Rare Earths Frontrunner Neo Performance Outperforms with an Impressive 48% Return YTD

Neo Performance Materials Inc. (TSX: NEO) continues its outperformance in 2021, posting an impressive 48% return year to date (YTD). That compares to the TSX Composite, which closed for the first time above 19,000 yesterday, up 9.1% on the year and the S&P 500 returning a positive 8.6%. The reason for this is somewhat obvious in that there have been several catalysts so far this year for Neo including a significant deal with Energy Fuels, solid year end results and encouraging guidance for the start of 2021.

Energy Fuels Deal

As discussed previously on InvestorIntel and further in this interview with the two companies, the deal with Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) could be considered a game changer to break the dominance of China in the rare earth supply chain. Additionally, the fact that Energy Fuels spent less than $2M to modify its White Mesa Uranium Mill in Utah (the only licensed facility of its type in the USA) to process up to 2,500 tons per year of monazite into clean mixed rare earth carbonates and Neo Performance already having existing capacity, makes this joint venture incredibly cost-effective and competitive with China. Neo owns the only operating rare earth separation facility in Europe at Sillamäe, Estonia (“Silmet”), which is the destination for Energy Fuels ore.

Q4 & Year-End Results

On March 21st Neo reported Q4/20 and FY2020 results that included significantly stronger sequential results in the fourth quarter of 2020, driven largely by a sharp rebound in automotive and industrial end markets in the latter portion of 2020. Highlights include Q4/20 revenue of $110.4M higher by 16.8% YoY and by 41.8% over Q3/20, adjusted Net income of $9.6M ($0.25 per share) improved by 56.7% YoY and reversed a loss in Q3/20, while adjusted EBITDA of $12.3M was higher by 114.8% sequentially.

Other than a $59.1M non-cash impairment charge in Q2 relating to non-productive assets whose value was adjusted as a result of the economic impacts of COVID-19 on future cash flows, the overall results would have been positive as well. Alas everyone has had some COVID impacts in one form or another.

First Quarter 2021 Outlook

More importantly, the company has indicated that the positive trends in volumes and higher selling prices that occurred in Q4/20 have continued into Q1/21 for the Chemicals & Oxides and the Magnequench business units, resulting in a significant positive variance between what Neo anticipates it will report for Q1/21 and current analyst consensus estimates. Neo expects that its Q1/21 financial results will exceed current analyst consensus estimates of $84.9M in revenue and $9.9M in EBITDA for the period (both lower than Q4/20), as well as being significantly higher than the Q4/20 financial results. However, we are going to have to wait until May for the Q1 results to confirm this.


Neo Performance has plenty of momentum moving forward in 2021. The company should start to see the positive benefit of the Energy Fuels deal towards the end of Q2, over and above the upward trending momentum seen from Q3/20 through Q4/20 and Q1/21. Neo finished 2020 with cash and cash equivalents of $72.2M and positive cash flow meaning the company has plenty of options to grow both organically or via acquisition.

There are currently 37.5M shares outstanding (38.6M fully diluted) of which Oaktree Capital Management, L.P. holds, directly or indirectly, an aggregate of 17.1M Common Shares, representing 45.7%, which gives the company decent leverage to good news or positive results. Neo’s market cap is roughly $759M as of close of business yesterday. Using conservative corporate guidance, an annualized Q1 P/E is 17-18x, which isn’t unreasonable in the context of the current market. The question is, how much is “significantly higher than the Q4/20 financial results” and thus how much upside is there for Neo Performance?

Jack Lifton on how President Biden’s American Jobs Plan Impacts the EV Market

In this episode of InvestorIntel’s Critical Materials Corner with Jack Lifton, Jack talks about President Biden’s American Jobs Plan which details how the United States government is going to spend nearly $2 trillion on infrastructure, alternate energy, and creating millions of good-paying jobs.

In this InvestorIntel video, which may also be viewed on YouTube (click here to subscribe to the InvestorIntel Channel), Jack went on to say that the Plan aims to have the entire United States adopt electric vehicles (EV) starting with an electrified Federal Government fleet, including the United States Postal Service. The Plan proposes a $174 billion investment to win the EV market by enabling automakers to spur domestic supply chains from raw materials to parts, retool factories to compete globally, and support American workers to make batteries and EVs. He said that the Plan will also target climate change and out-competing China and has identified rare earths separation as a goal along with uranium mining.

To watch the full video, click here

Disclaimer: This interview, which was produced by InvestorIntel Corp. (IIC) does not contain, nor does it purport to contain, a summary of all the material information concerning the “Company” being interviewed. IIC offers no representations or warranties that any of the information contained in this interview is accurate or complete.

This presentation may contain “forward-looking statements” within the meaning of applicable Canadian securities legislation.  Forward-looking statements are based on the opinions and assumptions of management of the Company as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements.  Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein.

Any projections given are principally intended for use as objectives and are not intended, and should not be taken, as assurances that the projected results will be obtained by the Company.  The assumptions used may not prove to be accurate and a potential decline in the Company’s financial condition or results of operations may negatively impact the value of its securities. Prospective investors are urged to review the Company’s profile on www.sedar.com and to carry out independent investigations in order to determine their interest in investing in the Company.

If you have any questions surrounding the content of this interview, please email info@investorintel.com.

Chinese Dominance of Rare Earths Sets off Alarm Bells in Washington

In this episode of InvestorIntel’s Critical Materials Corner with Jack Lifton, Jack talks about geopolitical issues with China and how regionalism is going to affect not just the interest and demand for rare earths, but for all critical materials.

In this InvestorIntel video, which may also be viewed on YouTube (click here to subscribe to the InvestorIntel Channel), Jack went on to say that the Chinese dominance of the rare earths space has set off alarm bells not just in the US but also in EU and Canada. “I see the security of the supply of critical materials becoming a regional issue in this world,” he added. Jack highlighted that Canada is going ahead faster than the US in the critical materials space by developing several rare earths deposits for production and building the first full-scale rare earths separation plant in Saskatchewan.

To watch the full video, click here