Novonix Limited (NASDAQ:NVX) Q3 2024 Earnings Call Transcript

Novonix Limited (NASDAQ:NVX) Q3 2024 Earnings Call Transcript October 29, 2024

Chris Burns: Hi, I’m Dr. Chris Burns, Founder and CEO of NOVONIX. And welcome to our Third Quarter Activities Report Update. I’m happy to be here today, to take you through the steady progress we’ve made in this quarter, toward our key activities around our Riverside facility as well as our cathode commercialization plan, amongst other highlights for the quarter. As always, please review our notice and disclaimers after the presentation. NOVONIX is a leading U.S. based battery materials and technology company, and we’re focused on lower carbon footprint production processes, for key materials for the battery industry. We have binding offtake agreements, with Panasonic Energy and KORE Power for synthetic graphite, and we’ll begin production at our Riverside facility shown on the right here in Chattanooga, Tennessee next year.

The sector has received strong support, for localizing key materials for the battery industry and NOVONIX has received significant support in the form of $100 million granted from the U.S. Department of Energy, the Manufacturing and Energy Supply Chains office. And we’re also selected for an allocation of up to $103 million under the Qualified Advanced Energy Project tax credit, or the 48C program. This government support alongside strategic investment from LG Energy Solution, and Phillips 66, has allowed us to make the progress that we’ll talk about today at Riverside, as we look to have Riverside be the first large scale facility, dedicated to the manufacturing of synthetic graphite, for the battery sector in North America. Alongside our Anode Materials group, we also have expansion now into patented all-dry zero-waste NMC cathode synthesis technology.

We’ve demonstrated this at pilot scale, with the opportunity to reduce cost and environmental footprint, in another key material in the battery industry, and we’ll speak about some of the progress we’ve made there this quarter. And at the backbone of the company is our Battery Technology Solutions group. This provides a competitive advantage for us, to continue to accelerate the pace of innovation for key materials, and process technologies for the business. Within the group we have these three areas of focus. Of course our Anode Materials division, which we’ll speak the most about today. A leading domestic supplier, of synthetic graphite for the battery sector. Riverside will produce up to 20,000 tons per year of material, when it’s at full production and is positioned to be the first large scale site as I mentioned, in operation in the U.S. Our activities around cathode materials, are focused on the commercialization of our patented synthesis processing.

We’ve now demonstrated this at pilot capacity of 10 ton per year, and we’ve shown both environmental and cost benefits, and now focused on the performance that we can reach using our synthesis technology, compared to the existing technologies. And I mentioned, our Battery Technology Solutions group. This group was founded over 10 years ago with a focus on our ultra-high precision coulometry equipment, and now we’ve expanded into research and development services with full in-house pilot lines, thousands of test channels and expertise, to accelerate our materials programs, and work across the industry. This quarter, we had a number of highlights. Our key focus was readying Riverside for 2025, and the beginning of production for our key customer in Panasonic Energy.

This quarter, we continued to receive, install and commission equipment at our Riverside facility for towards our first 3,000 ton per year line. This line will be online in the first half of next year, in order to provide full mass production samples for Panasonic and other customers, as we go through the qualification processes. We’ve received $9 million in reimbursements, under the government grant I spoke about through September 30 of 2024. As we continue to make investments in the expansion of Riverside, we’ll continue to benefit from reimbursements under this grant program. Alongside the grant, we’ve also progressed discussions with the Department of Energy with the Loan Program Office. Our focus with the Loan Program Office is on potential financing, for a future site beyond Riverside, as we’ll speak about continuing to see strong growth and the need, to expand capacity for these materials here in North America.

Q&A Session

And alongside all of that work, we’ve continued to discuss and qualify materials with Tier 1s, and automotive manufacturers looking at the demand for these materials, both from Riverside and future sites. Within our Battery Technology Solutions group. Our key activities have been around our cathode technology. We’ve signed development agreements with both CBMM and ICoNiChem, to focus on feedstock materials and their compatibility with our synthesis technology, to demonstrate additional benefits. And we’ll speak about both of those later. We published a white paper, with a focus on our cathode technology and the performance of our 60% nickel class of materials, compared to industry benchmarks. We have to focus not just on the benefits in environmental and cost of our technology, but similar to our Anode Materials group.

We have to focus on making the highest performance materials to service the Tier 1s that will help localize this industry here in North America. Outside of our activities in cathode, we had a patent granted for our graphite silicon alloy composite materials in Europe, and we also announced a strategic partnership with Voltaiq, to help drive efficiency and quality in the battery industry, with a focus on data and analytics. This is something that our Technology Solutions group has been focused on, for the past one to two years. And now we’re leveraging this partnership, to continue to move that forward. Across the group, we are excited to appoint Robert Long, as our new Chief Financial Officer. He’s been a great addition to the team, and we’ve continued to progress the support for the public listing of Axon Graphite, which includes our Mount Dromedary, natural graphite project.

We closed the quarter with a little over US$37 million on hand. As we focus on our Anode Materials division, and speak about the progress we’ve made there. We founded this group in 2017, with four key principles. Domestic supply and the need to bring materials onshore in North America, for the impending need to service the EV and ESS markets. The need for high performance materials, to meet the expectations of the Tier 1s, which would help drive that localization. The need for cleaner, more efficient process technologies. A key focus across the business, in how we can produce the same high quality materials, with environmental benefits that are needed to scale here in North America. And lastly, the need to strong – to form strong strategic relationships.

We needed to work, with the best in the industry in order to advance the sector. And as we look over the past number of years, of some of those key strategic relationships we’ve forged, of course it’s led by customers, such as the offtakes we have with Panasonic Energy and KORE Power Technology agreements with the likes of LG Energy Solution, Philip 66 and PowerCo. I mentioned strong strategic investment of $180 million between LG Energy Solution and Philip 66. And also working with key strategic suppliers, for both raw material in Phillips 66 as well as technology in Harper International around key process equipment. We continue to see huge growth in demand for these materials in North America. Of course, our existing agreements with Panasonic Energy, which calls for a four year commitment of 10,000 tons to start next year from Riverside, LG Energy Solutions, which alongside their investment we signed the joint development agreement, which contemplates upon successful completion of that agreement, entering into an offtake agreement for 50,000 tons, of graphite over a 10 year period.

And with KORE Power, our agreement is to be the exclusive supplier of graphite Anode Materials for their KOREplex facility, which they’re building in Arizona. And we’ve broken our growth plan into three phases. Our critical focus now is on our first phase in Riverside. As I mentioned, it will build out to 20,000 tons of capacity at full operation. And this is where we will service Panasonic Energy, KORE Power and potentially others, who will come into the remaining capacity available from the site. Then we’ll look at our growth in new facilities. And our first plan is to build a 30,000 ton initial phase of a Greenfield facility. And this is what we’re in discussions with the Department of Energy Loan Program Office, to potentially provide financing support for.

As we establish our production at Riverside and our first new facility. Then we’ll look to build additional plans toward our eventual goal of 150,000 tons of production here in North America. When we look at this year, and our focus on Riverside. The first half of this year started, with our agreement with Panasonic Energy, to drive our timeline to production for them. Then we continued to purchase equipment, upgrade the facilities and be ready to enter production. We completed an engineering report, to map out the milestones that we needed to complete along this path. The second half of this year has been and we’ll continue to be focused on installing that capacity, and beginning commissioning that capacity toward our initial 3,000 ton phase.

This 3,000 ton phase will start up in the early part of next year, and we’ll continue to invest through 2025 toward growth of our next incremental production phase of 5,000 tons, and then beyond toward 20,000 tons alongside customer demand. The criticality of our 3,000 ton production startup in next year is significant. It will allow Riverside to be the only operating site, which can produce fully integrated mass production sea samples for synthetic graphite, dedicated to the battery sector. And this will keep us on track to begin production and deliveries to Panasonic in the later part of 2025. As we shift focus from our Anode Materials division, we want to also look at the updates and the progress we’ve made around demonstrating, and commercializing our cathode technology.

We started this work in 2021, on our patented all-dry zero-waste cathode synthesis technology. And in the middle of last year, we commissioned our pilot line with a nameplate capacity of 10 tons per line, to demonstrate the scalability of this technology. And the images you see here on the left, are from that pilot line in Canada, where we are running at large scale to prove that the technology can move, from pilot into industry. We have a phased commercialization plan, where we’ve been leveraging our internal expertise to build an intellectual property portfolio. And then, we are expanding to key strategic partnerships, both with companies across our sector, and then eventually downstream to those who will look, to deploy and commercialize this technology.

This is building on our plan, to align key technologies both from our graphite side, and now from our high-nickel cathode synthesis side, with global market trends and the need for these materials, to be produced in cleaner process technologies. Then a focus on strategic development partnerships, similar to that with our Anode Materials group. We’re focused on partnerships and commercialization, and we’ll speak about two of those that we’ve signed just recently. And eventually, we’ll move into technology licensing or joint venture style agreements in order to see the deployment of this technology, with other key partners that want to bring it, to scale here in North America. And we of course have the opportunity, to continue to leverage government support, and potential strategic investment to both expand our research and development and capabilities, to develop new IP as well as deploy this technology at scale.

This quarter I mentioned, signing agreements with both CBMM and ICoNiChem. We signed the joint development agreement with CBMM. They are a global leader in the production of niobium specialty chemicals, and niobium has been demonstrated to have benefits, when integrated into high-nickel cathode material synthesis. Through our project with them, we will demonstrate the compatibility of their niobium products, with our all-dry zero-waste synthesis technology, and look to demonstrate the benefits and performance, which can come from those new materials. We also signed a collaboration agreement with ICoNiChem. They’re a world leader in the production and commercialization of cobalt, and nickel salts based in the U.K. We have a focus with them on sustainability, and the use of recycled feedstock materials, and critical minerals back into our process technology.

And again under this project, we will look to take these recycled materials, and demonstrate their compatibility with our all-dry zero-waste synthesis technology, furthering the sustainability and environmental benefits, of this process technology, which will lead to the ability to scale it more quickly here in North America. As we look toward the end of this year and into 2025, we’re focused on growth in four key areas. Of course, continuing to secure Tier 1 customer demand, for our materials and technologies. Second, scaling our Riverside activities, delivering production volumes next year, as we spoke about. Third, securing financing to support the growth in Riverside and beyond. And fourth, upholding industry leadership across battery materials.

As we look at customers, of course we spoke about Panasonic Energy and KORE Power, and their commitments for material from NOVONIX. We’ll continue to pursue other supply agreements, with cell manufacturers and automotive OEMs, to allocate the remaining capacity from Riverside, as well as our future Greenfield capacity, with the initial target of 30,000 tons per year of production. In terms of scaling Riverside, our key milestones are around our Panasonic Energy agreement. This involves the startup of our 3,000 tonight, first production line in the first half of next year, to enable us to finalize the qualification programs and enter production, and deliveries for Panasonic in late 2025. The other advantage to Riverside, is we’re able to leverage all of the engineering and technology growth in that site, toward our Greenfield facility plans to help us with financing, with customer support and with the ability to begin that project.

As we look at financing, we’ll continue to invest into Riverside’s growth, and continue to receive benefits and reimbursements, from the $100 million MESC grant that we will receive for that site. We’ll look to continue to attract strategic investments, for the build out of Riverside and beyond, and continue our work with the Loan Program Office for the potential support of our Greenfield facility. And as we think about upholding industry leadership and materials, our focus is on our cathode technology, and commercializing that technology. We’ll continue to demonstrate both the cost, environmental and performance benefits of our technology through our pilot line, and our full cell capabilities within our Battery Technology Solutions group. And we’ll build upon our CBMM and ICoNiChem partnerships, to demonstrate the breadth of this technology, and look to forge new partnerships to continue to pursue, the deployment of this technology at scale.

So as we look toward the long-term future of NOVONIX, our goal is to continue to stay at the forefront of product innovation, both in materials and process technologies, and this has led us to become recognized as a battery technology leader. Our two key areas of focus, which we spoke mostly about today scaling our Anode Materials production, to our eventual target of 150,000 tons per year, and commercializing and deploying our patented all-dry zero-waste cathode technology. We’ll continue to build on these positions and develop new IP, and potentially new leading market areas, all with the goal of generating businesses, which can produce strong cash flows, as they scale into this industry. We’re very proud of the progress we’ve made in the third quarter, and the position of the company moving toward the end of this year, and into 2025.

We’re focused on our key milestones in production at Riverside, and all the work around that. And we’re excited to continue to provide updates, as we make progress toward those goals. Thank you.

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