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In this article we are going to cover the news that Nano One (OTCPK:NNOMF) is entering the lithium iron phosphate (LFP) cathode market as announced recently.

Readers need to ponder: Nano One has three automotive deals under NDA. One is Volkswagen; the other two are unnamed car companies. We might venture that one of them is Tesla ( TSLA) and the third unknown. I might take a blind guess and say it is Ford ( F) though. All of these projects might tie into the cathode facility given time.

The third point we will cover is the utterly insane amount of available Canadian and US Government funding. Lastly realize that Tesla is a big fan of LFP batteries.

I'm always amazed at why people pick some stocks only later to leave when the price fluctuates via short term sentiment and then goes stagnant. For example, cobalt play Electra Battery Materials (ELBM). It has long been in a period of being sleepy and forgotten by Mr. Market… and now I sense twitches of activity.

The same can be said of Nano One. Last year, the stock was doing quite well and many new partners were being announced. Then the company pulled out of a China deal and simultaneously the deal with Johnson Matthey (OTCPK:JMPLF) changed when Johnson Matthey decided they wanted to try to sell the cathode portion of the company off. While the JM project still goes on, it appeared murky to Mr. Market. These two events cast a negative sentiment over the stock and investors were scared. Hence, the stock price has been in a slow downward trend for quite some time which makes it perfect to buy even with today's recovery. Note the low market cap of $148 million USD while cash stands around $40 million (give or take) after the buyout.

Nano One 5 Year Chart (Seeking Alpha)

This section can be kept pretty basic. Frankly Tesla likes to use LFP batteries and the Nano one cathode production plant is none other than LFP capable. A rather interesting article from April 2022 can be found at Insideevs. It would be worth your time to read it and ponder it as you continue to digest the rest of this article. Just remember, if the facility expands and Tesla can acquire cathode materials from North America as opposed to Asia they will. The saving from a shorter logistics chain (not to mention supply chain security) make it worth while.

Per the press release, we see the LFP cathode production acquisition weighing in at $10.25 million Canadian ($7.99 million USD). Details include:

Also in the press release, we learn that the facility has been in operation since 2012. This bodes well as it provides a well-seasoned work force along with R&D know how. Note the sentence: Team and facilities proven in supplying tier 1 cell manufacturers for automotive". I'll say it again "tier 1 cell manufacturers for automotive". The cathode facility factors in perfectly with the below automotive deals and given the cathode company has been in operation since 2012; one might wonder how much revenue it will bring to Nano One once the deal closes. Existing customers might sign deals using the Nano One one pot process. While the facilities 2,400 tonnes is not a huge operation it could be expanded once the big boys give the official green light. Being the only LFP operation in North America does give it some early move advantages. As a side note, it is interesting to see that Johnson-Matthey paid $96.3 million converted to CDN for the facility (and some assets in Europe) in 2015. Given that Nano One is paying just over $10 million CND this is quite the discounted fit.

To borrow from a prior article I wrote, I think it is well worth pondering the big picture when it comes to Nano One and automotive endeavors. The company has several deals under NDA with car makers. Note the three car NDAs in the below graphic. (Red graphics are the authors.)

****Update for clarity: It was brought to my attention that two of the below deals are for LNMO as opposed to LFP . For clarity sake it should not be assumed that these deals will go to the cathode facility that Nano One is buying. However we could see new deals involving LPF as offshoots by these three automotive deals. Hence when reading this section think of it as a reminder of what Nano One has now.

Three Automotive NDA's (Nano One - April 2022 IR Presentation)

Looking at the automotive deals below, we see the following two deals with a third deal via a Volkswagen (OTCPK:VWAGY) (OTCPK:VWAPY) wild card:

Time Line of Auto Deals (Nano One )

The first potential deal is with an undisclosed "Global OEM" - They are exploring Nano One technology for the car market.

(Source: Nano One - Jun 20, 2019)

We see a follow up PR in the form of "Nano One enters agreement with global automotive company to develop and evaluate manganese rich batteries" dated Sept 30, 2021. This is in relation to the above Global OEM deal.

Per the below, we have the completion of the LNMO (Lithium Nickel Manganese Oxide) batteries R&D. Then they are advancing to phase two which is an MOU (memorandum of understanding).

Nano One is pleased to announce that it has completed a project with a global automotive OEM (Original Equipment Manufacturer), that was first announced on June 20, 2019 and the two parties have signed an MOU to evaluate manganese rich cathode materials for potential use in automotive scale battery cells.

The completed project successfully demonstrated the synthesis, performance and improved durability of a proprietary and experimental nickel rich cathode formulation, using Nano One's patented One-Pot process. Nano One has built on this success and has now signed an MOU with the same OEM for the multi-phase development and evaluation of LNMO (Lithium Nickel Manganese Oxide) batteries using cathode materials prepared by Nano One. Work under the MOU will include performance testing, economic feasibility and future potential commercial collaboration for jointly developed battery cells using Nano One's advanced LNMO cathode materials.

LNMO, also known as high voltage spinel (HVS) has great potential in next-generation lithium-ion batteries for electric vehicles, renewable energy storage and consumer electronic devices. It delivers energy and power on par with other high-performance cathodes and is cost effective because it is cobalt free, low in nickel and does not require excess lithium.

LNMO's three-dimensional spinel structure enables lithium ions to flow more quickly than other types of cathodes for fast charging and discharge and keeps it from expanding, contracting, and straining the battery in both liquid and solid-state battery systems.

LNMO also has an operating voltage that is 25% higher than commercial high nickel cathodes, enabling fewer cells in applications such as power tools and electric vehicles while providing improved productivity, efficiency, thermal management, and power.

(Source: Ceo.ca - Sept 30, 2021, emphasis added by author)

The second deal is with an unnamed American multinational auto manufacturer.

"Nano One has entered into a cathode evaluation and benchmark agreement with an American based multinational auto manufacturer to jointly evaluate Nano One's cathode materials for automotive lithium ion batteries. Financial compensation towards the project is confidential."

"The goal of this project is to evaluate the performance and commercial benefit of Nano One's patented One-Pot process for nickel rich and cobalt free cathode materials in electric vehicle applications," said Ms. Hamutal Ben Bassat, VP of Business Development for Nano One. "This agreement formalizes efforts that began earlier this year and aligns Nano One with its second major automotive company. These are formative steps in developing a long term relationship. We are confident that given economic viability it will lead to commercial opportunities and strategies to integrate Nano One's technologies into the electric vehicle value chain."

(Source: Nano One - Dec 18, 2020)

Now we present a followup PR release (dated Aug 17, 2021) concerning this project which reads "Nano One adds industrial scale engineering study to automotive project". I want you to read this very slowly and focus on the content.

"Nano One announced a cathode material evaluation program with a multinational automotive company last year and is now pleased to report that progress has led to an expansion of their joint project. The expanded program will include an engineering cost model report on the industrial scale production of nickel rich cathode materials to supply a full-scale automotive battery cell assembly plant."

"The additional scope will examine the economic, environmental, and engineering details of industrial production. The report will be prepared by Hatch, based on the engineering study being prepared for Nano One, and will include a Front-End Loading level 1 (FEL1) analysis on capital costs, operating costs, and a cost comparison of the Nano One process versus the conventional cathode material manufacturing process."

"The report will enable the companies to evaluate both the economic and environmental advantages of Nano One's patented One-Pot, Metal to Cathode Active Material (M2CAM) and coated nanocrystal process technologies at large industrial scale. This work runs in parallel to the ongoing performance testing and validation work on Nano One's nickel-rich and manganese-rich cobalt free cathode materials."

"The name of the automotive OEM and details of the project remain confidential in accordance with the terms of the agreement."

(Source: Ceo.ca Aug 17, 2021, emphasis added by author)

The takeaway here is that massive automotive companies are deep in bed with Nano One. Today's cathode news only further solidifies these relationships and puts Nano One further down the road of commercialization.

CEO Dan Blondal comments on commercialization efforts via an interview with Proactive.

"We will begin at looking at commercial opportunities with their customers and we will be looking how our technology can improve the economics and the profitability there. So, looking to bring our know-how and knowledge that we develop in BC to commercial scale in Quebec at this facility."

"They (Johnson Matthey Battery Materials) bring a component of production DNA that we do not have at Nano One. We have the R&D DNA and now we have the production DNA. It is really going to enable us to bridge the learning gap that would otherwise be required as you scale up and commercialize. They bring the learning, know how, the expertise, and the systems that are needed to manufacture --- let's say for the automotive sector but also the equipment, the land, the building really helps us move quickly."

"It takes off years in the overall effort to commercialize our technology."

It appears Nano One has hired a lobbyist to promote cathode production. Note that the yellow highlights are the author’s. Lobbyists might assist in obtaining additional government support and/or funding. Speaking of funding, an absurd amount is available via Canada and the United States.

Cathode aspirations (lobbycanada.gc.ca)

As we discussed in our Lithium Americas (LAC) article, Nano One stands to benefit from government loans. We penned on May 3rd that the United States is offering $17.7 Billion in Federal Funding is available for companies to apply for via Advanced Technology Vehicles Manufacturing Loan Program (ATVM). Additionally, $2 billion Canadian is available via the Canadian government.

Canada's federal budget will include an investment of at least C$2 billion ($1.6 billion) for a strategy to accelerate the production and processing of critical minerals needed for the electric vehicle (EV) battery supply chain"

"Canada last month announced financial support for building two facilities that will make battery materials for electric vehicles, and one battery giga factory"

Lastly, we have the recently announced $3.16 billion in grants per the Department of Energy. Adding the figures, it approaches $23 billion via various loans and grants that are available. Could the company locate some assets in the U.S. to go after that Uncle Sam money? Sure, why not.

I do not think it is much of a stretch to think that Nano One might have political support of the Canadian government looking at past grants given to Nano One.

Something we need to remember is that a large swath of investors have not experienced a true bear market. Sure, some hiccups have occurred, but who was around for the 1999 tech implosion? I was. How about the 9-11 fueled disaster where the stock market was actually shut down? I was. The 2007-2008 housing crisis and market implosion? Yours truly was in the thick of it. A lot of new blood in the market has yet to experience a long drawn-out bad market. Hence, the recent experience of November going forward has been a real shock to many. Could it get worse? Sure, but no matter how bad it gets America will recover. Will inflation be tamed? Yes with time and yes at a cost of rising interest rates, a slower economy, and a loss of jobs. That is just part of the business cycle. Yet we need to remember that America will still be here when everything settles. Companies that are strong will survive and thrive in the afterglow. Weak companies will be picked up by strong ones. New opportunities will come about.

A lot of new money lacks patience. They want to chase things or try to optimize investments via timing. It can work, but you can also miss out on large movements. I bought into AMD (AMD) at $2 a share and exited at $36 only to miss an unexpected run which meant I had to buy in at a much higher price. I was in Lithium Americas (LAC) at $2 and some of my position exited via having sold calls against it at $17.50, missing some of that initial run to $40. Granted, I made many many months of premiums off of the calls, but it still mentally hurt to realize that a portion of my holdings missed a good run because I missed unexpected news. The point is unexpected news can and will happen, be it good or bad. The takeaway is to know why you are in something and then fluctuations are really not that disturbing. If, however, you do not understand a company (or know why you are in it) then fluctuations can shake you up mentally.

Nano One has three known automotive deals under NDA and I suspect more in the works. The recent acquisition of a cathode facility moves Nano One closer to manufacturing cells for car companies using Nano One technology that extends battery life. Government funding is a wild card. The market cap of Nano One as of 5/25/2022 is a mere $148 million USD. As of March 31, 2022, we see a healthy cash position of $49.4 million CND. Granted the acquisition will reduce this by $10.25 leaving us at $39.05 million CDN. Factor in two months of capital burning and let's guess we are at a flat $37.25 million if we glance at numbers and guess.

Given these factors and the known relationships, and we have our hard earned money in Nano One for the long haul and look forward to seeing what revenue emerges from current relationships and what lurks under the NDA surface with the big auto makers.

This article was written by

Disclosure: I/we have a beneficial long position in the shares of NNOMF, ELBM, LAC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We own Nano One on the Canadian stock market as well under ticker NANO.