Neo Lithium (NLC) - +$32M Raised & CATL Follows Money

WNeo Lithium has positioned itself to become one of the world’s most sustainable Lithium producers. As transportation becomes increasingly electric, the Lithium industry is expected to face a significant surge in demand. Neo Lithium expects to meet this demand with energy-efficient facilities that minimize freshwater consumption and carbon dioxide production, promoting a sustainable future for both surrounding communities and the industry at large. 

We caught up with Waldo Perez, President & CEO of Neo Lithium, who joined us for Crux Investor's Lithium Week to talk through the plans for 2021. The company has been very busy since we last spoke in January when we had a run through of the business plan, strategy, the team and the company assets.

Raise of $30M: CATL to Make an Additional Investment

Neo Lithium has recently raised CAD$30 million and CATL will be contributing about CAD$2.3M net to maintain their 8% position on top of the CAD$30M.

Lithium 'mining' is different from regular mining where the 'mined' ore is sent to a processing plant. At the Neo Lithium projects, the mines are actually ponds which evaporate the lithium brine, and once the pond is lined and filled with the brine, the brine is left exposed to the sun and wind to evaporate, which takes about 1 year. In total, construction, filling time, and then the evaporation time, which is 2 years. The purpose of the raise is to start constructing as soon as possible in order to speed up the whole process. Neo Lithium is not fully financed as they need an additional CAD$320M for the plant CAPEX, but they do have the money to start building the ponds, extracting brine and start the evaporation process. The objective is to be in production in 2023 so they need to start building the lithium brine ponds by the end of this year.

The Plan from Now On: The Process & Allocation of Money 

Money will be spent on moving the earth, improving the road, buying the liners and expanding and improving the local infrastructure for the contractors. Neo Lithium is completing the final Feasibility Study (FS) with a collaboration with CATL. The aim is to complete the Definitive Feasibility Study (DFS) by the end of Q3/21.

Market Dynamics & Timing it Right: Product Focus & Options

The market is moving and Lithium prices are going up on a weekly basis due to the rise of electromobility which will have an impact on all the metals and materials required for EVs. Neo Lithium will be a producer of battery-grade Lithium Carbonate, a niche product for EVs and they are busy working with CATL on that. They have a planned production of 20,000t a year of Lithium Carbonate with potential to double production. They aim to be in business in 2023 and follow on with expansion plans. It makes sense from the financing point of view to start relatively small and once in production, look to secure further financing for expansion.

Timing is everything and the supply demand gap will hopefully continue to drive prices in the Lithium space. Bigger companies, like Albemarle and SQM, will increase their productions and the industry needs them to, otherwise the electrification of mobilisation will not happen. Consolidation is likely to happen in the Lithium space as it always does when there is an commodity like Lithium in demand, so we are likely to see a lot of M&A in the next year or two.

Growth: Market Expansion, Consolidation & M&A Opportunities

The current Lithium industry produces around 300,000t of Lithium Carbonate equivalent in Hydroxide and Carbonate. This amount needs to grow to 1.2Mt in 4 to 5 years time which will be a real technical challenge to obtain environmental permits, raise the capital to do it in that timescale.

Neo Lithium has come to the market at the right time, on the right track and is aiming to be very low cost. The difficulty is timing due to the amount of time required for the brine evaporation which is why they are starting to build the ponds as soon as possible. They intend to start the building process in December this year ready for production in 2023.

Boom &  Bust: Evolution of Cycles

The EV thematic is driving this Lithium-ion battery so we will see an accelerated peak in the next 2-3-years with an estimated peak highest price for Lithium in 2023. The prices will keep rising for 2 more years and after 2023 it will depend on the amount of increased production worldwide in that time.

Next Steps: What's Left to do for Neo Lithium? 

The next stage for Neo Lithium is very clear with the final construction environmental permit, Definitive Feasibility Study (DFS) completed with CATL by the end of Q3/21, and financing of the plant, which will need a further CAD$260M of financing.

There is significant interest in the Lithium market to enable further financing for Neo Lithium and we will be following the story this year to see how they get on.

To find out more, go to Neo Lithium's Website.