Neometals’ Battery Recycling Exit Raises Questions on Future Growth Risks

Strategic Exit from Battery Recycling

Neometals Ltd (ASX, NMT) has announced a binding term sheet to exit its lithium-ion battery (LiB) recycling business by transferring its 50% interests in Primobius GmbH and the holding company for patented recycling technology to its joint venture partner, SMS Group GmbH. This move follows a comprehensive review of the company’s recycling strategy and reflects a broader shift in focus towards capital-efficient and lower-risk ventures.

The deal involves an upfront payment of €5 million (approximately A$8.9 million) in cash, plus an ongoing commercial compensation fee amounting to 2% of Primobius’ annual revenues from July 2025 through June 2037. This royalty stream is capped at €7 million (around A$12.5 million), indexed to inflation, providing Neometals with a continued albeit reduced exposure to the recycling business’s future performance.

Rationale Behind the Divestment

Neometals’ Managing Director, Chris Reed, acknowledged the company’s pioneering role in developing hydrometallurgical battery recycling technology and the progress achieved through the Primobius joint venture. However, he noted that Neometals is unable to commit the necessary working capital for the next phase of commercialisation. The decision to divest is driven by a desire to redeploy capital into nearer-term, cash-generative opportunities that align more closely with the company’s strategic priorities.

The review that led to this decision considered the timing and scale of future capital requirements, forecast market conditions in battery materials, and the evolving landscape of European lithium-ion cell production and electric vehicles. By exiting the joint venture, Neometals aims to reduce its exposure to capital-intensive projects and focus on business models that promise more disciplined capital management and value realisation.

Transaction Details and Next Steps

The parties intend to finalise formal agreements by 31 August 2025, with completion contingent on regulatory approvals and SMS Group’s shareholder committee consent. Upon completion, SMS will hold 100% ownership of Primobius and the associated recycling technology, while Neometals will retain a royalty interest through the commercial compensation fee.

This transaction is expected to provide Neometals with immediate cash inflow and relieve it from future capital calls related to the Primobius business development phase. The company will continue to update the market on material developments as the transaction progresses through the third quarter of 2025.

Broader Portfolio and Strategic Focus

Neometals continues to advance its portfolio of sustainable processing solutions, including lithium chemicals production via its patented ELi Process™, vanadium recovery technologies, and exploration at the Barrambie Gold Project. The divestment from the recycling joint venture underscores a strategic pivot towards projects with lower capital intensity and faster paths to cash generation, aligning with the company’s commitment to sustainable value creation for shareholders.