Nano One (OTCPK:NNOMF) is a small, Canadian pre-revenue tech company working to move its patented process for making nano-structured lithium battery cathode materials to industrial scale production with several major automotive OEMs and battery supply chain players. Nano One doesn't make a particular lithium cathode chemistry. It is not a "one-trick pony." Rather, the company's patented process makes any of the popular cathode materials - LFP, NCM, NCA, LNMO, even NMCA, the kind of cathode in General Motors' (GM) latest Ultium batteries - at low cost and with exceptional control of nano-structure and particle coatings.
Nano One is a pure play in the battery supply chain, and the company's licensing business model, having minimal capital requirements, offers investors potentially outsized returns. Success for the company and payoff for its shareholders will come when (and if) Nano One's process becomes an embedded part of lithium battery manufacturing. Prodigious volumes of batteries to electrify transportation and buffer energy for a renewable electric grid will require millions of tonnes of cathode material. Use of Nano One's process to make even a modest share of this cathode material will bring the company and shareholders generous returns.
We are in uncertain times, and Nano One investors need to gauge whether Nano One will succeed, or even survive. In other words, will Nano One go Viral or will Nano One Go viral?
Disclaimer: Nano One is a small (roughly C$100 million market cap) pre-revenue company. Investors should seek professional advice, perform thoughtful due diligence, and limit any investment in this company to funds they are prepared to put fully at risk. I am long NNOMF. That alone does not mean you should be too.
Recently, I had a lengthy talk with Nano One CEO, Dan Blondal, to see where the company stands and what are the plans for going forward in these unusual times. After finding out from Dan that the Nano One crew is currently healthy and taking appropriate precautions, we went over several aspects of Nano One's status and plans for moving forward which I will now relate.
Nano One is in a strong financial position at this time, having been recently awarded a C$5 million grant (boosted by another two allotments of C$250,000) from the Canadian government and, on February 24th, closed a C$11 million private placement. On May 6th, the company was awarded an additional grant of C$3 million from the province of British Columbia.
The company now has sufficient resources in-hand to carry forward planned development for the next three years. This ample war chest will allow Nano One to concentrate on moving its business plan ahead.
To understand the situation at Nano One, it is necessary to first understand in some detail what are the steps for bringing a specific cathode powder to industrial scale production together with the part of such efforts being played by Nano One. Cathode powders - the materials that Nano One's process can produce - form the positive electrode of lithium-ion batteries and are about 40% of a lithium cell, by weight.
Cathode powders are extremely fine with individual grains 50 times smaller than the diameter of a human hair. Battery makers "tune" the chemical composition, particle size, crystalline structure, and coatings of the cathode powder grains as part of overall cell and battery design. The objective is batteries with high energy density, quick charging, temperature stability, and many other attributes that can be made from lower cost feedstocks by a process having minimum capital requirements. More than a few tradeoffs are involved.
It is not enough to get the chemical composition of each cathode particle correct, the particle size and crystalline structure exact, the particle coating right. The coming transition to electric vehicle propulsion and grid-connected energy storage will require production of millions of tonnes of cathode powders. Before batteries powering thousands of cars or buffering grid electricity can be produced, specific cathode formulations must be selected, volume supplies of input materials identified and industrial scale cathode powder plants designed, built, and brought online. Nano One has a role in each of these steps as they tailor their process to the needs of individual partners/future licensees. This is very much a collaborative, partnering effort between Nano One and those who will process the cathode powder, make the batteries, and build the vehicles and grid energy storage equipment. And it takes time.
Collaboration begins with an automotive, battery, or cathode material maker evaluating the Nano One process, usually by obtaining some sample cathode powder with a chemistry similar to that eventually intended for a given application. These samples will be examined to understand things like particle size, crystal structure, and coating composition. Test cells will then be made to assess the performance of cathode material from Nano One compared to similar chemistry cathode material from conventional "roast/grind/roast" processing.
Nano One's process mixes cathode ingredients in aqueous solution from which precursor material is precipitated into nano-sized particles which become cathode particles upon firing. The result is single crystal cathode particles of exceptionally uniform chemical composition. No grinding required.
The process can be adjusted so that during the firing step, carbon, titanium, or other coatings a few atoms thick form and uniformly cover each single crystal particle without the need of additional process steps usually required to coat cathode particles.
Nano One processed cathode material differs in often subtle ways from similar chemistry cathode material from conventional processing. Potential users will want to understand these differences and if possible exploit them in their battery designs.
Consider, for instance, the use of stabilizing dopants such as aluminum in NCM cathodes (e.g. General Motors' NCMA cathode material) or chromium in LNMO spinel material. The extremely uniform chemistry from one cathode particle to the next that is inherent to Nano One's process can potentially allow slightly less stabilizing dopant. If you are a large carmaker - like Nano One partner Volkswagen (OTCPK:VWAGY) - it is not enough to know that a given cathode formulation is stable. If you are going to make millions of electric cars, you want to know how battery stability (thermal safety, cycle life, aging) varies with dopant concentration and exactly "where on the curve" you will be making your cathode material.
The same thing goes for the chemical composition, thickness, and thickness uniformity of protective coatings on individual cathode particles. Less protective coating thickness allows more active material and faster charge/discharge rates. Too little protective coating and battery life suffers, perhaps dramatically. Again, you need to experiment with the "limits" to know you are designing in the "sweet spot".
Then comes the matter of battery materials supply chains. Nano One's process is particularly flexible with respect to feedstocks. For instance, the Nano One process can use either lithium hydroxide or lithium carbonate when making NCM or NCA cathode material. Conventional processing requires more costly and difficult to handle lithium hydroxide for these materials.
Nano One and partner Pulead were able to identify a significantly lower cost iron feedstock (which they have not disclosed) for the Nano One LFP cathode process. Naturally, this new feedstock had to be verified by using it in Nano One's process, making cells with the cathode powder, so produced and testing those cells for performance, life, etc.
Nano One's role in this is to make batches of candidate materials and to advise on what adjustments to chemistry and process will best meet the needs of a specific partner application. Nano One is also engaged in analytical work to nail down eventual cathode material costs as well as engineering details and capital requirements for industrial scale cathode process lines using the company's process. Currently, Nano One is performing these activities without the need for face-to-face contact with partners and the travel that would require. Some company employees are working largely or entirely from home.
At the present time and for the immediate future, Nano One is well positioned for and is successfully managing health risks associated with the pandemic.
All of the testing and process evaluations so far described can and are being done with modest batches (up to a few kilograms) of Nano One processed material. Nano One is using its pilot scale "reactor" to verify that its "one pot" mixing/precipitation step works at larger scale. Some materials are prepared in kilogram quantities for third-party evaluation and some at bench scale and in glove boxes. Turns out Nano One is about to take a very big step forward.
Here, it is important that we look a bit at the several kinds of cathode materials that Nano One partners want to make with the company's process. Cathode precursor particles for all cathode materials are formed in Nano One's reactor and dried. From that point forward, different cathode material must be handled differently.
LNMO (High Voltage Spinel) is the easiest material. It can be fired in air and handled in air after firing. Easy-peasy...
LFP (lithium iron phosphate) must be fired in a controlled atmosphere, typically nitrogen, but after it is fired, it can be handled in air. A bit more bother to that.
NCM (Nickel Cobalt Manganese) material is challenging especially in the high nickel versions like NCM 811. High nickel NCM must be fired in an oxygen-rich environment and, subsequently, handled in a super-low humidity "dry room" (or in an argon purged glove box for small quantities.) High nickel NCM reacts with moisture in the air. While this difficulty stems from the material and not from the Nano One process, NCM is still much more challenging to make.
Bringing a battery design to scale involves a pilot cell manufacturing phase. Here is where the battery maker has established the design, the chemistry, the form factor of the battery cells to be built, and begins testing the automated battery manufacturing systems and equipment that will eventually be replicated to produce vast numbers of cells for vehicles or grid storage. When pilot cell lines are set up, it represents a significant step commitment on the part of the battery maker to the chosen cathode material and other constituent parts of the cells to be produced. And pilot cell lines for vehicle and grid storage size cells don't work with 100-gram quantities of cathode powder. Tens or even hundreds of kilograms of cathode material may be required for a "pilot run" of new design cells.
Nano One's pilot scale reactor is roughly 10% the size of eventual production reactors and produces precursor material for all types of cathode powder currently of interest. This pilot scale reactor can be practically used to make precursor material for 100s of kilograms of cathode powder. But precursor material must be fired to make cathode powder and that powder handled and packaged for shipment to partners. The bench-top and glovebox scale apparatus the company currently uses for firing precursor material and handling the resulting cathode powder is not adequate for making 100s of kilograms.
Dan Blondal tells me that Nano One will be expanding its pilot facility to add separate firing and handling "rooms" for the three different kinds of cathode material. This is very significant because it strongly suggests that Nano One partners are moving to pilot line cell manufacture, requiring larger amounts of Nano One processed cathode materials. And, that is a big step toward insertion of Nano One's process into the battery supply chain. It is great news for Nano One shareholders.
Nano One has announced that it is working with Volkswagen, Saint-Gobain (OTCPK:CODGF), and Pulead. The company also claims to be working with other unannounced partners under strict NDAs, including several of "Volkswagen's peers".
All of this sounds good, but what investors would like to know is which partners are working with which materials/process variants, what the status of the work is, and what part the Nano One process is likely to play with a partner's strategy going forward. Remember, the end game for Nano One and its shareholders is getting the company's process embedded in the supply chain to make large quantities of cathode material and earn commensurate royalty returns.
Let's begin with Nano One partner Pulead. Pulead is a major Chinese supplier of battery cathode materials and has been working with Nano One to apply the company's process for LFP cathode material. This work is quite far advanced with key feedstock supplies identified and validated. Nano One has recently completed an engineering study detailing characteristics and costs for a 4,800 tonne/yr LFP line using the company's process.
Pulead makes lithium batteries and also supplies cathode materials to others. Two of Pulead's customers for LFP are BYD (OTCPK:BYDDF) and CATL, both of which are looking to expand use of LFP batteries for electric vehicles. BYD has recently announced its "Blade Battery" and CATL will supply LFP cells for Tesla's (TSLA) short range Model 3 cars made in China.
It appears Nano One's process is on track to become part of the LFP battery supply chain at scale.
Nano One has not said much about partners working with NCM or NCA cathode material. Advanced, high nickel content NCM cathode material is suitable for high energy density batteries for automotive applications and many carmakers are looking to NCM cells for their near-term products.
Interestingly, most carmakers are obtaining their NCM (and in the case of Tesla, its NCA) chemistry cells from battery makers either by direct purchase or through joint ventures/partnering arrangements. Tesla works with Panasonic (OTCPK:PCRFF) and GM with LG Chem (OTCPK:LGCLF) for example. Outsourcing battery supply will be problematic for carmakers long term because the battery represents a large proportion of the value-add in an electric vehicle and because battery performance is the primary determinant of range, charging time, and acceleration.
The battery is to an electric vehicle much as the engine is to an ICE car, truck, or SUV. Ideally, a carmaker would like to vertically integrate battery manufacture so as to capture the associated value-add and develop proprietary IP in battery design and manufacture so as to differentiate product. The difficulty for carmakers with NCM and NCA chemistry batteries is that this technology is fairly well developed and key IP is held by battery makers and others. As a result, it makes sense for carmakers of 'outsource' NCM and NCA batteries while concentrating their in-house R&D on the next generation of batteries - the "solid-state" or "lithium metal anode" battery cells.
And, this brings us to High Voltage Spinel cathode material and work with this material for solid-state batteries.
In many ways, LNMO or HV Spinel is a challenging cathode material for the battery designer. At the same time, this cathode material offers a number of very compelling advantages.
HV Spinel cathode material from Nano One's process ticks all the boxes for the solid-state battery designer. Chemical uniformity of the cathode particles is excellent, single crystal nano-structure is precise, doping for crystal stability under charge/discharge cycling is effective, and coatings protect the manganese from the electrolyte.
The following represents my analysis of what is happening with Nano One and the state of battery development associated with the automotive industry. None of the following was provided to me by Dan Blondal or others at Nano One.
Nano One partner Volkswagen plans to have solid-state batteries in their electric vehicles, at scale by 2025. To achieve that schedule with the kind of robust field testing typical of an established German carmaker, Volkswagen will need to begin pilot scale battery production fairly soon. And, it will need to move quickly thereafter in order to have supply chain elements in place in time. I believe Nano One shareholders can expect significant announcements regarding partner Volkswagen within the next 12 months.
I plan to watch closely what Tesla says at its (hopefully, eventually) coming "Battery Day". We already know that Tesla will be using LFP batteries from CATL for some Model 3/Y production in China. But this incorporation of LFP cells is just another instance of battery outsourcing. Tesla, I believe, will have something "bigger" to show us on Battery Day.
Tesla acquired Maxwell Technology and with that acquisition Maxwell's dry electrode process and associated IP. The Maxwell electrode process has some very appealing features for making a solid electrolyte, lithium metal anode battery cell.
To summarize where we are with Nano One:
Nano One is in robust financial shape and their team is well and taking appropriate precautions against the pandemic. The company continues to move its business plan forward. Shareholders should be on the lookout for interesting news about the company.
The world is on track to build increasing numbers of electric cars, trucks, and buses and to install increasing amounts of battery grid storage. This will require prodigious amounts of battery cathode material. Nano One is starting to see its cathode material process become part of supply chains for those batteries. Shareholders should be appropriately heartened by how the company is doing and the progress being made.
This article was written by
Disclosure: I am/we are long NNOMF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclaimer: These writings about the technical aspects of batteries, electric cars, components, supply chain and the like are intended to stimulate awareness and discussion of these issues. Investors should view my work in this light and seek other competent technical advice on the subject issues before making investment decisions.