Barry FitzGerald: The rare earths State of Origin is on in the Murray Basin – here’s the starting lineups
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The Murray Basin which straddles the South Australia-Victoria border is laying down a challenge to China’s global dominance in rare earths.
And it is fuelling something of a boomlet in the ASX companies – or soon to be ASX companies – that have Murray Basin border exposure, all at a time when prices and demand for rare earths are on the tear again.
The challenge to China comes from the recent discovery of extensive ionic clay-hosted deposits of rare earths near the tiny rural town of Comaum in southeast SA by the recently listed Australian Rare Earths (ASX:AR3).
AR3 joined the ASX lists on July 1 through a $12m IPO of 40 million shares at 30c each. Its shares have since raced off to $1.10, valuing the company at $120 million on the strength of its Koppamurra discovery.
Alerted to region’s rare earths potential by a PhD student’s research project in 2016, AR3 has quickly established a sizeable maiden resource from drilling at the Red Tail and Yellow Tail deposits at Koppamurra.
The mineral resource estimate – 39.9Mt at an average grade of 725ppm total rare earth oxides – comes from shallow clay zones that sit on top of a limestone base, making for a similar geological setting to ionic-clay hosted zones that sit on top of a granite base in southern China.
Production from the southern China deposits account for as much as 70% of global supply of rare earths, something the world frets about because rare earths are critical to growth of the green energy sector.
Although low-grade compared with Lynas’ (ASX:LYC) hard-rock Mount Weld rare earths wonder in WA, the ionic clay deposits (so-called because the rare earths are easily liberated from the clay using a weak acid process), are much cheaper to mine and process than hard-rock deposits.
That’s why the market has got excited about AR3, knowing that the Red Tail and Yellow Tail deposits are likely to be the start of a bigger story as the geological setting for Koppamurra extends eastwards cross the Kanawinka Fault to the SA border, and across into Victoria.
It is in Victoria excitement over the Koppamurra discovery is already rubbing off, with the Toronto-listed Lions Bay Capital (TSX-V:LBI) this week striking a farm-in deal with the privately held Savic over the likely extension of the rare earths clays into Savic’s Victorian tenements.
The Savic tenements adjoin the Koppamurra tenement to the west and across the border in SA, and AR3’s ground to the north in Victoria.
Lions Bay might be listed in Canada but it really Melbourne through and through as it is led by John Byrne, the former financial journalist who has decades of experience in the mining investment space.
The deal with Savic – led by former stockbroker and oil and gas executive Rob Annells – prompted a 30% share price jump for Lions Bay to C11c a share, valuing the company at about $C15m, most of which is covered by the value of its investment portfolio.
Given the excitement around the rare earths in clay on the SA/Victoria border story, Lions Capital is headed to the ASX.
“It should be relatively straight forward given the strength of the company’s balance sheet and the fact that the majority of its assets are liquid investments in ASX listed public companies,’’ Byrne told the Canadian market.
Under its deal with Savic, Lions Bay has the right, on the exercise of a four-month evaluation option, to earn a 50% interest in the Savic areas (it originally took up the ground ahead of the AR3 discovery for their mineral sands potential) by spending $5m over three years.