CleanTeQ demerges water business, to focus on battery metals

Water treatment and battery metals miner CleanTeq (ASX:CLQ) has announced that it will now go to shareholders to vote on the proposed demerger of its water division.

The company previously announced in September 2020 that it had initiated a review to consider the separation of the water division from its mining business.

The review was conducted by consultant Grant Samuel, and has concluded that the separation will allow the company to focus on its mining business and give shareholders the opportunity to “more readily manage their own desired exposure to each of the businesses”.

Demerging the two businesses will also simplify the investment prosposition to new investors, given that the two divisions are practically unrelated.

CleanTeQ Water Business

CleanTeQ’s water business is currently the only revenue generating business of the company, with its metals mining business at Sunrise still to deliver output.

For the full year of 2020, CleanTeQ Water reported a net loss of $5.17 million.

The water business is focused on the mining, municipal and agri-food sectors.

Over the last 18 months, Clean TeQ Water has positioned itself for growth in a pipeline of new projects, along with those already underway in Oman, Australia and the Congo.

Sunrise is the crown jewel

However, the crown jewel of the company is its Sunrise Battery Materials Project at Fifield, New South Wales.

The company has predicted that this project, which is yet to generate revenue, will be a major supplier of nickel and cobalt to the lithium-ion battery market, and scandium to the aerospace, consumer electronics and automotive sectors.

The mine has the largest cobalt deposits outside of Africa. It also has some of the largest and highest-grade accumulations of scandium on the planet.

The world is fast moving towards clean energy transportations and electric vehicles (EV), and despite the COVID-19 pandemic, sales of EVs have increased in 2020, with analysts predicting that battery metals to surge in 2021 and beyond.

The world’s biggest EV maker Tesla has chimed in on the battery mining business – with CEO Elon Musk saying that Tesla would give mining companies a “giant contract for a long period of time if you mine nickel efficiently and in an environmentally friendly way”.

Brokerage firm Bernstein said that the probabilty of Tesla acquiring a nickel mine is low, although “Tesla could help finance new Class 1 nickel supply (such as for example the Sunrise project headed by Clean TeQ) via some long term pre-purchase agreement or a financing arrangement.’’

According to Stockhead author Barry Fitzgerald, of all of the nickel stocks listed on the ASX, it was only Clean TeQ that got a mention in the Bernstein report, albeit in passing.

What’s next for CleanTeQ

The shareholder meeting to vote on the CleanTeQ Water demerger is set for 24 March 2021.

Along with the demeger, there will also be other proposals including the adoption of a new company name to ‘Sunrise Energy Metals Limited’. The ‘Clean TeQ’ name will be proposed to be retained by the Water Business.

The CleanTeQ share price has risen by 20% over the last twelve months, and rose by 1.75% today to 29c.