Novonix does $45 million deal with LG Energy Solution

Novonix announced it has signed an agreement with LG Energy Solution (LGES) for the joint research and development of artificial graphite material. In a separate investment agreement, LGES will buy USD 30 million worth of unsecured convertible notes to be issued by Novonix, which will allow the battery maker to own shares in the Australian company.

Novonix, which has an artificial graphite production plant in Tennessee in the United States, making it eligible for U.S. government incentives via the Inflation Reduction Act (IRA) subsidy program, said the LGES financing will allow for continued development of battery anode materials, operational needs, and general corporate purposes.

The joint development project aims to develop active battery anode material that meets LGES’s product specifications and reduces its reliance upon Chinese suppliers. Upon successful development of the product, Novonix and LGES will enter into a separate purchase agreement with the South Korean battery manufacturer to purchase up to 50,000 tons of artificial graphite anode material over a 10-year period from the start of mass production.

Novonix Chief Executive Officer Chris Burns said the company was excited to formalise its work with LGES and establish the path to become a supplier for its artificial graphite anode material in the U.S.

“This agreement demonstrates our leading position to establish a supply chain for high-performance artificial graphite for the battery industry in North America,” he said.

Burns said the material will be developed at Novonix’s current Tennessee facilities with mass production expected to commence in 2026.

The company is targeting an initial 30,000 tons per annum (tpa) of production capacity of active anode material at its Tennessee facility but that is expected to ramp up with Novonix having previously outlined plans to increase capacity to 150,000 tpa by 2030.

Novonix also has plans to establish a second manufacturing facility having last year received a USD 150 million grant for the U.S. Department of Energy to support the construction of a second 30,000 tpa production plant.

“While the LG agreement has proposed 50,000 tonnes over a 10-year period, LG’s requirements are significantly more than that for their facilities here in North America,” Burns told Finance News Network. “So, there’s upside in our ability to potentially scale more volume for LG, but also focus on completing the work around other tier ones and bring more allocation and supply contract allocation into these facilities that we’re looking to build.”

LGES is among the world’s largest battery manufacturers and has two standalone and five joint venture plants currently operating or being constructed in the U.S.

The company said the partnership with Novonix will allow it to expand its local supply chain for battery components and maximise the benefits from the U.S. IRA that provides subsidies for electric vehicles (EVs) made with components sourced from the region.

“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 customer’s needs for lRA-compliant batteries,” LGES senior vice president of procurement centre Dongsoo Kim said.