Neometals sets fast pace in lithium space

THE INSIDE STORY: Emerging lithium player Neometals (ASX: NMT) would be the envy of many mid-cap mining companies. By Mark Mentiplay

Neometals has a healthy cash balance of $80 million and the Mt Marion lithium project, just south of Kalgoorlie, on track for first production by the end of the year.

Mt Marion is underpinned by a life-of-mine (LOM) lithium offtake agreement with China’s leading producer, which is also a project partner and another partner which is Australia’s largest contract minerals processor. The gradual sell-down to the two core partners has left Neometals with a smaller 13.8% stake in Mt Marion but the clever strategy de-risked the development for shareholders and delivered cash to pursue an exciting lithium technology proposition.

The focus for Neometals now switches to development of its patented ELi Process downstream lithium hydroxide (LiOH) plant to produce high-purity battery grade lithium hydroxide and lithium carbonate for the rapidly growing energy storage market and fed by Mt Marion lithium ore. This will be an exciting development and the first time such downstream processing of lithium has taken place in WA.

A Definitive Feasibility Study for that project, which is a joint venture with Mt Marion operator Minerals Resources (30%) is due in the current quarter, and is expected to see the lowest quartile costs for LiOH that are comparable with lithium brine operations.

The front-end engineering and design, and an investment decision is expected in 2017, followed, hopefully, by construction in 2018/2019.

The PFS on a 20-year plant life, targeted production of 10,000 tonnes per annum LiOH and 8,810 tonnes per annum lithium carbonate (Li2CO3) at an average cost of $US3,878 per tonne LiOH and $US4,538 per tonne Li2CO3, giving the project a pre-tax NPV12% of $US321 million.

At Mt Marion mining commenced at the first of six pits this year with plant commissioning now underway for first supply of six per cent lithium spodumene concentrate to 43.1 per cent Chinese project partner Ganfeng Lithium before the end of CY2016.

“Mt Marion will place Neometals high among the first of the lithium newcomers into production and to reap the rewards from current high lithium-rich spodumene prices and secure market share into the future,” Neometals chief operating officer Michael Tamlin told The Resources Roadhouse.

“In this exciting lithium market, you need to be in production or on the verge of production to take advantage of current prices.

“We will be in that market later this year delivering lithium spodumene concentrate to our partner Ganfeng.”

Total global lithium demand is expected to more than double in the next few years to feed a booming battery market, particularly in the automobile sector, major new electricity storage facilities and other uses that are springing up on a regular basis.

Recent industry estimates show Lithium demand rising from 200,000 tonnes per annum in 2014, 38 per cent of which was used in the battery market and 25 per cent for glass/ceramics, to 500,000 tonnes by 2025, 63 per cent accounting for the battery market and 15 per cent for glass/ceramics.

One thing not enough people are aware of is that Australia is the world’s largest lithium carbonate equivalent producer at 68,000 tonnes in 2014, just ahead of Chile with 67,500 tonnes, China 26,000 tonnes and Argentina 15,000 tonnes.

The Australian supply comes from a single source – Western Australian-based Talison Lithium’s 25-year-old Greenbushes mine, 250 kilometres south of Perth, which exports over 350,000 tonnes per annum of various lithium products.

Neometals took the equity route to raise funding from its existing, hands-on partners to fast-track Mt Marion into production based on current contained indicated/inferred hard rock resources of 23.24 million tonnes at 1.39 per cent lithium oxide (Li2O) and 1.43 per cent iron oxide (Fe2O3), open along strike and down dip.

In June, Neometals banked $US19.95 million after operator Mineral Resources exercised a call option to acquire an additional 13.1 per cent of Mt Marion project owner Reed Industrial Minerals P/L (RIM) from Neometals, taking its shareholding in RIM to 43.1 per cent.

This resulted in the Mt Marion J/V standings now being Ganfeng 43.1 per cent, Mineral Resources 43.1 per cent and Neometals 13.8 per cent.

Minerals Resources’ direct involvement as operator of the mine-to-port project has also meant no upfront capital costs for Neometals.

In May, Ganfeng expanded its LOM, take-or-pay agreement for 100 per cent of Mt Marion’s production from 80,000 tonnes per annum to 200,000 tonnes per annum of spodumene concentrate of between four per cent and six per cent Li2O, conditional on a decision to add a flotation plant for the lower-grade production, on which a detailed metallurgical test program is under way.

The original agreement was for 100 per cent of the six per cent Li2O grade spodumene concentrate and expanded by follow-up metallurgical testing that identified an additional lower grade spodumene product.