ASX-listed Neometals has switched up its corporate strategy to sharpen focus on rolling out bigger and more lithium-ion battery (LiB) recycling plants to a growing list of license holders via the Primobius joint venture (JV) it shares with global plant manufacturer, SMS group.
The company has today revealed it will also target the sale of non-core assets and building strategic partnerships in a move aimed at sharing the ongoing development expenditure of other technologies to better manage its capital.
While prices for lithium and vanadium – the primary metals extracted from its process – may be at multi-year lows, management believes prioritising the funding of Primobius above its other projects is a prudent strategy.
The patented process not only cuts the carbon footprint of recycling by 85 per cent, but also aligns perfectly with the growing demand for lithium battery recycling, which is now mandatory in the European Union. As the number of lithium batteries in the market continues to rise, Neometals’ proprietary recycling plants are poised to capitalise, with the market expanding at a compound annual growth rate (CAGR) of 25 per cent.
With the new measures and an existing cost-saving plan, the company is aiming to reduce its corporate and administrative overheads by 40 per cent, cutting its quarterly cash burn from $1.2 million to $700,000. Following a recent $4.5 million capital raise, the company says it now holds a solid cash reserve of $9.3 million.
Additionally, it has decided to let an option to buy a United States-based recycling plant lapse, which will save $15.4 million in outflowing cash and further solidify the balance sheet.
Neometals managing director Chris Reed said: “We have taken these tough, but necessary decisions to simplify our strategy, focus and organisation to prioritise the growth of the Primobius revenue base and forward order book. Primobius is a market leader, delivering a first-of-a-kind integrated recycling plant for Mercedes-Benz, a global marquee carmaker. The headwinds in the battery materials sector dictate that we must adapt to suit conditions by conserving capital, securing partners to fund our pre-commercial technologies and divesting non-core assets.”
In January, Neometals cut a deal with Mercedes Benz to put in a €18.8 million (AU$30.7 million) purchase order for Primobius to build a hydrometallurgical “hub” to complete the motoring giant’s new LiB recycling plant in the German town of Kuppenheim. The 2500 tonnes per annum (tpa) plant, primarily designed to recover lithium, cobalt, nickel and manganese, will be capable of using the recycled metals to produce 50,000 battery modules a year for Mercedes Benz’s range of electric vehicles (EVs).
Progress on construction is continuing apace, with acceptance testing for the shredding and beneficiation, or “spoke” section, of the Mercedes Benz pilot plant currently expected in the first half of next year and the refinery or “hub” section anticipated in the second half. Although the completion of the German pilot plant will meet the company’s primary objective of industrially validating the process, the royalty revenue from the 2500tpa plant will not be enough on its own to generate positive operating cash flow.
To that end, and once a successful commissioning is complete, a ramp-up to steady-state operations will significantly derisk the next level of scale, which is planned to be up to 21,000 tonnes per year. The hope then is that a successfully operating plant will spur an increasingly long line of potential buyers to put out the cash and commit to their own bigger plants.
By selling down non-core assets and trimming corporate overheads by 40 per cent, Neometals appears to be becoming a leaner, meaner fighting machine. And management believes its newly cashed-up and refocused status will further detach it from the strong correlation its share price has historically held with lithium prices.
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By James Pearson
