Part 2
SHQ: How critical to the future of Magnis Resources is the Nachu graphite?
FH acknowledged that in the current Tanzanian climate this issue was clearly of great interest to SH, and answered it by putting the flake size and purity of Nachu graphite ore in a ‘whole of battery-graphite supply chain’ pricing context. In those terms, he said, Block F graphite ore - its high quality not-with-standing - represents “perhaps five dollars, or say five percent, per ton’ market advantage. To be frank that initially seemed a bit modest to us, after the last few year’s prominent role given to the Nachu graphite’s ‘unique qualities’. But as FH pointed out, in any mining equation the start-point ore quality advantage only becomes fully realised when exploited in an equally high quality processing chain. At present the battery graphite marketplace remains dominated by the economy-of-scale imperatives of industrial graphite, and the dominant ‘Chinese route’. That chain is characterised by lowish-quality ore, costly and dirty processing, far-from-optimum feedstock techniques, and multiple middlemen. Our ore’s ‘5% cost-advantage’ is simply what Nachu ore might realistically offer that status quo, as a battery chain ‘start-point’ raw input. He pointed out that even if we did nothing else with our graphite ore but flog it, we’d still be 5% ahead of the market.
But we’re not planning to do just that (or, not only that), he pointed out – precisely because we’ve evolved the optionality to do much more. Much of his work over the last few years has been refining our capacity to take that initial advantage and squeeze every bit of added-value possible down the line. “Good quality ore to begin with makes that much easier, at each subsequent step in the chain’. It is a ‘two-way street’, he said: good graphite in, good, better, best graphite/battery products out. This was consistent with MSW’s point about your R&D being a function of the quality of the materials you get to work with. Adding truly competitive value to an end-output battery (like our BMLMP) is a matter of adding value at every point, FH said. And key to that added-value, he stressed, is ‘owning the technology’. We ‘cannot afford to give any advantages away’, FH said. This has been central to the move to establishing a ‘wide participation footprint’ across the entire sector. It will make it easier to protect the IP underpinning the crushing and floatation technologies we’ve evolved and their side-stepping of acid/heat processing; the ‘joint venture IP’ at the electrode micronisation, spheroidisation and coating stages; the battery design and engineering; and the electrochemical IP core of our battery-energy strategy.
SHQ: Regarding the formal/legal/IP status of our relationship with C4V.
FH said that Magnis Resources and Charge C4V have signed a binding ‘reciprocal IP agreement’. Details are necessarily commercial-in-confidence but basically enshrine a requirement that both parties negotiate and honour appropriate commercial entitlements, arising from any contract that is underpinned by ‘reciprocal Intellectual Property rights’. We expect case-by-case licensing/revenue details will simply reflect the proportional IP-specifics of any graphite supply/ processing/battery deals.
The history of LIB is sadly chockers with those who never made a cent from their world-changing work (John Goodenough, for example, was totes dudded, thanks to his personal sanguinity over IP). The company clearly grasps this well. MSW holds multiple patents, as does Shailesh Upreti/C4V. Magnis/FH brings processing IP to the table. Partners too, such as Primet Precision (the ‘IMP3 New York’ consortium member owns ‘NanoScissionTM’, a competitive micronisation technique). Importantly, FH noted that if it comes to it, ‘there is a third-party dispute resolution mechanism enshrined in the reciprocal agreement’, if sticking points need to be unstuck.
Enabling Future Energy Part B: Magnis as battery supply chain provisioner
Background: a word about graphite
To contextualise Magnis Resources’ envisioned role as battery-energy marketplace provisioner a quick survey of the now-changing graphite market is useful. Here a key concept to grasp is that the ‘graphite marketplace’ really needs to be bifurcated into two very different ones.
The ‘Industrial Graphite’ (old) marketplace
Traditionally, and as its global marketplace metrics are still disposed, graphite needs to be regarded as an abundant, easily-supplied, ‘kind-of-fungible’ industrial feedstock/process commodity. We all know its to-now dominant uses: in steel as a carbon riser, in refractory and foundry applications (moulds, casings, crucibles, ladles, nozzles, channels, linings, brickwork). As a dry-lubricant, expanded into heat/fire resistant materials, as brake linings, insulating foils & heat sinks, laminates, gaskets, seals, chemicals, paints, contact brushes, even pencils, still. We also know graphite has higher-processed applications: in arc-electrodes, in military, space and aviation apps, graphene tinkering, in Gen III+ and Gen IV nuclear reactor R&D…and, of course, since the 1990’s, in ‘future energy enabling’ applications i.e. LIB anodes.
In suggesting that this old graphite is ‘kind-of-fungible’, obviously we don’t mean that ‘all graphite is equal’. We mean in the way the different ‘marketable qualities’ of natural graphite have been to an extent ‘market-neutralised’, by an alternative product for those higher-tech applications: synthetic graphite. This is high purity graphite made – at great financial and environmental cost – artificially, out of petroleum coke, coal tar pitch, etc. This in our view has skewed the way prospective battery-graphite participants have approached the marketplace. In effect it has rendered ‘less important’ the true battery-graphite ‘market power’ of good quality natural graphite (which lies in its flake size and purity). To date the end-users that have needed high quality have been able to turn easily – and lazily - to synthetic. This has meant China. Cheap labour, abundant reserves (albeit low quality), very lax environmental standards…China’s dominance of world graphite supply, both industrial and energy, both natural and synthetic, has mostly been a matter of end-users following the supply chain path of least resistance. To date graphite mining has risen and fallen primarily in rhythm to the world’s steelmaking/construction cycles, and the relatively modest demand for higher-end feedstocks than needed for those industrial uses could most viably and sustainably be met by synthetic. This is existentially fundamental to grasp, for any not-yet-producing graphite miner jostling for a piece of the future battery-graphite action.
The ‘Energy Graphite’ (new) marketplace
Graphite isn’t rare. For that matter, ‘battery-suitable’ graphite isn’t really rare, either. Most new miners jostling for battery-graphite action will go broke.
Natural graphite? About 800 million inferred recoverable tonnes in the world. Last year the world dug up just 1.2 million tonnes (China about 65%, then India about 15%, then Brazil, Turkey, North Korea, Mexico, Canada). Mozambique and Tanzania dug up effectively none. Of that 1.2M tonnes 60% was amorphous (industry feedstock), with a bit of vein from Sri Lanka. The remaining 460,000-odd tonnes was in flake form, ranging from fine grade up to super-jumbo. Rough percentages: fine 31%, small 23%, medium 24%, large 18%, jumbo/s-jumbo 4%. What does that mean in battery-graphite terms?
There’s plenty of it about, basically. Excluding the fine and small size flakes which aren’t suitable, last year the world mined about 550, 000 tonnes of ‘battery-suitable’ flake graphite. Even with a (lowish) 40% yield, that equals about 220,000 tonnes of coated spheroidal anode graphite (CSAG). A thousand tonnes of CSAG gives you roughly 1 GWh of battery storage. Battery energy production for last year was that 70-80 Gwh (40-45Gwh electronics, 25Gwh EV’s, + ESS…?). So, 80,000 tonnes of feedstock demand, which means the maximum ‘battery-graphite’ mining sector demand last year would have been for, say, around 200,000 tonnes of natural flake. Less than half of what existing mines can manage. Obviously this is excluding non-battery uses for ‘battery-suitable’ feedstock. But it’s also completely ignoring synthetic supply, traditionally and still to a large degree the dominant feedstock.
The point isn’t that battery anode demand isn’t going to shoot up, very quickly, as those earlier battery production figures suggest. The point is that the existing, natural battery-graphite mining sector has both a lot of slack in it, and doubtless a capacity to ramp it up faster than any run-of-the-mill new entrant can get into production. In the interim synthetic graphite will remain if required to kick through any transitional demand bottlenecks.
What will become markedly different about the mining end of the ‘new’ battery-graphite supply chain as it does expand is, firstly: that it will be properly independent of the world’s steelmaking/construction cycles. Whether countries are in growth-construction expansions or retractions won’t impact as much on the operational viability of quality ore graphite mines. Second, it will be much more directly and responsively connected to the retail markets underlying it, and especially (obviously) the uptake in EV’s and ESS. Thirdly, and most importantly for entrants, it will finally factor in the true supply chain costs, which for decades the combination of Chinese dominance, the underlying industrial graphite base, and the viability of synthetic graphite, has served to disguise.
Primary among the implications of this is that graphite quality will become truly fundamental to any new mine’s viability. The key metrics will be ‘purity’ and ‘flake size’. Beginning with a naturally high purity is a huge advantage in the fight to keep all supply chain costs – all costs - competitive. Flake size is also important, although there is some misunderstanding on this. The scarce jumbo and rare super jumbo flakes have their own (hugely lucrative) sub markets, and if you can secure sales at that top end - which isn’t easy – they can represent terrific ‘cream on the top’, as well as a diversifying component of offtake strategy. On the other hand, the high-volume ‘meat and potatoes’ that battery feedstock will represent to a battery-graphite miner requires only medium flake size; larger flake sizes might even be technically (i.e. marginally) cost-disadvantageous. Of course, the real importance of ‘flake size’ is that it is almost-invariably linked to purity. The larger the flake size formation and structure, the less likely they will be host to junk. It’s here that enormous competitive leverage can be found over existing battery-graphite mines, especially if a new miner can combine quality ore with refined, ore-specific beneficiation techniques able to completely sidestep traditional acid and thermal processes en-route to becoming anode feedstock concentrate.
Even more critical here are the environmental implications. China’s graphite has dominated battery anode supply to date in large part because they have been able to sidestep the kinds of environmental impositions that, in Western economies, have generally rendered unviable both the processing of (most) natural graphite to anode quality, and of course, production of synthetic graphite at all. This is unlikely to change as we head towards a greener future.
So clearly, purity and flake size of ore will be fundamental in the ‘new’ energy-graphite marketplace, matched to efficiencies in the processing chain beyond those noted above. The graphite pathway from mine-face to retail battery has to date been a frightening inefficient one. The yield from graphite ore of anode-ready graphite can be as low as 40%, even 30%. Much of dominant China’s mining is done on a piecemeal basis with dated techniques and equipment, leading to huge variations in ore quality and processing flow. Their de-facto ‘strategic’ control of graphite to date has in truth been based mostly on low cost labour, centralised political control, minimal regulation, and path-of-least resistance economies of scale. Certainly not on quality of ore.
In contrast, as FH stressed, starting out with high quality ore leads to the reverse: value-adding gains all down the process chain. The successful new entrant into the ‘energy graphite’ marketplace will take the highest quality ore and, by a cascading process of efficiency and quality enhancements at each processing point, accrue the maximum possible competitive advantage.
Better ore, better concentrate, better anode feedstock, better battery R&D, better batteries. Clearly part of this efficiency maximisation process will be processing ‘flow’ factors, such as co-location where possible of stages, independent control of all inputs, and oversight of the entire chain. So too, diversification and flexibility in both material inputs and entry points, given that the energy-graphite marketplace will not arrive fully formed and in linear fashion, but rather in irregular and unpredictable response to EV/ESS market ‘pull’ factors.
AGM: Magnis Resources strategy and disposition
A quick look at the Magnis Resources AGM presentation (page 17) gives a clear picture of how the Board has been aligning the company precisely to fit the demands of this ‘new’ battery graphite marketplace.
We know well after years of drilling, chain process evolution and cell testing, and from the BFS of last year, that the quality of the Nachu graphite alone affords market advantages, even, as FH did, when monetising it ‘in isolation’. The company ‘could’ provide unprocessed, 180 micron/99.2% flake graphite to someone else’s battery supply chain profitably. But we also know that FH has evolved a patented beneficiation process that avoids acid and thermal purification, to concentrate stage. So we could supply this too, to another battery chain, having captured even more ‘value adding’, in both costs and environmental terms. Further downstream, partnership with an anode producer such Primet Precision – the case in the Imperium3 New York 15Gwh battery plant project – can give access to yet more competitive IP value-adding (up to 85% improvements in yield/operating costs). Again, this part in the Magnis battery graphite chain ‘could’ conceivably be both exit and entry point. Further downstream, better anode material allows improved final battery cell design/construction stage. Finally, the partnership with C4V allows the ‘whole of supply chain’ approach to continuous improvements at the electrochemical end. The IMP New York project is just one in-progress example of how our battery-graphite provisioning chain strategy is unfolding in reality, to align with the new marketplace.
The key will be supply chain optionality, maximising the company’s chances (in comparison to most) of entering it at all, and then quickly thriving. As the Board Chairman writes in the AGM presentation: Magnis Resources’ [repositioned] supply chain has significant flexibility to meet customers indicated specifications. The co-location potential of downstream facilities…[with their] efficiencies, reduced costs and rapid scale-up potential to meet end user demand…[represent] the establishment of a higher quality, and consistent, non-Chinese supply source [via which Magnis Resources]…may supply both coated and uncoated spherical graphite, subject to customer requirements.
The Battery Energy Marketplace - Demand
Reverting back to AGM actual order, the remaining contributors focussed on demand (and revenue!) aspects, starting - after MSW - with FP introducing Director Dr Ulrich Bez to talk briefly about LIB-powered EV’s in Europe.
Dr Ulrich Bez: ‘Even a 10% auto market capture by EV’s will be huge.’
Dr Ulrich Bez (UB) has over four decades experience in the global automotive industry, in director, executive and advisory roles driving the technological evolution of many luxury and mass market marques in Europe, Asia and America, including BMW, Porsche, Daewoo, GM and most recently as Chairman and CEO of Aston Martin. He has long been interested in new propulsion technologies for cars while also remaining an ICE enthusiast (he races classic petrol-guzzlers in his spare time).
UB began by good-humouredly declaring: “You’re probably all wondering what someone like me is doing here!” He then proceeded to make exactly clear just why, as someone who over his career has stewarded many, many innovative car technologies into market-changing production, and now sees huge potential in Magnis Resources’ role as energy-graphite/battery tech supplier to the coming EV revolution.
He started by summarising the car market status quo, pointing out that there are around 1.2B cars in the world today with projected annual sales for 2018 of about 80 million. He said that every major car producer has strategies and targets in place for a marked shift to EV production over the next two decades, pointing out that even a 20% shift to EV’s in the next 10-15 years will represent an enormous market for the battery-energy supply chain. As with battery production projections there’s huge uncertainty – the two are obviously interdependent - but for some context: in 2016 total EV sales were about 750,000 worldwide, with China leading at 40% sales, then the US, then Europe. Adding this year’s sales of about 1.2M global registered stock is now well clear of 2 million EV’s. Going forward industry projections of – and government agency targets for – take-up rates and volumes vary greatly. At the lower end of the scale is the IEA Reference Tech Study, suggesting 60 million total EV stock by 2030. At the upper end, the IEA B2DS projection reckons as many as 200 million. The mid-range Paris Declaration targets suggest 100M.
Well, we’ll see. As UB said even a modest capture of annual vehicle sales will represent a lot of EV LIB’s. But he then drilled down further into the specific EV characteristics of the shift, which is where it gets interesting. He pointed out the current reality that as things stand and for all the bigger picture importance of ‘climate change’ in the looming energy-market disruption, EV’s (in isolation) for now still actually represent an overall ‘carbon emission’ backward step, in comparison to ICE cars. Put simply, those EV’s burn electricity, and much of the world’s electricity still burns fossil-fuel. There is that apples/oranges comparison problem again, still making it a bit pointless to try to quantify which is ‘globally dirtier’, a tank of petrol, or a battery.
But UB’s main point was that what is really driving the shift into EV’s most decisively right now is not that overall ‘global carbon emissions’ calculus, anyway, but the same one that Edison and Ford originally thought would matter: the user-apparent factors like ICE smog and noise congestion and infrastructure practicalities, which impact consumers immediately and locally. For all the world’s growing awareness of it Climate Change remains abstract as a market-transitional motivator, while congestion, noise and pollution are increasingly ‘in your face’ - in the urban areas. Conversely, while ICE fuel infrastructure has long become fully integrated across both urban and regional use-areas, the viability challenges of EV infrastructure outside the former are and will remain hugely problematic.
The implications are that would-be EV battery-energy supply chain participants need to position based upon what is really driving EV uptake. That means producing batteries for the kinds of EV’s people are buying in volume. He offered some general comparative comments regarding most European manufacturers and the path followed to date by Tesla, often seen (erroneously in his view) as the EV ‘vanguard’. European and Asian EV’s to date have largely focussed on smaller vehicles, with batteries designed and engineered around what you might call ‘urban’ performance: trading off storage capacity, power, charge rates and range for cycle longevity, stability, reliability, weight/volume and cost. Why? Because the real (the consumer-demanded) ‘vanguard’ for the transition to EV’s will not be the high-speed, long-range, market-sexy and expensive ‘top end’, as inherent at least to date in the Tesla models (with their NCA batteries), but rather, in the realm of the daily urban commute: short ranges, low speeds and with modest acceleration demands, in workaday user-environments impacted most strikingly by noise/smog/congestion, and in workaday usage-patterns that easily accommodate slow, convenient, overnight recharging at home. Clearly, UB noted, would-be EV battery suppliers will be impacted by this no less than EV manufacturers.
SHQ: What role will government legislation play in EV uptake?
UB said that got at his key point. For all the ‘national emission policies’ and ‘global frameworks’ increasingly coming to bear on the automotive industry’s strategic repositioning, it’s at the city/urban-regional level that government legislation is having the immediate transitional impact. Many European cities are imposing limitations on ICE vehicle usage, he said, while also incentivising EV uptake, with striking marketplace effect. The 2015 white paper ‘EV Capitals of the World’ (Dale Hall et al, for the International Council on Clean Transportation) shows this in action: in that year about one third of all global EV sales were in just 14 cities in the world, and what each has in common is pro-EV legislation based not directly on ‘carbon emission’ metrics, but more-effective ‘consumer-experience’ ones. So: EV drivers in Oslo get waivers on tunnel tolls. LA has designated EV-only car-pool lanes. In Shanghai, EV’s are exempt the registration lottery; in London, congestion zone tax, and so on.
This kind of genuine local legislative + consumer pull factor, UB noted, is what will really shape the changing ICE/EV composition of the global car industry at its large scale/high volume/low cost centre-of-gravity, and the major European and Asian manufacturers at least are basing their core design, production and marketing strategies on this. As such, UB noted, it’s fundamental that would-be EV battery makers ensure their own strategies are similarly aligned, rather than being distracted by the spectacle of a ‘niche end of the market, designing and producing expensive sports cars to sell to millionaires.’ He said that to this end the battery factory projects now sprouting in Europe all have deeply-meshed, interactive relationships with its major car manufacturers.
SHQ: Can Magnis graphite supply EV batteries for this European focus?
UB said that in his view there was no question that the proven quality and process/cost efficiencies of even just the Nachu graphite battery feedstock makes it highly competitive for this evolving EV-market context. (Informally discussing our negotiations with one household auto-badge, he said: “I don’t see how they have any other choice [for anode feedstock] but Nachu.”). Coupled with the added capacity to design and produce a wide range of batteries and continually improve (under patent) electrochemical performance as the European EV marketplace evolves, he sees the company ideally situated to supply it. He repeated what FP (and MSW) had said about the importance of graphite and battery-makers having a ‘whole of supply chain’ presence, and interactive relationships (testing, cell design, etc) with the car makers, noting that those Magnis has with the European sector are well-established and intensifying, citing the two German gigafactory projects.
SHQ: Will EV manufacturers buy graphite, anode material or batteries? Are EV-makers seeking to develop their own organic battery-chain sub-sectors?
UB said that certainly in the immediate and transitional future the major car makers will continue to buy cells, perhaps basic cell arrays, and further design-and-engineer them into their different models’ packs as required. Clearly the technical aspects of any supply relationship would evolve as needed, but he thinks the specialised and dynamic nature of LIB technology makes this the optimum industrial interface for now.
As UB wrapped up, a SHQ: How important do you regard the ESS sector (i.e. non EV batteries) to the European transition?
UB agreed fully that in many ways the ESS demand side would likely be the more significant market demand side, given in particular the daunting challenges posed by EV recharge infrastructure issues and the consumer-uptake implications inherent in EV vehicle recharge times, neither of which are likely to be surmounted quickly.
Which is a good place to sidestep briefly, towards ‘battery demand’ generally.
Background: Demand? A contextual look at some Tesla EV/ESS numbers
We noted earlier that for all these predictions - LIB improvements, EV uptake, GWh production capacity needs, battery-graphite tonnage – absolutely no-one can be sure of how quickly consumer demand for LIB will finally ‘take off’. It’s a bit of a mug’s game doing detailed numbers, because as we keep saying all the projections are intrinsically interlocked and symbiotic: that is, deeply disruptive. It’s almost certain, however, that – as with smart phones, personal computers…TV’s, fridges, ICE cars, in fact any other disruptive technology – when it does, it will do so exponentially. People will go on buying their personal electronics as before (with their little LIB’s), but at some point a consumer-retail tipping point in both EV’s and ESS’s will be reached too, and that’s when LIB’s will go nuts. When? By how much? Who knows. In terms of ‘predicting’ demand the best idea is to forget ‘big picture battery numbers’, and just try to context via a few representative, consumer-end ‘little ones’.
We’ve imperiously ignored Tesla so far, but why not let’s chuck Elon a few peanuts, now. He is after all the new battery-energy marketplace ‘leader’.
Panasonic NCR18650B (C,D, etc, evolving)
The Panasonic/Tesla 18650’s. The BD (we think) by now, the cell basis in Tesla Model S power packs. An NCA battery with (probably) around 80% (?) nickel and 15% or less (?) cobalt in the cathode. The battery weighs about 50g, so of that, maybe about 8g is graphite anode. Energy density is 243 Wh/kg, power capacity 3250 mA at 3.6V. Musky apparently reckons the 18650’s are passé, though; Tesla/Panasonic have developed a ‘2170’ step-up, which with typical understatement he calls ‘the cheapest energy density in the world’, likely the basis for the Model 3 and the next-generation ESS’s (Powerwall 2 and Power Pack 2). Secretive tweaked chemistry, higher energy density, more power (‘up to 6000 mA’), etc. Nevada’s reportedly producing it now.
The Tesla Model S 70kWh
But we do know there are 7,104 of the 18650B(D) batteries in the Tesla S 70kWh battery pack, meaning that each carries say 54-58 kg of graphite. Assuming a 40% yield of CSPG (coated spheroid purified graphite) from graphite feedstock a Tesla EV represents roughly say 135 kg of mined flake. Musko’s aiming to produce 500,000 EV’s annually by 2018, so in natural graphite terms that’s an extra annual production of circa 70,000 tonnes – pretty much the entire global production for last year. That’s just one EV maker. As UB pointed out Tesla is not exactly a ‘representative’ EV producer but those numbers do give us some idea of how much, and how quickly, the EV energy graphite demand alone might lift. That 2018 target for Musk is two years ahead of original schedule, as set just three ago.
But as UB – and we - tend to agree, the ESS sector is where the real disruptive demand will be. And Musky is rushing us all towards that, too.
Tesla Powerwall
We’ve always thought that the sleeper ‘pull’ factor in energy-graphite demand will prove to be home storage modules. We see this is as classic retail-driven, under-the-radar, market-blindsiding demand territory - the iPhone of our moment. In Australia high grid electricity prices and a sound existing penetration of home solar panels mean home storage is starting to lift fast. In 2016 about 6500 units (Powerwall, or similar) were installed. This year the number was close to 20,000. Installation is an established, agent-piecemeal industry so the actual numbers could be higher, and will certainly outrun industry stats-updates. It’s highly likely that as installation costs and storage cost/kg drops, and our stupid pollies make even more of a paralysed hash of national energy policy, that early-adopter gang of fed-up, grid-spurning ESS-consumers will fast become a vote-with-your-wallets mass protest movement.
So: a Powerwall 2 – reportedly also based on that same tweaked ‘2170’ NMC chemistry - can store 14 kWh. Linked to your solar system (the one your local sparky installed a few years ago) it’s getting pretty close to taking you essentially off-grid (with its 30+ cents a kWh rip-off). In Australia Powerwall costs about $11-12,000 installed. On existing grid trends payback time is likely to be under five years. The unit weighs about 125 kg (a fat whack is inverter/systems, etc) of which graphite is perhaps 15-20 kg (?). Again just using this as a rough generic guide those 20,000 ESS’s represent a modest 300 extra tonnes of battery anode CSPG for now, or roughly 750 tons flake feedstock. But that’s just one country, of 15m homes. If this year’s tripling of take-up continues, and all over the world…well. You can do your own blue sky, fifty-bag fantasising.
Tesla PowerPack (Hornsdale Energy Reserve, SA)
Finally - at the oft-ignored but potentially awesome industrial/grid scale end of future demand - there are building-block ESS’s like Tesla’s Power Pack 2, a commercial/industrial battery storage system (using the higher-power NCA chemistry), chiefly used for back-up and surge power, load balancing and frequency management purposes. It’s infinitely scalable and is, hey presto, what the ‘world’s largest LIB’ is now made of: the Tesla/Neoen ‘Hornsdale Energy Reserve’ in South Australia, just switched on – and turning electricity-grid policy heads everywhere from Tulsa to Timbuktoo. This installation, hooked up to the existing Hornsdale Wind Farm, will be used mostly for load balancing and ‘emergency peak power’. Little is known about its overall composition but at the ‘cell level’ it’s almost certainly based on NCA chemistry (i.e. sacrificing cycle/longevity for power surge capacity). It’s also likely based around those same newer Panasonic/Tesla 2170 cell sizes Muskers is now busily bigging up in the press. A single Power Pack 2 contains 16 battery pods, and stores 210 kWh energy. About five PP2 thus gives you a Mwh. The Hornsdale Energy Farm will store 129 Mwh, meaning that anywhere up to 600 plus PP2 are ‘linked together’ to make Hornsdale. You can work out how much mined natural graphite that might mean: our heads are starting to hurt.
And that’s quite enough about demand, hugely unpredictable as it is. Suffice to say that it’ll be: ‘lots’. Enough about Tesla, too. They may well go bankrupt before the battery-energy marketplace truly takes off, anyway!
Enabling Future Energy Part C: Growing the Magnis Corporate Ecology
The Magnis Resources Board: corporate bases covered
So: how is Magnis Resources going about making all this vision a reality? Before returning to the AGM Q&A flow, a quick re-iteration of the remaining corporate expertise on the Magnis Resources Board is useful. Under FP’s impeccable leadership, aside from the LIB and EV presence of MSW and UB, the Board can draw upon:
Peter Tsegas: In-country presence and Tanzanian/African mining experience;
Marc Vogts: Forty years’ worth of global mining project management, value-adding and bringing to realisation large-scale projects, including for heavyweights BHP Billiton and Rio Tinto;
Peter Sarantzouklis: Senior executive roles in banking, finance and executive governance, in the context of a long relationship with the company;
Johanne Joost-Jacobs: over three decades of mining sector senior experience, and now seven years Board continuity through from the Uranex evolution.
Following UB’s words the focus shifted beyond Magnis Resources proper to the partnerships and projects via which we’re seeding and growing the new corporate ecology, with FP inviting Mr Corey Cooney (CC) to address the gathering. To start, a preliminary ‘framing’ reminder of the two key companies now involved in projects with Magnis Resources:
Corey Cooney/Boston Energy and Innovation
Corey Cooney (CC) is Executive Director with Boston Energy and Innovation, an ‘ethical investment house specialising in establishing renewable energy storage solutions in a sustainable environmental manner’. His corporate background is across real estate, energy, tourism and leisure, focussing on corporate investment/financing aspects, as well as funds management. As we know BEI is chaired by Bill Moss, ex-Macquarie, who needs little introduction in investment experience terms but who has also had a longstanding interest in renewable energy projects, especially to Australia’s north. He’s not physically tip-top – he suffers a form of muscular dystrophy – but his mind is as sharp as ever and his corporate networks unmatchable. Also on the BEI ‘advisory panel’ are MSW, UB, FH and C4V’s SU, corporate ‘cross-pollination’ at play.
Dr Shailesh Upreti/Charge C4V
Dr Shailesh Upreti (SU), also Magnis Resources’ battery lead consultant, is Director and President of Charge CCCV, which describes itself as a ‘knowledge company possessing critical insight related to optimum performance of lithium ion batteries’. SU is an Indian Institute of Technology Graduate with an MBA in International Business Development. He studied battery electrochemistry & materials under MSW at Binghamton Campus, and his start-up C4V grew out of the University’s ‘Entrepreneurship & Economic Partnerships’ Program (C4V was granted lab space as part of this seeding program). SU is a world-class expert at the very fore of the LIB ‘performance tweaking’ race, holding multiple US/global patents in electrochemical and related technologies, including as we saw for the nickel/cobalt free cathode technologies now being produced as commercial scale batteries.
Beyond its participation in the ‘Imperium 3’ projects C4V is pursuing other battery supply projects, such as for African microgrid storage (in solar powered cell towers), and Indian lighting and rail transport applications. SU/C4V is also a driving force behind the recently created ‘Centre for Excellence for the Lithium Battery’, a Delhi-based, parallel-evolving hub complementing the Magnis/CV4/Imperium3 corporate expansion underway and incorporating the Indian Institute of Technology and Binghamton University. Again, the cross-pollination strategy is clear: the Centre for Excellence Team includes key Directors from Magnis, BEI and C4V.
Imperium 3 consortium projects
So how is this all fitting together in terms of making deals? CC, attending the AGM in his consortium/advisory capacity, gave us an update on the projects specifically involving Magnis Resources in its 1/3 ownership capacity with BEI and C4V, as part of Imperium 3: the announced battery factories planned for Townsville and New York, and the prospect of a third in ‘a country in the Middle East’. CC explained that the general approach to establishing these projects in a realistic, systematic way is based upon smaller scale, phased production ambitions, and establishing strong partnerships with local other parties as well as government agencies from the start.
Imperium 3 Townsville Project
This was the first public roll-out of the new corporate strategy, an MoU with the Townsville City Council to investigate the feasibility of a 15Gwh battery plant announced in April. The project vehicle is what is now referred to as Imperium 3 (that is, MNS and BEI and C4V), as part of a wider Townsville consortium that includes NYSE-listed Kodak Eastmann and C & D Assembly.
CC re-iterated what we know from staggered Announcements since April: the completion of a scoping study; the provision (for equity) by Townsville Council of a 400 hectare infrastructure-serviced site (Woodstock); the strong backing by the Queensland government and the peak industry body Queensland Enterprise; the provisional pre-election commitment of $3.1M funding for the Feasibility Study, matched by the Opposition; now, with the ALP return, confirmation of that funding.
CC noted that the Townsville project has a number of very attractive characteristics within the context of the global energy shift: these include Australia’s recognised global status as a very secure, stable place to do business; the proximity of Townville to key global supply lines and trade centre-of-gravity; and the potential for the rapidly-changing Australian energy marketplace to generate local demand for production output - especially given Queensland’s high level of solar power use - and thus, early-stage revenue; and the attractiveness of Imperium3’s ‘global battery factory’ strategy.
CC said that investment discussions were proceeding well and that good relations had been established by BEI at all levels of government, with all options for public funding, including the Northern Australia Infrastructure Fund and the Clean Energy Finance Corporation ‘in the picture’. On the private investment front, he said, ‘We are talking to Investment Banks, Pension Funds, High Value Individuals, and both ASX-listed and offshore companies’. He would not be drawn on specifics but said BEI remained confident that funding for the Townsville project would not be a problem. A number of investors, he noted, were ‘…definitely on board’. The intention is to continue ‘talking to everyone’.
SHQ: Expressing concern with any reliance on government funding as a potential ‘deal-breaker’.
CC noted the SH’s concern and stressed that while government funding components to projects of this nature were clearly ‘desirable’ – as much, he pointed out, for the investment signals to the private sector as for any actual dollar amounts – a failure by the consortium to secure any would by no means be ‘a deal breaker’. It’s important with such projects, he noted, to stay attuned to both political and public feeling going forward, and – to a SHQ follow-up on the then-approaching Queensland election – stressed that BEI was being ‘absolutely not politically partisan’ in its approach, ‘talking to all sides of politics’ as required. He would not expand on the expected timing for project funding announcements, pointing out that the optimum approach is to focus on ensuring roll-out funding is secured ‘as it is required’, referring to the feasibility study dollar commitment from the ALP (now confirmed).
Imperium 3 New York Project
CC then moved on to the New York project, explaining that BEI was taking exactly the same approach: establish partnerships with local, existing companies, conduct wide-ranging discussions with public, private sector and individual investors, and work to ‘fill out’ the funding picture from the grass roots upwards. He described a far more conducive climate for renewal energy investing in New York, citing the importance of Governor Cuomo’s target of 50% renewal energy by 2050 for New York State, and noting that IMP3NY finance discussions were ‘very well advanced’, with some heavyweight investors ‘very interested’. He rehearsed the progress: selection of the old IBM site, announcement by Governor Cuomo of the US$13.25M funding package in October, and – two days prior to the AGM – the announcement of binding sales deals for 40% of New York’s stage one production. CC could obviously not expand on (commercial-in-confidence) details nor the buyers, beyond the public information that they are from ‘the automotive and energy/EV and ESS’ sectors, and the majority are from ‘United States, Asia and the Middle East’.
At this point FP intervened and pointed out the ‘huge significance’ of Governor Cuomo personally announcing the US$13.25 package in October (the televised ceremony was delayed for a week by Hurricane Maria), and also the securing of sales for ‘nearly half’ of the NY factory’s initial output. He said that the combined signal that sends to investors was ‘enormous’. Both he and CC expressed confidence – in response to a few SHQ’s seeking further information on funding, and timing – in the consortium’s view that, as with IMP3 Townsville, finance for IMP3 NY would ‘absolutely not be a problem’.
Imperium 3 battery factory project in ‘a Middle Eastern country’
CC then very briefly, and very circumspectly, advised the AGM of ongoing discussions BEI is conducting, for a further Imperium 3 battery factory, this one ‘in a Middle Eastern country’. Precisely the same strategic approach as in Townsville and New York was being taken: careful discussions with multiple existing local interests, with a view to establishing a similar staged, scalable project and associated financing and offtake deals. CC said – in response to multiple SHQ seeking further hints – that all he could do was assure us that discussions were ‘very advanced and ongoing’, and that he was ‘optimistic’ that more detailed announcements would come ‘in the near future’.
CC concluded by pointing out that one of the key advantages of the three companies (BEI-MNS-C4V) establishing a consortium – in terms of ‘growing’ from scratch a battery-energy supply chain ‘presence’ – is the corporate flexibility, agility and optionality it activates. As consortium leader BEI is able to seek out and establish relationships with multiple existing parties as local circumstances best suit, structuring the subsequent project upwards, fitting it into the overarching, IMP3-managed corporate strategy.
Background: Battery Energy Marketplace – Revenue
Here it’s useful to have a look at sample bear, mid-range and bull market case studies for the New York project - Imperium3 New York (BEI+MNS+C4V, Primet Precision, C&D Assembly) – which is the most likely to generate revenue first. This helps place the Magnis Board’s strategic vision in a concrete fiscal context, though SH should keep in mind that Bell Potter and media reports have also referenced margins in the order of $100 per kWh.
(20min delay)