Neo Performance Materials Inc. (“Neo” or the “Company”) (TSX: NEO), is pleased to provide an update on its manufacturing strategy execution with respect to Rare Metals operations at the NPM Silmet OÜ plant in Sillamäe, Estonia (“NPM Silmet”). This shift in focus away from midstream toward downstream operations is expected to diversify feedstock supply, reduce working capital requirements, and reduce volatility by lowering inventory volumes and holding times.
Beginning this week, NPM Silmet is updating its manufacturing processing of Niobium and Tantalum to improve business performance of its high-purity rare metals production. NPM Silmet will shift further downstream in its value-add operation, by halting the energy-intensive hydrometallurgical processing of Niobium- and Tantalum-bearing ores. Going forward, future products will be derived from oxides and recycled materials. Neo has completed testing of these purchased oxides and has entered into numerous sourcing agreements for these input materials.
This focus is expected to enable Neo to improve return on capital employed while better aligning material purchases with underlying customer demand for higher-value products. In addition, it is expected to deliver the following benefits:
- increase supplier base and sourcing optionality;
- reduce working capital requirements and inventory on hand;
- decrease price volatility;
- simplify the manufacturing process; and
- improve environmental footprint from reduced energy consumption and wastewater generation.
It is anticipated that the Rare Metals unit’s operational transformation will result in streamlined business processes. In connection with this production re-alignment, Neo anticipates taking a charge to its fourth quarter net income/(loss), including approximately US$2 to $3 million non-cash charge for impairment of assets and less than US$1.5 million of employee restructuring costs. In addition, savings from working capital reductions are expected to offset the restructuring and transition cash costs in less than a year with operating income improvements delivered on an ongoing basis.
“We are continuing to execute on our new manufacturing strategy to improve the return on capital employed, reduce dependency on concentrated supply arrangements, and better control volatility in earnings.” said Rahim Suleman, President and CEO of Neo.
