Nano One – “Mining” the Value-Added Chain
It is oft said that back in the California Gold Rush days the most money was made not by the miners but by those who sold them the shovels. In recent times we have had “gold rushes” in Rare Earths and Lithium which begged the same question, who makes the money in the value chain? In Rare Earths it was clearly down the chain where the money dropped into investors profits, in Lithium there is definitely money to be made in the mining end (though few of the class of 2010 have anything to show for it, yet) but there is also money to be made in the midstream and that is where Nano One have pitched their tent. In this review, I shall look at their product and its progress so far.
Nano One Materials Corp. (TSXV: NNO) is developing an innovative, scalable processing technology for the low-cost production of high-performance battery materials used in electric vehicles, energy storage and consumer electronics. Thus far the project has been bench tested.
The company claims its technology could reduce costs by up to 50% (in $/kWh terms) delivering cathode materials that last 2-3 times longer, store more energy and deliver more power. For electric vehicles, this could translate into fewer battery cells, less weight, less cost extended range, longer lifetime or better warranties. For consumer electronics, this could mean greater storage, faster charging or more power.
Key to note that most current technologies are Lithium Hydroxide based and this technology is Lithium Carbonate based.
The patented technology can be configured for a range of nanostructured materials (with principal targets being Lithium cathodes containing Nickel or Manganese or Cobalt) and should be able to adapt to emerging battery market trends and a diverse range of other growth opportunities. The three-stage process uses equipment common to industry and is being engineered for high volume production and rapid commercialization.
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The technology can use lower grade raw materials and complete a production cycle in less than a day using a three stage process with up to 75% fewer steps (compared to existing processes with 50 to 100 steps and production cycles of 4-7 days). There is less handling, lower cost capital equipment, no waste solvents, 90-95% yield, many fewer failure points, higher safety and flexibility to run different material formulations in a controlled and sealed environment.
As the chart below shows the cathode materials are the largest component by value in a Lithium ion battery.
This raises the issue that if the cathodes last a quantum longer (and use a lower grade), then potentially they will reduce the amount of Lithium required for replacement batteries or at least the cathodes. That would indeed be disruptive and not in a way that the miners might necessarily like!
Pilot Plant on the Way
Back in early August the company executed a Contribution Agreement (basically a grant) with Sustainable Development Technology Canada (SDTC) for a $2.08 million technology commercialization grant which shall be paid in four installments. SDTC is a not-for-profit foundation (but an arm of Canadian Ministry of ISED) that finances and supports the development and demonstration of clean technologies which provide solutions to issues of climate change, clean air, water quality and soil, and which deliver economic, environmental and health benefits to Canadians.
The company has received an initial installment of $488,944 for the first phase of its lithium battery materials pilot plant project. The payments will be disbursed in installments over the build, commission and demonstration phases with a 10% holdback awarded upon completion of the project. The phases are:
- Construction phase
- Operating trial phase
- Demonstration phase
Funds are dispersed at the beginning of each phase and are subject to Nano One meeting milestones and having matching funds in place.
The company initiated the project on June 1st and has already lodged purchase orders for capital equipment with long lead times. The goal is to complete construction early in 2017, prove up the technology, then license it out to industry majors.
Best of all, the grant proceeds are moreover non-repayable which is music to the ears of shareholders that have faced brutal dilution in many Lithium plays during the lean years.
The chart below shows the process (including the parts excluded by its innovation):
The pilot plant is in Vancouver in the neighbourhood of Simon Fraser University. It will be expected to produce batches of tens of kilograms of cathode. It makes cathodes of Lithium-nickel, Lithium-manganese and Lithium-cobalt.
Nano One is working on the premise that as the lithium ion cathode materials market is valued at $3bn and growing at double digit rates annually, then that value-added segment of the battery “mix” is the one to grab for.
If it can hone it product via the pilot testing push into a product that outcompetes the current cathode production methods then it has the potential to reduce Lithium requirements by extending the “shelf-life” of batteries made with its cathodes. This might set a cat amongst the lithium-mining canaries.
Its commercial logic is that advanced cathode materials are complex mixed metal structures that will require process innovations for producers to remain competitive. Therefore its technology is aimed at addressing this need and is based on “scalable” (our favorite word) methods that can be adapted to address a wide range of materials markets. The current goal is for the pilot plant to prove the technology at scale and to demonstrate cost and performance advantages and from that base then firm up commercial relationships with third party interests.
With testing at the pilot likely to show initial results in the first months of 2017, investors should not have a long wait to find out just how disruptive of Lithium demand this product might be.
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>