Further metallurgical work points to high value concentrate

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

Dreadnought Resources (DRE-ASX) has released the results of its second batch of independent metallurgical test work on ironstone samples from the Yin REE Ironstone Complex at the Mangaroon Project in the Gascoyne Region of WA. Recall that DRE’s primary focus at Mangaroon is the 100%-owned Yin ironstone and adjacent carbonatite targets, where the company is amidst drilling to grow the 14.4Mt @ 1.13% TREO (30% NdPr:TREO) resource.

Test results: A 2kg, three drill hole composite sample grading 2.36% TREO & 0.87% Nd2O3+Pr6O11 has produced a concentrate containing 31.22% TREO and 10.76% Nd2O3+Pr6O11 (NdPr:TREO ratio of 35%) at an 85.9% TREO recovery. This is in addition to the initial sighter test work completed by DRE in September 2021 prior to drilling the Yin ironstones.

Our observations: As tabled below and assuming spot NdPr pricing ~US$67.50/t, DRE can potentially create a high value concentrate product, which is comparable to many of its ASX peers. Although we note the feed grade used in both test batches is in excess of the 1.13% TREO resource grade, DRE highlights that there are natural variations in mineralogy within the ironstones and we note the test work from September 2021 produced a higher grade NdPr concentrate despite the lower feed grade compared to its second batch of test work. The bottom line is that feed grade does not equate to final NdPr grade. Nevertheless, we expect DRE to undertake further work using feed grades and compositions that closely match those that will ultimately feed its processing flow sheet.

Further metallurgical work planned: DRE has said that it will continue to undertake metallurgical testing on a variety of sample grades and of all Yin ironstones that it expects to convert into resources. It will also enlist ANSTO to perform acid bake performance analysis of bulk concentrates for producing a mixed rare earth carbonate to optimise midstream processing options for the concentrate.

Upcoming potential news flow: We expect Yin South to be brought into a resource and further infill at Yin derisking the deposit next month (June 2023). Our target would be up to 20Mt in resource across the project (currently 14.3Mt) with 50% Indicated at this juncture. By September/October 2023, we expect an updated ironstone resource lifting the total project inventory to somewhere in the region of 25-30Mt with 70% Indicated. This will form the basis off an initial mining study. We could also see a maiden carbonatite resource from C3 at some point in 2H23.

Valuation and recommendation: Our valuation remains underpinned by an EV/Resource multiple centring on a 60Mt @ 1% TREO resource defined at Mangaroon. Given DRE has already defined 14Mt of resource and has a further 50-100Mt defined in an exploration target, we believe a total resource offering of 60Mt is achievable from DRE over time. We maintain our SPECULATIVE BUY rating and price target of $0.24.

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