By M. Marin
NASDAQ:NVX
READ THE FULL NVX RESEARCH REPORT
NVX has successfully attained four key objectives, including securing upfront demand & funding
Novonix (NASDAQ:NVX) hosted an Investor Day last week that we attended virtually. As the company contributes to the development of a North American-based supply chain to support the battery and clean energy sectors, NVX believes it has a competitive advantage through what it calls its synergistic operating structure. The company’s three operating units – Novonix Anode Materials, Novonix Cathode Materials and Novonix Battery Technology Solutions (BTS) divisions – are complementary to one another and are expected to play important roles in the company’s development and growth, as Novonix leverages its proprietary R&D to develop critical materials for the battery and ESS sectors. For example, to further innovate within the battery testing space, last week NVX and Gamry Instruments, a leader in Electrochemical Impedance Spectroscopy (EIS) technology, announced a strategic collaboration that will allow for the integration of a Gamry EIS box with a NVX Ultra-High Precision Coulometry (UHPC) system to enable the integration of the EIS box and UHPC system and avoids the need for customers to remove cells from their UHPC and move to an EIS device for running EIS measurements during an experiment.
In the near-term, the Novonix Anode Materials division, further along in development than the cathode division, is the expected engine for near-term growth. The cathode unit is complementary, as each group focuses on enhancing battery performance and life in order to provide viable and economically produced batteries for electric vehicle (EV) and energy storage system (ESS) manufacturers. Lithium-ion batteries consist primarily of a cathode (positive electrode), an anode (negative electrode) and electrolyte architecture, as well as a separator. The BTS division forms the internal and external R&D arm that supports the expansion into the materials businesses. The three divisions are also expected to share an overlapping end customer base.
Key strategic 2024 objectives met
- Pursue industry leadership around R&D efforts and processes for battery materials
- Scale operations
- Secure new demand
- Obtain additional financing
NVX entered 2024 with four key objectives. The company sought to scale operations at its Riverside plant, while it maintained and pursued expanded industry leading R&D efforts for battery materials, with the goals of boosting the efficiencies and sustainability of its production processes, among others. Other key objectives were to secure new demand and to obtain additional financing to support its development plans. The company has been successful in achieving all the goals established and, in fact, has secured sufficient upfront customer demand that the Riverside plant capacity is fully allocated at this stage via binding off-take agreements with Tier 1 customers including Stellantis, PowerCo and Panasonic Energy. Excess demand that will spill over to a new facility down the road.
Novonix Cathode Materials, market represents large opportunity
The company’s goal as it advances Novonix Cathode Materials is to maintain industry leading and sustainable technology around its processes. Novonix has filed multiple patent applications, including around its cathode synthesis technology and believe it can produce high nickel cathode materials with higher yields at lower costs, no water waste and attain greater flexibility around input materials.
In 2021, NVX began development of its patented all-dry, zero-waste cathode synthesis technology. In 2023, the company commissioned a pilot line with a nameplate capacity of 10 tpa to demonstrate the scalability of its technology. In June of 2024, NVX was granted a patent for its all-dry, zero-waste cathode synthesis technology.
As it has done earlier with its Anode division, NVX is currently sampling materials to Tier 1 materials producers, cell manufacturers and OEMs. Recently, the company also formed a joint development agreement with CBMM that is focused on niobium materials for improved CAM performance and a collaboration agreement with ICoNiChem Widnes Limited that is focused on sustainable CAM feedstock materials. The latter collaboration targets further improving the sustainability of the NVX all-dry, zero-waste technology by using recycled metal feedstock such as cobalt and nickel carbonates and oxides in the process, which if successful, could lead to commercial agreements for NVX.
Funds obtained include non-dilutive funding from government sources
Separately, the company also successfully met its goal of obtaining funding to support its development plans, including non-dilutive funding from government sources. In addition, through recent strategic agreements with corporate partners such as LGES and Phillips 66, the company has also obtained funding support to pursue development activities. Phillips 66 acquired a 16% stake in Novonix and NVX issued US$30 million of unsecured convertible notes to LGES.
Sourcing critical battery materials primarily from China has potential risks, highlight need to establish local supply chain & reduce reliance on China
Currently, manufacturers in China produce about 65% to 80% of the world’s graphite, according to the U.S. Geological Survey and USTR, and Chinese companies control an estimated 80+% of the market for automotive battery anodes. China accounts for roughly 79% of global production of synthetic anode material. Sourcing critical battery materials primarily from China has potential risks, including geopolitical and economic. For example, tariffs and quotas can make materials supplied from China more costly and restrict the supply, make supplies vulnerable to potential increases in geopolitical tensions and logistics and supply side disruptions. The company believes the location of its plant and competitiveness of samples of its materials will be competitive advantages as North American battery demand climbs. Importantly, Novonix believes it has first mover advantage as an early manufacturer of synthetic graphite in North America.
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