Euroz has initiated coverage on GGG with a speculative buy recommendation and a 55 cents per share price target.
The broker sees Kvanefjeld as a genuine Tier 1 rare earth project with an incredible mine life and production potential and a simple processing flowsheet.
The following is an extract from Euroz’ initiation report:
- Greenland Minerals Ltd (ASX:GGG) is sitting on the largest undeveloped Rare Earths deposit globally, the Kvanefjeld Rare Earths Project in Greenland;
- The multi-element deposit has a JORC (2012) Resource of 1.01 billion tonnes at 1.1% Rare Earth Oxide (REO) and 266ppm of U3O8 for a total of 593Mlbs of contained uranium, the 5th largest total uranium resource globally;
- Recent optimisation work on a 2016 Feasibility Study demonstrates compelling economics with operating costs 3x lower and capital intensity 5x lower than ASX peers;
- REO production is 2x peer ave. at 32ktpa with by-products of 1Mlbpa of uranium and 15ktpa of Zn concentrate over a 37 year mine life;
- Based on a REO basket price of US$19.55/kg, we estimate annual EBITDA >US$450m and calculate a post-tax NPV10 of US$2,069m with an IRR of 77%, comparing favourably to current EV of US$90m;
- Updated flow sheet has been optimised in conjuction with supportive shareholders Shenghe Resources, a fully integrated Chinese Rare Earths producer with extensive knowledge of Rare Earths processing;
- The orebody is non-refractory, unique to Rare Earths deposits meaning that metallurgy is excellent from simple leaching with REOequivalent recoveries of 94% yielding a wide range of critical “magnet metals” Neodymium, Praseodymium, Terbium and Dysprosium elements;
- Rare Earths demand is growing given their use in permanent magnets for electric motors and wind turbines;
- China dominates downstream processing of Rare Earths, making it a critical mineral and of particular strategic importance globally;
- Greenland is developing into a mining friendly jurisdiction, with the government supportive of Rare Earth and uranium extraction;
- GGG has made significant inroads into obtaining a Mining License for Kvanefjeld which we expect delivered in CY20, allowing completion of BFS and FID shortly thereafter;
- Our Valuation of $0.55/sh is based on a DCF incorporating recently published optimisation numbers and risk adjusts this by 60% to reflect uncertainty around Mining License and funding;
- We Initiate Coverage with a Speculative Buy recommendation and $0.55/sh Price Target. As the largest undeveloped Rare Earths project globally with outstanding metrics, we see potential for Kvanefjeld to become the world’s leading Rare Earths mine;