The Neometals Ltd (ASX: NMT) share price is soaring 11% today after the company announced the formal execution of a deal to build a lithium-ion battery recycling plant for Mercedes-Benz Group AG (FRA: MBG).
The news follows an initial announcement on 11 March that the two companies intended to cooperate, with Neometals acting as a technology partner in the design and construction of the proposed plant.
Deal sends Neometals share price skywards
ASX investors are reacting positively to the news by bidding up the Neometals share price today. The small-cap ASX share is currently trading at $1.37, up 11.4%, at the time of writing.
The conditional binding agreement is between Neometals' incorporated joint venture, Primobius — owned 50:50 with SMS Group — and Mercedes-Benz's wholly-owned recycling subsidiary, Licular. The deal forms part of the luxury carmaker's global strategy for recycling car battery systems.
What are the details?
The companies are yet to finalise the location of the plant. However, it will likely be at Mercedes-Benz's Kuppenheim operations in southern Germany, according to Neometals.
The company's statement says the initial plant design has the capacity to recycle 2,500 tonnes per annum (tpa), or 10 tonnes per day, of lithium-ion battery material.
Primobius will first provide the design and engineering plans for the plant. It will then supply and install the necessary equipment. From there, Primobius will "enter into long-term research and development collaboration to recycle next-generation cell formats and chemistries" with Mercedes-Benz.
Primobius will provide a non-exclusive technology licence for the plant, as well as staff training and plant management support. During the operations phase, the two companies will evaluate an industrial-scale operation of Primobius' recycling technology.
What did management say?
In its statement, Neometals said the deal showed the company's "willingness to tailor commercial agreements to suit the recycling needs of EV car makers, LiB cell-makers, and environmental service providers".
Commenting on the news fuelling the Neometals share price, managing director Chris Reed said:
We are delighted to formalise our long-term cooperation agreement with Mercedes-Benz. The R&D collaboration is as important to us as successfully supplying the equipment. We are excited to work together to develop a more holistic recycling solution covering logistics, handling, compliance and sustainability. We are grateful for the opportunity and accept the challenge to futureproof our processing technology.
What's the next step?
The deal will become legally binding as soon as Neometals receives a purchase order from Licular for the supply and installation of the equipment.
Primobius is still working on the engineering and design packages to enable Licular to issue the order.
Neometals share price snapshot
The value of Neometals shares is up 187% over the past year but down 17% in the year to date.
The company has a market capitalisation of $674.5 million with 548.4 million shares on issue.
