Neometals is a project developer that has caught our attention. They segued out of mining after selling the Mt Marion lithium project and banked $200M. Neometals' board focussed their attention on the inevitable rise of the electric vehicle 'circular economy.' What does that mean? Well, automotive manufacturers are looking to reduce the carbon footprint of their vehicle production. The entire supply food chain needs to be looked at, including recycling. So, how do they deliver that? Neometals believe they are part of that solution, and their JV with multi-billion dollar SMS group just put them front-and-centre on stage.
Neometals has quite the project portfolio, with projects ranging from a lithium refinery, a vast titanium-vanadium project and, most recently, a high-grade vanadium-bearing slag recovery project in Sweden with SSAB.
As part of this slag recovery project, the company arranged a conditional supply agreement with a huge Nordic steel company, SSAB, which owns nearly 2Mt of waste/slag spread across 3 steel mills in Sweden and Finland, and which grows at 200,000t pa. By making this deal and forming a JV with Critical Metals, Neometals demonstrated its credentials to forge deals with major strategic partners. This perhaps foreshadowed the latest development for the company's flagship lithium-ion battery recycling project...
Matthew Gordon talks to Chris Reed & Jeremy McManus, August 2020
Neometals has entered into a binding deal with German metallurgical equipment supplier and plant construction company, SMS Group GmbH, to establish a joint venture to recycle lithium-ion batteries. This is exciting news and might be the first of numerous catalyst moments over the course of the next 12-to-18 months.
As you might already know, Neometals' battery recycling project is based upon a green, proprietary solution to the battery needs of our EV-driven tomorrow. Neometals has a unique hydrometallurgical process to recycle Li-ion batteries, and it is more effective (in terms of recoveries) and environmentally friendly than conventional pyrometallurgical practices. Neometals is able to regenerate sustainably-produced secondary battery materials such as nickel, cobalt and lithium from spent & scrap EV Li-ion batteries and consumer electronics.
So, What Exactly Does This Deal Look Like?
It takes the form of an incorporated 50/50 JV called Primobius GmbH, and the intention is that it will be utilised to commercialise Neometals' proprietary lithium battery recycling process.
This is now a formal agreement to follow on from the MOU agreed in October 2019. SMS Group has taken this time period to conduct due diligence on Neometals' Canadian pilot battery recycling trial, SGS Lakefield.
The next 12-to-18 months is a development runway, and there seem to be plenty of big catalysts on the horizon that may wake the market up to the value proposition on offer. With $85M in the bank, expect Neometals to move this battery recycling project forward at an accelerated pace. Phase 1 involves the construction and commission of a licensed demonstration plant at the SMS manufacturing facility in Germany. This will demonstrate that Neometals' proprietary process can work economically at an industrial scale before an FID needs to be made. Looking towards commercial operations, Primobius intends to capture the emerging European market, which is regarded by many commentators as the second-largest Li-ion battery production hub in the world (behind China). The model is to build the first plant in Europe and then set up a spoke & hub operation globally using the financial access that SMS brings to the table.
There has been mounting pressure on battery supply chains in recent years, with an emphasis on ESG. We saw it with the Responsible Cobalt Initiative, with Panasonic, Tesla's main battery supplier signing up, and Elon Musk stating that Tesla would eventually eliminate cobalt from its batteries. Pressure from environmentalists, like Greta Thunberg, has heaped scrutiny on the ethicality and environmental friendliness of supply chains in mining and industry, and both institutional investors and consumers have been paying attention.
Moreover, the "major confluence of regulatory initiatives to stimulate the electric vehicle sector to decarbonise transportation, secure battery material supply chains and support circular economies generally" has been the cherry on top of the carbon-neutral cake. Aggressive subsidisation packages across Europe have been actively implemented and European automotive manufacturers have invested heavily into their EV infrastructure. Germany is investing in thousands of EV charging ports across the country. France is close behind.
Elon Musk stated in his recent quarterly conference call that Tesla would need as much clean, green and sustainable nickel as possible. It is clear that individual battery metals need to have a cohesively green macro story if they are to form a major part of the EV revolution. Reed makes a call out to Elon Musk; he says, "We will recycle all Tesla batteries for free, forever." Neometals has the cash in the bank and a financially and technically capable business partner. We think he is serious.
Moving on to the terms, Neometals and SMS will co-fund the construction and operation of the demonstration plant, in addition to an Association for the Advancement of Cost Engineering (AACE) Class 3 Feasibility Study, totalling c. A$6M.
If certain criteria are met, SMS will earn a 50% stake in Neometals' proprietary technology subsidiary, and both parties will jointly finance commercial activities towards an FID on a commercial-scale battery recycling plant for c. A$1M.
Primobius has commenced an AACE Class 4 engineering cost study for a 20,000t pa Li-ion battery recycling plant. As previously mentioned, it is based in Germany and the findings are based on Neometals' pilot plant in Canada.
The JV will then begin construction of the demonstration plant, targeting early 2021 for commissioning.
After that, a feasibility study will commence, followed by commercial arrangements in relation to battery feedstock, product offtake, key reagents and project financing, and for future commercial preparations. The company is starting to show investors the scale of what their first non-mining project could look like; we think that with this clarity, more interest will be generated in Neometals.
This is a big story and could really shake up the way Neometals has been perceived by the market. What do you think? Comment your thoughts below; we'd love to hear them!
Company Website: https://www.neometals.com.au/