NOVONIX promotes leadership in battery materials

NOVONIX promotes leadership in battery materials

In a November 2024 research report by senior analyst Di Brookman of Corporate Connect, NOVONIX (ASX:NVX) has shown its growing presence in the North American battery supply chain. As it prepares to comply with binding contracts with Panasonic, KORE Power and the newly signed Stellantis deal, NOVONIX is poised for substantial growth in the lithium-ion battery industry. This includes the advancement of both anode and cathode technologies through a series of partnerships, facility expansions and patented sustainable manufacturing methods.

High-impact partnerships and major contracts

NOVONIX’s synthetic graphite production at its Riverside, Tennessee plant is ramping up to meet commitments made to battery giants such as Panasonic and KORE Power. These agreements position NOVONIX as the primary supplier for both automotive and battery gigafactories under construction in the United States, with production expected to begin in 2025 with initial output of 3,000 tonnes per year (tpa). By 2028, the Riverside plant’s capacity is set to expand to 20,000 tpy.

Key developments include:

  • Panasonic: binding contract for 10,000 tonnes of synthetic graphite over four years (i.e. 2,500 tpa)
  • KORE Power: a long-term agreement covering synthetic graphite up to 12,000 tpa by 2028.
  • Stellantis: A recent addition, which has signed a binding offtake agreement for up to 115,000 tonnes over six years (i.e. up to 19,100 t per year).

Innovative completely dry and waste-free cathode technology

A significant breakthrough in NOVONIX’s technology portfolio is its patented completely dry and waste-free cathodic synthesis process. This new method, patented in Japan, reduces water and energy consumption by almost 100%, significantly reducing both capital and operating costs. Additional jurisdictional patents are expected. Traditional cathode manufacturing involves energy-intensive processes that use toxic metal sulfates and large quantities of water, producing waste byproducts. NOVONIX’s process, in contrast, takes advantage of non-toxic metal oxides, reducing costs by 50% and energy consumption by 26%, offering a clear advantage in the context of growing global demand for sustainable production methods.

Brookman’s report highlights that pilot samples of this process are currently being tested by Tier-1 battery manufacturers. The process could ultimately reduce cell production costs, improve environmental impact and provide NOVONIX with a competitive advantage, especially if it expands its operations.

The push towards a US-centric battery supply chain

NOVONIX’s development of a greenfield facility is an ambitious step to strengthen the North American battery supply chain. Currently under consideration for a loan from the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) program, this proposed plant would increase initial production of synthetic graphite by 30,000 tpa, ultimately reaching 75,000 tpa by 2030. A DOE loan could cover up to 80 tons per year. % of the capital costs of this new facility. Capital could be provided through customer participation and/or upfront payments allowing NOVONIX to maintain rapid growth with minimal dependence on equity financing.

The report also highlights that recent US tariffs on Chinese synthetic graphite could provide further economic benefits to NOVONIX as it emerges as a domestic supplier, essential to reducing US dependence on Chinese imports.

An eye on innovation: collaborations in cathode chemistry and testing

NOVONIX has established collaborations to strengthen its position in the market, in particular with:

  • CBMM (Brazilian leader in niobium): a 1-year partnership to incorporate niobium into cathodes, improving cell stability and performance at a lower cost. The stability properties of niobium are in line with NOVONIX’s sustainable ambitions and this addition is being tested for potential adoption in high-nickel chemicals.
  • SandboxAQ: An Alphabet spin-off focused on artificial intelligence, SandboxAQ’s testing platform accelerated NOVONIX’s cell testing processes. This partnership has reduced cell testing times by up to 95%, potentially accelerating time to market by up to four years.

These partnerships contribute to NOVONIX’s research and development objectives, with its Business Technology Solutions (BTS) division leveraging these collaborations to improve testing efficiency and cathode chemistry innovation.

Derivation of natural graphite through Axon Graphite

In an effort to streamline their operations, NOVONIX and Lithium Energy (LEL) are combining their natural graphite assets into a new venture, Axon Graphite, which is expected to launch an IPO by the end of 2024. Brookman’s report notes that this spin -off will allow NOVONIX to focus on synthetic graphite production while maintaining an equity stake in Axon’s potentially profitable natural graphite operations in Queensland, Australia.

These resources, with a high-grade resource estimate of 12.8 million tonnes at 14.37% total graphitic carbon (TGC), could add significant value if the merged deposits achieve vertical integration with the Battery project Anode Materials (BAM) planned by LEL in Townsville, Australia.

A solid financial base with government support

Despite its significant investments in new facilities and research and development, NOVONIX’s financial outlook remains supported by government incentives, including:

  • $100 million DOE grant: Dedicated to the Riverside plant, enabling NOVONIX to reach its capacity goal of 20,000 tpy by 2028. $91 million remaining for remittances at the end of September
  • $103 million in tax credits: NOVONIX has two years to monetize these credits, which are intended to offset project costs and help expand the Riverside facility. Given that NOVONIX is unlikely to use all of these credits within 2 years and that the credits are transferable, it may choose to monetize in 2025.

With a cash balance of $37 million and access to additional no-cost financing through grants and tax credits, NOVONIX’s near-term financial risks appear manageable, although it may require additional capital to meet future business plans. expansion.

Future trajectory and evaluation

Brookman’s valuation model places NOVONIX’s share price at approximately A$3.29, reflecting the intrinsic value of its binding contracts, technological advancements and strategic position in the US market. As Brookman notes, with solid growth prospects and a focused strategy, NOVONIX is well positioned to benefit from a surge in battery material demand driven by electric vehicles, particularly as sustainability and onshoring become increasingly vital to supply chain resilience.

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With the start of synthetic graphite production in 2025, combined with a patent-protected cathode process and strategic collaborations, NOVONIX is on track to deliver strong growth in the North American battery materials industry. If it successfully capitalizes on its DOE loan request and strengthens existing partnerships, NOVONIX could be a key player in the push toward a sustainable, domestic electric vehicle supply chain in North America.

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