- ASX: NMT
- Shares Outstanding: 545M
- Share price A$0.16 (30.06.2020)
- Market Cap: A$87M
Interview with Chris Reed, CEO of Neometals (ASX: NMT), and Accompanied by Jeremy McManus, General Manager.
READ ARTICLE FOR THIS INTERVIEW HERE
Neometals is a ‘Project Developer.’ A technological innovator with a diverse portfolio of intelligent, economic projects, many of which position it in the incoming EV revolution. This includes a lithium refinery, a low-cost vanadium recovery from slag tailings project and their vast titanium-vanadium project. The most advanced project is a proprietary hydro-metallurgical technology that offers a much cleaner, more efficient means of recycling lithium-ion batteries than conventional pyro-metallurgical and mining methods, helping automotive manufacturers with their goal of NetZero carbon footprint.
The project has an ESG component that has become increasingly useful after Elon Musk’s request for as much clean, green and sustainable nickel to be produced. It is clear, the front-end of supply chains is under more scrutiny than ever before, and Neometals has the solution to fit perfectly into the backend of this green narrative. This will help deliver a solution for full supply chain.
Today, we’re talking about Neometals’ JV with SMS Group, a multi-billion dollar German conglomerate (Matt mistakenly refers to SMS as SGS on 2 occasions- apologies!). It was announced today, and Neometals now has a major partner for its flagship battery recycling project. It’s definitely a major milestone. We dig into the details, looking at the terms of the contract and the size of the opportunity that this could present for Neometals.
The company, as we’ve mentioned repeatedly, has more than enough cash, with $85M in the bank, to get this operation moving forward at an accelerated pace, and the next 12 to 18-months look like an exciting runway for catalyst moments. Expect an FID at the end of this period.
- 2:38 – Company Overview
- 4:51 – JV with SMS Group: Diligence Process
- 8:53 – Potential Size of Market & How They’ll Capture it
- 15:28 – Barrier to Entry: Differentiating Neometals
- 17:47 – Elon Musk’s Requirements: Greenest Tech Ever?
- 22:15 – Terms of the Deal with SMS Group: Liabilities and Funding
- 30:37 – “Dividends? Keep ‘Em!”: Addressing Shareholder Concerns
- 32:29 – Building Neometals: A Look at the ESG Movement
- 36:04 – Raising Money: Do Funds Care?
- 38:25 – Understanding the Potential: Timing for Studies and Numbers
- 43:55 – What Happens Next?
CLICK HERE to watch the full interview.
Matthew Gordon: Gentleman, how are you? How are you, Chris? How are you Jeremy?
Chris Reed: Very well. Thank you, Matt.
Jeremy McManus: Good. Thanks, Matt.
Matthew Gordon: Thanks for joining us. I know it late your time, so we’ll get straight into it. We have seen the press release came out this morning. It looks like pretty good news. You have actually managed to get this JV together and created a company called Promobius. Do you want to tell us a little bit about it? Maybe start at the beginning for people new to the story, and then we will pick it up from there and get into the weeds with you in a second.
Chris Reed: Neo Metals is an ASX-listed project developer. Historically, we developed the Mount Marion Lithium project, which is one of the world’s largest sources of Lithium. Immediately in 2005, after we started construction we started looking at where in the supply chain we should be next, and all roads lead to recycling. These batteries are a mix of Lithium that’s been mined in Australia up to China, into Europe. Cobalt that has been mined in the DRC into China, into Europe or into Asia into the US. We have gone to such great lengths to combine all these materials in the battery. Surely at the end of life there is significant value to be had by processing these and recovering the battery materials as opposed to, to keep mining primary sources of ore that have got a massive carbon footprint.
So, over the last 3 or 4-years, we have been developing a process. We have been scaling that up from bench scale work in Australia, through continuous lab scale into a pilot plant that we ran at SGS in Canada in 2019. We finished that early in 2020. We executed a MOU with a very large German engineering group SMS Group last year. They have done extensive due diligence. We finished the pilot plant and today is really the culmination of about 9-months of work to incorporate what will be a 50-50 joint venture to develop initially what will be Europe’s largest battery recycling business.
Matthew Gordon: Can we just talk about some of the moving parts first before we get into the detail around the deal itself? SMS Group. Who are they? You say they are a big German group, but tell us a bit more.
Chris Reed: SMS, they have been around for almost 140-years. Privately owned. More than 14,000 employees in 95 sites around the world. They are one of the largest builders of processing plants in the world, based in Germany, which for us outside of China is the largest Lithium battery production hub and emerging. A natural target; they are, what we would say is a high capability partner in terms of delivering what have been successful R&D outcomes from Neo Metals. They are eminently equipped to build and operate these plants on behalf of the joint venture. They are one of the largest generators of German-backed import-export financings. They have been around a long time more than €38Bn sales last year. And I had a look in the annual report that they have got almost €1Bn cash. So, they are a very, very strong capable group and they bring a lot to the transaction.
Matthew Gordon: It would be nice to talk about one of the other variables, which was the market for this. What I’m trying to do is work out the scale of the opportunity, and then be able to get a sense of the quantum that you’re going to be able to capture. SMS – they are German, is that’s why you’re focused on the European ecosystem? You have got this battery metal thematic going on throughout Neo Metals, but what is it that you have been doing with them over the last 9-months to get them through to this stage? Can you tell us what’s the diligence process? What’s the problem you’re trying to solve?
Chris Reed: So essentially, you have got these batteries at the end of life and they have a lot of base metals in them, they have Lithium in them. It is hard to store them safely and they’ve got very high value in terms of the in-situ metal in those batteries. So, we have had to develop a process that can deactivate those batteries. We shred them, make them safe to downstream process. And then we developed a downstream process to recover the cathode chemicals that can be reinserted back into the supply chain. And, you hear about, Elon Musk has come out and said, we need Nickel and the Nickel producers to produce more Nickel sulphate. Okay, I do need more Nickel sulphate, but the Nickel is going into these batteries, you can capture it at the back end and you don’t need to have big mines that make concentrates and then they get shipped to refineries around the world and then they get made into metal and then they get dissolved into sulfuric acid and make sulphates and then go to cathode manufacturers. We can actually regenerate exactly what needs to go back into the supply chain at a fraction of the carbon footprint of virgin-mined materials. My offer to Elon Musk would be: we will recycle all the Tesla’s batteries forever for free. And if you want to phone me up, hit me up and I’ll even let you share in some of the profits.
Matthew Gordon: That’s a big offer. I hope he’s listening. You never know. So that’s interesting. You’re saying that you have got a green solution for providing Nickel back into the battery cycle. But part of what I wanted to understand is the size of this market. What is the total potential size of this? What is the bit you’re going to capture and how do you do that?
Chris Reed: Our initial deployment, so we own a 20,000t commercial scale shredding plant, or a comminution circuit. So you have got to make it safe to process. Then you have to separate out the plastics, the steel, the Aluminium, and Copper foils, and then you are left with a black powder or what we call a black mass. We then leach that and recover the cathode chemicals. So that’s essentially the process in a nutshell. And that addresses pretty much what the market needs. It needs to process them safely and it needs to close the loop. And if we have a look at, perhaps the timing of the deal and you go back to, what have you done in the last nine months – so what we have done is, is we have shown them the scoping study, the results we have then walked them through and they have been able to witness the pilot plant. We have wound that up. They have seen the recoveries we get, they have seen the purities that we can make. We have got the format test where it reports the mass energy balance and it goes into the engineering studies, and the guys are comfortable. And the opportunity in terms of the size of the market, so they’ve deduced what we have got to process. It is technically feasible. What they’ve told us so far is that it is economically viable. But when you overlay that, what is the opportunity into Europe? The investments in the EV sector in Europe have outweighed what has been invested in China for the last three years. The Chinese were there, they’re bigger, but they were there earlier. Europe has been where the factories have been committed to. And so, what you have found, even from the start of the year to where we are now, it has gone up to 415 gigawatt hours. It is now over 500 gigawatt hours. And when you translate that into batteries that will hit the market and then how many batteries will come after they used for life, somewhere between 7 to 10-years, you are looking at a multimillion ton potential feed.
And so initially we’re going to roll out a 20,000t plant, and that’s designed really to take the production scrap from a gigafactory, not necessarily Tesla’s, but LG or any other, or indeed dealing with the car maker who gets their batteries from different sources, but initially designed to take production scrap. And then we would scale that up for the end of life applications. It is a big market. And if you multiply a couple of million tons by the in situ value, you are well into the double digit billions in terms of the market, and hence why for us, some might look at the transactions and go, well, you are giving half away, and then I would say, well, are you? You have approved a technology that cost you X to this point, and you have got to make it a reality for your shareholders and turn it into cash. What is the most efficient, timeliest outcome here, which is to get someone who is perfectly capable of delivering on time and scaling up to whatever the market needs? , SMS aren’t in there to build a little dinky 20,000t plant, they are there to build multiple 200,000t or larger plants. That’s the game.
So, quality product meets all the regulatory requirements, meets the needs of the market. This is a step away and you look for minerals and materials for a sustainable future – that way. And so, we are giving them materials for a sustainable future in a sustainable process. It is a step away from mining, but it is lower risk than mining. We have done is we have partnered with someone who can actually make our 50% worth multiples more than what we could do. Now, we could deploy this in Australia, but Australia wouldn’t be big enough for 5 to 10-years. Europe is big enough. We can say with confidence that the money that is being committed, last month you had the German government commit €135Bnto the health of the EV carmakers. All of a sudden, this €6,000 cash subsidy to go with the €3,000 from the producer – that’s the carrot. And then they’re going to invest €65 billion investing or installing 77,000 high voltage charges in 14,000 service stations in Germany. That’s €135Bn. That is more than my country has committed to COVID relief for the whole country. And this is Germany just for the car makers. And you have got the French who have committed €12,000 for every domestic. And then you have got penalties if your fleet produces more than 95g Co2 p/km. You have got the carrot and the whip, just driving this transition to decarbonise transport and circular economies.
We started out 3 or 4-years ago, we thought this will grow into a good business. And we get into these businesses early. We were first into Lithium, we were first out of Lithium production. We’re one of the first into large scale recycling. But what has surprised us, has been the confluence of all these regulatory and ESG and circular economy and just these massive tail winds and these volumes just, they keep coming at us.
Matthew Gordon: Europe is the right place to be, and you have got the right partner in SMS because they have got the capital and connections. I understand that. You talked at the beginning about – you have developed. I’m trying to understand what are the barriers to entry for people coming in to try and get to capture some of this? And also because I understand the first mover advantage that you have got, but have you got proprietary technology? Have you got intellectual property? What’s to stop other people coming in and talking the same game?
Chris Reed: Yes, sure. We have developed own flow sheet. We have EU and Australian provisional patents pending. We have done the normal freedom to operate searches. I guess anyone that tries to follow us will be getting a nasty letter from our employees, our lawyers. And probably the employees. We have learned a lot over the last couple of years; it is called research & development for a reason. If you knew what you were doing, you wouldn’t call it research & development. So equally as we have found a process, we have found not what to do as well.
So you have got to be careful with these batteries. I remember early on, my chief operating officer gave me a book on Lithium batteries called ‘Canned lightening’. If you don’t shred them the right way, we have all seen from the press what can happen? Safety primarily and then recovery of value with an eco-friendly footprint. That would be pretty much the 3 drivers that that I would espouse that our process has.
Matthew Gordon: So talking about the Elon Musk statement last week about Nickel. He wants a green, efficient production of Nickel. And some of the Nickel companies, especially the Sulphate guys, reacted quite positively to that. You are at the other end of the scale, but nevertheless, as important, it seems. That seems to be the story: you are saying that you’re nevertheless important in terms of the total carbon footprint associated with car manufacturers, products being the car. With your technology, can you claim to be the greenest battery? Because there are battery recycling companies out there, you’re not the only battery recycling company out there, but are you saying you are the cleanest or you have got scale? What’s your USP?
Chris Reed: If you have a look, and people say recycling and it covers a lot of business models. In Australia, people say, I’m battery recycling. And really what they’re doing is taking the batteries, they’re deactivating, they’re shredding them and they’re separating out casings, foils, plastic and the black mass and the black mass is going offshore. And then you can go to Europe, with some of our competitors, who are using traditional pyro-metallurgy routes. They would take either the battery or the black mass and basically melt it. You would incinerate the graphite, which is about 50% of the mass. The plastics, the electrolyte hydrocarbon that’s bearing the Lithium. And so instantaneously you are below 50% recoveries. Whereas the EU Battery Directive is heading towards higher than 85% recovery, which is where our process is now. We’re hoping to get well into the nineties.
Our process has higher recoveries. And if you have a look at, as Elon said: more efficient, and even if you go to Rob Friedland’s comments last week about his high-grade Copper in the Congo, which will also need to go on the batteries, he has got a 10% grade. If you compare that to a 1% grade, say in a big bulk Chilean operation, you have to mine 10x less ore – that has a lower footprint. And then when you put that in your processing plant, you have to process 10x less ore to get a ton of Copper. It is just arithmetic. It then follows, if I’ve got a battery, the battery has the highest purity, metal oxides, or metal sulphides to get converted to metal oxides that you can get. The metals that are in there were high purity. And we’re recovering. If I have a look at an Apple battery, by weight it is 20% Cobalt. It has got incredible value: USD$6,000, USD$7,000 p/t of the ancillary stuff. That is incredible. If you had a look on a Gold basis, that’s 3oz p/t, right? There’s fat in it.
Our process is, is not the cheapest. The cheapest would be just burning them, but they then have to factor the losses in. And so, we are confident that we have almost a future-proof process. And it is a technology, so we have to look at what the market wants in the future. They will need get down to ‘net zero carbon’.
And if you have a look at so you buy an internal combustion engine or a car, a normal car with an internal combustion engine, it has a lower carbon footprint from the EV. What’s different in the car? One has got a battery, ergo that difference is in the battery. And the battery, it is mainly materials, otherwise it is electricity and robots and a bit of labour. It is in the materials where the carbon is. And if you can recover that, recycle, recover, produce a secondary material, you massively reduce the carbon footprint. And then all of a sudden, the EV is not as far behind the internal combustion car so you actually can get to what the car makers want.
Matthew Gordon: That’s good for me. Because we have talked about some of the variables, which I needed to understand, the macro component, which is what you’re working towards. What technology you have got, and what you’re you think you’re going to be able to capture? Can we just talk about the deal then? Okay – so SMS – big company. 1) why on earth would they team up with a small Australian company? 2) once you have explained that, talk to us about how has the deal been broken down? Who gets what? Who provides what? What are both sides bringing to the table?
Jeremy McManus: At a high level, Matt, the way the deal works is, we have worked for years on the technology, and that’s patent pending. And there’s a chemistry flow sheet there, which, we have covered it for a long time. We bring that into the equation and what SMS bring to the table. Again, this is at a high level, but they bring the ability to help us design, build, operate, and maintain that very complex plant. And that’s one of the key reasons why we’re keen to partner with them because ultimately if you want to appeal to the world’s biggest OEMs, they need some confidence that you can get this done. Having a neat technology is great, but actually having the ability to deliver. And there’s lots of USPs associated with our technology, but really the thing that’s most interesting about it is actually the business case itself, and having SMS on board is probably one of the biggest ticks because it means this has a chance of actually happening.
So, in terms of how else does this deal look? We’re looking to share the costs as we evaluate through building a demonstration facility in the heart of Germany. That allows potential partners and others to touch and feel and look at this showcase, see what comes out the backend and evaluate products. We will do a Feasibility Study in parallel with all of that. We will get a stronger grip than we already have on the economics. And ultimately we will make a decision to roll this out commercially, and Europe looks like an interesting place to start doing this, but of course, we need to attract the people with the feed, which we’re busy doing already. And also the people who are going to buy and take in a binding off-take sense for us to make a decision to go ahead and build commercial plants.
Matthew Gordon: Talk to me about it, so what does the deal construct look like? And are you happy with the terms or are you the smaller partner in all of this?
Jeremy McManus: Yes, well, it took a very long time to get to this place, as you would expect with a German company. That diligence was really, really thorough. most people would see that as a very good thing because no stone has been left unturned with our partners. But yes, we’re exceptionally happy with the deal. It was negotiated very hard, but it is certainly fair to both parties. And we see both parties bringing a lot to the table. SMS can’t do this without us. We have to transfer technology, we have all the insights thus far, but we really do need a presence in Europe, the networks, which pull up with very big OEMs. And even just having a permitted site to demonstrate this, a lot of this is probably lost on people that don’t live and breathe it, but that’s hard to do and it is super time-consuming in the middle of COVID. So there is a fair bit to all of that, that screamed to us that we need to go ahead with this deal.
Matthew Gordon: Give me the terms of the deal. What is it going to cost you? What are your liabilities until you get to a point where there’s an FID on whether to move forward or not? Have you got the money?
Chris Reed: Yes. I can jump in here. We are very well-funded. We have got about AUD$85M in cash and listed investments, no debt – that’s Aussie dollars. So, €50M. In terms of the funding requirement for both SMS and Neo Metals through to the FID, the approved budget is €4M. In terms of moving into our first deployment into Europe, one of the terms of the deal was that SMS uses its best endeavours to procure German government-backed finance. And in terms of funding, our equity contribution, we’re completely able to do that off our own balance sheet with no dilution.
There’s a seamless path in terms of activities: both technical and economic and commercial. In terms of financing, we are good. We financed our entire contribution without debt, still off our own balance sheet. So, we have good flexibility there. It is roughly an 18-month funding requirement and our chip-in is €2M.
Obviously, all of our staff, labour, time. The joint venture will acquire our full commercial scale shredding or combination circuit. In terms of when we make a decision to commercialise, we can actually start up shredding and beneficiation well ahead of building a matching hydromet plant.
Matthew Gordon: Let me be clear, Chris, because we have had the questions sent in and so I want to be really clear: you are a project developer company. Your model is to fund those through to FID. But the company, at that point, whether they be JVs or otherwise will need to stand on their own two feet that, these are commercial operations, which you have got with partners. That seems to be your model. You develop a flow sheet, you bring in a big partner and then you make a decision whether to advance the project or not, jointly. But at that point, you go to market looking for debt or equity for that entity, and that does not affect the balance sheet or the ability of Neo Metals to continue with this current model?
Chris Reed: We have got total flexibility. Obviously, this project is the closest to cashflow for Neo Metals as a combined entity. It is more likely to stay in the group in terms of, we would love a cashflow-generating asset. We sold our last cashflow-generating asset last year, but banked a lot of cash at the front end of that. And the performance of the Lithium chemical prices, the Spodumene price is probably a third of what it was when we sold. So that vindicated that decision to sell early. And then what we have done with our extensive cash resources, as we have continued to share that; we have had five annual dividends back to the shareholders. We have returned more than AUD$55M in dividends and capital returns. We are cognisant of the importance of capital, particularly as you’re going into something like COVID-19. Now they are individually set up to, to be sell financing and non-dilutive, if we so choose, or we can embrace it. And certainly the Lithium battery recycling, we would embrace that as our first cash flow assets.
In terms of the other projects, they all have strong partners. They are all co-funded through the final stages of evaluation into FIDS. And we have complete flexibility whether they move in or out of the group, we can give them back to the shareholders, via an inspecie distribution. We could separately list them, raise capital, raise debt. Having such a strong balance sheet and no debt and a pipeline of projects that are getting to FIDS at the end of 2021, 2022, 2023, 2024. There is a pipeline of projects. , obviously we can’t fund all of them off the balance sheet, but the highest return with the lowest capital investment is going to get the first nod.
Matthew Gordon: Sorry to dig down on this one, but again, we have just had so much feedback from the market. You have been dishing out dividends. You did one recently, a big distribution. Your shareholders are probably happy, you would expect, but some of them came back and say, are these guys cognisant of the fact that we perhaps would rather have the security of knowing that the next project is going to get done, then have dividends. That’s a big group of people out of the shareholders going: keep your money, Chris. I want you to get this deal over the line. What are the discussions at board level around how you manage the capital that you have got?
Chris Reed: It goes through a very comprehensive process, a very highly experienced board. And we are very cognisant of what dilution costs to get projects. We are also aware of our weighted average cost of capital. We are also aware that if you do not have an immediate need, if you’re getting up to it and, you’re going to make the FID, it is different. These projects are advanced, but they’re still in the final stages. You have to have an equal balance. It is the shareholders’ cash. If I have not got a plan to deploy all of it, and we have given that over a 5-year period. So clearly we haven’t had the investments that have needed to be made. And we have taken the decision to return that cash to its rightful owners, which is the shareholders. Unless you have got a better use, right? If I can’t earn my weighted average cost of capital, or if my cost of dilution for an event coming up, then I shouldn’t pay it out, but we do go through a very detailed process.
Matthew Gordon: Do you think that this whole ESG movement is getting more traction now? I know you have been at it for 2, 3-years. You guys spotted it 2, 3-years ago and segued the business over it. Was there any point at which you are going, ‘crikey, I’m not sure people are going to pick up on this thematic other than just the nod to doing things the right way’?
Chris Reed: it has probably just, just caught up. Look – my family has been involved in the mining industry for more than a hundred years, so we have developed precious metal mines. We have done industrial metals mines. We have explored for base metals. The thematic in there for us, the thematic of minerals and materials for a sustainable future then defines the commodities that you should target. And then you have a look at, okay, well, if I was going to get this out of minerals, what are the trends? And if I have a look at just general minerals projects around the world, the grades are getting lower and they’re getting deeper, ergo, the mining cost per unit of output are going up. And unless you can work out a way to actually change the physical location of your ore body, enrich it and make it closer to the surface, that trend is immutable.
So for us, we thought, well, the only way really that we can level the playing field is to try to innovate on the processing side. And, hence, we had a look at recycling and then we have had a look at Vanadium recovery. And from our background, our background has been in minerals. We were in Lithium minerals, Lithium chemicals. And this is just the next progression. It is producing these chemicals, but without the mine, and so it is lower risk, lower time, lower uncertainty, and hence, we know what’s in the batteries when we process them. With perhaps the Vanadium recovery project we know what the Vanadium grade is in the slag, they see exceptional grade. And if you do your studies right, and we are diligent in our studies, if you have got the grades, the feed grades right, you shouldn’t have massive fluctuations in your operating costs.
Where a lot of these projects go wrong is in the mining: everyone wants them a certain size, and you have got to do your evaluation studies in a certain period of time. And we cut corners. And the results vary a long way away from these Feasibility Studies. But essentially, they rush the front bit and we don’t run that. We don’t rush the front bit. We want to get it right, and we want to get it right. And we want to bring in big partners. We want to get the highest return on capital in the shortest period of time. The board and management of the biggest shareholders in the company. And we want to make our money and share it with our shareholders. That’s what we do.
Matthew Gordon: At some point you are going to need to raise some capital. It is all well and good Tesla saying, ‘give me green, efficient, name the commodity, right? Lithium, Nickel’. And it is all well and good. Your conversations with automotive manufacturers saying, we need to address our carbon footprint, but when it comes down to raising the money, do you think that the funds care? Are they going to give you extra attention because you have got a greener solution? Do you think you are going to be able to raise the capital based on the economics you’re going to be able to achieve?
Chris Reed: Whether or not they are green or not, none of those green funds like losing money, and neither do we. So, you will find in the discount rates we use for the battery recycling, we use a 12% discount rate. We are here to get these projects built. We’re not trying to coddle them to get some outcome in the market. If we need to go and raise the money we will. We have raised equity and debt, probably in the order of USD$180M to $200M over the life of the company, overdue areas, projects, and always paid our debt back. If you do what you say what you say you were going to do with the money and you are open and transparent. I can’t see any reason why we wouldn’t be able to. We haven’t done it for a while. We haven’t raised money for seven or eight years, but that’s not to say that. That’s good I would’ve thought,
Matthew Gordon: Well, it is good, but that’s what : at some point you are going to need to go to market, presumably, in Oz or in Europe.
Chris Reed: We’re not scared of that. If you have a look at the portfolio, our shareholders have four projects, now, if I give it back to them in an end-share distribution, you can either put more money in it. If you don’t want to put more money in it, we have to bring in new money and some debt, you still own the same amount as if I kept it in the head company and did the same thing. Right. But you don’t want to dilute four projects. So, you want to keep your best projects, right. And the ones that have the tightest strategic focus. There’s nothing wrong. Just because we have got a big portfolio, I can return those back to the shareholders. We could do spin outs. You could do any number of corporate finance moves on it.
Matthew Gordon: So at what point, I know you said you’re going to be doing a Feasibility Study for this project going forward, and you will get a better sense of the economics and cost and so forth and efficiencies. What’s the timing of all of that? Because if I look at your business as a whole, people go, certainly the feedback we get: these are smart guys. They are good operators, they are efficient operators and they are straight talking. What they’re trying to do is get a line of sight and go look, how do I start to quantify or value or evaluate these four projects coming down the line? I know 2021, 2022, 2023, 2024 is great. But what do they equate to? Are you going to be able to start giving us and sharing with us that those sorts of numbers going forward?
Chris Reed: Yes, absolutely. We have 4 advanced projects. They are in feasibility and then moving into feed. So, these studies take 12 or 18-months and then they just land. They’re designed to land as we know them too, but essentially, we’ll have Feasibility Studies landing and then moving into feeds for some of the projects, but you will have them landing sequentially. So, we go through a disciplined process of Scoping, Pre-feasibility, Feasibility and then front-end engineering and design. We don’t cut corners.
Matthew Gordon: Help me with the numbers.
Chris Reed: We will be able to put metrics into the market, and if I’m spending the shareholders’ money, I need to tell them why. I need to tell them what the risks and rewards are. And they need to know that because they need to know whether, and I might put it into another company and I might ask them to put more money in and they have a choice whether to, or not, but they need to understand the risks and the reward. We go to some length to share that with them.
Matthew Gordon: So when can we expect you to start adding a bit more colour to the sequence of projects?
Chris Reed: We could certainly provide a consolidated timeline for the various projects to you. Over a long period on a quarterly basis is there’s quite a lot of events. But, for the battery recycling, you’ll have a Class 4, Class 3 Study. Now what we might do is, when I said we will share the risks and rewards, we’ll tell you what the operating and capital costs are. We might not tell you exactly what the financial model looks like because, there are often there some commercial in confidence elements about that. It is not like if you have got a mine; if you have got a mine and you are opening the mine, you can be completely transparent about everything, right? Because no-one is going to come in and take it off your hands. But this is a technology where I’ve got to go in and I’ve got to compete. I don’t want to tell the wider market anything that might prejudice the actual success of the business. People will have to just bear with us then, but just suffice to say, we have put out a Scoping Study, that has got enough data in there where you can work out a financial model. You can work out the operating costs. We have given you the capital cost. We have given you the assumptions on the battery mix, the pricing assumptions. An educated analyst could come up with a number that’s probably 5% of what our management model looks like.
In terms of what the pilot plant told us, we surpassed our expectations. So you can have a look at the Scoping Study and hold those going forward with some confidence.
Matthew Gordon: As a retail, family office investor, we need to get a sense of those numbers. My comfort comes from someone like SMS, a multibillion dollar operation, doesn’t go and do a deal with a small Ozzy company if it doesn’t think it is going to make a lot of money. And I also get that there’s enough data around to be able to create some crude model about what the opportunity is.
Chris Reed: 4 of our other projects, from the Vanadium recovery, the Lithium refinery and Barrambi, we are more explicit. So, for the Vanadium recovery project, we put out a Scoping Study last quarter. We will put out the Pre-feasibility mid next year. We’ll put out the final Feasibility mid the following year, we will make an investment decision and then you’ll have a timeline. For the traditional projects where there’s a known feedstock source secured, I’m happy lifting the skirt, so to speak. The battery recycling one, I just do need to be a little careful. It is a bit like Mount Marion, we developed what is the world’s second largest source of hard rock Lithium units. We never published a resource. We never published a reserve and we never published results of any Feasibility Study because we were negotiating with the Chinese. Only one country by Spodumene, that’s China. The last thing you can do is tell them your costs. If I’m trying to go into the EV market in Europe, these guys love beating suppliers up. I don’t want to tell them everything.
Matthew Gordon: Great catch up, Chris, a great story and well done on the JV. I’m excited to hear what happens next.
Chris Reed: So are we. A demonstration plant is starting up in the new year in the centre of Germany at one at SMS’s has production facilities. The procurement activities are highly advanced. We’ll start construction probably towards the end of September as the European summer starts to wind down and everyone gets a back into the swing of things and do the demonstration plant in the March quarter. We will then do the engineering and Feasibility and commercial in parallel. Come Christmas next year. It is hopefully going to be good times.
Matthew Gordon: Chris, I appreciate the update, Jeremy – thanks so much. Good to speak to both of you as always. Pick up the phone if there is some new news. Thank you.
Chris Reed: Excellent. You have a fantastic day.
Company Website: https://www.neometals.com.au/
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