Investors comparing SYR with NVX need to be reminded of a number...

Investors comparing SYR with NVX need to be reminded of a number of important facts and have some perspective about the key difference between SYR and NVX. In here, i am referring specifically NVX anode division only and not taking into account their BTS and cathode materials division aspiration:

1) Outside of BHP Nickel, SYR is the only Australian mining company that I am aware of that has a direct minerals supply contract with Tesla. As far as I am aware, no Australian listed lithium miners can claim that and certainly not NVX. Yet, somewhat ironically SYR has been disproportionally sold off today whilst the lithium plays and NVX continued to build on yesterday's gain. Where is the market's perspective ??

2) As it stands, Novonix market cap is around $5bn versus Syrah's $0.9bn. NVX's market cap is more than 5x of SYR despite it is still a non-commercially proven company at this stage versus SYR which has an operational mine and revenue generating company. Even if NVX eventually proves its synthetic graphite can be commercialised, it is starting from a very high base (market base wise).

3) NVX really took off when Phillips 66 took a stake in the company. Yet, some claimed this is a validation to NVX's synthetic graphite process, products and therefore leverage to the BEV structural growth. Market appears to have jump the gun here because Phillips 66 is NOT certainly not an established battery anode maker - it is just a global key producer of needle coke and largely a petrochemical company. It has only started to think about pivoting into a new platform, which involves getting involved in batteries. This slide (in their 2011 November Investor Update) does not exist in their earlier Investor Update slides. The US$150m investment for a US$57 billion balance sheet company is a 'cheap' option for Phillips 66.


4) NVX's anode material is currently being tested by Sanyo and Samsung SDI. Note that NVX only has a non-binding MOU with Sanyo. Yet, NVX supporters seem to miss the fact that Sanyo is NOT a major player at all in battery anode development for BEVs (You cannot spot Sanyo in the top 20 battery makers for electric vehicles). In fact, I am not aware if Sanyo is in battery anode development for BEVs yet. In contrast, Samsung SDI is indeed a leading existing battery anode maker for BEVs. However, the sales agreement is largely conditional (those who lamented SYR's conditional terms with Tesla forgot NVX's deal with Samsung is also conditional) and is currently premised on a small trial of 2,000 tonnes per annum. At best, the Samsung SDI agreement is just an initial trial - and yet, market is valuing NVX at $5bn market cap !!

5) NVX is using a proprietary furnace induction technology working in collaboration with Harper that it claims it could substantially improves the energy efficiency of the synthetic graphite manufacturing process compared to most of key Chinese syn graphite producers. This process is still not commercially proven in a large-scale, and yet, it is a A$5bn market cap company. There is still technology process risk. Furthermore, NVX has only just acquired the Riverside land to build the proposed anode facility. In contrast, SYR's BAM process is now conditionally validated by Tesla and at the cusp of actually building Vidalia on a large-scale and yet, only valued at A$0.9bn market cap.

6) SYR market cap of $0.9bn is arguably not even above the costs one might need to pay to replicate SYR assets. The Balama processing facility built cost was US$215m (or A$300m using FX of US$0.73) in 2018 value (ignore adjusted inflation impact) and if one conservatively value the Balama mine ore reserves at A$300m, the replacement value for the Madagascar domiciled assets is already A$600m. If one assumes Vidalia will be a 40,000tpa facility and based on its 2020 BFS, the Vidalia facility could cost around A$660m (US$477m using US$0.73 FX). Add the two equals to a prospective replacement cost of A$1.26 bn. While I have zero clue to NVX's asset build costs, i would imagine it would not be anywhere near A$5bn.

So, please have some perspective when one talks about SYR vs NVX. One starts at a much higher bar in terms of expectations when measured in market cap terms relative to its operational progress (in the anode space at least) versus the other where the bar is substantially lower but operationally one could argue it has made far more progress than the other.