Metallium Ltd (ASX: MTM) this week hit a major milestone, fulfilling a US government contract that shows its technology can recover gallium from waste streams, including semiconductor scrap and electronic waste.
The company has ticked off its to-do list under its Phase I Small Business Innovation Research (SBIR) contract with the US Department of War, it said this week, and delivered the program in six months – about half the time for a usual SBIR contract.
The analyst team at Canaccord Genuity has had a look at the company's progress and has a speculative buy recommendation on the shares, along with a bullish share price target, which we'll get to shortly.
Firstly, let's have a closer look at what was announced this week.
Image source: Getty Images
Gallium in short supply
The company said regarding its progress:
The program, titled 'Domestic Recovery of Gallium from Waste through Flash Electrothermal Chlorination', applied Metallium's proprietary FJH metal recovery technology to recover gallium from gallium-rich waste streams including semiconductor scrap and electronic waste materials. These feedstocks commonly contain germanium and other valuable strategic metals, expanding the potential impact of the technology across multiple critical material supply chains.
Metallium said the successful completion of the contract also set it up for further engagement with the Department of War, and noted that the US is 100% reliant on imports for its supplies of gallium, which is used in the manufacture of radar systems, semiconductors, and advanced communications systems.
The company noted that currently, China accounts for almost all primary gallium production globally.
Metallium's president of US operations, Steve Ragiel, said regarding the contract:
More than the contract value itself, the program validates the capability of our Flash Joule Heating technology to address a key national security challenge for the United States. "Gallium is a critical material used in advanced semiconductors, radar systems, satellite electronics and next-generation defence technologies. Demonstrating a pathway to recover gallium domestically from waste streams aligns directly with U.S. strategic objectives to build resilient supply chains for defence-critical minerals. Completing the program in half the typical timeframe also highlights the maturity of our technology platform and the strength of our team. We look forward to pursuing further opportunities with the DoW and other U.S. federal agencies as we move toward commercial deployment.
Shares looking cheap
The Canaccord team said while the funding associated with the contract was not overly material, they believed it derisked a pathway to further Department of War contracts, and integration of Metallium's technology into the US supply chain.
They added:
While waste volume data is limited, de-risking of Gallium/Germanium waste at scale could present a material revenue opportunity given the high in-situ value of Gallium/Germainum waste (up to US$600k/t) and MTM's reported recoveries of over 90%.
Canaccord has a price target of $1.60 on Metallium shares compared with the current price of 65 cents. The company is valued at $482.6 million.
