Junior battery metals miner Neometals says it has reached an “inflection point” and has decided to stick with lithium over titanium and vanadium.

Neometals (ASX:NMT) is spinning out its Barrambie titanium and vanadium project in Western Australia and associated non-lithium technology assets into a separate company that will be listed on the ASX.

The company wants to focus on its “fully integrated lithium business”.

“The company has reached an inflection point where both business arms need dedicated management, independent corporate structures and financial resources to realise optimal value,” boss Christopher Reed told investors.

“We understand the incredible potential of Barrambie, and with the application of the same staged development strategy we have used in the lithium business, we have every confidence it will become a globally significant operation.”

Neometals owns a 13.8 per cent stake in the already producing Mount Marion lithium mine near Kalgoorlie in Western Australia, which the company says “forms the backbone to its fully‐integrated lithium business aspirations”.

The other partners in the mine are Minerals Resources (ASX:MIN) and one of China’s largest lithium producers, Jiangxi Ganfeng Lithium Co.

Neometals (ASX:NMT) shares over the past 12 months.
Neometals (ASX:NMT) shares over the past 12 months.

Neometal’s plan is to maximise returns from its stake in the project via the development of the Kalgoorlie lithium refinery project, which will convert the lithium from the mine to the higher value lithium hydroxide product.

Companies that produce lithium hydroxide are likely to witness increased interest from end users, market forecaster Roskill said earlier this year.

Lithium hydroxide is mainly used to produce lithium greases, but it is also used as a heat-transfer medium and as a storage-battery electrolyte.

It is becoming more popular among electric car battery makers because it can produce cathode material more efficiently.

It is also a key component for the cathodes that go into the nickel-cobalt-aluminium batteries currently used by Tesla and the nickel-cobalt-manganese batteries that are more popular with rival car makers.

The cathode is used to conduct electricity flows out of a battery or device.

In 2017, around 30 per cent of the lithium used in automotive lithium-ion batteries was lithium hydroxide and this proportion is expected to increase within the next decade

Lithium stocks have been on the nose a bit for investors in recent months on the back of concerns that a flood of new supply is set to enter the market.

Investors to get a cut of non-lithium assets

Neometals believes two separate ASX-listed companies will benefit investors more.

The company says it is apparent to the board that the Barrambie project and the associated non-lithium technology assets are not “attracting fair value” while housed in the current Neometals structure.

Shareholders will receive shares in the new ASX-listed company via an in-specie distribution.

“The demerger creates an opportunity for shareholders to retain exposure to both businesses and capital markets will gain clarity, courtesy of simplified commodity focus and corporate structure,” Mr Reed said.

Neometals expects the demerger to be completed in the March quarter next year.

Stockhead is seeking further comment.