Neometals JV banks cash from 2nd Lithium shipment
Neometals and their joint venture partners in the Mt Marion Lithium project have watched the second shipment of concentrate set sail from the Port of Kwinana for China.
Mineral Resources, Neometals and Chinese off-take and project partner Ganfeng Lithium reported this week that a 16,662-tonne shipment containing concentrate at +4% and +6% Lithium Oxide departed on 14 March for Ganfeng’s receiving facility at Zhenjiang Port.
The next shipment of 18,000 tonnes is due to be loaded in early April, which will be the second consecutive increase in tonnage since the maiden shipment of 15,000 tonnes on 6 February.
Neometals holds a 13.8% interest in the Coolgardie-based project, while China’s leading Lithium producer, Ganfeng, and Chris Ellison’s Mineral Resources each hold a 43.1% stake.
Under the terms of the offtake agreement with Ganfeng, the joint venture receives 100% payment on shipping which means it has banked another sizeable cheque this week. Neometals currently have circa $70m in cash and liquid investment reserves and any dividend payment from the joint venture will further bolster their investment war chest.
The partners will receive a price increase from 1 July after negotiating a revised offtake agreement that includes exposure to price increases in the tightening global Lithium market in addition to a guaranteed floor price.
They are also set to boost their payable volumes by 20% under an expansion of the mine announced last month. The installation of a re-grind circuit and an expansion of the flotation facility is due to get underway this month.
Euroz Securities has taken a close look and the new pricing agreement and upgraded production plans and judged them to be highly positive for Neometals. The leading Perth broker has set a price target of 55 cents a share, an increase or more than 60% from recent trading prices.
The ultimate goal for Neometals and Mineral Resources, who have the option of clawing back a percentage of the off-take from Ganfeng after the first three years, is to go higher up the Lithium value chain.
The partners are working on studies for a processing plant in Kalgoorlie to convert Mt Marion concentrate into battery grade Lithium chemicals. The plant will use conventional processing technology to fast-track the path to production.
Looking further ahead, Neometals have some exciting proprietary technologies for Lithium processing that could fatten downstream margins and add even more value for shareholders.