SGQ: 155% increase, higher grade. Now for the share price to catch up to its bigger peers...

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 8,180,386 SGQ Shares and 12,500,000 SGQ Options at the time of publishing this article. The Company has been engaged by SGQ to share our commentary on the progress of our Investment in SGQ 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.

Brazil is shaping up to be a key player in the USA vs China race to secure valuable rare earths.

Today our development stage Brazilian rare earths Investment St George Mining (ASX:SGQ) just released a big new resource upgrade, confirming its a global Tier 1 asset.

Rare earths assets comparable to SGQ’s are owned by companies ~30-40x bigger than SGQ...

We are Invested in SGQ to see it close that valuation gap as it progresses toward production over the coming years.

A NASDAQ listed company recently paid US$2.8BN to get its hands on a Brazilian rare earths asset (with assistance from ~US$565M in US government funding).

So there is capital attention on Brazil. SGQ’s latest rare earths (and niobium) resource upgrade comes at a pretty good time...

After today’s big resource upgrade, SGQ now owns 100% of:

1. The highest grade, undeveloped, rare earths asset in the Western world.
2. The single biggest measured and indicated NdPr resource in the world.
3. The largest carbonatite-hosted rare earths deposit in South America.
4. The highest-grade carbonatite-hosted rare earths deposit in South America.

Those two rare earth types we mention above, Nd + Pr, are two rare earths that go into making magnets used in missile guidance systems, fighter jets and unmanned drones.

Making them command a premium in global markets.

The $391M capped SGQ now has more Nd + Pr than the two western rare earth heavyweights - $17BN Lynas and $14BN MP Materials.

(source - presentation)

As of today, SGQ is capped at ~$391M, and held ~$98M cash (as at June 30th plus July T2 placement funds, source)

Meaning SGQ’s enterprise value is ~$293M.

Despite having an asset that in some aspects (in particular that image above) beats out MP and Lynas.

MP has a market cap ~40x SGQ and Lynas ~43x SGQ:

1. ~A$16BN MP Materials - USA’s only rare earth mine. MP received US$400M from the Department of War and signed a US$500M deal with Apple last year.
2. ~A$17BN Lynas Rare Earths operating its mine in WA and a refinery in Malaysia.

SGQ’s asset is the biggest in terms of tonnage (size) out of MP and Lynas.

Here are the resources and market caps for the three companies side by side:

AND today’s resource doesn’t even include its new “East Araxá discovery” ~1km to the east of where SGQ’s current JORC resource estimate sits.

SGQ is currently drilling out that discovery with five diamond rigs and has a resource incoming for it next quarter.

(So it’s looking like SGQ’s resource WILL only get even bigger)

(source)(source)

We are Invested in SGQ to see it define a BIG resource, that is high enough grade to sit in its own league amongst the undeveloped rare earths assets globally.

With this work, and progressing its development, we expect SGQ’s valuation to increase closer toward its multi-billion dollar advanced peers.

(no guarantees of course)

Unless it gets taken out sooner by some large player looking to secure more rare earths...

Here is what former Lynas CEO Amanda Lacaze said when asked about Brazilian deposits:

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

We also recently saw a US$2.8BN deal that US listed USA Rare Earths closed on in Brazil.

(source)(source)

Australia’s richest person Gina Rhinehart’s Hancock Prospecting owns ~ 10.5% of SGQ

Whatever happens, with SGQ over the coming months and years Australia’s richest person - Gina Rinehart - will play a role.

Gina is in fact a major common shareholder in MP Materials, Lynas Rare Earths AND SGQ.

Gina’s Hancock Prospecting cornerstoned $22.5M of SGQ’s $72.5M placement last year at 10c. (source)

She then added to her position in SGQ’s most recent raise at 6c, taking up $20M of the $60M raise.

Gina’s Hancock now owns ~10.5% of SGQ.

(source)

We said in our SGQ note on the prior resource upgrade:

(source)

Surely Gina and her team will be sharing around SGQ’s announcement from today with the MP/Lynas guys and girls.

SGQ has also got niobium to go with its rare earths resource

On a rare earths basis, the assets comparable to SGQ’s are owned by companies ~30-40x bigger than SGQ.

The biggest difference between Lynas’, MP’s and SGQ’s project is... SGQ also has a big niobium resource to go with its rare earths deposit.

Niobium is also used in defence, aerospace and semiconductors.

(source)

Just for some context on how big we think the niobium is for SGQ’s project - one tonne of TREO is worth ~US$20,000. One tonne of niobium sells for ~US$50,000. (source) (source)

On the niobium side SGQ’s resource is now actually "the largest undeveloped niobium Measured Resource in the world” with a total mineral resource of 143.8Mt @ 0.53% niobium. (source)

SGQ’s project also happens to sit right next door to the world’s biggest niobium mine, owned by CBMM - supplying 80% of the world’s niobium.

(source)

SGQ’s niobium resource just so happens to be in the Silicon Valley for niobium - where there are people who know how to develop and operate a niobium mine.

Interestingly, SGQ has also managed to bring a few ex-CBMM folk onto its team:

(source - presentation)

So SGQ’s asset isn’t just a giant globally significant rare earths project - but also the same thing for niobium...

Why we think SGQ is in the right place at the right time

Coming back to the rare earths...

We mentioned earlier Aus producer Lynas was looking at Brazil for rare earths assets. (source)

We also think SGQ is indirectly an exposure to the broader US critical minerals macro thematic.

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

And the US has gone public several times about wanting to do a deal with Brazil on critical minerals - this was from back in January:

(source)

Since then the US went and signed a minerals MOU directly with the Brazilian state of Goiás in March. (source)

And in July, rare earths were explicitly exempted from Trump's 25% tariffs on Brazil.

We have also seen the US become comfortable pouring cash into assets inside Brazil including:

• 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 also came 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 ASX listed Meteoric Resources. (source)
  

Remember we wrote about the conceptual “Donroe Doctrine”.

US President Donald Trump’s version of the Monroe Doctrine (a piece of U.S. foreign policy from 1823 which viewed any aggression politically near US borders as hostile)

Basically, in the USA’s view at the time, South America, Canada (and Greenland...) were off limits to other countries' influence or “meddling”...

Now it feels like the US is reasserting itself as the dominant partner for countries inside its “hemisphere of influence”...

Including in South America:

Why the US government's willingness to fund projects in Brazil matters?

BECAUSE a few weeks ago, US president Trump signed an executive order which will mean:

1. US defence contractors NEED non-Chinese rare earths by 2027, or they risk losing their lucrative contracts, and
   
2. Foreign projects with US government funding attached are effectively pre-approved supply.

(Read the full Executive Order here)

That all starts on the 1st of Jan 2027.

So between now and then, the chances of the US government putting funding commitments behind a Brazilian critical minerals asset and then a defence contractor coming in as the private portion of capital to get the project built is a lot higher...

Especially now with the US Department Of War saying securing critical minerals like rare earth elements is “fundamental to national security and the economy”:

(source)

Brazil is also becoming a destination of interest for the Europeans

Added to the US interest - the EU is also looking at doing minerals deals in Brazil:

(source)

Inside the last two months we have seen:

• The EU-Mercosur interim trade agreement went live on 1 May 2026 (removing export taxes and export restrictions on raw materials between Brazil and the EU) (source).
  
• In June, French chemicals giant Solvay signed a letter of intent to take Brazilian rare earths into its plant in France (source).

One reason we think SGQ is positioning itself well to capture all this attention/capital is because it also meets one of the conditions the Brazilian government has set - for the processing of these minerals to happen inside Brazil.

Here is what Brazil’s industry minister said in April:

"The commitment we will demand from everyone is domestic technological development and job creation" (source).

SGQ is already doing this with a pilot plant agreement in place with CEFET, the Araxá technology centre, and as part of the MagBras magnet initiative alongside Stellantis, WEG and CBMM.

(source)(source)(source)(source)

(ALL of those initiatives are happening inside Brazil...)

Our view is that IF the US OR EU government/corporates decide to go out and look for a single project that can secure a MATERIAL amount of raw rare earths material...

...SGQ’s project could be right up there as one of the most obvious choices.

Of course, it's worth noting that SGQ is doing all of the right things BUT as always there is no guarantee any of this translates into funding for SGQ specifically.

Why rare earths, why now?

We think a big reason that rare earths are now front and centre of political/public debate is because the stakes are very high when it comes to securing supply.

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

And without rare earths, nation states can't build AI military infrastructure like robot armies.

(which gives everyone reasons to spend trillions, not billions?)

~12 months ago, the USA came to the realisation that the supply of critical minerals (especially rare earths) required to build things such as these is almost entirely controlled by China.

This realisation also came with the frightening reality that China could at any time withhold supply (exactly like it started doing last year).

There is also a hard deadline to all of this...

On the 10th of November 2026 China's temporary suspension of its export controls on rare earths expires. (source)

IF that suspension lapses... full restrictions come back into force for the minerals below:

(source - download the full report here)

IF full export controls come into place on rare earths it puts at risk ~US$6.5 TRILLION of downstream production.

(check out Page 249 of the International Energy Agency report for that info)

That’s US$6.5 Trillion of downstream production on a mineral that only impacts ~0.1% of the value of the end product even if raw material prices tripled...

(source)

We expect price-floors, government offtakes above spot prices and more US funding deals to be announced between now, that November suspension deadline and the 1st Jan deadline set by the Trump Executive Orders.

Especially when the trade off being considered is a toss-up between - 10x rare earths prices and the government needs to pay 0.3% more for its F-35 fighter jets...

OR no rare earths meaning no F-35 fighter jets...

(Each F-35 carries ~418kg of rare earths) (source)

Or no rare earths meaning no AI robotics...

(Each humanoid robot needs ~3.5-4kg of rare earth magnets) (source)

We think that SGQ finds itself in that fortunate position (that not many listed companies get) where:

• The macro thematic is hot - due to geopolitical tensions and supply chain dependency, there is an urgency to create a domesticated supply chain, especially away from China
  
• The company has cash - ~$98M (including raise T2 post quarter) at 30 June 2026, so there is no immediate need to raise (source)
  
• The rigs are turning - 5 diamond drill rigs are ongoing 24/7 drilling extensional holes to upgrade the resource even further. (source)
• There is REAL strategic appeal of an asset like SGQ’s - because it offers supply security in a relatively stable Tier 1 jurisdiction at a time of increasing and inflamed geopolitics
• There is REAL corporate/government interest in Tier 1 rare earths assets like SGQ’s - we are seeing large government investment in processing infrastructure and these companies are seeking supply.
• And the US critical minerals macro theme is hot - in the last 30 days two Executive Orders (one forcing US military suppliers to source domestically, one restricting exports of recycled critical minerals), plus a White House mining roundtable that announced over US$2BN in fresh deals.

We first Invested in SGQ back in August 2024, since then a lot has changed for SGQ - here are some links to the key takeaways we have had over the last 10 months:

• SGQ also has niobium - another mineral on global critical minerals lists
• Could SGQ’s JORC resource command a “location premium”?
• SGQ receives state government support for Brazilian rare earths project
• SGQ appoints US advisor for rare earths project
• SGQ Advances Toward Rare Earth Magnets with MagBras
• SGQ signs strategic rare earths alliance with US defence industry magnet maker
• SGQ acquires land for processing infrastructure at its rare earths/niobium project
• Western rare earth majors are flush with cash - is the next natural move to do some M&A?

What’s next for SGQ?

Drilling results

SGQ is currently drilling its project 24/7 with five diamond rigs - focused mostly on its discovery to the east of its current resource.

SGQ expects to have a maiden JORC resource out on that project in Q4-2026. (source)

(source)(source)

Beyond the drilling

Over the next 12 months, a lot of the catalysts for SGQ could come at hard-to-forecast times:

• Updates on downstream processing strategy - We want to see SGQ define its downstream rare earths strategy. We are especially looking forward to an update in relation to the US. SGQ recently extended its agreement with US magnet producer REalloys, who SGQ is aiming to supply feedstock to (source). SGQ has confirmed there are talks with more downstream partners and offtake partners, plus multiple strategic investors.
• Work on development studies - SGQ has already commenced environmental, geotechnical and development studies. SGQ has economic studies due on its deposit in Q3-Q4 2026. (source)
• Pilot plant trials - SGQ has signed an agreement with CEFET to jointly collaborate on a new Pilot Plant trial that will build on the prior 9 month trial from 2012-13 which successfully produced rare earth product at over 99% purity and recoveries of 86% TREO.

The pilot plant is expected to begin in H2 and should allow for product samples to be produced for potential strategics/offtake partners.

SGQ is also participating in the “MAGBRAS Initiative” - a program that has major automakers like Stellantis working toward building Brazil’s first permanent magnet-making facility.

• Permitting - SGQ is targeting completion for permitting to progress throughout 2026 with 2 mining concession applications and 1 exploration permit.

(source)

What are the risks?

The key risk for SGQ in the short-medium term is around “exploration risk”.

Exploration risk

A big part of our Investment is in seeing SGQ extend mineralisation at its project at depth and along strike. There is no guarantee that drilling will return anything of significant commercial value for SGQ (either through weak grades or thin intercepts).

Source: “What could go wrong?” - SGQ Investment Memo - 6 August 2024

Other Risks

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

Developing a complex deposit containing both rare earths and niobium presents technical challenges, and there is no guarantee that upcoming pilot plant trials will translate into commercially viable processing at scale.

SGQ's progress relies on securing key environmental approvals and converting exploration permits into active mining concessions in Brazil, which can face administrative or regulatory delays.

The broader investment case relies heavily on geopolitical tailwinds and favourable Western trade mandates, meaning any easing of trade tensions or shifts in US and EU foreign policy could dampen strategic interest.

Fluctuations in global commodity prices for rare earths and niobium could negatively impact the economics of the deposit regardless of resource size.

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

Our SGQ Investment Memo

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

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

Our SGQ Investment Memo covers:

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