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Neo Lithium advancing one of the world's best lithium brine projects towards final feasibility

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  • Best in class lithium project in Argentina
  • Very strong strategic partner in CATL
  • Pilot plant now producing 99.797% purity battery-grade lithium carbonate

What Neo Lithium Corp does:

Neo Lithium Corp (CVE:NLC) is focused on the green energy revolution and addressing the growing demand for lithium generated by the growth in the electric vehicle (EV) market and, more generally, new generation batteries.

The mining company is led by experienced mining professionals from Argentina as well as from the wider international mining community, who have particular expertise in lithium brines, which are known as salars in South America.

The company’s flagship is the Tres Quebradas project in Argentina, also known as the ’3Q’ project, which lies in the southern end of what is known as the “lithium triangle”, covering 35,000 hectares, while the salar complex within that area is around 16,000 hectares.

3Q  is one of the top three highest-grade lithium projects in the world and is the seventh-largest brine project on the planet with significant exploration potential.

The project has proven and probable reserves of 1.3 million tons of lithium carbonate (LCE) with 790 milligrams per litre of lithium and a report last year highlighted its very strong economics and 35-year mine life. In terms of resources, at the overall deposit area, using a 400 mg/l cut-off, the 3Q project has over 4 million tonnes of LCE in the higher confidence measured and indicated (M&I) category.

A pre-feasibility study in 2019 showed significant cash flows and a US$1.14 billion net after-tax net present value (NPV). Pre-production capital cost was put at US$319 million and low operating costs of US$2,914 per ton of LCE. The internal rate of return (IRR) is around 50%. Pay-back period from the beginning of production is put at just 1 year and eight months.

Average annual production was put at 20,000 tons of battery-grade LCE with significant potential to expand with reserves representing only 32% of the entire resource. At US$16,000 per tonne of LCE produced, 3Q is the lowest capital-intensive brine project to be developed today

In 2019, the group reached another milestone, with its submission of an environmental impact assessment for the project.

How is it doing:

In September last year, Neo Lithium announced a material development, with news of a C$8.5 million investment from a Chinese manufacturing giant, which produces lithium-ion batteries for electric vehicles (EVs).

Contemporary Amperex Technology (CATL), the largest lithium battery maker in the world, said it would subscribe for over 10.2 million shares in the company via a placing at C$0.84 each, giving CATL an 8% stake in the lithium miner, and becoming a partner.

Headquartered in Ningde, China, in 2019, CATL had more than 26,000 employees around the world. It is a global leader in the development and manufacturing of lithium-ion batteries.

In January 2021, the group unveiled another major step, namely that it had hired leading global engineering firm Worley to carry out a definitive feasibility study (DFS) on 3Q as prices for the commodity have recovered in recent months.

The decision to progress further on the asset was made in conjunction with its partner CATL, which will participate on all technical matters.

Then, on January 19, it announced a further boost for the project, saying it had significantly improved the purity of the battery-grade lithium carbonate produced at the pilot plant.

After closing due to the pandemic, the plant in Fiambalá resumed operations in the fourth quarter last year and an improved processing method has led to the uplift of purity to 99.797% from 99.599%, the firm said.

The company said it meant the carbonate was now meeting worldwide premium specifications and very close to electric vehicle (EV) battery giant and the company’s 8% shareholder CATL high standards of product quality. 

Recently, CATL said it intends to subscribe for 860,870 shares in Neo Lithium to maintain its 8% stake, generating proceeds of $2.62 million for the company — which also raised an additional $30.1 million. All told the company now has about $61 million in the bank as it plans development work at the 3Q Lithium Project in Catamarca, Argentina. 

What the broker said:

Stifel GMP in early February 2021 reiterated a BUY on shares of Neo Lithium, with an increased price target of $3.90 a day after the mining company closed on $30.1 million in equity financing.

Neo Lithium plans to use the net proceeds from the offering to fund development work at the 3Q Lithium Project and for working capital and general corporate purposes. More specifically, the company intends to use the majority of the proceeds to advance the construction of the concentration pond system at a commercial scale with a view to accelerating future production from the 3Q Project.

The analyst firm noted that Neo Lithium now is flushed with a cash balance of about $61 million.  

“We continue to believe that this could be the last public equity financing required by NLC in order to put the 3Q Project into commercial production,” the firm wrote. 

Also, the firm noted, Neo Lithium is benefiting from a committed investment from CATL, which said it intends to subscribe for 860,870 shares in Neo Lithium to maintain its 8% stake, generating proceeds of $2.62 million. This transaction is expected to close within the next 45 days. 

“We continue to believe that the 3Q Project is one of the highest quality green field brine projects in development,” Stifel wrote.

The firm raised its price target to $3.90 a share from $3.70. The stock currently trades around C$3.13 a share. 

In January, broker Canaccord Genuity said the company was its top pick among lithium developers, as it repeated a ‘Speculative Buy’.

It also hiked its target price on the stock to C$4.20 from C$3.40 following news the company had improved the purity of the battery-grade lithium carbonate produced at the pilot plant.

Inflection points:

  • Completion of final feasibility study
  • Financing talks 
  • Further purity improvements to carbonate

What the boss says:

Following news in January this year that the group had engaged Worley to carry out a definitive feasibility study (DFS) at 3Q, chief executive Waldo Perez spoke to Proactive.

“The feasibility study is going concurrent with financing discussions with our partner (CATL) and other groups so this is going to be a very busy year for us at Neo Lithium,” he said.

Story by ProactiveInvestors


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