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The Multibillion-Dollar Catalyst Solution in the Making

Omri Wallach Omri Wallach, Stockhouse
2 Comments| May 13, 2020

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Click to enlarge

Click to enlargePalladium’s run over the last year has been great for prospective mining projects. But for automakers and OEMs, it has led a renewed drive for a catalytic converter solution.

The problem is simple: catalytic converters used in vehicles to reduce harmful emissions, and required by regulators on all vehicles, have been getting more expensive. As automakers and palladium investors are all too aware, the precious metal has eclipsed platinum as the primary component of converters, but the rising price of palladium has impacted the cost of producing and acquiring converters.

How serious is the problem? Putting aside the increasing number of catalytic converters being stolen from vehicles on account of palladium’s cost (even when the precious metal was sitting at only US $1,000/oz), vehicle manufacturing is a famously low-margin production. Automakers and OEMs have publicly and privately been working to reduce the amount of precious metals needed in catalytic converters, or looking to remove them altogether, but to little success. After all, even savings in the tens of dollars are magnified by the sheer number of vehicles produced in the world, a demand expected by analysts to increase once the COVID-19 pandemic passes.

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(Image via Aether Catalyst Solutions)

It’s a well-known opportunity that many have tackled and none have solved, the car-maker’s developing equivalent to Fermat’s Last Theorem in mathematics. But just as that seemingly impossible theorem was eventually solved by English mathematician Andrew Wiles, the catalytic converter problem is well on its way to being solved, this time by a Vancouver, Canada based technology innovator.

That innovator is Aether Catalyst Solutions Inc. (CSE:ATHR,Forum), which has quietly been working for several years on a prototype for a catalytic converter that doesn’t use any precious metals. Designed and tested by an experienced crew with engineering and business success, the Company has gone from a promising design to a fourth-generation prototype that has already overcome many of the obstacles those behind them could not.

Paul Woodward, the President and Director of Aether Catalyst, spoke to Stockhouse Editorial about the feedback the Company has received from interested automakers, OEMs, and investors, and the result has always been the same: These groups want their solution to work, and they’re impressed by their progress.

We don’t have a problem reaching out to OEMs and getting interactions, they always respond to us, which is an example of the pull this technology has. OEMs want this tech, and many of the hurdles that killed other attempts, we have been able to overcome. An OEM in Asia tested our catalyst, developed in less than three years, and said we had outperformed their base metal catalyst developed over the last fifteen years. That was our third-gen product, and we’re already past that level of performance with our current catalyst.

Developing a catalytic converter that does not utilize precious metals is no easy feat, and neither is impressing OEMs attempting to accomplish the same thing. But Aether Catalyst has done both, prototyping a low-cost, high-performance three-way catalyst that does not contain any palladium, platinum, or rhodium. The potential savings? 90% reduced production costs for catalytic converters applicable to all gasoline internal combustion engines, including cars, trucks, and small engines.

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(Cost calculated using 2016 commodity pricing | Image via Aether Catalyst Solutions)

The problems Aether Catalyst had to solve were numerous, and required hefty engineering experience. Heading the developments on the Company’s management team are COO Greg James, the former Chief of Engineering at fuel cell developer Ballard Power SystemsInc. (TSX:BLDP), and Director Neil Branda, a Tier I Canada Research Chair in Materials Science at Simon Fraser University and executive director of SFU’s $65 million research centre for advanced materials, 4D Labs. Through their combined expertise, they’ve navigated through the hurdles that have plagued every non-PGM catalyst solution to this day.

Catalytic converters have to face rigorous performance standards to make sure they hold up in vehicle use while still reducing harmful emissions at the levels required. The first problem faced by early prototypes of Aether Catalyst and others attempting to develop their own was high temperatures, which are utilized to quickly age the catalyst (to determine how they would hold up over a life-time of use in an automobile); this will generally lead to a loss in performance. After hundreds of tests and design tweaks, the Company passed its first hurdle and retained good exhaust conversion even after aging at 900°C.

Worse than heat, however, was the second hurdle Aether Catalyst had to overcome: water. Their catalyst needed to withstand high temperature aging in water, and retain activity in the presence of water, which significantly worsens performance. It was historically the toughest hurdle to overcome, but in 2019 the Company did just that, with their newest prototype catalyst effective even after 100 hours of wet aging at 900°C.

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(Image via Aether Catalyst Solutions)

Woodward sees Aether Catalyst as a binary story - if they are successful, precious metals catalysts are short for this world, and the company’s scientists have many more levers to pull before the alternative could be considered. It is not a case of competition breathing down their neck, and in his interview with Stockhouse Editorial, Woodward highlighted that they have a surprising amount of flexibility.

“The advantage, especially in terms of visibility, is that there are fewer and fewer competitors in this space – because it’s difficult. Most successes in reducing costs have occurred from ‘thrifting’, or reducing precious metals content, and if we get stuck our next step would be to look at “doping” with PGMs – which would involve a considerably lower content than thrifting. Importantly, we are not looking at being better than incumbent technology, we are looking at matching it with better tech, and we’re in the final stages. We also don’t need to get all the way there ourselves…once we attain a certain level of performance, there will be a partner to help us get the rest of the way. If our catalyst is able to perform, then we are THE play, and our history shows we have been able to overcome technological obstacles.”

Flexibility is also the highlight for where Aether Catalyst's products could be used. The automotive industry has been the focus so far, as it is the most rigorous use of catalyst technology, but there are other sectors that could see benefits. Due to the low cost of their tech, the Company is investigating uses for catalytic converters in small engines and stationary power generators. Over time, even lawnmowers could be equipped with the tech and reduce emissions.

The question is, what is left for Aether Catalyst to solve, and how do they get there? As the Company has ramped up testing prototypes, both at its new custom-built facility in Burnaby, British Columbia and with multinational OEMs and well-known third-party testing facilitators, it is now focusing on getting prototype catalysts vehicle-ready. That means they can withstand not just heat and water, but the “final hurdle” of a dynamic engine environment that constantly changes between rich and lean mixtures of gasoline.

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(Image via Aether Catalyst Solutions)

At this point, it is a question of whether Aether Catalyst can engineer prototypes that can handle the dynamics or if it needs to step back and tinker with their composition a bit. The good news for the Company and its investors is that they are not the only party interested in seeing their labours come to fruition, with more than $450,000 in funding coming from Canadian Government grants, and OEMs either offering feedback and advice directly or indicating they would be interested in investing or partnering once the tech is further refined.

Stepping back and looking at the current state of the market before and after the COVID-19 pandemic, it’s easy to see why. Demand for vehicles, and catalytic converters, is increasing, to the point that demand for autocatalysts accounted for 125% of palladium production in 2018. In 2018 prices, Aether Catalyst’s technology would have served as a direct replacement for more than US $9 billion of PGMs per year. As of April 2020? That number has climbed to US $16 Billion.

When you’re able to reduce the cost of a catalyst for an OEM and a vehicle manufacturer from more than US $130/catalyst to the low US $10’s, you accrue a lot of interest very quickly. That is why the Company has developed its catalysts specifically to be easily integrated into the existing supply chain and scalable to high volumes and low costs. Woodward called their catalysts “plug and play,” as they take the same substrate incumbent catalysts use, coat it using simple wash-coating methods, and they are ready to replace their more expensive counterparts.

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(Image via Aether Catalyst Solutions)

Aether Catalyst is not looking to disrupt vehicle manufacturing, or OEMs. Instead, the Company is on the verge of disrupting catalytic converter technology directly, saving billions of dollars and generating their own windfall in the process. If they are successful, PGM mining will no doubt be disrupted to some degree, though major tech upheavals take a bit of time to get rolling.

You might expect palladium miners to not be big fans of Aether Catalyst and the progress they are making. But mining investors, on the contrary, are quickly coming around. It might be surprising to some, but for investors riding the palladium tide, it’s hard to pass on the perfect hedging opportunity.




FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.


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Comments

For an infomercial it's pretty good, it lacks some vital research and statistical data. Like the decline in auto manufacturing in the last 5 years, the amount of gas vehicles produced per year. Replacement cycle and annual replacements of C/C's on existing gas vehicles. The effects on existing C/C already produced as replacement stock. Things the company will face because it's not just the major auto companies that are going to be using the tech but the auto parts makers that will be impacted.
(485)
May 14, 2020

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