Good morning, and very welcome to Bergen Carbon Solutions Q3 presentation and the company update in this first day of November. I'm Odd Strømsnes, and I'm the CEO of the company. The agenda is a pretty straightforward financial and operational business update. We will continue to talk about batteries, and we will have a deeper dive into the importance of the different battery designs and chemicals, and what role BCS can play. This is especially relevant for the next generation's battery design. The relevance of BCS is apparent, as even though nanocarbon and graphite do have different functions within the battery, it is the different functions for different battery designs. It's all about enhancing the battery's functional quality.
Q3 continues to take us in the right direction in a very promising, extremely dynamic, and a very exciting market, as we are continuously pushing towards improving our process, make quality products, and very importantly, reduce costs. These are the highlights. Q3 is very much a reflection of the progress we announced in Q2, where it's all about continuing the technical qualification progress of the nanocarbon, enhancing the battery's functional quality, make the battery charge faster, replace scarce material, make it cheaper, and extend the duration and overall battery lifetime. We continue to make good progress with no red flags to report, closing in towards the specified requirements, solidly reconfirmed by the extension of the Huchems' agreement. Implementation of the new testing and verification reactor for faster turnaround time from characterization of tester cells into revised production optimization program is completed. Basically, we're speeding up our development process.
An improved sustainable battery production program is very high on the global electrification agenda. As such, new battery regulations are being established by EU, confirming the environmental footprint, among other, aiming for local sourcing of sustainable carbon for the battery industry. Spot on for us. And finally, with the financial burn rate also on budget, we have all in all delivered a very productive and promising quarter. Our financial number confirms that we continue to have the finances to execute on our strategic plan. A solid cash balance, with a cash burn rate of NOK 20 million per quarter, including one-off cash items of NOK 3.2 million, accumulating to close to NOK 54 million during these last nine months. This is a NOK 10 million increase from last quarter, which is as expected. We have a solid cash position of NOK 240 million.
With the current burn rate, which is expected to continue to grow slightly, we have the robustness to successfully conclude on our strategy I have described until being ready for a subsequent scale-up. We're still running with 0 debts and equity position of 90%. Bergen Carbon Solutions in brief, and I encourage you all to have a look on our new and exciting website. I said last quarter, I believe the "U" in the bigger CCUS picture, carbon capture utilization and storage, will play an increasingly important role going forward. Bergen Carbon Solutions, as a high-end technological material company, is one of the very few Norwegian-based pure-play CCU developers. We continue to be something rare as a Norwegian technology company, creating industry independently from local natural resources.
The concept of producing an advanced carbon product, which the world's electrification transformation is solely dependent on, from the greenhouse gas itself, is still a second-to-none equity story. The importance to produce sustainable batteries are growing on the international agenda, which is obviously good for us. This is why 2023 is, as we have said several times, it's a year for consolidation, it's a year for product quality improvement. We're spending most of our time on process optimization, reducing costs, and building organization. We are, after all, building a new industry. We are continuing to build our team with battery expertise, as well as general electrochemical process competence. In a highly competitive Norwegian labor market, where upcoming new green industries like ourselves shall compete with the petroleum industry, now back on speed and steroids, BCS continues to attract international talent.
It's all about competence, and I feel we are now in the position to attract the right mix we need with the right background. Our equity story and, and our technology attracts a lot of enthusiasm when being presented on different events. We are going to be 32 employees at the end of the year, and we anticipate to grow also in 2024. China has a massive hold on the worldwide supply chain of critical minerals needed to make electric vehicles' batteries. China is also the world's top graphite producer and exporter. It also refines more than 90% of the world's graphite into the material that is used in virtually all electric vehicles' battery anodes. The market for graphite used in batteries has grown more than 250% globally since 2018.
Carbon materials and batteries are at the center of global geopolitical discussions, and as such, we see a number of policy programs being established to accelerate and attract the green industrial initiatives in order to create new sustainable industry and be less dependent of Chinese export. BCS value proposition is well-placed in the middle of this huge geopolitical challenge, as we are responding to many of these requirements by offering a local, sustainable production of clean nanocarbon and graphite. We have previously been communicating comparisons of our green carbon from BCS with the prevailing fossil carbon production taking place today in China, based on petroleum and mining. Obviously, these product groups are being produced with significant negative environmental impacts and large CO2 emissions, which, again, is a huge paradox, as the energy transition should be based on a global green electrification.
So we are, for all practical purposes, talking about the perception of clean batteries, but in reality, they are made of non-sustainable components. And as a response to this, EU, through the European Green Deal program, will create a framework that ensures legal certainty for all operators involved, avoids discrimination, and enables the battery industry to be at the forefront of this green transition. The regulations presented as Battery Passports intends to prevent and reduce the adverse effect of batteries on the environment and ensure a safe and sustainable value chain for all batteries, while taking into account the carbon footprint of battery manufacturing, ethical sourcing of raw materials, and security of supply, among others. The Battery Passport will apply to all categories of batteries placed in the EU internal market, and it will be obligatory from February 2027.
We recently attended and held a speech at a key conference in Amsterdam concerning exactly this, the criticality of battery raw materials. Obviously, our value proposition resonated extremely well to this new EU initiative. It's a fair assumption that batteries with a Battery Passport made with BCS Nanocarbon and graphite should have a competitive advantage. Over to a description of where we are today and what we do in terms of technology and business development. This illustration, which you have seen before, which is quite good, illustrates our role in a full carbon-based value chain, where BCS can indeed play a critical role, both upstream, in terms of carbon capture, close to a CO2 point emitter, and downstream in terms of carbon utilization, close to a carbon end user, like a battery factory.
Today, many of these planned battery factory startups are being based upon imported anode graphite from Asia, as previously said, produced from petroleum coal mining. And when we know that one third of the battery CO2 emission actually comes from the anode material itself, it should be paramount to seek local solutions in order to drive also the battery component emissions down. I believe this challenge has not gained enough focus, and many companies are interested to talk to us merely as a capture company, as they have a lot of CO2 to get rid of. So it's important, again, to emphasize that our business case, it's absolutely dependent of the utilization element, by the fact that we need a commercial viable agreement of our product take off. We are independent of geographical location as long as we have CO2 and electricity.
Based on clean hydropower, the production is a true net CO2 consuming exercise, and as many of you know, we documented this successfully last year with a proof of concept with BIR. We need to focus on and we need to talk about cost. So we announced a pretty aggressive cost reduction program earlier this year, and now we are delivering on it. Our new CO2 separation and filtering methodology is now commissioned and in full operation. It will reduce our electrolyte consumption, which we call the salt, by more than 90%. We are basically able to recycle the salt consumption with our CO2 based on this technology, and almost eliminate the use of hydrochloric acid as we're using today. It's basically a win-win. And this is very important milestone, as the cost of the electrolyte is a substantial part of our total operational cost picture today.
Our target of bringing down the cost towards the fossil market alternative within next year remains fixed. Another important message worth repeating is the fact that we do have tailor-made products, not built materials, which fits all. Each customer has its own recipe for the confidential battery chemistry. This has indeed a strong bearing towards the specification of our deliveries, as the characteristics of both the nanocarbon and the graphite plays a key role of the battery performance. New equipment is now being implemented to speed up the testing and reduce the turnaround time from carbon characterization and the subsequent operational adjustments. As previously announced, we are relentlessly optimizing our process to meet the Huchems' specifications of the nanocarbon in terms of diameter, surface, and metal impurities.
We have made massive improvements and are now so close that we have initiated samples to South Korea for Huchems' verification and checked into several of their battery applications. Hence, we announced a one-year extension to this agreement in order to secure ample time to conclude on the characterization before commercial discussions are initiated. BCS is an attractive partner and is currently involved in several important industrial development projects with key partners like SINTEF, the Norwegian Research Council, Vianode, and Elinor. Here, we have listed a few ongoing projects related to sustainable battery, raw materials, and manufacturing of next generation's battery technology. Many of these are driven by Innovation Norway, and will, to an increasingly level, also include larger EU projects.
Batteries are complex, and it's important for us to make sure we are communicating the fundamentals of our role in this landscape, both in today's battery chemistry, but more importantly, in the next generation battery design. The dependency of nanocarbon into tomorrow's battery design is increasing. Almost all batteries will contain nanocarbon going forward. Today, I want to deep dive into the different battery chemistries, as overall varies among the different designs. The good news is that our product is needed in all the applications. A quick repetition into the basics of the world of battery chemistry. As many of you know, carbon is a key material for all batteries, and BCS does have a key role for supplying novel, clean material, introducing different functions, both for the anode as well as the cathode.
Adding carbon nanotubes to the cathodic material will enhance the conductivity and enable faster charging of the battery. For other battery chemistries, it will also act as a reinforcement agent if applied on the anode side. The cathode is a lithium mixed-metal oxide compound, releasing lithium ions and electrons during charging, and accept them during discharge. Anode graphite, however, acts as a carbon-based host material for lithium ions. The graphite structure is able to absorb and stack large amount of lithium ions, accept lithium ions during charging, and release them during discharge. Graphite has a superior quality to other carbon alternatives in terms of the ability to store lithium ions. The fact that we have a role to play in the entire battery design opens up a variety for us of different supply chains solutions.
Our solutions do have an interest across the entire battery value chain, as we can offer raw material essential for companies with many different interests in this field. This means our market interface intersects on different levels in the vertical supply chain, from the raw material suppliers to the car manufacturers. As the battery is so critical for electrical vehicles' performance, many of the electric vehicle producers want to control the entire battery supply chain, like Tesla, BYD, and others. As we are a CCU-based raw material company based on negative emission technology, competing with fossil-based CO2-emitting producers for nanocarbon and graphite. However, many of these companies are looking for blending in a green precursor material to reduce their own CO2 footprint, meaning that our fossil-based competitors can also be our clients.
The suppliers of the entire battery chemistry, blending in our product with the electrode chemistry itself, like Huchems, is obviously a very important client base for us, and in many cases, the most likely entry point. Obviously, enhancements of the battery performance is, in the end, the ultimate verification of our product and of paramount importance to the battery manufacturer. So in many cases, they will be our main point of contact. Our CCU offering, enabling nanocarbon production close to or as an integrated part of the battery fabrication infrastructure, will offer additional cost and quality competitiveness. Battery development is all about driving by cost and energy density, where energy density is really a measure of the battery's ability to store energy per weight unit. An additional key driver is the obvious geopolitical necessity in reduction of abundant material.
Here is an overview of what we see is the development of the different battery chemistries going forward. Different batteries based on different components. As we can see today, the market is close to 100% lithium-ion-based batteries, mostly NMC and LFP, and we believe this will also be the basis for the next five to 10 years. However, in the coming years, we can anticipate advancements in safer and more available and cost-effective sustainable materials like silicon, like sulfur, and like sodium, enabling batteries tailored for specific applications from electric vehicles to grid storage. The main message from us is that all these present, and in particular, future battery chemistries, are dependent on conductive additives in order to boost the energy density and increase the performance of the battery itself. Hence, the demand for nanocarbon blended into the electrode will increase dramatically for the foreseeable future.
More than 60% of all batteries today are expected to contain nano carbon conductive agent, and this is up from 27% for two years ago. A substantial market increase, which will continue to grow. Different battery chemistry possesses unique specifications due to the distinct materials and reactions involved in their makeup. These variations influence factors such as energy density, lifespan, and charging speed. Development from today's NMC and LFP to silicon, sulfur, and sodium-based batteries. The sodium-ion-based batteries will replace the lithium-ion batteries as a whole due to cost, availability, and safety. From 10 years and on, solid-state and lithium-air batteries are then the next energy-intensive chemistry. Again, we are adapting to very different technical requirements, pending the final carbon application. For both the electrodes, certain characteristics are important, such as surface area, level of graphitization, and level of metal impurities.
As such, different structure carbons hugely affect the end result, making early characterization and initial material testing key. A good illustration is that the optimal surface area for the graphite particles to store lithium ions is 1 square meter per gram, while the nanocarbon tubes shall produce as much surface as possible in order to be as conductive as possible, with an ideal surface area of more than 200 square meters per gram. All in all, over two product groups are used to achieve totally different effects in the battery. As we have said, different structured carbon does therefore hugely affect the end result, and that's why characterization and initial material testing is the most important thing to do first. We are still concentrating on quality. We are not concentrating on volume.
We said this last time, and we will probably say this next time, as volume will come when we are ready for industrial scale-up. We believe we are very close in meeting this specification based on a process consuming CO2 instead of releasing CO2. Currently, we have talks with more than 10 different potential customers all over the world, confirming these specification levels. The entry barrier is high, but so is the reward for improved battery functional quality for the end user. That's why we see a market with high willingness to pay for the right product quality, and the long-term offtake contracts for higher volumes. For us now, it's all about quality. Bringing the technology to market is a time-consuming exercise. We have made huge progress over the last 5-6 months, concentrating on the specifications and our product behavior in the battery application itself.
The summary and outlook is hence basically in continuation of this progress development. So, we are fully funded to deliver on the following five key priorities: cost reduction initiatives, they are significant and paramount for the success of BCS. A systemized process optimization and continuous improvement. Meeting technical specification of the clients. We are working in a growing market with European focus, today totally dominated by China. And secure and develop contract and partnership, with reference to our previously communicated three-legged market strategy, recently confirmed by the Høyanger agreement. And finally, capital discipline to support these ongoing activities until we are ready to take the next step. So to conclude, we continue to deliver on cost reduction initiatives and promising technical qualification progress, customer and partner interactions, burn rate under full control, and a very clear strategy going forward.
That concludes my presentation and brings us into the Q&A session. Thank you for your attention.
Thank you, Odd. Then we are going over to Q&A. This session is hosted by CCO Fredrik Øksnes. The first question is, what's the main focus of the company now and for the next half year? Future research slash lab work only, or do you already have significant resources on planning the first production plant?
First of all, thank you for the question. I think that, the intention, of course, is that our presentation is a response to this, to this question. I mean, we are working on, as I said, quality, not volume. We're working on the cost reduction initiatives. We're working on the specifications and quality. We have implemented two new projects, which will bring the cost down, but will also speed up the results of our testing. And we are building the organization, and we are developing partnerships. This is what we are spending all of our time on, and we'll probably do so also for some time going forward.
Thank you. Do you have any updates slash plans that you can share for our large or medium scale production facility? Where, when, target volumes, et cetera.
Again, we are working to understand the market requirements with the focus on batteries. I mean, this was strategy taken for more than a year ago, focusing the company into the electrification market in general, batteries in particular, and meeting the quality specification there is what we are working on. We have not spent much time lately of an upscaling initiative. This will follow automatic as we have the right specification in place, and we have the right client commitments in place.
The downstream purification and recycling process developed fairly recently in lab only, I presume. Is this now ready for large-scale production?
This project is implemented, and it's in operation, and the sole purpose of this was basically, again, to significantly bring down our unit cost by the fact that we are able to recycle the electrolyte, which is, as I said, a substantial part of our cost base. This is all in place. We have confirmed that we're able to recycle more than 90%, and we are producing carbon as we speak. This piece of equipment, together with the other equipment we have here at Flesland, will all be subject to adjustments at a point in time when upscaling is relevant.
Okay, over to question four: If Høyangen is the production plant first in line, do you have the required capital slash funds to finance the production facilities there? If no, how are you planning to finance this plant? I assume you will rent locations in old Fundo building, but maybe fit out will be at your cost.
Again, we are spending time on quality and not upscaling. We have, as previously announced, an optional agreement with the Høyangen Kommune. If we decide to scale up in Norway, Høyangen is a very realistic alternative, but I mean, we are talking to many other potential client environments. Many of them are in Asia. Our TKG Huchems agreement, as we have announced, talks about the 10,000 tons factory in South Korea. So there are many options, and we have to come back to this, and at that point in time where we are, we have decided to scale up, either alone or together with a partner, or we are licensing out our technology. I mean, there are many options for commercializing this. We will come back to how we will do that in terms of financing.
That leads us over to question number five: Are there any, any news you can reveal about MOU agreements with Huchems?
Yeah, I think I said that in the presentation.
Yeah.
We have sent over samples. It's currently being investigated and characterized by Huchems in South Korea. And we will have a dynamic discussion with Huchems going forward, and hopefully be able to sit down and initiate commercial talks going forward.
And then the last of the in-mails questions: In light of the recent Chinese ban on export of certain kinds of graphite, are you proceeding with slash have resource allocated to project C as well, or are you all focusing on CNT at the moment?
I mean, the process with Huchems is a process on CNT. We have said before we get more traction and market interest in Asia than we do in Europe for the time being. We believe, and we see, that the Asian battery developers have much more focus on next-generation battery design than we are experiencing the European battery developers. And as such, we have been focusing on CNT, and we have been focusing on, on Huchems, as we also, through this process, is really understanding and grasping the real requirements of the market. I mean, we are a small organization, and we have prioritized CNT now versus graphite, and we will—but we will come back to what we do with graphite when we have progressed this a bit.
Okay. Thank you, Odd. Do we have any questions live from the audience?
Yes, so this will be the first time you've sent CNTs to South Korea for TKG Huchems then? Or has it been a sort of iterative process where you've sent stuff, got it back?
I mean, we are sending products to many different potential clients.
Okay.
But we are not announcing names-
Yeah
... and all that in detail. The process with Huchems has progressed for a long time, and they have... This is the first time they have received product from BCS.
Okay. And has it been sort of a very difficult process to get the product into the specification that Huchems has, or has it been... And the variability in your production process, are you able to consistently meet the criteria that they are, or the threshold that they are?
Oh, that's a good question.
Uh-
I mean, we have consistently improved the quality of our CNT the last 4 to 5 to 6 months, and we are now reduced the sizes such that we are very close to meeting the specifications. We're not exactly there yet, but we are so close that it's interesting to start the dynamic testing with Huchems, because this will take some time. And we believe that based on the progress we have done, and which we talked about in Q2, we are close to meeting the Huchems specification, which represents the market in many ways. And we are pretty optimistic that this is... We are very, very close now to meet what they want.
It's a relatively binary thing. You need to meet them, or you're out.
Yeah. But it's binary in a way for the specification, but what is interesting, and what I try to say here, is that what is really interesting is how our product is working in the battery application itself. So what we are keen to understand more is actually how our product is acting in the battery, and how is it impacting the battery functionality, which might not be a pure reflection of exactly the specification definition.
An anode graphite might be a bit easier to meet the quality thresholds, or if you should-
It's different. It's different.
Different, yeah.
We are a small organization. We don't have resources now to run on all different alternatives there, so we have decided to prioritize CNT now in the Huchems process. Graphite has different challenges and different operational parameters, which we will be able to handle, but we will come back to how we will do that.
The focus now is on CNTs.
Yes
... and Huchems.
Yeah.
You, you said that 2023 was the year of what did you call it?
Consolidation.
Consolidation.
Mm.
What's your guess for 2024, then? Which year would that be?
We will continue this consolidation process in 2024. I think I said last time, in Q2, that, in my mind, I have some kind of a 6-month window for the specification, and this will bring us into March something. I guess I still have that type of forecast. We will not say anything in terms of when and how, and with who, in terms of upscaling our business. But in terms of meeting the specifications of the work, we should be able to do that, definitely within the first half of next year.
Okay. Thank you, Petter from Nordnet Securities, for these questions. I think that was all. Thank you, Odd.
Thank you.