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KMX Technologies Attracts Powerful Partners

KMX Technologies Attracts Powerful Partners
By Andy Gordon
Date March 23, 2023

KMX Technologies is raising again. We recommended the company to you last July at a $40 million valuation. At the time, everything was beginning to come together for the company and its innovative approach to lithium production. 

So it’s not surprising that KMX has made significant strides since then, including signing a major licensing deal and winning a Canadian government lithium research grant. 

If you recall, KMX offers direct lithium extraction (DLE) complementary technology. It replaces environmentally damaging mining and evaporation salt ponds or flats. The lithium extraction process has historically included boiling water with dated mechanical evaporators following an evaporative pond process — to extract, separate or concentrate lithium from the brine found beneath salt flats. 

KMX’s post-DLE lithium concentration technology, however, takes another path. It uses “amplifying” technology, which is the opposite of reverse osmosis. The technology achieves a complete separation of particles (lithium and whatever else) and water. Nothing passes through the membrane. The raw lithium is then concentrated before being turned into battery-grade lithium.  

The technology — as I told you in the original recommendation — has several advantages. It’s faster, cheaper, uses much less water and is much more environmentally friendly than traditional mining and salt flats. For those reasons, it has attracted great interest from lithium-extracting companies. 

From my original recommendation, you already know of two companies — CleanTech Lithium and Cornish Lithium — on the verge of signing contracts with KMX. Since then, KMX has added another major partner to the mix and is driving diversification through various channel partners. Each represents a huge opportunity to boost near-future revenue and offers a clear path for KMX to develop and diversify into extremely attractive use cases, such as oil and gas.

A Powerful Trifecta

Following my original recommendation, KMX signed a licensing deal with oil and gas service company TETRA Technologies. TETRA is a half-billion-dollar NYSE-listed company that has operations on six continents and is one of the largest recyclers of oil and gas wastewater in the U.S. Signing TETRA to a licensing deal is a huge win for KMX. 

Oil and gas operations recycle a massive amount of water. TETRA has seven recycling centers in the Permian Basin and is adding two more. TETRA is also well-positioned to sell KMX’s technology to other producers in the oil and gas industry. 

Like we’ve seen with Cornish Lithium and CleanTech Lithium, KMX’s technology aligns remarkably well with TETRA’s plans to aggressively lean into a more environmentally concerned outfit. KMX’s technology will also help TETRA extract other valuable minerals in addition to lithium. 

How did KMX attract such a large company? Reverse osmosis doesn’t work in the Permian Basin where TETRA operates. The water suffers from too much tetramethylsilane (TMS) contamination. KMX’s technology does work. It’s as simple as that. 

But TETRA has even more reason to partner with KMX. It also has a big lithium mine in Arkansas where it plans to use KMX’s DLE technology. KMX CEO Zach Sadow says that KMX’s technology “fits right in line with what TETRA wants to do.”

Another of KMX’s new partners — California-based KAAM — is a much smaller company. But it has more than a century’s worth of experience in the power and utilities space providing water treatment solutions. It understands the space as well as any company and has an amazing network within the industrial and municipal industries. 

KMX is in discussions with one of the biggest power utilities in the U.S. as a result of KAAM’s network. KAAM will serve as a useful marketing channel bringing inbound leads to the company and will hopefully have a significant payoff down the road. It’s likely that municipal industries will be operating under stricter environmental regulations over time. Zach sees a lot of opportunity in this space. 

KMX’s third new partner is Pacific States Engineering Group. It’s the biggest infrastructure company in California. And it does a lot of ground remediation and water management work. Pacific States has been involved in some of KMX’s demos throughout the years. Not uncoincidentally, KMX and Pacific States share some of the same large investors. Pacific States represents another gateway for KMX’s burgeoning diversification efforts. We’ll see where the partnership goes from here, but it has intriguing possibilities.   

KMX’s focus is still squarely on lithium with oil and gas and the power utility sectors offering new opportunities to expand and broaden its footprint. As a result, KMX has a much bigger pipeline entering 2023 than it did in mid-2022. In my original recommendation, I said that KMX has “contracts signed, about to be signed, or in the final stages of contract discussions.” Finalizing contracts with CleanTech Lithium and TETRA is significant progress along this front. Enlarging the pipeline is also noteworthy. Of course, KMX has to jump through a lot of hoops with these companies before reaching leasing or licensing deals. Still, it’s a positive start to ginning up deal flow.

A Wave of Momentum

I don’t consider 2023 to be an inflection year in terms of revenue. KMX’s focus is not (nor should it be) on current revenue generation. Rather, it’s focusing on future revenue diversification… continuing to prove that the technology works… and fundraising to provide a multiyear runway for converting pipeline companies into paying customers. It’s the correct approach.

There’s also more clarity, which I welcome. With signed leasing and licensing contracts, we can now see lowering tech and marketing risks and an upside that no longer requires a leap into the unknown. Family offices, institutional investors and infrastructure funds are showing increasing interest in backing tech-enabled infrastructure as promising mid-term investment plays. 

KMX is raising a maximum of $500,000 on Netcapital. Why the modest amount? With a leading global bank heading its current efforts to raise outside of Netcapital, KMX expects the vast majority of its funding will come from institutional investment sources. KMX is appealing to the big boys now. It no longer has to depend solely on crowdfunding. 

As such, this will probably be the last opportunity for crowdfunding investors to back the company. KMX’s valuation has increased from $40 million to $60 million. I consider the increase in valuation to be in line with its progress over the past half year. For those who didn’t invest the first time around, it’s a nice opportunity to pull the trigger now. For those who did invest last July, you should be feeling good about your investment. 

KMX is riding momentum on several fronts — most notably in its diversification efforts and additional partnerships. It’s making the kind of progress that will generate near-future revenue while laying the foundation for sizable revenue gains in the out-years. It’s an appealing combination.

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