New Ideas: Volatility to provide buying opportunitiesThe energy...

New Ideas: Volatility to provide buying opportunities

The energy and climate change train wreck continues on its merry path; this should create a lot of opportunities to re-enter some previous recommendations as much of the junior resources sector has been sold down 40-50% from their highs.

Figure 7: S&P/ASX Gold sector (source: CMC Markets, 10 June 2022).

As I have indicated over recent weeks, the gold sector is testing two-year lows (figure 7) and if you are a believer in the gold thematic, then companies such as Northern Star Minerals (ASX:NST) and junior explorers such as Nexus Minerals (ASX:NXM)(figure 8) represent good value.

The caveat is obviously rising input costs for the producers.

Figure 8: NXM two-year price chart (source: CMC Markets, 10 June 2022).

While it is early days, Asra Minerals (ASX:ASR) (figure 9) flagship Mt Stirling (figure 10) project, which is situated 20km northwest of Leonora (WA), is now revealing its rare earths.

While the previous focus has been Archaean gold exploration, the discovery of outcropping yttrium-bearing rocks in December 2021 from a PXRF result has modified the company’s focus to include rare earths.

ASR then proceeded to re-assay previous vacuum auger and RC drilling which has turned up a 3.6km x 1km area of anomalous REE in the top 100m.

Figure 9: ASR two-year price chart (source: CMC Markets, 10 June 2022).

The rare earth mix is dominated by heavy rare earths (figure 11) with 60-70% ratios of heavy to light REE, a more desirable mix for technology/defence applications.

Anomalous yttrium at the Wishbone Prospect can be traced for over 3.5km and appears to be related to the underlying mafic rocks. Yttrium also showing a close correlation with copper, cobalt and nickel.

A 160m x 40m drill program is planned to target the gap between Yttria and Wishbone (figure 12). A mineralogical study by the University of Queensland is also underway.

Figure 10: Asra Minerals’ Mt Stirling Project (source: ASR, ASX Announcement, 3 May 2022).

Importantly, unlike many REE projects, there is no association with uranium or thorium which should assist in the production of a potentially “clean concentrate”.

Figure 11: Mt Stirling REE distribution (source: ASR, ASX Announcement, 3 May 2022).

ASR exploration manager and former Northern Minerals (ASX:NTU) geologist Claudio Sheriff-Zegers (try saying that after a half-bottle of scotch) is now working with REE consultant and leading expert Professor Ken Collerson, to further evaluate the project.

Drilling so far suggests that REE mineralisation occurs between the surface and 20m in flat tabular bodies varying from 1 to 9m in true width.

Figure 12: Wishbone Prospect at the Mt Stirling project (source: ASR, ASX Announcement, 3 May 2022).

A maiden REE JORC Resource is due to be published at the end of 3Q 2022; it will be well worth keeping an eye out for this.

An updated JORC Resource (currently standing at 100Koz) is also due out on their gold prospects shortly which will hopefully underpin the $44 million enterprise value with the REE providing further upside.

With some choppy markets ahead there will be some buying opportunities with companies such as ASR (and others mentioned here previously), so I would recommend putting this on the watch list.

One of the keys to unlocking the value of REE is cracking the metallurgy. Stay tuned.

At RM Corporate Finance, Guy Le Page is involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting, and corporate advisory roles.