Good article. Just on the supply/demand discussion i posted some...

Good article.

Just on the supply/demand discussion i posted some thought on this in Post #:49761379

"We mostly discuss the overall market and macro movements around rare earths and he's really been reinforcing the fact that china's clay deposits are depleting in the next 5-10years which will cause a spike in pricing for HREO. Where he believes others will fall down is that when HREO demand lifts prices will bring on new supply to fill void. If players with NdPr rich hard deposits attempt to fill this because their baskets are not HREO and CREO rich they end up flooding the market with LREO and NdPR. This is not dissimilar from lithium brines whereby the by-product is potash. Essentially increasing the lithium brine output craters the potash price making it not a massive gain overall.

If you look at alot of the other players, they're relying on huge output of TREO to generate revenues. with baskets driven mostly by the NdPr content it's competitive market. Most run 75% of basket value with NdPr.

Whereas makuutu around 40% NdPr by price and another 40% in the Tb, Tm and Dy. Makes IXR's concentrate somewhat immune from a NdPr flood. With small operating margin, profits are heavily leverages to NdPr prices whereby a small change sends you underwater.

Lynas is good example where exorbent amounts of capex are poured in to expand and improve recoveries and keep the revenues up."

What i'm essentially eluding to is that it's fairly evident that HREO and CREO with be in high demand and overall drive prices. Hence why you see alot of rare earth project target NdPr Dy Tb Tm etc etc. The issue i foresee for hard-rock project is such that the HREO content as a function of % of price for basket is much lower. In laymans terms their basket contains a larger portion of LREO.

Note the below; most deposit types are of the carbonatite associated with a few anomolies therein. Regardless there are a couple of other things to note. The below is the typical(average) content of deposit in the raw state. i.e. this is how they exist in the ground. Now post processing the HREO to LREO content can change. For hard-rocks, because they aren't cracking the rare earths the relationship of HREO to LREO remains fairly linear. Essentially there recoveries are linear across the elements. The advantage of ionic clays is they exist in a state that the prevailing processing techniques typically recover at different rates. Namely the HREO recover at higher percentages than the LREO, meaning that the HREO content increases as a % in the concentrate basket.



you can refer to the below and see that the Ce and La recoveries are lower than the high priced elements.



Regardless back to our convo of LREO and HREO. for IXR its LREO content (Nd, Pr, La, Ce) makes around $19 USD of its $53 usd basket. Dy, Tb make another $19 USD and another $10 USD for Tm, Tb, Lu.

Now let's analyse the LREO as a function of basket.



With the exception of NTU whom's basket is quite unique 50% is actually Tb and Dy you can see that most other rare earth projects are heavily reliant on NdPr. So my point becomes that with increased demand we will see increased rare earth pricing. The issue most hard rock project will have is that they are all heavily reliant on the NdPr price and this is the primary profitable elements in most baskets.

In short, it's a me2 product. Note the below, regarding economics importance and supply risk. If i took the
Pr, Lu, Y, Nd, Eu, Tb, Dy (which are all highest economic importance and biggest supply risk) this is $48 of the $53 basket. If i now exclude NdPr (so lets assume there's a price glut with every man and his dog targeting to supply this then IXR still has $26 of it's basket.



In short, IXR has a large enough NdPr content to get an economically benefit from the current price surge, but it's basket is not beholden to this and in time when/if the market is flooded with LREO (NdPr) included it has 50% of its basket value in the most at risk of supply and economical importance.

Economics and therefore S/P valuation

Specifically economics. Post #:49210076 is probably the most up to date post which talks through start to finish economics, but is not updated for spot pricing.

I repeated this with some more context in Post #:49360333 and priced in some increased recoveries. is probably the comprehensive download for how i computed the revenue figures with all inputs.

on those posts i was asked about recoveries Post #:49371865
and was also asked about my NPV based on development cycle.

Finally, i updated the basket pricing, and additionally gave my personal view on the valuation of makuutu.



People will need/can apply their own P/E ratio's and additionally their own % of project valuation. lastly people will need to decide whether the factor IXR off its Y1 production profile or Y7 as this is 4 times as large thus the NPV is four times larger.

Post #:49371250

Also
"my general rule of thumb for (FAIR VALUE) S/P as a function of NPV is as follows.
1) SS/PFS performed, no offtakes, no finance = 10-20% of NPV
2) DFS/BFS pilot plant no offtakes no finance = 15-30% of NPV
3) Either of the above with offtakes secured = 25-40%
4) Any of the above with finance secured = 35-50%
5) in construction near term production = 50-75%"

"2.5mtpa - (year 1 of production)
60M AUD profit p/a. So P/E ratio of 10-20 is 600M to 1200M in Y1 of production.
Take 60% ownership and we're at 360M to 720M valuation in Y1.

IXR is at stage 1 thus IMO around 15% is fair valuation of NPV (off PE valuation model).
i.e. 15% of 360m-600m = 54M-108M

10mtpa - (year 7 of production)
240M AUD profit p/a. So P/E ratio of 10-20 is 2.4bn to 4.8bn in Y7 of production.
Take 60% ownership and we're at 1.4bn to 2.8bn valuation in Y7.
IXR is at stage 1 thus IMO around 15% is fair valuation of NPV (off PE valuation model).
i.e. 15% of 1.4bn-2.8bn = 216M-432M

So in my view IXR should be valued between 54M-432M at current junction.

Note all the above calculation are based of production throughputs above what the company has recently announced.

SF2TH