products, notably cobalt and nickel. and with no value attributed to lithium content at this time, as we continue to sell black mass as an intermediate product. As a reminder, aligning with our contracts and IFRS reporting requirements, we recognize revenues on product sales at the point of delivery to our customers, based on product sales volume and prevailing market metal prices. Our customers take title to the materials and we retain pricing exposure until the related receivable is fully settled. As a result, fair market value adjustments are booked to revenue until fully settled. For the quarter, we sold 1,302 tons of black mass, an increase of 210 tons from the corresponding period in 2021. Revenue was $3 million compared to $4.4 million for the same period last year. The primary driver of this decline in revenue and the change in fair market value pricing adjustment was a decrease in commodity prices for cobalt, offset by a small increase in nickel prices. For the full year, we sold 3,679 tonnes which was more than double the 2021 level of 1,824 tons. Total revenue was $13.4 million compared to 7.3 million in the prior year. The increase in product revenue was primarily attributable to increased production of black mass due to ramp up of our operations at the company's bulk facilities. with both the Arizona spoke and Alabama spoke coming online. Revenue was negatively impacted by a cumulative non-cash fair market value adjustment of $2.2 million as compared to a fair market value gain of $800,000 in the comparable period last year. Turning to slide nine for the quarter, adjusted EBITDA loss was $32.6 million compared to $11.7 million in the same period in 2021. This was largely related to growing volumes offset partially by lower metal prices and increases in raw material costs. Additionally, production costs, inclusive of raw materials and conversion costs, exceeded the net realizable value of black mass leading to inventory write downs of $3.8 million. The net reliable value of black mass inventory is based on cobalt and nickel content with no value assigned to lithium. Finally, as we continue to support the expansion of our global network, particularly the Rochester hub, we encourage higher employee compensation for operational corporate, commercial, and engineering resources. For the full year, adjusted EBITDA loss was $100.7 million versus $26.2 million last year. Similar to our fourth quarter results, This was largely attributable to higher costs associated with the ongoing expansion of our operations in North America, as well as the impact of net realizable value inventory write-ins of $4.8 million. Turning to slide 10, I'd like to cover our planning and strategy for our growing black mass production. As we have discussed on prior calls, black mass sales are a near-term bridge or an intermediate sales product in the lead up to the commencement of operations at our Rochester hub. It will then serve as a feed source to the hub. Over the course of 2023, we will strategically start the build of black mass inventory for processing at the hub. Turning to slide 11, another important rationale related to black mass inventory build is to monetize the significant lithium value embedded in black mass. Currently, black mass has no lithium payable under our current sales contracts. Here we show the opportunity cost or value upside assuming current end of period market prices for lithium, which is meaningful. Turning to slide 12 for a review of the strength of our balance sheet and liquidity. Lifecycle ended the year with approximately $578 million of cash on hand. As Ajay mentioned, we enhanced our balance sheet during the year with $250 million in combined investment proceeds from LG and Glencore. During the fourth quarter, cash uses included capital spend of approximately $60 million with the majority allocated to securing equipment for the continued construction of our Rochester hub. Our operating expenditures also rose by about $9 million in support of the global network expansion. Looking ahead, future major change drivers of cash include capital investment and operating expenditure to support the network growth. Our Black Mask Inventory Optimization Strategy. And finally, and importantly, meaningful debt financing for future growth capital. We plan to provide an update in the first calendar quarter of 2023 on financing alternatives. Moving to slide 13 to review our future reporting timeline and plan for providing additional guidance. As we announced in late December, Lifecycle will change its fiscal year from end of October to a calendar year end. As a result, in late March, we will file a transition report that will provide financial statements for the two-month step period covering November and December 2022. With this earnings report, we plan to provide guidance on key metrics for calendar 2023. In mid-May of this year, we will report our first quarter results for the period ended March 31. I would now like to hand it off to Tim for an update regarding the Spoke Network and Rochester Hub.
spk03: Thanks, Debbie. Turning to slide 14, the driver of this significant TAM is the increasing demand by battery and electric vehicle manufacturers in North America and Europe for localized supply. As shown on the right side, the TAN potential is driven by planned megafactory investments with capacity expected to grow by nearly five and ten times by 2025 and 2030, respectively. This dynamic is driving many global supply chain participants to lock in commercial recycling arrangements, which we expect to continue to benefit Lifecycle as we expand our network capacity. We are strategically growing our global commercial position and network reach by locating our facilities near high regional demand centers and mirroring customer timing. Lifecycle sustainable and scalable technology enables us to move flexibly and quickly to meet our customer needs. Turning to slide 15 for a discussion of the planned total processing capacity of our Spoke network. Today, I would like to provide an update on the continued innovation of our spoke processing technology, which has evolved over three generations of design. With each subsequent spoke rollout, we are incorporating design upgrades to match our customers' growing volumes and mix of varied materials. By way of background, our initial capacity was focused on our patent-protected submerged shredding technology, which is referred to here as the mainline capacity. This is specifically for battery materials that contain electrolyte and have a risk of thermal runaway. More recently, we have added ancillary processing lines that include dry shredding, processes materials that don't contain electrolyte and therefore are at less risk of thermal runaway, such as electrode foils. Powder processing processes electrode powders to minimize dusting and downstream processes, and baling, processes electrode foils into form cubes for optimizing logistics and downstream processing. In summary, the existing and planned development, we expect total processing capacity to be more than 95,000 tons per year. As we continue to build upon the first mover advantage, you should expect that we will focus capital allocation to projects that enable us to adapt and grow with commercial demand. Turning to slide 16, our North American operational spoke capacity totals more than 50,000 tons per year and is distributed across North America in key strategic growth regions. Starting with an update on Ohio, which was originally planned for 2023, we are deferring this site capacity as we look for operational efficiencies to consolidate our processing capacity with growing multiple customer needs. Our Ontario spoke is a Generation 1 spoke that was constructed in 2020. We are now working on plans to develop a new Generation 3 spoke and warehouse facility in Kingston, Ontario to replace the existing site with the initial site work expected to commence in 2023. At our Generation 2 New York spoke, we recently completed improvements which included upgrading the mainline and the addition of baling to supplement the ancillary capacity, which now provides up to 18,000 tons of processing capacity per year. In 2022, we operationalized the Arizona and Alabama spokes. Both are Generation 3 spokes incorporating multistage shredding with full pack shredding capabilities. These plants have the optionality for dual main lines and flex capacity with ancillary processes. Our Arizona spoke is up and running as expected and benefiting from our recent optimization projects, underpinning a significant increase in our fourth quarter production. Moving to slide 17 for Alabama. The warehouse seen here was designed with significant capacity to safely handle and store all types of value materials, particularly the increasing demand for the processing of full electric vehicle battery packs. As discussed earlier, we are seeing significantly growing volumes and an increased mix of battery materials from OEMs and battery producers. Turning to slide 18 for a look at the Alabama Spokes processing activity. This site became fully operational in late October following the implementation of learnings from the Arizona Spoke, This facility is operational with high-quality talent from the automotive and battery industry and is ramping to target throughput, processing all types of lithium-ion batteries. Turning to slide 19 for an update on the construction of our Germany and Norway spokes. Germany represents the largest market for both battery manufacturing scrap and the expected supply of end-of-life lithium-ion batteries in Europe. The country's battery ecosystem continues to grow with leading players in the electric vehicle industry establishing operations throughout the country, providing a high density of battery and electric vehicle manufacturing facilities. On our last earnings call, we noted that we would take a staggered approach to the startup of our spokes in Germany and Norway. While this remains the plan, in the near term, we are redirecting the equipment from Norway to double up the mainline capacity in Germany. The German spoke will also have an additional 10,000 tons in ancillary processing for total capacity of 30,000 tons per year. Our decision to expand total capacity at our German spoke is driven by the recent increase in successful contracting with global top-tier battery and electric vehicle OEMs in the region. In line with this, we are re-timing our Norway spoke from 2023 to 2024. In the interim, we will continue to develop the Norway location, initially as a battery consolidation facility. Turning to slide 20. The Rochester hub is expected to be the first commercial hydrometallurgical battery resource recovery facility in North America and positions Lifecycle as a leading domestic supplier of battery grade materials. As a reminder, as a key input for the definitive feasibility study that was completed in December of 2021, Lifecycle constructed and operated a large pilot plant in Kingston, Ontario, for approximately one year, providing a strong technical basis for the plant's future operations. This includes testing and qualifying battery grade materials such as lithium carbonate, nickel sulfate, and cobalt sulfate for key customers in the global battery supply chain. Turning to slide 21 for an aerial view of the Rochester hub as of mid-January. As you can see, significant construction progress has been made since our last update. Turning to slide 22 for more details on the key engineering, procurement, and construction milestones. To reiterate, a key part of our strategy was to accelerate the procurement of long lead equipment and construction materials. This has proven to be a strategically significant advantage to maintain the project schedule. Specifically, key milestones include achieving nearly 75% completion of the warehouse and associate administration center for the storage of black mass and finished battery grade materials. Progress the construction of the cobalt, nickel, and manganese processing buildings. Largely completing civil works as well as underground utilities and electrical infrastructure. More than 90% of equipment has now been procured, and we're nearing 65% completion on detailed engineering for the project. We're on track with our project budget and schedule. We are reiterating that we expect to commence commissioning in late 2023. Turning to slide 23, I would like to close with a recap. We are incredibly proud of what the Lifecycle team has accomplished in 2022, building strong momentum for our Spoken Hub business for 2023 and beyond. We continue to competitively position Lifecycle to be a preferred recycler and domestic supplier of critical battery-grade materials. We are growing and diversifying our portfolio of commercial partnerships, capturing the benefit of a robust battery supply chain and positive regulatory support. And we look forward to providing a progress update and details on debt financing and our 2023 outlook in the first calendar quarter. That concludes our formal remarks. Operator, we are ready to take questions.
spk07: Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star 2. We remind you to please pick up your handset for optimal sound quality. Again, to ask a question, please press star 1. We'll take our first question from PJ Jubicar with Citi.
spk01: Yes, good morning. A couple of questions. Congratulations on your spoke startups. You know, going over to Europe, obviously you are prioritizing Germany there will be a very large spoke. How much of that plant input is contracted? And also the same question about the output.
spk06: Hey, PJ, good morning. It's Ajay, and that's a good one for Tim to answer, so I'll turn it over to him.
spk03: Yeah, no problem. So good morning, PJ. So we typically don't provide plant-by-plant details in terms of utilization. I think the message is clear, however, that we were going to be short capacity with a single line, and so we saw the need to accelerate the second line, and we expect to have that installed and commissioned this year.
spk01: And in terms of your hub operations that you're building in New York, have there been any changes to the design or flow process as compared to what you had in Canada. And then, you know, there are some new companies popping up in recycling, battery recycling. Obviously, you guys have the first mover advantage, but is there any other types of chemistries or processes that we should be aware of that keep an eye on?
spk06: Yeah, so Tim will take the first one, PJ, and then I'll take the second one.
spk03: Yeah, and so, PJ, in essence, the process design hasn't changed since we developed the process in Kingston. If you think back to what was our objective, our objective was to utilize metallurgical principles that have existed in the primary industry and bringing them together in a novel way. And so from our perspective, the flow sheet that we've designed is both robust from a technical perspective, but also very well suited from an economical perspective to process black mass from lithium ion batteries.
spk06: And competitively, to your question, PJ, yes, I mean, broadly speaking, I know a lot of you folks are well aware, Good to divide the space into pre-processing and post-processing. So pre, meaning battery materials to black mass or an equivalent, and then post from black mass or equivalent to end product. So when you look within those sectors of the landscape, if you will, On the pre-processing side, yeah, we continue to see growth there. We continue to see also at the same time that we're very differentiated. And today, you would have seen we added even more color on the ways that we've continued to keep the network flexible and optimized to deal with all types of lithium-ion battery feeds. That continues to keep us ahead. And then on the post-processing side, and that, of course, is the real financial strategic driver here for lifecycle in addition to pre-processing. It continues to be, I'd say, pretty stark in the sense of we're ahead on permits, we're ahead on construction, we're ahead on procurement. You would have seen the update today from Tim. You do see a lot of announcements from companies, but I think the reality of the lead time for permits and long lead equipment and also doing the base piloting work means that we have several years of head start. It doesn't mean that we can sit here and be happy about that. It means you have to continue to keep the pace. And Tim's going to add a little bit to that as well.
spk03: Yeah, and I think one final point on this, PJ, and that is that, you know, you've been around the chemical industry for a long time. And one of the things that people are always cautious of is introducing new processes and technologies to any flow sheet. I would say when you're looking at different things that are coming through, think about it from a total risk perspective in the sense that, you know, coming back to my point earlier that we deliberately designed this flow sheet with robustness in mind, with proven principles. And so I think every time you think think about it from the perspective of introducing new principles for processing, et cetera. You really need to make sure that it's being properly risk assessed from that perspective. We feel very confident in our process.
spk01: Great. Thank you.
spk07: Thanks, PJ. Thank you. We'll take our next question from Jeff Rossetti with Cowan.
spk04: Tim, just a quick one. On slide 15, you provided on the spoke pipeline processing capacity. Just wondering, is there any incremental revenue or cost associated with the ancillary tonnage that you provided?
spk03: Good morning, Jeff. And so when it comes to the ancillary processes, what you can expect is that these have lower processing costs relative to the traditional mainline processes, simply because they're simpler processes in themselves, typically single-unit operation steps, so less operators to run those operations. In terms of revenue, it depends. If you have a look at slide 26, what we've tried to explain here is that as you produce lithium-ion batteries, you actually generate all different sorts of materials from this process. And depending on what that material is depends on how we process it, where it's most optimal to process it. And if you think about it from the perspective that each of these different feed streams have different metal content, the higher the metal content, the higher potential revenue for that material. So in essence, it's quite a good business for us today. It provides us flexibility and overall provides high quality returns on those operations.
spk04: Okay, thanks. And then, Debbie, I believe you mentioned that in 2023, over the course of 2023, you'll begin to build some black mass inventory for the hub. I just want to see if you could elaborate if there's, you know, how that cadence might be over 2023. And is there a certain tonnage that you would be gunning for, you know, relative to the 35,000 tons of black mass input capacity that the hub will have?
spk02: Hi, Jeff. Yeah, there's two parts to it. So I think I also said by the time we get to our March release, we'll be in a position to give you some more color around our 2023 outlook. So we'd expect to hear more in that space around there. And we do actually, you're nailing the plan here. This is exactly as planning ahead for having sufficient tons of black mass on hand, not just for running the hub, but in the early stages where we're commissioning and ramping up. So yeah, that is the plan and should probably be able to share some more information with you when we get to March.
spk04: Okay, great. And one more quick one, if I could squeeze one in. I think on slide seven you gave kind of an indication for November and December production. It seems to be a little bit of a lower monthly run rate than Q4. I was wondering, are you taking the First Ontario spoke offline, or is that at a later point?
spk03: Yeah, I can take that one, Jeff. And so for November, December was partially impacted by we had a planned maintenance and upgrade process in Alabama. And so what you're going to see is that our Generation 3 plants, being Arizona and Alabama today, and then coming up Magdeburg in Germany, and then thereafter Ontario, which is your final point, they have the biggest influence on our overall production for the quarter. And so having that downtime planned in December did impact that slightly. The other aspect is that because we were still ramping up the facility, we've only just now at the start of January in Alabama gone to 24-7 operations with the addition, of a fourth shift. And so what you should expect to see is continued ramping up of the production over the course of the year.
spk04: Thanks very much.
spk07: Thank you.
spk00: Thanks, Jeff.
spk07: Thanks, Jeff. Thank you. As a reminder, if you would like to ask a question, please press star 1 at this time. We'll take our next question from Evan Silverberg with Morgan Stanley.
spk05: Good morning, guys. In regards to the 1.6 thousand tons of black mass produced in the fourth quarter, can you give any color on what the lithium input was to yield that 1.6 and what kind of differences are you seeing in the yield between each facility? Thanks.
spk06: Yeah, so I think broadly speaking, you know, there's two answers here. One is, you know, the range of the roughly 35% to 65% content of black mass, depending on the feed. I think hopefully today with the view of the different streams for manufacturing scrap, you get a bit of a sense of how that can range, right? So obviously if you're a cathode material or an electrode stack, as per the page in the appendix, then you're going to have a very high content of black mass. If you're a full pack, there's other stuff in there, right? So you can have a lower content of black mass. So that's what we see. Roughly speaking, second, just take, you know, you rule of thumb like half as a factor. It does vary. But if you take feet in and then take half of that, that's probably a good general rule of thumb, if you will, for black mass output.
spk03: And then maybe just to build upon that, because I think you were asking about the lithium content perspective, is that you can consider that one of the key constitutes of the black mass obviously is the cathode materials. And so if you consider that the lithium content is relatively consistent across the cathode materials, our lithium content is... is relatively consistent across our black mass. Today, we don't get any value for lithium within the black mass because we sell it to traditional nickel and cobalt refineries. However, that's one of the key benefits of the Rochester hub coming online is that ability to extract and recover that lithium value.
spk05: That's helpful. Thank you. One follow-up. It was Miss C on slide 22, what's been spent for Rochester, basically back into what's remaining. What kind of lead time do you have on CapEx spend so we can kind of get a sense? Obviously, you're not writing 23 numbers, but trying to get a sense of where the capital outflows are going to be during 23. Thanks. Evan, it's a big bill here for us.
spk02: So I think you can expect to see an acceleration this year in our capital spend if we get pretty serious about this construction and also supporting getting to what we said, which is starting our commissioning towards the end of 2023. Thanks.
spk07: Thank you. We'll take our last question from Brian Dobson with Chardon Capital Markets. Please go ahead. Yes.
spk06: Thanks very much for taking my time. So I guess I understand your additional focus on Germany. You mentioned multi-year agreements with top-tier OEMs and battery makers in North America and Europe. As it pertains to Europe, are you partnering with a battery OEM or an auto OEM? And how do you see that partnership kind of benefiting both parties? And when can we expect to learn more about it? Hey, good morning. Yeah, so I think that's a good one for Tim to comment on. The general comment for Tim elaborates on Europe. I mean, you know, look, I think take it back to the fundamentals here of why we're building this boat. It's ultimately there to feed the hub, right, at the end of the day. It's to really secure the resource. So the whole point here from our perspective is to get great customer diversification, and we've seen a lot of diversification over the last year and a lot of growth. So that's the bigger picture, and then Tim can comment a little bit on the Europe side in general.
spk03: Yeah, no, good morning. And so just in terms of why we're doing this, and if you think about it, I talked about it a little bit, in the presentation this morning, and that is that Germany has really become the ecosystem, as you know, for not just vehicle OEMs, but battery manufacturing in Europe as they begin to scale and ramp up. Coming back to our business plan and strategy is that we have a combination of what we call merchant sites and co-located facilities. This, of course, is a merchant facility that benefits from supporting multiple customers. And this is really important in this stage of the development of the industry. As our customers begin to scale and grow their businesses, their volumes will also grow over time. But in the meantime, we can support them from these centralized facilities within the regions in which they're operating. So whilst we don't provide – typically we do not provide guidance in relation to individual customers as we respect the confidentiality of the customers and the groups that we work with, I think what you can expect is this site will continue to support not just one customer within the region but multiple customers. and we'll continue to evaluate additional options within Europe as our customers continue to build up and bring that scale to market that will require additional recycling capacity.
spk06: Excellent. Thank you. And then could you expand a little bit on your partnership with Vine EF in Vietnam and how you expect that to position you in the region? Yeah, for sure. Yeah, so Vingroup is the largest private company in Vietnam, and folks may be aware that VinFast is a relatively newer EV brand, car brand, that has launched actually in the U.S. and North America. So they're doing great things, and they're one of our great customers and partners, and VinES is the battery group within Vingroup. that is actually making battery cells. So they have plans and are already currently making battery cells in Vietnam. And then within North America, VinFast is also on track to be making vehicles, and they do plan to also assemble packs. So that's a classic example of a multi-pronged partner with numerous types of feed, and they saw us as a strategic partner, and hence what we announced back in October. Yeah, excellent. And finally, if I can sneak in just one more. As you stockpile Black Mass ahead of the Rochester opening, do you anticipate that that stockpiling will interfere with any of your deliveries to current partners? Should we expect to see those decline as you hoard this after the opening? Yeah, so in summary, no, it won't conflict with any of our commitments. I think at the end of the day here, we're taking an economic decision, as Debbie talked about, to get the best intrinsic unlocked value. And as you've seen, what's been interesting, we're looking at prices staying relatively high and sustained, even though there might be some short-term perturbations. that has shifted the value equation significantly. As you saw on page 11, 70% of that roughly intrinsic value is being lithium. So this is really the inflection point that our Rochester hub will drive. And that's the best decision most likely in those cases for us to retain that value, but still keep some flow as needed for some black mats to be sold. And Debbie, do you want to add to that?
spk02: No, there's two strands to it, Brian. As I just said, it's the values. It's parking the industry to access the embedded value in the future, which is a very good economic decision. And then the second part, too, is just operational planning and making sure that we build sufficient inventory to help with this new start to the hub.
spk06: Excellent. Thank you very much.
spk00: No problem.
spk07: Thank you. We'll take a follow-up question from PJ Chukar with Citi.
spk01: Hey, Ajay and Tim. I understand that you don't get any value for lithium today because you sell to cobalt and manganese smelters. But what happens to the lithium that is there? Who gets that value?
spk03: Nobody, PJ. In short, I mean, basically it goes into a high-temperature smelter-style arrangement, and the lithium is effectively converted to waste, whether or not that's in the form of slag or simply burnt off as part of the off-gas from the smelter. So it's lost. And that was one of the key drivers why we started last night from the first place is that – That traditional way of processing black mass and lithium ion batteries doesn't attribute the value to where the value is.
spk01: Clearly. And when your hub starts in Rochester, how much of the revenues would be lithium given that, you know, where prices are and how valuable it is and it's lost today? How much would that be as part of your revenues there?
spk06: Yeah, if you look at page 11, PJ, with the breakdown essentially of that bar chart that we had given for the black mass. So the bar on the right of page 11, it shows 70% of rough value attributable to lithium and then 30% to nickel and cobalt. That gives you a rough indication. And obviously, as prices move around, they may shift. But just roughly, that gives you a bit of an idea. Yeah.
spk03: And if you think about it today, keep in mind we don't extract 100% of the nickel and cobalt value when we sell the black mass today. We're only extracting... proportion of that, so the whole stack grows proportionally.
spk01: Great. Thank you.
spk07: Thank you. Thank you, PJ. Thank you. And at this time, it appears we have no further questions in queue. I'll turn it back to Ajay for any additional or closing remarks.
spk06: Thank you. So to reiterate our earlier remarks, this past year was foundational for Lifecycle, and we continue to be excited by our growth prospects. We continue the implementation of our Spoke and Hub strategy, keeping the Rochester Hub on budget and schedule, and advancing our spoke technology and processing capacity. We continue to mirror customer demand and expect continued execution of long-term arrangements with key global battery market participants. We also expect to drive further network growth with meaningful debt financing, and we look forward to updating you with more details in the first calendar quarter. Thank you for your interest and your support of Lifecycle. This concludes today's call.
spk07: Thank you for your participation. You may disconnect at any time.
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