Neometals Ltd (ASX:NMT) has signed a memorandum of understanding to further progress the development of a downstream lithium chemical plant in Western Australia.
Under the plan the partners would use lithium concentrate from their jointly‐owned Mt Marion Project to produce a battery‐quality, lithium hydroxide product.
Neometals owns 13.8% of the globally significant Mt Marion lithium deposit currently being developed.
The company also owns 70% of the ELi Process which converts spodumene concentrate into high value battery grade lithium hydroxide and lithium carbonate.
Chris Reed, managing director, commented: “With the transition of Mt Marion to production we are now confident that a downstream lithium processing plant located nearby to Mt Marion will deliver superior economic outcomes for the joint venture partners with the added benefit of bring new employment opportunities to the Goldfields.”
Background
The Mt Marion Lithium Project is owned by:
- 43.1% Mineral Resources Ltd (ASX:MIN);
- 43.1% Ganfeng Lithium; and
- 13.8% Neometals Ltd.
Minerals Resources is the project operator and Australia’s largest contract minerals processor.
Ganfeng is China’s leading, most profitable lithium producer and has secured a life-of-mine, take-or-pay offtake agreement for Mt Marion.
Memorandum of Understanding (MOU)
Under the MOU, Neometals and a subsidiary of Mineral Resources have agreed to jointly assess the feasibility of the construction and operation of a lithium plant.
Key activities under the MOU will include:
– Front end engineering and design (FEED);
– Site selection and acquisition;
– Negotiation of reagent supplies (gas, sulphuric acid, caustic soda); and
– Assessment of environmental and regulatory approvals.
Initial work streams under the MOU will commence immediately, with a final investment decision expected by Q3 2017.
The commercialisation program of the patented ELi process will continue separately from arrangements under this MOU.
Analysis
The signing of an MOU is an important step for improving downstream economics for the Mt Marion lithium project.
A lithium plant that sources input from Mt Marion also will give Neometals a greater exposure to the battery-grade lithium market.
The proposed plant located near the Mt Marion operation is expected to provide significant operational and logistical cost benefits.
The process route can potentially eliminate the need for pilot testing as Ganfeng will be processing run‐of‐mine concentrates at commercial scale from the December quarter, 2016.
The current market for battery grade lithium hydroxide and lithium carbonate is in tight supply due to high demand growth and constrained supply.
The market demand is forecast to grow significantly for the next 5 years through to 2020.
This is fortuitous timing as this is the timeframe in which Neometals and Mineral Resources are aiming to commence production at the project.
The company's share price is up circa 90% year to date, trading around $0.325.
Neometals is positioned as a near term producer coming online in a strong lithium market.
Project milestones and upcoming news flow includes:
- Commission coarse circuit (imminent);
- First shipment (October 2016);
- Drill results (October 2016);
- Updated Resource (October 2016);
- Maiden Reserve (October 2016); and
- Commission fines circuit (Q1 CY17).
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