PFE intersects 14m of Hematite sandstone on first drill campaign.
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Share price when sent: $0.235
Pantera Minerals (ASX:PFE) is an early stage explorer with a virtually un-explored, potential high-grade and high-tonnage iron ore project in the north west of WA.
PFE’s iron ore exploration project is located just kilometres from Mt Gibson Iron’s existing iron ore production infrastructure on nearby Koolan Island. Mt Gibson is Australia’s highest grade iron ore producer and is capped at over $480M - a nice neighbour to have for PFE.
We invested in PFE at the 20¢ IPO in August 2021 - we liked PFE’s enterprise value and tight capital structure at listing, as well as its promising suite of exploration projects, with near term drilling plans.
We invested in PFE because we wanted to see them drill for high grade iron ore right next to Mt Gibson Iron (and all their infrastructure) and expected the price to run up into its initial drilling campaign.
Our longer term investment thesis is that if PFE can successfully go on to delineate a large high grade iron ore resource it might one day attract the attention of its producing neighbour Mt Gibson as a takeover target. Of course this would be a remarkable result, there is still a long, long way to go here - PFE has only just started drilling.
We have been eagerly awaiting PFE’s first batch of drill results since our investment in August.
Today PFE today announced that three drill holes have been completed encountering broad widths of up to 14m in Hematite sandstone - the cores have been sent to the assay lab and grades are expected to be announced in December.
14m of Hematite sandstone is a good early sign - Hematite ore generally has a higher iron concentration, which makes processing the ore into steel cheaper and more efficient - in the next drilling program we want to see more of the same, and thicker widths.
In mid December we expect to get the assay results - this is the next big piece of PFE news, and will give us the best indication of the hematite grades at depth and geological information to plan the next drill targets.
With the target at PFE’s Yampi Project being a higher-grade iron ore deposit, we think that anything above 55-60% Iron ore grades would be a really encouraging result for PFE - and we should find out this information when the assay results arrive.
We will then look to PFE’s next drilling campaign, which is going to see how far the hematite sandstone extends with some additional drill holes. This will come hopefully on the back of getting some good high iron grades back from the lab in a few weeks.
So far PFE has executed on the timeframes set out in the IPO which gives us confidence to hold into any follow-up drilling at the Yampi project in 2022.
Pantera Minerals Ltd
Here is a quick summary of why we originally invested in PFE:
- First drilling in the next few months - three holes done, many more to come in early 2022 - drilling is always an exciting time for an explorer.
- High grade hematite (iron ore) - rock chip samples of 55% to 68% - these are good early signs. How much and how high grade will depend on assay results and upcoming drilling. High grades are good for beneficiation and direct shipping.
- Right next to export facilities - no “stranded” deposit. PFE’s project is 5km from a deep water port and $480M capped producer Mt Gibson Iron.
- Takeover target? We think so, if one day PFE can successfully identify a high quality iron ore resource.
- Iron ore is trading around ten year highs - This was the case when we first invested - the iron price has since come off - but as we have seen, commodity prices can move quickly. There is an increased likelihood of mergers and acquisitions during a commodity super cycle.
- Tight capital structure and low EV - Enterprise Value of $6.95M on 20c ASX listing, with a big portion of stock in escrow (the majority of our holding is escrowed for 2 years).
- One of very few Indigenous CEOs on the ASX - PFE has a strong relationship with the traditional land owners and has ESG credentials.
- Ex Mt Gibson Exploration Manager - he must know a good iron ore project when he sees one.
For more info on each point, see our original PFE initiation note here.
More about PFE’s announcement today
PFE originally planned to drill five holes in this campaign, however PFE only managed to drill the three holes reported today.
Unfortunately the drillers had to leave site due to the onset of the wet season, which brings intense tropical storms to this part of the world.
The additional two holes that were originally planned will need to wait until the next drilling season starts early next year.
Now that the first phase of drilling has finished, PFE will be waiting on the assay results which will inform the follow up drilling and drill targets - we want to see thicker intersects in the next holes.
The good news is that all three of the drill holes had an excellent sample recovery rate >95% indicating that most of the drill core was intact & able to be analysed.
A sample recovery rate this high will mean the lab can provide excellent assays through the drill cores.
The samples are already on their way back to Perth for analysis now.
With the drilling program confirming visible Hematite, our focus is now on the grades & the thickness of the intercepts. Results from the drilling programme are expected in Mid-December this year.
With the target at the Yampi Project being a higher-grade iron ore deposit we think that anything above 55-60% Iron ore grades would be a really encouraging result for PFE.
Confirmation of a mineralised zone can then be followed up with step-out extensional drilling as soon as possible.
Our PFE investment strategy:
Our investment strategy for minerals explorers is to invest during the quiet periods before speculation around drilling results. This is when we typically see share prices run upwards - at this stage we aim to take some profit and possibly free carry, holding the rest of the position into the drilling results.
Our original plan for PFE was to sell 20% prior to the first results IF the share price ran, BUT after the heat came out of the iron ore market, PFE share price didn’t really move as much as we had hoped, so we ended up holding nearly all of (~94%) of our original position into these results.
We cover our full investment plan for PFE in detail in this note from early September, of relevance now is our Plan B:
Plan B: Having made our investment in the IPO back in August, we have held onto 94% of our position through the initial drilling campaign and we will reassess completing the top slice (i.e. taking some profits) going into potential step-out/extensional drilling in 2022.
What are we watching out for next:
Assay results from the recent drilling program. We look forward to receiving the results & getting a better understanding of the potential at the Yarampi asset.
Depending on the consistency of the assay results by the end of 2021, PFE will be in a position to detail what a step-out drilling programme looks like and when to expect it.
With an enterprise value of around $10M and $6.3M in cash, we expect PFE to quickly follow-up any success from the current drilling programme as soon as the drilling window in WA opens up around April-May 2022.
Our expectation is that PFE will need to drill the Yampi project several times before it can declare a discovery, and commence resource estimation/scoping study works.
What are the risks
PFE is a micro cap, early stage explorer and a risky investment.
The drilling programme could be unsuccessful & assays grades could be returned below the market’s expectations.
Remember that exploration investing is high-risk in nature and you should only invest what you are comfortable to lose.
With small cap explorers there is no revenue to fall back on, and companies need to continually raise capital to try and deliver value - the rewards can be large, but the risk is high as well.
PFE’s side bets (while we wait for next drill campaign)
As we mentioned in our original note on PFE, there are two side project PFE is progressing that will keep things interesting while we wait for Yampi assay results and the second drill campaign next in 2022.
An interesting highlight from today’s PFE announcement was that management flagged PFE has a pending tenement near Yampi ~5km north of Dreadnought Resources’ Orion, Fuso & Grant’s Finds Copper/Gold/Silver prospects. Dreadnought is capped at over $100M...
Dreadnought Resources recently completed a 32-hole RC drilling program and is expecting assays throughout November/December. If significant, results from Dreadnought Resources could also get the market interested in PFE’s tenements immediately to the north.
The granting of the exploration license at the Weelarrana Manganese Project now means that PFE management can commence internal reviews over existing results & start the permitting process for exploration works in early 2022.
Management have also flagged that the existing sampling data available to PFE are being re-analysed at the Fredericks polymetals asset where the next step is to commence Geophysical surveying & getting back on-site for more sampling work before drilling targets are identified.
As mentioned above the already pegged tenement 5km to the north of Dreadnought’s Orion prospect could also come into play for PFE. We will be watching Dreadnought’s drilling results to see if this impacts our investment thesis for PFE.
Yampi Project Milestones (Main Bet - Iron Ore)
✅ Heli-Drill Rig Commissioned
✅ Permit Secured
✅ Drill Program 1 Complete (3 of 5 Holes Drilled)
🔄 Assay Results [December 2021]
🔲 New Exploration Targets Announced
🔲 Drill Program 2 Commenced [Feb-Mar 2022]
🔲 New Milestones Identified and Added
Drilling Program 1
✅ Heli-Drill Rig Mobilised to Site
🔄 Assay Results 1
🔄 Assay Results 2
Weelaranna (Side Bet #2 - Manganese)
✅ Tenement Grant
🔄 Summary of known results, Including Geophysical Model
🔲 Exploration Programme Announced
🔲 New Milestones Added
PFE Investment Milestones
✅ Initial Investment: @20c - Majority escrowed for 2 years
✅ Initial Investment: @20c - Non escrowed
🔲 Increase Investment
🔲 Increase Investment
🔲 Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
🔲 Price increases 2000% from initial entry
🔲 12 Month Capital Gain Discount
🔲 Free Carry - Non escrowed
🔲 Take Some Profit - Non escrowed
🔲 Hold remaining Position for next 2+ years - Escrowed portion
Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities (including staff), own 2,467,000 PFE shares.