MoneyTalks: Rumble Resources could be 6x higher; Pilbara still a Buy despite sagging lithium prices

Wilsons rates Rumble Resources overweight, with a huge price target
Pilbara Minerals still rated a Buy by Jarden despite sagging lithium price

Rumble Resources gets 6X price target

Wilsons Advisory likes the look of Rumble Resources (ASX:RTR), giving the stock an OVERWEIGHT rating with a 12-month price target of 40c (vs current price of 7c).

Rumble recently announced that further significant high-grade Zn-Pb sulphide mineralisation has been intersected along strike of the exciting new Mato Prospect discovery at Earaheedy.

The latest drilling highlights a potential 3km x 3km area of high-grade Zn-Pb mineralisation at Mato, which is highly prospective, up dip to the southwest and along strike, and likely to lead to additional resource growth at Earaheedy, according to the company.

Some of the recent assays include 12m @ 6.07% Zn+Pb, 19m @ 4.23% Zn + Pb & 13m @ 3.31% Zn+Pb.

“We remind investors that Rumble declared a maiden resource for Earaheedy in April 2023 of 94Mt @ 3.1% Zn+Pb and 4.1g/t Ag (at a 2% Zn+Pb cutoff).

“This resource places Earaheedy as one of the largest zinc sulphide discoveries globally in the past decade,” said Wilsons.

Further, the large maiden resource came only two years after the initial discovery hole (suggesting relatively easily definable and extensive mineralisation). In Wilsons’ view, this is only the starting point for how large Earaheedy could become.

“These drill results are encouraging for the potential to further add to the already large resource base at the Earaheedy Project.

“Key catalysts for the stock are likely to be the results of the DMS/Ore Sorting test work currently underway, which has the potential to materially expand the economic potential of the resource base,” Wilsons added.

But despite its vast scale potential, Wilsons believes that one possible limitation for Earaheedy’s upside is the relatively low grade of the resource.

“Although, we believe, the open cut nature of any potential operation, plus the potential scale benefits that the large resource can provide, will help to ameliorate the grade impact.”

Should Earaheedy ore prove amenable to DMS (dense medium separation), then lower grade mineralisation will suddenly become significantly more economically attractive, said Wilsons.

Pilbara Minerals still a Buy despite falling lithium prices

Meanwhile, Jarden Research has rated Pilbara Minerals (ASX:PLS) a BUY, with a price target of $4.30 (vs current price of $3.80).

Jarden says despite capitulating lithium prices in in 2023, PLS still generated a cash margin of $176m from operations, or $118m after incorporating sustaining capex and capitalised mine development costs.

“We calculate an AISC for the quarter of ~US$620/t, compared with current spot prices of ~US$800-900/t, a ~44% cash margin for the quarter and a ~27% cash margin even at depressed spot prices,” said the note from Jarden.

Jarden adds this is supportive of its long-held view that PLS’ Pilgangoora operation is capable of becoming embedded in the second quartile of the cost curve.

“Further, Pilgangoora is free of any joint venture complications or vested interests that may impact assets that are located even lower on the cost curve,” said Jarden.

However, Jarden says its key concern remains the price realisation achieved by PLS, which was again very weak for the quarter (US$1,113/t).

While PLS is continuing to invest in organic growth projects to deliver additional capacity, the company may ultimately reassess the timing of capacity ramp-up depending on market conditions.

PLS recently announced an expansion of the existing offtake agreement with Ganfeng, to 310ktpa for three years, at market prices.

Meanwhile, the POSCO joint venture guided a ~6-month delay to completion of the second lithium hydroxide train, and a ~12% capital cost increase (~US$17m net to PLS).

“We remain of the view that PLS is a unique equity exposure and we retain our Buy rating, despite a reduction in 12-month target price from $4.60 to $4.30. The key risk is further weakness in near-term SC6 prices,” said the note from Jarden.