Neometals Ltd.: Vanadium Recovery Project Delivers Strong Feasibility Results

Highlights

-          Feasibility Study confirms improved Net Present Value (“NPV”) compared to Preliminary Feasibility Study (“PFS”)[1] to recover vanadium pentoxide (“V2O5”) from vanadium-bearing steelmaking by-products in Finland;

-          Strategically important average annual production (excluding ramp up) of 19.1 million pounds per annum (~8,655tpa) of potentially carbon negative high-purity V2O5 secured by 10-year supply agreement with Scandinavian steelmaker SSAB;

-          Lowest quartile cash cost (US$4.19/pound), excl. royalty, with potential to lower with by-product/carbon credits;

-          40% increase in pre-tax NPV10, to US$323 million compared to PFS1 and pre-tax IRR of 24.8% on 100% ownership basis; and

-          Final Investment Decision on schedule for June 2023, subject to finance.

8 March 2023 / Emerging sustainable battery materials producer, Neometals Ltd (ASX: NMT) (“Neometals” or the “Company”), is pleased to announce the successful completion of an Association for the Advancement of Cost Engineering (“AACE”) Class 3 Feasibility Study (“FS”) on the recovery of high-purity vanadium pentoxide (“V2O5”) from high-grade vanadium-bearing steel by-product (“Slag”).  The FS was completed with assistance from leading Nordic engineering group Sweco Finland Oy (“Sweco”).

Figure 1 below shows the key project metrics from the FS.

Figure 1: Key Highlights of the FS (all figures expressed on a 100% ownership basis and are pre-tax)

Neometals is a 50% shareholder in an incorporated joint venture company, Recycling Industries Scandinavia AB (“RISAB”) (see Neometals ASX announcement dated 2nd March 2023 titled “Neometals Now Controlling Shareholder in Vanadium Recovery Project SPV”). RISAB is evaluating the feasibility of constructing a facility to process and recover high-grade V2O5 from vanadium-bearing steel making by-product generated by SSAB EMEA AB and SSAB Europe Oy (collectively “SSAB”) in Scandinavia. (“Vanadium Recovery Project “or “VRP1”).

Neometals Managing Director Chris Reed said:

“Neometals is encouraged by the outcomes of the FS. Importantly, increased evaluation detail and cost accuracy has not seen a significant departure from prior cost studies. VRP1 remains in the first quartile of the operating cost curve and since the historical PFS, the sector tailwinds behind this project have increased markedly. With our newly expanded 300ktpa feed rate and some updated data since the last cost study, the FS highlights the significant opportunity that exists. Specifically, that opportunity is to deliver some of the highest-grade, lowest-cost vanadium chemicals globally with a carbon-negative footprint. Security of supply is a key issue globally, particularly so in the EU where battery material resilience is the topic du jour”.

Background

Under the binding feedstock supply contract with SSAB (“Amended LD-Slag Supply Agreement”), a steel producer that operates steel mills in Scandinavia, SSAB will supply 2 million tonnes of Slag with RISAB having the first right to purchase additional tonnes on an as available basis.

The FS which assumes a 300,000tpa feed rate and incorporates updated data from the previously announced Class 3 Engineering Cost Study (“ECS”) (see Neometals’ ASX release dated 8 July 2022 titled “Vanadium Recovery Study Confirms Lowest Quartile Cost Potential”). VRP1 aims to produce high purity carbon- negative V2O5 without the need to build a mine and a concentrator like existing primary producers.

Neometals’ wholly owned subsidiary Avanti Materials Ltd (“Avanti") has developed a proprietary processing method to recover high purity V2O5 from steel Slag (“VRP Technology”). This hydrometallurgical process utilises conventional equipment and operates at atmospheric pressure and mild temperatures. Pilot Plant testing of the selected flowsheet was completed in Perth and resulted in product purities of greater than 99.5% V2O5 with maximum vanadium recoveries exceeding 75% (for full details refer to Neometals ASX announcement entitled “Successful Completion of Vanadium Recovery Pilot Plant Trials” released on 11th August 2021). The information from the operation of the Pilot Plant was utilised to inform the FS (-15% +15%) for a 300,000 dtpa hydrometallurgical processing circuit.

The FS was based on establishing an operation at Tahkoluoto Port, Pori in Finland.  This location has excellent infrastructure, including a deep-water port, as shown in Figure 2, and was chosen after the completion of an extensive location study (for full details refer to Neometals ASX announcement entitled “Pori, Finland selected for Vanadium Recovery Project” released on 11th December 2020).

Figure 2: Aerial schematic showing location for the proposed VRP1 processing plant at Tahkoluoto port, Pori, Finland

The VRP1 offers a compelling business case which is underpinned by:

-          Access to very high-grade vanadium feedstocks without upstream mining costs/risk;

-          Potentially robust economics;

-          Processing flowsheet utilises conventional equipment at atmospheric pressure mild temperatures and non-exotic materials of construction;

-          Negative greenhouse gas footprint given the absence of mining and a processing route requiring the use and potential capture CO2; and

-          Potentially saleable carbonate by-product which minerally sequesters CO2;

Financial Summary

Key highlights from the FS are summarised below. Financial analysis and estimates are denominated in US dollars using an exchange rate of 1 Euro:1.059 US$, the spot exchange rate as of 28/02/2023. The FS assumes an average selling price of US$9.82/lb V2O5 plus a purity ‘premium’. The selling price assumes base price forecasts from internationally renowned and independent CRU Group (“CRU”). CRU was commissioned by RISAB to provide independent vanadium market information to support the VRP1 project debt and equity process. The CRU Vanadium Market Study showed prices for 98% purity V2O5 EU EXW, (US $9.82/lb V2O5 average) plus a US$1.84/lb premium for 99.5% purity on product from 2027 (year 2 of operations inclusive) onwards (based on Asian Metal data 18/8/20 until 22/2/23). The planned production level in 2027 will represent approximately 3% of global production. Notwithstanding that the product purity alone supports the abovementioned premium, it also needs to be considered that V2O5 production at VRP1 could potentially generate valuable carbon credits for RISAB as well as significant benefits to buyers associated with the EU carbon border adjustment mechanism (“CBAM”). Carbon negative V2O5 could impart savings to ‘mid-stream’ purchasers who wish to sell final products back into the EU where total embedded emissions dictate tariffs due. For further information on vanadium markets and pricing please see Appendix 1.

Table 1: 300 ktpa FS Highlights (all figures expressed on a 100% ownership basis and pre-tax)

Figure 3 below highlights the competitive operating cost of the VRP1, with a first quartile position on the industry operating cost curve (excluding royalties, taxes, depreciation, and amortisation)

Figure 3: 2022 Vanadium Operating Cost Curve

Capital Cost Estimate

The capital cost estimate for the Finnish process plant and relevant infrastructure was developed to a FS-level accuracy of -15% /+15% based on budget price estimates obtained from equipment suppliers and appropriate agreed factors.  Table 2 below presents the summary of the project capital costs.

Table 2: Capital Cost Estimate (all figures expressed on a 100% ownership basis)

Operating Cost Estimate

The VRP1 operating cost was estimated by major cost type and is considered an AACE Class 3 level estimate with a nominal accuracy level of -15% / +15%. The estimated operating cost excluding royalties is on average US$4.19/lb. V2O5. The operating cost breakdown is shown in Figure 4 below:

Figure 4: Operational cost breakdown by key areas (excl. royalty)

Economic Analysis

Neometals prepared a comprehensive discounted cash flow analysis to provide an indication of the economic potential of the VRP1. The analysis makes the following assumptions:

-          No allowance was made for tax

-          No allowance was made for inflation

-          NPV is calculated against the full capital cost of process plant and does not allow for debt or any other type of funding of the project

Additional important economic and technical assumption inputs are summarised below:

-          Overall metallurgical recovery of V2O5, based on results from the Pilot Plant, is 73.8%

-          Pricing of V2O5 based on CRU Vanadium Market Study for 98% purity V2O5 EU EXW, (US $9.82/lb V2O5 average) plus a US$1.84/lb premium for 99.5% purity on product from 2027 (year 2 of operations inclusive) onwards (based on Asian Metal data 18/8/20 until 22/2/23)

Link to the original press release in full length:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02641033-6A1139729?access_token=83ff96335c2d45a094df02a206a39ff4

Forward-looking Statements

This release contains “forward-looking information” that is based on the Company’s expectations, estimates and projections as of the date on which the statements were made. This forward-looking information includes, among other things, statements with respect to studies, the Company’s business strategy, plan, development, objectives, performance, outlook, growth, cash flow, projections, targets and expectations. Generally, this forward-looking information can be identified by the use of forward-looking terminology such as ‘outlook’, ‘anticipate’, ‘project’, ‘target’, ‘likely’,’ believe’, ’estimate’, ‘expect’, ’intend’, ’may’, ’would’, ’could’, ’should’, ’scheduled’, ’will’, ’plan’, ’forecast’, ’evolve’ and similar expressions. Persons reading this news release are cautioned that such statements are only predictions, and that the Company’s actual future results or performance may be materially different. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information.

Forward-looking information is developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to general business, economic, competitive, political and social uncertainties; the actual results of current development activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of metals; failure of plant, equipment or processes to operate as anticipated; accident, labour disputes and other risks of the chemical industry; and delays in obtaining governmental approvals or financing or in the completion of development or construction activities. This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully, and readers should not place undue reliance on such forward-looking information.

Neither the Company, nor any other person, gives any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statement will actually occur. Except as required by law, and only to the extent so required, none of the Company, its subsidiaries or its or their directors, officers, employees, advisors or agents or any other person shall in any way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of whatever nature arising in any way out of, or in connection with, the information contained in this document.  The Company disclaims any intent or obligations to or revise any forward-looking statements whether as a result of new information, estimates, or options, future events or results or otherwise, unless required to do so by law.

Advice

Nothing in this document constitutes investment, legal or other advice. Investors should make their own independent investigation and assessment of the Company and obtain any professional advice required before making any investment decision based on your investment objectives and financial circumstances.

Authorised on behalf of Neometals by Christopher Reed, Managing Director.

ENDS

For further information, please contact

Chris Reed

Managing Director

T +61 8 9322 1182

E [email protected]

Jeremy Mcmanus

General Manager, Commercial and IR

T +61 8 9322 1182

E [email protected]

About Neometals

Neometals is an emerging, sustainable battery materials producer. The Company has developed a suite of green battery materials processing technologies that reduce reliance on traditional mining and processing and support circular economic principles.

Neometals’ three core battery materials businesses, listed below, are commercialising these proprietary, low-cost, low-carbon process technologies:

-          Lithium-ion Battery (“LIB”) Recycling (50% equity) – to produce nickel, cobalt and lithium from production scrap and end-of-life LIBs in an incorporated JV with leading global plant builder SMS group. The Primobius JV is operating a commercial disposal service at its 10tpd Shredding ‘Spoke’ in Germany and is the recycling technology partner to Mercedes Benz. Primobius’ first 50tpd operation, in partnership with Stelco in Canada is expected to reach investment decision in Q3 2023;

-          Vanadium Recovery (50% equity) – to produce high-purity vanadium pentoxide via processing of steelmaking by-product (“Slag”). Targeting a 300,000tpa operation in Pori, Finland, underpinned by a 10-year Slag supply agreement with leading Scandinavian steelmaker SSAB. Finnish project investment decision with JV partner, Critical Metals, expected June 2023. MOU with H2Green Steel for up to 4Mt of Slag underpins a potential second operation in Boden, Sweden; and

-          Lithium Chemicals (earning 35% equity) – to produce battery quality lithium hydroxide from brine and/or hard-rock feedstocks using patented ELi® electrolysis process owned by RAM (70% NMT, 30% Mineral Resources Ltd). Co-funding pilot plant and evaluation studies on a 25,000tpa operation in Estarreja with Portugal’s largest chemical producer, Bondalti Chemicals S.A.

[1] For full details refer to Neometals ASX announcement ‘Vanadium Recovery Project - PFS Indicates Robust Potential Economics’ released on 4th May 2021