Interview with Chris Reed, CEO of Neometals (ASX:NMT), and Accompanied by Darren Townsend, Chief Development Officer, and David Robinson, General Manager.

Neometals' management team's track record of success extends to the Mt. Marion Lithium Project, where they timed their exit to a tee, selling their 13.8% stake for AU$103.8m. We've interviewed them several times. Each time, they've described a project that fits neatly into a green, profitable narrative. It's a cookie-cutter approach of finding value that's gone under the radar, acquiring it for a steal, and developing it efficiently. We're amazed the market hasn't clocked the potential of Neometals yet, with their market cap valued at less than the cash they currently hold, irrespective of their project portfolio.

We've previously questioned Neometals' marketing strategy; however, today we're questioning its latest in a long line of green projects. As of last week, Neometals has entered an agreement with unlisted (but public) Scandinavian mineral development company, Critical Metals, to consider developing a recycling facility to recover and process high- grade vanadium products from vanadium-bearing steel by-product in Scandinavia. The green component has already been ticked off! The by-product is slag, not tailings, though we'll get into that in a moment.

So, what exactly does the agreement entail? Reed states that what Neometals believes it has acquired is a "call option to acquire what is the world's largest stockpile of high-grade vanadium slags." The 27-month consideration period will allow Neometals to conduct its extensive dude diligence on the potential vanadium plant, which will result in a feasibility study to be completed by 31st December 2022. At this point, a final investment decision will be made. If Neometals agrees to go ahead, the company will enter into a 50/50 arrangement, with the certainty of a supply agreement from SSAP, the largest fuel maker in Scandinavia. Total CAPEX prior to FID will be A$5ML: a figure Neometals can easily afford, and one that fits into the project generator narrative the company has been pushing.

Slag vs tailings? Tailings is the waste rock at a mine after the raw ore has been processed to remove the metal, whereas slag is a glass-like by-product left over after a desired metal has been smelted from its raw ore. The process of dealing with the slag is not only immensely economic but is also a remediation process, as the glass itself will change colour and no longer be a sea-adjacent eyesore.

What is the upside in terms of revenue? The steel slag with vanadium content has a standard benchmark vanadium grade of 3.9% V2O5, 2-3X higher than any producer can make in a concentrate before a similar level of processing. There is no mining cost, no crushing plant, no grinding plant, no magnetic gravity separation plant, and no kilns for the traditional salt-roast-leach process. 50% of the CAPEX had been wiped out straight away. Moreover, while vanadium is a volatile commodity that hasn't had its best few years, the macro story, including fundamental demand for stainless steel, and the potential growth of VRFBs, still places vanadium as a promising commodity.

Once the process is completed, what happens to the inner pile of largely calcium/iron-bearing residues? Reed states Neometals will take ownership and either safely dispose of it, or reinsert it back into the front end of the steelmaking process. The green thematic is consistent throughout Neometals' operations.

Reed actually sees COVID-19 as the element that forced Neometals and Critical Metals to get the deal over the line when it did but also says it will have little impact on operations, especially considering mining is considered an essential service, and the population density of Australia is low.  

Company page: https://www.neometals.com.au/

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