In a November 2024 research report by Senior Analyst Di Brookman from Corporate Connect, NOVONIX (ASX:NVX) showcased its growing footprint in the North American battery supply chain. As it gears up to deliver on binding contracts with Panasonic, KORE Power, and the newly signed Stellantis agreement, NOVONIX is poised for substantial growth in the lithium-ion battery sector. This includes advancing both anode and cathode technologies through a series of partnerships, facility expansions, and patented sustainable production methods.
High-Impact Partnerships and Major Contracts
NOVONIX’s synthetic graphite production at its Riverside facility in Tennessee is ramping up to meet its commitments to battery giants like Panasonic and KORE Power. These agreements position NOVONIX as a primary supplier for both auto and battery gigafactories under construction in the U.S., with production expected to start in 2025 at an initial 3,000 tonnes per annum (tpa). By 2028, the Riverside facility’s capacity is targeted to expand to 20,000tpa.
Key developments include:
- Panasonic: A binding contract for 10,000 tonnes of synthetic graphite over four years (i.e. 2,500tpa)
- KORE Power: A long-term agreement covering synthetic graphite for up to 12,000tpa by 2028.
- Stellantis: A recent addition, signing a binding offtake deal for up to 115,000 tonnes across six years (i.e. up to 19,100tpa).
Groundbreaking All-Dry, Zero-Waste Cathode Technology
A significant leap in NOVONIX’s technology portfolio is its patented all-dry, zero-waste cathode synthesis process. This novel method, awarded a patent in Japan, reduces water and energy usage by nearly 100%, significantly decreasing both capital and operational costs. Further jurisdictional patents are expected. Traditional cathode manufacturing involves energy-intensive processes that use toxic metal sulphates and large amounts of water, producing waste by-products. NOVONIX’s process, by contrast, leverages non-toxic metal oxides, cutting costs by 50% and power consumption by 26%, offering a clear advantage amid growing global demand for sustainable production methods.
Brookman’s report underscores that pilot samples from this process are currently being tested by Tier-1 battery manufacturers. The process could ultimately lower cell manufacturing costs, improve environmental impact, and provide NOVONIX with a competitive edge, especially as it scales its operations.
The Push Toward a U.S.-Centric Battery Supply Chain
NOVONIX’s development of a greenfield facility is an ambitious step to fortify the North American battery supply chain. Currently under review for a loan from the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) program, this proposed plant would increase initial synthetic graphite production by 30,000tpa, eventually scaling to 75,000tpa by 2030. A DOE loan could cover up to 80% of this new facility's capital costs. Equity could be provided through customer participation and/or prepayments allowing NOVONIX to maintain rapid growth with minimal reliance on equity funding.
The report also highlights that recent U.S. tariffs on Chinese synthetic graphite may provide further economic advantages for NOVONIX as it emerges as a domestic supplier, essential for reducing the U.S. reliance on Chinese imports.
An Eye on Innovation: Collaborations in Cathode Chemistry and Testing
NOVONIX has established collaborations to strengthen its market position, notably with:
- CBMM (Brazil’s Niobium Leader): A 1-year partnership to incorporate niobium in cathodes, enhancing cell stability and performance at a lower cost. Niobium’s stability properties align with NOVONIX’s sustainable ambitions, and this addition is being tested for potential adoption across high-nickel chemistries.
- SandboxAQ: An Alphabet spin-off focused on artificial intelligence, SandboxAQ’s testing platform has accelerated NOVONIX’s cell testing processes. This partnership has reduced cell testing times by as much as 95%, potentially accelerating the commercialisation timeline by up to four years.
These partnerships contribute to NOVONIX’s R&D goals, with its Business Technology Solutions (BTS) division leveraging these collaborations to improve testing efficiency and cathode chemistry innovation.
Natural Graphite Spin-Off through Axon Graphite
In a move to streamline its operations, NOVONIX and Lithium Energy (LEL) are merging their natural graphite assets into a new venture, Axon Graphite, which is expected to launch an IPO by the end of 2024. Brookman’s report notes that this spin-off will enable NOVONIX to concentrate on synthetic graphite production while maintaining an equity stake in Axon’s potentially lucrative natural graphite assets in Queensland, Australia.
These assets, with a high-grade resource estimate of 12.8 million tonnes at 14.37% total graphitic carbon (TGC), could add significant value if the merged deposits achieve vertical integration with LEL’s planned Battery Anode Materials (BAM) project in Townsville, Australia.
A Strong Financial Foundation with Government Backing
Despite its significant investment in new facilities and R&D, NOVONIX’s financial outlook remains supported by government incentives, including:
- US$100 million DOE Grant: Dedicated to the Riverside facility, enabling NOVONIX to reach its target of 20,000tpa capacity by 2028. US$91m remains for remittance at end September
- US$103 million in Tax Credits: NOVONIX has two years to monetise these credits, which are intended to offset project costs and aid the Riverside facility's expansion. Given, NOVONIX is unlikely to use all these credits within 2-years and the credits are transferrable, they may choose to monetise in 2025.
With a cash balance of USD $37 million and access to additional zero-cost funding through grants and tax credits, NOVONIX’s near-term financial risks appear manageable, though it may require further capital to meet future expansion plans.
Future Trajectory and Valuation
Brookman’s valuation model places NOVONIX’s share price at an estimated A$3.29, reflecting the intrinsic value of its binding contracts, technology advancements, and strategic position in the U.S. market. As Brookman notes, with robust growth prospects and a focused strategy, NOVONIX is well-placed to benefit from an EV-driven surge in battery material demand, particularly as sustainability and onshoring become increasingly vital to supply chain resilience.
Outlook
With synthetic graphite production set to commence in 2025, coupled with a patent-protected cathode process and strategic collaborations, NOVONIX is on course to deliver strong growth in North America’s battery materials sector. If it successfully capitalises on its DOE loan application and strengthens existing partnerships, NOVONIX could be a key player in the drive for a domestic, sustainable EV supply chain in North America.
