Neometals: Diversifying into Battery Metals and Building Royalties

• Neometals is commercializing technologies to generate royalties, with the first pilot plant countdown underway for December 2024.
• The business model involves supplying recycling plants and earning royalties once operational, requiring low capex from Neometals. First royalties expected mid-2025.
• Partners like Mercedes and SMS are helping derisk the business. The goal is to prove the technology then scale up with minimal capex.
• Other projects like lithium, vanadium and titanium are progressing, with partnerships reducing the need for Neometals to put in much capital.
• The strategy focuses on battery metals, low-cost production, high returns on capital, and portfolio approach. Sticking with the plan despite market volatility.

About Neometals

Neometals is an Australian-listed company that is transforming from a mining company into a developer of mineral processing technologies. The company is commercializing technologies to produce battery materials from both mining and recycling, with the goal of generating royalties. Neometals was previously focused on nickel mining, but has shifted its strategy to focus on lower risk, lower capex opportunities in the battery metals space.

Led by Managing Director Chris Reed, Neometals is advancing three main projects:

• Primobius - Recycling lithium-ion batteries to recover valuable materials like lithium, nickel, and cobalt
• Vanadium Recovery - Extracting vanadium from steel manufacturing byproducts
• Lithium Refinery - Processing spodumene concentrate into lithium hydroxide

Interview with Chris Reed, CEO/MD of Neometals Ltd.

Commercializing Technologies to Build Recurring Royalties

A key part of Neometals' strategy is to commercialize its mineral processing technologies through partnerships, rather than fully funding projects itself. For its battery recycling business Primobius, Neometals has partnered with German engineering firm SMS Group. SMS will fund construction of recycling plants, while Neometals will supply the proprietary technology and earn an ongoing royalty on production.

The first Primobius commercial plant is on track to begin operation in late 2024 for Canadian steelmaker Stelco. This will demonstrate Neometals' recycling technology at scale and start generating royalties. Chris Reed explains "the growth and the continued revenue will come from building your own royalty in a way." Over 25+ years, each 20,000 tonne per annum Primobius plant could generate over US$5 million per year in royalties for Neometals.

Strategic Partnerships to Derisk Projects

Neometals aims to commercialize its technologies through strategic partnerships, rather than fully funding projects itself. This derisks the large capital outlays and avoids dilution for shareholders.

For its vanadium recovery technology, Neometals has partnered with Finnish government financing and Swedish steelmaker SSAB for the first commercial plant. The €400M project will be majority funded by debt and external equity, with Neometals retaining a minority stake and a royalty stream. This strategic partnership helps derisk the large capital requirements.

The lithium refinery technology is also advancing through a partnership with Portuguese chemical producer Bondalti. Neometals is negotiating a cooperation agreement to jointly develop the technology. This removes the need for Neometals to fully fund the refinery alone.

Portfolio Approach Across Geographies

Neometals is advancing a portfolio of projects across geographies and commodities. This provides diversification and reduces reliance on any single project.

The Primobius recycling business is focused in Europe, close to battery supply chains. However, Chris Reed highlights opportunities to expand into North America and South America in future.

The vanadium recovery technology is initially being deployed in Finland and Sweden, linked to steelmaking hubs. But multiple global projects are under evaluation.

For its lithium refinery, Neometals is targeting commercialization in Portugal initially. But the technology could be deployed across lithium brine resources in South America.

By retaining the core IP, Neometals can earn royalties across global projects in the years ahead.

Conclusion

In conclusion, Neometals represents a unique investment exposure to the battery metals megatrend. By focusing on commercializing processing technologies rather than mining assets, Neometals aims to generate attractive royalty returns from partners' projects.

The company's partnerships help derisk the large capital requirements needed to scale up new technologies. In a challenging market, Neometals continues to methodically advance its portfolio of projects. Management remains confident in the long-term growth trajectory underpinned by demand for electric vehicles.

Patient, long-term investors could benefit from Neometals’ royalty streams and portfolio approach in the battery metals sector. But further patience may be required as the company bridges the gap to first production royalties expected from 2025.