Latest drilling extends Yin

Paul Howard | Analyst | Canaccord Genuity (Australia) Ltd. 

Dreadnought Resources (DRE-ASX) has received the assay results for nine RC holes that have extended the Yin deposit at depth.

All nine holes have returned high NdPr:TREO ratios (i.e. >30%) and will likely have a positive impact on the current 14.4Mt @ 1.13% TREO resource given the holes have shown continuity outside this resource.

Results include:

  • 23m @ 1.28% TREO from 115m (incl. 11m @ 2.28% TREO & 32% NdPr:TREO);
  • 12m @ 1.25% TREO from 136m (incl. 5m @ 2.03% TREO & 31% NdPr:TREO); and
  • 10m @ 1.74% TREO from 99m (incl. 6m @ 2.54% TREO & 34% NdPr:TREO).

Why were these drilled? The initial drilling of Yin tested a 3km strike and targeted a nominal depth of 150m below surface (mbs). Due to scheduling and permitting at the time, this initial ~150m depth target was achieved over ~2.1km strike. These latest nine holes represent the final 0.9km of strike to target down to 150m below surface, so now DRE has 3km strike and down to 150m depth completed over Yin.

Drilling of the Yin Ironstone Complex shows that the main lode pinches, swells and changes dip and orientation along strike and ranges in thickness from 1-54m. In addition, parallel lodes have been intersected above and below the main lode and often exhibit a similar orientation as the main lode with thicknesses ranging from 1-10m.

Our take on the results and what’s to come: Given the consistency seen to date at Yin, these last remaining holes to test down to 150mbs were also going to be successful, in our view, and we note the increasing NdPr:TREO ratio to the north at Yin. We are excited and eagerly await DRE’s extensional drilling at Yin and further afield given its ~14Mt resource represents just 7% of the mapped ironstones within its tenure.

Is share price impacted by limited news flow…? DRE’s share price has fallen sharply over the past six weeks. We note that this period has coincided with limited news flow release (other than the exploration target) from a company that has a strong retail following. The limited news is likely to be a knock-on affect of a summer drilling break over Christmas, but we should start to see a more steady flow of results in the coming weeks in the form of assays for 66 holes at the C1-C5 carbonatite targets drilled late in 2022. Drilling will also ratchet up with the arrival of a second RC rig.

…or is it that Tesla is developing a rare earth-free permanent magnet? We recently reported on Tesla’s claims that it is developing a rare earth-free permanent magnet for use in its next generation EV drive trains. We believe this has likely had an impact on potential rare earth miners/suppliers such as DRE. However, we expect rare earth magnets (i.e., NdFeB) to continue to power a large percentage of future EVs and therefore we maintain our bullish view on rare earths.

Valuation and recommendation: Our valuation remains underpinned by an EV/Resource multiple centring around a 60Mt @ 1% TREO ironstone resource defined at Mangaroon. We justify this given DRE has already defined 14Mt of resource and has a further 50-100Mt defined in a JORC exploration target. We also model a takeover scenario given the strategic nature of the project.

We maintain our SPECULATIVE BUY recommendation and price target of $0.24.

Read the full report here.