After Neometals Ltd closed a A$9 million fundraising (£4.7 million) and looks to drum up another A$13 million, analysts at house broker RBC Capital Markets said the company's Primobius solution is "potentially worth multiples of the current share price".
Added to A$14.2 million of cash at hand, the placing that closed last week and the entitlement offer (right issue) are priced at A$0.19 or 10p per share.
RBC, which has set a new share price target of 25p, acknowledged that delays to the battery recycling roll-out and tough fundraising conditions in the stock market have forced the company into an entitlement issue.
However, analysts at RBC said, Neometals' LiB recycling solution, being rolled out as part of the Primobius joint venture project with Germany's SMS Group, "continues to look compelling".
The technology's hydrometallurgical (hydromet) process has significant operational, cost and risk advantages over traditional pyrometallurgical (salt-roast) processes, and the analysts said it provides a "viable solution for carmakers to process their lithium battery manufacturing scrap, as evidenced by the Mercedes partnership".
With the fundraising providing the capital for the group to "keep optionality open" for another 18 months, bridging to the first revenue from the Stelco JV in 2025.
The next 18 months "will be all about progress and keeping optionality open", the analysts added, expecting a Mercedes demo hub announcement by year end, a Stelco JV decision in the first half of 2024 and hub in the first half of 2025.
"Then further partnerships should be announced providing a path to accelerated revenue growth and longterm funding solutions."
RBC's target price is based on forecast modelling suggests that the Stelco and Mercedes-Benz plants will provide circa US$60 million each in royalty value to Neometals, assuming 10% royalty and an 8% discount rate, with the expectation that Primobius will be able to build two plants every 18 months.
"If we run this from 2027-31 and then finish with a 200ktpa plant, we would generate a discounted value of some US $420 million."
With financing, partnership and permitting risks outstanding, only 20% of this value was used to make the base case, with a 65p unrisked upside target, down from its previous 95p.
RBC rate's NMT at 'outperform' with an added a 'spec risk' qualifier due to the company remaining pre-revenue till 2025 and risks around the successful execution of partnerships.