Good summary. Some key points were/are: - all tier-1s are going...

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08/06/23

15:16

Post #: 68198728
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Originally posted by Joey6: ↑

Hi mate.

Just to clarify, this isn't a JV. If it was a JV a good portion of us here would be absolutely livid. From what we can tell and unlike their venture into Saudi, NVX should be able to access capital relatively easily in the form of a grant (confirmed, pending) a low interest loan (application stages with high likelihood of success) and support from possible partners -- we have already seen the latter by Phillips 66 and now LGES.

In terms of what NVX are contributing, they are committing to designing a custom product specifically for LGES. Putting aside the investment for a second, NVX essentially take the risk here to make sure the product is suitable for LGES. They will allocate supply (earning no revenue in doing so) to test and develop this product. Part of this supply - designated to testing and developing - will consist of what may or may not have been allocated to other suppliers, of which NVX may have actually received $$$. This is obviously in addition to the development teams that will be focused on getting the product right as per LGES' specifications. That is the key risk for NVX.

If successful, the product will be cross-licensed but subject to a six-year exclusivity period for LGES. Again, favourable for LGES here but it will still be cross-licensed to NVX. So no, I am not of the view that LGES can then take the IP and do what it likes with it -- it is still NVX's IP in conjunction with LGES.

Agree re: point 3. I don't think there is an obligation and I am sure there is fine print that allows LGES to get out of the supply deal. This is the reason the supply is essentially shit all in the scheme of things (50k over 10-year period). That said, it isn't in LGES' interest to walk away from it. They are investing in NVX with what is essentially a US30m loan and are entering a partnership to produce a custom product that they require. LGES will do everything in their power (you would imagine) for this to work in their favour. The industry will still be in deficit by this point and suppliers (like them) will need anode. This isn't something you can just throw into your battery so LGES are incentivized to get this right and hence the investment they are making. LGES are being smart too though. They will effectively own a piece of NVX if all goes to plan, again incentivising them to get this right.

Another thing about the supply arrangement, if NVX can produce the product LGES want (after what will be years of development) they will not settle for 50k over a 10-year period. LGES will likely try and secure what they require. Chris Burns alluded to this in the interview posted above, the 50k over 10 years is an initial figure only.

My view is this is essentially a long term commitment by LGES, despite being favourable conditions for them, to back in NVX as a future supplier of anode. The ball is now is NVX's court to get it right. You would imagine that if NVX succeed in making a custom product LGES are happy with, LGES will throw business and support behind them (already partly doing this with a 30m investment). By this point, it will make sense for LGES, they will effectively own around 10% of NVX (as it currently stands) by this point.

Does anyone disagree with any of this?

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Good summary.

Some key points were/are:
- all tier-1s are going to want custom products, and
- there is a very clear mutual benefit for much larger offtake agreements if things go to plan, and it is clear that this is what Chris expects. this future larger offtake could by well over 50kt per annum by 2029. insane if we get this right.

NVX Price at posting: $1.09 Sentiment: Buy Disclosure: Held
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