Monsters of Rock: WA1’s 200Mt Luni discovery is officially the most significant niobium find in +70 years

WA1 unearth 200Mt inferred resource at Luni
Mining experts Argonaut downgrade price target to $25.45
Coal miners surge as fire shuts major Anglo American mine

The owner of what could be Australia’s first niobium mine has unveiled an initial 200Mt resource, establishing the Luni deposit as a leading, global critical mineral discovery.

Niobium, a lightweight critical mineral used largely in steel to make it stronger, has been catapulted into investor consciousness once again by WA1 Resources (ASX:WA1) – the ones responsible for uncovering the mammoth Luni discovery in 2022.

The find at the time set shares in the stock alight, surging some 500%, on the possibility that WA1 may have unlocked a new critical mineral province in WA’s remote West Arunta region.

Fast forward only two years later, the company has gained some 7816%, carried out more than 29,000m of drilling, and has gone from a $9m market cap stock to above $1b.

And today, well, it’s unveiled a maiden 200Mt inferred resource at 1% niobium with a significant, high-grade subset of 53Mt at 2.1% niobium.

“This resource confirms Luni as the most significant niobium discovery globally in more than 70 years in an entirely greenfield belt in the West Arunta,” WA1 managing director Paul Savich says.

“The shallow, high-grade nature of the deposit, coupled with the recently announced initial metallurgy results, indicates the deposit may be amenable to conventional processing techniques and reinforces Luni as a highly strategic critical mineral asset.”

On the radar of major world economies

Niobium is on the critical lists of several countries around the world including Japan, South Korea, the United States, the United Kingdom, India and the European Union, meaning it is vital for modern technologies and our national security, yet the supply chain is at risk.

Around 80% of global niobium supply comes from a single mine in Brazil, while the rest comes from a second Brazilian mine and another smaller mine in Canada.

Adding niobium to steel in cars is considered a fuel efficiency measure as it reduces the weight of a car.

Argonaut downgrades WA1 price target

But although it looks like WA1 could be in the running to bring on Australia’s first niobium mine, WA stockbroker and mining expert Argonaut has shaved off a $1 from its previous valuation to $25.45.

“The 200Mt global deposit is an impressive accumulation of potentially economic mineralisation,” Argonaut senior analyst George Ross says in the firm’s latest research note.

“In our view, a large tonnage global resource is great on paper but delineation of high-grade material with strong metallurgical performance remains the main game.

“We would expect future iterations of the MRE to include greater detail on high grade zones within the resource,” Ross writes.

“The ‘high-grade’ subset of the MRE is larger, but lower grade than our predicted ~34Mt grading 2.6% Nb2O5. We anticipate future updates of the resource will include a higher grade ‘high-hrade’ resource.

“We still expect a future development would process between one and two million tonnes of ore per annum but continued success from metallurgical test results will be key to derisking and the entry of a strategic corporate partner could drive further investor interest.”

Luni development scenario

The currently envisaged 2Mtpa throughput development could deliver strong returns including a NPV of $3bn, Argonaut says.

“With an assumed mineable inventory of 32Mt grading 2.5% Nb2O5 our proposed operation would operate for 17 years with plant commissioning from 2030,” Ross says.

“Mining and flotation processing would occur at site, high-value mineral concentrate would then be trucked to a pyrometallurgical refinery located at either Port Hedland or Karratha and concentrate would be leached and converted into ferroniobium for sale.

“Assuming a US$40/kg Nb2O5 (US$26/kg FeNb) price, the project would generate profits after tax of ~A$400M per annum.”

For the remainder of the year, WA1 plans to convert a portion of the current resource to the indicated category, targeting additional high-grade potential both laterally and at depth.

Santa could be short of coal for Christmas in July

Anglo American’s Grosvenor mine has been shuttered by fire for the second time in four years after a methane gas ignition over the weekend.

No injuries this time around, though still sufficiently worrisome to keep the place closed from Saturday and sent shudders through met coal buyers.

It’s all come at a terrible time for Anglo, which has committed to sell its Queensland coking coal mines — a business contributing ~16Mtpa to global seaborne supplies — after seeing off a string of market churning takeover bids from BHP.

Grosvenor was expected to produce 2.3Mt in the June half and 3.5Mt for 2024, with a longwall move in the second half of the year expected to slow things up.

It was shut previously for close to two years from May 2020 after a methane explosion left five workers extensively burned, and required a string of safety checks to return to operation.

In response Aussie coal stocks charged into the green, led by met coal miners like Whitehaven Coal (ASX:WHC) and Coronado Global Resources (ASX:CRN).

Look at those coal miners fly. Pic: Commsec

Not only could a supply crunch boost prices, but it could well make buyers think twice about the price they offer for Anglo’s coal suite.

Given the safety imperatives at play, Grosvenor’s likely to be out of action for months.

“If operations were to remain suspended for the rest of the year, consensus EBITDA forecasts could be reduced by just 1% based on current price and cost assumptions,” RBC’s Marina Calero said in a note to clients.

“However, with AAL currently under pressure to execute on an ambitious restructuring plan which involves selling these assets, the downgrades to production will likely weigh on the stock and the potential sale of the division. (emphasis ours)

“AAL’s steelmaking coal mines have been facing complex geotechnical challenges which led to steelmaking coal emerging as the division with the largest fall in guidance in the Dec 23 investor update.”