Greenland Minerals and Energy (ASX:GGG) recently received final approval from shareholders to place 125 million shares to a subsidiary of Shenghe Resources Holding Co Ltd (SHA:600392).
The proposed placement was subject to approval from Australia’s Foreign Investment Review Board (FIRB) and shareholders, both which have now been attained.
Greenland Minerals will receive $4.625 million through the issue of 125 million shares priced at $0.037 to Shenghe.
The fundamental objective of both parties is to develop the Kvanefjeld rare earth and uranium project in Greenland as a cornerstone to new supply networks.
This strategic relationship with Shenghe represents a major landmark for Greenland Minerals and the development of its flagship Kvanefjeld rare earths and uranium project.
Kvanefjeld
Greenland Minerals' vision is to develop a stable, long-term source of materials for clean energy generation and energy efficient technologies.
Kvanefjeld is one of the world's most advanced rare earth and uranium projects with defined JORC compliant resources of over 1 billion tonnes containing 11.1 million tonnes of rare earth oxide and 593 million pounds of uranium.
As per the updated feasibility study, the net present value of the project is US$1.59 billion and the internal rate of return is 43.4%.
Project financing costs are US$831.9 million and the project has a payback period of 5 years.
Shenghe Resources Holding Co Ltd
Shenghe is a leading rare earth company with experience in all parts of the rare earth industrial chain including mining, beneficiation, metallurgy, separation, downstream processing and marketing.
Shenghe also has an extensive financial investment background and solid capital strength.
The Shenghe group:
- Controls domestic sources of rare earth ores and concentrates;
- Controls significant rare earth separation capacity in China;
- Produces rare earth metals and alloys to the highest purities;
- Produces end-use rare earth products such as polishing powders, catalysts, molecular sieves; and
- Has an established international customer base for its products.
With the permitting process underway, the partnership with Shenghe will help to ensure that the project is optimised to integrate with downstream processing, and that customer networks are established.
Shenghe’s leading technical expertise, processing capacity, and strong international customer base make Shenghe an ideal strategic partner for the project.
Analysis
The relationship with A$2+ billion market cap Shenge is significant given its expertise in mining, beneficiation, metallurgy, separation and downstream processing and marketing.
Greenland Minerals recently received a Speculative Buy recommendation and a A$0.23 per share price target from Perth-broker RM Research.
This price target represents 289% upside from the current share price of $0.059.
The valuation is based on based on relatively conservative rare earth and uranium prices and recent announcements regarding limiting supply of rare earths from China could result in significant upside price risk in the short to medium term.
Other short to medium term price catalysts for Greenland Minerals include:
- Further announcements on technical reviews, project optimisation studies together with progress on permitting at Kvanefjeld; and
- Any improvements to the financial metrics from the April 2016 revised feasibility study.
The share price has had a strong past six months trading up over 100% to $0.061.