Barry FitzGerald: Here’s why Meteoric’s REE moonshot is only just firing up
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Meteoric’s December pick-up of the high-grade Caldeira rare earth elements (REE) project in Brazil has already worked wonders on the company’s share price.
What was a 1.5c stock ahead of the acquisition had become a 6.5c stock by mid-week, giving Meteoric (ASX:MEI) a $95 million market cap.
Garimpeiro’s Brazilian cousins reckon that could just be the start as their background checks suggest Caldeira has world-class potential as Meteoric itself has suggested.
There is lots of confirming work to do but the previously privately-owned Caldeira does seem to have something special about it.
So much so it could be a global changer for everyone who is stressed about China and its control over the rare earths business.
Again though, lots of confirming work to do, let alone completing the $US20 million plus royalty acquisition.
What is known is that Caldeira is of the ionic adsorption clay-hosted type that underpins Chinese production. It also looks to be off the scale when it comes to the grade of the shallow mineralisation.
Based on results from an estimated $5 million drilling program by the Japanese government’s JOGMEC arm between 2016 and 2019, the grade of any JORC compliant resource estimate could be around the 4,000ppm level.
That compares with China’s 600ppm grade, and the 1,500ppm grade of the advanced Serra Verde REE project in Brazil which recently attracted a $US150 million investment from two resource investment funds – Energy and Minerals Group and Vision Blue Resources, the latter led by Mick Davis of Xstrata fame.
A drilling program at Caldeira is about to kick off and Meteoric expects to announce a maiden resource estimate in the June quarter.
The attraction of ionic adsorption clay deposits is their simple open-cut mining and easy processing compared with the hard rock deposits in which the rare earths are locked up in in all sorts of weird and hard to crack minerals.
In ionic adsorption type deposits, the rare earths are held on the outside of the clay lattice by an ionic bond and put simply, can be “washed’’ off or desorbed for collection using ammonium sulphate in weakly acidic conditions.
The REE hosting clays at Caldeira have been mined by a family business for more than a 100 years to make bricks and pipes. So there are a lot of unbeknown REE-enriched bricks and pipes in the region.
If as Garimpeiro is suggesting Caldeira has the makings of something special, why was little old Meteoric able to pick it up?
It goes to relationships. Meteoric director Andrew Tunks has stomped around Brazil over the years on the gold/copper hunt. During that time he got to know a young lad who he helped out on understanding things mining.
The young lad’s uncle is the vendor of Caldeira.
And why did JOGMEC walk away given the spectacular earlier drill results? It seems its entry price was based on a tonnage formula that quite possibly could have ended up being a huge upfront cash payment given Caldeira‘s tonnage potential.
Assuming Meteoric pulls in the final $US17m due in March from its sale of its Juruena gold project in Brazil in an unrelated deal, it will have the readies to keep up the pace at Caldeira. It has the bustling Tolga Kumova cheering it on as a 13% shareholder.
On things more general like the state of the REE market, Macquarie noted on January 13 that prices of the all-important magnet REEs (NdPr) recovered in the December quarter from the multiple month low of $US83/kg in September.
As a result, Macquarie kept its average price estimate for the basket of REEs produced by ASX sector leader Lynas (ASX:LYC) largely unchanged at $A48.9/kg. It has a $9.20 price target on the stock which compares with its mid-week price of $8.53.
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