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Neometals’ lithium strategy gets a thumbs-up from Hallgarten & Company

12-month target price of 42 cents, an upside of about 45% based on the current share price of 29 cents.
Mt Marion Lithium Operation
Mt Marion Lithium Operation

Neometals Ltd (ASX:NMT) is in full-steam-ahead mode and doing all the right things as per the research report by New York City based investment bank Hallgarten & Company.

Hallgarten has assigned a LONG recommendation for Neometals shares with a 12-month target price of 42 cents, an upside of about 45% based on the current share price of 29 cents.

Neometals has interests in three Western Australian lithium projects which are in various stages of development.

Western Australian lithium operations map

The company achieved strong operational performance at the Mt Marion mine during the June 2018 quarter with 109,000 tonnes of lithium concentrate produced.

Neometals: horizons of growth

The following is an extract from the Hallgarten report.

Mount Marion

The Mount Marion lithium project was added to the Neometals portfolio in September 2009. It is one of Australia’s largest high-grade lithium spodumene occurrences.

Neometals and its partner Mineral Resources Limited (ASX:MIN) cut canny back-in offtake deals for themselves when they sold out their majority of the Mt Marion lithium project to Ganfeng in 2016.

Mt Marion is now churning out Lithium concentrate and generating income for the partners.

The retained right to 12.37% of the production of Mt Marion from February 2020 means that Neometals has a potential flow of ore that it now wants to upgrade and keep the value-added.

Mt Edwards Lithium Project

In mid-March of 2018 Neometals announced the acquisition of the Mt Edwards Lithium Project from Estrella Resources and a minority partner.

The project covers 240 square kilometres and is located 40 kilometres south of Mount Marion.

Neometals views Mt Edwards as a strategic addition to its spodumene sourcing pipeline to support its planned lithium hydroxide business.

Price Action

We have been following Neometals for the best part of a decade now.

In the depths of the lithium slump the stock was trading at 3 cents but then soared in 2016 to around 50 cents upon developments, ironically all before lithium became fashionable again.

The stock then slumped back into the low 30 cents range and has dawdled about there, irrespective of developments in the company or the mineral, with only a fleeting recovery to 50 cents in November of 2017 and has dwindled again back to around 30 cents.

Conclusion

Neometals and MinRes did this in their dealings with Ganfeng with seemingly the Chinese group thinking it could circle back and take out the minorities at its leisure. It has proven to be grievously mistaken in this and Neometals looks to be the next global producer of elaborated Lithium.

Our only fear on the current strategy is that it may be a gambit saying to Ganfeng “take us out or we will be competitors of yours, depriving the mothership of content”.

If Neometals were to sell out to Ganfeng this would be a bitter disappointment to ourselves (and the WA government) and we would finally cut our ties to this story.

However, at this point, the company is in full-steam-ahead mode and doing all the right things.

We have had Neometals in our model mining portfolio since last decade as a Long call and we reaffirm our twelve-month target price of 42 cents.

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Neometals Ltd Timeline

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