Graphene batteries get Rio Tinto boost
Graphene Manufacturing Group (GMG) has announced a binding joint development agreement (JDA) worth A$6mln with Rio Tinto, one of the largest mining companies in the world. The company hopes to expedite the development of applications for its graphene + aluminium batteries (G+AL) in heavy mobile equipment in the mining industry such as for drills, excavators, and trucks. This could mark an important step to the wider commercialisation of GMG’s core technology through a proof-of-concept industry application of its technology, primarily its G+AL pouch cell batteries.
GMG produces high-quality graphene at scale from natural gas via its proprietary process. It is using graphene to develop advanced G+AL batteries for a range of applications. G+AL batteries are not yet commercial, but, as the remaining technical and scale-up challenges are resolved, G+AL could have a massive market opportunity given its core technical advantages over dominant lithium technologies.
The JDA, building on the non-binding agreement with Rio Tinto from May 2022, is an important financial and strategic step towards the commercialisation of GMG's core technology. Rio Tinto will provide technical and operational performance criteria by which GMG can adapt and reconfigure its batteries in line with industry and company-specific requirements. This includes a A$6mln facility spread over two years from Rio Tinto for preferential access rights to G+AL batteries, and this cash should give the company important reliable revenue alongside revenues from its Thermal XR graphene coatings line to fund its growing operations.
The agreement should also help offset development costs for its pouch cell batteries and de-risk future industrial application development with other companies, removing potential barriers to entry. The agreement shows the attractiveness of GMG and its technology in facilitating the transition to net zero for industrial partners.
Cash for industrial application of core technology
In H1FY23 (to 31 December 2022), sales were A$89.4k plus an R&D tax credit of A$142k. Cash on 31 December 2022 was A$12.6mln (30 June 2022 A$12.3mln). This followed the Q2FY22 bought placing of 2.1mln units of one share plus a warrant (exercisable at C$3.35) for C$2.75 each. This raised A$6.3mln gross in total. Transaction costs were A$0.8mln. Share warrants worth just under A$1mln were exercised giving a net cash flow, after leases, of A$6.3mln.
In H1FY23, operating costs were A$5.5mln with a net cash flow of A$5.4mln after A$107k of customer receipts and tax credits. This indicates that GMG has over 12 months of funding. In Q1FY23, GMG closed the deal to acquire Thermal-XR (which produces graphene coatings). This cost A$1mln in cash plus A$1mln in shares. The acquisition is expected by management to add a growing revenue stream. This will depend on gaining major orders from manufacturers. The A$6mln facility from the JDA will supplement these revenues. In FY22, revenues were A$54.5k, down from A$246k in FY21 and the loss was A$11.8mln. However, the reported loss included A$4.4mln of non-cash adjustments on warrants. The FY22 operating loss was A$6.6mln.
Financials
Year end Dec 31 · 2021 · 2022
Revenue (A$-000's) · 246 · 55
Operating Profit (AUD$, 000's) · (3,349) · (6,568)
Cash(AUD$, 000's) · 3,400 · 12,300
Graphene is a form of pure carbon. It is one atom thick, but can extend in theory, infinitely in two dimensions. Carbon atoms in graphene each have a “spare” electron, so the material is an excellent conductor of electricity and heat.
GMG's innovative electrode technology, licensed from the University of Queensland (UoQ), enables GMG to modify its pure graphene to make its advanced G+AL. batteries.
Exhibit 1 - Graphene pouch cells
Source: GMG
GMG produces coin cell batteries (primarily for proof of concept and efficacy tests on a small research scale) and pouch cell batteries (literally a battery in a foil pouch). The latter is very versatile and used in mobile technology like laptops inside the hard battery casing and can be scaled and connected for energy-intensive applications or longer run times. Graphene batteries have been shown in a research setting to charge up to 70 times faster than ubiquitous lithium-ion batteries as well as lasting around three times longer.
The JDA with Rio Tinto will facilitate the co-development of GMG's pouch cell batteries into proof of concept battery modules — numerous pouch cells arranged together within a hard outer casing — suitable for use in the mining industry. Both parties aim to work with original equipment manufacturers and heavy mobile equipment manufacturers to ensure that the development of GMG's product is commensurate with end-use requirements in heavy mobile equipment in the mining industry (trucks, excavators etc.).
GMG will be making an important contribution towards Rio Tinto's long-term carbon emissions reduction goals, which has seen the mining giant sign multiple agreements with clean energy companies and invest millions into green assets. In doing so, it is exploring the use of electricity rather than fossil fuels for vehicles and diesel generators for mining sites. The G+AL batteries' structure and components mean that they ought to be safer than lithium-ion batteries (which can ignite or explode if structurally compromised) and also more environmentally friendly as G+AL batteries do not include toxic chemicals present in lithium batteries, and instead use abundant and relatively cheap aluminium.
GMG will retain intellectual property rights to their technology while Rio Tinto, following the end date of the agreement, will retain rights to buy and use the developed batteries for their operations.
Rio Tinto development boost
GMG continues to develop sales opportunities for its Thermal XR products — graphene-based coatings which reduce energy efficiency, usage, and costs in HVAC-R systems. The company fully acquired the rights and property to Thermal XR technology and products in H1FY23. It has closed important sales at scale including a single contract with an Australian resort worth A$130k (alone far exceeding total H1FY23 sales of A$89.4k pre-Thermal XR acquisition), and is negotiating with distributors in other regions to realise even more sales. GMG has also bought a new coating plant and lab equipment to support the growth of this revenue line. This will help the company's cash position as it develops its product and grows manufacturing capacity.
Extra revenue