NVNXF: Strategic Phillips 66 Relationship Validates & Enhances Prospects

By M. Marin

OTC:NVNXF

READ THE FULL NVNXF RESEARCH REPORT

Positive implications strategic investment

• Important relationship with major industry player

• Facilitates and helps fund production expansion

• Facilitates access to critical precursor material

• Validates NVX opportunity

Novonix NVNXF is an integrated developer and supplier of high-performance materials, equipment and services for the global lithium-ion battery industry. The company is leveraging its proprietary technology to process and develop critical materials and technology for the global lithium-ion battery industry, beginning with anode materials. In addition to the Novonix Anode Materials unit, the company also operates the Novonix Cathode Materials and Novonix Battery Technology Solutions (BTS) divisions.

Novonix announced earlier this month that Phillips 66 intends to acquire a 16% stake in the company. The strategic relationship with Phillips 66 underscores the company's opportunities in the lithium-ion battery space, in our view, and is expected to provide NVX access to critical components it needs to produce advanced materials for battery production.

Expanding production to meet growing demand

To benefit from the anticipated growth in battery demand, Novonix has developed specialized furnace technology, through a strategic alliance with Harper International Corporation, that enables it to produce competitively priced, high-quality synthetic anode material at its Tennessee plant. NVX expects North American demand for lithium-ion batteries to continue to rise and intends to ramp production capacity. The roughly US$150 million investment from Phillips 66 will help fund growth initiatives, including the expansion.

Relationship with major industry player validates NVX opportunity…

We view the Phillips 66 strategic investment, as well as the U.S. DOE grant of a US$5.6 million award towards developing the technology, as positive validations of the company's strategy. We also view the supply agreements with Samsung SDI and Sanyo (see below) as further validation of the opportunities NVX has if it executes its strategy successfully to produce synthetic graphite, a critical component of batteries. Reflecting many competitive advantages compared to natural graphite, synthetic graphite is expected to overtake natural graphite in terms of market share.

… While major battery producers assess NVX product

Moreover, Novonix has formed agreements with Samsung SDI and Sanyo for its materials. NVX will supply Samsung SDI with 500 tons of synthetic graphite anode material for lithium-ion batteries from its Tennessee plant and expects this agreement likely will be expanded, following quality testing of the NVX product. Sanyo also intends to assess production materials from the Tennessee production facility.

Potential uplisting another positive

With the above-noted investment by a major participant in the energy sector and expansion of its Tennessee facility, the company plans an uplisting of its shares to the Nasdaq. This would boost awareness of Novonix within the investment community, we believe, and likely expand the pool of potential investors in the shares.

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