Size of HPA market

Whilst we await the MRE and HPA results for CR9, I thought we would revisit the potential size of the HPA market, particularly demand from EV’s, or more specifically the lithium-ion battery market as it relates to EV’s and by extrapolation the value of our little known explorer, CR9.

Stick with me, it might appear I meander, but it is background and relevant….

I will confess only 18 months ago did I start to research Tesla, by extension the EV market and the associated opportunities that exist for investors. Just yesterday Tesla released their 3Q FY21 financials and broke virtually all previous metrics. Zak Kirkhorn (Tesla CFO) on the yesterday’s earnings call… “there appears to be quite a profound awakening to the desirability for electric vehicles, and to be totally frank, its caught us a little bit off guard”.

This statement from the CFO of the company who has almost single-handedly lead the charge for EV’s and nearly a decade after the launch and automotive industry acclamation for the Model S is startling.

In a recent interview between Jason Calacanis on his YT channel “This Week in Startups” and Tesla co-founder JB Straubel, JB made a comment after the release of the Model S, Tesla expected the auto industry to get to work and “they (Tesla) would have to go as fast as they could to try and carve out a niche…and it didn’t happen.”

During Tesla’s Battery Day in September 2020, Tesla released their new battery form factor the 4680 which would:

·Be twice the diameter and 10mm longer than the current 2170 type manufactured by major lithium-ion battery manufacturers (CATL, SAMSUNG, LG and Panasonic)

·Deliver 6 times more power

·Cost $14 less per kWh

·With a larger size, it will from part of the car chassis, saving weight and maximising space

The net benefit of all of the above will be a 56% per kWh reduction in battery costs, and be a precursor to enabling Tesla to produce a car at the budget end of the market ($25,000) with much longer range.

From a recent YT video “Tesla 4680 Manufacturing Show & Tell” on the Official X Pod channel, James Stephenson (Twitter: ICannot_Enough) deduced…”in the manufacturing process a 12km “mother roll” of copper anode, which is 16 cells wide (i.e. 16 x 46mm), yields enough battery cells to power 40 EV’s.”

Following from this, it would seem it would also require a 24km long separator roll and this is where it gets interesting for us CR9 investors!

Lithium-ion battery separator’s are increasingly turning to HPA to coat the separator to improve thermal run-off, and performance.

If CR9 can attain 4N’s or better…and not wishing to appear to be arrogant…if SUV can attain 4N’s from their inferior grade deposit, then CR9 at a minimum will be able to attain 4N’s and potentially higher...IMHO.

What does this equate to by way of demand for HPA from the lithium ion battery/EV market?

Lets refer to some of the inputs above and make some educated best guesses:

·Copper anode “mother roll”: 12 km x 0.736m (16 x 46mm = 736mm or 0.736m) = 883.2 m2

·Separator coating = 24km roll: let’s assume 1g of HPA coating / m = 24,000 g or 24kg of HPA

·Produces batteries for 40 EV’s

Therefore we can roughly deduce from the above 1.67kg ofHPA is required per EV

·24kg/ 40 EV’s = 1.67kg’s of HPA for the lithium batteries required to power each EV

What will demand for EV’s and by extension demand for HPA from lithium-ion batteries be through to 2025?

Tesla have stated publicly on at least their past two quarterly earnings calls their CAGR will be 50% for many years into the future. With Giga Berlin and Giga Austin not even in production until Dec 2021/Jan 2022 and both Gigafactory’s with an initial production target of 5,000/week and ultimate capacity of +1mil p.a. their 50% CAGR looks very conservative.

So……let’s try and guesstimate what HPA demand from the EV market looks like if we use the following assumptions:

·Teslavehicle deliveries grow at 50% CAGR, with a starting point of FY21 896,024 Tesla’s delivered…r efer: Tesla EV’s delivered, refer to James Stephenson’s “Tesla’sProduction Ramp & Profitability” table below

·Teslashare of EV market at 15% (it has been as high as +20%)

·1.67kgof HPA per EV produced

	Year	No. of Tesla produced	Global EV’s produced	HPA demand (tonnes)
1	2021	896,024	5,973,493	9,976
2	2022	1,344,036	8,960,240	14,963
3	2023	2,016,054	13,440,360	22,445
4	2024	3,024,081	20,160,540	33,668
5	2025	4,536,121	30,240,807	50,502

Altech Chemicals (ASX: ATC) are a HPA manufacturer, in Feb 2021 they presented to the RUI in Fremantle, their presentation contained several slides which validate the forthcoming demand for HPA from the EV market.

LIB = Lithium Ion Battery

From ATC’s slides and graphs, sourced from CRU Consulting, my estimates are VERY conservative (approx. 50% of demand they have forecast for 2025), I am not sure if the traditional auto manufacturers will be able to gear up as quick new EV entrants, but that is a different discussion on a different forum.

ASX: FYI in their recent presentation (Oct 2021) and on slide 9 “Project Economics” used a figure of $24,000/tn of HPA for 4N’s and $26,400/tn for 4N/ 5N’s.

If CR9’s MRE comes in at approx. 20mil tonnes and the imminent HPA test results come back with $N’s or better, CR9 is in a very good position to be able to supply into the increasing demand for HPA driven by “…the world's transition to sustainableenergy”