Company Overview: Neometals Ltd is a mineral project developer. The Company’s segments include Lithium, Titanium and Vanadium, and Others. The Company’s projects include Mount Marion Lithium Project, Lithium Hydroxide Project (ELi Process), Alphamet, Barrambie Titanium Vanadium Iron Project (Barrambie Titanium) and Forrestania Nickel Project. The Company's Mount Marion Lithium Project is located approximately 40 kilometers southwest of Kalgoorlie, Western Australia. The Company is also focused on the Mount Finnerty Project, which is located approximately 60 kilometers east of Koolyannobbing. The ELi Process has been jointly developed by the Company and Mineral Resources Limited. The Company’s Barrambie Titanium project uses a technology to manage titanium, vanadium and iron compounds. The Company’s Forrestania Nickel Project is located approximately seven kilometers north of the flying fox nickel sulfide mine in the Yilgarn region of Western Australia.


NMT Details
 
Neometals has optimised its shareholders’ returns through its lower-risk, long-life and high-margin operations, via returning $30M in dividends/buyback over last 3 years. The group is moving ahead to develop a globally significant mineral resource portfolio, and its focus on recycled battery business is expected to provide good boost to organic growth. Primarily, NMT is co-developing a technology which can recover the high-value cobalt economically and recycled within the battery manufacturing chain. On the other hand, lithium prices have remained high and have stimulated the construction of new concentrate conversion capacity in China, while new concentrate production capacity is under construction in Australia and in Brazil. A search for potential projects has resulted in discussions with several globally significant companies in the battery and car industries; and the Company aims to advise the market of any material developments. NMT has also worked towards its commitment to deliver the shareholders' value which should be consistent with the Company’s strategic plan.
 

Organic Growth through Integration and Scaling-up of different business units (Source: Company Reports)
 
Expanding lithium asset base via acquisition of Mt Edwards Lithium: Neometals and Estrella Resources have entered into a conditional binding agreement for the sale of Estrella’s wholly owned subsidiary, Mt Edwards Lithium Pty Ltd (MEL) as it holds the lithium interests at Mt Edwards. This has been valued at a consideration of up to $2.7 million, and royalty over future lithium mining. As Neometals has gained expertise in lithium exploration and in development in the goldfields region of the Western Australia over time, Estrella found Neometals to be the best option to explore and develop the Mt Edwards Lithium Project area. For this, Neometals will have to pay Estrella $700,000 on completion of the acquisition of MEL, $1 million each upon definition of JORC resource and processing of 2,000,000 tonnes of ore at above 1% of Li₂O; and a royalty amount of $0.50 per tonne of 75 per cent of the amount of lithium bearing ore processed from the tenements. The sale is conditional on parameters that include Neometals and the Company entering into a Royalty Deed. It is expected that the transaction will be completed within 2 to 3 months. As a part of the acquisition, Neometals will also have to acquire the underlying tenure of all the tenements comprising the Mt Edwards Lithium Project and some neighbouring tenements and the nickel rights on an adjoining nickel rights package. Under this transaction, Neometals will acquire the 75 per cent of the lithium rights which are owned by 20 tenements and are held by Mt Edwards Lithium Pty Ltd. It will also acquire one exploration license held by MEL and the balance of 25 per cent of the lithium rights by acquiring the ownership of 19 of the tenements on which MEL’s lithium rights are held from Apollo Phoenix Resources Pty Ltd. It will acquire additional 3 tenements that are owned by Apollo and will also acquire Apollo’s nickel rights on 14 neighbouring tenements. Completion of acquisition is subject to the receipt of necessary Ministerial consents to transfer the tenements and receipt or execution of any necessary consents and deeds of assignment /assumption in respect of the rights and obligations of third parties. This acquisition will increase and broaden NMT’s lithium asset base and will provide a second source of spodumene production which will enable its integrated lithium business to grow in size.
 

Mt Edwards Lithium Project’s Location (Source: Company Reports)
 
Outlook of the Business: NMT’s focus is on building a secure and a cost-competitive lithium hydroxide supply for the Western cathode/battery/car makers. For this, it will use local natural gas, sulfuric acid and a conventional flowsheet which will remove the technology risk. It was reported that less than 5 per cent of Li-ion batteries get recycled and this area thus entails an opportunity. It is expected that pilot and scale beneficiation test work results will be out soon and pilot scale Hydromet Test work for Neomet Evaluation will be completed by September 2018. The Company has invested huge amount on Research and Development and has conducted Engineering Cost studies to manage cost and time schedule. Mineral Resources has been into a partnership with the Neometals and is one of the Australia’s largest contractors of mineral processor. These efforts and business engagements are expected to boost the group.
 

Overall Business Outlook (Source: Company Reports)
 
Sound Financial Position: Cash and term deposit on hand as at 31 December 2017 amounted to A$39.8 million which included $4.0 million in restricted use term deposit and supported performance bonds and other contractual obligations. Net Receivables and listed securities amounted to $42.8 million approximately and debt instruments had a face value of A$0.3 million. As on 31 December 2017, the Company had acquired 22,271,311 of shares through the on-market buy-back which closed on 21 February 18. These were bought back for a consideration of $6,252,812.53 and the highest and the lowest purchase price for the market buy-back was $0.33 and $0.25, respectively. During the period, the Company granted a total of 3,390,828 of Performance Rights to eligible executives, employees and to contractors pursuant to their employment and engagement agreements. The Company did not declare any dividend for the period.

Statement of changes in Equity (Source: Company Reports)
 
Progress at Key Projects: At Mt Marion, Lithium operations continued while 1,387,085 tonnes of ore were mined. NMT holds 13.8% equity at Mt Marion that reported 1H FY18 EBITDA of A$52M (100% basis) and 1H FY18 Profit of A$7.35M (NMT share). At Barrambie Titanium Project, the Company’s project engineers, Sedgman Ltd, continued refinement of the titanium hydrolysate flowsheet design which will be stabilised in the preparation for the Minimax pilot plant for operations, expected to commence in September Quarter 2018. A number of third-party ores were tested during the period and the first sub-license for the technology was granted by Alphamet (NMT’s subsidiary) to recover zinc, copper, iron, silver and lead from electric arc furnace dust at a steel mill in Serbia. The Company also lodged a provisional patent application to obtain protection of the LTO (Lithium Titanate) production IP. A leading US test facility successfully conducted testing of pouch cell batteries using Lithium Titanate anode material. The Company has progressed on the vendor equipment test work in North America and the results of this test work can be out anytime soon.
 

NMT’s Growth Options (Source: Company Reports)
 
Stock Performance: It is expected that lithium demand will be decent in the medium term despite speculation on the long-term pricing scenario. Market demand is forecasted to grow significantly for the next four years till 2021. Neometals Option to take minimum 12.37% Offtake of production from 2020 onwards based on the offtake agreement with Ganfeng Lithium is also a key achievement. The commercialisation plan is on track with commissioning expected from March Quarter of 2021 from Mt Marion. Meanwhile, NMT will grow its market capitalisation basis the maximised returns from its existing operations and increased margins via higher value products and will develop growth options. The stock price climbed up by 12.3 per cent in the past six months but was down by 27.3 per cent in the past three months (as at March 29, 2018). Meanwhile, the Company has been admitted to the Nasdaq International Designation (as RDRUY) during the quarter ending December 31, 2017. The stock has promising prospects and by looking at the current trading scenario, the stock seems to be offering a good buying opportunity. We recommend a “Buy” on the stock at the current market price of $0.315
 

NMT Daily Chart (Source: Thomson Reuters)

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