Neometals is a mineral project developer. The company’s projects include Lithium, Titanium, Nickel and Vanadium, in the shape of the Mount Marion Lithium Project, a Lithium Hydroxide Project (ELi Process), Alphamet, Barrambie Titanium Vanadium Iron Project (Barrambie Titanium) and Forrestania Nickel Project. The Company's Mount Marion Lithium Project is located approximately 40km southwest of Kalgoorlie, Western Australia. But what it is going to become known for is its Lithium recycling project in Europe and also a large scale Vanadium recovery project also in Europe. Both partnered with multi-billion Euro conglomerates.
We caught up with Chris Reed, CEO of Neometals for an end of year round-up and to talk about a couple of press releases we’ve seen since we last spoke in November.
Company Overview
Neometals is an ASX listed project developer with a number of projects, all with direct exposure into commodities that are required to supply the Lithium battery supply chain. Those projects cover Lithium battery recycling, Vanadium recovery from existing stockpiles, Lithium conversion opportunity, and they also have upstream resources of Nickel and Vanadium.
2020 Review: Progress & Difficulties
Neometals is in the evaluation and development phase and are not actually constructing yet. If they had been involved in construction and operations offshore, which most of their projects are, it could have been very, very challenging during the Covid outbreak. In terms of the Lithium battery recycling, they were finishing a pilot plant just out of Toronto this year and managed to finish it and negotiate their joint venture with SMS. They have however started to build the demonstration plant which is on track.
The Vanadium Recovery Project has not been impacted by Covid as Sweden did not go into lockdown so they have the samples from Sweden for the pilot to go into the full Feasibility Study which has been seamless.
The project in India is probably a couple of months behind in terms of permitting and securing the running of the commercial side. The technical risk is not a concern to Neometals because Ganfeng converts Mount Marion concentrates every day.
The Vanadium Titanium Project has been a little slow because they’ve had a few political implications with the Chinese and are not seeing eye to eye with the Australian government at the moment. And as for the Nickel, they’ve increased the size of resources and made a few gains on the exploration side.
Neometals has achieved probably 75% of what they wanted to in 2020. The technical streams have gone really well, a couple of the commercial ones are a couple of months behind but they plan to catch up in the New Year.
EU Carbon Reduction Efforts & Approach
Neometals had the second lithium mine in the world, after Greenbushes, of industrial scale and that is still the world’s second largest Hard Rock source. That generated over $55M of cash that investors have seen returned to them and also the +$80M of cash that the company is sitting on today. However, the biggest opportunity for investors still lies ahead, having moved into and established itself into the battery thematic in 2016, because they believed that the world would have to start to recycling and reprocessing tailings to keep up with demand. Looks like this early strategic move will pay off dividends for Neometals shareholders.
Neometals points to the new EU Battery Regulations which will require battery companies to report their Life Cycle Analysis in 2024 and to comply with CO2 limits from 2027. There will be a minimum requirement of recycled materials in batteries. Recycling batteries reduces the dependence for further mine development. They got into it early with R&D success and have a large German partner for promotion initially in Europe with the ambition to become a global business.
Opportunity to Reality: Partners' Input & Contracts
SMS and Neometals have formed a joint venture called Primobeus GmbH, which is in the process of setting up a demonstration plant at Hilkenbach in Gemany, which is SMS’s centre of manufacturing. SMS has 14,500 employees in 95 sites around the world and is one of the world’s largest builders and processing plants. They are targeting the European car makers as they are located in the centre of Germany. The car makers can bring their modules and packs which can be safely shredded, the CO2 measured and they can take the product back. This work can be independently verified by the supply chain and once at that stage, SMS can build the necessary requirements for any cell maker or car maker at any size from 200,000t to 500,000t.
The biggest recyclers in Europe at the moment have about 7,000t of capacity and the first Neometals plant will be 20,000t capacity and is like a chemical processing plant. 1t of batteries is the equivalent of having a tonne of concentrate that has got 15% Copper, 15% Nickel, 2% Cobalt, and 2% Lithium and Neometals will initially get paid to recycle them.
Next Steps: Goals for 2021
In 2021, Primobeus will finish construction of the demonstration plant by the end of March and will finish the trials by June/July. They are doing a Class 3 Feasibility Study which will be finished in the second half of 2021, leading them to consider an investment decision on a fully integrated operation in March Q2/22. They already own a 20,000t shredding plant, so are able to start up with shredding the batteries and making the ‘black mass’ before they build out the chemical plant. So they can provide a service to safely dispose of the batteries and can take fully charged, partially charged, and discharged cells in all varieties of format, safely process them, physically recover the copper foil, the aluminium foil, the plastics, the steel casings, and are left with what is called ‘black mass’ which is a mixture of Nickel, Cobalt, Manganese, Lithium and Graphite. The ‘black mass’ is safe to store as has been deactivated and looks like a black powder which can be kept in drums and bulk bags to process at a later date.
It is necessary to shred the batteries as in battery form, they are a serious fire hazard. EV cars will have much larger battery packs with a lot more charge so will be a greater risk if stockpiled.
Finland Vanadium Plant: More Land Found
The Vanadium Recovery Project uses a process that can recover Vanadium from steel slags that are a by-product of melting Swedish Iron ores which have incredibly high grades of Vanadium. Neometals has access and a Conditional Purchase Agreement with SSAB to buy 2Mt and process it and they are looking at a plant that can do 200,000t a year which will produce about 5,500t of Vanadium Pentoxide, which will be about 5% of the world’s supply at the bottom end of the Cost Curve. They have completed a Scoping Study for a mini pilot plant and are now in the Pre-Feasibility Study. They have a partner, Critical Metals who has been running the location Study.
They looked at 10 sites in Sweden and Finland, and decided on the city of Poray, where there is a port owned by the City. It’s a deep-water port, so the feedstocks are able to come in by barge and has power, rail, and chemicals. They have a build-ready 50 acre site at the port where they can build the plant and stockpile their inbound and outbound products and have access to the city utilities. They are also able to access the CO2 streams from the biomass plant. The government has offered to provide financial assistance for their Carbon capture as Finland is committed to becoming net Carbon neutral by 2035 and in return, Neometals is cleaning up the slag piles and extracting vanadium cheaply.
Neometals now has patents on both the Sulphuric route and the Carbonate route, but the tails would have been a Sulphate in Finland. They will recover the Vanadium, and make money, but are prepared to consider less recoveries and less profit as long as the tailings are the safest they can make them for the environment.
Views for the Vanadium Market & Price
85% of the Vanadium produced goes into hardening Steel, some goes into Titanium alloys for Aerospace, and some goes into chemical additives and energy. Neometals is producing high grade material that will go into the High Purity and Energy cathode and electrolyte materials, whether they’re Lithium-ion batteries, or the new Lithium-Vanadium batteries. Nickel Vanadium Manganese is used to replace Cobalt in a Vanadium Sulphate electrolyte solution. The Vanadium market is less than 100,000t of Vanadium and is dominated by China, South Africa, and Russia in terms of production.
There is going to be a fundamental shift in the demand upwards, and the supply is struggling to keep up. There are no more stockpiles of slag in South Africa. China has shut down all the little backyard operators. So, Neometals is in a good place to service Europe with its own resources. There is a lot of talk of the ESG thematic, and Neometals has shifted mentality from 2016, 2018 for the Lithium and then the slag recycling projects and fundamentally changed the projects that they are targeting and developing to move into something that’s more environmentally sustainable.
Timeline for Deliverables
The Pre-Feasibility Study will be completed and released before 30 June 2021, if not before then. It is likely that before that date they will have completed the pilot plant and they have about 45t of material from the 3 different Steel plants, so they can run that and move straight into the Feasibility Study, finish the full Feasibility Study by the 20 June 2022. They have allowed themselves 6-months to make the final investment decision, but that timeline could be accelerated.
Neometals has the site, the supply contract, power, water, access to CO2 and all that’s needed is the commercial side. They need to go and get the contracts so that people can see the quantity of supply of batteries they will get and how much money they will make.
Growth & Value: On Dividends & Upscaling
All the projects are in either the Final Pilot or the Final Feasibility stage with the exception of some of the Upstream assets which will become increasingly more valuable. They can also look at returning those back to the Shareholders in a structure that leaves Neometals as perhaps one of the only Carbon negative miners around. Just on the Vanadium component, Neometals has the feedstock for decades, and more of this is being produced on a daily basis.
Plans for the Other 3 Projects
The Feasibility Study for the Lithium Hydroxide Project will be out in Q1/21 which then needs to go into the final Engineering and Design Phase, which is another 15 months. The Plutonium/Vanadium Project has a grounded Mining Proposal and has approval to build a plant. They are currently trying to get offtake agreements with Chinese counterparties, and are having political and trade talks with the Chinese which are not easy at the moment.
Neometals has 150,000t Nickel metal in 11 Sulphide deposits. They acquired these when the price was about 12,500t for Nickel and the price now is over USD$17,500t and Nickel is an exciting market so the price is continuing to increase.
The Nickel will develop into a whole series of mines and Neometals has 5 of the deposits under evaluation to be put into a sequence of open pit and underground mines then they’ll move into the Pyramiding Phase. They are only 50kms from BHP’s unutilised Nickel 2Mt concentrator and smelting complex.
Investors looking at Neometals have a had a hard time trying to find comparables with which to work out what the opportunity is. The reality is that this is new ground. They are an industrial player now, and no longer a miner, and should be re-rated higher, as such.
The battery thematic is evolving as OEM / car manufacturers invest billions of dollars to segue their companies. Energy storage too, especially VRFB, are trying to establish eco-systems, technologies and supply chains. What both of these groups need are solutions, solutions that very few can offer in a truly green and ethical manner. In addition, having cash has allowed Neometals to be able to negotiate on equal terms with their multi-billion Euro partners and be able to use the partners relationships to insert themselves into the European Circular eco-system. First mover advantage is often enough, but with the contracts and agreement in place it's going to be hard for others to compete.
It is an exciting time for Neometals. They have lots of optionality on all their projects and we have enjoyed following them in 2020. We hope they can keep up the momentum into 2021 and look forward to catching up with them again soon.
(20min delay)
