Yin maiden resource on our Christmas wish list
Paul Howard | Analyst | Canaccord Genuity (Australia) Ltd.
Yin maiden resource out before Christmas: Dreadnought Resources (DRE-ASX) has received all assays from its maiden drilling program at the Yin prospect, within the Mangaroon Project in the Gascoyne region of WA. The company remains on track to release a maiden resource over Yin before the end of 2022, i.e., in the coming weeks.
How big could Yin be: We have taken publicly available drill data from the 120 drill holes at Yin and modelled mineralisation in Micromine. Our updated interpretation (Figures 1-3 overleaf) implies a mine inventory of 16-18Mt grading 1.0-1.2% TREO from the 3km strike drilled at Yin.
Three discrete pods of mineralisation are emerging from our modeling of Yin: the main central pod where the first discovery holes were drilled, a similar size pod of mineralisation in the north and a smaller pod that remains open to the south, in the southern part of the Yin prospect. Note that Yin has been traced for over 16km and DRE also has follow-up drilling required at the 1.5km-long Sabre (Y3) and emerging Y8. DRE is also assessing its carbonatite targets, which now appear much larger than initially thought prior to the recent drilling.
Immediate REE drill success at Yin: In June 2022, DRE commenced drilling the ironstone targets at Yin and releasing thick, high-grade assay results from the first six holes of the 120-hole program:
- 35m @ 2.75% TREO from 94m;
- 34m @ 2.59% TREO from surface; and
- 31m @ 1.73% TREO from 24m.
Further drilling along the mapped 3km of strike has returned results including:
- 24m @ 2.57% TREO from surface;
- 31m @ 1.64% TREO from 62m; and
- 24m @ 1.17% TREO from 94m.
Infill drilling at Yin was completed in August 2022 with all assays now received. Assays also remain pending for ironstone drilling at Sabre and Y8.
Carbonatite targets much larger than initially thought: First pass, wide-spaced 160 x 160m RC drilling of the C1-C5 carbonatites has been completed with the program successfully identifying six coherent zones of rare earth element (REE), niobium (Nb), titanium (Ti) and/or phosphorus (P) mineralisation. The REE-Nb-P mineralised zone at C3 is ~600m x 550m and follow-up drilling is underway on an 80 x 80m grid. The carbonatite intrusive complex is interpreted to be much larger than originally thought with C2-C5 extending to ~6.5km in strike length x 1km wide, nearly doubling in size. All assays for the carbonatite drilling have been submitted with results due by February. In addition, we are buoyed by a large coincident gravity/magnetic anomaly (~4.3km x 2.4km) that has been confirmed at the C6 carbonatite complex target and will be drilled in the MarQ’23. Part of C6 that outcrops is an intense 900m x 600m magnetic feature which has been confirmed as an outcropping pyroxenite cumulate intrusion. Pyroxenite intrusions are known to occur associated with carbonatite intrusions.
Valuation and recommendation: We maintain our SPECULATIVE BUY recommendation and price target of $0.24. This pending maiden resource should be viewed as an initial offering given Yin has been traced for over 16km (but only drilled over 3km) and DRE also has compelling targets further afield. The carbonatites appear much larger than expected, which means further drilling is required to better understand the geology. In our view, a 40Mt resource would appear to be achievable over time, and forms the basis of our valuation. Given the early-stage nature of Mangaroon (Yin), we have opted to use a blend of a Resource multiple and takeover scenario to value DRE. We value the early-stage DRE on an unfunded NAV basis. Our NAV comprises our Yin REE Project valuation weighted 50:50 for a Resource Multiple and 75% takeover premium.