Greenland Minerals and Energy Limited’s (ASX:GGG) Kvanefjeld project holds the world’s largest undeveloped rare earths deposit.
Recently completed optimisation studies have firmed up what is, by rare earth industry standards, a remarkably simple process flow sheet and a highly competitive cost structure.
Pitt Street Research has valued Greenland Minerals at 44 cents per share base case and 74 cents per share optimistic case using a DCF approach with conservative assumptions on rare earth prices.
Following is an extract from Pitt Street’s research note revisiting its February 5, 2019 update report:
Greenland Minerals and its collaborators have progressively driven down the estimated project cost base since completion of Kvanefjeld’s initial feasibility study in 2015.
The most recent feasibility study in July 2019 highlights further improvements to project metrics.
The project’s capital cost estimate (US$505m) has been reduced by a further ~40% from the US$832m reported in 2016’s update of the initial feasibility study.
The Kvanefjeld project, which we believe can potentially start production in 2022, is particularly valuable because of its duration, its scale, its favourable metallurgy and the fact that its critical rare earth production profile mirrors long term demand forecasts.
A steady increase in rare earth and U3O8 prices, potential supply disruptions resulting from a US-China trade war and the completion of permitting in Greenland can help re-rate the stock.
New valuation range A$0.44-A$0.74 per share
Using the new estimates from the July 2019 update, and the recent $7m equity raising, we now value Greenland Minerals at 44 cents per share base case and 74 cents per share optimistic case using a DCF approach with conservative assumptions on rare earth prices.