Dr Lee Finniear is the CEO of Li-S Energy, which is a new IPO that opened on Monday, 2 August, raising $34 million at 85 cents per share. It’s a spin-off from PPK, the boron nitride nanotube company that I’ve interviewed and been following for a while now out of Deakin University. This company, Li-S Energy, is developing lithium-sulphur batteries that also use BNNT, boron nitride nanotubes, and PPK developed this technology as a way of creating a market for its BNNT. Anyway, the business has now been spun off into its own company and the whole point of lithium-sulphur batteries is that they are lighter and have greater energy density than lithium-ion batteries. Therefore, they’re better, I guess, they’re a better battery, that’s the idea.
Lee Finniear says that electric vehicle companies, drone companies in particular, are desperate for better batteries that are lighter and can go for longer. They reckon they’re going to change the world, which is an interesting claim and fair enough – I thought you should hear about it and particularly with an IPO coming on. PPK, of course, has been going nuts on the share market lately, so if Li-S Energy repeats any of that then those coming in with the IPO should do okay.
Here is Dr Lee Finniear who is the CEO of Li-S Energy.
Lee, the IPO opens today and you’re raising $34 million dollars in that, you’ll end up with $31 million and a bit out of that after costs and you had a raising in April, I see, it was pre-IPO raising of $20 million dollars, what price was that at per share?
The price was at 50 cents a share back then.
And the IPO’s 85, so that’s a big uplift in just a few months for those people who came in in April.
That’s true. They did take more risk because back in April we just didn’t have the kind of test results that we’ve got now.
Yeah, but you’ve been going for 20 years, April to August is not very long.
Well, Deakin’s been going for 20 years and I have to say, we’re building on the shoulders of giants there.
That’s right. Okay, but so you’ve got $52 million in the bank, is that right?
Yeah, after costs it will be just around $50m, I think.
In terms of the allocation of the money, what the money gets spent on, I see in the prospectus that $29 million is to be spent on the project. Explain to us what exactly that means and over what period are we talking for that money?
We’re looking at about $29 million over a two-year period. The key thing with the project is we have proven out the – I suppose I ought to go back and explain what we do first of all. The core science has been proven, the point is now to scale and test the envelope on that.
And you think that $29 million gets spent over two years?
Yes.
What happens at the end of the two years? Are you saying that that’s the time period or at the end of that two years you start making money?
At this point, what we’ve put forward, and we haven’t said categorically we’re going to make money after two years. R&D and commercialisation doesn’t work that way, we can’t make guarantees. Having said that though, we’ve been able to prove up our battery cycle life, which is the key characteristic we’re trying to improve, is up past 600 cycles now which is remarkable for a lithium-sulphur battery and now it’s about scaling it, getting commercial relationships with product manufacturers that need batteries like this and then moving towards licensing our intellectual property to battery manufacturers to be able to manufacture those at scale.
I may be wrong and this is I suppose what we need to talk to you about, really it feels a little early for you to be IPO-ing, since you’re more or less still in the lab, is that right? Does it feel to you it might be a bit early?
No, it doesn’t, actually. I guess you can only really draw comparisons from other people in the battery space at the moment. If you look at, for example, QuantumScape, they are trying to do an anode-free battery – there’s no such thing as an anode-free battery. Anyway, they’re currently at a lab scale, they have a single layer pouch battery right now, they’re currently valued at $9.5 billion dollars and are a public company.
Crikey, is that right?
Yeah.
[Laughs]
The battery industry is about…
I presume they’re on the Nasdaq, they’re all crazy over there!
Well, that’s fair enough and we’re not asking to be crazy over here and listing on the ASX I think is the right move for the company.
Yes. I’ve been reading about lithium-sulphur batteries, there was a breakthrough in 2009, as I understand it, because academics have been working on lithium-sulphur for years, decades, but the breakthrough involved – the trouble was, they were unstable and liable to catch fire, but the breakthrough in 2009, perhaps you can elaborate on this for me, was involving the use of carbon nanotubes to make them more stable. I take it that you’re using boron nitride nanotubes instead?
That’s right. There’s a difference between safety and stability. That was more on a safety aspect, which is great, but still with lithium-sulphur batteries the key problem of why they haven’t been commercialised to date was the issue of cycle of life stability. In other words, how often you can charge and discharge a battery. The best batteries we’ve seen in lithium-sulphur so far had a really, really high energy capacity and that’s the reason why lithium-sulphur is such a well-regarded technology from an energy capacity point of view. But the problem with that battery was it only had a cycle life of 55 cycles before it effectively failed and so what we’re doing is…
Lee, by cycle, you mean charge and recharge and so on?
That’s right, yeah. The last thing you want is to have a mobile that after you’ve charged it and discharged it 55 times, it doesn’t work anymore, and that’s really been the issue with lithium-sulphur batteries before what we’ve done.
Right, and perhaps just to explain why lithium-sulphur is better, as I understand it the lithium-ion batteries use cobalt, nickel and magnesium oxides I think in the cathode and they’re heavier than sulphur and also sulphur takes two lithium-ions instead of one, is that right?
It does. The combination of things means that the theoretical maximum energy capacity of a lithium-ion battery is 387 watt hours per kilogram – sorry to use the technical terms – but when you compare that to the maximum theoretical energy capacity of a lithium-sulphur battery, it’s over 2,500 watt hours per kilogram. What’s happening now is lithium-ion batteries are butting up against their maximum theoretical energy capacity, whereas lithium-sulphur have a much, much higher one, over five times more, which gives you a lot more headroom to be able to improve on a lithium-sulphur battery, providing you can get the cycle life to work.
The components, as you mentioned, of a lithium-ion battery, contain a lot of heavy metals like nickel, magnesium, cobalt, which are expensive and hard to get, particularly in terms of cobalt. Whereas, we use sulphur, carbon and lithium metal as the main components of a lithium-sulphur battery.
Tell us where you’re up to in the lab? You’re using the laboratories at Deakin University in Geelong, where have you got the process to, the technology to, exactly?
Our most recent tests have – what we decided to do was, when you’re comparing any new technology – and we embedded boron nitride nanotubes into the cathode construction and also a new composite we’ve developed called Li-Nanomesh to protect the anode – I’ll explain in more detail later if you’re interested.
We are, of course we are, we’re broadcasting or talking to investors who are thinking of putting their own money on the line here…
Yeah, well that’s really true. Anyway, what we did was develop a lithium-sulphur battery, we built one without our BNNT and Li-Nanomesh in the construction and then we built one identical with BNNT in the construction and we put them through the same testing. The testing is to test how many charge and discharge cycles the battery can withstand before it fails. With the identical battery without the BNNT, it failed after 27 charge/discharge cycles. In the battery with the BNNT in the construction, we hit 600 cycles still with a specific energy capacity more than three times that of a lithium-ion battery. So it was quite a profound difference in terms of the results we’re obtaining with the BNNT in the construction and without.
Is 600 enough?
It’s still going. Testing batteries takes a long time. In that context, the charge/discharge cycles have to be done – obviously, you have to discharge it completely and recharge it completely and you don’t do that in a couple of minutes. We’re continuing with those tests at the moment, it didn’t fail at 600, it’s continuing.
Oh, I see, so it’s still going after 600?
Yeah.
And so, you don’t really know what you’re going to get up to?
We don’t, no, it’s going to be very interesting to find out. What I would put into context, a typical consumer grade lithium-ion battery that you might have on your phone or any device knocking around your office, the manufacturers recommended cycle life is between 300 and 500 cycles, so we wanted to get above that before we put out our announcements, which was good.
So, if everyone’s charging their phone battery every day, I don’t know whether this is relevant or not, 300 to 500 seems like one or two years, that’s not enough!
That’s fair enough too, but we’re talking about complete 100 per cent discharge and 100 per cent recharge, and when you do a partial charge/discharge it doesn’t count the same way as a complete discharge/recharge. If you put your phone battery on when there’s 30 per cent left and you charge it back up, that’s not like an entire charge/discharge, it’s the depth of charge that causes the wear to the battery.
That same principle applies to electric vehicle batteries?
It does indeed, yeah, so the bigger the battery you’ve got in your electric vehicle, the more you can, I guess, top it up and discharge it because you’re running it through less of the range of its depth of discharge. Lithium-ion particularly suffers if you completely discharge it and recharge it all the time.
Given the typical depth of discharge of a battery, whether it EV or phone or whatever, what does your business model suggest you need in terms of the number of cycles to make a go of it?
Well, we could make a go of it with what we have in terms of the number of charge/discharge cycles, because they’re complete charges and discharges and you have to remember that a lithium-sulphur battery can have a lot more energy in any charge/discharge cycle, so you don’t have to charge it or discharge it as often to use it the same amount. Obviously, we want to drive the cycle life up as far as we can and part of our work is to optimise the construction of the battery to get the very best out of it.
Are you saying at 600 cycles, which you’re at now, you’ve got a viable product?
At 600 cycles, we have a viable single layer pouch cell that we have tested and what we’re doing now is to scale that up to multi-layer pouch cells and scale to size…
Explain to us what that means, what do you mean by single and multi-layer pouch cells?
The way you do battery development is you start off with a single anode and a single cathode and you test it to see what performance you have and you adjust the construction and the chemistry to make sure you get maximum performance out of a single layer cell. When you start off testing a battery, you start with coin cells and then you move up to what we call pouch cells, which are kind of like the battery you might have inside your phone but with a single anode and a single cathode. Then, what you do to get more power and more energy, you stack those one on top of the other to make what we call a multi-layer pouch cell, which is just really like a – if you think of a layer cake, instead of having a single sponge layer, you have like 10 of them.
A series of batteries, effectively?
Effectively, a series of cells that are connected together within a single pouch, yeah. By scaling those up – you start off scaling to maybe 10 layers, then 20, then 40 or 50. That’s how you increase the overall capacity of your battery pack.
Have you tested multi-layers for your battery?
We have tested one and it was fine, but what we want to do is optimise that construction and there’s a bit of work to do with that.
That’s the $29 million dollar project over the next two years, is it?
That is – well, there’s a bit more to it than that. We have a number of things we’re doing in that development project. The core of it is to optimise the construction of the cathode and the anode. I think I ought to explain why a lithium-sulphur battery fails so that you understand what we’ve had to do to mitigate that.
Please do.
Okay, so the three ways a lithium-sulphur battery fails, firstly, we have a lithium metal anode, that’s different to a lithium-ion battery which has a graphite anode. A lithium metal anode can give you a lot more power and energy capacity in your battery, but when the lithium deposits – lithium-ions go between a cathode and anode, in any lithium battery that’s how the power is transferred, if you like, charged and discharged, it’s the movement of those lithium-ions. When lithium-ions come back onto a lithium metal anode, they plate back and form pure lithium again but they don’t do so in a flat way, they form high spots. Those high spots are like lightning conductors, they attract the other lithium-ions to form long dendrites or spikes, they can pierce the separator and as a result, cause short-circuit.
We developed a new nano material called Li-Nanomesh which we put into the construction of the anode so that it stops that dendrite formation, that’s one of the major causes of failure of the lithium-sulphur battery.
What’s the mesh made of?
That’s a proprietary piece of information so I can’t tell you, unfortunately, but part of our IP is how to do that. The exciting thing about that is it doesn’t just apply to lithium-sulphur batteries, it can apply to any battery with a metal anode. Part of our work is to explore the breadth of what that composite material can do in the battery industry, as well as protecting our lithium-sulphur batteries.
Are you thinking that you’d be able to sell that mesh technology separately to the lithium-sulphur battery technology?
To other battery technologies that use a lithium anode, absolutely. There are several different battery compositions you can use for that, including a thing called lithium metal, which is a lithium anode, but an ordinary lithium-ion cathode. But they’re still heavy. On the other side, where we use a sulphur and carbon, it’s much lighter weight than the heavy metal oxides in lithium-ion, but they have two problems. Firstly, the sulphur creates new compounds with lithium when it’s charged and discharged and it produces a thing called lithium polysulphides and they can dissolve in the electrolyte and you end up losing active sulphur, that’s called the polysulphide shuttle.
What we found is our BNNT in the construction actually mitigates that so you don’t lose capacity over time. The third thing is, that the sulphur in the cathode, it expands and contracts each time quite dramatically each time there’s a charge and discharge and that can cause the sulphur cathode to crack. With the BNNT, the boron nitride nanotubes, are a hundred times stronger than steel and they act a bit like reinforcing mesh in a concrete slab and they help to manage and mitigate that mechanical stress of expansion and contraction. That’s the three ways we’ve dealt with the three major problems of lithium-sulphur and we have to remember that we’re not reinventing the wheel here, what we’re doing is increasing the cycle life of a mature battery technology which no one’s been able to do before.
Okay, I was a little bit wrong to begin with, I thought you were replacing the carbon in the sulphur cathode with BNNT, boron nitride nanotubes, but that’s not the case, you’re just adding boron nitride nanotubes to it to, in a sense, protect it?
That’s correct, that’s absolutely right. We still need carbon in the mix in a cathode because sulphur doesn’t conduct electricity and we have to have carbon in there to actually do that conducting.
Are you satisfied that each of those three things that you’ve mentioned, you’ve licked?
Yeah, we are. Obviously, we’re doing more testing, we’re testing the envelope in terms of extremes of performance, but our Li-Nanomesh we’ve tested extensively and it seems to be working extremely well and the testing we’ve done so far on the BNNT in the cathode also seems to be working extremely well. We’re obviously testing more and we’re optimising the construction to maximise the performance and that takes a bit of time. But the core science is there and it’s proven and we’ve had battery experts come in and take a look at it who aren’t involved with the project and provide a report as part of the prospectus.
Can you explain to us how and why your company was spun out of PPK?
Of course. PPK is an extraordinary company and I think they’ve got some incredible people running the business and quite visionary in some senses, because they started moving from mining services to looking at technologies that could be commercialised and that’s where they first got involved with Deakin University, to develop a new way of producing boron nitride nanotubes. Looking at that, they have a tremendous ability now to produce high volumes of high purity BNNTs, but in terms of the market for BNNT globally, it’s relatively small because BNNT was so expensive. PPK looked for ways to vertically integrate, in fact, stimulate the market, look at ways of using BNNT to really have a profound impact in different key areas of technology and material science. Li-S Energy was one of the things that Deakin had been working on for a long time with BNNTs and lithium-sulphur batteries.
Battery commercialisation isn’t cheap and that’s why we’ve chosen to raise capital, obviously to drive us through from proven science to proven manufacture and then in doing so, PPK has made the choice to go public with the company rather than just keep it as a privately held company at this point. I think that’s the right thing to do, I think the ASX is a great place for an Australian company to go public rather than going directly to the Nasdaq or doing a SPAC. We’ve raised sufficient capital to be able to do what we need to do to prove up the battery technology that we’ve come up with.
What we also find, is PPK is a great partner to us because they’re, for example, providing management services to us, so I don’t need to employ a separate CFO, I can keep my costs down and at the same time focus our business on making sure that we deliver the commercial outcomes that we need to.
What are your costs, your overheads on a sort of monthly or quarterly basis?
They’re relatively small – that’s all in the prospectus…
Yeah, but take me through it.
Yeah, fair enough – the listeners won’t be reading the prospectus necessarily so…
Well, yeah, this is an introduction to your company, so hopefully they’ll read the prospectus before putting their money in.
I would hope so too. It’s an interesting read, I’ve read it quite often.
[Laughs] It is an interesting read, I agree with you, it is, fascinating.
Our cost base primarily – most of our costs are going into two things. Funding the development programs that we’ve got running with Deakin University, they’re under a research framework agreement we have with Deakin, so we can pull any scientific or technical staff we need to from Deakin. We have a relatively small number of permanent employees. We have brought in the former Deputy CTO of a company called Oxis Energy, which was the leading lithium-sulphur company in the world, he’s joined us from the UK.
They went broke?
They did, they didn’t have BNNT, you see, Alan.
They’re still going in administration, aren’t they?
They’ve just been purchased by a company that’s going to turn their facilities into, I think, a hydrogen catalyst production facility.
Is that right, that they went broke because they didn’t have BNNT?
Well, that’s actually the case. They produce a very high capacity lithium-sulphur battery which was phenomenal, but it could only achieve a cycle life of 55 cycles before breaking down. By bringing on Steve Rowlands, the former Deputy CTO, we’re bringing on all that experience, while at the same time having the solution for cycle life already within Li-S Energy.
It sounds like one of the main reasons your cycle life is up to 600 now and still going, is that you’ve got this mesh that stops the lithium dendrites causing a short circuit. Is that mesh made of BNNT?
I’m not saying exactly what’s in the mesh.
I’m just wondering whether that particular process came from PPK or was the mesh developed separately to the PPK technology?
We developed the mesh – I can’t actually tell you what’s in the mesh, I’m afraid.
Okay, all right, don’t tell me what’s in the mesh, but is that an entirely separate IP that is not…
What I can say is that the IP for the Li-Nanomesh is 100 per cent owned by Li-S Energy, as is the way that the BNNT is used in the battery construction as well. All of the IP that we need to deliver this is owned by Li-S Energy, it’s been either transferred from Deakin University, transferred from PPK or developed in-house.
So it’s not licenced, it’s owned by your company?
It’s owned by us, yeah.
And that’s global?
Yes, absolutely.
What sort of interest are you getting from potential customers?
It’s been kind of crazy actually, in a good way. Deakin put its first announcement out about our results on the 18 May. We’ve had tremendous inbound interest from some of the biggest household names you might think of in the product industry, which has been absolutely awesome. We haven’t gone out there and really touted our capabilities, it’s all been inbound at this point which is great, it really is. I can’t tell you exactly who yet, but I will obviously as soon as we have collaboration agreements signed.
Has anyone else apart from Oxis Energy got a viable lithium-sulphur battery?
Not that we’re aware of. The key thing is the cycle life. If you have a use for a lithium-sulphur battery that you can throw away and put a new one in every 50 cycles then there are lithium-sulphur batteries you could use, but that’s the very, very niche area of the market. Very few people want a rechargeable battery they can only use 50 times.
I’ve seen you or somebody in your company say that they’re going to change the world, is that because you think your batteries will entirely replace lithium-ion batteries?
No, I don’t think so. What I’m seeing is that between now and 2030, there’s a 10-fold increase in the forecast for the requirement of batteries and gigawatt hours per year. It’s a huge change going on in the industry, it’s a huge change from the point of view of – when we say change the world, the next 10 years is going to change the world, we’re going to be part of it. Our batteries work really, really well because they’re so light and so, anything requiring mobility or drones that have to fly and carry the battery’s weight, that’s where we can really, really impact the future of the battery industry and the future of the electrification of the planet. We won’t necessarily see lithium-sulphur batteries used in grid storage, for example, where weight is not important. I think it’s more where you have mobile applications where you want an EV…
But energy density is important in grid storage as well, I think your batteries are denser than lithium-ion, aren’t they?
They are, yeah, but the key thing about grid storage is it’s going to be driven down on a cost basis. You have new technologies like iron-air batteries, liquid-metal batteries, they’re all aiming at the grid storage market and it’s basically on cost per kilowatt hour. When you are trying to drive larger and larger grid storage, lithium-ion is not the right choice and probably not lithium-sulphur either. I think there’s going to be other technologies such as iron-air, liquid-metal that will provide a more cost effective solution for something that you don’t want weighing 50 tonnes.
Do you think the weight and energy density of your batteries will enable them to power commercial aircrafts at some point?
Yes, they’ll generally be smaller ones, electrified aircrafts are the key thing. I saw an article recently that came from the US, someone’s trying to build an electric bus – a flying bus. The battery weight was 70 per cent of the total weight of the aircraft and it was three times the weight of the passenger load, that’s because it’s currently lithium-ion. If we can drive that weight down by half or more for the same energy capacity, we can increase the carrying capacity by literally three times for that particular aircraft.
That one that you mentioned, did it get off the ground?
It’s still in development stage, but when you look at the commercial drones that Amazon and the like are using, one of the biggest weights they carry is the battery itself. For every kilogram you can drop off that battery, you can add a kilogram of payload or add a significant addition to the flying time. Lightweight energy dense batteries are really important where the battery weight forms a part of the work that the battery does.
Well, in fact it potentially opens up a whole new market, not just drones but passenger aircraft of some sort, whether it’s a flying bus or a flying taxi or whatever?
Absolutely right – and you see more and more of these being done in prototypes around the world and every one of them, one of their primary considerations, one of their primary issues is the weight of the battery they have to carry.
Yeah, well I’ve seen plenty of science fiction movies with flying cars…
[Laughs] Absolutely.
…at the moment, given current technology, it’s not possible.
That’s right, and what we see at the moment, trying to get to the point where it could be commercially viable is all about carrying capacity and flight time. Getting those two up means that you’ve got to drop weight and increase energy density and that’s exactly what a lithium-sulphur battery can do better than almost any technology out there.
Just getting back to the timeframe that investors can expect from you, this two-year process of the project that you’re currently on, that the money from this IPO is to be spent on, what exactly happens at the end of two years? How far off commercialisation and positive cash flow would you be at that point?
We can’t put an exact date on this, but what we’re doing in the next two years is to scale up our batteries so that they can be tested and retrofitted into existing products. Our intention is to build demand for the batteries rather than just walking over to a battery manufacturer and saying, “Hey, would you like to build our batteries for us?” What we’re finding is the real desperation, and it is desperation, is with big product manufacturers, whether they’re cars, drones or similar, they’re desperate for a better battery. Lithium-ion batteries aren’t going to cut it for the next 10 years, they have to find an alternative.
Over the next two years, our job is to scale our batteries to be at a point here we can retrofit them into those products. We’re also building a pilot manufacturing production plant in Geelong at Deakin University so we can produce enough of them to be able to retrofit them into those products for trials with those manufacturers. That two-year process is really to go from where we are now, to having products being tested in those real products, retrofitted into those products, and then to use those relationships with the product manufacturers to then build that demand and give battery manufacturers a reason to swap from lithium-ion production to lithium-sulphur production.
One of the benefits of lithium-sulphur is that quite a lot of the work of the existing equipment in a lithium-ion production plant can be used in lithium-sulphur production, so it’s not like you have to throw away your invested asset and rebuild a new giga factory, it can be adapted.
Yes, but do you think the people who are investing in nickel and cobalt might be making a mistake?
There’s always going to be room for a range of different types of batteries. I don’t think they’re making a mistake, I think lithium is the place to be if you’re into raw material investment because, quite frankly, that is an irreplaceable part of almost every battery technology is going to be meaningful out there. Cobalt, over 70 per cent is mined out of the Congo, I don’t really think that’s necessarily going to be a part – certainly isn’t a part of lithium-sulphur batteries. But, yeah, my bet would be on lithium and Li-S Energy.
Great to talk to you, Lee, appreciate it, thanks.
Thanks very much, Alan.
That was Dr Lee Finniear who is the CEO of Li-S Energy.
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