I think you’re right to compare the two. That's what I've been doing.
At this point in time, they are the only ASX listed peer to AR3, if not globally exChina. As both have proven ‘ionic’ clay hosted resources, they’ll be towards the lowest cost quartile when in operation and they will not have to spend billions of dollars to get started as opposed to their hard rock hosted counterparts.
Therefore, a comparison between these companies may be a good guide as to what is a fair share price for AR3 at this early stage of their journey. So, for what it’s worth here’s my research thus far which I’ve summarised as follows:
Market capitalisation (as at 12 February 2022) AR3: $69.8 MC IXR: $173.7 MC
AR3 represents over 50% discount
Resource size AR3: Koppamurra JORC 2021 Inferred Mineral Resource of 39.9 Mt @ 725 ppm TREO IXR: Makuutu JORC 2020 Mineral Resource Estimate of 315 Mt @ 650 ppm TREO
IXR have spent much more time on the ground drilling to define their resource.
Metallurgical performance recovery programs AR3 and IXR are at about the same stage with their programs. However, I believe AR3 are being smarter with shareholder funds by putting in place a metallurgical program from the get go rather than concentrating on further drilling (which for clay hosted rare earths deposits is generally consistent and predictable). Therefore, it’s all about the metallurgical performance of recoveries and creating a balanced basket of rare earths (RE), in particularly Nd, Pr, Dy, Tb which are needed for the exponential growth of electric vehicles (EV) and wind turbines.
Furthermore, I believe that Nd, Pr, Dy, Tb are the most critical elements for the exponential growth in EV and wind turbines in particular. They represent well over 90+% of all RE value. So, although there is value is some of the other REs, the applications are limited and therefore thepotential for over supply long-term could impact their prices significantly. However, this is unlikely to be the case for the 4 above mentioned elements as they are all part of the green energy transition to renewables. In fact, it may further squeeze the percentage higher in demand for them. Therefore, any favourable testwork is regard to this will derisk projects significantly.
Scoping study Despite IXR having defined a large resource and 27+ year mine life, the market reacted poorly to the release of its Scoping Study (Ann 29 April 2021) with a 30% drop in share price value. Reason, is unclear. More research needs to be done here. However, as AR3 is a relatively new listing it understandably needs time to produce theirs.
Location and ESG risks As you say, IXR is located in Uganda which is a high sovereign-risk country with a poor human rights record. Recent story. On the other hand, AR3 is located in the safe jurisdiction of South Australia which has high Environmental Social Governance (ESG) credentials. This makes them highly attractive for potential Offtakes, government initiatives and the larger ESG responsible investment community.
Local jobs and royalty advantage AR3 will create local jobs and enhance the local community and infrastructure in Australia. They will also pay royalties to the state which means they will be looked upon in a favourable way for potential government support whether it’s through the Clean Energy Finance Corporation, Austrade or direct with State and Federal Governments via the Australian Critical Minerals Road Map initiatives.
Summary Overall, IXR is slightly more advanced on the ground but not necessarily with its metallurgical testwork. However, I think as iconic clay hosted resources as so rare there is plenty of room for many players in this sector with minimal barrier to entry compared to hard rock mineralisation. Nonetheless, each project will have to find a business model suited to its own unique resource characteristics. I just feel AR3 seems better leveraged for greater fair value at this point in time.
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