LSR: high grade, heavy rare earths PLUS result of first drill into never-before-drilled copper project in a few weeks...

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 38,596,178 LSR Shares and 26,627,263 LSR Options at the time of publishing this article. The Company has been engaged by LSR to share our commentary on the progress of our Investment in LSR over time. This information is general in nature about a speculative investment and does not constitute personal advice. It does not consider your objectives, financial situation, or needs. Any forward-looking statements are uncertain and not a guaranteed outcome.

A few days ago our Investment Lodestar Resources (ASX:LSR) announced high grade heavy rare earths from its project in Arizona, USA.

Up to 3.7% TREO, with 64% of that being HEAVY rare earths from reconnaissance rock chip samples. (source)

Access to and control over HEAVY rare earths help determine which nations can build, sustain, and upgrade next-generation:

• Artificial Intelligence (AI)
• AI-driven defence
• Autonomous war robots and drones
• Quantum computing, and
• Advanced energy technologies.

Whoever wins these technologies will likely be the next global superpower.

And to build these technologies you need heavy rare earth minerals.

So it's kinda important to NOT be 100% sourcing the heavy rare earths you need to win this race (USA) from your main adversaries (China) who also want to win the race.

(we want to see LSR make a heavy rare earths discovery at its USA project)

We also noted in that back of this week’s announcement that LSR is a few weeks away from announcing the result from the first ever drill hole into a greenfield, moonshot, never-been-drilled copper project in Chile:

(source)

As we have seen many times in the past, it's often the “side salad” projects (where there is the least expectation) like this Chilean copper asset that can deliver for micro cap explorers like LSR.

Particularly when it's a never before drilled project - nobody knows what could be there... not even a clue...

(other than a mysterious anomaly which attracted LSR enough to drill it)

And especially because the copper price just hit new all time highs this week.

(copper is used to transport electricity, and also critical to each of the 5 “who will win world dominance” technologies we listed above)

So the $12M capped LSR could deliver a major new copper discovery, a so-so first result worth following up OR just a flat out fail (mineral exploration is high risk) - we’ll find out in a few weeks.

(More on this project in a second)

But first... back to LSR’s US heavy rare earths asset...

Yesterday the US Department of War put this statement out - outlining “securing rare earth elements a national security imperative”:

(source)

Then Reuters had a special report on the US rare earth shortages (especially in US aerospace) getting worse inside the US... Here is that Reuters report:

(source)

One of the rare earth elements mentioned over and over again was Yttrium - Yttrium prices are up 69x (hehe) versus this time last year.

(source)

LSR’s US heavy rare earths asset “contains high concentrations” of that exact rare earth element (alongside many other heavy rare earths):

(Source)

Noting that LSR’s project is pre-discovery and still very early stage - so we will need to see some more exploration before we know how much of these heavy rare earths the project contains.

We Invested in LSR because we think heavy rare earths assets inside the US will be one of the big winners from the attention and capital pouring into the sector inside US borders.

And it looks like that may be happening now only two months into 2026...

Again, access to and control over HEAVY rare earths help determine which nations can build, sustain, and upgrade next-generation:

• Artificial Intelligence (AI)
• AI-driven defence
• Autonomous war robots and drones
• Quantum computing, and
• Advanced energy technologies.

Whichever country wins the race in AI, AI robotics and military robotics will likely be the next global superpower.

(the DoW is saying securing rare earths is a “National security imperative”)

~12 months ago, the USA realised that the supply of critical minerals (especially heavy rare earths) needed to build these things is almost entirely controlled by China.

And that China could at any point withhold supply (like it started doing in 2025).

The US is now responding by throwing capital at the sector with a US$12BN critical minerals stockpile which we think is creating an excellent setup for companies that were early movers into heavy rare earths inside the US (like LSR).

Earlier this week LSR put out a batch of sampling results which returned even higher concentrations of rare earths than when the company acquired the asset:

(source)

LSR assayed rock chip samples up to 3.73% total rare earth oxides (TREO), with heavy TREO’s making up to 64% of the mineralisation.

That’s almost 4x the grades from the previous rounds of sampling.

Previous channel sampling on the project returned grades between 0.53% and 1.26% total rare earth oxides (TREO) - made up ~57% of heavy rare earths. (source)

More importantly, though, we now know the mineralisation runs across ~225m of outcrop and an interpreted ~5km structural trend:

(source)

The market seemed to like the news too - LSR was up 44% on the day.

(the past performance is not an indicator of future performance)

We think the market interest could be because LSR is now starting to show signs its project could have scale (the ~225m of outcrop and the ~5km interpreted trend).

While it’s still very early days for LSR’s asset given it is pre-discovery - that scale is important when US domestic needs come into play.

At the moment, the US national champion $15BN MP Materials is building a rare earths processing facility in California - funded mostly by a deal done with the Department of War and Apple (US$400M and US$500M respectively).

That plant, called the “10X Plant” is capable of processing heavy rare earths. Here is a render of the plant:

(source)

BUT MP Material’s mine produces mostly light rare earths.

Meaning MP may need to look elsewhere for heavy rare earths supply.

Here is what the Wall Street Journal had reported after those funding deals:

(Source)

The topic of where MP would find heavy rare earths to process even came up in the management Q&A section of the Q3 earnings call where management made it clear they are:

1. MP had started stockpiling heavy rare earths concentrates already, and
2. MP was actively looking for third party supply - management were clear in confirming third party feedstock processing deals as a way of filling its advanced magnet production plant...

Management even stated that MP is “actively engaging new suppliers, planning to integrate several over time”... (source)

Here is where LSR’s project sits relative to where that MP Material’s processing facility will go:

Next we wait to see what comes from the mineralogical study results (expected in March) - that study will be when LSR can start to think about how the potential ore supply from the project could be processed.

Then a follow up program to test that broader ~5km interpreted trend.

Here is a video of LSR’s executive director Coraline Blaud talking about the announcement:

(Watch it here)

Another thing that caught our attention in the video above...

Coraline seemed pretty excited about LSR’s copper assets in Chile.

(especially the project that LSR are drilling right now with results due in the next few weeks)

skip to 3:27 where she starts talking about them.

One of the reasons for our Investment in LSR was the free kick we were getting at the copper assets the company owned - basically where IF anything ever came in then it would be an added bonus to LSR’s heavy rare earths asset.

So when Coraline said in that video that LSR were drilling one of those big targets RIGHT NOW (Three Saints Project)...

AND she said that “the rig is getting very close to the geophysical target depths”...

Means results (either visuals or assays) from the project might not be too far away now.

You just never know with exploration projects - everything can change if one hole comes in.

LSR is drilling one of its two copper assets right now - drilling into a geophysical target chasing a big copper discovery:

We think there is almost no expectation baked into LSR’s share price for this drilling - which means if it does come in it could catch the market off guard and be a catalyst for a re-rate.

Noting that this is contingent on the hole actually coming in - this is an early stage, greenfields exploration and a discovery from a first hole is extremely rare.

Especially considering LSR is drilling a target that has literally never been drilled before.

LSR also has a second copper project in Chile, this one is more advanced...

Beyond that first target, LSR also has an option to acquire a second project which was actually drilled in the past - by the United Nations (yes the UN, turns out they used to have an exploration arm) and supermajor $75BN Anglo American.

Here were some of the results from the project - mostly from holes down to ~150m depths:

(source)

Since 1969 no one has done any modern geophysics on the project. (source)

So things could get interesting on this asset as LSR works up the target area with some modern geophysics.

IF we see any improvements to those old hits then it could be game on for this project too:

(source)

For now though, with the Chilean copper it's all about the results from those first two drillholes LSR is doing right now...

And of course progress on the company’s US heavy rare earths asset which forms the basis for our LSR Big Bet as follows:

Our LSR Big Bet:

“LSR makes an economic discovery on its US heavy rare earths projects and re-rates 1,000% from our Initial Entry Price”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is no guarantee that our Big Bet will ever come true. There is a lot of work to be done, many risks involved, including development risk, country risk and commodity price risk - just some of which we list in our LSR Investment Memo.

Success will require a significant amount of luck. Past performance is not an indicator of future performance.

What’s next for LSR

🔄 Target Generation on US rare earths project

We want to see LSR sample, map and run geophysics on its US asset to identify priority drill targets.

Next, though its all about the results from mineralogical studies (expected in March).

This is basically when LSR will workout what type of rocks the rare earths are hosted in so that a metallurgical testwork on the rocks can begin.

Here are the milestones we are tracking:

✅ Acquisition completed

✅ Mapping and sampling (soil and rock chips) - (today)

🔲 Geophysics

🔄 Metallurgical testwork (Mineralogical studies ongoing - results expected in March)

🔲 Drill targets confirmed

🔄Chile drilling - Three Saints Project

LSR is currently drilling here and in a recent interview from LSR’s Coraline Blaud (Executive Director and Head of Exploration) she said that “the rig is getting very close to the geophysical target depths”

So we may see an update on results here in either the form of visuals from the drilling soon, or the drilling results themselves in coming weeks.

What could go wrong?

With the current drilling at the copper asset the main risk in the short term is “exploration risk”.

There is no guarantee LSR finds anything with the drilling which could mean cash spent for no economic return.

If that were to happen, then it could re-rate LSR’s share price lower (even though we think there are very low expectations baked into the share price from the copper assets).

Check out our LSR Investment Memo for a few other risks that we identified and accepted when Investing in LSR.

Others Risks

Like any early-stage exploration company, LSR carries a high degree of risk, here we try to identify a few of those risks.

LSR is operating at the very early, high-risk stages of the mining lifecycle. The current drilling at the Three Saints copper project in Chile is a "moonshot," greenfield target that has never been drilled before. As mentioned earlier, there is a high chance the drilling does not find any economic mineralisation.

For its US heavy rare earths project, LSR’s current data is based solely on surface rock chips and sampling. There is no guarantee these high grades continue at depth or form a continuous, economic deposit.

Furthermore, rare earth element projects carry significant metallurgical risk. Heavy rare earths can be notoriously difficult and expensive to extract.

If the upcoming mineralogical studies show complex metallurgy, the project may not be commercially viable to process regardless of the in-ground grade.

As a pre-revenue junior explorer managing operations across two distinct jurisdictions, LSR generates no cash flow and has high capital requirements.

The company is entirely reliant on capital markets to fund its ongoing drilling, geophysics, and test work in both Chile and the USA.

Any future capital raises will likely result in dilution for existing shareholders, and access to funding could tighten if broader market sentiment toward the junior resources sector weakens.

LSR’s current valuation is heavily leveraged to the "US domestic critical minerals" macro thematic.

If US-China geopolitical tensions ease, alternative supply chains emerge, or underlying commodity prices drop, the strategic market premium currently attached to LSR's US asset could quickly evaporate.

Finally, operating in both Arizona and Chile involves navigating stringent environmental, heritage, and mining regulations.

Any difficulties or delays in securing the necessary drill permits, land access agreements, or environmental approvals could significantly push back exploration timelines and increase the company's cash burn.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Our LSR Investment Memo

You can read our LSR Investment Memo in the link below.

We use this memo to track the progress of all our Investments over time.

Our LSR Investment Memo covers:

• What does LSR do?
• The macro theme for LSR
• Our LSR Big Bet
• What we want to see LSR achieve
• Why we are Invested in LSR
• The key risks to our Investment Thesis
• Our Investment Plan