Novonix doubles down on its US graphite play with $11m of debt funding
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Battery technology company Novonix (ASX: NVX) has raised money to beef up its ownership stake in PUREgraphite (PG), its US joint venture.
The Tennessee-based company develops graphite anode materials used in the production of lithium-ion batteries.
As part of its 50/50 joint venture agreement signed in February 2017, Novonix held an option to take its stake to 75 per cent.
The company advised the ASX this morning that it’s now exercised that option, with funding from a $10.9m convertible loan.
Tapping the debt markets
To raise the funds, Novonix has issued non-tradable convertible loan notes to the value of 40c each.
The notes have a term of three years, with an annual interest rate payable of 10 per cent.
Of the total debt amount, $10m of it has been snapped up by the St Baker Energy Innovation Fund, a private investment company run by energy entrepreneur and BRW rich-lister Trevor St Baker.
St Baker’s son, Phillip St Baker, is the managing director of Novonix.
The other $900,000 is a “co-investment from a major Australian listed investment company”.
According to Novonix, taking a controlling stake in the joint venture is a key strategic investment that leaves Novonix well-placed to benefit from the growth in lithium-ion battery production.
“Our investment will help Novonix commercialise its PUREgraphite-branded battery anode materials that will deliver better performance, longer life and lower costs,” Trevor St Baker said.
Novonix highlighted that as part of the new arrangement, it now claims the rights to 100 per cent of all production over 1,000 tonnes per annum.
The company plans to produce and sell its first commercial quantities of battery anode material in the second half of this year.
Less love for lithium
For now though, Novonix isn’t bringing in much money.
It’s latest quarterly filing released this morning showed cash receipts from customers of $481,000, offset by expenses of $1.712m resulting in operating cash outflows of $1.312m.
The bulk of those expenses related to staff costs ($718k) and administration & corporate costs ($518k).
For the industry more broadly, the medium-term demand dynamics for lithium batteries are expected to remain robust.
However, a flood of new producers has given rise to a recent bout of oversupply, which weighed on prices for raw lithium in 2018.
In line with those falls, shares in Novonix have declined steadily from a peak of $1.60 in October 2017 to their current value of 38c.
The company’s share price was unchanged in early trade following this morning’s announcement.
In addition to its US joint-venture, the company also runs Novonix Battery Technology Solutions, a Canada-based company that carries out research & development to improve battery speed.
It also owns a 100 per cent stake in a graphite deposit located in Mount Dromedary, NSW, which is still pending mining approval. Novonix says it’s considering partnership or divestment opportunities for the site.