Drilling programme to boost Songwe Hill Rare Earth Project green REOs
• Industry consolidation and broad upgrading of production quotas is cutting back illegal mining across China improving supply clarity, price stability and limiting environmental degradation.
• Drive for ethical metal sourcing highlights the substantial cost of rehabilitating unsanctioned activity, estimated at $30bn.
• Chinese government environmentally-focused legislation is restricting oversupply, drawing down swollen inventories and bringing the market into balance.
• Fundamental to green technology application, rare earth oxide consumption is benefiting expanding ‘high-tech’ markets.
• Weight-saving potential of permanent magnets (PMs) is creating the biggest blind spot in the raw metals EV supply chain for rare earth elements.
• Neodymium ‘NdPr’-based motors enable 15-20% battery capacity savings in Li-ion EVs to significantly enhance driving range and usability.
• Significant demand for new and upgraded wind turbines each using ~600kg of REO alloys per MW could raise wind power capacity to 1.9TW by 2050.
• Mkango NdPr production could represent >80% of sales for the new Songwe Hill REO mine.
• Talaxis’ funding gives a clear investment and development pathway to take Songwe Hill into production by end-2021.
• Phase 1 investment has rapidly advanced the most comprehensive drilling programme to date aimed enhancing geological, geotechnical and geophysical characteristics to maximise Songwe Hill resource potential and BFS.
• Joint R&D Venture with Metalysis aims to help Mkango to move further downstream to expand high-value sales.
Conclusion: Our longer-term target price of 27.9p is based on Mkango’s 25% interest in the project post the Talaxis investment for construction of the project due on the release of the Songwe Hill BFS in late 2019 or early 2020. Our target focuses on the Talaxis transaction valuation and their option to provide project finance upon a favourable BFS, which estimates a project valuation of $235m. We recognise there are risks achieving this target and apply a 50% discount to the valuation, which will be sequentially reduced as management hit development milestones and improve confidence towards first production. We look forward to the first target milestone of an updated resource statement by the end of 2018.
*SP Angel act as Nomad and broker to Mkango Resources. The analyst has visited the Songwe Hill exploration site.
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
James Mills – 0203 470 0486
Sergey Raevskiy – 0203 470 0474
Phil Smith (Technology) – 0203 470 0475
Zac Phillips (Oil & Gas) – 0203 470 0481
Richard Parlons – 0203 470 0472
Jonathan Williams – 0203 470 0471
Prince Frederick House
35-39 Maddox Street London
*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.
This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.
This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.
The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.
This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.
Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.
It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.
This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.
SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).
SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SP Angel Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.
If anyone reads this article found it useful, helpful? Then please subscribe www.share-talk.com or follow SHARE TALK on our Twitter page for future updates.
Terms of Website Use
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned