Good day. My name is Britney, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2022 Li-Cycle Holdings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

[Operator Instructions] Thank you. I would now like to turn the call over to Nahla Azmy, Head of Investor Relations. Please go ahead..

Thank you, Britney. Good morning, and thank you, everyone, for joining us today for Li-Cycle's 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; Tim 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, Li-Cycle issued a press release and a presentation, which can be found on the Investor Relations section of our website at investors.li-cycle.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.li-cycle.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..

Thank you, Nahla, and good morning. We are pleased that you could join us to discuss the significant achievements during the past quarter. Strategically, we are positioning Li-Cycle’s Spoke & 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 3, 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 Solution together LG, leading participant in the global battery supply chain.

On operational level, we operationalizing the Arizona Spoke and made advancement on the construction of the Rochester Hub. And on the financial front, we further strengthened our balance sheet through a total of $250 million in funding from the Glencore note at the LG investments.

Before reviewing our progress in executing on our commercial strategy, on slide 4 through 6, I would address market trends, including the supply and demand fundamentals for critical battery materials and the growing need for domestic sources of supply. Turning to Slide 4.

Secular trends and geopolitical concerns are accelerating the movement to attain energy independent 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 much of vehicles and many have announced they are phasing out the internal combustion engine vehicles. On a global scale, this trend is driving a projected growing deficit in the supply of critical and battery materials this decade.

The pace of the development of supply is being outstripped by the continued and rapid growth of EV demand and accelerating secular trend in this industry. This underscores the importance of incorporating recycled metals into the supply chain, to help augment supply and increasingly localized production.

Our total addressable market or TAM for lithium-ion batteries available for recycling continues to grow, even from our last quarter update. The TAM for North America has increased by more than 170% since year-end 2021 levels, and Europe, by more than 330% for a combined increase in both regions of more than 200%.

This meaningful step change is largely driven by increased battery manufacturer, mega factory investments to keep pace with EV OEM anticipated demand. Turning to Slide 5.

Not only our key battery metals estimate is being a growing supply deficit, but importantly the top three region I control primarily and post-processing supply sources for these battery materials are outside of North America and Europe.

Given these dynamics, the need to accelerate the domestic development of the battery supply chain key things from demand is abundantly clear. Turning to Slide 6. A number of new public policy program in the US 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 leading this to be a critical strategic industry.

Now, let's shift the Li-Cycle commercial strategy and our recently completed global partnerships bolstering our ability to capitalize on these market trends and accelerating our comps in sustainable regional closed loop battery supply chains. Turning to Slide 7. Our high level background and our new partners in this critical and growing industry.

On the far left, Glencore is a leading provider of primary metals for lithium-ion batteries and electric vehicles. Importantly, they are a top producer at cobalt, and a top three producer Class 1 nickel globally. For context, Class 1 nickel is used in lithium-ion battery production.

On the far right, LG Chem is a leading global chemical company with expertise in active battery materials manufacturing. LG Energy Solution, who has battery production sites in 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 with plans to establish robust battery cell production capacity North America and Europe. Both LG and Glencore have designated Li-Cycle as a preferred recycling partner.

Li-Cycle 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 recycler metals with recycling capability.

These partnerships are expected to accelerate a half to circular economy with lithium-ion batteries in North America and Europe. With these strategic partners Li-Cycle 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.

Turning to Slide 8. The recently completed long term in-take and off-take commercial agreements with Glencore and LG are expected to deliver significant economic value to Li-Cycle. These new partnership complementary existing Li-Cycle commercial agreements such as attractive. I'll provide more color on the Glencore’s agreement first.

These are long-term agreements with a 10 year plus term beginning August 1 of this year.

Importantly, these agreements enables us to jointly develop big opportunities for Spoke, secure incremental black mass supply to our hubs and optimizing the black mass sales, commercials, expand the market for our battery-grade end products to reach our house, secure off-take for the main byproducts producing our Spoke & Hub network, and finally, obtain a secured supply of sulfuric acid, one of the key region inputs for our house.

Next, regarding LG, we completed long-term in-take and off-take contracts for battery materials in North America. LG Energy Solution will supply Li-Cycle with lithium-ion battery scrap for recycling at our Spokes and Li-Cycle will supply LG with off-take for the Rochester Hub. Turning 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, Li-Cycle’s Spoke & Hub Network is well-positioned at the intersection of the battery material supply chain. As depicted here, metals mining is currently the primary source 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 Glencore's global primary mining network and Li-Cycle’s localized recycled sources.

We're providing an integrated battery materials platform for the global customers predominantly focused on North America and Europe. Battery manufacturing is a key source for recycling feedstock to provide a secondary sources of battery grade materials.

Our contractual arrangements with LG provide Li-Cycle with the nickel based feedstock for recycling back into battery grade nickel sulphate 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 for their differentiated recycling solution and unique position in the value chain.

Our focus continues to be to expand and operationalize our Spoke & Hub Network to meet this increasing market demand. Now, I'll turn it over to Tim to provide an operational review..

Thank you, Ajay. Beginning on Slides 10 and 11, I'll provide an update on our Spoke & Hub network. As we've discussed on prior earnings calls, in order to be a reliable secondary source on battery grade materials, it is important to secure sustainable intake of battery materials for recycling.

To facilitate this, battery and automotive manufacturers minimizing transportation and costs. And our innovative process designed to the chemistry and form factor agnostic. In addition, we are positioning the Spoke network to capture growing volumes of manufacturing scrap to about a strong base load of materials for our operations.

Supplementing this will be end of life batteries volumes, which should continue to rise steadily in the coming decade. As you can see on Slide 10, we now have 3 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 will double the capacity of the earliest 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 in the same specification. This growth is coming online on schedule, following the build and process learnings from Arizona. These growth facilities have been constructed without proven modular approach upon Li-Cycle’s Ontario fabrication side to 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 Spoke size for optimal processing based on the feed fit.

For example, manufacturing scrap and consumer electronic derived batteries can be flexibly processed at all slowing sites. For EV battery packs process throughout first generational Spokes sites such as Ontario and New York required manual disassembly by trained technicians before being processed.

With expanded capacity and processing capability in Arizona and Alabama, fully EV battery packs can be process without dismantling driving to improved efficiency.

This combination of different processing sides and capabilities allowed Li-Cycle to provide a fit for purpose solution for all lithium-ion battery times and form factors driving to enhance safety and economics.

A final note with the upgoing commissioning of the Alabama Spoke, we continue to expect that second half acceleration to our black mass target production for fiscal year 2022 to be between 6,500 to 7,500 tonnes, which is more than 3 times the level of last year. Turning to Slide 11 for an update on the Rochester Hub.

As we mentioned in the first quarter, we obtained the key environmental comment for the Rochester Hub, enabling us to move forward with next stage of project development and construction. During this past quarter, we continued to make progress on several fronts.

Specifically, we have locked in the delivery schedule and pricings 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 space of the capital cost target. We continue to expect commissioning as planned in 2023. In the coming quarters, we look forward to sharing further exciting construction developments of the Rochester Hub.

Turning to Slide 12 for an update on our European build out. Similar to North Americas deployment strategy, Li-Cycle is targeting Spoke locations in close proximity to battery and electric vehicle manufacturers.

Our development of the Norway and Germany Spokes continues and both we expected to come online in 2023, with a total processing capacity of 20,000 tonnes per year of lithium-ion batteries. Summing it all up on Slide 13, here we depict the current portfolio of Spoke & Hub projects in not to become 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 Spoke & Hub Network strategy.

One, we continue to demonstrate the flexibility of our innovative patent protected and time tested processing technology that is a 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 [Technical Difficulty] by executing efficiently and growing our Spoke & Hub integrated network.

We anticipate continued commercial expansion serving the market as a key regional partner for closing the battery material supply loop. That concludes my formal remarks. Debbie will now provide the financial update..

Thank you, Tim, and good morning, everyone. If I could turn your attention to Slide 14 for a review 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 pricing.

Our customers take title of the materials and we retain pricing exposure until the related receivables is released asset. As such both our revenue and receivable balances are remeasured at each period end for movements in metal prices between the initial recognition of the sale and the final settlement of the receivable.

Hence the fair market value adjustment in any reported period. Black mass produced in the quarter was more than 2 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 with large format 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 long term pack with that 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 grew 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 comps. In addition, this reflected the higher cost from raw material and supplies attributable to our increased black mass production.

We are being deliberate and balanced in our operating expense, investing in corporate infrastructure that will support our extended 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 Spoke & Hub Network in North America and Europe, as well as becoming a public company, which we did not incur 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. If non-cash cost is primarily associated with the continued build-out of Li-Cycle’s operational, technical and corporate mention (ph) 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 $761 million.

As a result, we have sufficient liquidity for our capital and operating needs to fund the current pipeline of projects in development. Having achieved this important strategic and financing milestone, we are continuing to be methodical and 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 our longer-term financing strategy.

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 have been North America targeted to be operational in 2023. This phase of our goal 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 expense. Hand in hand with this, we expect to take a modular rollout approach to the funding requirements that will support these global 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 environment. The foundational growth I’ve seen through our current Spoke & 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 opportunity 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. Li-Cycle is strategically anchoring its Spoke & 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 Spoke & Hub Network projects in development. That concludes our formal remarks. Operator, we are ready to take questions..

[Operator Instructions] We will take our first question from Robin Fiedler with BMO Capital Markets. Your line is open..

Hey. Good morning, everyone. I want 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 little bit surprised, I guess 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 trying to better understand like this fair market adjustment, and maybe you can help us understand how to think more of that in the context of like Q1 and Q2, was there some, like, how should we think what the shift there like was some of this revenue, obviously, which is really strong, despite like the production issues seemingly still, I guess some of that forward from Q1 technically like maybe just trying to figure out how to model that a bit better going forward? Thanks..

Yeah. Hey, Robin. Good morning. It's Ajay. So, maybe we will split it into two. So two things cover the production part and Debbie will take the financial parts of the team..

Okay. Perfect. Then, -- and good morning. Weclome, To answer your question in relation to production, one of the things that we've been guiding to is the waiting of the second half of the year in relation to production. So what we are expecting is not Arizona is ramping up and Alabama is due to come online slowing.

This will be a significant step change in production. I would also highlight what we've been doing is focusing on inventory and talking about battery, about feed inventory that relates to larger format materials that things like energy storage system and we've had recent EV report that we've been working through.

Rochester and Kingston are really our first generation plants, which are better suited for all purchasing 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 will have the ability to direct feed sub-optimal slides in order to improve both throughput, but also recoveries associated with different types of battery feeds.

That’s a long way of saying [indiscernible] and Kingston, specifically.

Kingston has been running a lot of large format feeds, which in the future would be directed to one of our newer format plants, which will have increased ability to process that material and we'll optimize by Kingston and Rochester to focus on smaller format materials for consumer, electric drive batteries and manufacturing scrap in order to see a further increase in throughput.

No significant achievements to production more focused on optimizing around battery feedstock..

And then maybe Debbie can tackle the financial part of your question..

Hi, Robin. So I will give you some descriptions and then, you tell me some objection, your issue. Again, I gave you little bit of a outline in my formal remarks [indiscernible] of operating leases. So let me just kind of walk through that a little bit for a minute and to keep that helpful.

So in [indiscernible] revenue, we would say that based on current market prices. And then each period as recall, will require -- if that revenue hasn't been settled, i.e., if we haven't received the receivable balance [indiscernible] of that revenue.

Then we remeasure both the revenue and the [indiscernible] growth out to the market prices [indiscernible] and that's its fair market value impact. So you see in our disclosures this quarter, that actually pulls all that information together into one spot in our financial statements.

It is in our financial statements before the [indiscernible], we had [indiscernible] following impact, so I've now given you a little table of [indiscernible] financial statement [indiscernible] with the revenue out by the value of the items that were sold in the period.

And then it's very much the value of the previous deals [indiscernible].So in this quarter, our revenue [indiscernible] $4.2 million and then fair market value for our [indiscernible] is $4 million for our [indiscernible]..

Yeah. Just flipping out on, I think it's Page 14, I think that's network for [indiscernible] expected than our market, that's where we actually provide breakdown within actual chart [indiscernible]. And then as Debbie mentioned is [indiscernible] detail in the actual metric..

Okay. Thanks. And just as a follow-up. [Multiple Speakers].

I'm sorry, [indiscernible] I think it's maybe helpful just to really [indiscernible] steps. We would have expected a bump in that based on our remarks from Q1. This is actually an intentional choice for us to hold these new products and produce it in the right facility, firstly putting it to at a higher cost [indiscernible].

So as we brought our [indiscernible] online on towards the [indiscernible] we do have contact that inventory to either raw texture or deal, but that was not the best technology position. So we chose to maybe in part and we will profit [indiscernible]..

Okay. Sounds good. Maybe we can chat with more about that in a follow-up call. But just if I could sneak a second question in, it's been a couple of quarters since you guys have actually specified what you used to call like a 2025 network targets. I guess like the next leg of growth.

It seems like there's a bit more prudence around that now, somewhat understandably so. But it almost sounds 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 think about the next leg of growth in terms of timelines and then the size of those plans kind of seems like the old 2025 targets are unlikely at this stage? Thanks..

Hi, Mr. Robin. And then maybe Debbie can take. Yeah. There is two part. The first part is, I guess, elucidating how we think about financial investment decisions or fit as part of our business and that was really the purpose of Page 15 and when Debbie was talking through that.

So on the one hand, we have a current network in development or operating today, which is the safest boat in one of the coming. And as a first step, if you think of it as a set of stairs, right? So the first step of the stairs, that's on that path and that 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 a financial investment decision. The other part of it is, into your question, okay with not taking the market and how do we our customers and how do we foresee applying the math.

And as you heard in my remarks, there has been no slowdown in the face of development of our customers, in fact, it continues to increase at blazing case.

So on the other hand, we have ample opportunity and perhaps it's really going to be a decision at scale, sizing and continue to work with those work streams but really becomes firm when that financial investment decision was made, a larger part of that and one of the options in there of course is financing, right? So we just really want to delineate between what is approved and need versus the incremental growth we can take advantage..

Is that helpful, Robin..

Yes. 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, it is actually going to be deep dive of our own business.

And then what will be the growth opportunity on that?.

Understood. Thank you..

We'll take our next question from P.J. Juvekar with Citi. Your line is open..

Hi. This is Patrick Cunningham on for P.J. Good morning, everyone. I had a question on the Rochester Hub.

So what are your current expectations for start a production and what can we expect that ramp up to look like? And if there's anything, any uncertainty there, what are the like sort of drivers of the moving start date and is it equipment backlog? Is it hiring? Just any more detail on that would be appreciated..

Thanks, Patrick. I'll turn it over to Tim 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 mainly focused on the challenges in the worlds day in relation to, as you alluded to labor shortages, material cost rise, et cetera. How we've been able to address that and we've talked about this on the last earnings call as well and we've continued on this part and is to focus on early procurement wherever we can.

And so, as I said, in my remarks, we've secured a majority of the long lead mechanical equipment now. I would also manage to be progress all material purchasing over the last the quarter. Why is this important, because Patrick this really drives to the schedule.

And so we're at less, I would say, serve about material cost growth and more focus on making sure we have those requirements and materials available for when they need it. Our attention now is really turning to focus for the staff and requirements for the construction, and we're ramping up that team as we speak.

But at this point in time, whether it's still guiding to completion 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 an unmetallurgical plant using standard processing equipment. This is for industry goal for the type of application.

And so I think that there's lots of great examples of, let's say, low temperature atmospheric operations and their ability to ramp up relatively..

Great. Thank you. And I just had a second, I had a follow-up, Tim. And I saw as part of the Glencore agreement. It looks like there are some arrangements, not only for on the supply side, but for off-take of black mass and end products.

Is this going to be a substantially large offtake partner and are these volumes contracted through the current track agreement or does this involve some sort of other agreement?.

Yeah. Thanks, Patrick, and I can address that. I mean, maybe two parts of the answer. One, taking a step back, I mean, this has been a very transformative deal for the company. And we announced this in closing about two weeks ago. We essentially do today to talk about the strategic aspects.

No one, and that's one question that we could take opportunity to answer your question. Look, I mean, we all know that raw materials, critical materials are the linchpin and we'll leave the rate limiting staff to be frank or electrification and we see that. Now some of the recycling space will say or recycling can solve each and every day.

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 as a holistic global very strategic agreement with Glencore.

Glencore is the top producer of cobalt, the top producer. There are top three producer of plasma and nickel. which is the nickel grade that goes into the fine battery materials.

So, look, as time go on, there'll be more that will come through as we continue to develop with Glencore, obviously extremely exciting for the business, highly validating and a great underpinning strategic partnership with the business.

On your question, so just to describe and maybe there's some questions about this how this interplay between Traxys and Glencore. To be clear, attractive, so that's object driven and they continue to be great partners. Expense for the Rochester hub which is for the 100% off take of lithium, nickel, cobalt, manganese and graphite.

And then in North America today for any black mass that we do sell that is through traffic development. The Glencore agreements are actually outside of that jurisdiction, a longer term basis.

So that pertains to the uptake for any up products, uptake to the black mass that we might sell, but there were a couple of other very exciting assets that including very quickly byproducts -- made byproducts that have now been fully spoken for by offtake with Glencore, key rated supply and one of the really exciting parts is working together on feed supply.

So, Spoke supply is for black mass to wrap. So, again, that wasn’t really your questions, but I just want to take the opportunity to really emphasize how important and exciting this business is..

We'll take our next question from Brian Dobson with Chardan Capital. Your line is open..

Hi. Good morning. Thanks for taking my question.

So let's talk about Europe a little bit, I guess given geopolitical issues there, have you found local governments are becoming more accommodated in terms of approvals in order to secure local battery recycling capabilities?.

Yeah. Thanks, Brian and thanks for joining. I'll turn it over to Tim for [indiscernible] comments..

Yeah. Good morning, Brian. And so I guess there's two charts of trends that we are 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, increased prudence around environmental regulations and sustainability, which is actually working in Lifecycle's flavor. So it's one of the benefits obviously about processing technology is about minimal environmental footprint as it relates to our waste water, air emissions, et cetera.

And so what we're seeing is strong support from government bodies. We're looking to both regionalize supply chains as well as customers of the regional supply chains that's also coincided with increased focus on how we're actually doing the work. And so we see both these things being favorable to lots of people..

Thanks very much for that. 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.

And I'd like to Debbie to clarify that you really ask around how do you maybe expect so far to really pick up the year?.

Yeah. Hi, Brian. It's Debbie here. So I think knowing what you've got, I think we are beginning to hit a little bit straight, right? So I think that work is brought to your benefit. It's our Q1 and our Q2. I think there is a reasonably good run rate, forming there that's indicative of what a zero will look like.

The one thing that I would say that I had in my remarks is just to take a kind of the fact that there is about $4.5 million of share-based comp, which is non-cash in this quarter. And you would expect that to be at the minimum wage as a balance of the year through..

Thank you very much..

Welcome..

We’ll take our next question from Ben Kallo with Baird. Your line is open..

Hey. Good morning. Thanks for taking my questions. Maybe first just going to -- back to Europe.

Could you talk to us about the folks there or the newer version similar to Arizona and Alabama?.

Yes. Hey, Ben. So you’re right. [Multiple Speakers].

So Ben, good morning, first of all.

So you're right, so to the two spots that we've announced, one in Norway, one in Germany are both in the same design as the Arizona and Alabama Spokes, so what we're forecasting is that they'll reach out to that time to the year of processing capacity and be able to process everything up when excluding four electric vehicle battery packs.

I should note that we are expecting to commission both these facilities by near tear..

And then could you just talk to us more about the change that was made because that's good news for us, but to be able to process without the disassembly when that was developed and how much has been tested there?.

Absolutely. And so this is an act to calm myself a little bit just because it is a very exciting development for the company. I actually believe this is a first 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 merge shredding process.

But if you think about what we were trying to do previously is in a single stage, we're going to go whatever form factor material we were feeding. So you can imagine and I'll try and talk to what's your ability to hear a little bit and people understand.

But if you could imagine a module that is sort of three feet long, two feet wide and six to ten inches tall. And now we're taking that one single piece of material and we're breaking it down into materials as well low as seven 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 has actually gone to multiple in line size reduction steps. So we actually can go from these very large format of 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 that are essentially getting larger.

They're getting more integrated into the vehicles with the -- in terms of we've seen things like structural parts being announced, for example, which make it nearly impossible to disassemble.

So we can now take everything up to those full packs subframes and 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 integrating the black mass and doing all the other important things that we do as part of our business..

Thank you. And then my last one, have you seen any change in your offtake agreements from cell producers or battery producers, in terms of either length of contract or the details in the contract, how much you have to pay for the off-take anything like that? Thank you, guys..

Thanks, Ben. I'll take that. Yes. So, I think, it’s interesting. I can say, I rewind [indiscernible] business with a very comment that we would sign a couple of year contract with the district master services agreement and we still do that in that form. Well, I think it's been interesting the movement towards longer term.

And our LGE agreement as an example is a good case of that. So the intake premium in that case is actually the same term as we all take, which is ten years. So that's rewinding a couple of years ago when we did the case. So that's very encouraging and, obviously, for us, it really helps with the planning time goes on.

Vis-à-vis, if I would say, and the pattern in the market, yeah, there are different segments in different types of price, in different ways. So for example, manufacturing scrap, has a tie to the contained materials or other materials or other types of batteries may not hurt more of service.

So much of the thing, I think in terms of the way our business has continued. We're going to be able to see multiple market segments and multiple pricing purchase..

Thank you..

We will take our next question from Jeff Osborne with Cowen & Co. Your line is open..

Hey. Good morning. A couple of questions on my side.

I might have missed it, but did you give the average price of black mass in the quarter?.

Hey, Jeff.

Debbie, can you pick up?.

We did not guess. We actually don't disclose that got sold in the quarter, but I can tell you that our canceled was greater than the [indiscernible], so we got canceled due. And we did actually use an inventory as we would through from Q2. Actually, when you said we carry over to the tonnes sold with [indiscernible] tonnes produced in the quarter.

And I think what we can do is use that disclosure in the Note 14 now and if you're calculating per ton numbers, I would actually use the revenue to the period number. So the number excluding the [indiscernible] market following adjustment, and that was completely different (ph)..

Right. Got it. And when you answer the question on fair market value, your line -- the speakerphone was tough to hear, but given the fair market value adjustments or half year revenue, I just want to understand that sector better. So can you give us a sense of how many metric tonnes were subject to fair market value adjustments.

And then, I think in your disclosure you talk about just under 2,600 metric tonnes that are subject to future fair value pricing adjustments as of April 30, when would you expect those adjustments to flow through the P&L?.

So, yes, when we sell -- because I don't have a separation for you in terms of coming from [indiscernible] fair market value. So what happens is when we look the revenue, there's a long lead time to actually settlement -- two week settlement and [indiscernible] And so it used a bit to repricing in that phase of time.

And that window of time can be anything from about nine months to 12 months..

Got it. And then maybe the last one, is it 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 say recalls?.

No, I would say that’s -- it's still roughly online. We've always sort of forecasting a reduction in total consumer electronic batteries as a proportion of our overall fleet mix. Let's say that's been consistent.

We've seen -- 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 from 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 six months than what we would have originally forecast 12 months ago.

But this is all what I would consider outsize relative to what we'll forecast in previous..

Got it. Appreciate it, Tim. Thanks so much..

There appears to be no questions in the queue. I will turn the call back over to Ajay for his closing remarks..

Thank you. In closing, Li-Cycle continues to accelerate its position as a leading preferred recycling and resource recovery partner to global strategic partnerships in battery supply chain. We have sufficient liquidity for our capital and operating needs to fund the current pipeline of projects and development incentive costs.

And finally, our Spoke and 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, we appreciate your time and interest in Li-Cycle and we look forward to continuing to update you regarding our ongoing build out and execution..

This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day..