Aldoro Resources Limited


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Investment Memo: Aldoro Resources (ASX:ARN) - LIVE

Opened: 07-Mar-2022

Shares Held at Open: 845,000

What does ARN do?

Aldoro Resources (ASX:ARN) is a junior exploration company aiming to discover rubidium, lithium and nickel across a portfolio of projects in Western Australia.

What is the macro theme?

Rubidium is currently used industrially in fibre optic cables. It also provides exposure as an up and coming battery metal with its use in sodium-ion batteries. Sodium-ion batteries have lower energy density than lithium-ion batteries, are faster to charge and more resilient to cold temperatures.

Nickel & lithium are critical raw-material in the production process of electric vehicle (EV) batteries. Nickel makes batteries energy dense, so that cars can run further on a single charge. lithium is the primary raw-material used in EV batteries. Nickel can also be found in everything from mobile phones to jet engines.

Why did we invest in ARN?

Rare exposure to rubidium on the ASX

Rubidium is used in a few high tech applications, and can be used in sodium-ion batteries. Rubidium is more expensive than gold because of how difficult it is to find, we believe it could evolve into a strategically important metal. ARN offers a rare exposure to this commodity on the ASX.

Dr Minlu Fu backing the company

Fu made a strategic investment into ARN via a $2m placement @20c. Dr Fu has been heavily involved in a number of nickel, copper and gold discoveries and was also a strategic investor in another one of our portfolio companies Los Cerros at 3.5c.

Leveraged to a new discovery

ARN’s Nickel-copper-PGE Project in the Murchison Region, sits on grounds synonymous with a specific type of nickel-copper resource that can also include platinum group elements (PGE). Other discoveries made in similar geological settings sold for multiple $B within 1-2 years of discovery. Voisey’s Bay sold for C$4.5BN just two and a half years after it made its discovery. Nova Bollinger sold for A$1.8BN, three years after its major discovery. Chalice’s Julimar discovery saw it reach A$3BN+ valuation.

What do we expect ARN to deliver in 2022?

Objective #1: Drilling across the company’s rubidium/lithium projects

With an RC drilling program ongoing at the Niobe project, we want to see ARN go on and drill its other rubidium/lithium project (Wyemandoo) ~40km nearby.

Objective #2: Maiden JORC resource estimate at the rubidium/lithium project

We want to see ARN convert its current exploration target for its rubidium/lithium project (33,000-150,000 tonnes of rubidium oxide grades ranging from 0.07% to 0.15%) into a maiden JORC resource estimate.

Objective #3: Drilling at the company’s nickel project

EM surveys and more rock chip sampling as part of target generation works leading up to the next round of drilling at the company’s nickel project.

What could go wrong?

Exploration Risk

All of ARN’s projects are still only prospects. With no confirmed resource or mineralised system there is a risk that after drilling nothing is found.

Financing Risk

ARN as a junior explorer is heavily reliant on freshly raised capital to finance high-risk drilling programs. ARN is currently in the middle of multiple drilling programs. With this much exploration activity ARN is likely to need to raise capital to finance further exploration later in 2022. Market conditions are also important for ARN, a deterioration in conditions could mean accessing capital becomes a problem for ARN.

Commodity Risk

Rubidium trades in an illiquid spot-market meaning it can be hard to model out a development project. There is also a risk that commodity prices fall and high-risk explorers like ARN fall out of favour.

What is our investment plan?

We have been holding ARN for almost a year now, the share price has performed well since entry so we have free carried, and now intend to hold our position into the 2022 drilling campaigns.

We may look to further de-risk our current position by 20% if the share price re-rates on a lithium or rubidium discovery, and then update our investment memo depending on drilling results and (hopefully) a JORC resource.

Disclosure: The authors of this memo and owners of Catalyst Hunter, S3 Consortium Pty Ltd, and associated entities, own 845,000 ARN shares and 220,000 ARN Options. S3 Consortium Pty Ltd has been engaged by ARN to share our commentary on the progress of our investment in ARN over time.

Investor Presentation

Purple specs of lithium intersected at lithium/rubidium project

ASX:ARN Jun 23, 2022 Announcement

Investment Memo: ARN 2022

Key Objective #1: Drilling across the company’s rubidium/lithium projects

This morning our exploration investment Aldoro Resources (ASX: ARN) put out a drilling update for the RC drilling program being run at its lithium/rubidium project in WA (Wyemandoo).

As of today, ARN had completed a total of 26 RC holes for a total of 3,286m down to depths of ~202m. From these drillholes the majority of holes have intersected pegmatites.

Importantly today, ARN confirmed that it has intersected lithium and rubidium with purple lepidolite in the RC rock chips. The images look encouraging but the ultimate determinant of success will be the assay results which will determine just how much lithium ARN has found.

We also note that the intersection is largely lepidolite and not spodumene bearing pegmatites, this will mean the metallurgical testwork results will be important to see. ARN has confirmed that analytical & mineralogical works are ongoing and that results will be released shortly so it will be interesting to see what comes of this.

Off the back of these results, ARN also confirmed that it is currently going through the planning process to increase it’s drilling program from ~4,000m to 6,000m of total drilling.

More rubidium/lithium drilling to commence in WA.

ASX:ARN May 04, 2022 Announcement

This morning our exploration investment Aldoro Resources (ASX: ARN) confirmed that a rig contract had been signed for a 40-hole, 3,500m drilling program at its rubidium/lithium project in WA (Wyemandoo), with drilling expected to start within the next 5 days.

The drilling program which will be done with an RC drilling rig looks to have been designed around the targets generated from previous sampling programs and will test the previously identified pegmatite outcroppings the company finds scattered over the project area.

The ultimate aim will be to test the thickness, depth and orientation of the outcropping pegmatites and to see whether or not they contain economic levels of rubidium/lithium.

This drilling program comes after the company recently completed a 65 hole RC drilling program at another one of its rubidium/lithium projects in WA (Niobe).

Here the company had already established an exploration target of between 33,000-150,000 tonnes of rubidium oxide with grades ranging between 0.07 and 0.15%.

We are now waiting on the assays from the drilling program here before we get a better understanding of whether or not the drilling program can convert that exploration target into a maiden JORC resource estimate.

Both of these speak to key objectives #1 and #2 of our 2022 ARN Investment Memo which can be viewed by clicking on the image below.

In our Memo we detail the key reasons we continue to hold ARN in our portfolio, what we want to see the company achieve in 2022 and the key risks to our Investment thesis.

More assays from WA nickel project

ASX:ARN Mar 18, 2022

Today, ARN announced that it had received assays from two diamond drill holes at the VC1 target that we wrote about in our last note. Peak results from the two assays were as follows:

  • 0.55m @0.87% Nickel, 0.14% Copper and 0.06% Cobalt from 109.45m.
  • 1.5m @0.76% Nickel, 0.29% Copper and 0.06% Cobalt from 150.05m.

Overall, we don’t think these are spectacular results. But it is still a sign that there is nickel in and around the targets that ARN was focussing on with its last round of drilling.

ARN will be following up these drill results with EM surveys which will form the basis for the next round of drilling.

But we are more focussed on the assay results from ARN's recently completed rubidium/lithium drilling program — a precursor for what ARN hopes could be a maiden JORC resource.

We set these drilling results and a potential maiden JORC resource from its rubidium/lithium project as two of the three objectives we want to see from ARN in 2022. To see all of the objectives and why we continue to hold ARN in 2022, see our 2022 Investment Memo.

Drilling completed at WA rubidium/lithium project

ASX:ARN Mar 17, 2022

Earlier in the week, ARN announced that its 65 hole RC drilling program had been completed at its Niobe rubidium/lithium project.

With the majority of the drill holes making pegmatite intercepts, all eyes will be on the assays which ARN will be looking to convert into a maiden JORC resource. In our last note on ARN’s drilling program we set the following expectations for the assays:

  • Excellent: Average rubidium grades at or above the 0.15% upper range ARN set for its exploration target, with the project also proving out a lithium resource at the same time.
  • Good: Average rubidium grades above 0.07% and some indication of lithium mineralisation.
  • Poor: Average grades <0.07% rubidium and no lithium mineralisation in the assays.

We set this based on the exploration target that ARN had set based on analysis of historic drilling results: 33,000-150,000 tonnes of rubidium oxide grades ranging from 0.07% to 0.15%. ‘

The drilling program and the announcement of a maiden JORC resource are two of the three primary objectives we set for ARN to achieve in 2022. To see these and why we continue to hold ARN in 2022 view the memo here.

Assays received from Nickel project

ASX:ARN Mar 04, 2022

ARN ended the week with some of the final assays from the drilling program completed at its last Nickel project at the back end of 2021.

Peak results from the program were as follows:

  • 7.86m at 0.53% Nickel from 269.5m
  • 4.26m at 1.22% Nickel from 277.14m

The positives from the drilling program is that ARN has managed to intersect massive sulphides and confirmed there is nickel in them. However, the market didn't seem to react to the results, we think because of the nickel grades.

With nickel now trading at US$28,000 per tonne we think that the market may at some stage start to take an interest in these types of results.

Our focus for ARN in our 2022 Investment Memo (coming soon) is around the rubidium/lithium project where ARN is currently in the middle of a drilling program. Be on the lookout for our memo launch in the coming weeks.

Wyemandoo pegmatite rock chip samples

ASX:ARN Feb 28, 2022

ARN announced today assay results from its last round of rock chip sampling at the Wyemandoo lithium/rubidium project.

Out of a total of 188 assays received by the company, ARN reported a peak result of 1.24% rubidium and in a separate assay a peak grade of 1.05% lithium.

This forms the basis for the geochemical sampling program ARN are using to define drill targets, which it will be following up as soon as the drill rigs are done at the companies Niobe project.

At the moment we are waiting on the assays from all of the pegmatite intercepts ARN has made whilst drilling Niobe.