Yin resource grows and increases confidence

40% increase in resource tonnes: Dreadnought Resources (DRE-ASX) has released an updated resource over Yin and now includes the Yin South prospect. This is within the Mangaroon Project in the Gascoyne region of WA. At a 0.2% TREO cut-off, the updated resource stands at 20.06Mt @ 1.03% TREO for 206kt of contained TREO and comes off the back of impressive exploration work undertaken by DRE over the last year. Importantly, the resource comprises an Indicated component of 5.52Mt @ 1.23% TREO, which sits over just 250m of strike. The Yin trend remains open both along strike and at depth. DRE has also run preliminary pit optimisations over the deposits, which has been modelled down to a maximum depth of 200m below surface.

The total resource also comprises 28% NdPr:TREO for 58.4kt of contained NdPr oxide. This is high-grade by global standards. While TREO is a common descriptor for REE
grade, NdPr oxide and NdPr:TREO ratios are perhaps more appropriate given these are the main value drivers and payable in a monazite concentrate.

Hits our expectation: Our recent note outlining Yin South drill results highlighted our thoughts on a resource totalling 20Mt, so todays’ announcement very much meets our expectation. We are excited about the next phase of drilling given this resource covers just 4km of the mapped 43km of ironstones across the project.

We note the grade has fallen slightly (1.03% TREO, 28% NdPr:TREO vs 1.13% TREO 30% NdPr:TREO previously) and as noted by DRE, grades increase to the north, so we could expect a bump in grade at the next update, as Yin North is brought into resource.

50-100Mt @ 0.9-1.3% TREO exploration target in the medium-to-long term: Recall that in February 2023, DRE published an exploration target range for the ironstone potential within the 100%-owned Mangaroon REE Project. The company cited a substantial amount of geological knowledge derived from work undertaken by DRE itself and neighbour HAS-ASX in advancing the Yin and Yangibana ironstone province. DRE defined a JORC 2012 Exploration Target of 50-100Mt @ 0.9-1.3% TREO for the 43km of mapped within its Mangaroon Project. This was in addition to the 14.36Mt resource at the time. Given the resource is now 20Mt from 4km of ironstones, we can assume DRE has converted ~5Mt of the exploration target into the resource category.

The exploration target excludes ironstone mineralisation at depths greater than 150m below surface, and all carbonatite mineralisation across the project.

Upcoming potential news flow

DRE expects to publish an initial resource for the C3 carbonatite in August, following receipt of final assays this month. Recall that C3 has returned very broad widths of rare earth mineralisation (195m @ 0.55% TREO from 6m incl. 33m @ 1.10% TREO (21% NdPr:TREO)) and includes significant niobium mineralisation too (15m @ 1.16% Nb2O5 and 30m@ 0.97% Nb2O5). We therefore do not write off potential for a niobium resource as well as a rare earth resource at C3 next month.

During the DecQ’23, we expect another updated ironstone resource lifting the total project inventory to somewhere in the region of 25-30Mt with +50% Indicated. This will include a further 12km of drilled ironstone (remember, 16km of 43km drilled to date) and will include the higher grade Y2 and Yin North prospects. This resource will form the basis off an initial mining study in 2024.

Valuation and recommendation: Our valuation is underpinned by an EV/Resource multiple centring on a 60Mt @ 1% TREO resource defined at Mangaroon. Given DRE has now defined 20Mt of resource and has converted ~5Mt of its February 2023 JORC Exploration Target of 50-100Mt into resource, 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.

Read the full report here.