NEO Battery Materials Ltd. (TSX-V:NBM) revealed that its recently completed internal feasibility study on its South Korean silicon anode commercial plant shows “robust economics” and “high profitability” for the company’s cost-transformative silicon anode materials (NBMSiDE).
The Vancouver-based company, which is focused on electric vehicle (EV) lithium-ion battery materials, said the study demonstrated the substantial potential for “scalability, international plant expansion, and mass adoption” in EV batteries. NEO said it will appoint a third party engineering firm to validate the projections.
The internal feasibility study has been conducted with the assumption that the South Korean commercial plant is NEO Battery’s only operational, revenue-generating asset. The study uses updated mass-production models generated by the EPC contractor, preferential bids submitted by construction contractors, cost projections of the optimized NBMSiDE derived from supplier quotations.
By the first half of 2024, NEO hopes to complete the plant construction with an initial capacity of 240 tons per annum (TPA). Financial projections integrated an equal proportional production of the two main product lines of NBMSiDE, P-100 and P-200. Each silicon anode material will be supplied to battery manufacturers and EV makers at an initial average price of US$50,000 per ton (US$50 per kg), resulting in maximum annual revenues of US$12 million at 240 TPA and US$50 million at 1,000 TPA, noted the company.
Through NEO’s one-step manufacturing process and the use of a cost-effective raw material, metallurgical-grade silicon NEO expects to decrease the selling price of NBMSiDE, while widening gross and earnings before interest and tax (EBIT) margins with Phase I to Phase IV expansion.
Remarkably, with mass production and material optimization, NEO is projected to achieve a 70-to-80% cost reduction in the selling price compared to current silicon anode options. Clearly, demand for lithium-ion batteries will bolster NEO’s cost differentiation strategy to allow it to capture a more significant slice of the global silicon anode market.
Final phase IV plant capacity
In each phase, NEO plans to double the annual maximum capacity each year to achieve a final production of 5,000 TPA in the next five years. Assuming full-scale NBMSiDE production, the company expects average annual revenues of US$235 million to US$250 million, representing an after-tax net present value (NPV) of US$316.2 million discounted at an 8% cost of capital and an after-tax internal rate of return (IRR) of 33.3%.
Without forgoing the long-term selling price reduction strategy, the financial projection integrated constant NBMSiDE selling prices and margins to reflect the study’s evaluation methods and current market conditions. Unlike other core battery metal prices traded as standardized commodities, cost projections for NBMSiDE were derived from direct quotations from upstream suppliers and estimates with long-term supply or forward contracts for metallurgical-grade silicon, pointed out NEO.
Separately, with cost efficiency, the capacity-to-CAPEX is expected to grow at an exponential rate as CAPEX is substantially minimized with each capacity addition. NEO hopes to partner with downstream battery manufacturers and EV automakers for strategic investments in each expansion phase.
Third party feasibility study
NEO said it will appoint a third party South Korean engineering firm specializing in the battery manufacturing and materials industry to validate the internal feasibility study. After conducting due diligence and extensive review, the company will select a firm with a proven track record.
NEO cautioned that there can be no assurance that the economic projections upon which this study is founded will be realized.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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