A strategic increase of holdings for the top shareholder is always a good sign of confidence and it was bought at market price on a level playing field of 0.007-0.008, so no favours done here to him, which is a signal for the rest of us to observe, act and potentially buy as this OVL rare earth play could pan out to the asx penny stock success story of 2020 due the following things that most observers here on HC have overlooked
1. The Deposit of heavy rare earths at 0.007% or 700 PPM may not sound much to the non-professional but if you research ( information is hard to come by on the Chinese mines) who are the current dominating suppliers of rare earth in china which provide 90% of the worlds supply, this OVL deposit shares the similar geological characteristics as the Chinese; they are in soft clay which are very easy to extract and process at probably 1/10 of the cost compared to the hard rock competition of Lynas and other RE hopefuls such as Alkane, Greenland and Hastings ( probably never ever get of the ground due to the $1B + capex needed for the plant.
1b. Rare Earths are not that rare to find, its just hard to find them in commercially viable quantities to warrant the expensive capex needed to extract and process them . Rare earths are 17 elements that are critical to modern military applications such as missile guidance and radar systems. A US made F-35 Fighter jet takes about 1/2 ton of rare earths , so you can see why now Trump and the US Pentagon are worried about China's domination of rare earths. They are also critical to the Clean Green revolution such as Ev's, Wind Turbines, medical, industrial and electronics such as headphones, speakers, Smartphones and Tablets.
What is the holy grail of the rare earths baskets is "heavy rare earths " such as Neodymium which is very expensive and probably the strongest magnetic properties. Its used in Electric vehicles ( 2kg per car) which used for the power transfer efficiency. Its also heavily used component in Wind Turbines, so we can see that NeoDymium is critical for the Green Energy revolution in EV's and Green Power generation
1c. There is no other comparable soft clay rare earth deposit in the world that is commercially viable and that is similar to the main Chinese five soft clay who even have a lower Heavy Rare Earth of 0.004%-0.005%, but manage to still produce 90% of HREO due to the ease of leech processing and extraction from the soft clays. Take a look at the projects webpage http://rwenzorimetals.com.dedi153.jnb3.host-h.net/the-makuutu-mine/ and carefully see the similarities to the Chinese mines. This is the key to differential of OVL to the other asx rare earth hopefuls and this will sink in as you begin to understand this important similarities of OVL to the chinese mines. There are plenty of hard rock / expensive processing costs hopeful competitors but none compare even near to the cheap and easy soft clay rare earth deposits in china that dominate the worlds supply. This is where OVL future strength lies in that its almost the same resource as the rich Banyan Deposits in China.
1d. Yes there a many rare earths players on the ASX, Toronto and LSE exchanges, however there is only one listed producer at the moment being Lynas Corporation which is a $1.75 Billion listed ASX company. The rest are explorers hopefuls begging for scarce billion dollar finance. The only other rare earth near producer is Rainbow Metals in Burundi which is a small operation in comparison to Lynas and OVL potential of 300 Mt-700Mt exploration target. Hence the recent price surge in 2018-19 of Lynas and attention from Wesfarmers as a strategic geo-political investment. Most of the others will never get of the ground as most projects need at least $1 Billion capex and three years before they become a producer and the price of Rare earths could change as they did in 2013-2017 and cause the projects to become unviable as the US based Molycorp found out the hard way when it went broke with its huge Mountain Pass project in California when the Chinese manipulated the price of rare earths to make it unsustainable for Molycorp to compete.
However Lynas is not that of strong producer of 5% of worlds supply of rare earths if you dig deeper, as it took them since 2003 and $2 billion of investment into the project which was a former Wesfarmer's Phosphate deposit to produce a project of 20,000 T of rare earths concentrates of which most its "basket" of RE is the cheap low profit industrial low end RE's of lanthium and cerium used in polishing and car catalysts, which are more expensive to process than to sell.
Lynas also have the Achilles heel of having their controversial processing plant in Malaysia which could be shut down by the Mahatir Government due to pollution concerns of radioactive waste to local communities. Its this question Lynas CEO nervously twitches her eyes in a youtube interview when asked the Malaysian question, knowing that basically Lynas is screwed if Malaysia halt processing of Lynas concentrates.
2. Rare Earths are becoming a Geo-Political strategic tool of China against the USA. Its quoted " The Middle East has its Oil, However China has its Rare Earths" former Chinese Communist party leader Deng Xiaping cunningly noted. This strategic domination of Rare Earths by China is causing great concern political and military wise for the US and its allies, especially in recent months in the Trump vs Xi trade war rhetoric, with the Chinese Leader Xi walking with a grin in the Banyan Rare earths mining area implying with a warning the US that China can stop rare earths export to Japan and the US and their economies and military will suffer greatly . To show the importance of rare earths to the modern military machine, is the F-35 jet that requires 500 kg of Rare earths per jet. Lynas only produces 20,000T and half of that is the cheap light rare earths. Do you see the supply problem the US is facing? What about night vision goggles, tanks , weapons guidance systems, sonar, ect. These all need RE! This is just the military . I have not been mentioned Apple or Samsung's reliance on rare earths and will do another time. So who is going to supply the US and its allies like Japan & South Korea in the short term ?
3. Rare Earths prices could rise dramatically in 2020-2021 due to increased demand and china's market power. This would lead nearly all decent rare earths plays to ride the wave of speculation upwards and OVL would be surfing that wave if it happens as its easy to mine and process and requires a 1/10 capex cost to hard rock.
4. The leeching process that OVL is proposing for Uganda project is quick and cheap to set up compared to the complex and expensive hard rock processing plant that Lynas uses and other RE hopefuls are planning to do. It will cost probably 1/10 of cost or $100m to building the crushing and leeching plant in Uganda. This low capex costs, its speed to build of say 1 year ( rather than 3 years of Lynas ) and the cheap labour costs of Uganda ( cheaper than china ! ) make OVL' rare earths project an high risk investor dream as it represents a 2.5-3 year pathway to production to potentially become a worlds class mining project and a top 3 producer after the Chinese and Lynas, if the stars align with the drilling, exploration and management of the project.
4b. Another thing of production and processing note is that the leeching process of the heavy rare earths ore has little or no radioactive waste unlike Lynas and other potential rare earth players who are burdened by this toxic waste from small amounts uranium found in the baskets of RE's.A strategic increase of holdings for the top shareholder is always a good sign of confidence and it was bought at market price on a level playing field of 0.007-0.008, so no favours done here to him, which is a signal for the rest of us to observe, act and potentially buy as this OVL rare earth play could pan out to the asx penny stock success story of 2020 due the following things that most observers here on HC have overlooked
1. The Deposit of heavy rare earths at 0.007% or 700 PPM may not sound much to the non-professional but if you research ( information is hard to come by on the Chinese mines) who are the current dominating suppliers of rare earth in china which provide 90% of the worlds supply, this OVL deposit shares the similar geological characteristics as the Chinese; they are in soft clay which are very easy to extract and process at probably 1/10 of the cost compared to the hard rock competition of Lynas and other RE hopefuls such as Alkane, Greenland and Hastings ( probably never ever get of the ground due to the $1B + capex needed for the plant.
1b. Rare Earths are not that rare to find, its just hard to find them in commercially viable quantities to warrant the expensive capex needed to extract and process them . Rare earths are 17 elements that are critical to modern military applications such as missile guidance and radar systems. A US made F-35 Fighter jet takes about 1/2 ton of rare earths , so you can see why now Trump and the US Pentagon are worried about China's domination of rare earths. They are also critical to the Clean Green revolution such as Ev's, Wind Turbines, medical, industrial and electronics such as headphones, speakers, Smartphones and Tablets.
What is the holy grail of the rare earths baskets is "heavy rare earths " such as Neodymium which is very expensive and probably the strongest magnetic properties. Its used in Electric vehicles ( 2kg per car) which used for the power transfer efficiency. Its also heavily used component in Wind Turbines, so we can see that NeoDymium is critical for the Green Energy revolution in EV's and Green Power generation
1c. There is no other comparable soft clay rare earth deposit in the world that is commercially viable and that is similar to the main Chinese five soft clay who even have a lower Heavy Rare Earth of 0.004%-0.005%, but manage to still produce 90% of HREO due to the ease of leech processing and extraction from the soft clays. Take a look at the projects webpage http://rwenzorimetals.com.dedi153.jnb3.host-h.net/the-makuutu-mine/ and carefully see the similarities to the Chinese mines. This is the key to differential of OVL to the other asx rare earth hopefuls and this will sink in as you begin to understand this important similarities of OVL to the chinese mines. There are plenty of hard rock / expensive processing costs hopeful competitors but none compare even near to the cheap and easy soft clay rare earth deposits in china that dominate the worlds supply. This is where OVL future strength lies in that its almost the same resource as the rich Banyan Deposits in China.
1d. Yes there a many rare earths players on the ASX, Toronto and LSE exchanges, however there is only one listed producer at the moment being Lynas Corporation which is a $1.75 Billion listed ASX company. The rest are explorers hopefuls begging for scarce billion dollar finance. The only other rare earth near producer is Rainbow Metals in Burundi which is a small operation in comparison to Lynas and OVL potential of 300 Mt-700Mt exploration target. Hence the recent price surge in 2018-19 of Lynas and attention from Wesfarmers as a strategic geo-political investment. Most of the others will never get of the ground as most projects need at least $1 Billion capex and three years before they become a producer and the price of Rare earths could change as they did in 2013-2017 and cause the projects to become unviable as the US based Molycorp found out the hard way when it went broke with its huge Mountain Pass project in California when the Chinese manipulated the price of rare earths to make it unsustainable for Molycorp to compete.
However Lynas is not that of strong producer of 5% of worlds supply of rare earths if you dig deeper, as it took them since 2003 and $2 billion of investment into the project which was a former Wesfarmer's Phosphate deposit to produce a project of 20,000 T of rare earths concentrates of which most its "basket" of RE is the cheap low profit industrial low end RE's of lanthium and cerium used in polishing and car catalysts, which are more expensive to process than to sell.
Lynas also have the Achilles heel of having their controversial processing plant in Malaysia which could be shut down by the Mahatir Government due to pollution concerns of radioactive waste to local communities. Its this question Lynas CEO nervously twitches her eyes in a youtube interview when asked the Malaysian question, knowing that basically Lynas is screwed if Malaysia halt processing of Lynas concentrates.
2. Rare Earths are becoming a Geo-Political strategic tool of China against the USA. Its quoted " The Middle East has its Oil, However China has its Rare Earths" former Chinese Communist party leader Deng Xiaping cunningly noted. This strategic domination of Rare Earths by China is causing great concern political and military wise for the US and its allies, especially in recent months in the Trump vs Xi trade war rhetoric, with the Chinese Leader Xi walking with a grin in the Banyan Rare earths mining area implying with a warning the US that China can stop rare earths export to Japan and the US and their economies and military will suffer greatly . To show the importance of rare earths to the modern military machine, is the F-35 jet that requires 500 kg of Rare earths per jet. Lynas only produces 20,000T and half of that is the cheap light rare earths. Do you see the problem the US is facing/ what about night vision goggles, tanks , weapons guidance systems, sonar, ect. This is just the military . I have not been mentioned Apple or Samsung's reliance on rare earths and will do another time. So who is going to supply the US in the short term ?
3. Rare Earths prices could rise dramatically in 2020-2021 due to increased demand and china's market power. This would lead nearly decent rare earths plays to ride the wave of speculation upwards and OVL would be surfing that wave if it happens as its easy to mine and process and requires a 1/10 capex cost to hard rock.
4. The leeching process that OVL is proposing for Uganda project is quick and cheap to set up compared to the complex and expensive hard rock processing plant that Lynas uses and other RE hopefuls are planning to do. It will cost probably 1/10 of cost or $100m to building the crushing and leeching plant in Uganda. This low capex costs, its speed to build of say 1 year ( rather than 3 years of Lynas ) and the cheap labour costs of Uganda ( cheaper than china ! ) make OVL' rare earths project an high risk investor's dream as it represents a 2.5-3 year easy pathway to production to potentially become a worlds class mining project and a top 3 producer after the Chinese and Lynas, thats if the stars align with the drilling, exploration and management of the project.
OVL Price at posting:
0.8¢ Sentiment: Buy Disclosure: Held
(20min delay)