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

Lithium Battery Recycling Study:Neometals Ltd (ASX: NMT) has finished the laboratory scale test work on 100kg of spent lithium?ion laptop and phone batteries (containing an average of 19.8% Cobalt) and engaged Sedgman to finish an Engineering Cost Study on a small-scale plant using the technology. The company has finished the test work at its facilities in Montreal, Canada. The group is in line with its strategy to diversify into the downstream lithium/battery material supply chain, and would continue to advance its opportunity to focus on processing used lithium ion batteries to recover high value materials. Moreover, the group has a dedicated subsidiary, Urban Mining Pty Ltd, to hold its interest in the intellectual property and manage the commercialization of the technology. The Preliminary Engineering Cost Study supports the business case to accelerate commercialization of the technology. The company has an immediate plan to invest in a continuous operation, pilot?scale hydrometallurgical plant at NMT’s Montreal laboratory to accelerate the evaluation of the recovery of high?purity Cobalt and future recovery of lithium, nickel, copper and aluminum. The proposed work plan would be funded internally, while the expected date of completion is in December 2017. The projected operating cost is of US$4.45/lb contained Cobalt. Additionally, the Scoping Study has identified many opportunities, to further improve the economics by optimizing factors such as recovery of other battery materials beyond cobalt like lithium, nickel, copper and aluminum oxide products.
 

Scoping Study Highlights (Source: Company Reports)
 
Mt Marion Lithium Operations: The Mt Marion Lithium Operations have successfully reached throughput at rates of 280 tonnes per hour. The recoveries and product grades are in line with the ramp?up plan. Further, the construction of the fines flotation circuit is expected to be finished by the end of February 2017 and the commissioning is scheduled to start immediately. Moreover, the first shipment of 15,000 tonnes of lithium concentrates has been loaded onto the MV Pacific Venus at the Port of Kwinana and has departed on its journey to the Zhenjiang Port, China where it would deliver the product to Ganfeng. This first shipment is after the successful commissioning while the ongoing ramp up of production from Mt Marion, is projected to produce 400,000 tonnes per annum at full capacity. Additionally, the second lithium concentrate shipment is scheduled for mid?March, with expected tonnage of about 15,000t with product grades of +6 and +4% Li₂O. The shareholders, Ganfeng Lithium, Mineral Resources (MIN) and Neometals have finalized negotiations and expect execution of formal documentation by end of February 2017 for the Offtake Arrangements and the Mining Services Arrangements.
 

Mount Marion location (Source: Company Reports)
 
Industry drivers: Despite the recent volatility in thecommodityprices, there has been constant interest in construction of new processing capacity. In fact, the market demand is expected to enhance mainly for the next four years through to 2020 which would support the group’s and MIN plans to start production of lithium hydroxide in 2020. Even China Customs have been reported to declare that import prices rose to over USD11,000/t Li₂CO₃. The addition of Chinese tariffs and taxes on the import price lifts the delivered prices for imported product as per the reported rates achieved by Chinese domestic producers of over USD15,000/t. The current median prices for battery?grade lithium hydroxide have had enhanced over USD14,000/t, on a CIF basis to Europe and US, and now converged with Chinese prices average. As per the titanium market, most of the feedstocks (an annual market of US$17 billion or 85% by value) are used to produce titanium dioxide pigment which is then used as an additive in paints, plastics, paper and ink with the balance (15%) used to produce titanium metal products. The current median price for high quality titanium dioxide pigment is US$2,650 per tonne on a CIF basis to USA (Source: Industrial Minerals 26 January 2017). Even at the Spodumene market, the price of Talison chemical grade lithium concentrates (6% Li₂O) are projected at US$572 per tonne on a CIF basis to China (Source: Ganfeng). The group’s competitor Galaxy Resources Limited (ASX: GXY) made supply concentrates at higher prices in 2017 as compared to the present Talison price. This indicates a solid opportunity as compared to the average fair market prices for concentrates in 2017.
 

Lithium Downstream Activities (Source: Company Reports)
 
Downstream lithium processing facility:The group made a MOU with MIN to jointly assess the development of a downstream lithium processing facility close to its Mt Marion Lithium Operation. A modern version of the direct hydroxide sulphate process is favored for initial production which is located the Eastern Goldfields region of Western Australia to eliminate the substantial bulk overseas shipping costs from the process.  NMT and MIN have continued to study the project process and potential locations during the December quarter. Moreover, all the downstream lithium processing technology and patents are owned by Reed Advanced Materials Pty Ltd (RAM). RAM is beneficially owned 70:30 by the NMT and MIN. Meanwhile, RAM is in discussions with the potential users regarding sub?licensing the ELi Process to produce lithium hydroxide. Additionally, during the December quarter, NMT has finished the refurbishment of the laboratory and mini?plant test facility in Montreal in preparation for the Barrambie pilot study. The laboratory facilities are at operational status, the mini?plant has been refurbished and resumed operation in December 2016 and the upgrade of the pilot facility is nearly complete. Barrambie is one of the world’s highest grade titanium deposits, containing total Indicated and Inferred Mineral Resources of 47.2Mt at 22.2% TiO₂, 0.63% V₂O₅ and 46.7% Fe₂O₃, at a cut?off grade of 15% TiO₂.
 
Assisting Hannan’s subsidiary Scandinavian Co & Estrella Resources:The group had indicated about assisting Hannan’s subsidiary Scandinavian Co to realize lithium, cobalt and carbon opportunities in Scandinavia through a technical assistance agreement.  Neometals would hold 13.5% of Hannan’s subsidiary once that agreement is finalized. Moreover, NMT has entered into a binding commitment to subscribe for 9,000,000 shares in Estrella Resources (ESR) at 2 cents each ($180k) as part of its acquisition of Mt Edwards Lithium, a former WMC nickel project at Widgiemooltha south of Mt Marion.  This was settled in December 2016 and the shares were issued by the company in January 2017 with NMT holding about 2.61% of ESR.
 
Stock Performance:NMT stock rose over 12.7% in the last three months (as of February 28, 2017), however, the recent stock fall of over 8.97% in the last four weeks placed them at a low level.  Moreover, Neometals Ltd has proposed to initiate the on?market buy?back of ordinary shares, under which the company would acquire up to a maximum of 5% of the company’s issued ordinary shares (limited to $5 million worth of shares). The group did not acquire any shares under the 2016 buy?back program, but this recent initiative would drive the stock further. The group has a cash and term deposits on hand of A$61.28 million as of 31 December 2016 comprising $4.1 million in restricted use term deposits supporting performance bonds and other contractual obligations.In the December quarter, the results of the 2016 drilling program have increased the Mineral Resource Estimate to the previously?announced Indicated and Inferred Mineral Resources of 77.8 Mt at 1.37% Li₂O and 1.09% Fe, at a cut?off grade of 0.5% Li₂O. We give a “Buy” recommendation on the stock at the current price of $0.355
 

NMT Daily Chart (Source: Thomson Reuters)

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