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Neometals (NMT) - High-Grade Nickel & Palladium Project Advances

April 22 2021, 19:44 GMT+01:00

Neometals

  • ASK: NMT
  • Shares Outstanding: 545.35M
  • Share price C$0.50 (19.04.2021)
  • Market Cap: C$243M

Neometals is an innovative project developer based in Western Australia looking to develop projects for commodities that are exposed to the EV thematic and the energy storage megatrend. The company is developing a Lithium-Ion battery recycling business in Europe which aims to be the largest in Europe. They are developing a Vanadium recovery project and have interests in Lithium, Titanium, Vanadium and Nickel. The provision of these materials to the market will help to speed up the decarbonisation of the supply chain.

We recently chatted with Christopher Reed, Managing Director and CEO at Neometals, an up-and-coming firm focused on providing key materials for the green energy revolution. He and his colleagues, Jeremy McManus, General Manager –Commercial and Investor Relations, and Darren Townsend, Chief Development Officer, helped us understand the evolution taking place at Neometals and the potential for continued growth and profitability going forward.

Company Overview

Neometals, based in Perth, Australia, is involved in the development of opportunities in key minerals and advanced materials such as batteries. These mineral and products are essential for a sustainable energy future. With a focus on the energy-storage megatrend, the company strategy revolves around de-risking and developing long-life projects with strong partners and integrating down the value chain to increase margins and provide value for shareholders.

Reed’s Short Company Overview        

Reed summarized the company as a firm that is looking to develop projects for commodities such as lithium, titanium, vanadium, and nickel that are exposed to the EV theme and the energy storage megatrend. He indicated that, in essence, they seek to provide materials to speed up the decarbonization of global energy supply chains in order to develop a more sustainable future. One of the company’s major themes is the recycling and materials recovery of finite resources.

Principal Projects

The company’s flagship project is its lithium-ion battery recycling business in Europe, held in a joint venture with the SMS Group. The company is currently building a state-of-the-art demonstration plant in Hilchenbach, Germany, which will be the largest capacity plant of its type in Europe, permitted for 1tpd. Plans are in place to move beyond the demonstration stage and scale up by a factor of 10.

The company is also involved in several other major projects. These include vanadium recovery, lithium refining, the Barambie titanium-vanadium project, the Mt. Edwards nickel project, and several R&D initiatives.Neometals (NMT) - High-Grade Nickel & Palladium Project Advances

You Used to Be Miners

The company is now sitting at the downstream end of the green-energy supply chain, at the other end of the spectrum from its former self as a mining company. We asked Reed about that. He indicated that the firm’s pivot away from upstream and into end-of-life and recovery project has resonated quite well with the street, especially given the company’s strong focus on ESG principles. They are in the sweet spot, he said, of recovering and recycling finite-yet needed resources. And they are doing that very efficiently with a very low-carbon footprint and by using environmentally friendly processes.

The Mount Marion Legacy

Prior to the company’s shift, it had made quite a bit of money back in the day from their mining activities at Mt. Marion. This is a lithium mine near Kalgoorlie, Western Australia, which contains the world’s second-largest high-grade lithium reserves in the form of the mineral spodumene. Neometals was involved there in a joint venture with Mineral Resources, beginning in 2009. They built Neometals sold its interest for $A103.8M in 2019 at the top of the last lithium cycle highpoint, giving them plenty of money on our balance sheet at this point in time.

The Carbon Component

Clearly, as a purveyor of green minerals and products, the whole issue of carbon comes into the discussion for Neometals. We asked Reed to elaborate on carbon a bit. He indicated that the easiest way for the company to move away from carbon is to get out of mining. Mining is inefficient in that regard. Nevertheless, society needs these minerals, so it's a chicken-versus-the egg type of thing, he said. He believes that they need to look at things in a new way and a new light if we’re going to run a long-term, sustainable business.

He also said the mining and energy industries are going to have to reinvent their carbon-usage policies. He cited the company’s vanadium recycling business as an example, where they are recycling: “Some of the world’s highest-grade vanadium grades in steel slags that have stockpiled for 40-years.” With new carbonic acid process they are now using, they can sequester 65,000t to 80,000t of carbon dioxide a year from that recycling project. 

Neometals and ESG

The company has put a lot of effort in coming to grips with and complying by ESG principles. Indeed, the firm’s new direction is governed by these principles. They are actively remediating sites and sequestering carbon dioxide. In some cases, particularly with the European initiatives, the company is reducing the carbon footprint of entire supply chains.

Nevertheless, the company's management known that they are operating in a business that is not 100 percent “clean”. McManus contributed that “You can’t have stuff without minerals. We’re trying to complement the requirement to dig more stuff out of the ground, but you can’t replace it. Our intention is to do it smarter and try to do it sustainably and ethically where possible”.

Who Are Neometals Competitors?

Clearly, Neometals is not the only company thinking about green-energy ecosystems. Others are vying for participation in this space across North America, Asia and Europe.

We asked about Neometal’s edge vis-a-vis the competition. Townsend responded, stating that they do have competitors, but that their edge is in recovery percentages. Neometals has achieved over 85% recovery with their hydro-mat process, which is 10% higher than the current European regulations require. He also believes that they have a “best-of-breed” solution to recovery and a highly flexible business model.

Li-Cycle has a business model similar to theirs and is probably a big competitor, said Townsend, but with the SMS joint venture, Neometals will have the capacity to build many large facilities around the globe.

Will There Be Shareholder Dilution?

The company believes that it can ramp up their lithium-recycling business without overly diluting current shareholders. They have the capacity on their current balance sheet to completely fund the first plant in Germany. In fact, that country is giving a 30% capital subsidy for projects like this. In some other ventures, they have partners like ITOCHO of Japan who can finance their share of the expense. Nevertheless, he admitted that they might need financing to fund the construction of at least an additional plant.

Vanadium Summary

The company has a 27-month option to evaluate a 50/50 joint venture with the Scandinavian firm SSAB to recover and sustainably produce vanadium from about 2Mt of steel slag. The slag contains about 4% vanadium pentoxide. Early feasibility analysis has indicated that they can produce vanadium at the bottom end of the cost curve from this initiative. Both CAPEX and OPEX numbers are coming in at the lowest quartile. They are envisioning full-scale production by the end of 2024.

Mt. Edwards Update

Neometals wholly owns the Mt Edwards nickel sulphide exploration asset, located 40km south of the Mt. Marion property in the eastern goldfields of Western Australia. Although principally a nickel asset, the company was extremely pleased with some recent assay analyses taken there, which indicated a significant amount of palladium, platinum and gold in association with the nickel. These valuable add on minerals were apparently largely overlooked by the previous operator. At this point, Neometals is looking at some fairly hefty co-product credits at Mt. Edwards. Continuing evaluation of the total mineral resource at Mt. Edwards is still ongoing.

Happenings at Barrambie

The company has a 100% interest in the shovel-ready Barrambie titanium and vanadium project, in central Western Australia. This hard-rock asset produces titanium from ilmenite and vanadium from iron-vanadium concentrates. Neometals loves titanium because of its importance in the economies of highly developed countries. According to Reed, the high-quality, ilmenite-rich mineral sands across the globe are running out, so the hard-rock suppliers are setting the price. Neometals is delighted, he said, to have a Chinese buyer looking to obtain 800,000 t from them. An investment decision will be made in mid-2022 on how to ramp up operations at Barrambie.

The Latest on Lithium Refining

Neometals is evaluating a lithium refining initiative, principally via a partnership with an Indian company, Manikaran Power Limited, to supply lithium hydroxide to the battery cathode industry. Manikaran is India’s third-largest power trader. The plan is to put a 20,000 t lithium hydroxide refinery in India. Neometals expects to make a development decision in 2022 at the earliest.

Recap and Plan Forward

It’s apparent that projects are coming to fruition on several fronts over the next 4 to 5 years at Neometals. We asked the leadership what they intend to do with this set of valuable businesses as they become commercially viable. In fact, the street has apparently taken notice, as the share price of Neometals has moved up quite a bit lately.

Reed indicated that indeed they do have some options going forward. For some of their projects, such as their recovery initiatives, they will be looking for additional feedstock as part of the growth story. They will also be carefully evaluating selected partners in order to scale up these emerging commercial businesses. They, of course, will also be monitoring where they are in the market cycle of each of their projects. It’s not off the table that they would sell one of these businesses if they could bring in another Mt. Marion-like deal to provide an outsized return to the shareholders.

To find out more, go to the Neometals Website.


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