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Neo Metals Ltd (ASX:NMT) - February 2018

De-risking projects key to value uplift
A$170m or 68% of our A$249m SOTP valuation for Neometals (ASX:NMT) iscomprised of 1) our valuation of NMT’s 13.8% interest in the operating MtMarion Lithium Mine, 2) NMT’s FY18E cash balance and, 3) NMT’s equity stakein ASX-listed diversified minerals explorer Hannans Ltd (HNR). We view thisaggregate valuation– equivalent to 31cps - as “locked-in”, with relatively lowforecast risk. 

At current share price levels of 37.5cps, the market appears to be attaching(only) A$36m or 6.5cps to NMT’s extensive portfolio of technology projectsand the globally significant Barrambie Titanium/Vanadium Resource ([email protected] 22.2% TiO2, 0.63% V2O5). We believe this is overly conservative; our riskadjustedvaluation for these projects is closer to A$79m or 14cps. However,we suggest that as the projects are de-risked, with the path tocommercialisation (quantum of revenue, timeframe) more visible, NMT has thepotential to offer significantly higher upside for speculative investors. Risks toour earnings profile and target price include, operational performance at theMt Marion Lithium Mine, spodumene and AUD:USD exchange rate volatility,project development at the WA LiOH and Barrambie Ti-V Projects, anddevelopment of the group’s lithium processing/technology projects. 
12/02/2018 8:04:00 AM

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