Yin maiden resource

Maiden resource within our expectations: Dreadnought Resources (DRE-ASX) has released a maiden resource over Yin, within the Mangaroon Project in the Gascoyne region of WA. At a 0.2% TREO cut-off, the wholly Inferred resource stands at 14.36Mt @ 1.13% TREO for 162.3kt of contained TREO and comes off the back of impressive exploration work undertaken by DRE over a short 2.5-month drilling program earlier this year.

We recently outlined our resource expectation for Yin, and we are pleased to see that DRE has delivered a maiden within our range (16-18Mt @ 1-1.2% TREO for 162-216kt on contained TREO). Perhaps more importantly is the NdPr to TREO ratio, with Yin returning a relatively high 30% NdPr:TREO.

At a 1.5% TREO cut-off, the resource stands at 4.6Mt @ 2.17% TREO with cross- sections (Figure 3 overleaf) pointing to near-surface high-grades, which could improve mine economics in the future.

Resource intensity points to large scale: DRE highlights that the Yin resource comprises just 3km of the 30km of mapped ironstones across the project, made up of Yin itself (16km) as well as Sabre, Y8 and other ironstone prospects. DRE’s 14.36Mt resource over 3km implies a resource intensity per strike kilometre of 4.8Mt/km. Similarly, Hastings Technology Metals (HAS-ASX: $3.56 | SPEC BUY, TP $6.90 | Reg Spencer) has recently (15 December 2022) outlined an exploration target for its nearby Yangibana Project of 40-60Mt @ 0.7-1% TREO. This has been based on its 29.3Mt @0.93% TREO resource over 24km of the total 66km of ironstones it has mapped (Figure 1 overleaf). This implies a resource intensity of 1.2Mt/km.

DRE’s 4.8Mt/km resource intensity would imply up to 144Mt of resource potential at Mangaroon and 77Mt/km at Yin alone. Applying HAS’ resource intensity still demonstrates that DRE could achieve 36Mt in resources across the project. We also note DRE’s long-term incentive plans to deliver 30Mt @ >1% TREO by end of CY24.

DRE to hit the ground running in 2023: DRE recently completed first pass, wide-spaced 160m x 160m RC drilling of the C1-C5 carbonatites with the program successfully identifying six coherent zones of rare earth element (REE), niobium (Nb), titanium (Ti) and/or phosphorus (P) mineralisation. All assays for the carbonatite drilling have been submitted with results due by February.

DRE has received all approvals to commence drilling along strike from Yin and Sabre in February/March 2023 and expects further resource growth. Additional drilling at C1-C6 will commence in March 2023.

Valuation and recommendation: We maintain our SPECULATIVE BUY recommendation and price target of $0.24. The resource intensities above suggest Yin could grow to +70Mt and at least 36Mt across the project if using HAS’ values from its lower grade resources. With this in mind, we continue to base our DRE valuation of a 40Mt resource over time. Given the early-stage nature of Mangaroon (Yin), we continue 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.

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