By Peter Epstein, CFA, MBA
Small-cap stocks across a number of sectors, especially TSXV listed, have been decimated over the past few months. However, there’s always ?an except?ion to the rule. Nano One Materials (TSXV: NNO), while down from its 52-week high, is holding up better than most. By searching Google for the word, “lithium,” one might conclude that lithium-ion batteries have won the battery wars. However, there remain several types of batteries incorporating either more, (or less), lithium and even batteries? that use little or no lithium at all.
Our rule of thumb is that the less lithium found in a proposed new battery chemistry, the further from commercial scale it is?. True or not, one thing is abundantly clear. Investors studying the lithium-ion space are keenly aware, and perhaps nervous, about the possibility of lithium’s role diminishing as new materials come to fore. For instance, what about the myriad of battery materials? proven at lab scale in universities and corporate R&D departments around the world?
US$8 million market cap
That’s why I believe that Nano One Materials truly is an exception, note I didn’t call it a, “game-changer.” It could be, but need not be, for investors to potentially enjoy a ?tremendously profitable investment. What if a lithium-focused junior had the following attributes; 1) materials agnostic, so that alternative materials are not a threat, 2) a business model embracing industry change, 3) flexibility to simultaneously work with multiple partners on multiple projects 4) potential collaborations with one or more of the top battery makers on the planet and 5) opportunities to expand well beyond batteries in coming years. ?Nano One has these attributes and more, yet trades with a market cap of roughly US$8 million.
Make no mistake, this is a highly speculative opportunity, but the risk/reward appears compelling (in my opinion). ?Regarding item 4, potential collaborations with large battery makers are underway. Samples have been sent, testing is ongoing and prospective client’s labs have largely verified Nano One’s claims. Management does not know the timing or exact type of agreement(s) that could transpire, but they are excited and hopeful that news on this front is possible within months, not years. A single collaboration, in virtually any form, with a major would place Nano One squarely on the map of potentially disruptive, paradigm shifting technologies.
?Technology risk hard to ignore no matter how scalable
New technologies developed by small cap companies in any sector are inherently risky. These risks cannot be eliminated, but a number can be mitigated. The five attributes mentioned above diversify Nano One’s risk and lower its correlation to other natural resource sector stocks. In the near-term, technicals and fear could dominate fundamental developments, but that creates attractive investment entry points. I believe the time has come for investors to take a much closer look at Nano One. First, consider what’s going on in the lithium sector. Neometals Limited, Pure Energy Minerals, Rodinia Lithium, Nemaska Lithium, and DajinResources are up, on average, abit over 300% from their respective 52-week lows, while Nano One Materials is up, “only” 44%.
Nano One has developed a scalable process for manufacturing low-cost, high-performance energy storage materials for batteries. This has nothing to do with a single new battery design or upgrade, but everything to do with all existing and new battery discoveries that are scalable. The single most important attribute is that Nano One is materials agnostic, not pigeonholed into a hit or miss, binary outcome. It can thrive on events that could render others obsolete. According to Nano One?’s? corporate presentation, at commercial scale, the Company would ?have the ability to reduce battery costs ?of cathode materials by up to 50%. This gives Nano One the flexibility to adjust to market trends and enable it to position the technology as a means of commercializing new emerging materials in batteries and eventually a number of other materials markets.
?Nano One hopes to change the way ?key battery materials are sourced and the technology and process that puts them together. Think of Nano One as a nano-particle assembly line. Assembly lines are known to drive economies of scale, reduce waste, improve quality and cut costs. The belief of stakeholders that scale-up from pilot to commercial scale? will not be difficult is aggressive that I take careful note of and discount in my thesis. Having said that, Nano One plans to use lower grade feedstock (~30% less costly) and simpler processing (~75% fewer steps & 3x-4x higher throughput) to produce cathode materials with considerably improved charging, cycling and energy capacity. CEO Dan Blondal provided this quote, “Nano One is developing the recipe, or processing technology, that makes robust, long-lasting structures from any number of ingredients and assembles them using cost-effective feedstock and a scalable industrial process.”
Conclusion:
Combined, the attributes of the technology/process is forecast to produce 90%-95% yields, fewer failure points, longer lifetimes, fewer harmful solvents and create a safe, more reliable product. Electric Vehicle, “EV” battery packs are built with excess capacity, partly to increase longevity and warranty periods. If Nano One’s technology could improve the longevity of the energy storing materials making up the battery pack, EV manufacturers could utilize fewer cells, enjoy faster charges, less weight, less cost, and increased mileage. Nano One, and others across a wide range of disciplines, is poised to rapidly boost EV adoption rates and continued R&D on scalable substitution alternatives. Those interested should visit this video clip of CEO Dan Blondal.
I end on a note that will be addressed more thoroughly in future articles, Chairman & Director Paul Matysek is a legend in Canadian circles for developing, marketing, attracting investors and facilitating the sales of Potash One, Lithium One and was Founder, President & CEO of Energy Metals Corporation, acquired by Uranium One. Mr. Matysek was the driving force in these deals, not just along for the ride. Matysek reports that he believes,
“Nano One has game-changing technology in one of the fastest growing spaces in the world. I like the management team and I hope to be able to add considerable value through my network and 30 years of market experience.”
Disclosures:
Disclosure: Several of the companies mentioned herein have small market caps, including Dajin Resources, Pure Energy, Western Lithium, Lithium Americas, Critical Elements, Galaxy Resources, Nemaska Lithium, Bacanora Minerals and Rare Earth Minerals. Small market cap stocks are highly speculative, not suitable for all investors. I, Peter Epstein, own shares of DJIFF and PE.V. Mr. Epstein, CFA, MBA is not a licensed financial advisor. Readers should take that fact into careful consideration before buying or selling any stock mentioned. Readers are encouraged to consult with their own investment advisors before buying or selling any stock, especially speculative ones. At the time that this article was posted, Dajin Resources and Pure Energy were sponsors of: http://EpsteinResearch.com. Please consider visiting: http://EpsteinResearch.com for free updates on Dajin Resources, Pure Energy and others across a wide range of sectors. While at http://EpsteinResearch.com, please enter an email for instant delivery of my work. Thank you for supporting my articles & interviews.
