Exploration company, Krakatoa Resources Limited (ASX: KTA) intends subject to grant, to rapidly develop the Mt Clere Rare-earth Project in Western Australia. As both the demand and price of rare earths elements are expected to increase in the near future, this acquisition is providing a gateway of opportunities for investors.
The earlier activities by BHP at Mt Clere Project, which were not aimed at rare earth elements’ discovery at that time, have identified:
- Substantial monazite (with mineral abundances exceeding 50%) in a significant number (>20%) of pan concentrate stream sediment samples;
- Monazite concentrates can contain up to 70% REE after physical upgrading, primarily cerium (Ce) and lanthanum (La) as well as significant concentrations of neodymium (Nd), praseodymium (Pr), and samarium (Sm);
- The thorium (Th) content is also high, ranging from 4% to 12%.
As the price of Neodymium (or Nd) is expected to continue its upward trend, these previous results from heavy weight BHP are obviously very encouraging for KTA investors.
Neodymium (or Nd), a crucial rare earth element, is a critical raw material used in the production of high-strength permanent magnets. The main reason behind the bullish price rise is the demand associated with a revolution underway of a scale that is being compared to the renaissance; the electrification of unconscious movement.
The movement of mobile machinery motors including fixed plant motion involves EVs, HVs (Hybrid Vehicles) such as cars, trucks, buses, trains, forklifts, road bikes, off road bikes, earth moving equipment, robots, drones of all shapes and sizes and soon; air and sea craft. Also, wind turbines, power tools, computers including lap-tops and hand phones via the miniaturization of electric motors which is also well underway and made possible by Neodymium magnets.
Nd mixed with Iron and boron (NdFeB) are used to make these permanent, high strength magnets so strong that pulling a match box sized NdFeB magnet off the fridge becomes almost impossible.
(Source: Arafura Resources Limited Reports)
Although rare earth elements have a wide range of applications, they are mostly used in the manufacturing of magnets. The magnets of almost all of the modern motors are derived from rare earth elements like Neodymium and Praseodymium (NdPr).
The following three rear earth elements are used to make the magnets that drive the electric motors:
Neodymium (“Nd”) is a rear earth element used to make permanent magnets (most widely used rear earth magnet). Nd magnets find their application in stereo loudspeakers, TVs, car parts, turbine systems, modern day smart phones, and many electric vehicles.
Praseodymium (“Pr”) a rear earth element used to make permanent magnets.
Dysprosium (“Dy”) also a rear earth element used in magnets. The magnets made out of this element is resistant to demagnetization at high temperatures.
The observations from some other companies which have conducted exploration programs on the Mt Clere Rare Earth Project are as follows:
From Astro Mining NL, which was also not looking for REEs at the time:
- Extraordinarily high monazite (up to 48%) was independently confirmed in heavy mineral concentrates taken by Astro Mining NL
- Heavy mineral concentrates also included very high zircon (up to 60%), ilmenite (up to 29%) and leucoxene (up to 20%)
- The extremely high levels of thorium are apparent in the airborne radiometric imagery, form prime targets for Chinese-type ion adsorption clays
From All Star Minerals Plc:
- Project’s REE prospectivity further confirmed by All Star Minerals Plc:
- Heavy mineral concentrate produced from alluvium returned up to 0.46% Ce, 0.25% La, 0.12% Th, 1.4% Zr and 9.9% Ti;
- Numerous REE anomalies returned in limited shallow auger drilling, including sample EBA052: 1050ppm Ce, 660ppm La, 112ppm Pr, 360ppm Nd and 43ppm Sm
And district prospectivity: Carbonatite type geochemical signatures exist in the district, with identification of numerous lamprophyre dykes and a carbonatite dyke swarm. The nearby Gifford Creek-Yangibana area contains a resource of 21.67 Mt at 1.17% TREO as reported by Hasting Technology Metals Ltd (ASX: HAS ), ASX-listed rare earths producer, in its ASX announcement released on 22 November 2018. Hasting Technology has a market cap of $114.65 million (as on 31 July 2019).
Currently, China is the leading exporter of rare earths and home to the largest permanent magnet maker. However, due to the current trade war with the US, China recently limited its export of rare earths to give a fitting reply to the US, a leading importer of rare earth elements (REEs). This has given birth to a gap between the supply and demand for REEs and has opened doors of opportunities for companies like Krakatoa, potentially owning REE projects outside China. In addition to this, the global emergence of electrical vehicles will add to the demand for REEs.
In the current scenario, a small-cap company like Krakatoa Resources Limited is providing investors with a significant leverage opportunity. The company has already commenced the data compilation work and non-invasive groundwork on its Mt Clere Project and aims to delineate a JORC resource post application granting.
For comparison, an ASX snapshot of listed REE companies appear below:
*Market Cap as on 31 July 2019 (Source: ASX): One wonders where KTA will fit on the above table should their applications be granted
At market close on 31 July 2019, KTA’s stock was trading at a price of $ 0.023 with a market capitalisation of circa $3.38 million.
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