Resources Top 5: Magnesium madness takes hold as VW boss says shortage ‘definitely happening’
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Here are the biggest small cap resources winners in early trade, Tuesday November 9.
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The $200m market cap magnesium project developer has now gained 550% since the start of October as buyers, including carmakers, desperately look to diversify their supply outside China.
China — which produces around 85-90% of the world’s magnesium – has slashed production by 50% due to the ongoing power crisis. Prices are soaring.
In a recent earnings call, Volkswagen’s head of purchasing said a shortage was expected.
“We cannot forecast right now if the shortage on magnesium, which will happen definitely according to planning, will be bigger than the semiconductor shortage,” Volkswagen’s Murat Aksel said.
Last week, LMG said it would expand its yet-to-be-built demonstration plant from 3,000tpa to 10,000tpa to meet world demand.
The plant, which will cost $123m to build, will result in estimated EBITDA of $42m.
Funding for this expansion of ~$75M will be financed through 100% magnesium offtake agreements, LMG says.
8,000tpa is already allocated in its current offtake agreements and enquiries have been received for an additional 2,000tpa. LMG’s eventual objective to scale up to a 40,000tpa plant.
The company had just $169,000 in the bank at the end of September, plus $3.6m in unused financing facilities. That gives it about 5 quarters of funding before it must raise more cash.
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Like Latrobe, $20m market cap Korab has been working to get its magnesium project up and running for over a decade. This could be the moment long suffering shareholders have been waiting for.
Over the last few months, KOR says it has been approached by two separate groups expressing an interest in developing the ‘Winchester’ magnesium project in the NT.
The latest unsolicited proposal would see the two parties “jointly develop the Winchester quarry where the other party will fully fund the development in exchange for sharing the future profits from the quarry”.
The company is also in discussions with magnesium metal users and magnesium buyers, including car makers (Fiat and Daimler), and aluminium/magnesium alloy producers.
The stock had ~$2m cash at the end of September, plus a small financing facility, giving it an estimated 1.5 years of funding before it would have to raise cash again.
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MRQ’s focus is developing the ‘Corridor Sands’ heavy mineral sands (HMS) project in Mozambique.
Valuable heavy minerals fall into two categories: titanium minerals (ilmenite, leucoxene, and rutile) and zircon.
Titanium is used as TiO2 pigment in paint and as an alloying agent. These alloys are used in aerospace and aircraft applications including engines, where strong, lightweight, temperature resistant materials are needed.
Zircon — a very valuable part of the HMS suite — is processed as a separate concentrate.
MRQ is an Ilmenite play with significant zircon and rutile and potential iron ore credits, it says.
The company is currently upgrading mineral resource estimates – due out mid-November and mid-December — before embarking on a scoping study in early 2022.
This will be the first proper look at whether the project is economic to build.
MRQ had $1.1m in the bank at the end of the September quarter, giving it an estimated two quarters of funding before money must be raised.
The $24m market cap stock is up 30% over the past month.
In a carbon conscious world, mining companies with low or net zero emissions will be prized.
That’s the opinion of construction materials stock Mayur, which wants to be the “supplier of choice” for carbon neutral lime and cement products in PNG, Australia and the Pacific.
A study on MRL’s the Central Cement & Lime (CCL) project in PNG shows that~ 500 megawatts (MW) of solar capacity would not only provide a source of renewable energy for the CCL project, but also for use by other future large scale industrial users, and local communities that currently have no access to electricity.
With a minimum 30% renewable electrical power for the CCL Project’s Phase 1 Quicklime Plant, CCL will have a far lower carbon footprint than other competitors from day one of operations, it says.
With a modest size Battery Energy Storage System (BESS) of 1 MWh (megawatt hour) the renewable penetration could increase to 40%. Mayur’s ultimate intention is to incrementally increase renewable penetration to 80% as the capital intensity of BESS systems reduces.
This will give the business a major advantage within the Australasian building products, mineral processing, water/waste treatment and pollution abatement markets, managing director Paul Mulder says.
“We have to ensure our approach is bankable, pragmatic, realistic and over time adopt different levels of carbon reduction, offset and capture initiatives so that we continue to be competitive and be able to provide a high-quality reliable product to our customers,” Mulder said.
“Importantly, this move to reduce our carbon footprint from day one aligns with the broader ESG commitments made by many of our downstream customers who are also seeking to reduce emissions across their respective supply chains.”
MRL had $2.9m in the bank at the end of September, giving it an estimated two quarters of funding. The $50m market cap stock is down 13% over the past month.
The recent IPO is hitting ultra-high grade iron ore at the ‘Switch Pit’ target on WA’s Cockatoo island, which has a rich history of iron ore mining going back to the 1950s.
A new highlight intercept of 65.9m at 55.5% Fe from surface includes a 11.8m zone grading 65.5% Fe from ~50m. Assay results from the remaining holes are pending.
“The second set of drill results from the Switch Pit target is improving our understanding of how the ultra-high grade seawall haematite mineralisation continues along strike on to our tenements,” PLG chairman Russell Clark says.
“In addition, we are seeing supporting footwall mineralisation which has historically proven to be highly amenable to simple beneficiation produce high grade products.”
“These latest results increase our confidence of the potential for economic ore and how we might economically mine it. We look forward to further developing this understanding with the next set of results and upcoming metallurgical test work.”
PLG had $3m in the bank at the end of September, giving it just over 1 quarter of funding before more cash is needed. The stock is down 30% on its IPO price of 20c per share.