Pensana Metals – the world’s next rare earths miner? #PM8
At the time of writing the author holds a long position in Pensana.
Pensana Metals (PM8) is an ASX listed (and soon to be London-listed) pre-revenue mining company which owns 84% of the Longonjo Neodymium & Praseodymium (NdPr) Rare Earths Project in Angola. At A$0.27, Pensana’s Market Cap is A$46 million:
(Source: Google Finance.)
NdPr is required/used to make permanent magnets which are critical for both electric vehicles and offshore wind. NdPr are the rare earths which have the highest demand and greatest value. As demand for both electric cars & wind turbines increases, NdPr supplies are predicted to go into deficit:
The Longonjo project benefits from multiple advantages compared to other projects:
- Mineralisation is from surface – this lends itself to open pit mining which is almost always cheaper than underground mining.
- The project has access to cheap hydroelectric power, rail line links & a recently refurbished Port.
- The Angolan sovereign wealth fund has invested into the project multiple times and is considering investing another $10m USD.
- The project has received presidential approval for exploitation.
- Drill results continue to intersect high grade rare earths – which is likely to extend the resource and life of mine.
- The project is expected to be eligible for UK Export Finance Guarantee which should lower financing costs.
- The Pre-feasibility study indicates a low capex and high IRR project over an initial 9 year life of mine:
Financing – in principal offers
I believe that the Longonjo Project has compelling fundamentals and that the project will ultimately be financed & built.
From the PFS:
“The Company has commenced discussions with a wide range of financiers from institutional equity, through conventional project finance, bond finance to various forms of private equity finance. In addition, the Company has received approaches from royalty streamers and other financiers and intermediaries to fund the project. Fidelity UK, one the country’s largest fund managers has taken a 10% stake in the Company and RFC Ambrian has introduced the Company to over 90 institutions in London ‐ a large number of whom have expressed strong interest in funding the Company once listed on the LSE.
The Company has recently presented to over 25 institutional investors in Munich and Zurich, a number of which have expressed strong interest in investing in the Company. Through an advisor the Company has received in‐principle advice from three Scandinavian banks that they are happy to provide debt funds to the project in Angola (these banks are already lenders to the Angolan oil and gas sector)”.
In summary, I think Pensana has one of the best rare earths projects on the market.
I was previously invested in Mkango Resources as it’s technically very cheap, trading at less than cash in the bank, however they’re completing what must be the slowest definitive feasibility study in history. It’s due in H2 of 2021, having been started in 2019.
I prefer Pensana as they could be in construction before Mkango deliver their feasibility study & Pensana’s project benefits from better infrastructure, lowering their costs. It’ll be interesting to see how Mkango & Pensana’s share prices compare over the coming months!
Till next week!