Level 14
Level 5
172 St George’s Terrace
64 Clarence Street
PERTH WA 6000
SYDNEY NSW 2000
PO Box 7625
PO Box R1931
CLOISTERS SQUARE WA 6850
ROYAL EXCHANGE NSW 1225
P: +61 8 9288 3388
P: +61 2 9024 9100
Neometals Ltd All on track for mid-year lithium production
2 February 2016
Construction of the Mt Marion Lithium Mine in WA (NMT 45%, Mineral Resources (ASX:MIN) 30%, Jiangxi Ganfeng Lithium 25%) started in November 2015, with MIN funding the capex on a BOO basis. In the 28 January 2016 Quarterly Activities Report, NMT restated a mid-2016 production start-date (State One forecast: July 2016) with first shipments expected in the September 2016 quarter.
NMT A$0.155 (TP A$0.27)
NMT and MIN also announced that 100% offtake partner Ganfeng has agreed to expand the scope of the current 200ktpa 6% spodumene concentrate offtake agreement, by 80ktpa of additional lower-grade (46%) material which could be generated through the addition of a flotation circuit to the current beneficiation plant. During the quarter, work commenced on the DFS for the down-steam Lithium Hydroxide Project (the DFS is on-schedule for completion in mid-2016). Post the quarterly activities report, NMT announced that the first 46 RC drill holes of a 335-hole resource infill and extension programme at Mt Marion was completed at the No.6 Deposit. The dill programme is expected to be completed in the June quarter 2016, with an upgraded Mineral Resource Estimate and Ore Reserve planned to be completed in the June and September 2016 quarters respectively.
NPV-based valuation: A$0.27ps (unchanged) With production on track for a mid-year start, and with 100% of offtake contracted to JV partner Ganfeng for the first three years, we believe that NMT is well-positioned to take advantage of a strong demand environment for lithium oxide. Risks to our earnings profile and target price include, but are not limited to: lithium oxide and AUD:USD exchange rate volatility, the production start-date at Mt Marion and subsequent ramp-up profile, the start-up date and operational performance at the lithium oxide beneficiating plant (currently in DFS-stage), and project development (particularly funding) at NMT’s (100%) Barrambie Titanium-Vanadium Project.
Spodume price (US$/t)
Risk Assessment Higher Resources – Lithium David Brennan, CFA Senior Investment Analyst
[email protected] +61 (0)2 9024 9142
Neometals Ltd ASX Code 52 week range Market Cap (ASm) Shares Outstanding (m) Av Daily Turnover (shares) ASX All Ordinaries FY16E BV per share (A$) EPS FY16E (A$) Net Debt/(Cash) FY16E (A$m)
FY15A
FY16E
FY17E
FY18E
FY19E
450
450
450
459
468
ASX Small Resources
0.83
0.74
0.80
0.80
0.80
ARP (A$/t)
na
na
544
555
566
Sales (NMT interest) (t)
na
0
90,000
90,000
90,000
500
Revenue (A$m)
0
0
48.9
49.9
50.9
400
-11.3
-4.4
10.3
10.6
10.9
na
na
49
50
51
na
na
430
437
444
200 100
Costs (A$/t ore) Costs .(A$/conc.) Normalised NPAT (A$m)
-10.7
-4.6
6.3
6.6
6.9
EPS Reported (A$)
-0.02
-0.01
0.01
0.01
0.01
EPS Normalised (A$)
-0.02
-0.01
0.01
0.01
0.01
DPS (A$)
0.00
0.00
0.00
0.00
0.00
na
na
14.0
13.4
12.7
Net debt / (cash) (A$m)
1
-16
-23
-29
-36
Capex (A$m)
-3
-4
-2
-2
-2
PER (x)
NMT
700
AUD:USD
EBITDA (A$m)
NMT A$0.03-A$0.23 92 559 1.7m 5,094 0.02 -0.01 -16
Relative price performance
Key Financials Year-end June
Recommendation Speculative Buy
600
300
0 Jan-15
Apr-15
Jul-15
Oct-15
Source: IRESS
So urce: IRESS, Co mpany Data, State One Sto ckbro king. Share price: $ 0.155 Feb 01, 2016
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Jan-16
Financial Statements Neometals Limited Year ending June Profit & Loss Statem ent (A$M)
FY15A
FY16E
FY17E
FY18E
FY19E
FY15A
FY16E
FY17E
FY18E
Spodumene (6% Li2O) (CIF, US$/t)
450
450
450
459
468
(12)
AUD:USD
0.83
0.74
0.80
0.80
0.80 585
Revenue
0.0
0
49
50
51
Mining
0.0
0
(12)
(12)
Processing
Lithium Price
FY19E
0.0
0
(14)
(14)
(14)
Spodumene (Li20)(CIF, A$/t)
542
608
563
574
Corporate/Royalty/Other
(11.3)
(4)
(13)
(13)
(14)
NMT Average Received Price (A$/t)
na
na
544
555
566
EBITDA Depreciation & Amortisation
(11.3) 0.0
(4) 0
10 (2)
11 (2)
11 (2)
Premium / (discount)
na
na
-3%
-3%
-3%
Operating profit
(11.3)
(4)
9
9
9
Production profile (Mt Marion)
FY15A
FY16E
FY17E
FY18E
FY19E
0.0
0
0
0
0
Mill throughput (Mt)
0
0
1.75
1.75
1.75
(11.3)
(4)
9
9
9
Li2O grade (%)
0
1.37%
1.37%
1.37%
1.37% 6.00%
NOI EBIT Interest income
0.8
0
0
1
1
Target concentrate Li2O grade (%)
0
6.00%
6.00%
6.00%
(0.5)
(0)
(0)
(0)
(0)
Spodumene grade (%)
0
22.8%
22.8%
22.8%
22.8%
0.3
0
(3)
(3)
(3)
Spodumene tonnage (t)
0
0
399,583
399,583
399,583
Reported NPAT
(10.7)
(5)
6
7
7
Recovery (%)
0
50%
50%
50%
50%
Norm alised NPAT
(10.7)
(5)
6
7
7
Spodumene conc. (t) (100%)
0
0
200,000
200,000
200,000
EBITDA Margin (%)
na
na
21%
21%
21%
na na
45% 0
45% 90,000
45% 90,000
45% 90,000
Interest expense Tax expense
Operating profit margin (%)
NMT equity share (%) NMT equity share (t)
na
na
18%
18%
19%
EPS Reported (A$)
(0.02)
(0.01)
0.01
0.01
0.01
Costs (A$/t Spodum ene conc.)
FY15A
FY16E
FY17E
FY18E
FY19E
EPS Normalised (A$)
(0.02)
(0.01)
0.01
0.01
0.01
Mining
na
na
132
134
136
nm
nm
5%
5%
Processing
na
na
152
155
158
Corporate/Royalty/Other Total unit cash costs
na
na
146
148
150
na
na
430
437
444
EPS grow th (%)
nm
DPS - Declared (A$) Avg. no. of fully-diluted shares (m)
0.00 502
0.00 544
0.00 569
0.00 569
0.00 569
YE no. of fuly-diluted shares (m)
509
569
569
569
569
FY15A
FY16E
FY17E
FY18E
FY19E
(10.9)
(4)
10
11
11
(0.2)
(0)
1
0
0.3
0
(3)
(3)
Status
Mt
Grade (%)
Tonnes
Indicated
10.1
1.5%
145,725
Inferred
13.2
1.3%
176,746
0
Total
23.2
1.4%
322,471
(3)
TiO2
47.2
22.2%
10,468,960
V 2O5
47.2
0.6%
297,360
Fe2O3
47.2
46.7%
22,042,400
Resources (JORC) Cash Flow Statem ent (A$M) EBITDA Investment in w orking capital Tax expense Operating Cash Flow
Mt Marion Lithium Project
(10.8)
(4)
9
8
8
Capex
(2.7)
(4)
(2)
(2)
(2)
Other investments
0.0 (2.7)
26 22
0 (2)
0 (2)
0 (2)
Net interest received / (paid)
0.3
(0)
0
0
0
Leverage
FY15A
FY16E
FY17E
FY18E
FY19E
Debt draw dow n / (repayment)
0.0
0
0
0
0
Net Debt/Equity
4%
cash
cash
cash
cash
Dividends paid
0.0
0
0
0
0
Gearing (ND/ND+E)
2%
cash
cash
cash
cash
(0.1) 0.2
0 (0)
0 0
0 0
0 0
Interest Cover (x)
na
-34.5
na
na
na
7.7
(0)
0
0
0
Valuation Ratios (x)
FY15A
FY16E
FY17E
FY18E
FY19E
(5.6)
17
7
6
6
Normalised P/E Price/OP Cash Flow
na -7
na -17
12.2 8.9
11.6 9.9
11.1 9.6
0.03
0.02
0.03
0.04
0.05
-7
-13
5
4.4
3.6
-81%
-53%
42%
31%
24%
Investing Cash Flow
Equity raised / (repaid) Financing Cash Flow Non-operating & Other Inc/(Dec) in Cash Balance Sheet (A$M)
FY15A
FY16E
FY17E
FY18E
FY19E
Barrambie Ti-V Project
Note: Barrambie Resorce is 74% Indicated and 26% Inferred
Book value per share (A$)
Cash & Equivalents
1.4
18
25
31
38
Receivables
0.6
1
5
5
5
ROE (%)
Inventories Other Current Assets
0.0 1.0
0 1
4 1
4 1
4 1
SOTP Valuation
12.7
17
17
18
18
PPE and Exploration & Development Deferred tax asset
0.0
0
0
0
0
Other Non Current Assets
6.8
(19)
(19)
(19)
(19)
EV/EBITDA
(A$m ) 70
(A$/share) 0.12
Com m ent NPV valuation
Dow nstream Processing (unrisked)
119
0.21
NPV valuation
Downstream risk weighting
50%
Mt Marion Lithium Mine inventory
22.6
18
33
40
47
Dow nstream Processing (risked)
60
0.10
50% of unrisked NPV
Payables and other current Liabilities Short Term Debt
2.1 1.9
2 2
11 2
11 2
11 2
Barrambie Titanium Project Other (Lake Johnston Ni Project)
10
0.02
Nominal
0
0.00
Long Term Debt
0.0
0
0
0
0
Group Enterprise value
139
0.24
Other Non Current Liabilities
5.3
5
5
5
5
Net (debt)/cash (FY16E)
16
0.03
Total Liabilities
9.3
9
18
18
18
Group Equity value
155
0.27
13.2
9
15
22
28
0.5
(16)
(23)
(29)
(36)
Total Assets
Total Equity Net Debt (Cash) Top 3 Shareholders
%
Melaid Holding Inc
7.9
HSBC Custody Nominees (Australia) Ltd
3.7
JP Morgan Nominees Australia ltd
3.4
Date Sep-15
Neometals Ltd (NMT, formerly Reed Resources Ltd) has a 45% equity interest in the Mt Marion Lithium Project (WA), which is scheduled for first production of 200ktpa Li 2 O from mid-2016. NMT also has a 70% interest in a downstream processing venture - Reed Advanced Materials (RAM) - which is looking to beneficiate a portion of the Mt Marion output to higher-value Lithium Hydroxide (LiOH) and Lithium Carbonate (Li 2 CO 3 ). In addition, NMT has a 100% interest in the large (44Mt) Barrambie Titanium-Vanadium Project (WA); NST's pre-feasibility study (PFS) estimates the project's NPV at A$355m.
Source: Company, IRESS, State One Stockbroking forecasts
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