Magnis Energy Technologies

Vertically-integrated Battery Technology Developer, Manufacturer and Near-term Graphite Producer

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Overview

Magnis Energy Technologies (ASX:MNS) is a vertically-integrated battery technology developer, manufacturer and near-term graphite producer. The company’s flagship Nachu graphite project in Tanzania is one of the world’s most advanced and shovel-ready graphite projects. The project is fully-permitted, has a bankable feasibility study (BFS), a power supply agreement and a favorable port authority agreement.

Magnis has demonstrated that Nachu represents a viable alternative for end-users seeking a greener and lower-cost supply chain for graphite anodes in lithium-ion batteries. The project is able to produce high-performance, high-purity graphite products without the use of any chemical or thermal purification methods.

The global graphite market is expected to reach $18.7 billion by 2022. The demand for graphite in recent years has been due to a rise in clean energy initiatives, new building materials and the demand for lithium-ion batteries. Graphite is an essential component in lithium-ion batteries and as electric vehicle sales grow, so will the demand for the metal.

In addition to developing its graphite project, Magnis has been working with Charge CCCV LLC (C4V) and Boston Energy and Innovation (BEI) to develop two lithium-ion battery gigafactories in New York, US and Townsville, Australia.

The New York factory is expected to be operational in the near term and will initially be able to produce one gigawatt hours, but will be increasing its capacity to 15 gigawatt hours. The factory has received $13.25 million in funding from the New York state government. A US$52 million term sheet has also been signed to fund development.

The Townsville Gigafactory is planned for first product in 2022 with the project nearing a full feasibility funded by the Queensland State Government. Magnis and its operating partners have been engaged in discussions with various end-users to secure offtake and sales agreements. Additionally, Magnis is responsible for sourcing the anode material and technology to be used at the factories.

Company Highlights

  • One of the largest mineral resources of large flake graphite in the world: 174 million tonnes at 5.4 percent total graphitic carbon for 9.3 million tonnes contained graphite.
  • BFS released in March 2016 contained an after-tax NVP (10 percent of $1.69 billion, an IRR of 98 percent, a capital payback of 14 months and a capital cost estimate of $269 million.
  • Demonstrated ability to produce a greater than 99.95 percent purity coated spherical graphite anode product with no chemical purification processes.
  • Key environmental, mining permits and fiscal agreement in place.
  • Power contracts secured and port authority agreement nearly complete.
  • Arranging project financing and offtake and supply agreements.
  • Acquired 10 percent interest in C4V.
  • C4V has developed the first solid-state lithium-ion battery.
  • 47 percent interest in the New York gigafactory.

Nachu Graphite Project

Magnis’ wholly-owned Nachu graphite project covers approximately 199 square kilometers and is located in southern Tanzania, west of the coastal city of Lindi and approximately 220 kilometers from the port city of Mtwara. First discovered in 2013, the property contains five deposits with mineralization at or near surface. The modelled resource depths vary between deposits with over 85 percent of the defined total resource located less than 150 meters from surface.

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High-purity anode graphite product

Since 2015, Magnis has been working with a number of prospective end-users and supply chain parties to demonstrate the company’s ability to commercially produce high performance anode graphite which meets or exceeds end-user specifications.

In April 2016, the company announced that it had produced a greater than 99.95 percent purity coated spherical graphite anode product from Nachu graphite using existing commercial scale technology. The high purity material was made from larger size flake graphite without any chemical or thermal purification or use of toxic acids. The anode product demonstrated outstanding battery cell performance comparable to leading Chinese natural and synthetic graphite anodes.

The ability to produce battery grade anode material using existing commercial scale technology in North American facilities without the use of chemicals and toxic acids demonstrates that Magnis represents a viable alternative for end users seeking a greener and lower cost supply chain for graphite anodes in lithium-ion batteries.

“Magnis has now illustrated the pathway to a supply chain that is both greener and more cost effective for sustainable industries using lithium ion batteries,” said Magnis CEO Dr. Frank Houllis. “With qualification work continuing, Magnis expects to realize further improvements in both the quality of its anode graphite and the cost efficiency of its production.”

Resource Estimate

In February 2016, Magnis released an updated JORC-compliant mineral resource estimate for Nachu showing 174 million tonnes at 5.4 percent graphitic carbon at a three percent graphitic carbon cut-off grade. With 124 million tonnes in the measured or indicated categories, Nachu represents one of large, jumbo and super jumbo flake graphite in the world.

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BFS

Magnis completed a BFS for the Nachu graphite project in March 2016. The study shows that the high-quality size, purity and crustal structure of the contained graphite flake at Nachu should result in robust financial returns and low technical risk. The BFS considers high purity product delivered from solely flotation and without chemical purification with a nameplate capacity of 240,000 tonnes per annum graphite concentrate over an initial mine life of 15.2 years.

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“The release of the BFS is another important milestone towards the development of the Nachu graphite project,” commented Houllis. “It confirms that the project has outstanding projected financial returns. The BFS also details how premium graphite concentrate products of exceptional size and purity can be generated using low cost flotation processes with an exceptionally small environmental footprint. These products are targeted into fast growing graphite markets such as the lithium-ion battery sector and the BFS firmly demonstrates the commercial viability of the Nachu project to potential end users.”

The export route outlined in the BFS calls for the graphite concentrate produced on site to be trucked 200 kilometers to a storage facility located near the Port of Mtwara. The port has a 400,000-ton-per-annum capacity with current utilization between 130,000 and 140,000 tons per annum and existing plans to upgrade the port to 750,000 tons per annum.

In June 2016, Magnis announced a LOI from the Tanzania Port Authority (TPA) allowing the company to move to the next phase of acquiring a long-term lease at the Port of Mtwara. Under the terms of the LOI, Magnis would be allocated 25,000 square meters of land adjacent to the main wharf and berth of the port—the company’s preferred location for its concentrate storage facilities. Magnis is now working to finalize its applications for a long-term lease agreement with the TPA.

Mining license and mineral development agreements in place

In September 2015, the Ministry of Energy and Minerals of Tanzania issued Magnis a special mining license (SML) for the Nachu graphite project for a period of 16 years. The license covers approximately 30 square kilometers of the existing Nachu exploration license, containing a suitable area for mine development including the resource areas of Blocks F, FS, J and B.

Following an announcement to the ASX in late November 2016 regarding the completion of the land valuation process, Magnis is in the final phase of the compensation process. Those residents who are affected by the SML have been offered and accepted resettlement to a new village area to be constructed by Magnis. IFC principles and guidelines have been used throughout the process with affected residents being resettled into new accommodation to an equivalent or better standard. The new resettlement village proposed by the company will exceed these guidelines.

In October 2015, the company finalized a mineral development agreement with the Tanzanian government for a period of 10 years. The agreement provides the Nachu project with necessary fiscal stability including a 30 percent tax rate and three percent production royalty.

“We certainly welcome our partnership with the government in the project and we look forward to our end goal of bringing Nachu into production in a sustainable manner for the benefit of all stakeholders, especially the local community,” stated Magnis Chairman Frank Poullas. “The Nachu project has the potential to be of similar economic significance to Tanzania as the gold industry, which has also benefited from the political stability and degree of comfort from previous MDA agreements.”

In March 2018, Magnis signed a new agreement with the Tanzanian government in response to new legislative regulations pertaining to the mining industry implemented in mid-2017. The new agreement features some amendments to the special economic zone license that the company was granted in March 2017.

Under the new agreement, Magnis’ Tanzanian subsidiary, MTT, will own and operate the company’s processing plant at the Nachu graphite property and Magnis’ second Tanzanian subsidiary, Uranex, will be solely in charge of the mining operation at Nachu. The agreement also will maintain a stable fiscal environment for 10 years and includes no corporate tax.

Power supply agreement

Magnis has secured a power supply agreement with Symbion Power, a leading US-based power engineering and construction group. The agreement includes the development and operation of a dedicated 30-megawatt gas fired power station, associated substations and a 132-kilovolt transmission line to connect Nachu to the main power grid. The development has the principal approval of the Tanzania Electric Supply Company.

”Magnis has closely studied a variety of power supply options for Nachu and we believe this Agreement represents the most attractive and viable pathway to provide a stable power supply for Nachu,” stated Poullas.

Offtake agreements

Magnis has signed a sales agreement with a division of World Group for 25,000 tonnes per annum of flake graphite for an initial period of three years at a fixed rate. The order consists of 15,000 tonnes per annum of super jumbo at a purity of 97 percent to 99 percent total graphitic carbon and 10,000 tonnes per annum of jumbo at a purity of 97.5 to 99.5 percent total graphitic carbon. Additionally, Magnis has the option to source the graphite from the Nachu project or from other mines that meet these criteria.

Lithium-ion Battery Gigafactories

In addition to Magnis’ holdings in Tanzania, the company is also invested in developing next generation lithium-ion batteries. Magnis has teamed up with Charge C4V and Boston Energy and Innovation (BEI) to develop two lithium-ion battery gigafactories in New York, US, and Townsville, Australia.

Magnis holds a 47 percent interest in the New York battery gigafactory, which is to be located on the Huron Campus and home of IBM in Upper State, New York. As the factory is fast-tracked into production, it is expected to initially produce one gigawatt hours, but will be increasing its capacity to 15 gigawatt hours.

The New York factory project has garnered a substantial amount of interest in the US, Asia and the Middle East. As such, the factory has secured a sales agreement with a number of end-users that account for the first three gigawatt hours of production. The New York Governor Andrew Cuomo has designated $13.25 million in funding to go towards the development of the gigafactory. A US$52 million term sheet has also been signed to fund construction.

The Townsville battery plant will be a 15-gigawatt hour plant situated on 400 hectares of land located in Townsville, Australia. To date, the company has finished a scoping study for the plant and is working on completing a feasibility study. Magnis will be providing anode materials and technologies from its Nachu project in Tanzania.

C4V

To further their three-year working relationship, Magnis acquired a 10 percent interest in C4V, a leading US-based lithium-ion battery technology group with exclusive agreements in place for select patents, in September 2018. Under the terms of the agreement, Magnis will have exclusive rights for a period of five years to select patents held by C4V and the two companies will co-share their respective intellectual properties (IP) and expertise.

To date, C4V has developed its first-generation, commercially-viable battery composition, which features a cobalt and nickel-free cathode chemistry that has a higher voltage and longer cycle lifetime than other commercial materials. The composition also has compositionally-patented modifications that ensure the battery’s safety. C4V anticipates the start of battery production in the near term. Additionally, C4V’s technical team is working towards improving its current and future battery designs to include a semi-solid-state design that the company intends to have in production by 2025.

Technology development

Magnis and C4V have been conducting tests on anode and cathode materials for the development of lithium-ion batteries. To date, the anode testing has shown an 80 percent improvement on the energy density performance of existing graphite-based anode material on its first cycle. The anode material is also showing a first cycle efficiency of greater than 89 percent without pre-lithiation and a greater than 98 percent capacity retention after 35 cycles.

As for the cathode testing, testing remains ongoing for the second-generation cathodes, which are designed to have a higher energy density and temperature stability.

In October 2018, C4V completed the production of a working prototype of a solid-state battery. This battery replaces over 80 percent of the liquid electrolyte with a solid one, which results in a lower-cost battery that has a higher capacity, density, performance and slightly reduced charging times when compared to existing battery solutions.

In May 2019, Magnis delivered C4V lithium-ion batteries with a BMLMP composition to Martac, who has signed a commercial in confidence agreement with C4V and iM3NY. Each battery is 20 kilowatts in size and will be used in commercial marine vessels for demonstration and testing purposes. The batteries will be subjected to an extreme condition testing program to make the batteries compatible with various applications. Martac is anticipated to need several hundred megawatts of batteries over the next five years to meet the demand of its vessels.

Strategic Partnerships and Agreements

Celgard

In Febraury 2018, Magnis signed a joint development agreement with Celgard, a global leader in separator technology for lithium-ion batteries. Celgard will be supplying advanced separators to the lithium-ion battery production plants that Magnis is developing.

Separators provide critical performance benefits in batteries. By incorporating Celgard’s separator technology with Magnis’ anode designs should enhance the company’s ability to produce high-performance and cost-effective batteries and would secure a sustainable supply of critical components for its product.

Siemens

In March 2018, Magnis signed a LOI with Siemens AG (OTCMKTS:SIEGY), a global technology powerhouse and a leading supplier of efficient power generation and transmission solutions, to enhance the lithium-ion manufacturing technology via digitization and automation. Magnis’ collaboration with Siemens will be extended to all of the company’s Imperium3 projects.

Under the terms of the agreement, Siemens will be in charge of identifying the resources needed in order to incorporate their industry software and automation solutions as well as to provide technology standards to help with the formation of new plants.

“We continue to validate the quality of our projects, our strategy to eliminate manufacturing risk one step at a time and our technology with quality partners and don’t get any bigger than Siemens,” said Poullas. “To have a global powerhouse in Siemens showing its commitment to what we are doing is huge validation to our exciting project in New York.”

Babcock and Wilcox MEGTEC

Magnis has also signed a strategic partnership agreement with Babcock and Wilcox MEGTEC (B&W MEGTEC) to procure market-leading, double-sided coating for lithium-ion manufacturing. B&W MEGTEC designs, engineer, manufactures and services sophisticated air pollution control systems as well as coating and drying equipment for the industrial sector.

B&W MEGTEC has commenced the specifications of their GigaCoaterTM line for use by Magnis. To date, the first production at the B&W MEGTEC pilot plant has completed the testing the line of coated cathode and anode electrodes that will be used in lithium-ion batteries.

Dendrobium

In September 2018, Magnis and C4V partnered with Dendrobium Automotive Limited to produce the next generation of high-performing batteries, including semi-solid-state batteries. A working group has been created between the three companies to develop and produce the next generation of high-performance batteries utilizing C4V’s and Magnis’ technology and the three companies will be collaborating on battery packaging solutions, hybrid systems, management software, performance testing and development materials. Additionally, C4V’s second generation and semi-solid-state battery technologies will also be used by Dendrobium.

Management

Dr. Frank Houllis – Chief Executive Officer

Dr. Frank Houllis has over 20 years of practical experience in the development and engineering of metallurgical processes. He has worked on processes for a wide range of commodities, including rare earths, base metals, precious metals, lithium, titanium and uranium. His particular area of expertise is in the application of systems engineering techniques to ensure seamless project development from concept through to commercialization in a timely and cost-effective manner. Front end engineering to take into account technical, economic, regulatory and environmental considerations are central to his approach. Following completion of his doctorate in chemical engineering in 1995, Houllis has led process development teams at ANSTO (2008 – 2014), BHP Billiton (2005 – 2008) and Intec Ltd (1995 – 2005).

Travis Peluso – Investor Relations Director

Travis Peluso joined the executive team and takes on a lead role within Magnis including the accountability for the communication to both the institutional and retail investment communities. His role is the point of contact to add detail and context behind the Magnis journey, going from African graphite miner to the world’s largest manufacturer of lithium-ion battery cells. He has been a supporter and significant long-term investor of Magnis for the past eight years.

Peluso has spent the past 22 years immersed in the rapidly evolving Telecommunications and Technology Sector, with his last 10 years in senior management and executive roles at both Telstra and Singtel – Optus. An experienced executive and manager of large diverse teams, he has an aptitude for evolving technology with strong commercial and deal-making capabilities.

Brent Laws – Manager, Exploration

Brent Laws has a diverse background in geology with extensive exploration and project development experience. His broader ten plus years of experience covers exploration, resource and mining projects and a variety of commodities including uranium, coal, gold, copper and zinc. Most recently, he spent five years working in Botswana as a Resource Development Manager and Senior Geologist with A-Cap Resources; accountable for the development and execution of exploration and resource definition programs and mineral resource estimates. He has also been involved in project reviews of tenements and potential joint ventures or acquisitions, including graphite and gold within southern Tanzania. Prior to living in and working in Botswana, Laws worked in Laos as a Resource Geologist with Oxiana developing gold and copper exploration projects and in Australia with OZ Minerals/Oxiana and Newmont on copper, zinc and gold exploration, resource development and mining projects.

Megan McPherson – CFO

A Chartered Accountant and Company Secretary, Megan brings more than 15 years of commercial and public practice experience. She has experience across multiple jurisdictions including ASX and NASDAQ listed entities, most recently in the resources and biotech industries. She holds a Bachelor’s Degree in Commerce (majoring in Accountancy) from the University of Wollongong.

Frank Poullas – Non-Executive Chairman – MAICD

Frank Poullas has spent the last 15 years working in the investment banking and engineering sectors. In his personal capacity is a professional investor specializing in the resources sector. For over 15 years he has been involved in various ventures increasing shareholder value in the resources sector.

Hon. Warwick Smith AO – Non-Executive Director

Warwick Smith has extensive public policy and commercial acumen and a wealth of experience from national and international business relations in a variety of industries including property, financial services, natural resources, energy, transportation, heavy machinery and equipment, health, media, technology and entertainment.

During his 15-year Parliamentary career, Smith held many portfolios as a Federal Government Minister including Minister of Sport, Territories and Local Government along with Minister Assisting the Prime Minister on the Olympic Games in Sydney and Minister of Family Services. Various Shadow Minister roles included Communications, Privatization, Aboriginal Affairs, Science and Energy and Leader of the House of Representatives. Previously, he was an Executive Director with the Macquarie Bank Group, Chairman New South Wales and Australian Capital Territory and former Senior Managing Director for the ANZ Banking Group Limited, Chairman of E*TRADE Limited, Chairman of the Australian Sports Commission and Australia’s first Telecommunications Ombudsman. He has received a Centenary Medal and an Order of Australia.

Professor M. Stanley Whittingham – Non-Executive Director

Professor Stanley Whittingham has over 40 years of experience in the lithium-ion battery industry and is best known for being a key figure in the invention of the lithium-ion battery technology which earned him a nomination for the Nobel Science Prize. During his illustrious career, Professor Whittingham has headed large projects for the US Department of Energy, Exxon and Schlumberger. He has 16 US patents and has been involved in writing over 240 pieces of scientific and engineering literature.

Currently, Professor Whittingham is a professor of Chemistry and a Director of both the Materials Research and Materials Science and Engineering program at Binghamton University which is part of the State University of New York. Professor Whittingham is also Director of the Northeast Center for Chemical Energy Storage (NECCES), which is an effort being led by Binghamton University, and includes as partners Rutgers University, Argonne National Laboratory, Cambridge University, MIT, University of Michigan, University of Illinois at Chicago, University of California at Santa Barbara and University of California at San Diego.

Leslie Hosking – Non-Executive Director

Leslie Hosking has a long and distinguished career which spans over four decades in Australian business with a strong focus in the energy and the global futures industries. Currently, he is serving as an independent Non-Executive Director of AGL Energy Limited and is an adjunct Professor of the University of Sydney John Grill Centre for Project Leadership. Previously, he was the CEO and Managing Director of the Sydney Futures Exchange, Chairman of Adelaide Brighton Limited, CEO of Axiss Australia, an Australian government inward investment agency used to promote Australia as a global financial service, and a Director at the Australian government’s Industry Research and Development Board.

In the domestic energy industry, he has served as the CEO and Managing Director at National Electricity Market Management Company (NEMMCO), Director of the Australian Energy Market Operator (AEMO), The Carbon Market Institute Limited and Innovation Australia Pty Ltd.

Johann Jacobs – Non-Executive Director

Johann Jacobs has more than 30 years’ experience in the resource sector where he has managed established companies and acquisitions, expansions or start-up mining operations in Australia, South Africa and Indonesia. His more recent roles have included Chairman of IMX Resources Limited, Managing Director of the ASX-listed coal producer CIM Resources. In addition, he holds various directorships in private resource-focused companies’ active in Australia and internationally.

Peter Tsegas – Non-Executive Director

Peter Tsegas has over 15 years of experience in Tanzania (10 years as a resident). He has worked to engage both the private and government sectors on a number of projects. Tsegas was founder and Managing Director of Tancoal Energy which he successfully took from an exploration company through to a JV with the Tanzanian government and then into production. A number of consulting roles to the Tanzanian government have been undertaken, including the Ministry of Industry and Trade and the Ministry of Energy and Minerals. He has also consulted to a number of mining companies including Rio Tinto.

Marc Vogts – Non-Executive Director

Marc Vogts is a project executive with over four decades of experience in the mining industry and over 30 years’ experience as a Senior Executive in major mining projects in South Africa, Madagascar, Australia, Canada, Chile, Indonesia, Papua New Guinea and USA. Vogts has held Director roles for the likes of BHP Billiton and Rio Tinto during his career. In recent roles, he was Project Director for the QMM Project in Madagascar for Rio Tinto, Vice President for Project Management for BHP Billiton and Vice President for all Uranium Projects including Olympic Dam for BHP Billiton.

Currently, he is the Chief Executive Officer at the John Grill Centre for Project Leadership at the University of Sydney, a world leading project leadership executive education for value creation and realization in large-scale projects.

Doug Richardson – Company Secretary

Doug Richardson has over 23 years of experience in the financial services and resources sectors. His experience has included investment research, analytics and client advising for various organizations including GIO Asset Management, the Australian Prudential Regulation Authority and Suncorp Investment Management.


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