The Neometals Ltd (ASX: NMT) share price is sliding today, down about 1% in late morning trade.
But you won't hear any longer-term shareholders complaining. Since this time last year, the Neometals share price has surged 350%.
And according to Kardinia Capital's portfolio manager, Kristiaan Rehder, there's more upside to come for the ASX lithium and resource explorer.
Commodities and energy tend to outperform with inflation
Last week Rehder shared his insights on the Bennelong Kardinia Absolute Return Fund with the Motley Fool. (You can find the full interview here.)
Addressing the growing likelihood that today's inflation isn't all transitory and interest rate hikes are looming, Rehder said:
If interest rates do lift in an inflationary environment, history shows that equity returns can beat inflation. Equity markets can move higher in a rising interest rate environment as long as earnings growth continues to grow alongside.
Drilling down to the best-positioned sectors, Rehder said, "In this sort of environment, the commodity and energy sectors tend to stand out.".
Which brings us to…
Why Kardinia Capital is bullish on the Neometals share price
Rehder told the Motley Fool that Neometals has been among the fund's best-returning positions over the past 12 months.
He explained:
It's developed a process to recycle lithium-ion batteries. This is going to be a big issue globally. In Europe, most discarded batteries are incinerated, meaning 90% of the battery's mass is released into the atmosphere. Volkswagen alone have estimated they will have 1 million tonnes of discarded batteries by 2030.
Rehder also likes the Neometals proprietary extraction process. "The company has a very low-cost solvent extraction process, which can extract key commodities from those batteries," he said. "The 2 most valuable components are the zinc and the nickel."
While some of the catalysts helping to drive the Neometals share price higher have already occurred, Rehder expects more to come:
A number of catalysts have already played out for the company. One of the major catalysts has been the commissioning of the demonstration plant in Germany. It was fully commissioned at the end of October.
Going forward, we expect the feedstock arrangements to secure end of life lithium-ion batteries is not too far away. They're also planning a listing on the London Stock Exchange. And shortly, we expect the final decision on the first North American plant.
Neometals share price snapshot
The Neometals share price is up 108% over the past 6 months. By comparison, the All Ordinaries Index (ASX: XAO) has gained 6% during the same period.
Over the past month, the Neometals share price is up 14.5%.
