Sparc Technologies brings new graphene technology to the ASX

Sparc Technologies (ASX: SPN) is getting set to make its ASX debut this month via a reverse takeover by former listed coal developer Acacia Coal (ASX: AJN).

Following its recently announced $5.9 million acquisition of South Australian company Graphene Technology Solutions (GTS), Acacia is changing its name to Sparc Technologies with a view to become a “significant developer of graphene-based products that will disrupt and transform industrial markets”.

The company intends to leverage its exclusive research collaborations to develop and commercialise graphene technologies with its sights set on three initial target markets – marine and protective coatings, environmental remediation, and metals recovery from tailings.

With a relisting date of Monday 23 November under the new ticker code ‘SPN’, the revamped Sparc is expected to have an enterprise value of $8 million and a market capitalisation at listing of $14.1 million.

Along with its previous board, Sparc will say goodbye to Acacia’s only remaining exploration licence, the Mt Windarra nickel-copper project in Western Australia.

Cornerstone investors and collaborations

As part of its readmission to the ASX, the company announced a public offer to raise $4 million through the issue of 20 million shares priced at $0.20 each. The offer was underwritten by Morgans Corporate with Discovery Capital Partners acting as corporate advisor to the transaction.

Cornerstone shareholders include Hoperidge Capital, the investment vehicle of significant technology investor Rod Jones, as well as Sparc’s key collaborator and a world leader in graphene research, the University of Adelaide.

“The level of academic, government and industry support we have seen behind these technologies and potential applications is truly impressive and we look forward to being part of the creation of a new global industry with a new base in Australia,” Mr Jones said.

Through its acquisition of GTS as a wholly-owned subsidiary, Sparc already has a strategic partnership and exclusive licensing agreement with the University of Adelaide, which is ranked as the principal member of the Australian Research Council’s Graphene Hub.

Under the licensing deal, the company is currently licensing three technologies under patent applications related to marine and protective coatings, water purification and soil remediation, and sound adsorption.

It has also committed to contribute at least $1.5 million over three years to graphene research and development to retain and develop world-leading applications.

The strategic relationship includes the university taking an approximate 5% stake in Sparc.

Target markets

Research has shown graphene is the lightest, strongest, most electrically conductive substance on earth and according to Sparc, its properties have the potential to revolutionise everyday products such as batteries, sensors and water purification systems, and can be used to create smart devices and structures.

Sparc will initially target three industrial markets for its graphene products: marine and protective coatings, environmental remediation, and metal recovery from tailings.

The company believes graphene’s ability to become hydrophobic (meaning it separates toxins from water), conductive and chemically-resistant make it a viable and preferred option to replace existing coatings solutions.

“We have already demonstrated in trials the enormous commercial potential that graphene can deliver as a performance additive for anti-corrosion, drag reducing coatings in marine and industrial applications, and we look forward to continuing that development in real-world scenarios,” Sparc executive chairman Stephen Hunt said.

According to research by Frost & Sullivan, the global marine coatings market was worth US$7.35 billion (A$10.3 billion) in 2018 and is forecast to reach US$9.24 billion (A$13 billion) in 2025, driven by growing demand from China, South Korea, South East Asia, Turkey and Latin America for both new shipbuilding and maintenance.

Meanwhile, the global protective coatings market (which includes coatings for industrial workplaces within the oil and gas, mining, power and infrastructure sectors) was valued at US$13.39 billion (A$18.9 billion) in 2018 and is expected to grow to about US$34.8 billion (A$49 billion) by 2027.

Graphene can also be used to quickly and efficiently separate oil, pollution and other substances from water and soil.

“Australia alone has an estimated 160,000 contaminated sites with as many as 75,000 different contaminants,” Sparc said in a recent investor presentation.

Under its partnership with the University of Adelaide, the company plans to commercialise functional graphene for broad commercial applications with a particular focus on oil spills and the containment and destruction of per- and polyfluoroalkyl (PFAS), a group of man-made chemicals used since the 1940s that don’t breakdown substantially over time and have even been known to cause cancer.

“Not only containing PFAS but destroying it in an economic manner will be a game changer,” Sparc said in its prospectus.

Graphene can also be used to separate specific metals from tailings dams and waste ore on mine sites. Sparc plans to partner with mining companies to develop precious metals extraction solutions with the “added environmental benefit of removing metals from soils and local waterways”.

“Approximately US$1 trillion worth of precious metals sit in waste rock and tailings already extracted from the ground at old mining sites globally,” Mr Hunt said.

Growth strategy

Sparc has outlined a clear growth strategy for the newly merged business, with funds raised from its public offer expected to contribute to its execution.

This strategy includes undertaking a scoping study on the production of graphene and graphene additive products in commercial quantities, designing and constructing commercial production facilities including laboratory equipment, and undertaking a feasibility study into the establishment of larger-scale graphene production facilities in South Australia.

Between $1.4-$1.9 million of the raised funds have been allocated to the construction of these production facilities and production costs.

Sparc’s forward plan also comprises building its technical and commercial team, and commercialising graphene projects following the results of research and development. This could include developing industry partnerships, offtake agreements or technology licensing deals, as well as the ongoing marketing of graphene additive products.

Up to $1.3 million has been earmarked for research and development, up to $730,000 for marketing and business development, with the remaining funds reserved for working capital, administration and offer costs.

Board changes

The former Acacia board will be replaced by a new board headed by executive chairman Stephen Hunt, who brings more than 20 years of experience as a director of ASX-listed companies.

Mr Hunt is currently a non-executive director of American Pacific Borates (ASX: ABR) and was formerly the executive chairman of Volt Resources (ASX: VRC).

The board will also include managing director Tom Spurling, a former chief executive officer of medical device company Ellex Medical Lasers, and financial and equities market specialist Daniel Eddington as a non-executive director.