Is Neo Performance Materials a beneficiary of the transition to EVs?

As a result, any corporate press release that includes the words lithium, cadmium and batteries in the same paragraph will almost certainly result in a boost to the stock price and an offer of financing from three levels of government.

According to the Toronto-based company, it has 30 years of magnetics experience inside and outside of China. This is important because 85 per cent of all traction motors for EVs use motors driven by rare earth magnets and 90 per cent of global rare earth magnetics are produced in China today. Each EV traction motor uses one to two kilograms of rare earth magnets at US$80 a kilo, so this is not a trivial manufacturing input.

Another concern may be that the company still has more than US$60-million of remaining capital expenditure requirements to complete the rare earth magnet plant in Europe, which will deplete much of the current cash balance. After that, there will be pressure to establish a similar facility in North America at a time when governments may be tightening their purse strings.

Both the chief executive and chief financial officers are sizeable and recent insider buyers, which is a testimonial to their confidence – and perhaps why the dividend remains intact. I am a sucker for net-net working capital stocks, so I, too, own some shares.

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