Why Glencore’s decision to shut MtIsa could spark regional...

Why Glencore’s decision to shut MtIsa could spark regional consolidation

Neighbours Hammer and Carnaby highlight scope for mergers. Plus, M&A value-creation can take time and brokers line up to back Meteoric. Barry Fitzgerald
Livewire markets

Meteoric:
Assessing what was the best mining discovery of the year has been made all the easier by the conga line of broker and investment bank analysts singing the praises of Meteoric (ASX:MEI) and its Caldeira ionic clay project in Brazil.

Price targets/valuations on the stock are all plus 40c a share which is kind of interesting given the stock has been trading around 20c,
The latest addition to the conga line was Barrenjoey. In a 30-page tome on the company and Caldeira, it arrived at a 50c a share price target and a 44c a share valuation.

It is worth remembering that 2023 – and the back of half of 2022 - has been a tough year for rare earth stocks generally. Prices for the key magnet rare earths have fallen from around $US150/kg to $US60/kg.
But as mentioned here recently, the ASX rare earths king Lynas (ASX:LYC) remains convinced growth in demand from EVs and wind turbines is set to accelerate through to 2030.

There are serious doubts that the demand can be met, with Lynas also saying there is already more demand than it can serve.
Then there is the over-arching thematic that the western world needs to break China’s grip on the rare earths market, one underpinned by its domestic supply from ionic clays.

But back to what Barrenjoey had to say about Meteoric.
“The rare earth market is highly strategic, and a difficult one to enter; particularly so during 2023, when the prospects of most greenfield projects have dimmed from a cyclical decline in rare earth prices and high capex inflation,” it said.
“We believe Meteoric’s prospects are materially better than peers due to the uniquely high-quality nature of the resource (large scale, high grade and recoverable).”

Getting down to tin tacks, Barrenjoey modelled a 5Mtpa project, yielding 3.2ktpa of NdPr oxides contained in a mixed rare earth carbonate (MREC).

“We model first production in 2027, capex of $US200m, and opex of about $US30/kg (real) of contained NdPr, or about $US42/kg on a payable basis. Our NPV of 44c is based on an NdPr price of $US85/kg,” it said.
“We believe Meteoric’s project requires a NdPr price of about $US50/kg to earn a greater than 15% IRR, well below hard rock greenfield projects that need $US100/kg.’’

That says it all really.

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