Rainbow Rare Earths (LSE:RBW) bounced 4.6pc to 5.1p after releasing the first-ever JORC mineral resource estimate for its Gakara rare earths project. Gakara has a total resource of more than 1.2MMts of ore covering a small fraction of total acreage.

Rainbow said three areas of the project – Gasagwe, Murambi South, and Gomvyi Centre - are very high-grade vein stockwork deposits. The sites total 12,491ts of total mineral resource at an average total rare earth oxide grade (TREO) of 55pc. This compares to an average rare earth project grade of between 1-4pc TREO.

The work defined another area called Kiyenzi as a substantial, lower grade deposit with a mineral resource of nearly 1.2MMts. It has an average grade of 2.2pc TREO employing a cut-off of 1pc TREO.

Rainbow has been producing from Gasagwe since December last year. It plans to bring Gomvyi Centre and Kiyenzi in production next year. Gakara is based in Burundi, North Africa, and is the continent’s only producing rare earth mine. It holds more than 1,000 rare earth discoveries with a basket weighted heavily (c.20pc) towards magnet rare earths.

Today’s resource uses just four of 28 mineralised prospects across the entire mining licence. Rainbow said this indicates significant further upside for future exploration.

The JORC resource follows a great deal of work undertaken by Rainbow at Gakara over recent years. This has included greenfield and brownfield exploration, drilling, mining, ore processing testwork, modelling, and ore processing and concentrate production.

Martin Eales, CEO of Rainbow, said: ‘We are pleased to announce the maiden JORC-compliant Mineral Resource Estimate for the Gakara project, on time and on budget. The Mineral Resource, which is based on only four out of the 28 identified targets within our licence, shows over 1.2 million tonnes of ore, a considerable deposit in its own right, and provides further evidence that the Gakara deposit is a world-class source of rare earth oxides.

‘Three of the areas are high-grade vein stockworks, and include 12,491 tonnes of ore Resource at 55% TREO. These alone will provide over two years' head feed for our planned ramp-up to 5,000t concentrate, and we will of course continue to explore these deposits further.

‘The Kiyenzi deposit has been confirmed as a very large, lower grade deposit, which ties in with the airborne and ground gravity results previously announced. The currently modelled deposit amounts to nearly 1.2 million tonnes of ore at 2.2% TREO, and may well be related to a carbonatite source. This deposit is open in all directions and is an extremely exciting prospect as it presents a new opportunity for Rainbow to further develop its mining and processing capabilities.

‘These results will provide us with confidence in our ability to obtain near and medium-term sources of ore, but more importantly point to the existence of a truly unique deposit, which we will continue to explore in the future.’

Until recently, Rainbow hoped to ramp up production to 5,000tpa or 400t a month by the end of 2018. However, this target was delayed in October until 2019.

Rainbow put this down to a challenging geological environment and uncertain average yields at Murambi. Compounding this, the business has also suffered lower production rates from Gasagwe in recent months. This has resulted from unpredictable vein structures.

Rainbow said the precise date at which it hits its target production rate will depend on progress at Murambi. It will also hang on one or two more mining areas that it plans to bring online over the next nine months. It plans to release upgraded production guidance for the 12 months to June 2019 early next year.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Systems Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Systems Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Kavango Resources (LSE:KAV) rose to 2.4p on the offer today as the company announced it has identified several high-quality drill targets at its prospective Kalahari Suture Zone (KSZ) project in Botswana. With the news marking yet another step towards the recently-listed business potentially locating what it describes as ‘world-class mineral deposits’, could this weakness provide an exciting buying opportunity?

A weak commodity market and a negatively-received production delay in October have pushed shares in Rainbow Rare Earths (LSE:RBW) down to 4.8p, well below their 2018 high of nearly 24p, achieved in April. Despite this, the firm has taken major steps forward, steadily increasing production at its Gakara project in Africa and completing wide exploration work to support the release of a maiden JORC resource by year-end. With rare earths looking set to benefit from the inbound electric vehicle boom driving battery metals like nickel and cobalt, CEO Martin Eales explains why Rainbow’s current share price weakness could provide a good buying opportunity.

Rare opportunity

Rainbow Rare Earths listed in January last year to target production in the rare earths sector. The rare earths comprise seventeen chemical elements that often occur in similar deposits and share properties.

Thanks to their diversity, the elements have many uses including catalysts, alloys, glasses, and electronics. However, the one that Rainbow is most interested in is their use in the production of strong magnets. Rare earth magnets are used in several growing areas including electric generators and wind turbines. However, they are perhaps most notable for their use in electric vehicle (EV) motors. Indeed, with global EV sales growing 63pc last year alone, magnet rare earths now account for c.70pc of the total RE value chain.

With estimates putting 530m EVs on the road by 2040, Eales believes the current growth dynamic will continue for some time. As rare earths represent a much smaller market than established battery metals like nickel and cobalt, he says they provide investors with an attractive, alternative way of getting exposure to the upside potential on offer:

‘Every EV motor has a strong magnet in it, and we believe these will become more prevalent as the world continues to shift away from traditional vehicles. So, the demand drivers surrounding lithium, cobalt, and nickel in the EV batteries also apply to rare earths. Unlike these metals, there is not a lot of near-term supply for rare earths as projects take a lot of money to get going. Even if supply can be incentivised by financing, many projects  are still three or four years away from supplying the market, providing an ongoing tailwind for prices.’

Ramping up

Rainbow is taking advantage of this dynamic at its Gakara project, located in the African nation of Burundi. The historic mine holds more than 1,000 RE discoveries with a basket heavily weighted (c.20pc) towards magnet rare earths. However, the real string to the site’s bow is its high grades, which sit at between 47-67pc total rare earth oxide (TREO), compared to an average project grades of 1-4pc TREO.

The site entered production from its Gasagwe mining area in December last year, followed shortly by the commissioning and construction of a processing plant. This development made Rainbow one of few rare earth producers outside China and the only African producer. Eales says Gakara’s high grades allowed production to begin at a ‘fraction of the cost and less time’ than similar RE projects:

Typically, rare earth operators have to mine thousands more tonnes at their projects than we do because the grades are lower. We are also supported by our veins, which are easily identifiable and extractable . We process far fewer tonnes and can use a smaller plant because we don't have to upscale or beneficiate our ore. This was quick and cheap, allowing us to enter production at a capex cost of just $2.23m.’

Output from Gasagwe has continued ever since, accompanied by ongoing drilling work to better understand the area and help to boost production. Work has also been completed to bring a second area called Murambi into production, supported by a £1.6m placing at 12p a share in August.

An aerial view of the Gakara rare earths project

Until recently, Rainbow was aiming to ramp up production to 5,000tpa, or 400t a month, by the end of 2018. However, this target was announced as delayed in October until 2019. It put this down to a challenging geological environment and uncertainty around average yields at Murambi, which has now entered production. Compounding this, the business has also suffered lower production rates from Gasagwe over recent months due to unpredictable vein structures.

The firm said the precise date at which it hits its target production rate will depend on progress at Murambi and one or two additional mining areas that it plans to bring online over the next nine months. It plans to release upgraded production guidance for the 12 months to June 2019 early next year. With shares falling from 9.6p to 4.5p over a matter of days following the announcement of the delay, Eales argues that the market over-reacted to the news:

‘We had set ourselves an ambitious production target for the end of this year. We haven’t quite got there, so we have pushed it back to next year. We know what we need to do to get there and the market I think punished us quite hard and did not realise that our strategy remains unchanged. We know what a great project we have got here so we will get our heads down and crack on with it and the share price will take care of itself over the long term. If Murambi ends up performing as we expect it to, then hopefully we will see production numbers double because both areas will be producing at a similar rate. It is difficult to forecast production as we do not have reserves and resources at present, but what we do know is that, given our inventory, we have multiple years of operation here and we will be going for a good while yet.’

Exploration upside

As well as ramping-up production, the last year has seen Rainbow increase its efforts to explore Gakara’s upside potential. This work began in November 2017 when an airborne magnetic survey found significant exploration upside at the project, identifying four large, prospective anomalies for a carbonatite source for Gakara's rare earth veins.

In particular, one anomaly complemented a ground-based gravity survey at Gakara’s Kiyenzi prospect, which was selected for investigation after it was found to contain large boulders at surface with very high RE grades. Following this, the firm carried out a phase one exploration drilling campaign on the Kiyenzi anomaly and the wider prospect area. This work identified new high-grade rare earth mineralisation up to 5m thick, consistent with that found previously in the boulders.

After failing to find mineralisation at the other anomalies, Rainbow began phase two drilling at Kiyenzi in July. The results will form the basis of its maiden JORC resource, which Eales says will be released this month. Following this, the firm hopes to identify a large deposit to enable production to ramp up to 10,000tpa or more.

Gakara mining licence perimeter, mining areas, and rare earth discoveries

Over a longer-term horizon, Rainbow is also looking at ways to process its own rare earth concentrate. As it stands, the business produces a mixed mineral product and sells it to someone in the market that will then separate the concentrate into processed rare earths and sell it on at a much higher price.

The business took its first significant step towards this goal in August when it partnered with a firm called TechMet. The company will fund a DFS for downstream rare earth separation at Gakara on a reimbursable carry basis up to $3m. According to Eales, Rainbow’s RE concentrate currently sells at a c.70pc discount to the finished metal product. As a result, he said he is very excited by the potential presented by any future JV with Techmet:

‘We have always said that if we can calculate the economics to allow us to process our own material then would be determined to do so. We are the feedstock, so if we can process our own material to make a higher value product, then the margins are very attractive. Our work with Techmet has begun, but we haven't given any estimated time for completion. I would imagine we would be seeing some news on that towards the end of next year. We are very excited about the possibilities because if we can narrow the gap between our sale price and our customers’ sale price, then it could have some serious benefits.’

Market turnaround?

Financially, Eales tells us that Rainbow’s revenues and cash balance are funding its existing work programme. The firm’s last publicly stated cash position came in its annual results in September, when it revealed that it had $354,000 as of 30 June 2018. However, it bolstered this considerably in August when, as mentioned, it raised £1.6m ($2m) to- in its own words- ‘cater for the sometimes irregular sales cycle for its concentrate and ensure sufficient working capital reflecting the company's complexity and nature of its operations’.

In October, the business then said it remained focused on using its existing cash and financing to reach concentrate sales of 250-300ts per month, the point at which it expects to be generating positive EBITDA. Once Rainbow has reached this point, Eales plans to use its relatively fixed cost base to reduce its operating cost per tonne by bringing additional areas into production:

‘Over the next year, we want to accelerate the third and fourth mining areas into production. We are currently using some of our recent placing proceeds to explore and develop an area called Gomvyi, which could be our third mining area. Our cost base is pretty fixed, so as we get more tonnes through the plant, costs come down significantly, and we achieve greater profitability.’

Despite this optimism, Rainbow’s shares have been on a downward trend since April, when they sat at highs of close to 24p. Alongside October’s negatively-received delay this can at least be pinned partly on this year’s broader commodities sell-off stemming from concerns over a US/China trade war, something that has hit junior miners across the board in H2 2018. It is worth noting, however, that Rainbow continues to enjoy strong backing from institutional investors Miton AM (4.6pc) and L&G (4.7pc). Likewise, management have taken advantage of this year’s downturn to increase their stakes. In particular, non-exec chairman Adonis Pouroulis, who founded Petra Diamonds and Chariot, maintained his 25pc stake in the company by participating in the August placing.

Eales tells us he believes that market sentiment towards Rainbow will begin to align with management once the firm provides proof of concept by achieving some of its near-term goals. He expects this to occur shortly:

‘Over the near term, I think the market will be looking at our maiden JORC resource and will be looking for us to demonstrate that we are cashflow positive on a monthly basis. These catalysts will provide some more understanding around the speed of ramp-up of production. One thing for sure is that the feedback from customers is very positive and we are sure there is a lot of demand for everything we produce.’

Alternative EV play

While the delay to Gakara’s profitable production is disappointing, it is worth noting that Eales insists nothing has changed in Rainbow’s business plan. Objectively, this point carries a lot of weight. Not a lot of junior miners can boast production revenues and imminent profitability in a niche metal sector that has substantial exposure to the popular EV investment play.

If this all sounds interesting to you and you are confident in Rainbow’s cash position, then the stock’s recent weakness could provide a decent entry point ahead of significant expected newsflow. Indeed, over the coming months, it will be worth keeping an eye on how the market responds Rainbow’s maiden JORC resource for Gakara alongside ongoing production and profitability updates.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Systems Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Systems Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

KEFI Minerals (LSE:KEFI) provides an update regarding its Tulu Kapi Gold Project in Ethiopia this morning. The company reports that progress at the project is moving at a significant pace with a newly recruited construction manager and senior site risk manager relocating to the site next week. They join around 100 locally recruited personnel hired for land clearing and the drilling rigs required to complete the geotechnical surveys. Kefi bought the mine from Nyota Minerals in 2014 and plans to pour first gold in the second half of 2020. The company estimates output from the mine will include open-pit gold production of around 140k ounces (oz) per annum over a 7-year period at an all-in sustain cost (AISC) of $800 per oz. Ore reserve estimates for the project is 15.4Mt at a grade of 2.1g/t gold, containing a total of 1.1Moz.

There are still a few remaining regulatory consents required from Ethiopian government agencies which are expected over the coming weeks ahead of triggering the project. These include the approvals of the final community resettlement plans, Project financing details and the updated works program. The final design of the foundations for the processing infrastructure and dam walls will follow the geotechnical surveys. Upon receipt of the remaining Government consents, project-equity investor ANS Mining Share Company (ANS) will release US$9m of equity funds into the company's project subsidiary Tulu Kapi Gold Mines Share Company (TKGM) for funding the planned activities in Q1 2019 – these include the first phase of community resettlement and ongoing project financing and planning costs.

An additional US$9m of funding is expected at the end of Q1 2019 to fund the planned Q2 2019 project development. This will allow TKGM to proceed with activities prior to the closing of the US$160m bond/lease of non-equity capital project financing. The remaining balance of ANS's planned US$30-38 million equity investment is expected to coincide with full project finance close as soon as the non-equity component is accessed.

Managing Director of KEFI, Mr Harry Anagnostaras-Adams, said: "It certainly is an interesting period in Ethiopia, with many changes taking place, including far-reaching transformation on many levels.  Our Tulu Kapi Gold Mine Project has remained a high priority for all stakeholders throughout this period and I am pleased with both the speed and level of progress being made. I would like to take this opportunity to thank all our partners and in particular the Ethiopian government at many levels for their continued support.  All the pieces of the Project are coming together and we look forward to providing further updates as matters progress."

Author: Stuart Langelaan

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Systems Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Systems Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

 

 

 

 

Mkango Resources Ltd (LSE:MKA) announced on Monday that it had intersected its highest grade rare earth mineralisation to date. The company is focused on assets in Malawi and released its final drill results from the Songwe Hill project. The final drilling phase comprised of 21 drill holes with 19 encountering significant zones of rare earths mineralisation grading above 1% total rare earth oxides (TREO).

Mkango holds interests in three exclusive prospecting licenses in Malawi, the Phalombe licence, Thambani licence and Chimimbe Hill licence. 

The Songwe Hill deposit is on the Phalombe licence which is 80% held my Mkango. This area features carbonatite-hosted rare earth mineralisation and was subject to previous exploration in the late 1980s. A Feasibility Study is currently underway and will be a main focus for 2019. Talaxis Limited will fully fund the study at Songwe with an investment of £12m for a 49% interest in the project. Talaxis has a further option to acquire a further 26% by arranging funding for the project which will leave Mkango retaining a 25% interest, free carried to production. The initial phases of the study includes the recently completed 10,900 metre drilling programme. Talaxis has already invested £5m so far and will invest a further £7m on the publication of an NI 43-101 technical report detailing the results at Songwe – the report is expected to be published in the first quarter of 2019.

Mkango completed a Pre-Feasibility Study for the Project in September 2014, which was subsequently updated in November 2015. The Pre-Feasibility Study is based on a conventional open pit operation using contract mining and a mine life of 18 years. 

William Dawes, Chief Executive Officer, commented: "This rounds off what has been a highly successful drill programme with another excellent set of results. Metallurgical optimisation and work relating to the Environmental, Social and Health Impact Assessment is also progressing well and we look forward to updating the market as we progress the feasibility study through 2019, starting with the resource update in the first quarter."

Author: Stuart Langelaan

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Systems Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Systems Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Harvest Minerals (LSE: HMI), the Brazilian focused fertiliser producer, was up nearly 7% this morning after the company released an operational update. 

The company leads with news regarding its working relationship with Geociclo Biotecnologia S/A.  in July, Harvest announced that it had entered into a strategic alliance with Geociclo to enable the marketing and selling of the company’s KPfértil product.

As well as utilization of the sales team the deal also allowed access to of Geociclo’s MAPA accredited research and trial production laboratory and storage facilities. Harvest reports the alliance has been a success, however, Geociclo has sought judicial administration due to its existing liabilities and lack of available funding.

While at first this may sound problematic, the administration of Geociclo has actually created an opportunity for Harvest. The company has acquired the majority of the sales team, some support staff and Geociclo’s existing client database, allowing progress in developing new markets for KPfértil to continue. In addition, Harvest will no longer be required to pay commissions to Geolciclo.

KPfértil is produced at Harvests 100% owned Arapua Fertiliser Project in Brazil, a country that is currently trying to reduce its dependency on importing the potash it requires for fertiliser.

Harvest sells KPfértil to a number of distributors who deliver it to over 30 different farmers - with a further 12 currently testing it - ranging in size from small holders to some of the largest producers in Brazil.  

The Company now wants to double the size of the current storage facility to 20Kt and add additional silos to reduce the time taken to load each truck and expects this work to commence in the New Year.  The cost is expected to be less than US$300,000 and should be completed by Q2 2019 and will be funded via existing resources.  The company has been stockpiling around 4,000t of inventory in anticipation of the wet season. Harvest will focus its efforts on stepping up production during January and February, which tend to be quieter months, ahead of the ‘buying season’ starting in March.

The company also announces that KPfértil has been granted certification from the Brazilian Institute of Biodynamics as a fully organic and biodynamic product which the company expects will further enhance sales.

Harvest's Executive Chairman, Brian McMaster, commented, "During the year, we have been working hard to develop our brand and distribution channels for KPfértil.  Whilst contracts with distributors can allow us to leverage existing sales teams and their relationships in the market, direct sales through our own sales team are equally as important to building our brand.  We are therefore delighted to have acquired most of the existing sales, support and marketing team at Geociclo to support this strategy.

"We are pleased with the progress of the plant since it was commissioned. We are planning the expansion of our product storage capacity, which will be fully funded from available cash resources. We have recently slowed production due to early commencement of the rainy season, but the idiom 'every cloud' is even more true in our case as our customers are expecting a bumper harvest this year, which will mean they should be out in force to buy more KPfértil next year."

Author: Stuart Langelaan

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Systems Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Systems Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Toronto-listed cobalt developer Global Energy Metals (TSXC:GEMC) has announced numerous encouraging intersections from the latest round of drilling at its 70pc-owned Werner Lake project in Ontario, Canada. Five new metallurgical drill holes have been completed by Australian miner Marquee Resources as part of its $2.5m commitment to advance Werner Lake and earn-in to 70pc of the project.

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