NOVONIX Limited, a leading battery materials and technology company, and LG Energy Solution, a global battery manufacturer, today announced they signed an agreement for the joint research and development of artificial graphite anode material for lithium-ion batteries. Also, in a separate agreement, NOVONIX has agreed to issue an aggregate principal amount of US$30 million unsecured convertible notes to LGES.
Upon successful completion of certain development work under the JDA, LGES and NOVONIX will enter into a separate purchase agreement pursuant to which LGES will have the option to purchase up to 50,000 tons of artificial graphite anode material over a 10-year period from the start of mass production.
As a leading global battery manufacturer with two stand-alone and five joint venture plants currently operating or being constructed in the U.S., LGES plans to maximize the benefits from the Inflation Reduction Act (IRA) by expanding local battery production, as well as establishing a local supply chain for battery components. In order to solidify its market leadership in North America, LGES further aims to expedite the localization of manufacturing and assembly of battery components, including electrodes, cells, and modules.
NOVONIX aims to provide a robust, sustainable supply chain option for high performance artificial graphite in North America, a vision which LGES supports to diversify its suppliers as it expands battery cell production. NOVONIX, with current operating sites in Chattanooga, TN, will produce IRA-compliant materials for its customers in the United States. The company was selected for a US$150 million grant by the Department of Energy to support its expansion, which demonstrates the government’s commitment to the battery supply chain sector.
Since December 2022, LGES and NOVONIX have been in informal discussions towards this financing and joint development of artificial graphite anode material that meets LGES’s specifications. The material will be developed at NOVONIX’s current Tennessee-based facilities. Then mass production is expected to start in 2026 from NOVONIX’s proposed United States-based greenfield facility.
NOVONIX’s proposed greenfield facility targets an initial 30,000 tons per annum of production capacity of active anode material. NOVONIX has applied for a loan with the U.S. Department of Energy’s Loan Program Office under the Advanced Technology Vehicles Manufacturing Loan Program to aid in the financing of the facility. NOVONIX continues to pursue and hold discussions with additional original equipment manufacturers and cell manufacturers for the purchase of anode materials from its greenfield facility.
“Our partnership with NOVONIX once again demonstrates LG Energy Solution’s determination to establish a solid battery supply chain in the U.S., complementing our local manufacturing network to meet our customers’ needs for lRA-compliant batteries,” said Dongsoo Kim, Senior Vice President of Procurement Center at LG Energy Solution. “As we work with NOVONIX in developing a new source of artificial graphite anode material, we will stay committed to strengthening our product competitiveness and operation excellence, delivering the world-best quality products both in scale and with speed.”
Chris Burns, CEO of NOVONIX, said, “We are excited to formalize our work with LG Energy Solution and establish the path for NOVONIX to become a supplier for LGES of artificial graphite anode material in the United States. This agreement demonstrates our leading position to establish a supply chain for high-performance artificial graphite for the battery industry in North America.”
Key JDA Terms:
- The purpose of the JDA is for the parties to jointly undertake the development of active anode material that meets certain product quality specifications, and the JDA shall be for a term through June 2025. The material for testing will be supplied from NOVONIX’s pilot plant in 2023 and its mass production facilities in 2024 and 2025.
- Any jointly developed and owned intellectual property will be cross-licensed by LGES and NOVONIX and its subsidiaries. Upon successful development of materials, NOVONIX and LGES will enter into a purchase agreement giving LGES the option to purchase up to 50,000 tons of artificial graphite over 10 years, and if any volume increases are requested by LGES, NOVONIX shall use its best efforts to meet the increased volume. The parties have agreed to a pricing framework under which the final product price will be mutually agreed upon as part of the purchase agreement.
- The supply by NOVONIX to LGES of the products developed under the JDA would initially be subject to a six-year exclusivity period followed by a preferential period of four years (during which any supply to a third party would be subject to a minimum floor price tied to the price offered to LGES).
Key Investment Agreement Terms:
- NOVONIX has agreed to issue US$30 million worth of unsecured convertible notes to LGES with a four percent coupon and a maturity date of June 7, 2028.
- The convertible notes will mandatorily convert into ordinary shares upon acceptance of the first purchase order under the purchase agreement, although LGES may elect to convert some or all of the notes prior to such time. No interest would be payable on the notes in these circumstances.
- The convertible notes may be redeemed or converted (at the election of LGES) on the maturity date, in which case interest is payable in cash (in respect of a redemption) or “in-kind” (in the case of conversion). The convertible notes will be issued with a conversion price of AUD$1.60 per ordinary share.
- NOVONIX plans to utilize the proceeds for continued development of anode materials, operational needs and general corporate purposes.