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Dhaka Tribune

Neometals shares down 27% In Oz - killing the vanadium project hurts and badly

Sometimes things just don’t work out but that’s not really quite the problem here

Update : 30 Oct 2023, 03:32 PM

Neometals (ASX: NMT) (LON: NMT) shares are down 27% in Australia. The problem is not just that they’ve cancelled the vanadium project. It’s also the reason they’ve given for cancelling the vanadium project. That they might be doing too many things for the capital that they’ve got available. That’s not a good sign - and of course if all of their projects were just great then more capital wouldn’t be a problem. So we do sort of have an indication that something’s not quite right here.

The vanadium announcement: “ Innovative battery materials recycler, Neometals Ltd (ASX: NMT & AIM: NMT) (“Neometals” or “the Company”), advises that it has provided its partner in the Finnish vanadium recovery project (“VRP1”), Critical Metals Ltd (“Critical Metals”), with notice that it does not wish to proceed with the construction of a vanadium recovery facility. Despite the potential lowest-quartile operating cost and low-carbon footprint, the state of the global financial markets dictate that the Company preserves its cash balance and not contribute further material funding to VRP1 evaluation activities.” Note what they’re saying there. It’s a bonzer project (and as they note, they’ve got an offtake partner lined up on Glencore) but they’re still not going to go ahead with it. As they’re not enough money to do so (and also, they note that they’ve two quarters of runway left without more capital).

It’s not, that is, a problem with vanadium at all, it’s a problem with Neometals.

Neometals share price from Google Finance

We’ve talked before of Neometals: “NEO shares have risen on the back of the announced offtake agreement with Glencore over the future vanadium production.” And also of NEO shares: “Neometals (LON: NMT) is running an entirely achievable vanadium recovery project. We know this is achievable because other people do much the same thing.”

Some part of the value of Neometals was the prospects for that vanadium project. Without that project NEO is worth less. OK, that’s simple enough. But there’s more which is that reason why - the restriction on the amount of capital they have available to devote to it.

That matters when we come to consider the other issue, the hub and spoke system of lithium battery recycling. This is a capital intensive operation, as we know from the recent problems at Li-Cycle (trying to do much the same thing). If Neometals faces a capital shortage are we going to see the same problem then?  

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