3M throws lifeline to Ilion Technology

By RICHARD WOOD

Troubled lithium material exporter Ilion Technology has hope for the future thanks to a deal with multinational 3M.

The arrangement follows years of multimillion-dollar losses, a financial lifeline last year from major shareholders and moves this year to avoid receivership through a $1.5 million share offering, as well as operational and financial restructuring.

The 3M deal will see Ilion, which began life as Pacific Lithium, manufacturing its PL50 lithium-based battery cathode material for 3M to market globally under an exclusive arrangement.

Ilion will also manufacture new materials for 3M that involve application of intellectual property provided by 3M.

Illion chief executive Brett Ammundsen said 3M and Ilion had been filing patents in the areas of lithium cathode technology and the agreement would enable the two firms to pool research and centralise manufacturing at Ilion's plant in Auckland.

The materials were used in lithium-ion batteries, most commonly found in mobile phones and laptop computers.

Ammundsen said Ilion's product had been primarily aimed at emerging lithium-ion batteries for scooters and hybrid electric vehicles, and 3M had been targeting consumer electronics.

He said 3M had patent applications for a broader range of chemical composition than Ilion. "We focused on a narrow area for a specific product."

Ilion, as Pacific Lithium, began life in 1994 to extract lithium from seawater but that plan fell through after the price of lithium dropped.

The firm established a manufacturing plant producing lithium carbonate from waste product from the United States.

Under the leadership of Robin Johannink it moved to the US and attempted to list on the Nasdaq, just before the market crashed at the end of 2000.

With the company heading into financial trouble during 2001, major shareholders stepped in with a loan. They included entrepreneur Murray Haszard who took the chairman's role.

Haszard is well known in New Zealand technology circles as the creator of Ghost, a disk cloning software tool business sold to multinational software vendor Symantec for US$27.5 million ($47 million).

Companies office records show he had put $7.73 million into a loan facility up to the end of December 31 last year.

Ilion has since closed down its US operations, has been through a cost-cutting exercise, and in the past couple of months has converted all money lent into equity and raised more through a share offer.

Haszard now owns about 50 per cent, although he plans to reduce that marginally in coming months.

He said the 3M deal showed a lot of promise but Ilion could not be complacent and must deliver on its side of the bargain.

Ammundsen acknowledged that Ilion was still "burning cash".

Ilion's consolidated results, which include its 100 per cent-owned operating subsidiary Pacific Lithium NZ Ltd, show revenue last year of US$1.29 million, with a net loss of US$7.07 million. Revenue to December 2001 was US$1.93 million and the loss was US$8.84 million.*

Losses were also recorded in 1998, 1999 and 2000.

Ilion files its financial statements in US dollars because it is still a US-incorporated company.

Ammundsen said with the restructuring he expected turnover to rapidly increase and the firm to break even in the first half next year.

Ilion currently has 30 staff and has a manufacturing plant in South Auckland. There are over 1300 shareholders, 1000 of them in New Zealand.

3M is a $16 billion US-based firm with offices in 60 countries.

* CORRECTION: In the original version of this report, the financial results quoted were for the parent company ILiON only. They were in US dollars although this was not indicated.