2023-07-06 13:02:56 ET
Summary
- Nano One Materials is a Canadian manufacturer of low-cost cathode materials for electric vehicles, consumer electronics, and energy storage systems, with a unique "one-pot-process" and M2CAM technology.
- The company has partnerships with Rio Tinto, Volkswagen, and BASF, and is currently scaling up infrastructure for initial manufacturing pilot in 2024, with a total addressable market expected to expand due to increasing demand for electric vehicles.
- Nano One has a strong financial position with over $40 million in cash reserves and government grants, and is the only public company specifically focused on cathode materials for batteries, making it a promising growth investment.
Introduction
Nano One Materials (NNOMF) is a Canadian-based battery company with the potential manufacturer of cathode active materials ((CAM)). The idea behind Nano One is that they will use their in-house "one-pot-process" to create cathodes for electric vehicles but they can include consumer electronics and energy storage systems. The company is currently in its early stages as they recently acquired its commercialization hub that has a production possibility of 1 tonne per annum.
Nano One Materials March 2023 Investor Presentation
The commercialization effort has been supported by a variety of companies such as Rio Tinto ( RIO ), Volkswagen ( OTCPK:VWAGY ), and BASF ( OTCQX:BASFY ). Each company represents positions on the supply chain for cathode materials. Rio Tinto is there to supply the battery materials such as cobalt and nickel, BASF will manufacture these batteries using Nano One's low-cost cathode materials, and Volkswagen is the primary OEM that will use the end batteries.
Unique LFP process
Nano One Materials March Presentation
The traditional cathode process is wasteful and detrimental to the net zero aspirations of many car companies. Even though Nickel-Manganese-Cobalt batteries (better known as NMC batteries) are able to be recycled the amount of sodium sulfate runoff from the process negates many environmental benefits of having an electric car. This is a big reason why I believe OEM's will look for more green processes for their cathode material.
Nano One Materials March Presentation
What makes Nano Materials stand out from other OEM's who are vertically integrated across their EV supply chair is their "one-pot-process". The process works for both NMC and LFP chemistries. To make these two different types of battery chemistries, their precursors are put through the same one-pot process into a powder called PCAM (Precursor Cathode Active Material) which is fired in a furnace to make CAM (Cathode Active Material) which Nano One then sells off to LFP and NMC battery manufacturers. A major advantage that Nano One has in its cathode process is that they have no environmentally harmful sodium sulfate runoff.
Operations
Nano One Materials March Presentation
Nano One is currently scaling up its infrastructure to complete the initial manufacturing pilot in 2024. Currently, all of the work Nano One has done to this point, from engineering to marketing, has been done in their Vancouver headquarters. The real test will come when the Burnaby Commercialization hub sends out and starts manufacturing Cathodes at scale.
Nano One Materials March Presentation
The commercialization hub is where the money will be made. Currently, the timeline for commercialization production is 2024. This will be bolstered with the excess cash reserves of over $40 million. Contracts for commercialization efforts are already underway as Nano One Materials announced a partnership with EV Batter maker Our Next Energy . Nano One will provide Cathodes for Our Next Energy's Aeris and Gemini batteries. The commercialization will undergo re-commissioning in Q3 2023 which will allow Nano One to be in a good position to fulfill orders and to expand their partnership network to other battery makers in North America. In terms of timeline for consistent revenues, there isn't a very tied downtime mainly because of the re-commissioning and investors should have more clarity in the coming quarters when Nano One has more information.
Future Market Opportunities
Nano One Materials March Presentation
The total addressable market for CAM (Cathode Active Material) will only expand through excess demand. There are 3 main catalysts propelling the EV market, and thereby the cathode market, higher. First, The Inflation Reduction Act, will be a big boon to EV companies and suppliers alike because it allows first time EV buyers to use a $7500 dollar tax credit. Secondly, car manufacturers are going all electric and focusing on being "net zero" or "carbon neutral" by 2030. All this means is that these car companies are planning on having no future impact on the environment themselves. Of course, there are problems with this statement because there are obviously emissions along the supply chain outside of the companies themselves but that is neither here nor there. Thirdly is the worldwide push toward decarbonization that has been occurring over the past couple of years. During COP 27 (UN's Annual Climate Change Conference) Secretary-General Antonio Guterres stated
The science is clear: any hope of limiting temperature rise to 1.5 degrees means achieving global net zero emissions by 2050. But that 1.5 degree goal is on life support - and the machines are rattling. We are getting dangerously close to the point of no return.
Source: ( COP 27 Selected Remarks from Secretary General Antonio Guterres )
These bold remarks give an insight on the global importance that leaders have placed on climate change. This means that there are growth opportunities past what we can currently see and the market will only continue to grow as electric vehicles become a bigger percentage of the world's automobiles.
Fundamentals
Let's look at Nano One's recent financial and operating activity during Q1 2023. On the surface, just looking at the quarterly operating loss of $8.07 million , it looks bad relative to the market cap of 230 million the cash burn won't be a significant problem as there is major government backers. Just in Q1 alone Nano One received a $ 3.36 million dollar grant from Sustainable Development Technology Canada, from which the company has received a total of CAD$13 million in grants . Investors do need to look at feasibility and future cash burn to commence operations. With the new commercialization facility, it should take roughly an additional $33 million based upon the current cash burn for operations to commence on a 2024 timeline. Since Nano One covers this with cash on hand I am not worried about Nano One liquidity up until production.
Competition....Or Lack of
Currently, there are no major public companies with a specific focus on cathode materials for batteries. Nano One is the only public company really innovating in the sector as all the other cathode materials companies have been going through similar processes for years with massive runoff. Many of these companies ( Panasonic , CATL , etc) have gotten in trouble for these issues, and that's why more OEM's will switch over to Nano One for their low waste approach which should give U.S. OEM's further tax breaks for their net-zero upstream production models.
Conclusion
Nano One is still volatile and in its early stages. However, compared to other small-cap stocks I have covered in the past they have a solid strategy with adequate liquidity and financing. I wouldn't harp too much on the short-term price and buy in before institutions price out retail investors. I rate Nano One Materials a buy and I look forward to evaluating future earnings reports.
For further details see:
Nano One Materials: Pick And Shovels Battery Play