NOVONIX Limited

Hi, I'm Dr. Chris Burns, CEO of Novonix. Welcome to our second quarter activities report update, where I'll be excited to share the progress we've continued to make through the second quarter toward our business objectives this year, both in our InnoMaterials division and across the company. As always, please review our notice and disclaimers after the meeting. Novonix is uniquely positioned to build out the North American supply chain. We've been working for over 10 years on developing materials and technologies toward lower material carbon footprints and new technologies that will support enabling a local supply chain. And for the past seven years have been building out our anode materials division into a large and growing market for the need for battery materials for the electric vehicle and energy storage sectors. We developed significant intellectual property around the processing of synthetic graphite materials and newer areas, such as our all-dry, zero-waste NMC cathode synthesis technology. Much of this has been underpinned by our battery technology solutions group, something that sets Novonix apart from other materials companies as we're rooted in battery science and have full battery pilot lines and testing capabilities to evaluate the materials that we produce and sample to our various customers for different aspects. And now we're working in an environment of customer and government support to enable and build out a local supply chain here in North America. At the core of our business is our battery technology solutions group. We have industry leading efforts around testing technology to accelerate the pace of research and development, full battery pilot lines, and we provide that as a service to the industry and continue to work on cooperation and collaboration on how we can develop new technologies and new process technologies that will continue to be needed to improve batteries and improve the processing footprint of batteries and their key materials as we build here in North America. Of course, our biggest area of focus is our Anomaterials Division. I mentioned starting this group in 2017, and we've become a leader in the domestic production of battery-grade synthetic graphite. Our Riverside site, we expect to be the first large-scale operating site for battery-grade synthetic graphite here in North America, and we'll speak about the progress we've made on that this quarter as well. But of course, we see significant opportunity to continue to grow the business in new areas in the battery material supply chain. And over the past several years have made huge strides with our new cathode material synthesis technology on all dry zero waste synthesis technology to significantly potentially improve the cost and environmental impact of making high nickel cathode materials. And we've brought this technology all the way to pilot scale within our technology solutions group. and are sampling these key materials to various potential customers across the industry. This quarter, we continue to build on all of those activities. And of course, at our Novonix Anno materials division had huge milestones in being selected for $103 million U.S. dollar competitive tax credit program under the Qualifying Advanced Energy Project allocation, or what we call the 48C tax credit program, and also entered into a testing and development agreement with another major potential customer in PowerCo. We are working to develop materials that would support their needs for their planned St. Thomas facility here in North America. Another major milestone was the completion of our independent engineering assessment for our Riverside facility. We worked with Hatch Engineering to assess everything around the Riverside project, operationally, technology, product, customers, and timeline, and completing this work is a huge milestone toward continuing to advance that project and build it toward its 20,000 ton target over the coming years. Beyond that, we continued our work with the Department of Energy and the Loan Programs Office in targeting a loan through their advanced vehicle manufacturing program. And major news from the government was around the Section 301 tariffs. Of course, this has been a longstanding tariff where 25% tariff was enacted on synthetic graphite and natural graphite anode materials coming from China. But it's had a waiver on it for several years, and that waiver has been lifted. And this 25% duty is in place now as of last month. In our battery technology solutions group, we make great strides with our all dry zero waste cathode synthesis technology, including granting one of the first foundational patents in Japan. We also had granting of other patents around graphite silicon technologies in Europe this quarter. And we've continued to progress our customer sampling programs and discussions with potential commercialization partners for our all-dry zero-waste cathode synthesis. And this was recognized by being a winner at Reuters' Global Energy Transition Awards for the potential impact that this cathode technology could have on continuing to decarbonize and improve the footprint of key battery materials here in North America. And across our group, we participated in White House discussions, progressing how to build the supply chain for batteries and specifically around graphite as a key material that the government is focused on how to enable localization. Chardin picked up coverage of the stock and we announced completion of their due diligence for the combination of our natural graphite assets, Mount Dromedary, with those of Lithium Energy Limited to form a new company, Axon Graphite. And I'll speak about that near the end. We also announced that Nick Liveris will be leaving as CFO and joining as a non-executive director on the board. And we ended the quarter still with a strong cash position of over $47 million. Of course, our biggest focus is delivering on our goals for our Antimaterials Division, and we set out to build this division with four key principles in mind. The need for domestic supply, understanding back in 2017 that localization was going to drive the need for new process technologies and new companies to emerge in North America. And we needed to make high performance materials for the tier one customers that we'll be building in North America with cleaner, more efficient process technology. And this was going to require establishing strong strategic relationships. And as we look at some of those strategic relationships across customers, such as Panasonic Energy and Core Power, technology agreements with LG Energy Solution, Phillips 66, Powerco and Samsung, including strategic investment from both of LG Energy Solution and Phillips 66 and key upstream partners, both in technology and raw materials with Harper International around our graphitization technology and Phillips 66 as a provider of potential key input materials to our process. And our process has to be able to make the key products that customers need. And these synthetic graphites made for the vehicle and energy storage sector are not commoditized. They are specified to target specifications for each customer, which is dependent on their application. And over the past seven years, part of the key intellectual property we've developed within our nanomaterials group is to be able to cater our products to the different needs of different customers and different applications, such as the energy storage market, and electric vehicle and fast charge electric vehicle market. And this is what we've continued to underpin through our technology development and our pilot facility, and now is being scaled into our Riverside facility. This quarter, we updated the indicative unit economics that we provided to the market last year, leaving the same sales price of a target of $7 to $10 per kilogram and expecting the same operating costs of around $6 to $8 per kilogram, but really updating the potential impact of the government funding specifically on our Riverside facility. Our DOE MESC grant, the $100 million grant, could have an impact of up to $0.45 on our project economics. And our 48c tax credit, depending on how monetized and claimed, could have an impact of up to $0.50. And this has improved the upside of our margin potential within Riverside up to 30% from the mid 20% range. Of course, this depends on the final products that we produce, the distribution of those products, the agreements that we negotiate with customers, and still has the potential to be impacted on the recent announcements to bring the 25% tariff back on synthetic graphites that are competitive to the materials coming from our Riverside facility, which are generally all produced in China today. And of course, we're focused on the execution plan at Riverside over the next 12 to 18 months. This year, we started with a significant offtake with Panasonic Energy and the engineering report, and in this quarter, continued to make progress on equipment installation, orders and deliveries, and facility improvements needed to continue to reach our 3,000 ton module by the end of this year. In this next quarter, in Q3, we'll continue to commission and run equipment and install new equipment that arrives on our way to our 3,000-ton target that will be reached by the end of this year to support mass production qualification sampling and the start of production with customers such as Panasonic Energy and Core Power. And 2025 will be focused on accelerating the output of the plant from 3,000 tons and building up toward our eventual target of 20,000 tons with customer demand. And Riverside is of course only the first project for us. This 20,000 tons will be allocated to Core Power, Panasonic Energy, and likely one or two other customers that will come into this site. But all of our technology will be demonstrated, developed, and at scale in the Riverside site enabling us to grow into future sites with much less risk and therefore financing will come to those projects from potentially the government through our loan program office application and our intent is to build an initial greenfield project with a 30,000 ton capacity which can be expanded on that single site which will bring new customers into including hopefully converting our joint development agreement with lg energy solution into a supply agreement for that site all on the way toward our eventual target of 150 000 tons per year in north america where we still see demand for these key materials in the million plus ton per year range And lastly, I want to revisit our Mount Dromedary asset. As I mentioned, we completed the diligence work to spin out this asset with LEL's Burke and Corella deposits in Queensland into Axon Graphite with the intention to list this company and raise capital in order to dedicate a team to this great resource and the development of this resource and process technology toward downstream materials in battery-grade spherical coated natural graphite. we continue to see strong demand for these types of projects outside of Asia, and the great work that can be done in Queensland in a pro-mining jurisdiction and the ability to develop partnerships, technology, and leverage the work that Novonix has done in this industry, we see as a great opportunity to build Axon into another participant in the global battery material supply chain. And so when we look at the goals that we set this year in the key focus areas, We had four key pillars maintaining industry leadership and battery materials, scaling our operations, securing customers and securing financing. And of course, in industry leadership and research and development, this includes our battery technology solutions group, our all dry zero waste cathode synthesis progressing into full cell performance testing and sampling phases. and continuing to look at how we can leverage AI and machine learning models into the products and services that we offer in our development work in our battery technology solutions group. Scaling operations was really underpinned now by our engineering report completed for our riverside facility and our target staying on track to reach our 3 000 ton production target at the end of this year and use that to do final qualification and start production for our key customers all of this engineering will be leveraged directly into our greenfield facility that's a key advantage of novonix and being ahead in building out our riverside facility than any other project in the synthetic graphite space in north america In terms of customers, our target is to continue to allocate customers volume from both our Riverside site and our Greenfield site with the target of signing more agreements throughout the course of this year with other key strategic partners, battery materials, battery suppliers, and automotive OEMs. And we will look to allocate all of Riverside's capacity and hopefully the Greenfield capacity as well so that we can begin construction of that site. And as we secure financing to scale those operations, we're now able to draw funds from our Department of Energy MESC grant. We're looking at options to monetize our 48C tax credit program, and of course, continue to push forward with our loan application with the loan programs office for our greenfield facility. All while continuing discussions with potential customers and strategic investors who see the value in the leadership position that Novonix has built in our annual materials division, and the need to continue to invest in the localization of graphite as a key material to underpin the EV and ESS sector in North America. So with that, it becomes clear that we are at the forefront of product innovation and the deployment of that product innovation in our anode materials group. And we're recognized as a battery technology leader for this, where our focus is to scale our anode materials division to our eventual target of 150,000 tons and continue to commercialize and demonstrate the benefits of our all dry zero waste cathode synthesis technology. all while being able to use our technology solutions group to continue to develop IP in new market-leading positions to build new parts of the company to generate strong cash flow margins in the future. So we're excited by the progress that we've made through the second quarter of this year and really looking toward the end of this year when we have our first full 3,000-ton module running, a key milestone for the company to go through our qualification and begin delivering next year on our contracts with key customers such as Panasonic Energy. Thank you.