Neometals Ltd (ASX:NMT) has determined that the retention of its 13.8% equity stake in the Mt Marion Lithium Project in Western Australia is in the best interests of shareholders.
The decision comes after a period of improved offtake pricing structure and levels, and the achievement of significant project milestones.
Neometals believes that these factors have materially enhanced the project’s intrinsic value.
Chris Reed, managing director, commented: “Since we originally offered to sell the stake in Mt Marion, we’ve been impressed by the production performance from site which, combined with the enhanced pricing structure and levels, makes a compelling case for retaining the stake and offtake rights.
“We will now focus on developing the next step in the lithium value chain, a downstream processing plant to produce lithium hydroxide, the key component in cathode chemistries for the electric vehicle and stationary storage battery revolution.”
Mt Marion
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.
Reasons for holding onto equity
Neometals has opted to end its sales process for its 13.8% equity stake in Mt Marion for a number of recently enhanced valuation factors.
In order of impact to valuation, they are:
- Recent re-negotiations of the offtake pricing mechanism with Ganfeng, which will deliver pricing linked to international lithium carbonate and hydroxide prices rather than bilateral spodumene market prices providing less variability in long-term pricing;
- Retention by the company of its binding offtake option rights for a minimum of 12.37% of production from Mt Marion from February 2020;
- The ramp-up in plant performance and product quality exceeding expectations with the shipment of 30,055 tonnes in May and late June/early July shipments totalling 50,000 tonnes; and
- Potential commitment to modify the process plant to facilitate production of all 6% lithium oxide spodumene concentrate, removing the discounted 4% lithium oxide product.
Possible demerger
Neometals has engaged advisers to assist it in considering demerging and separately listing the company’s technology and titanium assets.
The company will keep the market informed as to progress of this initiative and the timing of its implementation, if any.
Background
Alongside the 13.8% equity stake in Mt Marion, Neometals has a 70% interest in the ELi® lithium hydroxide processing technology; and a 50% ownership in the lithium battery recycling technology.
The company also has two titanium exposures being the 100% owned Barrambie Titanium Project and the Neomet titanium processing technology.