Lynas Rare Earths, making record profits and growing to meet the EV demand

While the lithium-ion battery boom for EVs is getting most of the headlines, investors should not forget about the rare earths. The most valuable rare earths, neodymium (Nd), praseodymium (Pr), and dysprosium (Dy) are those used in the permanent magnets used in electric motors, key components in electric vehicles, EVs.

As shown on the graph below, China neodymium (Nd) prices are up 73% the past year as demand for the rare earth permanent magnet material continues to grow. Praseodymium (Pr) prices and dysprosium (Dy) prices are also on the rise.

Neodymium 5 year price chart

Source: Trading Economics

Lynas Rare Earths Limited (ASX: LYC) (“Lynas”) is the second largest NdPr [The trade term for the neodymium-praseodymium blend, which is the standard item of trade in the rare earth magnet raw material production industry], producer in the world. Lynas owns the Mt Weld rare earth mine, which is one of the world’s highest grade rare earths mines, and it operates there also the Mt Weld Ore Concentration Plant, both located in Western Australia.

Lynas has recently drilled up to 1 kilometer deep at Mt Weld discovering addititonal  carbonatite below the current rare earth open pit mine. Lynas stated: “The current exploration drillhole has ended in visible coarse grained REE mineralisation. First pass geochemical assay results, microscopic petrology, and mineralogical study reports are expected by November 2021 and the drilling report is expected to be completed in December 2021.”

Lynas also owns the Lynas Advanced Materials Plant (LAMP), which is an integrated manufacturing facility, preparing and separating the mixed rare earths from Mt. Weld into individual rare earth materials, located in Malaysia. In recent legal news, Lynas announced that: “….on 28 July 2021 the High Court of Malaysia at Kuala Lumpur dismissed the judicial review proceedings commenced by the anti-Lynas activists seeking review of the processes followed by the Government of Malaysia in reaching the August 2019 decision to renew Lynas Malaysia’s fourth operating licence. Lynas has received a notice of appeal by the anti-Lynas activists. Lynas intends to defend the appeal.”

In company news, Lynas recently announced a record net profit after tax of A$157 million for the 2021 financial year (July 1, 2020 to June 30, 2021). The profit was partly as a result of higher rare earths production, but mostly due to stronger rare earths pricing. Lynas stated: “Despite the global shortage of semi-conductors which affects all industries and in particular, the automotive industry, the NdFeB market is experiencing very strong growth, supporting the demand for NdPr and the Heavy Rare Earths’ blend produced by Lynas”

Lynas’ rare earth products (notably NdPr) are seeing strong demand and rising prices

Source: Lynas Rare Earths FY 21 results presentation

Latest progress at Lynas as part of their 2025 growth strategy

  • Kalgoorlie Rare Earths Processing Facility (Australia) – Lynas is currently progressing their new Kalgoorlie Rare Earths Processing Facility, where site works have commenced and orders have been placed for all long lead time items. Fabrication of the five kiln shell sections is now complete. The final Environmental Review Document (ERD) has been submitted to the Australian EPA for the Kalgoorlie Project.
  • LRE/HRE separation & specialty materials facility (USA) – Lynas has completed the Phase 1 detailed engineering and design work for a Heavy Rare Earths (HRE) separation facility in the USA, and it has been submitted to the US Government. The U.S, DoD is now conducting a merit evaluation of the submission. Lynas is progressing with site studies and planning for the American  integrated Rare Earths Separation Facility.

Lynas current facilities and 2025 growth strategy

Source: Lynas Rare Earths FY 21 results presentation

Closing remarks

Lynas Rare Earths is performing very well, buoyed by strong rare earth prices. Most analysts are forecasting a strong decade ahead for rare earths based on growing demand for the powerful rare earth permanent magnets used in electric motors in the automotive, aerospace, and appliance industries.

Lynas is steadily working towards achieving its 2025 growth strategy of developing new facilities to enlarge its capacities for rare earths processing and separation in Australia and the USA.

Investor interest in Lynas remains strong, because it is the largest non-Chinese based rare earth permanent magnet raw materials’ producer. Lynas trades on a market cap of A$6.4 billion. It is certainly one to follow as it makes steady progress towards achieving its 2025 growth target.

Get ready EV Metal Investors as global electric car sales for June 2021 increased by a massive 2.5x

Global electric car sales for June 2021 increased by a massive 2.5x (compared to June 2020), reaching 8.7% market share. These results were led by Europe hitting a record market share of 19% (last year June 2020 was 8.2%) and China reaching a market share of 15% (June 2020 was 5.5%). 70% of all global electric car sales in 2021 were 100% battery electric vehicles (BEVs), the balance being hybrids. These results highlight the exponential growth and disruption that is now occurring in the car market and indicate that electric cars are now well on the way to becoming mainstream. In most cases sales are only limited by production, an example being the 1.25 million Tesla Cybertruck pre-orders, with production now delayed until 2022 due to battery shortages. Tesla Semi is another example.

The lithium-ion battery shortages are being caused by a lack of new production capacity, but even worse is the shortage of EV battery metals. I say even worse as it usually takes 5-10+ years for a new EV metals mine to make it to production, compared to only 2 years for a battery or car factory. This means that this decade the choke point for EV supply is expected to be the battery metals.

In June 2021, the International Energy Agency (IEA) announced forecasts for 2020 to 2040 total demand increases of lithium 13x to 42x, graphite 8x to 25x, cobalt 6x to 21x, nickel 7x to 19x, manganese 3x to 8x, rare earths 3x to 7x, and copper 2x to 3x. These types of numbers are unprecedented and will be an enormous challenge for the mining industry to bring on adequate supply.

IEA forecast for clean energy metals 2020 to 2040

Source: International Energy Agency 2021 report

On July 1 Reuters reported:

“Shortages flagged for EV materials lithium and cobalt…..High lithium prices have failed to spur investment in new capacity due to lower long-term contract prices, while the problem for cobalt supply is that it is mainly a byproduct of copper, meaning investment decisions are based on copper prices……BMI’s George Miller forecasts a LCE deficit of 25,000 tonnes this year and expects to see acute deficits from 2022. “Unless we see significant and imminent investment into large, commercially viable lithium deposits, these shortages will extend out to the end of the decade,” Miller said……Analysts at Roskill forecast cobalt demand will rise to 270,000 tonnes by 2030 from 141,000 last year.”

Investors are now catching on and a lithium miner’s price surge has begun

A combination of greater investor awareness and rising EV metal prices is now resulting in sizable price movements for the miners, lithium being the prized example. Lithium prices have more than doubled from their lows and many lithium miner stock prices have gone 3-12x as a result.

Lithium miners stock prices have increased as much as 1,126% since May 2020

Source: Yahoo Finance

What should investors do now that EV metal miners stock prices are flying higher

New investors are now facing a conundrum – Do they buy now into stocks that have already risen dramatically or do they wait for a pullback? The answer will depend on an individual investor’s tolerance for risk and their time frame for investing. My view is that it is still not too late as the EV and associated battery and EV metals boom should run for at least a decade or two as we still have a huge way to go before all new cars are electric. Here are some recent forecasts to help you decide:

  • BloombergNEF Economic Transition Scenario: Passenger EV sales pa are projected to increase sharply, rising from 3 million in 2020 to 66 million in 2040.
  • UBS: By 2025, we think around 25% of new cars may be electrified. By 2030, the share may reach 60–70%.
  • Bank of America (BoA): EVs to represent 67% of total car market share by 2030. EV batteries will reach a ‘sold out’ scenario in the next 5 years.
  • Whitehouse: President Biden outlines target of 50% Electric Vehicle sales share in 2030.
  • EU: Proposes end to the internal combustion engine in 2035.

My view is that the UBS and BoA forecasts above will prove to be the better forecasts, and they align with my own forecast of 25% by end 2025 and 75% by end 2030. Ask yourself why anyone would want to buy a gasoline car after about 2023-25 when an electric car is the same price or cheaper, has 3x less running costs, and 5-10x less maintenance costs. Not to mention the better driving experience. History shows that when a new technology is better change happens exponentially.

Bloomberg’s forecast for passenger electric cars to 2040

Source: BloombergNEF Economic Transition Scenario

Closing remarks

Electric vehicles are now rapidly moving towards becoming mainstream. The choke point in supply will most likely be the EV metals. These can include any or all of lithium, graphite, cobalt, nickel, manganese, rare earths, and copper.

Given the demand surge ahead this decade it is still not too late to invest into the EV sector. At InvestorIntel we cover a wide range of EV metal miners and some EV related stocks, as you can see in our member’s area here.

Fasten your seat belt and be sure not to miss the biggest trend this decade!

Lithium: The Haves and the Have Nots

Too little attention is being paid in all of the chatter, both informed and uninformed, about a lithium supply “deficit” and its longevity, to the culling of both battery and vehicle manufacturers that such a deficit would (will[?]) entail.

There is not even the remotest possibility that global lithium (measured as metal) production could grow to this week’s prediction, for example, by the child-like prognosticators at Deloitte, that in 2030 32% of all newly manufactured motor vehicles would be battery electric vehicle (BEV). Even assuming no growth in total OEM automotive production, a CAGR of zero, there would be 100,000,000 cars and trucks manufactured in 2030, and, under this prediction, 32,000,000 of them would be BEVs. Using an average lithium-ion battery capacity per vehicle of 100 kWH and the requirement of 16 kg of lithium per 100 kWH this means a need in 2030, just for BEVs and excluding stationary storage (the so far un-named gorilla in the battery needs zoo) and personal portable electronics, of 512,000 tons of lithium or six times the new production level of 2020!

China’s new economic plan “only” calls for 20% of its domestic OEM automotive production in 2025 to be BEVs. Again assuming no growth in OEM automotive output from 2020 levels this would mean the production in 2025 of 5,000,000 BEVs in and for the Chinese domestic market. This would require, under the above usage of Lithium requirements, 100% of the lithium produced in 2020. But China is different. Today, in 2021, it already controls (owns or owns the output of) 60% of global lithium production and has today 82% of the global installed capacity for manufacturing lithium ion batteries of all types. Assuming that 65% of current lithium production is used for lithium ion batteries and the 100 kWH size of the average car battery and that it takes 9 GWH of battery making capacity to outfit 100,000 BEVs, this means that China today, with its installed capacity (in 2021) of 455 GWh of battery making capacity, could already produce 5,000,000 BEVs a year domestically. In other words, China today has already enough battery making capacity to match its current supply of lithium that is allocated to BEV battery manufacturing, and, further, to already be in a position to achieve its 2025 target production of BEVs!

There’s really no comparison between the efficiency and effectiveness of China’s mandarins as state resource allocation experts/executives and the bureaucrats/advisors of former Soviet Russia or today’s Washington and Brussels.

China continues to acquire global lithium sources, build processing and manufacturing capacity for lithium-ion batteries, and increase production of BEVs to meet long-term state planning goals. In the West bureaucrats “study” the needs for capital allocation to do the same thing.

China seems acutely aware of the balance its needs for steady societal growth (in the standard of living) required when set against its need to allocate capital efficiently to meet security of supply. This is where Western politicians who lack even a rudimentary understanding of economic planning have completely failed in their governance.

Yesterday I heard the chairman of a lithium junior in Argentina criticize China’s Ganfang Lithium, the world’s largest producer of lithium chemicals for batteries, for announcing that it is acquiring ownership of, what he called, a “crap” lithium junior in Argentina, Millennial Lithium Corp. (TSXV: ML | MLNLF: OTCQB). He failed to note that just this year Ganfeng has gone ahead with the building of a 20,000 ton per annum, lithium chloride production plant to be powered entirely by a 120 megawatt (Chinese manufactured) solar cell installation in Argentina, and also agreed to complete its purchase of Mexico’s Bacanora Lithium PLC. Ganfeng with its $120 billion market cap and its own cash along with the permission of the People’s Bank of China is valuing Millennial above its current market price primarily for its holdings and its recent PEA and pilot plant success.

Investing in junior lithium miners is not a bet on the US or the EU’s future demands it is a bet on the value that China puts on its critical resource supply security. 

The “free” market allocation of capital in the West is not for the societal benefit it is for economic growth, supposedly for the benefit of society, but increasingly for the benefit of an oligarchy now in control of finance. China seems to be taking a different path to economic growth and perhaps a better one for the long haul.

Lithium by the numbers, is there enough to deal with battery-powered electric vehicle demand?

Understanding the looming lithium supply crisis is perhaps the cure for the environmentalists’ movement’s bipolar approach to the profligate use of critical materials. On the one hand, they want to believe that everyone can have an electric car and on the other hand they refuse to understand the practical and economic limits of natural resource recovery and fabrication for use.

The earth’s resources available to us are only those we can afford to recover because we get more value from them than the cost of obtaining them. Up until now the actual use per person of critical technology metals has been small enough so that the extremely high cost of obtaining them and processing them into useful forms can be distributed widely enough across their end-uses in the market to justify and recover that cost.

This distributed cost of critical technology metals has served to make the use cost per manufactured product low enough to enable the mass production and use of miniaturized electronic devices such as mobile phones, personal computers, and entertainment devices accessible almost universally across the contemporary economic classes of mankind.

The rechargeable lithium-ion battery and the miniaturization of electronics, so that on an individual basis they use very little power and very little material, and so can be kept operating for hours, even days, has severed the need for massive devices using large amounts of materials and needing to be wired to a main power distribution hub (a wired home, fed from the grid, with wall sockets).

Rechargeable batteries themselves underwent a long evolution from the lead-acid behemoths to nickel-iron, nickel-cadmium, nickel metal hydride (rare earth based), to today’s lithium-ion chemistry. Each step in the evolution of rechargeable batteries allowed for smaller lower mass devices delivering the same power.

But, with the advent of the battery-powered electric vehicle (BEV) a threshold has been approached. The barrier to the widespread manufacturing and use of BEVs is the need for kilograms, not grams, per BEV, certainly of lithium and probably of copper, nickel, cobalt, and the magnet rare earths, in that order. Moving one or two tons of steel up to 500 km before its power source needs to be refreshed requires an irreducible minimum of scarce raw materials. That “minimum” in the case of lithium is thousands of times more mass than are needed to power a mobile phone for days!

The accessible and economically available resources of those metals simply do not exist on the scale that would be required to convert even the contemporary global internal combustion engine (ICE) transportation fleets of 1.5 billion motor vehicles alone, to BEVs.

The case of lithium is the one I will discuss here because its supply is the necessary prerequisite for a BEV revolution.

There is not enough lithium produced today to convert more than a tiny fraction of the global fossil-fueled internal combustion engine fleet of cars, trucks, railroad engines, boats and ships, aircraft, home utilities (generators), and industrial equipment (earth movers, trains, lift-trucks, etc) to rechargeable battery electric power. In addition, the other existing uses of rechargeable lithium-ion batteries for personal electronics, such as mobile phones, personal computers, digital cameras, play stations, and other toys need a significant fraction of global lithium production, and the use of lithium-ion batteries for stationary storage also needs a growing fraction of global production.

So, how much lithium is there actually for BEV manufacturing now and in the future, and just where, geographically, can and will that manufacture take place?

The electronic properties of lithium require that it takes 160g of lithium, measured as metal, to have one kilowatt hour of storage. Therefore a 100-kWh lithium-ion battery needs 16 kg of lithium. This is the irreducible minimum amount of lithium required to move two tons of steel on low friction tires at 60 kph for 500 km.

Global production of lithium in 2020 was 86,000 tons, or 86,000,000 kg, measured as metal.

If ALL the lithium produced in 2020 had been used to make 100 kWh batteries for BEVs then a total of 5.375 million such vehicles could have been (but were not) built.

But, according to the USGS, the use of lithium for batteries in 2020 was just 65% of global production.

So, only 56,000,000 kg were turned into batteries, so if this were entirely devoted to 100 kWh units for vehicles then 3.5 million could have been built.

Global production of vehicles in 2020 was 78,000,000 units, but the average of the three previous years was 95,000,000, so 2020 was an anomaly due to Covid.

One more thing: What percentage of global lithium for batteries is available outside of China? The answer is 40%. China today processes 60% of global lithium into battery and other use grades and produces 82% of the Li-ion batteries manufactured.

Therefore, the world is today totally dependent upon Chinese owned or based manufacturers for its supply of lithium chemicals used in batteries and for lithium-ion batteries of all types for all uses!

It is predicted that China will produce only 50% of lithium-ion batteries for BEVs by the end of the decade, but predictions as to the percentage of lithium processing that will be done in China are less optimistic.

Today’s lithium producers say that they can double annual lithium production by 2025 to, perhaps, 200,000 tpa, measured as lithium. I’m going to predict that lithium used for vehicle batteries will reach 75% of that total by 2025. But China will still process 60% of all the lithium for batteries, so that if all of the Chinese lithium industry’s output were devoted to BEVs then the 120,000,000 kg of Lithium produced could be used to make 7.5 million vehicles leaving the rest of the world with just enough lithium for about 2 million BEVs.

The Chinese have mandated that 20% of their new vehicle production in 2025 be BEVs. This would be about 5 million BEVs. Thus the rest of the world will be left with just enough lithium to make 4.5 million BEVs. This means that Chinese BEVs as a proportion of total OEM automotive production will be 20% while the rest of the world will have an aggregate 7% proportion. I predict that the European and Japanese automakers will produce the lion’s share of non-Chinese BEVs with most of the American OEM domestic production being that of Tesla.

The nonsensical, really just ignorant, predictions of the financial analysts of skyrocketing production of lithium are not even remotely possible due to the unbearable costs of increasing production from declining grade deposits and the fantasies of large high-grade new deposits being miraculously found and developed. All of this while keeping lithium prices in line, of course.

The financialization of the stock market is now complete. Value has been divorced entirely from momentum.

Until politicians wake up to the fact that they are being played by the financializers investing in lithium and other “battery metals” will be a good idea, since the supply can never meet the (political) demand.

Rare earths, by contrast, will always be a good investment, because personal motor transportation will always use rare earth permanent magnets and to get the best mileage per kWh the lightest traction motors for vehicles will always be the rare earth permanent magnet type.

More on this next week….

Jack Lifton on the Real X-Factor in the Critical Materials Supply Chain

America’s permanent civil servants, otherwise known as the employees of Federal agencies and the staffers of the elected officials of both local and national governments, are required to believe in the efficient market hypothesis as promulgated by the credentialed clerisy, in this case the Chicago (Milton Friedman and his disciples) School of Economics. This school holds that it is a law of nature that the demand for and the supply of any commodity will always trend towards an equilibrium in which the one equals the other, so that, for example, if the demand for copper wire exceeds the supply then capital will pour into the copper production industry until the supply equals the demand, or prices for copper will increase so as to deflate the demand increase, or some combination of both will occur.

Since there is no infinite reservoir of copper just waiting to be mined, refined, and fabricated by the driver of increased prices, the efficient market hypothesis fails to be reliable when the real world is involved.

This would, of course, be common sense if not only the correct (Ivy League) education, but also first-hand knowledge, experience, and skill in the particular subject matter were valued in Washington, DC. They are not.

What the Chinese refer to and define as “New Energy” is the production of electricity by means other than using fossil fuels for heating water to a boil and using the steam to spin turbines. This definition includes solar, wind, fuel-cell, nuclear, and recently commercialized chemically based rechargeable storage devices and systems such as batteries. Thus, all, or in-part (hybrids) battery powered, fuel cell powered, and even hydrogen powered (internal combustion engine) motor vehicles in China are called “new energy vehicles” (NEVs) and I am going to adopt that terminology here.

The contemporary market for NEVs globally is primarily driven by politicians, not consumers. In authoritarian industrial economies such as China, consumers can be forced to demand NEVs by laws and ultimately by the mandated production of only NEVs. This is known as industrial policy planning. In the free-market economies, politicians attempt to do the same thing by artificial price manipulation, aka subsidies in the form of tax incentives or outright grants to make prices appear lower than they actually would be if only efficient market dynamics were involved. These payouts sourced from taxation are known as “free money” in the capitalist economies. This free money is of course a transfer of wealth from the general population to the wealthiest by the pretense that it is for the common good.

Legislators (a.k.a., politicians) attempting to drive, not just influence, the consumer market for energy use, do not understand thermodynamics as applied to the production and use of energy by man-made devices. The relatively inexpensive electrical energy derived by burning fossil fuels cannot economically or efficiently be substituted by more expensive methods of transforming sunlight and wind through the use of the scarce resources of the electronic and magnetic properties of metals that are scarce mainly because of the energy needed to collect, separate, purify, and concentrate them. That energy can never be recovered by using them to transform light energy or the kinetic energy of wind into useful forms of electricity. Alternate energy construction economics fails with wind and solar.

It is argued that, even so, such relatively inefficient methods of energy production are a common good, even a necessity, since their purpose is to preserve an environment that is best for human beings. This is a moral judgment not a scientific one, in any sense. In an open system, it is not possible to balance or preserve or recycle energy efficiently. The world is an open system and pretending it is a closed one is a thought experiment and is not realistic.

Natural resources available to us are limited by the amount of energy we are able to deploy economically to extract, refine, and fabricate them into forms useful not to the inanimate world but to our species for its comfort, health, safety, or survival. Extracting particular resources means reversing the natural forces that created and mixed them together in the first place, and this always needs an excess of energy input over what is recoverable from the use of the resource.

Natural resources are not organic. They do not reproduce themselves. Human beings use and must continue to use the energy of fossil fuels to produce the structural metals necessary to recover relatively tiny amounts of technology enabling metals for energy transformation and then pretend that the relatively small and expensive amounts of useful energy obtained by the use of the electronic or magnetic properties of the technology enabling metals are saving the world, but the net irreversible flow of energy used to obtain these metals overwhelms the useful production of electricity obtained and due to the fact that the new energy generators wear out (I.e. return to their natural oxidized and useless state relatively rapidly) can never be recovered. In fact, additional energy must be applied to recycle them to the metastable state in which they are useful. Peter is being used to rob Paul.

A good example is the production of lithium for lithium-ion batteries. The best deposits of lithium currently used to produce it are the South American brines in which the lithium content is 2000 parts per million or 1/5 of 1 percent.

In order to produce 2000 tons of lithium, it is necessary to process 1,000,000 tons of water! It will be argued that most of the energy necessary for this is from natural solar evaporation, so that no fossil fuels need to be burned to create it. However, it must be noted that half of the world’s lithium is still derived from hard rock deposits of the mineral spodumene. The average run of mine grade of spodumene is 1% Li, measured as metal, so that 2020’s 50,000 tons of Li from spodumene required the moving, crushing, and processing of 5,000,000 tons of rocks.

The 140,000 tons of cobalt, measured as metal, produced in 2020 required the mining of 30,000,000 tons of copper and 2,500,000 tons of nickel in both of which the run of mine content of Co was less than 0.5%. The rock moved to produce this amount of copper, nickel, and cobalt was 3,000,000,000 tonnes.

The energy necessary to mine, crush, roast, smelt, extract, separate, purify, and fabricate these metals into useful forms is staggering, and it is all produced by burning fossil fuels!

Just as the Chinese were allowed to set costs of producing rare earths without considering environmental degradation, health, and safety so western politicians do not consider the energy costs or source development necessary to produce New Energy.

The Chinese minimize their need for the most energy intensive part of resource production, mining, by buying and importing ore concentrates whenever and from wherever possible. Lately, this has included even the rare earths. America and Europe have fallen far behind China in globally sourcing mined materials.

The amount of energy just consumed in mining, but not refining critical materials outside of China is staggering. There is no way this can be economical or efficient. This need for energy will inhibit the development of countries such as the DRC in Africa, slow the development of Chile, Argentina, and Bolivia and raise the cost of living in Australia.

The prices for the critical metals for new energy production will continue to rise but if present trends continue their supply will only be what is leftover from Chinese domestic needs and from those sources outside of China not controlled by China, because it doesn’t need them. China is the single largest producer of electricity of any nation; it has already allocated the necessary power for its new energy construction as well as obtained the necessary flow of raw materials without impeding its consumer’s needs for their standard of living.

No one but the Chinese has looked at the life-of-mines of critical natural resources. This is the key to a new energy future.

The laws of nature supersede those of economics.

Stock price up 275% over the past year, Nano One progresses commercialization efforts with JV partners in the lithium ion battery industry

Battery cathode materials nanotech company, Nano One Materials Corp. (TSX: NANO) (“Nano One”) continues to make solid progress with regards to commercialization of their patented licenses via several joint development agreements. The Company has also recently been upgraded to the TSX exchange, trading under the new ticker “NANO”.

Nano One is working with some of the biggest names in the battery and EV industry

Source: Nano One investor presentation

Nano One’s recent development agreements update

Announced on April 20, 2021, Nano One reported that they had successfully advanced phases one and two of their joint development agreement (JDA) with their multi-billion-dollar Asian (outside China) cathode producer development partner. The announcement stated: “LNMO cathode materials have met performance metrics and initial economic targets. Next steps include scale up, detailed economic modeling, third-party evaluation and planning for commercialization……The JDA provides a framework to develop a business plan for the commercialization of cathode materials, through a joint venture, licensing of Nano One’s technology and or through further development work.”

The key takeaway here for investors is that Nano One has developed advance intellectual property that will help cathode makers make next-generation batteries, needed to support the next generation of electric vehicles that require lower cost, faster charging, and still with good energy density and power. Nano One’s high-performance lithium-nickel-manganese-oxide (LNMO) cathode materials (using Nano One’s patented one-pot process) is also known as high voltage spinel (HVS). It delivers energy and power on par with other high-performance cathodes and is more cost effective because it is cobalt free, low in nickel and does not require excess lithium. LNMO’s three-dimensional spinel structure enables lithium ions to flow more quickly than other types of cathode for fast charging and discharge and keeps it from expanding, contracting and straining the battery.

Announced on June 3, 2021, Nano One and Johnson Matthey entered into a joint development agreement for lithium-ion battery materials. The co-development agreement is for next generation products and processes for Johnson Matthey’s eLNO® family of nickel-rich advanced cathode materials using Nano One’s patented one-pot process. The agreement also includes a detailed commercialization study for pre-pilot, pilot and scaled up production.

Announced on May 6, 2021, Nano One and niobium producer CBMM entered into a co-development agreement. The project will build on CBMM’s niobium products and technologies, and on Nano One’s successful demonstration and patenting of niobium coated cathode materials. Niobium coatings protect the cathode which leads to long-term cycling stability and improved battery durability.

Nano One is targeting to make US$1B from the forecast US$23 billion cathode market by 2025

Source: Nano One investor presentation

Closing remarks

Car makers and customers are demanding electric cars at lower prices with longer lasting and better batteries. To achieve this car makers, cathode and anode manufacturers, are spending up big on R&D and innovation. For most companies, it is easier and faster to pay a royalty to benefit from this better technology than spend billions of dollars trying to develop it themselves. The battery cathode market alone is forecast to be worth an incredible US$23 billion by 2025, so there is plenty of incentive to have the best technology. Nano One’s goal is to target just US$1 billion of the sector.

Nano One has done the work and is now rapidly co-developing better cathode materials to support cathode and battery manufacturers, and ultimately the EV and energy storage industries. This should potentially lead to successful commercialization and the beginning of strong revenues for Nano One.

Nano One is recently cashed up after a successful equity capital raise of C$28.9 million and trades on a market cap of C$436 million after a nice 275% stock price rise over the past year. There should be good times ahead for Nano One.

Critical Materials for the Two American Economies, The Military and the Consumer

Today’s demand for critical technology enabling materials was originally brought about by (industrial) policy driven military procurement during, after, and since World War II. The continuing production of these relatively scarce materials is only made economically today possible by the additional and much larger demand of the consumer economy based not on an industrial policy but on the (regulated) free market model of capitalism. Pentagon procurement of its needs for critical materials through policy can bend the law of supply and demand, but it cannot break it. The demands of the free market economy (in the USA) drive the creation of it’s critical material’s supply. The present (2021) needs of the Department of Defense (DoD) for rare earths, mainly as permanent magnets, for example, are “classified,” but are around 3,000 tons, measured as magnets per year. This is not enough demand for private capital to make an investment in a project that requires an entire supply chain to be (re) established.

The American consumer market from which 80+% of the domestic American rare earth demand arises has well established supply chains and has not experienced credible politically driven supply constraints. The largest single user of rare earth permanent magnets in the USA, the domestic OEM automotive industry, is faced with the need for a fundamental shift in its use of capital if it attempts to restore a total domestic rare earth permanent magnet supply chain for its demand. The best way for such restoration would be vertical integration, the antithesis of today’s just in time system of sourcing components. For any individual automotive OEM the costs would be prohibitive and not only is the expertise not available in-house, but also the lack of suitable domestic personnel to carry out such a project, or to manage, or to engineer it is palpable.

The American administration’s latest announcement on how it will address the supply chain “crisis” is wrongheaded and misguided. The related bill in the U.S. Senate to promote “innovation” is another misguided use of taxpayer borrowing ability. This, “borrowing ability” is, in fact how the US government is financed; its debt so far exceeds its revenues that to speak of spending in Congress is to describe moneyholics, drunk on their power, and putting the future on a tab.

Washington’s aging and apparently permanent lawmakers, such as Senator ( D-New York) spout drivel written by their jejune staffers about innovation as science, which, of course, means funding of University and internal government “grant mills.”  The urgent need in America is for manufacturing “technology,” the engineering of science to, modernize, rebuild, and utilize specialized legacy technologies. We do not do endless laboratory work to invent new ways to do things that industries can already do as efficiently as possible while remaining competitive. This particularly applies to capital intensive industries such as mining, automotive, and electronics.

The lithium-ion battery manufacturing industry is a good example of something completely misunderstood by Washington’s insulated, isolated, and commercially illiterate mandarins. From Xanadu on the Potomac, the Biden administration decrees that it will bring lithium-ion battery production to the USA by aiming a money missile with a 19-billion-dollar warhead at the “problem.”

But investment money is not the problem in commercializing science; it is the projection of positive returns on investment that drive new consumer industries, not innovation on its own. A good example is the American OEM automotive industry. That industry’s dominance peaked in the 1950s when a completely vertically integrated General Motors was the number one industrial firm in the world. It was not “innovation” that drove GM to the top; it was superior management that knew how to manufacture, finance, and deliver the company’s products to the consumer who either desired that product or could be manipulated into thinking they did. The position of Chief Engineer of a successful OEM automotive company, once held by Henry Ford in his own company, evolved into Vice President, Engineering, perhaps the second most important position in a manufacturing company’s management, and the one individual in any company who must know the limitations of his company to develop and manufacture its products.

Today’s, so-called, “tech” companies deliver specialized software (computer programs) as brainless toys to infantile adults using the throw-away model of consumer capitalism. Apple, for example, unconsciously mimicking the marketing ploy developed by GM to differentiate itself from Ford, has a new iPhone and Mac every year with “innovations” that only fit into their existing manufacturing supply chains. In order to maintain sales, existing customers must discard their existing products and buy the “new” ones. GM’s marketers decided in the early 1920s that the next Chevrolet would be called the 1922 Chevrolet and that thereafter all GM cars would be named by the year they were produced. Other car makers continued to name models, such as Ford’s Model T, but the success of the model-year naming ploy soon caught on. Car makers became fixated on the car’s exterior appearance and its passenger compartment and experimented with drive and power trains mostly out-of-sight of the buying public, so that the enormous research, development, and manufacturing engineering processes needing time for development in power trains could be done and tested before being offered for sale.

Safety regulations have contributed a great deal to the fall of the American OEM automotive industry to its present state, where all (both) of the domestic American OEMs have less market cap than just a couple of Wall Street’s flavors-of-the-moment “tech” companies that make no profit and never will.

To sell a car or truck in the USA it must meet rigorous safety standards that have forced car makers to produce much more robust and therefore long-lived products. In 1970 GM predicted that the domestic car market in 2000 would be 26 million units per year and that it would need 28 domestic assembly plants to supply its share of that market. What has come to pass is a “mature” (aka, saturated) car market in which there is a vehicle on the road for every American citizen. The prediction of a 26 million unit year is long gone down the memory hole and the total number of assembly plants in North America does not equal what GM predicted for its own 2000 model year needs.

The Defense Department’s investments were father and mother to the American technology boom that took place between 1941 and 1973 (The initial funding of the Manhattan “district” and the cancellation of the Space Shuttle). After that, innovation, slowed down considerably as private industry resumed its pre World War II internal funding of science and engineering that brought about the ascendancy of American consumer capitalism and global military dominance. Industries created before World War II, and without government support, included the telegraph, mass produced uniform quality steel and aluminum, the telephone, the light bulb, radio, the automobile, the airplane, television, the mechanical computer (OK, adding machine), miniaturized electronics, mechanical electric refrigeration, and many others in the life sciences, such as x-rays, insulin, and, originally, penicillin. Although we pay lip service to the inventors of the above “technologies” as intentional promoters of higher living standards, in fact, their driving motive was almost always profit. The scientists whose discoveries led to the technologies listed above are long forgotten or known only to historians; they rarely sought fame or fortune.

It was Franklin D. Roosevelt who kicked off the great age of American innovation in 1941, not just by authorizing the Manhattan Project, but primarily by bringing in the CEOs of GM, Chrysler, Ford, GE, and Westinghouse to oversee the transformation of American free enterprise manufacturing and innovative product development into the industrial policy driven global powerhouse that crushed Nazi Germany, Fascist Italy, and Imperial Japan, all of which began a war to capture the raw materials and land their society’s desperately needed to manufacture the weapons of war and feed their armies.

After World War II a subset of American manufacturers soon known as the “military industrial complex created itself in order to produce products required by the industrial policy, and power to execute it, created by the War (now Defense) Department during the war. The civilian, soon to be known, as the consumer, economy decoupled itself and followed the free enterprise model of capitalism, but it was spillover from military spending that created the miniaturization of electronic switching into the integrated circuit, aka, the “chip,” which sparked a consumer product revolution the basis of which was further inspired by the rare earth permanent magnet the development of which was itself inspired by stylists in the OEM automotive industry who wanted slimmer doors on cars with power windows.

The Ford Scientific Laboratory was working on a sodium sulphur battery in 1964. I was a “helper” on that project. I didn’t work for Ford but I was being recruited by Ford Scientific for its materials sciences group. I had been working with the electronic properties of Lithium and it’s salts since 1962 at Energy Conversion Devices, my first employer, where we made a molten salt version of what is now known as a lithium ion battery in 1963. These molten salt power train batteries proved extremely inappropriate for automotive use, but my point is that there isn’t much new under the sun other than different ways to do desired things such as energy storage more efficiently and safely. And these today are really engineering problems more so than scientific ones.

The US Defense Department on its own and without subsidies cannot catalyze the reshoring of a total domestic American, lithium, cobalt, or rare earth permanent magnet supply chain. It’s time for the White House to call in the managers of the manufacturing part of the domestic consumer products industry for a chat about the creation and implementation of a national industrial policy.