Shares in the company last traded at $0.105. The following is an extract from the broker report.
The Maritime Safety Study approved for Public Consultation
- On 11 October 2017, GGG announced that the Danish Maritime Authority, acting on behalf of the Government of Greenland, had approved the Maritime Safety Study for public consultation. The study was prepared by the independent Danish consultant Blue Water Shipping and is an extensive document that determines the safest and most environmentally acceptable method to transport cargo to and from the Kvanefjeld Project port location in the Narsaq Illua Bay.
- RM Research believes that approval of the Maritime Safety Study is a significant step forward as it is one of the three major documents - the others being the Environmental Impact Assessment (EIS) and the Social Impact Assessment (SIA) - required to progress through the public consultation process before a Mining Licence can be granted for the Kvanefjeld Project.
- The EIA, which is being prepared by Danish consultants Orbicon, is stated as being 80% complete, whilst the SIA (prepared by Danish consultants Niras) is 90% complete.
- GGG does appear to be on target to achieve its goal of creating an actionable development path forward for 2018, including finalising a revised Feasibility Study with updated capital and operating costs by 2018 year-end.
Strategic cooperation with major shareholder, Shenghe Resources gathering pace
- Shenghe Resources Holding Co., Ltd (Shenghe) took a c.12% interest in GGG in 2016 and continues to work with the Company to optimise the Kvanefjeld Project. Shenghe is an integrated Rare Earth mining, beneficiation, separation and downstream processing business that is listed on the Shanghai Stock Exchange (code: 600392) with a multi billion dollar market capitalisation.
- Shenghe recently changed its nominee director to the Board of GGG from Ms Wenting Chen to Mr Xiaolei Guo. Mr Guo holds a degree in Law and is the manager of the investment and development department of Shenghe, which is responsible for acquiring rare earth projects for the Group.
- RM Research expects that the work programmes conducted by Shenghe and GGG in both Australia and China will deliver cost enhancements to the Project and ensure that output is aligned with downstream processing and market requirements.
Chinese Policy & strong demand driving up Rare Earth Prices
- The intensification of environment compliance investigations by the China central government has driven consolidation in the sector. Meanwhile, demand for rare earth products, such as neodymium-praseodymium (NdPr) oxide, has been very strong due to the combined impact of electrification of commercial motor vehicles and increased use of wind turbines in the power generation mix.
- The price for NdPr oxide FOB China is currently around US$66/kg including VAT, down around 15% from the peak achieved in September 2017, but still up 70% from a year ago and similar to levels of 3 years ago.
Action and Recommendation
- RM Research is maintaining a Speculative Buy. It appears that permitting of the Kvanefjeld Project is nearing finalisation and the commitment of the Governments of Greenland and Denmark remains strong. Rare Earth Oxide (REO) prices have strengthened considerably during 2017 due to increasing demand for REOs (in particular permanent magnets) in clean technology applications, and a crack down in illegal mining activities in South China. Our current A$0.29 risked NAV for GGG remains valid, with upside based on the current strength in REO prices.