Neometals (NMT) - New MoU with Battery Maker

Neometals is a value proposition that we have covered extensively on the Crux Investor website. Most recently, we discussed the company's project generation credentials and extensive portfolio of green projects. It is a company we have been keeping an eye on in recent months as its share price continues to hold steady. In this article, we will discuss the latest developments for the Aussie project generator.

On October 23rd, the company's annual report dropped. On the first page, Neometals reaffirms its status as a company that 'innovatively develops opportunities in minerals and advanced materials essential for a sustainable future with a focus on the energy storage megatrend.' The remainder of the document outlines a grounded interpretation of the company's progress this year. As stated by Neometals, the COVID-19 pandemic has created 'significant commercial headwinds for all companies.' In spite of these limitations, the company has continued to make material progress.

The project generation model is key to this; it has allowed the company to mitigate risk by 'targeting globally relevant sectors early, building value in diversified opportunities and reducing risk with R&D and downstream integration before bringing on strong partners to expedite successful commercialisation.' The company's 4 core projects have all advanced this year. They are now subject to partnering arrangements and are all funded through evaluation to FIDs. 

The company's segue away from upstream mining towards responsible materials recovery and recycling projects now appears to be planting the seeds of success, and this has been evidenced by the company's growing battery recycling presence in Europe. This flourishing footprint is exemplified by recent major deals with European companies, such as the company's 50/50 battery recycling binding deal JV, called Primobius GmbH, with giant German metallurgical equipment supplier and plant construction company, SMS Group GmbH, agreed in August, and the vanadium recovery JV with the world leading Scandinavian steel maker, SSAB.  

The European Commission's stalwart support of the EV macro story has resulted in significant moves to ensure the resilience of domestic critical minerals whilst accelerating efforts to create a decarbonised circular economy. There was a record €60Bn of investment in electric vehicles and batteries in Europe in the year leading up to mid-2019; that is significantly higher than China's €17.1Bn expenditure for the same time period. Moreover, Europe's figure is said to be 19 times higher than it was 2 years ago. It is clear some real acceleration is taking place, and with aggressive European subsidy packages aiming to incentivise EV adoption, and Tesla making plans for a $25,000 EV, momentum continues to grow. 

As Neometals and Dusseldorf-headquartered SMS Group aim to construct a battery recycling plant in Germany, the most recent news to come out of Neometals continues to indicate the company's bolstered European position. The company's European battery recycling alliance has now been expanded. Primobius GmbH has now announced an MoU with European battery producer, InoBat j.s.a. The intended JV will investigate the business case for sustainable Li-ion battery recycling, InoBat production scrap and alternative, third-party feedstock in Central and Eastern Europe. Commercial operations could begin as early as 2024. This venture seems to be a really positive step for Neometals. Not only is it impressive that Primobius has sourced a battery-producing partner so early after its inception, it is also impressive that the company has increased its scale in a jurisdiction that leaders EV value-chain investments globally. This first step towards a European roll-out has secured a pathway to a source of significant volumes of critical plant feed stock.

Quarterly Cash Flow Report

Released on the 30th October, Neometals' quarterly cash flow report clarifies the company's strong, stable financial position. Having grown the business, it is interesting that Neometals doesn't appear to have spent anything. With the company's cash position of A$76.569M remaining consistent before Q3 and after Q3, investors may find encouragement. This lack of expenditure is a testament to the virtues of the project generation business model. The company has been able to expand without deploying its cash. This is an especially useful component of the story given the COVID-induced volatility that is currently shaking up global markets on a regular basis. 

If Neometals can accomplish what it has so far on a shoestring budget, what would the company be able to achieve if it carried out more direct strategy of investment to accelerate growth? That is a question for another day, but in the meantime, the fundamentals appear to be falling into line nicely. 

To find out more about Neometals, check out the company's website.