January 13th, 2025
To Our Shareholders:
It would be an understatement to say that 2024 was a challenging year for RecycLiCo and the entire battery recycling industry. We face multiple headwinds including slowing EV consumer demand, low commodity prices , and the effects of political (and geopolitical) developments on the prospects for mandatory recycling regulations. An essentially new Board and management team spent a good deal of time understanding a changed and changing world and made significant course corrections to preserve the Company’s financial position and industrial relevance.
We discussed these challenges at length during the AGM, which I know left some shareholders with the impression that the Board has a bleak view of the recycling sector and the Company’s prospects. That impression is incorrect. We are, in fact, optimistic about the future but getting there requires clear-eyed assessments of the roadblocks and potential pitfalls.
We begin the year anticipating new and exciting opportunities in critical mineral sourcing and recovery and are taking the steps that will allow the Company to take advantage of those prospects.
Creating Shareholder Value
We believe that the best measure of our success will be the shareholder value we create over the long term. Emphasis on the long term can be frustrating to some investors and executives, but we have seen too many examples of high-flying, big-spending and supposedly well-capitalized companies and projects crash and burn over the past year.
In our view, there will ultimately be increasing demand for the recovery of the critical mineral components of batteries and regulatory frameworks in multiple countries that will require the kind of battery upcycling that our technology can deliver. The pace, however, has slowed markedly and we believe that it would be unwise for us to commence speculative, capital intensive projects “at this time.” That is why we are in discussions with our joint venture partner in Taiwan regarding possible changes to that project and the nature of our participation.
While we welcome partnerships with battery manufacturers and suppliers who have the resources to build new facilities, they also seem to be of the view that now is not the time. Witness, for example, recent developments at Molicel (postponement) and Northvolt (abandonment). Even as we adjust our investment decisions to account for the slower pace of growth, we believe it is critical to increase our in-house scientific and technical capacity and enhance and protect our intellectual property in order to remain ready to participate in recycling projects as they come online.
At the same time, shifts in the political landscape highlight the need to augment our activities to reflect the current state of the battery materials industry and more generally the need for the recovery and reuse of critical minerals. We believe that our technology and relationships will enable us to explore critical mineral recovery activities that are not limited to just battery recycling. We also believe that military and national security concerns will create opportunities for us to partner with governmental entities and take advantage of grant and cooperative funding opportunities. To qualify for these highly valuable and sought-after programs, the Company must demonstrate that it has the relevant in-house scientific and technical expertise, and we are actively engaged in building out our team. In that regard, please see the discussion of our relationship with Kemetco below.
I was asked at the AGM what reasons I could give for someone to buy our stock. On reflection, I gave a “shorthand” answer to that question – this letter is, in part, the longer version. While there is no one-size-fits-all investment approach, the decision to buy or sell a stock should be based on the investor’s resources, goals, and research. That research should include learning about the relevant industries and management’s policies and current endeavors. RecycLiCo investors need to be aware of our focus on the long term when making their decisions. We expect to be judged on our ability to develop and execute a plan, and believe that markets will reward patient, informed shareholders if we succeed in doing so.
Management Policies and Current Endeavors
The Board’s goals for RecycLiCo are to:
- Build a team of skilled scientists, engineers and technicians to engage in continuing research and development and product qualification and provide the team with appropriate resources.
- Relocate our demonstration plant to a RecycLiCo location and, if needed, reassemble it and procure operating personnel.
- Explore with expert and informed professionals recycling-adjacent opportunities in the critical mineral space, particularly those related to national security concerns.
- Step-up business development and marketing activities both by adding staff with considerable industry experience and making judicious use of outside consultants. We need to forge new, and to strengthen existing, strategic and commercial relationships. We will be exploring potential research partnerships, joint ventures, sales, licensing arrangements and business combinations.
- Measure our programs and the potential effectiveness of our investments analytically. We need to have the courage to jettison those that we believe will not provide acceptable returns or otherwise consume too much of our current capital and to make new investments when attractive opportunities present themselves. We need to continue to learn from both our successes and our failures.
- Share our strategic thought processes with you (to the extent competitive pressures and non-disclosure obligations allow), so that you may draw your own conclusions about our strategies, implementation and the future value of the Company.
- Spend wisely and maintain our lean culture. It is always important for a company to be cost-conscious, but it is particularly so for a pre-revenue business or a growing one incurring net losses. Our “burn rate” is discussed in more detail below.
- Continue our search for a permanent CEO and provide them with the framework and resources that will enable them to grow our business.
Thoughts on Kemetco
Kemetco has been and continues to be the Company’s principal service provider and technology vendor. Our relationship has been invaluable, and we look forward to working with them for many years to come.
It is, nonetheless important to remember that Kemetco has always been independent of the Company. We are a paying customer, but we are not their only customer. We are not even their only battery materials customer.
We run the persistent risk that one day, for perfectly good reasons (e.g., retirement, illness or the competing needs of their other clients), Kemetco’s services will be temporarily or permanently unavailable to us. Without in-house capacity, RecycLiCo would have to go out of business. This risk has been identified by some potential customers and by virtually every potential strategic or financial investor that has had discussions with the Company.
Kemetco is aware of our situation and of our need to qualify for government funding. The team at Kemetco is talented and supportive and we have assured them that we expect to continue to make regular use of their services.
Current Financial Condition
For a detailed review of our financial condition, please see our Annual Audit for fiscal 2024, the interim financial statements for the first quarter of fiscal 2025, and the accompanying Management Discussions and Analyses (all posted on our website). On December 31, 2024 the Company had approximately $15.5 million in cash on hand. Our recurring monthly expenses currently average around $50,000, although that is expected to increase as we invest in growing our business. The significantly larger “burn-rate” number reported at the AGM included a number of large non-recurring expenses incurred in the last year. While it is tempting to observe that the Company has financial resources sufficient for 25 years at our current burn-rate, we caution that the only way to create real value will be through continued investment. We are competing with much larger and better capitalized companies, and we will need to leverage our lean structure. We will continue to balance the needs to invest in growth opportunities and preserve our cash resources.
Goals for 2025
We still have to view ourselves as being in the early stages of learning how to bring new value to the critical mineral supply chain through upcycling and other technologies. This requires sustained investment in research and development, product demonstration, business development and the creation and deepening of relationships with government and industry participants.
We know a great deal about critical minerals and battery upcycling, but we still have a great deal to learn. We are optimistic, but we must remain vigilant and flexible in our responses to what will be an uncertain and changing landscape. We are excited about what we want to do.
We are grateful to our employees for their hard work and to our shareholders for their constructive feedback and support.
Best wishes for the New Year,
Richard Sadowsky
Interim Chief Executive Officer
