Neometals (NMT) - 300% Increase in European Vanadium Size
Neometals innovatively develops opportunities in minerals and advanced materials essential for a sustainable future. With a focus on the energy storage megatrend, the strategy revolves around de-risking and developing long life projects with strong partners and integrating down the value chain to increase margins and return value to shareholders.
We caught up with Chris Reed, the CEO of Neometals, and Darren Townsend, the Chief Development Officer to discuss some questions from our investment club with regards to the Hannans deal with Critical Metals and how it impacts on Neometals.
Recent Deals, Critical Metals Decisions, & Some Decisions
A recent deal between Critical Metals and Hannans has attracted some interest. Neometals is a very large shareholder in Hannans and is a large shareholder in Critical Metals who are partnered in the Vanadium recovery project. A number of years ago, Neometals gave the rights to their battery recycling technology in Scandinavia to Critical Metals as they had operated there for 10-years and were well ingrained in that community. At that time Neometals were focused on deploying the technology, before SMS, in North America. Subsequently, Neometals ran a partner selection process and ended up concentrating on Europe, and with SMS as a partner.
The Vanadium recovery project has got massive scope and Critical Metals has got Hannans which was the original parent of Critical Metals, to farm in and fund that opportunity up to an investment decision. It’s a similar transaction to that which Neometals is undertaking with the Vanadium recovery project. They are funding it through to FID which will earn them a 50% interest in the project.
This was a transaction between Critical and Hannans and Neometals were just beneficiaries on both sides. Critical Metals is working towards an investment decision at the backend of 2022 and will be needing to raise capital to make commitments. The capital providers will want most of the funds to flow into that which it’s raising for, and won’t want to see leakage into other assets, be it the Lithium battery recycling or their existing exploration portfolio.
Neometals shareholders are keen to understand the upside for them on the Hannans deal on the Lithium recycling technology as it is specifically an agreement that deals with the 4 countries in the Nordics. Hannans needs to fund the investment in business development activities in procuring feedstock, supply agreements etc so that a decision can be made. That would earn Hannans a 50% interest in the licence and Neometals has a direct interest in Hannans and an indirect interest in the Critical Metals’ license.
The Neometals shareholders will have an interest of around 26% in the licence via their shareholding as an indirect interest as long as they maintain their relevant interests. Also, they get a 10% Royalty or ACN 630, the owner of the battery recycling technology, once the demonstration plant has met certain criteria, will give SMS 50% ownership in the IP. Neometals will be getting a net benefit of a 5% Royalty, so the 10% will be shared with SMS.
Huge Barriers, More Neometals, & Growing Shareholding
The 4 countries, Denmark, Norway, Sweden, and Finland are blessed with hydropower, and have very supportive governments for this electrification of transport. They have the highest penetration rates of EV in the world, and now the Scandinavian licence area looks like it’ll have 2 battery plants of about 83-gigawatt hours in terms of total capacity, 40 for Northvolt, and 42 for Moray.
Outside Germany, Scandinavia now looks to have the next biggest pipeline which is impressive. There will be lots of batteries produced and there will also be scrap like there is in every battery plant around the world. With the highest penetration rates of EV cars, notwithstanding the smaller size perhaps than mainland Europe, end-of-life cars will get back quicker than in some of the jurisdictions where there’s a slow take-up, like perhaps in Australia.
Neometals has a first-mover advantage with this deal that creates barriers. It also gives global reach for the technology, and also scale. Neometals didn’t put a press release out because it wasn’t their transaction, despite being a beneficiary. After the transaction, Neometals did increase their shareholding in Hannans and so the change in the substantial shareholder where Neometals went from 31% to 32% was made known publicly.
Vanadium: Project, Pricing, Market, & Suppliers
The immediate issue that Critical and Neometals are facing is the investment decision at the end of 2022 for the Vanadium recovery project, and that is just the first Vanadium recovery project. Neometals has announced that they’re now working on a second Vanadium recovery project.
The first plant is underpinned by a conditional supply agreement with SSAB covering 2Mt. Neometals has now signed an MOU with H2 Green Steel for 4Mt and they are assessing a pipeline of potential feeds which is a clear demonstration of the benefit of their technology to the suppliers. Neometals will pay them for a waste/by-product, and they are able to responsibly dispose of the waste obligations. They extract the Vanadium and then essentially carbonise the tailings.
The Vanadium price rises and falls but the price is good at the moment and above that which Neometals forecast in the original Pre-Feasibility Study for the first plant. The market needs more Vanadium to go into the Lithium Vanadium chemicals and the Vanadium Redox batteries. Cell makers are making Lithium Vanadium cathodes and Valore has developed Lithium Vanadium batteries as the most energy-dense batteries available. Volkswagen is currently testing out a Nickel Vanadium Manganese battery to replace Cobalt.
The ambitions for the Neometals Vanadium business with Critical are 200,000t per annum at the first plant and around 400,000t per annum throughput at the second plant. Neometals is 100% confident of being able to finance the build and once this is done they will be the largest producer of low-cost, 0-carbon Vanadium chemicals.
This is an opportunity in a project where they don’t have to build a mine, they’ve got stockpiles, and are producing down at the bottom end of the cost curve, with the only challenge then to make it bigger. Neometals has gone through extensive test work producing amongst the highest purity chemicals in the market, sequestering carbon. The vanadium market is tight, the demand is growing and the market needs projects like this. It needs the primary producers in Australia.
Budget Situation, Short-Term Plans, & Upcoming Major News
The schedule and the budget is on track and the next milestone is to deliver the Bankable Feasibility Study to SSAB in June next year, and everything is well on track for that. The project is in a subsidiary of Critical Metals called RISAB (Recycling Industry Scandinavia AB) which can be independently financed, so Critical and Neometals will own it 50-50.
From making an FID in 2022, Neometals has given themselves 2-years to build and construct the first Vanadium recovery project. They can finish their evaluation studies in parallel and move a construction team into Boden, Switzerland to continue the build-out and potentially make those 2 projects larger by evaluating other feedstocks.
Neometals is getting ready to crank up their demonstration plant for the battery recycling project. They put in guidance that they would start the commissioning of the hydro met refinery in September, start the trials in October, and wind them up in November. A couple of weeks ago, they announced that they were going to scale up the front-end section at Hilchenbach from 1t a day throughput to 10t, to satisfy some of the demand in Germany for the disposal of EV batteries.
Manufacturers' Intent, Car Producers, & Market Good Guys
The EV revolution is a massive paradigm shift for carmakers who have never had to worry about the fuel in the cars before. Now, they have to take the CO2 out of the cars and half of that resides in the batteries, so that is a challenge in itself which is what Neometals is looking to address with the recycling. There are big changes ahead for the EV makers, and the big, well-funded guys are getting out there early. China as a country moved first, but there are now the European and the American carmakers, and the Asian carmakers in China.
Carmakers are demanding that everyone in the supply chain can trace the components back to where they found it, invariably in the ground, or in an animal, and working its supply chain all the way through to the car. This includes the glass, the leathers, the metals, magnets, going back to the source. The mineral explorers and producers are going to have to measure their CO2 footprint, and comply with ESG criteria to be able to sell into the battery supply chain.
The H2 deal is a big step up for Neometals and we look forward to hearing more about it in the news over the coming weeks.