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Pensana Rare Earths

spasmodicus
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Re: Pensana Rare Earths

#499791

Postby spasmodicus » May 11th, 2022, 10:54 am

The latest (May 6th) puff on Pensana’s prospects is here at
https://pensana.co.uk/wp-content/uploads/2022/05/Pensana-Plc-Corporate-Presentation-Indaba-FINAL-060522.pdf


highlights include
UK Trade mission to Angola
https://www.miningweekly.com/article/uks-dit-pensana-host-mining-trade-mission-to-angola-2022-04-11

results from borehole samples at Coola prospect
22 samples from 4.2km diameter ring structure at
Sulima West reported up to 10.6% TREO, av 4.2%
TREO (NdPr = 0.86%)
Sampling of 0.9km diameter Coola carbonatite ring
dyke reported up to 4.9% TREO (average 2.6%) with
soils reporting up to 13.18% TREO (average 3.21%)

There’s a lot of dross about potential usage for the rare earth production (Neodymium and Praseodymium), which anyone interested in magnet technology will know about already. Adamas Intelligence (who they?) and others predict a significant global shortfall from 2024 onwards. Before worrying/jumping for joy about that, the main thing is to get the stuff into production.

Financials (from table on P 19 of presentation)
Capex is forecast to be $494M for both Angola (Longonjo mine) and UK (Saltend refinery).
Opex is stated as 15$/kg TREO (Total Rare Earth Oxide)
Annual production is given as 12500 Tonnes(?) per year TREO / 4500 tonnes NdPr

For the stated annual production and Opex that should give annual Opex of 15*1000*12500 or $187M.

They state revenue (average steady state) USD 893M (Average per annum based on first five years).
Eyeballing the graph on Page 15, we see that the average price for the middle (white) price prediction from 2024 – 2029 is about $180,000 per tonne, giving revenue of 4500 * 180,000, i.e. $810M/annum, i.e. not far from their figure of $893M. Subtracting Opex from revenue, EBITDA would then be about 810-187 = $623M, which agrees pretty well with their figure of $610M

All this assumes of course that
- Capex will be as forecast
- Production volume will be as forecast
- Opex will be as forecast (energy costs?)
- World NdPr price will be as forecast
- they get the plant up and running in a timely fashion
- they can raise the necessary $500m (interest rates, cost of financing?)

If all this comes to pass, then
Current market cap is £183M at share price around 75p. Cash (£16M) and borrowings (small) are negligible, so they need to raise about $500M for the CAPEX.

There’s recent another take on all this here at
https://masterinvestor.co.uk/commodities/two-footholds-in-the-rare-earths-industry/?mc_cid=ec725e4548&mc_eid=288f0b71de

where they paint a similar (but 20% lower) upfront cost for the project, i.e.

The company has published its financial projections, which at this stage must be somewhat speculative even though undertaken by world-class consultants and engineers, and unsurprisingly look extremely good with a 50% irr and a $2.1bn NPV8 (scaled down – as is par for the course – from previous estimates) in return for what is now $400m or so upfront cost.

They add
A report late last year said the government had doubts about Saltend’s viability and, whatever the reason, a mooted government grant has still not materialised.
If funding does arrive, Pensana expects it to be a mixture of offtake agreements (paid for up front) and various levels of debt, and fresh equity including from the Angolan sovereign wealth fund for Longonjo.



So there you have it. My optimism in buying a modest holding of PRE a couple of years ago has not so far been justified by the subsequent share price fall and my initial modest punt is down about 45%, but that’s water under the bridge. I think that the outlook for rare earths will pick up when everyone stops worrying about the price of gas and starts thinking about renewables again. Think of all the wind farms they are going to need in Germany. I did a modest top-up today and also on rival rare-earther RBW to keep things balanced in my dodgy miners department.

Keep on truckin’! (preferably in an electric truck)
S

everhopeful
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Re: Pensana Rare Earths

#500010

Postby everhopeful » May 12th, 2022, 9:16 am

Thank you spasmodicus. The constant pr output from PRE becomes ever more wearing. I get emails regularly from them crowing about something or another but never really anything concrete. I agree absolutely that the case for rare earths is compelling but I am not sure this lot will deliver. I continue to have a small holding having fortunately sold the bulk at a 90% gain a year or so ago.


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