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Dion Vaughan 'A story like ours is huge and disruptive'

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In theory, the number of different metal alloy powders that UK-based Metalysis could make with its proprietary solid-state,
electrochemical, manufacturing technology is essentially infinite. In varying proportions, two or more of the 40 or so periodic table elements amenable to the process can deliver a vast range of different metal alloy powders for further downstream processing into finished products. The technology’s ability to control the powder grain size provides an additional multiplying factor to the variety.

Metalysis’ options to monetize its process are to produce and sell metal powders, to license use of the technology – for which the company has global rights – to third parties, or to conduct research and development projects under contract to other businesses interested in investigating the potential of promising new alloy compositions. The company is pursuing all three, so there is no shortage of opportunities for Dion Vaughan, Metalysis’ chief executive officer, and his nearly 100 colleagues to explore.

Set within that big picture, Vaughan’s personal experience and expertise are perhaps exactly those you would expect for a CEO leading a still relatively small, but growing, company looking to maintain an entrepreneurial spirit, which Vaughan has described as a “mature start-up.”

A PhD in materials science, past roles in corporate R&D, other metal companies and investment banks, give him an ample toolkit of
experiences to draw on for discussions about technical details, arranging technology licenses, negotiating powder production and
sales, or raising capital from investors.

A year reviewed

The company has been expanding in recent years, so the highlights of its activity in 2018 are a good place to start looking at its long-term strategy.

Acknowledging the support of key stakeholders and shareholders, Vaughan recalls that, “In no particular order of highlights, we
completed a financing earlier in the year – that really enabled us to put some oomph into accelerating our programme, which culminated in our next milestone in September.” The fundraising delivered £12 million (about US$18 million).

That milestone saw Metalysis’ Generation 4 commercial-scale plant become operational, following cold commissioning in the early part of the year. “Successfully carrying out hot commissioning trials and the handover to operations was obviously a big occasion,” says Vaughan. “There is a range of products that we are now aiming to push through Gen 4 and we have considerable customer interest in them.”

Those products fall into two categories. The first is titanium related alloys, which primarily are powder in terms of output, produced for applications including 3D printing (additive layer manufacturing), which Vaughan notes is a huge growth area.

The second is a very special master alloy. “What we’re doing there is producing a value-added product which enables improved
economics of the key process flow sheet, which is another incredibly important area for us,” Vaughan explains. “The flagship product
there is scandium aluminide; a high-scandium-loading material which we believe will make huge impacts in the market of
aluminium-scandium alloys downstream through melting routes. That has been very exciting for us,” he adds.

He explains that it is a small field with a range of primary and secondary producers, but with a large amount of end-user interest.
He adds that there is a logjam in the supply chain where people are looking to answer the question: “How do we take expensive scandium atoms and move them efficiently through a process flowsheet without a significant yield loss?” Vaughan says that Metalysis provides the answer.

He summarizes the technology at the heart of the business: “In simple terms, it’s a batch and flexible solid-state process that can make a very significant number of conventional alloys, and downstream can potentially make a myriad of unconventional alloys
as well.”

He also explains how demand ties these products together: “We are addressing similar end-use markets. Titanium is a material of choice for aerospace and automotive applications and that remains a focus for us. Aluminium-scandium is a neat bedfellow as a finished wrought material for those same markets as well.”

The automotive sector has been the subject of much discussion in terms of the advanced materials required for the growing adoption of electric vehicles. “What we’re focused on primarily are efforts around vehicle lightweighting through our product streams.
Lightweighting is a common denominator for a lot of what we do,” Vaughan stresses. “Automotive is a big driver, and aerospace has also been a major adopter of lightweighting for obvious reasons – two themes that are pulling our business plan together,” he adds.

Disruptive technology

Now that Metalysis has reached commercial production through Generation 4, has the balance between the three main revenue
streams for the company changed? “We clearly believe that we are now into a period of dramatic commercial growth and the piechart between these various revenue streams will vary from time to time, but against a growing forecast for all of them,” Vaughan
responds. “Generation 4 is an important production platform to enable us to do interesting things with customers and offers a material revenue stream for Metalysis as a business.”

Generation 4 is designed to produce hundreds of tonnes of metal powders per year, as well as to showcase the technology. “We have aspirations to produce ourselves, but ultimately customers in various parts of the supply chain will want to do things on their own, where we can enter into partnerships, and we have some good traction there across a range of points.”

One area where Metalysis sees interest is in basic streams of metal processing and the metal supply chain. “We see activity at the
minehead, where there is a great driver to find more sustainable ways of producing finished products. If you are making metal powders with exotic materials, there is a strong argument to do that more sustainably with better returns at the minehead instead of shifting ores and concentrates around the planet to be finished off in other parts of the world – sometimes to go back to their points of origin [as finished products]. You don’t have to be a business consultant to realise that is not a particularly efficient way of doing things.”

He adds that, at this stage, the focus is on value-add metals and alloys, rather than materials in bulk.

“At the other end of the supply chain, with Generation 4 type activities, we have companies in the aerospace, automotive and biomedical industries that see the opportunity of integrating production within their own factory-of-the-future environments and that is a really powerful thing,” he points out.

“You need only look on Wikipedia to see different visions for the factory-of-the-future and the mine of the future. Value-add
through metal processing rarely gets mentioned,” he notes. “The mine of the future talks about efficiencies of production, big data
and similar things, which is great, true and valuable, but it is largely about resource companies doing what they have done for many years more efficiently, rather than explicitly engaging with end-users
in new ways.”

He says that there is evidence of that changing. Big automotive companies, for example, are discussing long-term purchasing
agreements for specific high-value materials. “That is still work in progress on both sides of the discussion, but what it does point to is that end-users are very much more cognisant now of the role of materials and getting the atoms they want, at the price that they
want, in the forms that they need within their own factory environment.” He stresses that Metalysis’ system “can add a lot to
that story and that is something that we’re very focused on.”

Broad experience

Drawing on his own substantial metals sector experience, Vaughan observes that the metals industry has always been very conservative. “Other materials supply chains have moved to the flexibility and value of powders, over and above additive
layer manufacturing, many years ago, whether you look at glass, plastics or ceramics. The metals industry was rather later in the
game.” He says that a lot of his experience was valuable in seeing where trends and innovation make big steps forward.

“My first step, in the early 1990s, was at BP Research in their Central Research Laboratories – a powerful organization focused on new materials development. It was a very exciting time for a younger person because they looked at many different types of materials and, at the time, BP was very focused on downstream value-add. It had the kind of ambition and resources – in terms of people and finance – to capitalize on big new trends. Certainly, during my time at BP there were lots of investments in specialty materials companies and that was a key part of corporate strategy.”

He says that it is important to place your ambitions as a scientist in an operational context. “I worked at Johnson Matthey Metals, which was a very significant specialty metals company. That, particularly on the sales and marketing side, provided a huge amount of
experience. Some of Johnson Matthey’s product lines were winning and some of them were not. That was often a common theme in the specialty metals industry – you are often moving from times of great profitability to times when things were a lot more stretched.”

He took that experience to Sheffield Forgemasters, where he became head of their marketing activities. “Sheffield Forgemasters
is a major specialty steel company with lots of different products and lots of innovation, but often tackling challenging markets as well as exciting opportunities,” Vaughan recalls. “You moved from feast to famine on big orders for big things that take several years to produce and that was a huge learning experience.”

Vaughan says that the variety of experience he brought to Metalysis serves him well as CEO. “I like to think that the broad statements I
make about where the metals industry is, and where it could go, are based on hard-won experience. I am both an insider and an outsider, which I think is probably the right balance when you’re trying to bring new ideas to fruition. All of those experiences – BP, Johnson Matthey, Sheffield Forgemasters and my time in the City – are all important to me.”

Leading the way

The opportunities for Metalysis are potentially enormous. Its clients operate at multiple points in the supply chain – from miners through to companies making components with 3D printers. Their scale, timeframes, budgets and materials are very different, so how does he manage all of that complexity?

“The reality is that we have a clear and focused business plan, while not denying the broad potential of what we are doing. Shareholders want a plan that has deliverables to work to, but a story like ours is huge and disruptive so we also emphasize the breadth of what we could do. Really, it’s an 80:20 balance, with 80% focused on the core business plan and R&D effort focused around the products which I described earlier.”

Of necessity, at any given point Metalysis has a limited number of projects. As of now, these range from rare earths to other more
exotic high-entropy, complex compositional alloys. “They are markers to the future,” Vaughan says. “As the CEO, the 80:20 rule is
really important. For other industries and metal companies, 20% of more-speculative or paid R&D would be seen as ‘not on plan’, but by definition, we’re a start-up technology company. It’s important that we get the balance right overall
and I think we have.”

A customer journey

Metalysis now has four generations of cell in operation, each of which is significantly larger than the last. They range from the laboratoryscale Generation 1 to the commercial-scale Generation 4 cell that commenced operation in September this year.

How do customers progress their way through those stages?

“It normally starts with the customer approaching us with an idea because either they want to make a new material within a
broader plan – for example a new titanium-alloy variant – or a conventional material that shows a clear cost advantage compared with something else. So it’s usually either functional performance or cost reduction which are the two clear drivers,” Vaughan explains.

Projects typically start with an R&D contract invested in by an external company. “The important thing for that customer is that they
have a clear vision that, from our side, if successful we can scale up pretty quickly within the resources that we have to reach a Generation 4 scale of output – an important differentiating factor,” Vaughan says, adding that although not every project needs progress to Generation 4 scale, most of them will.

He makes the comparison with other technology start-ups. “There are many great companies around the world that can make a new or conventional material with differentiated features on a laboratory scale, but very few offer the capability to achieve meaningful
levels of production from a standing start. And that is one of our clear
advantages.”

Metalysis has begun looking to its next expansion, Generation 5, and is looking for support and partnerships to develop it. “Essentially, Generation 4 is the modular cell and we can imagine putting more of these units together, rather like an aluminium production line, to target increasingly larger levels of production,” Vaughan explains.

“We are not imagining leaping to millions of tonnes in the next few years with Generation 5 because most of the customer interactions are really focused around distributed production. That is, you bring the production to the minehead or the end-user. There
are very few single-resource players or end-users that want tens of thousands of tonnes of a specific material on a specific day,” he points out.

Nevertheless, many will want access to production capacity greater than that of Generation 4, and on a single site. “That is the next
exciting stage in our development. Next year we will be talking more formally about Generation 5, and we are having a good deal of great background conversations at the moment,” Vaughan adds.

Metalysis has one Generation 4 cell operating, housed at its Materials Manufacturing Centre in Wath-upon-Dearne, South Yorkshire. Vaughan says that with modest capex the company could put another cell in. “Within the existing footprint of the plant we could
certainly add another reactor, probably another three or four in and around the complex if we chose to.”

He says that Metalysis needs power, transformers and associated ancillary equipment to accommodate a higher level of production than Generation 4 can achieve at present. “There is stretch in the story, but it’s a function of finance and that is what we’re
working on at the moment,” he summarizes.

Versatile system

In future, customers may need to produce several different alloys, in volume, on a single site. “It is one of the features of our technology that we can, with a relatively modest amount of readjustment, produce different alloys using the same cell from one day to another. Materials tend to be common, so the kit is common. What differentiates one product from another is understanding the
recipe for producing with that common set of kit. That is what we do (defining the recipe for particular alloy systems) at our Materials
Discovery Centre.”

Metalysis opened its Materials Discovery Centre for R&D in South Yorkshire in March 2017. The three main process steps of
metal powder production – pre-processing of feedstock, electrolysis in the cell, post-processing of alloy powders produced – have to work in harmony.

“The delivery of the input to the reactor and then post-processing it, according to a recipe, uses common equipment, but there is a lot of implicit know-how in each case. The reactor by itself has some ‘magic’ to it, but it is very difficult to make a working system for any alloy unless you’ve got all three [process] elements humming at the same pace,” Vaughan confirms.

He says that there are no bottlenecks on Metalysis’ existing equipment, and the company will focus on maintaining that once it goes about process scheduling planning for Generation 5: “Slaving that appropriately to the business plan is a key consideration.”

Raising finance

Vaughan stresses the continuous thread of metals running through all of his working life: “The industry is a common denominator between all of my career points. In the early days there was a broader materials brush, but over the span of time the metals industry has been at the core of my career.”

That thread continued to run through his roles in providing finance at investment banks. He left Sheffield Forgemasters to join
Robert Fleming Corporate Finance. “We did a lot of deals from magnet companies to steelworks,” he recalls. “These ranged from
management buyouts to privatizations and capital raisings, and that again was a very exciting time of my career.”

He played a similar role at JP Morgan. “It was a bigger machine than Robert Fleming and tended to do things on a larger canvas in terms of deal sizes,” he says. “From the finance side I’ve been involved in some pretty small deals, but I’ve also been involved in some of the largest deals in the metals sector over the past couple of decades”. While his finance experience encompassed mining and resources too, he says that metals processing was the centrepiece of his time in investment banking.

A kinetic fisherman

Given the international breadth and depth of Metalysis’ business, is he in constant motion as CEO? He responds that people are more inclined to talk about kinetics in all sorts of contexts now, “But motion is generally good!” he quips. “The truth is that if you are a technology company that has global ambitions, which we do, we need to be out and about... travel is pre-requisite.”

So how does he relax? “I’m a fisherman. Fishing in all of its various forms provides the opportunity to take time out and think about
things. Some of my most productive thoughts come as a consequence of communing with water.” He notes that fishing is often described as a sport. “It’s not really. It’s closer to meditation than physical activity and a key release for me.”

Vaughan’s pastime involves lake, river and sea fishing: “I love water, there is a certain Zen state when fishing and that is an important tool when making decisions about small and big things as a normal part of executive management,” he adds.

He caught an “enormous” cod not too long ago, but he was at pains to put it back. Stressing just how important his hobby is to him, he notes that when he can, he heads to the riverbank or shore for a moment of peace on his travels, from the pristine rivers of Central Asia to some of the grubbiest canals in the UK!

Plenty still to do

When Metal Bulletin Magazine, predecessor of Metal Market Magazine, interviewed Vaughan in mid-2017, he was clear about the
outlook for Metalysis then. “For the next two years, our focus will be on 3D printing, lightweighting with titanium and aluminiumscandium alloys, for aerospace and automotive, as well as the drivetrain and magnetic components for electric vehicles,” he said back then. That is the 80%, he affirms today.

What does he see unfolding for Metalysis in 2019?

“Three things. We hope to announce some major new commercial partnerships next year. We are looking forward to an increased level of production from the Generation 4 plant. And I am focused on making some big leaps forward on planning our Generation 5 expansion in 2019. Those three themes provide the legs to Metalysis’ strategy,” he summarizes.

He sees the financing for what he still thinks of as a start-up company, “even on the scale that we are,” as part of the day job. “We’ve enjoyed some fantastic support from the existing shareholder register and we are always talking to new people but, during 2019, we aim to bed down the commercialization aspects of what we’ve touched on earlier, which will give us some really interesting operational cash flows,” he predicts.

“The challenge we face in financing terms is really to access, in the broader spectrum, financial instruments in order to support
ambitious, significant projects like Generation 5. These become big-ticket items capable of meeting our current shareholder interests
and materially growing the company.”

Vaughan adds that for each new generation of plant, Metalysis does look to get a tenfold increase in capacity more than the preceding
facility.

“The financing doesn’t quite scale like that. At each stage, capital is required and, naturally, our supporters are looking for demonstrable success in terms of what we’ve delivered to date. Generation 4 does exactly that. It all comes back to the core business plan,” he concludes.


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