Neometals (ASX:NMT) is proposing to sell its 13.8% stake in the operating Mt Marion Lithium Project located in Western Australia for US$96 million.
The company gave notice to its joint venturers, which gives them 30 days to decide whether to exercise their pre‐emptive right to buy Neometals’ shares at the nominated price of $US96 million.
If there is no exercise of those rights, then Neometals is able to offer the shares to third parties.
Neometals gave notice on 23 March 2017 and understands that one of the joint ventures is in the process of convening a meeting to seek shareholder approval to exercise the right.
The divesture provides Neometals with the ability to re‐direct its capital and energies to higher margin downstream opportunities, as well as its titanium assets.
Background
The Mt Marion Lithium Project is owned by:
- 43.1% Mineral Resources (ASX:MIN);
- 43.1% Ganfeng Lithium; and
- 13.8% Neometals.
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 off-take agreement for Mt Marion.
Reflecting on the value at Mt Marion
To date, before this currently proposed final sell‐down of Mt Marion equity, Neometals has realised US$66.55 million (~A$88 million) in cash.
When combined with a successful divestment, this will result in total sale proceeds of US$162.55 million (~A$213 million) on an investment with a historical cost of circa A$3 million.
Neometals has already distributed A$22.5 million of that return to shareholders by way of dividends in 2016.
Post-sale picture
Assuming acceptance and timely completion by the remaining Mt Marion partners of their pre‐emptive opportunity to acquire Neometals’ residual 13.8% equity interest, Neometals’ projected unrestricted cash balance will be ~A$184 million.
Neometals also has listed investments of circa A$10 million.
Accordingly, the company has commenced a review of its strategic funding requirements and capital management initiatives, including its recently renewed on‐market buyback program and other potential shareholder return initiatives.
Neometals will have the opportunity to focus on its:
- ELi Process: lithium processing technology for lithium hydroxide conversion;
- Lithium battery recycling: Recovers cobalt from old lithium batteries;
- Barrambie Titanium Project: Second highest grade titanium deposit globally; and
- Neomet Process: acid recovery processing technology.