Resources Top 5: Rare earths stocks spark to life as China threatens export ban
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Here are the biggest small cap resources winners in early trade, Tuesday April 11.
(Up on no news)
The ionic rare earths play caught a rocket after it was featured in a weekly column written by Far East Capital (FEC) analyst and founder Warwick Grigor.
Grigor, a veteran broker/analyst who formed FEC with Andrew Forrest over 25 years ago, says China’s threat to ban exports again could mean “fun and games coming for the REE sector”.
“A dispatch overnight said that China was considering banning exports of various rare-earth magnet production and process/refining technologies as a response to the US targeting the Chinese chip-making industry,” he says.
“The last major official rare earth policy shift by Beijing saw NdPr prices skyrocket when exports to Japan were suspended in 2010, over the Senkaku Islands.”
He highlights AR3, which flew out of the gates post 2021 IPO before falling back into the pack, as one to watch.
The flagship Koppamurra project is big and getting bigger, with its 101Mt at 818ppm TREO resource bolstered by an exploration target of between 330Mt and 1.4 billion tonnes.
“The market capitalisation of AR3 is a modest $23m but if you add the stock that is escrowed until June this year, this figure increases to $31m,” Grigor says.
“Now that the hot air in the stock price has cooled down, it may be that the shares are very modestly priced as these levels for a company operating in a sound jurisdiction like South Australia, having achieved the progress already reported.
“Traders might wait for a rare earths pricing signal before moving on the stock, but longer-term investors could get set at these levels without competing with hot money.”
The AR3 share price is now at its highest point since August last year. It had just over $9m in the bank at the end of December.
PRS chose a good day to unveil a potential REE monster at the recently acquired Jokikangas project in Finland, where old drill core returned intercepts over a strike length of 4km.
Highlights included 0.20m @ 24,448 ppm TREO and 4,700 ppm niobium from 74.2m (sampling was limited to very narrow intervals for academic purposes, PRS says).
The explorer has started sampling wider intervals of the Jokikangas drill core, which includes 36 diamond drill holes at Jokikangas and 68 diamond drill holes at Korsnas.
Korsnas surrounds a former lead mine, where previous operators reported total REE content in samples ranging from 0.7% to 2.2%, PRS says.
Things are now looking up for the $8m capped stock, which has struggled since listed as a gold explorer in late 2020. It had $228,000 in the bank at the end of December and announced a $2.5m raise in March.
Also perfect timing for PEK to announce a Framework Agreement Signing Ceremony for the Ngualla REE project with the President of Tanzania.
The April 17 ceremony is all part of PEK getting its ducks in a row prior to project development.
“Peak believes that the Framework Agreement and associated documentation that has been negotiated with the Special Presidential Government Negotiation Team (SPGNT) supports attractive economic returns for Peak shareholders and a strong alignment of interests with the Government of Tanzania,” the company says.
“A more detailed ASX announcement about the Framework Agreement and its key terms will be released following the conclusion of the Framework Agreement Signing Ceremony.”
Ngualla (214Mt at 4.8% TREO) is one of the largest and highest grade undeveloped rare earth deposits in the world, PEK says.
A BFS update envisaged a 16,200tpa REO concentrate operation with an initial lifespan of 24 years. Post tax NPV and IRR attributable to PEK have been calculated at US$1,483m and 37.3%, respectively.
It would cost US$321m to build.
NPV = the sum of all future cash flows over the project’s lifetime, minus initial investment.
IRR = like NPV, the higher it is the more desirable the investment. (Usually).
PEK is aiming for a final investment decision this year, ahead of first production mid 2025.
(Up on no news)
Another small cap winner exposed to the REE thematic.
G88’s main project is Quicksilver in WA, where G88 has established a 26.3Mt resource grading 0.64% Ni & 0.04% Co (168,000t of nickel and 11,300t of cobalt), plus rare earths and scandium.
CEO Damon Dormer says what makes Quicksilver exciting – beyond the scandium and REE bonus – is that it could be a very simple, free dig, low cost and low complexity mining and processing operation.
And with that simplicity comes risk reduction and lower CapEx and OpEx.
“We don’t have to worry about blasting and dealing with explosives, with mechanical processing we don’t have to deal with harsh chemicals for processing,” he said.
“That simplicity comes down to the high potential for a very low cost, low capital and efficient operation which is all about getting the best product to maximise the saleable price and maximise margin.”
The $7m capped stock is up 35% year-to-date. It had $808,000 in the bank at the end of December.
LRL today reported a high grade 95,710oz resource (open pit and underground) at the historic Comet Vale project in WA.
The resource, which includes an Indicated component of 42,000oz @ 10g/t gold, is open in all directions “demonstrating substantial growth potential through both the near-mine and regional drilling”.
While grade isn’t necessarily king when it comes to gold deposits, 10g/t is very impressive.
“We have defined a significant resource at consistent high grade across the historically mined areas for both open pit and underground scenarios to reinvigorate the Comet Vale Project at an exciting period for the gold market,” LRL CEO Matt Nixon says.
“The underground resource grade of 7g/t shows the high-grade nature and genuine potential of this deposit in a world class gold belt.
“Importantly, the estimate shows high grade mineralisation continues at depth and along strike. This provides immediate high priority drill targets to further grow the resource.”
This resource covers only the Sovereign Trend of lodes to a maximum depth of 400m below surface, Nixon says.
“With seven other known mineralised gold trends as well as the potential for parallel systems to be discovered, there is significant growth potential across the project,” he says.
“Following on from the success of this Mineral Resource, the company looks forward to conducting drilling both for future resource growth as well as exploration to bring new discoveries into the pipeline.”
Drilling to grow LRL’s 500,000oz at 5g/t resource at its namesake project in Quebec, Canada is also in the works.
The $16m capped company had $1.3m in the bank at the end of December.