NOVONIX Limited (NVX) Earnings Call Transcript & Summary

Welcome, everyone. This is our NOVONIX 2025 Investor and Analyst Day. So thank you for coming and participating here. Really excited to have you here today, tell you a little bit about what's been going on at NOVONIX. And so there's a nice little disclaimer here for the public. But what I wanted to do is first start off by talking about some of the more recent changes at NOVONIX. And for me, it all starts with the team. Now NOVONIX has been around for some time, and it's been primarily a materials company, a materials development company, a technology development company. And we're essentially at a transition. We're going to be moving from those technology and materials development activities and moving into a manufacturing company. And so as part of that, we've recently undergone a transition, and that really starts with the team. And so the team -- we've had an executive team that has really gotten us to this point, which is fantastic. We've got -- we've done a lot as a company up to this point. But really, we're now going to be moving into the next stage. And so a little more than a year ago, the executive team really started changing and we've really completely changed the executive team at NOVONIX. I joined the company about 6 months ago. I've got a background in a lot of different technologies, primarily automotive, but the last 15 years in the battery industry. And a lot of it is centered around new product launches, new plant launches and start-ups, really that transition from the technology development to the industrialization. And so that's really where my expertise lands. But then also with that, we've got an executive team that is also relatively new. Robert Long, our CFO, joined us last September, and he has the longest tenure with us. Dwayne Johnson is our COO. He has also just recently joined us last week, beginning of November. Kimberly Heimert was -- beats him by a couple of months and has joined in September. But when you look at the backgrounds and the experience of the executive team, it is a lot about this transition. It's a lot about really industrializing companies and getting them to the next stage. And that's really -- it's going into production, generating revenue. It's not really about the -- so much the science part. And we have a lot of those people that are still part of the NOVONIX team that have really done a lot of the materials development and technology development. But this team is really -- was put in place by the Board of Directors to really take the company to the next level because that's really what's going to happen. When I look forward in the next year or so, we're going to be really transitioning and making that transition. So that's the reason why there's a lot of leadership change that has happened at NOVONIX. It's not because things weren't going right. It's just because the company is now ready for the next stage. When we look at the Board, our Board of Directors and also our senior advisers, a lot of experience. And so having this type of Board or this caliber of Board with their experience has been fantastic. They have -- they are not new. They've been around and with the company for a long time. They certainly recognize where the company is going, and we're really behind a lot of that change that has happened. So -- but really, it's a fantastic support to myself, the other executive and the management team to have that experience level. Now that's a little bit about the team. I want to talk a little bit about the company. So we have several different lines of business that effectively complement one another. We are in the anode active material business for batteries, and that's the picture of the big blue building over on the left-hand side. But we also have a couple of complementing lines of business as well. We're developing cathode materials, and we also do various battery testing services. So there's still very much a technology component to the company. The center and the right-hand side, those lines of business are in our Halifax, Nova Scotia and our Canadian division. We call it Battery Technology Solutions, BTS. But we're going to talk primarily about the anode side of the business, anode active materials. And that is a part of the business that is really where we're putting a lot of the capital, a lot of the growth, a lot of the things that you see about the business, it's all about the anode side. And so a little bit of the transformation that's also been happening with the business is more of a shift and a focus on the anode business. So the rest of -- really the presentation, we're going to be talking about this -- the anode business. And so on that, we are really very uniquely positioned in the synthetic graphite space in the anode space. We're in North America. We're headquartered now. The company is headquartered in Chattanooga, Tennessee. Yes, we are listed on the ASX and cross-listed on the NASDAQ. And we have our roots in Australia, but essentially, our employees are all in North America. All of our anode employees are in the United States. And this is where we're setting up our manufacturing. This is also our market. Our market is in the United States and/or North America, and that's where we're starting out. So we have a history that starts in the South, but certainly, it's very much shifted in North America. And some of the things that you've seen recently about NOVONIX is part of that shift and that focus really around synthetic graphite in for the North American market. So we're in a very unique position where we are one of the first movers. We are the most advanced synthetic graphite manufacturer in North America. Now a lot of other companies make synthetic graphite, they're based largely in China, and I'll talk a little bit about that. That's our competitive landscape. We're effectively competing against competitors at scale in China that already do this. It's not really directly transferable technology to the North American market. And there are certain environmental reasons why that's not possible. So we needed a new technology if we're going to grow and scale and expand this. So that's why this new technology of graphitization has been developed, and we're commercializing it here in Tennessee. Talking a little bit about the market, and this is really stepping back a little bit, understanding the market that we're operating in. There's a lot of things that have been moving and changing. And so that's -- I always like to think about that in the context of how we look at NOVONIX and the things that we're doing. You have to look at it through the lens of the market that we're operating in. So I talked a little bit about China already. China is absolutely dominant in all things battery, but specifically graphite. Graphite is the negative side of a battery, it's the anode material. When you talk about synthetic graphite, China makes about 95% of the world's supply of synthetic graphite. And that in and of itself is problematic for a lot of other regions. It's -- when it's -- the supply is so highly concentrated in one region, there's certainly supply risks. And so a lot of battery customers, a lot of governments don't necessarily like that concentration of supply. They'd like to see it more diversified. And so there have been movements a little more slowly over the last several years, starting to diversify the battery industry, but also the battery materials industry. We are part of that. We're a diversification. That's why we're moving in North America right now. But some of the things because the concentration or the supply is so concentrated in China, it gives a lot of cause and worry in the industry. And so -- and then when things happen like export controls, where China places export controls on this material, that certainly puts a lot of worry into the whole supply chain and what do we need to do? How do we diversify away from this. And so graphite is identified as a critical mineral by the U.S. government and by many governments, and they're recognizing this as a risk, a supply chain risk and energy risk. And so something that we really need to fundamentally change, and that's why a lot of governments are getting behind this and starting to put money into diversifying the supply chain. And so this is just a couple of pictures here of what it looks like, what -- how graphite is made. This is a picture of an Acheson furnace. It's a large pit. And as you're cooking this petroleum coke and converting it into graphite, it off gases a lot, and that generally goes all out to the atmosphere. Something you can't really deploy in the United States, someone that is concerned about these emissions. So you need a different process, different technology. And so this is essentially the existing technology and it's also been around for a very long time. Another aspect to the market is just understanding a little bit about synthetic versus natural. Some of you already know this, but just as a refresher, there are 2 primary types of graphite that go into a lithium-ion battery. One is natural graphite, and this is a material that is mined out of the ground, purified, shaped, coated in order to get into a battery-grade material. And -- but it starts coming out of the ground as graphite already. The other way of making it is synthetic graphite. So you essentially take a byproduct of petroleum refining and it's a petroleum coke. That's the feedstock that goes into synthetic graphite. That's the raw material that NOVONIX takes. In the United States, we have a huge supply chain of petroleum coke. We do a lot of oil refining in the United States. So we have a very plentiful supply in the U.S. We do not need a mine in order to make our product and rely upon that feedstock. It is also a 100% U.S. supply chain. That's something that U.S. government certainly likes, but also the battery manufacturers that are in the U.S., they like that. It's a very short supply chain. It's local, and it's also very, very plentiful, at least from a supply perspective. Now when you look at batteries themselves, what's the difference? Why do you have natural? Why do you have synthetic? Natural is known for being less expensive. It also has higher energy density, which is great. However, it has some issues and the life is limited. So in certain applications and certainly in energy storage, you need longer life. Even with EVs, you need longer life. And so what typically -- what an EV battery manufacturer will do will blend the 2. They'll blend a little bit of natural along with some synthetic to get the right performance that they're looking for. When you look at ESS, this is energy storage systems, one of the primary characteristics of that type of battery system is very long life. They want these batteries to last 20, 25 years. And so that characteristic of long life is something that you find primarily in synthetic. So when you look at different markets, you look at EVs or energy storage and energy storage is taking off, perhaps EVs, at least in the United States, are flat or maybe even waning because of the lack of incentives. What we're seeing is a shift overall to utilizing more and more synthetic graphite than natural graphite. And the chart that's on the right-hand side is from Benchmark Minerals. It's essentially showing that. So there's still some growth on natural, but the vast majority of the market is today and will continue to be synthetic graphite. So that really puts us in a very -- in a very good position. We're feeding the largest part of the market and still continuing to grow. And this is still a forecast of growth. You still see significant growth. It probably represents about a 22% CAGR over the next several years. And so that's nice growth to be part of, even with EVs waning in the United States and that what's making it up is the energy storage. So the other big thing that's happening in the market is what's happening with critical minerals in general, the trade war and a lot of tariffs that are going on. So because you have this really highly concentrated supply chain in China, you -- the U.S. government certainly does not like that. This is also happening in other regions in the world, in Europe and also Japan. They're looking at this as a threat to supply chain security. They're looking at what can we do to build our own industry. And what has happened and in the United States, we've had a trade case that's been going on with the Department of Commerce. This is something that started at the end of last year and has continued on. And the U.S. Department of Commerce has come out this past summer and said, well, it is, in fact, that they have made a determination there is dumping that is happening. Dumping of synthetic graphite in the U.S., essentially providing a material retardation of the industry growing in the U.S. So certainly, the U.S. government is looking at this. They're saying, well, this is a critical mineral. We must have this. We must build up a supply chain in the U.S. So the preliminary determinations came out and saying we're going to impose fairly significant tariffs in the U.S. And it's between antidumping countervailing duties, that's about 105%. There's a few other duties that also stack on top of this. So the effective duty rate is 150%, 160%. And so what this chart is showing, if you take synthetic graphite and it's just an assumed price of $5 per kilogram and you stack on top of that and you convert it to a landed cost of Chinese graphite in the United States. So transportation cost and these duties that are all stacked on top of the other, the realized or landed price of this material that started out as $5 is now over $14 in the U.S. And so if you're a battery manufacturer in the U.S., this is your reality. You're going to be subject to these things because 95% of this material is made in China. The current supply chain is coming from China, largely. And so they're looking around in the market, where can I get this material that's not subject to this duty. And certainly, NOVONIX comes to the top of the list. And so when we look at this, that we know what the market price is effectively. We want to be priced at that or just slightly below. So we have a range of where our price is. And so we're working with different battery manufacturers to be in this band, but essentially be underneath where the Chinese landed price is. That gives us [ various ] amount of cushion to really start up this plant to start up as even as a small-scale manufacturer, we're not the large scale that exists in China. But that certainly gives us some headroom to maneuver and to build up our capabilities and really get to scale where you get a lot of those efficiencies. So this is something that's happening and has really been in place since this summer. It will be finalized, really, we believe, in Q1 of next year where it's going to be put in place. But this is a significant driver that's happening in the market in the United States. So this is, again, some backdrop of the market that we're positioning ourselves in. I'm going to switch gears a little bit, talking about, okay, what's NOVONIX doing specifically and our progress towards industrialization. So just a really quick overview of what the process actually is. So how do you make synthetic graphite for the lithium ion battery space? So it does start out as a petroleum coke. These are essentially rocks. It's a byproduct from petroleum refining, as I said. We bring it in, we crush it into a smaller size. Then we start to shape it and give that material very defined particle sizes, surface areas, densities. And so that is essentially in the milling and shaping. These are very important parameters that are needed to make the lithium-ion battery last a long time or have a certain energy density. So we mill it, shape it. And then depending on what the battery ultimately needs to do, there's a few optional processes. Those optional processes could be an agglomeration and calcination. We'll see some of that equipment later on. But that's to essentially enhance certain properties in the material. All of the material goes into the heart of the process, which is called graphitization. So that's taking a carbon source, which is coke. It's a lot of carbon, and you're converting that carbon into a graphite, which is an organized carbon atoms. And that's really what gives the material properties that gives the energy density. And so that graphitization process, the way that we do it at NOVONIX is different. I showed the pictures of the Acheson furnace. That's typically how it's converted. Coke is converted into graphite in China. We do it in a continuous process. We use induction heating. And so it's different. It's clean. There is no yield loss in that graphitization process. So there's a lot of things that -- when we get to scale, we should be much more efficient than this Acheson process, but we've got to get to scale first. But that is the heart of the technology and the advancement that NOVONIX is bringing to the market. So it's not the same technology that's used elsewhere in the world. It's homegrown U.S. developed technology with U.S. developed equipment suppliers. So it's a completely U.S. process and technology. Now after graphitization, there's a couple more -- there's another optional step of a coating that again, gives different performance characteristics in a battery. We work with battery manufacturers to really tune the product and what's actually needed in the battery. So there are several different grades and types of material that we make. But you can see these process steps are optional. So it all goes through the exact same equipment, so we can make material for many different battery types. We can include process steps or delete certain process steps depending on what the battery manufacturer wants. But we can use the same equipment to make just about any type of synthetic graphite material for different customers. So that's really important. And then we just finish and package it, send it off to the battery manufacturer. This material does go directly to the battery manufacturer. So it's not an intermediate. This is the anode active material, and that's the product that they put directly into a battery. So what we've been doing over the last 18 months, 12 months is really building out our mass production facility in Chattanooga, Tennessee. We call it our Riverside facility. We've installed all of the necessary equipment to make the product for our lead customer, which is our lead battery customer, which is Panasonic. And so you'll see a lot of different pictures and you'll move through the plant when we take a tour of the plant. You'll see a lot of this equipment in place. It's running today. We're making product for Panasonic today. And so you'll see a lot of that. So we've come a long way with construction, installation of equipment, commissioning equipment and also fine-tuning the process. So really making a lot of advancements. In a very short order, we're going to be making that delivery of battery-grade material. Later -- earlier in September, we announced that we are delivering material or we had delivered material to a different market. We delivered material out of this Riverside facility to an industrial customer. Now we make a couple of different types of graphite here. Industrial graphite doesn't necessarily have the same purity levels as battery-grade graphite. And so it's actually a little bit easier to make, has a slightly lower price point, but we've delivered that and the qualification time line is a lot shorter with industrial customers. So we look at that as an opportunity to diversify our markets as well as our customers. But we did that earlier and made that shipment, and we're now marching towards battery-grade graphite and shipping that out. So this first facility that we're working on and building out the capacity now will ultimately have a capacity of around 20,000 tons -- 20,000 metric tons now of capacity. This is a facility that's also supported by the U.S. government with a grant. It's a $100 million grant that we're executing upon that there. So we're getting a certain amount of support there. This facility is also subject to a 48C tax credit where we're going to, again, be able to claim a tax credit in 2028 to recoup some of the invested capital that has gone into the facility. So it does have some support, tax credits and also grants from the U.S. government, but we're still -- we're raising capital to finish the build-out of this facility. So really building this facility up is the next step for us. But even still, we see a lot of demand in the market. We're working with lots of different battery manufacturers and even industrial-grade graphite manufacturers that are looking for more product. So 20,000 tons, while that's good, that's really only about 10% of the market today. And so we need to grow and we need to continue to scale. So we have plans to continue to grow and scale into a second facility. We call this now Enterprise South. We've talked about this publicly. That is a facility that is also supported by the U.S. government. This facility will be around 30,000 tons. So it will be 1.5x the size of our Riverside facility. And in this case, this facility is supported by a Department of Energy loan from the LPO. And so that's about a $754 million loan that is going to support that facility. And it will also be eligible for a different type of tax credit, a 45X tax credit. And that's a 10% credit of cost of production. So that's something that will also be beneficial for our ongoing operations. So -- and like most operations, you get local support as well. So we were able to qualify for some of that. It's really a nice show of support from the community here locally, the city and the county that it back to about $54 million of support for this second facility. So we're continuing to grow and expand, certainly need that. Now the next step is you need customers. We are fortunate enough to have some very good customers already with binding offtake agreements, and we've been talking about them, Panasonic and PowerCo. When you're going through the start-up and ramp-up, you really rely on these customers to help you grow and help you scale. They're with us very regularly, helping support us about their quality control systems, their quality programs, things that they very specifically want to see as we march towards industrialization. So having a very collaborative customer group to start off with has been very beneficial for NOVONIX. And I really want to credit Panasonic and PowerCo for helping us along that journey. So we have some binding offtake agreements. Over on the right-hand side of the screen, you'll see the green line. That's essentially the committed volume. And so it's taking a large portion of this first facility, but we're engaged with a lot of other customers. And it's not just these 2 customers. There's a continuum of customers that we start out with, and it usually starts out on a technical scale or on a technical side and then ultimately marches towards a commercial agreement. And so a little bit about this is where we're at with some of it is what this overall process. And we've received a lot of questions about what does the validation process look like. And this is essentially what this is trying to describe. So the validation process of these engineered materials, this anode active material takes a long time. It takes years. So it's not something that happens overnight. It's not digital. And it goes through a multistep process where you start out with pre-A samples going to A samples, B, C samples and ultimately, you go to production volumes when you start production. And so they typically start out at smaller samples on the technical side. So in our pilot scale facility at Lookout Valley, also in Chattanooga, Tennessee, we make these smaller scale samples. It's a lot easier to run it at a pilot scale. So we make our pre-A, A samples as well as B samples in our pilot scale facility. If it gets -- if the sample gets over 5 tons, we'll typically make it in our larger scale facility at our Riverside facility. And so -- but the C samples must be made in the mass production scale plant. And so -- but this process takes a long time. And where we're at with various customers, we're right at the final stage. We're at the C sample stage, making this material for Panasonic. It doesn't mean we're going to be able to -- once we make this material and we ship it, it doesn't mean we're going to be able to start production. What Panasonic is going to do with that material is they're going to take that material, test it, but test it means put it into -- build it into a battery and then test that battery for the complete cycle life. It's accelerated testing, but that testing usually takes 9 to 12 months to complete that. And so we won't get the full green light to go into mass production until about 9 to 12 months after we deliver that final mass production sample, which we call C sample. So that's right where Panasonic is at. When we look at PowerCo, their timing is a little bit behind Panasonic. We have delivered A samples out of our pilot facility. They want more material. So we're actually going to be making their B samples out of the Riverside facility. They want a lot more material. And so we're going to be delivering a larger scale, larger quantities of that material from our mass production equipment. So you can -- it will be of the same quality and through the same equipment, same process. And so it will essentially be a C sample at that stage. PowerCo still needs to go through their battery process and their battery design, so that's still B sample moving into C sample. But their start of production will also follow these time lines that are on here about 18 months after we deliver that B sample. So those are some rough time lines. You can consider those when you're trying to think about when is NOVONIX going to start generating revenue after these samples, have those time lines in mind. And so -- but every battery manufacturer is slightly different. But it's really to sort of what is the process and to fundamentally just set expectations. This is the way the entire battery industry works. This is how they bring in new suppliers. This is how they qualify new materials. And so it just takes a long time. And so that's something, I think, is largely misunderstood and the reason why we put it here to show what that is. I mentioned we are getting into diversifying into different markets. Now for industrial applications, it doesn't have necessarily the same purity levels. It's a little bit easier to make. But -- and the market isn't as large as the lithium-ion battery market, whether it's energy storage or EVs. But it's still -- it's another market. It's a diversification. It doesn't take as long to fully qualify these materials. It's typically around 6 months, plus/minus. So as we ship out this material in 2026, we are anticipating that we'll be going into production with this material at lower volumes than our battery applications. But still, it's a very nice diversification for us. So we started with one customer. We also have several other customers we're beginning to work with at some of that early sample stage. So we think it's a really good diversification for us, and we're going to continue on that path all throughout 2026 and beyond. So that's a nice milestone achievement that happened. In the -- when you're starting up, it's very important to have partners. And I already talked about a couple of our battery partners, and they're helping us along the way. Another key partner and also the lead investor behind NOVONIX is Phillips 66. So they're a huge source of the supply material, the petroleum coke, but also a lot of the technology development and materials development has been going back and forth with Phillips for quite some time. It's one of the reasons why they came in and invested. This is a natural and higher value outlet for their petroleum coke product. Rather than exporting it, having it burned for fuel, we're actually converting it into an engineered material. So this is just a natural extension for their business, and that's fundamentally the reason why they invested. So -- and they continue to support us. Even earlier this year, they put some additional money into the business, which has been fantastic. So we really appreciate the support of Phillips 66. Now looking forward, what's next? What's going to happen next? We're going to continue to scale. So we have a lot of very short-term things that we're going to be doing, getting these materials out to our industrial customers, our battery customers and really working very closely with the customers that have already signed up under contract. But there's going to be more that's coming. There's going to be more customer announcements that we'll be making over the next 12 months because we're already working with an incredibly large pipeline now on the material development side in that pre-A sample, A sample phase right now that we haven't come out and aren't public with yet. But that will eventually convert into contracts. So that's one thing that's very important. The next thing that you'll see in the next 6 to 12 months is a lot more change on the financing side. So as it's widely written about and known, the U.S. government is doubling down on critical mineral manufacturing in the United States. And so whatever the critical mineral is, they want to make sure that the United States has that capability, and they're backing it up with a lot of money. We've already been very much supported by the U.S. government with grants, loans and tax credits. This is continuing on. But we're -- there's still a lot more money that's out there. And so we're working closely on our existing awards with the U.S. government. Some of that has been under review because a lot of that was granted during the previous administration. Current administration wants to make sure that various projects are aligned with our key priorities now as a country. Critical minerals, synthetic graphite is absolutely aligned 100%. And so we're going to continue on with that and continue to make that product. So that's a big part of it. So having U.S. government support is helpful, and we're going to continue on some of that support. So -- but that's also -- that's good. We're still going to be out in the market looking for some additional capital. We've had interest from various strategics like a Phillips 66. We have had interest from other investors that want to come in and they -- through various different mechanisms. So we're going to continue to explore that. When we think about that, it's really -- it's a lot about cost of capital, and we're looking to optimize that cost of capital, but also at the right terms. We don't want to take in capital that is going to somehow restrict us and/or make it unfavorable to us to continue to grow and maneuver and raise additional capital. This is a capital-intensive business that we're in. And so we are going to need access to capital. U.S. government is certainly a great channel for that, has been and will continue to be, but we're going to have to bring some private funding along with that. So that's going to be some continued activity, and you'll see that over the next 6 to 12 months as well. So -- and then really, one of the things that's going to enable that, and we'll see continued interest from customers is really because of the market that we're in. This trade case, the tariffs, really battery manufacturers are looking where can I find this material, where can I get it that is going to be at a cost that's going to be competitive, and we're pricing our product so that it can be competitive with landed China pricing. And so really, what this has done is really driven a lot of our development work that has been going on and driving it more into the commercial realm. What are the terms? What's the tenor of these contracts? What are the supply conditions? And really, we're sitting in a pretty good position right now. We're not necessarily a price taker. We're a price maker and because of the market and because there's really no other company that's making this material in the United States, certainly at scale. And so we're in a very good position going into these contract negotiations. So that's helpful, but we're also just starting out. So we do need help of some of these initial customers to grow and to scale. And that's where we're -- as the second -- or I'm sorry, the third and fourth and fifth customer that comes in and takes capacity and signs up with a contract. We'll have already gone through a lot of that initial work from our initial partners. And so that's a big area and a big area of focus as we grow and as we scale over the next 6 to 12 months. So that's essentially where we're at. There's, again, some contact information about the team, where you can reach us as well as our different locations and where we're at. The anode business is in Chattanooga, Tennessee. The Battery Technology Division is in Canada, in Nova Scotia, and that's where we're doing a lot of that work. But there was -- we're really looking forward to all of the excitement and things that are going to happen over the next 6 to 12 months. So thank you.

Were the original contracts with Panasonic and PowerCo signed competitively with Chinese supply at that time?

So the original contract with Panasonic was signed February 2024 and the one that was signed with PowerCo was, I believe it was October of 2024. So it was last year. It was before the trade case came out. However, as we were going along, there was -- there were a couple of things were happening before the trade case. So certain battery manufacturers were already looking at diversifying their supply chain. Typically, you want multiple sources of a material and you want to get them from different regions. And so that's why a lot of battery manufacturers were already engaged with NOVONIX sampling materials in that AA sample or pre-AA sample, even going towards B sample. Typically, in the B sample stage is where you get -- where the discussions go commercial. And all right, now can I reserve that? So that's -- this is some of what has been happening last year. So there are different motivations for different companies of when they want to -- when they're signing up, is it really is a diversification? Are they going to pay a premium? When they signed up in 2024 that the tariff amount was not known. And so they're going to pay a premium for a new supplier in the United States. It's generally more expensive to produce a material, cost of capital and building a facility is certainly more expensive than it is in China. So most battery manufacturers were expecting a premium. So we landed those contracts not necessarily at Chinese prices. And so it was at a premium. But in 2025, certainly in 2026, the price of graphite has gone up in the United States, clearly. And we're seeing that. And so without getting too specific on pricing, that's -- you have to look at the time line of when these -- what was going on at the time and the pricing levels that were achieved. And so having -- there is a certain benefit to having these customers working with us, getting us to scale. They're investing a lot in us. We've invested a lot to get it up and ready. So -- but they're not quite necessarily at the prices that you see that would exist today in 2025, 2026.

Mark Shooter at William Blair. I know we touched on this a bit previously, but I'd just love to hear a bit more on how the engagements with customers has developed as you've gotten about 2 years now with the EV softness here in the domestic U.S. and you have some of these large battery manufacturers converting their nickel and NMC lines over to LFP, transitioning from your EVs to your ESS solutions. So how have those customer engagements developed? And I understand that a lot of the subsidy structures are FEOC compliant. There's some covenants in there for specifically the ESS installations. So at what point do you think that the graphite anode becomes a key component to reaching those -- the foreign entity concern requirements?

Yes. So you had a lot in your question there, so I'll just try to break that down into a couple of things, a couple of points. But -- as the battery industry was diversifying and coming to the United States and a lot of investment has happened over the last several years, a lot of battery plants, gigafactories have been -- were being constructed and built. A lot of them are still under construction today. So this is a battery industry that's growing. That was at a time when it looked like the EV market was really going to continue to take off. It was being heavily subsidized with tax credits, incentives for people to buy EVs in the U.S. that essentially with the current administration, those at least incentives on EVs had gone away that -- so essentially, the growth that we have seen over the last 3, 4 years isn't necessarily forecast to continue. And we're seeing it in some of the recent numbers. So we're seeing a flatness, maybe even a retardation of demand on EVs, batteries for EVs. So battery manufacturers that have put billions of dollars into these plants have recognized this. They are essentially -- if you put in billions into a facility, you don't want it to be sitting idle and watching your demand wane. So they're shifting their product portfolio into a different area, which is energy storage systems. These are large batteries that go on in the grid that help stabilize the grid. And so virtually every battery manufacturer that's in the U.S. is looking at this and/or actively converting to different types of batteries that are designed to be ESS batteries. You threw out NMC, LFP as part of that. That part of that shift moving from EVs to energy storage is on the cathode side, which is NMC to LFP. And so that's happening. LFP is known to be a less expensive cathode material. All batteries, whether they're NMC, LFP do require an anode and require some graphite. One of the unique things when you have this switch though is -- and I think I mentioned it earlier when I talked about the differences between natural and synthetic. Natural is known for high energy density, which the EV market really wants and needs. They want really long range on their EVs. That's not so important in the ESS market. The thing that's really important in the ESS market is really long life, which is what synthetic graphite is really good at and really strong at. So when you look at the ESS market, it's almost entirely synthetic graphite because of the long life. And that's also largely LFP and LFP typically is always -- almost always paired with synthetic graphite. And so when you see this overall shift in the market from EVs to ESS, that's better for synthetic graphite. When you see shifts from NMC-based batteries to LFP batteries, also, that's very good for the synthetic market. And you saw that in the benchmark minerals graph. Why is synthetic graphite growing more than natural? And it's because of those 2 shifts in the market. So that positions us pretty well. Does that answer your question?

I had a question around -- you mentioned the diversified revenue streams. So as we -- if you could kind of handicap for us -- you mentioned the opportunity in EV, which is ongoing. You have the 2 customers. Obviously, those time lines are going to be a little different, and that's very customer dependent. But then we have energy storage, which curious around that. And then in the industrial, so you kind of have these 3 areas of the market you're going after. Any kind of sense realizing you're still writing the book on this about that first customer introduction to actually having them be on as a customer?

Yes. So our first 2 customers that we're talking about, those are for EV applications and the time line and qualification for that. One of the things you think, okay, EVs has a very long qualification time line. Actually, for energy storage, it's the same, even potentially a little bit longer because that battery has to go through even a longer cycle life test. And so that has a very similar time line. We are engaged with ESS specific battery designs with battery manufacturers. Typically, every battery manufacturer makes both. They make both EV batteries and ESS batteries. It's largely the exact same equipment. They're swapping out some different materials, but essentially, it's the same equipment, same process. So -- but the qualification for that is still ongoing. So it's fair to say that we're more advanced with these 2 first customers with the qualification for EV applications. But right behind that in the A moving into B sample phase right now is -- are some ESS applications and ESS customers. The third market being industrial, that is a shorter time line. And so we have just made effectively the C samples for some industrial applications because we're able to move right into that. And we anticipate a shorter qualification time frame. And it's not measured in years, it's measured in quarters or months. And so -- but right now, it's a newer market. There's nobody really making this material today. So it's all getting imported. So a new supplier, it still has to go through validation. It still -- the product still has to work in the end products. So we still anticipate about a 6-month plus/minus qualification time frame. So I would anticipate at lower volumes because it is a new market. It's not as established as these big battery manufacturers. We'll start up with some revenue in the middle of next year, but it will also be smaller. And so -- but it is -- it does represent a diversification, and we're going to continue to grow that -- it's not the largest part of the market. So when you look at all the available applications for us for graphite, whether it's ESS, EV or industrial, industrial will be the smallest, but it's an area that we hadn't previously been focused on. And so we're going to continue to grow that. And so it will become a larger portion, but I still see it in third place as far as size of market as well as our opportunity that we have in front of us. But it does represent a nice diversification. So maybe 1 or 2 more questions, and then we can head on a tour.

Just interested in your -- in this plant, how much of the capital is being allocated or spent and how much is to spend? And then just your time line on the next facility. Is it customer-driven, grants from the government, this being what sort of assessment will you make on that?

Yes. So we've invested quite a bit in this facility, but we still have more to invest in the Riverside facility. So we're going to be continuing to add capacity and continuing to invest in the capabilities over the coming years. We -- current forecasts are by 2028, we'll have this facility built out. Now one of the things that we're very careful on is we're engaged with customers and looking at their demand and their demand curve and their ramp-ups. So a lot of them are building their own battery plants. They're building and scaling. They're starting out small, maybe they pushed out a little bit. But when do they want product, and we want to have capacity installed and qualified before them, but only slightly before them. What we don't want to do is we don't want to build a lot of capacity, invest a lot and have this available capacity with no outlet, no offtake. So the customers that sign up commercially, where are they at, what's their ramp look like? And we're matching our investment and matching the capacity expansion with their ramp curves. And so that's really the appropriate way of doing it of scaling and investing in capacity. And so we're looking at that curve on a very regular basis in discussions with customers of how they're ramping. And so we're doing the exact same thing. So it really -- it depends upon the market. And so we're already very much moving forward with our first facility in installing capacity and continuing, and we have plans what we're doing in '26 and '27 and the amount of capacity that we need by that date. And then also what does '28 look like? High probability, it will be completely built out by '28, but that could also shift depending on what happens in the market. Talk about the next facility, expansion, it takes time. If it's a new greenfield facility, that's going to take about 3 years from the time you start digging to the time you start producing material. So you've got to forecast where that's at. So when are we going to have this plant completely built out and sold and then going into the next facility. So there's things that you can do for relatively little investment on that expansion, a lot of engineering work, a lot of permitting, things like that, that take time that are not a whole lot of money. So that's something that's going on today on the second facility, but we want to be in a position when it's time press -- and ready to press go, we've got the permits, we've got the engineering done. We've got all of that ready to go. So ideally, that plant and we start construction on that before this facility is completely built out because you can imagine that there'll be a continuum of growth of the capacity that we're going to have. So once we get to the capacity of 20 kilotons, we don't want to have a period of time where we're not able to service the market or the demand growth that is -- that's not only forecast, but we're realizing through contracts. One of the things we're going to be doing is not building on speculation. We're not going to install capacity on the if come. We're going to be -- once we get a contract in, we're telling customers what the lead time is to install that capacity. And you sign a contract in x number of months or years later, we'll have that capacity ready for you. So that's something that's very much known that we're talking to all of our customers, and that's part of the commercial discussion. That pretty much matches up with their qualification time line anyway, which is also measured in years. So they more or less line up. So we're telling all of our customers that have partnered with us for the development cycles. If you want capacity, if you want to reserve capacity, you've got to put a commitment down in order to have that built. And so it's the right thing to do. We're being just really good stewards of capital from our investors, from the U.S. government, and it's just the right business thing to do, so. [Presentation]