Ann: IperionX Awarded $47.1M by the U.S. DoD, page-21

IperionX Limited: A Small-Cap Titan With High Growth Potential

• IperionX aims to disrupt titanium markets with innovative technologies, securing US supply chains and targeting significant growth despite current lack of revenue.
• Successful pilot projects and strategic acquisitions position IperionX for rapid scaling, with potential government funding and defense sector partnerships as key growth catalysts.
• Financially robust with $77.1 million in cash, IperionX is expected to generate substantial revenue by 2026, making it a promising long-term investment.
  
  Investment Thesis
  
  IperionX Limited (NASDAQ:IPX) is a small-cap stock with big ambitions: with its $900 mn market cap, it aims at disrupting both the stainless steel and aluminium markets and the geopolitics of titanium. Titanium is a critical metal with critical military (e.g. jets) but also consumer applications (mobile phones, bicycles…, being more resistant and lighter than steel. The supply chains of titanium are currently controlled primarily by Russia and China (70% of the global titanium supply chains) and the remaining 30% are under the control of Kazakhstan (a key Russian ally) and India (with its own defense ambitions).
  The company doesn’t generate any revenue which justifies the small market capitalization. All the stock price upside depends on the successful scaling of production. Investing now in the stock has its risks, but I do think there is enormous upside given the successful initial pilot stage in Utah, the rapid development of the Virginia processing facility, the securing of mining rights in Tennessee and the recent purchase of the patented technologies portfolio for $6 mn. The new Trump-Vance administration has already shown determination in securing critical materials of national interest, with the recent blocking of a majority acquisition of US Steel (X) by Nippon (OTCPK:NPSCY), and with the attempted deal to own 50% of Ukraine’s critical mineral rights (including titanium).
  Stock Performance
  
  Upon successful scaling of the business, the stock could turn into a tenbagger within the next 5-10 years. The stock goes with its risks which I will discuss later in the article. Still, the stock price already doubled in the last 12 months showing optimism that the company, led by an experienced management team, will successfully scale its operations in the next years.
  
  Data by YCharts
  Business Case
  
  IperionX’s main business moat is the control of the full supply chain in the US from the mining rights in Tennessee (called Titan Project) to the processing with a plant in Virginia. The patented technologies it recently acquired for $6 mn protect it from any real competition, with the key ones being HAMR (Hydrogen Assisted Metallothermic Reduction) and HSPT (Hydrogen Sintering and Phase Transformation).
  Its trademark technology HAMR is a mineral processing technology that permits the company to process titanium much faster (under 6 hours) and with much less heat and equipment corrosion: this means production capabilities could be higher, cleaner and cheaper upon successful scaling. Oxygen being the main and most difficult impurity to remove, HAMR de-oxygenates both recycled titanium scrap and mineral by using hydrogen to destabilize the Ti-O bonds. HSPT, on the other hand, is the forging technology which uses the above HAMR-processed titanium powder to manufacture the titanium parts and components critical to several industries. The combination of both patented technologies make IperionX’s business model an attractive investment case for the medium to long-term.
  
  Left: titanium scrap. Right: titanium powder (IperionX)
  The underlying mineral titanium has high potential and a potentially large TAM: it is 45% lighter and three to five times stronger than stainless steel, and in addition is corrosion resistant granting it an unmatched strength-to-weight ratio. The main challenge until today was the processing of titanium, but IperionX’s technologies could potentially disrupt the $365 bn stainless steel and aluminium markets. With a titanium supply chain entirely “made in USA”, the company has real arguments to catch the attention of the new US administration.
  Scale-up and Growth Catalysts Ahead
  
  IperionX’s initial successful pilot scale production in Utah showed management has what the company needs to grow: a cash-conscious experienced team. The large scale production already began in Virginia in 2024 and the facility is almost finalized.
  
  IperionX 4Q24 Quarterly Report
  Both the initial pilot project and the completion of scaling milestones in 2024 could help unlock US government funding, even with the recent administration change. The new US administration has shown determination to secure access and supply of critical materials of national interest. Additionally, Lieutenant General Ross Coffman recently joined as IperionX Defense Advisor, providing strategic direction on titanium product development for the U.S. Army and other defense agencies. This opens up a network of possibilities beyond the already interested potential customers that are Lockheed Martin (defense), Canyon (bicycles), Carver Pump (naval) to name just a few. One figure I will watch very carefully and that investors also should, is the production scaling: from a titanium production of 2 tpa in 2024 the company plans to reach 2,000 tpa by 2026. Potential government funding and possible investment from large defense contractors could, of course, provide a cash boost, although the company has a fairly comfortable financial position despite naturally still being a cash burner.
  Financials, Balance Sheet, Valuation
  
  IperionX holds a comfortable amount of cash and has excelled at liquidity management during the 2024 Virginia scaling. As of December 31, 2024, IperionX held $77.1 million in cash, with an additional $4.1 million available under the DPA Title III funding program. This ensures a comfortable cushion to continue scaling operations at the Titanium Manufacturing Campus in Virginia. IperionX raised around $66 million through the issuance of 31.25 million new fully paid ordinary shares. Despite the dilution, the price per share has managed to double in the last 12 months. The company is a cash burner, which is expectable at this stage: IperionX used $10.6 mn in operations in 2024 (much lower than the liquidity raised), showing both cautious cash management which is critical in a scaling phase and investor optimism.
  Analysts forecast that the company will generate $20 mn of revenue in FY26, $164 mn in FY27 and $330 mn in FY28, with potential to double annual revenue every year in the successive five years. The company could even generate cash as early as next year with potentially $40 mn in free cash flow. The company is therefore expected to grow very quickly and ramp up its operations rapidly. The ramp-up could be boosted by government funding and private partnerships or investments.
  
  IperionX
  The valuation is of course somewhat tricky at this stage and without real comparables. The valuation can only be forward-looking and somewhat speculative. However, based on revenue estimates, the company is currently trading at 5.7x FY27 revenue and 2.8x FY28 revenue. With the current $900 mn market cap, the company appears cheap if it manages to support the scale up and the revenue growth in the next 3-5 years, when it is expected to double revenue every year. Revenue could even top today’s market cap as early as 2030, clearing the path to continued stock price growth in the long-term.