- Red Metal has pivoted to rare earths following the unexpected discovery of a unique rare earths deposit near Mount Isa
- A metallurgical breakthrough earlier this year put the company on the radar of institutional investors
- The longstanding junior explorer has previously enjoyed funding support from several major mining companies and has a current strategic alliance with BHP
We’re sure you’ve been following the recent news about Red Metal. No, we’re not talking about the copper price.
OK, so this longstanding junior used to be a copper explorer, hence the name Red Metal (ASX:RDM), but it now appears to have snared one of the most unique rare earth projects in the country.
Shares in RDM peaked at 23c during February, having traded below 10c in the preceding month, after declaring a metallurgical breakthrough for its Sybella discovery near Mount Isa in northwest Queensland.
Market commentators such as Barry Fitzgerald have suggested Sybella has a “world-class smell to it” because of its potential to be developed and operated like a low-cost clay-hosted deposit – but without the clay handling issues.
While the Sybella success may have come as a surprise to those outside the inner circle of a company first established a little over 20 years ago, RDM managing director Rob Rutherford was never closed to such an unexpected opportunity.
“We always keep our eyes alert to new opportunities in the areas where we explore and really that’s how this rare earths discovery came about,” he tells Stockhead.
“It’s definitely a world-first and I think it’s caught everyone a little bit by surprise.”
Very humble beginnings
RDM – and to an extent Rutherford – were spun out of Phelps Dodge in 2003 when the American conglomerate decided its Australian assets were best suited for a company trading on the local bourse.
Phelps Dodge continued to back the company for the best part of the next five years before its own acquisition for a sweet US$25.9 billion by Freeport McMoRan.
Since its IPO, RDM has spent roughly $2-4 million each year on exploration, largely across parts of northwest Queensland, with those efforts typically funded by the likes of Glencore, Rio Tinto, Oz Minerals and now BHP.
“Because we look for the big Tier-1 base metal project, we’ve always had funding arrangements with majors, which has kept us going,” Rutherford says.
“We also run a pretty lean little outfit, there’s not a lot of people in our group. People have been with us for many, many years, so we’re a pretty lean operation. We put most of the money into the ground, we’ve spread the risk over the years and we’ve been quite fortunate in that regard.”
Until Sybella came along, RDM’s high point appeared to be the discovery, advancement and eventual spin-out of the Maronan lead-silver-copper-gold deposit into Maronan Metals (ASX:MMA) which only yesterday published an updated resource that highlighted the potential early development of the Shallow Starter Zone.
RDM retains an almost 53% holding in MMA.
Remember that Chinese fisherman who went sailing where he shouldn’t have…
In late 2010, a Chinese fisherman made global headlines when he ventured, allegedly innocently, into Japanese waters.
Following his hasty and very public removal, China swiftly banned exports of its prized rare earths to major consumer Japan, triggering a sudden exaggeration of the neodymium price by upwards of US$200/kg.
“It was the first time that China used it as a geopolitical weapon – and with that I took an interest in rare earths,” Rutherford recalls.
“I started reading up on rare earths all over the world, heard about these clay-hosted deposits in China and then we went looking for them in Australia. We went through all the databases and found a really neodymium-enriched granite in an old seismic blast hole logged by Geoscience Australia.
“It just so happened to be right where we were working in that Mt Isa belt, so we went out there and looked, found there actually wasn’t a lot of clay on it, which we thought was a bit unusual. So we took a sample, did some petrology, sent it to ANSTO and asked what’s causing the rare earths? They said, ‘oh, it’s in fluoro-carbonate’ which got us really excited because we knew that was soluble stuff.
“We quickly proved that up with an acid test and, no sooner had we done that, rare earth prices collapsed. So the project sat there for quite a number of years until someone invented the electric car.”
Curious to learn more about REE deposits?
Tune in below to hear Rutherford explain the current state of rare earths discoveries, the varying types of deposits and more with Stockhead TV.
‘We can’t believe how good it is’
RDM resumed work on the Sybella project in earnest two years ago with Rutherford conceding he was unsure at the time if the test work completed on that single sample over a decade earlier would be representative of the rare earths potential across the rest of the granite.
Those worries were alleviated when “proof of concept” drilling returned kilometre-wide zones of elevated neodymium and praseodymium – and only reiterated earlier this year upon receipt of the metallurgical results which confirmed the project’s suitability to heap leaching.
Drilling to scope out the 12km by 3km granite at Sybella is set to resume in the coming weeks as the wet season in Queensland abates, with further mineralogical work continuing in the background.
While it is still early days at Sybella, Rutherford’s gut is already telling him there is something particularly special about this rare find.
“If I look at the copper space, which I’ve worked in for many years, the best deposits in the world are soluble copper minerals hosted in a non acid-consuming granite,” he explains.
“We’ve got the same here but with rare earths. We’ve got soluble rare minerals in a low acid-consuming granite host.
“And the beauty of those in the copper space, they come in vast tonnages. So we think we’ve got vast tonnage potential in this thing, too. There’s a lot of similarities, albeit in rare earths, that’s why we can’t believe how good it is.”
Is there more ‘big brother’ funding on the cards?
Unsurprisingly, the Sybella discovery has propelled RDM in front of investors who have previously not batted an eyelid in the company’s direction.
“We’re tweaking the interest of institutions, let’s say,” Rutherford says.
“We’ve never really had that much interest from institutions, because we were a very high risk, high profile sort of company, and when you’re looking for the big stuff, it’s hard to get institutions on board,” he says.
“There’s a lot of institutional interest coming our way now that we’ve got something that people can see may actually be something pretty special.”
If Sybella grows to be as big as the RDM management team believes it will, it is unlikely the company will be short of potential funding options.
But will the company continue to attract fiscal support from the ‘bigger brothers’ which have helped keep the company afloat over the past +20 years?
Rutherford isn’t ruling it out, even if there appears to be a more obvious opportunity already on the table.
“Glencore has been talking about closing down their copper mine at Mt Isa and the Queensland State Government has allocated something like $30-50 million towards helping companies that could potentially establish new resources and opportunities around those operations,” Rutherford says.
“We think we might fall into that category. If we can get some funding from that, then we don’t have to go to the market. That’s how we’ve kept our share register so tight for all these years.”
Red Metal (RDM) share price today
At Stockhead, we tell it like it is. While Red Metal is a Stockhead advertiser, it did not sponsor this article.