PNN: Second hole delivers 53m at 10% TREO and 1.7% MREO from surface. Rare earths stocks in USA popped on Friday

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 7,338,223 PNN Shares and 4,399,786 PNN Options at the time of publishing this article. The Company has been engaged by PNN to share our commentary on the progress of our Investment in PNN 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.

This was how the big rare earth names in the US closed on Friday:

As always, noting that the past performance is not an indicator of future performance...

The ASX hasn’t had a chance to react to Friday’s US rare earths moves yet.

So we think today should be good for all rare earth names across the ASX.

And even better for those with big news today.

Like our Investment Power Minerals (ASX:PNN) - which just put out another monster hit from its rare earths project in Brazil.

PNN is currently on its first drill campaign on this asset, following up decades old drilling data to establish a maiden JORC resource estimate for its project.

Two holes in, and so far, so good.

Three weeks ago we said PNN’s last hole was “One of the strongest single intercepts we have seen from a rare earths project on the ASX before”.

Today’s one was even better...

137m at 4.31% TREO - from surface.

(source: PNN announcement)

Including a 26.9m interval with MREO at 2.4%.

(source)

For context:

• ~$16BN ASX listed Lynas Rare Earths’ defined resource estimate averages ~4.1%. (source)
• ~$15BN NYSE listed MP Materials’ defined resource estimate average ~5.9%. (source)

Whilst its very early days for PNN here, given these are only two holes, the grades across these holes sit above Lynas’ 4.1% and in some intervals even above MP Materials’ project.

For some more context:

PNN’s two neighbours, the $610M Meteoric and $566M Viridis’ projects have average TREO grades of 0.23% and 0.25% respectively. (source)(source)

Again, PNN is at the early stages of defining the extent of mineralisation on its asset.

Viridis and Meteoric have defined resources and are a lot more advanced - which may be why the valuation gap exists between the companies right now.

PNN currently has a market cap of $74M.

Below is where PNN sits relative to $610M Meteoric and $566M Viridis:

(source)

As we noted above, PNN has barely drilled out the asset - today’s hole was only PNN’s second hole into the project.

The last time the project was previously drilled was decades ago.

PNN is currently testing in and around that old drilling, to confirm the decades old data, and put together a resource for the project.

(source)

The first hole was a belter, the second hole (today’s result) was about 25m away and even better, validating the project's historic data.

(The old timers really did drill and record the data correctly - a good sign for PNN.)

Now we want to see PNN put together that first resource estimate and really start testing out the limits of its project.

How big and high grade could this asset be?

Remember, PNN’s project also has a geological analogy to MP’s asset, so it’s possible it could get bigger (and higher grade) with more drilling.

PNN's acquisition announcement said the mineralisation is "comparable to the producing Mountain Pass Mine (USA)" because it is hosted in bastnäsite, the same rare earths mineral that MP Materials has processed for decades.

All PNN really has to do is define a 20-30-40Mt deposit at some ridiculous 4-5%+ grade and its asset enters the conversation amongst Lynas and MP’s assets.

Especially when PNN is hitting ~53m, 1.69% MREO hits.

MREO = Magnet Rare Earth Oxides = which make up ~80% of the value in rare earths markets.

Most rare earth assets measure TREO (Total Rare Earth Oxides) in percentages... not MREO.

Another big surprise today - there was a 26.9m zone at 13.0% TREO and 2.40% MREO with elevated HEAVY rare earths - dysprosium, terbium, gadolinium, erbium and holmium.

Heavy rare earths are the hardest ones to find outside China - China controls ~98-99% of refined supply of the important ones, more on that below.

Heavy rare earths are the valuable ones that go into humanoid robots, drones, jet fighters, missile guidance systems, AI data storage and quantum computing.

A week ago we saw this:

(source)

So those niche smaller rare earths like gadolinium, erbium and holmium might actually be super valuable at some point too.

Here are PNN’s assay results from today with those niche rare earths:

(source: PNN announcement)

Point made - today’s drill hit is strong...

IF the drill hit alone isn’t enough to catch the market’s attention...

Last week we saw this - rare earths in US mainstream media:

(source)

And this - rare earths being used as political campaign tools in Brazil:

(source)

We think the drill results would have put PNN’s asset on the map with the market (and maybe corporates/governments).

A maiden JORC resource could really get the blood pumping for anyone watching.

PNN still has another hole in the lab for assays and two rigs drilling right now ahead of a maiden JORC resource estimate targeted by the end of the year.

So there should be a fair amount of newsflow between now and then...

That maiden JORC is coming at the right time...

The big rare earth elephant in the room is still there...

On the 10th of November 2026 China’s rare earth export bans come into play.

(unless a deal is struck between China and the US)

Remember last year when the USA agreed to a 12 month tariff truce with China because they threatened to withhold rare earths supply? That “pause” ends in 2.5 months.

China still controls ~90% of the world's rare earth magnet supply chain. (source)

For the heaviest, most valuable rare earths like dysprosium and terbium, China controls ~98-99% of refined supply. (source)

China announced these export restrictions in April 2025 (in response to Trump’s tariff threats):

(source)

Those bans were put on PAUSE as part of the US-China trade truce in November 2025.

(source)

And that pause ends on the 10th of November this year.

(source)

Right now dysprosium and terbium (two of PNN's four magnet metals) still need case-by-case export licences out of China.

And a few months ago, China banned exports of “dual-use items” to US defence contractors including two US rare earths companies:

(source)

Rare earths are considered “dual-use” items:

(source - we google’d dual-use item China ban)

Brazil to solve the western rare earths supply chain problem?

Brazil is home to the world's second biggest rare earth reserves (behind only China). (source)

We mentioned that Washington Post article from earlier:

(source)

Here is another article specifically highlighting the region that PNN’s project sits in is a rare earth hotspot inside Brazil, calling it the "new front" for rare earths:

(source)

There is also corporate precedent for interest in Brazilian assets:

• The US$2.8BN USA Rare Earth's takeover of Serra Verde - the only large-scale producer outside Asia producing rare earths from ionic clays. The deal comes with a 15-year US government supply agreement including a price floor. (source)
  
• A US$250M letter of interest from the Export-Import Bank of the United States (EXIM) to PNN's next door neighbour Meteoric Resources for its Caldeira project. (source)

$16BN Lynas Rare Earths former CEO has publicly said they are looking at Brazil for rare earths assets - here is what she had said at the time:

"Yes there are deposits there, yes there are deposits in Brazil. Yes we are looking at them." (source)

(source)

Even the EU is looking to do a Brazil minerals deal:

(source)

So there is definitely a group of important global capital allocators that are open to cutting cheques for Brazilian assets.

PNN is starting to remind us of St George Mining (ASX:SGQ)

We first Invested in PNN following the corporate advisor who got us into SGQ that was up almost 7x from our Initial Entry Point at one stage (thanks Flynn).

Here is what we said when we first Invested in PNN:

(source)

Now that SGQ has become the $439M capped beast that it is today and is trading millions of dollars in volume a day, we are hoping that some of the winners from SGQ go out looking for “SGQ 2.0”.

Which we hope leads them to PNN.

Of course the past performance of SGQ is not an indicator of the future performance of PNN.

A big reason why we think PNN could become SGQ 2.0 for us is because of the way PNN has structured its deal.

PNN’s acquisition will end up costing a total of ~$25.4M (a mix of cash, milestone payments and shares, and there is ~$19.4M remaining).

Which sounds like a big chunk of cash when you consider PNN’s current market cap is ~$74M (fully diluted).

But that was very similar to how SGQ structured its deal.

When SGQ initially acquired its asset, the market was somewhat taken aback by the price it was paying for the asset.

There was even a period of suspension where the company had to iron out the initial funding to pay for the asset.

14 months later, SGQ rallied from ~2.5c to a high of 18c and the company pulled off a $72.5M mega raise, cornerstoned by one of Australia’s richest people, mining magnate Gina Rinehart's private investment vehicle Hancock Prospecting.

Gina followed her money in again with $20M of a $60M capital raise SGQ closed in June. (source)

Gina is a substantial shareholder now in MP Materials, Lynas Rare Earths and our Investment St George Mining.

SGQ was one of our best performers in 2025 - sitting at a peak share price rise of 620% for us at one point:

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

We continue to be big holders of SGQ.

There was a lesson we took away from that SGQ deal - sometimes the more expensive acquisitions are expensive for a reason.

Especially when the project being acquired justifies the acquisition price...

Like SGQ’s project, PNN’s is also relatively advanced - an existing discovery sitting on a "Manifesto de Mina" - a legacy title from the 1930s that functions as a full, granted mining licence - with no expiry date. (source)

From a regulatory standpoint, the main thing PNN needs to take its project into production will be environmental approvals.

PNN also owns the freehold farmland above the deposit - so there are no third party landholders to negotiate with either.

IF PNN can define an economic resource, this is the kind of project that can move to a development decision a lot faster (relatively) than most rare earths projects globally.

Anyway - the point is, paying up for an asset makes sense if you are getting a lot back in return.

Another example is PNN’s neighbour - Meteoric Resources which paid $20M cash in total for their asset:

(source)

Only 12 months after acquiring the asset Meteoric’s share price was up 1,837%.

Now, 3 years later the company has defined a large ionic clay rare earth system and trades at a market cap of $610M.

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

The other one in the same region as PNN is Viridis Mining & Minerals which IPO’d at 20c and ran all the way as high as $4.03 per share (up 1,915% at its peak).

Today Viridis is capped at $566M.

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Here is where $74M PNN sits relative to $610M Meteoric and $566M Viridis:

(source)

The difference between those two regional peers is that PNN’s asset (for now) has a different mineralisation style. (source)

Viridis and Meteoric’s projects are both considered “ionic clay” deposits.

So the hard rock mineralisation is the primary target for PNN and we essentially get the ionic clay upside for free.

PNN has explicitly said it would “prioritise the examination of this potential” at some point.

(source)

Very early days for PNN on the ionic clay potential.

But we like that the project has this exploration optionality - especially for discovering two types of deposits the ASX understands well and knows how to value:

• Hard rock mineralisation similar to $15BN MP Materials and $16BN Lynas, and
• Ionic clay mineralisation similar to ~$566M Viridis and ~$610M Meteoric.

Ultimately, with PNN’s market cap where it is today at ~$74M, we think a resource (hard rock or ionic clays) could be enough to re-rate it from here.

No guarantees of course, this is small cap investing, things can and do go wrong.

Our PNN Big Bet:

"PNN proves up a major high-grade rare earths resource in Brazil and re-rates 1,000% from our Initial Entry Price - via development, strategic investment or acquisition"

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 PNN Investment Memo.

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

What's next for PNN?

🔄 Maiden drill program at Morro do Ferro (MDF)

Here are the milestones we are tracking:

• ✅ First hole assays (116m at 4.78% TREO)
• ✅ Second hole assays (TODAY - 137m at 4.31% TREO, incl. 53m at 9.87%)
• 🔄 Hole 3 assays (at the lab now - lab has flagged delays)
• ✅ Second rig starts (full operations + two extra shifts since 4-Aug)
• 🔄 More drilling (two rigs, program runs through December)
• 🔲 Metallurgical test work drilling
• 🔲 Gallium follow up results (new best hit today: 2m at 87.7ppm Ga from 83m)

🔲 Maiden JORC resource estimate at Morro do Ferro (MDF)

Expected before the end of the year - this is the big one for us.

🔲 Ionic clay potential tested at Morro do Ferro (MDF)

The "free shot" at the style of deposit that made PNN's neighbours worth a combined ~$1BN.

What could go wrong?

One of the biggest risks right now is “exploration risk”.

Today's result is a strong start but it's only two holes into PNN’s drill program.

There is always a risk that the remaining holes in PNN’s drill program come in below market expectations.

Exploration risk

All of Morro do Ferro's headline grades were drilled by previous owners, mostly in shallow holes. The project has no JORC resource yet. IF PNN's drilling fails to confirm the historic grades, or the deposit doesn't extend, the investment thesis takes a direct hit and we would expect the share price to re-rate lower.

Source: “What could go wrong” - PNN Investment Memo 15 June 2026

Other Risks

Like any early-stage exploration company, PNN carries significant risk, here we aim to identify a few more risks.

PNN still owes ~$19.4M in remaining acquisition and milestone payments against a ~$74M market cap. The company will likely need to raise capital to fund these commitments and ongoing drilling, which could result in shareholder dilution.

While early drill grades are exceptionally high, hard-rock rare earth deposits often face complex metallurgical processing challenges. If upcoming test work shows low recovery rates or high processing costs, the economic viability of the project could be impacted.

The broader investment thesis relies heavily on geopolitical tensions and global rare earth prices. Any shifts in market sentiment, changes to Chinese export policies, or drops in rare earth prices could negatively affect PNN’s valuation.

Although the project sits on a granted legacy mining license, PNN still requires environmental approvals to progress toward development. Unforeseen delays or strict regulatory conditions in Brazil could stall project timelines and increase overall costs.

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

Our PNN Investment Memo

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

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

Our PNN Investment Memo covers:

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