- ASX: NMT
- Shares Outstanding: 545M
- Share price A$0.16 (25.06.2020)
- Market Cap: A$87M
Interview with Chris Reed, CEO of Neometals (ASX: NMT), and Accompanied by Darren Townsend, Chief Development Officer, and David Robinson, General Manager.
We’ve spoken about the Australian technological pioneers at Neometals on several occasions. Each interview has unpacked an additional exciting project. The value proposition of Neometals grows stronger by the month. The projects all share several things in common: they are forward-thinking technical ventures that fit adeptly into the EV & battery thematic. Feel free to check out some of my previous articles about the company.
Matthew Gordon talks to Darren Townsend and others, 25th June 2020
Vanadium Recovery Project
Today’s topic is Neometals’ high-grade vanadium-bearing slag recovery project in Sweden. The company has a conditional supply agreement with a Nordic steel company, SSAB, which owns nearly 2Mt of waste spread across 3 steel mills in Sweden and Finland. The average vanadium pentoxide grade in the slag ranges between 2.67% and 4.1%. Neometals intends to purchase 700,000t of stockpiles. In addition, Neometals has a JV with the Scandinavian company, Critical Metals.
We were keen to delve into the results of the recent PEA:
- Annual production of 12.12Mlbs of V205.
- 10.5-year project lifetime.
- This equates to a sizeable life of plant revenue: US$1.1Bn.
- Initial CAPEX of US$159M.
Total worldwide vanadium supply in 2019 was 102,365t V (tonnes of vanadium equivalent). The market is dominated by the Chinese (59%), with South Africa and Russia holding 9% and 8% respectively. 69% of vanadium production was extracted at 14 mills (in China, Russia and New Zealand) using slag generated during the production of steel using vanadium titanium magnetite as feedstock. The main issue for vanadium is that Chinese production costs are well above market prices, and without new greenfield capacity it is increasingly likely that there will be a shortfall of vanadium supply and a growing supply deficit. By bringing new greenfield capacity into the market, Neometals can seek to plug this gap. Moreover, Neometals has a sophisticated extraction methodology to achieve extremely efficient and economical recoveries, placing the company in a low quartile for cost.
There’s another aspect of excitement to this story, and it comes from Neometals’ business model. As a classic project generator, Neometals is able to develop these high-quality projects with a minimal capital outlay and downside risk, instead opting to utilise strategic partners to bankroll development into production; the company can opt-out at any point Furthermore, Neometals’ robust balance sheet has c. A$100M cash in the treasury, a huge amount when you consider Neometals itself is only valued at A$87M. This value discrepancy appears to be one of the most obvious I’ve ever encountered.
Neometals also manages to mitigate risk by ensuring its projects are in stable, secure mining jurisdiction. Its strategic partners are reputable and the company’s commodity-based risk is diluted via diversification. Neometals has the liquidity and expertise to manoeuvre its way through even the toughest of markets.
The next step for Neometals is to complete a PFS by mid-2021. Early work has already commenced. If it represents an economic success, the company will proceed through to an FS, which it will aim to complete by mid-2022. Investors can expect an FID for the project by the end of 2022. On this project, the only financial obligation for Neometals right now is these studies; total expenditure will be around A$5m until the FID. Neometals and Critical Metals will have to wait and see what the ultimate cost will be, as the vanadium price will continue to fluctuate. Neometals expects to spend 5-10% of the project’s CAPEX on purchasing the stockpiles.
Neometals is shaping up to be a really nice investment opportunity, as the management team looks to replicate its remarkable success at Mt. Marion. More opportunities are likely to come the companies way, and additional work with SSAB could certainly be on the cards.
What did you make of Chris Reed, Darren Townsend and David Robinson? Comment below and we will respond.
Company Website: https://www.neometals.com.au/
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