Barry FitzGerald: Is 'the premier rare earths project on the planet' still a screaming Buy?

Andrew Tunks did not want to leave the investor crowd at the Melbourne Mining Club’s “Cutting Edge’’ series for up and coming junior companies on Tuesday night in any doubt about where he thinks Meteoric (ASX:MEI) is headed.

He is executive chairman of the Brazilian rare earths high-flyer which has soared from 1.6c a share in December to 20c a share mid-week for a market cap of $388 million on the strength of its Caldeira ionic clay-hosted rare earths (REE) discovery.

Tunks said that after such an spectacular run, investors could be thinking that they had missed the boat.

“I can assure you that we are only just starting and that there is more to come,’’ Tunks said. It was at that point that Garimpeiro, who somehow had found himself in the front row, sat up and began to take notes.

“It has been a life-changing event for me and our company. It is certainly the premier rare earths project on the planet (of those not currently operating), and possibly one of the most significant mineral projects in the world, in my opinion,’’ the veteran geoscientist with a PhD from the University of Tasmania told the crowd.

Garimpeiro previously mentioned Meteoric on January 21 when it had already wriggled its way up to 6.5c a share. It has since gone to 20c a share for some very good reasons, most notably the recent declaration of a world-class maiden resource at Caldeira of 409Mt at 2,626ppm total rare earth oxides (TREO).

World-class all right. But just the start of the story. As Tunks explained, the maiden estimate was based on drilling by the Japan government-funded JOGMEC between 2016-2019 using hand-held augers to an average depth of 10m.

Since picking up the project last December, Meteoric has brought in a drilling rig to probe for depth extensions of the clay-hosted mineralisation. Only recently it reported a 150m intersection grading an off the charts 8,912ppm TREO.

Tunks said that to date, 32 holes have been drilled outside of the maiden resource estimate.

“Every single one has been well mineralised. It is going to double or triple… our resource growth is potentially enormous.’’

A second factor behind the run up in Meteoric’s share price has been confirmation that it is of the ionic adsorption type which means processing would involve simply “washing’’ the positively charged REEs from the surface of the negatively charged clays in a mildly acidic ammonium sulphate solution.

It means low processing costs compared with non-ionic clays which require leaching with highly acidic solutions. It also means lower capex requirements than hard-rock alternatives, and when it starts from surface like it does at Caldeira, it makes for low operating costs.

Another factor in Meteoric’s run to date has been the encouragement coming from the Minas Gerais state government in the form an accelerated timeline of 24 months for a project construction licence to be issued, subject to all of the normal environmental and social impact requirements being met.

To make sure Tunks is not alone in thinking Caldeira is something special, Garimpeiro did some research on what the analysts have been saying.

SCP Capital (formerly Sprott Capital Partners) set a price target on Meteoric of 50c in early August. It reckons first production could be possible in 2027.

It said Caldeira was a disruptive project with the right grade/near surface mineralisation/easy metallurgy to make money at the bottom of the cycle, and could generate a net present value of $US1.5-$US2.5bn at mid-cycle prices, reducing China’s dominance over the rare earths supply chain in the process.

“We expect significant resource growth from here for what already should be a multi-decade, large and low-cost RE supplier.’’

Macquarie has a 12-month price target on the stock of 45c. Commenting on the impressive drill results from outside of the current resource, Macquarie said that it sees “material upside through exploration success that could further enhance our base case.’’

Bell Potter has a 40c valuation after initiating coverage on September 1, suggesting Caldeira was the “King’’ of ionic clay rare earth deposits.

Foster Stockbroking has a 42c a share 12-month price target on the stock after initiating coverage on September 5.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.