Frontier Resources Ltd Limited


Investment Memo: Frontier Resources (ASX:FNT)

What we want to see from our investment in FNT during 2022.

Feb 10th 2022

This investment memo is a short, high level summary of why we continue to hold FNT and what we expect the company to deliver in 2022. The purpose is to record our current thinking as a benchmark to assess the company's performance against our expectations 12 months from now.

What does FNT do?

Frontier Resources (ASX:FNT) is exploring for rare earths in the Gascoyne region, WA located in close proximity to Hasting Technology Metals’ advanced Yangibana Rare Earths project.

What is the macro theme?

Rare earths are crucial for the clean energy transition. As China is by far the world’s largest producer of Rare Earths, there is a strong geopolitical element to the industry as major global powers look to secure domestic or friendly supply of strategic resources.

Specific to FNT, rare earths like Neodymium (Nd) and Praseodymium (Pr) are used in the permanent magnets found in EVs and wind turbines, where we expect demand to surge over the next decade.

Why did we invest in FNT?

  1. Rare earths are strategic resources and highly leveraged to energy transition - with demand for the specific Rare Earths that FNT is exploring for (Nd, Pr) set to quintuple by 2030 - governments and investors are quickly moving to secure or get exposure to Rare Earth resources. This is because Nd and Pr are essential for the manufacture of permanent magnets found in EVs and wind turbines.
  2. FNT’s tenements are adjacent to the “next major Rare Earths project in Australia” - Hastings’ Yangibana project is due to come into production in 2023 and it boasts the highest grade of its peers in the rare earth space. Additionally, we believe FNT’s geology setting could lead to another rare earths discovery in the region.
  3. Key catalysts in the pipeline - as this is a high risk, very early stage exploration company there are a large number of catalysts to look forward to. This includes EM surveys, drilling and assays.
  4. Optionality - depending on FNT’s progress, they could become an acquisition target, or should the exploration yield a sizeable deposit they could look to bring in a development/JV partner to de-risk or carve their own path. This is a long way off though, which we highlight in our risks section.

What do we expect FNT to deliver in 2022?

Objective #1: Complete EM surveys to generate targets

  • EM surveys are the first step FNT needs to take in order to get the exploration project in the Gascoyne region up and running. Prior to our investment, FNT signalled that these EM surveys were imminent and we want to see drilling targets generated from the EM surveys.

Objective #2: Delivering a drilling campaign on WA rare earths project

  • Initial drilling and the subsequent assays should give FNT a basic understanding of the grounds they are working with.

Objective #3 - Deliver enough successful Rare Earths drilling results to warrant further drilling campaigns

  • Early stage exploration is risky, and successfully striking enough rare earths to warrant more drilling programs to determine if there is a commercial quantity would be an excellent result in our opinion during 2022.
  • Getting positive drilling results is not in the companies control so this objective is partly reliant on exploration luck

What are the risks?

Exploration risk - despite FNT’s tenements existing in an established rare earths region - there is no guarantee that EM surveys deliver any attractive drill targets. Even if the targets they generate are worthy of further exploration, drilling could return limited or no mineralisation. If they do return significant mineralisation the potential deposits may not prove economic.

Commodity pricing - While the two rare earths that FNT are seeking are trading at elevated prices with significant further demand projected, a number of market factors could impact the underlying commodity prices. This includes but is not limited to, an increase in Chinese production or a “flooded market” scenario, new resources coming online, cooling investor interest or a lack of government support for new projects.

Funding risk - Should all or any of the risks above present, FNT may fail to secure additional funding for its operations. Alternatively, market sentiment towards highly speculative explorers like FNT dries up - further impacting their ability to tap the market for funds.

Delay risk - Metals exploration is booming at the moment, meaning many companies want to be drilling. We understand there is currently a shortage of drill rigs, drill crews and delays at assay labs, which means the companies drilling timelines may blow out.

What is our investment plan?

FNT is a new portfolio addition, our position was taken at ~2.93¢.

As with all our new investments, we have a 90 day trading blackout. After 90 days we are allowed to sell a maximum of 20% of our total position, which we will do if the FNT share price has risen from a positive drilling campaign or pre-drill speculation.

This is our standard plan across all early stage exploration investments.

The rest of the investment will be held into the drilling results, and hopefully over several further delineation drill campaigns if the initial drill campaign delivers encouraging results.

Disclosure: The authors of this memo and owners of Catalyst Hunter, S3 Consortium Pty Ltd, and associated entities, own 12,823,582 FNT shares at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by FNT to share our commentary on the progress of our investment in FNT over time.

960.1ppm (~.1%) TREO from Historic Sampling + Pegmatites?

ASX:FNT May 05, 2022 Announcement

Our rare earths exploration investment, Frontier Resources (ASX:FNT), has found promising results from a historic soil sampling campaign at its second rare earths project in the Gascoyne region.

In yesterday’s announcement, FNT also flagged that they will be on the hunt for lithium at this project as well.

From the soil sampling campaign, the highest recorded presence of Total Rare Earth Oxide (TREO) was 960.1ppm.

While not related to our three Key Objectives from our 2022 FNT Investment Memo, we’re pleased with the results from this project - as it indicates to us that FNT is building up a portfolio of promising rare earths exploration projects.

Importantly, the results come from a soil sampling program - which was followed up by a rock chip program in key target areas.

We think that given the fact that rare earths were detected at such an early stage, this bodes well for the rock chip sample assays which are due later this month.

There’s another aspect to FNT’s work at Mt Clere as well - and that’s its prospectivity for lithium.

As per yesterday’s announcement:

Mt Clere is located along the northern margin of the Yarlarweelor Gneiss Belt, with major bodies of Proterozoic Durlacher Supersuite and Moorarie Supersuite granites also prospective for lithium bearing pegmatites. The review of publicly available data recorded fifty-one (51) pegmatites mapped across the Mt Clere Project area by the Geological Survey of Western Australia (GSWA). The surface extent and potential for these pegmatites to host lithium mineralisation will be a primary focus of initial work programs.

Below is a map of pegmatite occurrences on FNT’s project (circled in blue):

What’s next for FNT? While we are yet to get word on when drilling will commence at their primary rare earths project in the Gascoyne region, we’re looking forward to the assays from their rock chip sampling program at Mt Clare, which are due later this month.

Here is why we invested in FNT and what we expect them to achieve in 2022 - FNT Investment Memo.

Rare earths drilling scheduled for May, drill plan confirmed

ASX:FNT Apr 26, 2022 Announcement

Our Catalyst Hunter rare earths investment, Frontier Resources (ASX:FNT), gave us a closer look at the targets that the company will be drilling in May.

We previously covered the EM surveys that FNT ran where it generated 12 high priority drill targets and the results from a recent rock chip sampling program which returned peak rare earth grades >8% in and around these high priority drill targets.

To read the deep dives into both of these check out our previous Catalyst Hunter coverage below:

In today’s announcement, FNT detailed each proposed drillhole and the reasoning for its inclusion in the upcoming drilling program.

There are ~41 proposed drillholes across the Lyons prospects and ~22 across the Edmunds prospect.

Interestingly, FNT also confirmed that these priority drill targets were displaying more and more similarities to Hastings Technology Metals (capped at $558M) Yangibana rare earth deposit when compared using magnetic imagery.

FNT looks to have designed the drilling program to test all of the targets picked up via the EM surveys. FNT is following a similar strategy that Hastings used when it made the Yangibana discovery.

We detailed this similar approach in our previous article covering the EM targets here.

What’s next for FNT?

FNT have now confirmed that the programme of works for the RC drilling program has been approved and that heritage surveys were ongoing to allow for site works to commence.

In today’s announcement, FNT guided for drilling to commence at some point in May after the heritage survey approvals were granted.

Alongside this, FNT has also started some metallurgical test work to test whether or not the ironstones discovered on its project can be commercially processed. This is effectively FNT getting some of the work that would generally be done after drilling, earlier.

We have been looking forward to this upcoming drilling program ever since announcing our investment in FNT back in February, with the drilling program being key Objective #2 in our 2022 FNT Investment Memo.

To see all of the objectives we want to see FNT achieve in 2022, the reasons for our investment and the key risks to our Investment thesis, check out our 2022 Investment Memo here.

Exploration Licence Granted at Murraydium Rare Earth Project

ASX:FNT Apr 21, 2022 Announcement

Our rare earths exploration investment, Frontier Resources (ASX:FNT), announced this week that they were granted an exploration licence in South Australia.

While not one of our Key Objectives in our FNT Investment Memo, we think FNT’s exploration licence in South Australia could benefit the company down the track.

The licence is located near to the Koppamurra Project which is owned by $78M capped Australian Rare Earths.

That project has an Inferred Mineral Resource of 39.9 Mt @ 725 ppm Total Rare Earth Oxide (TREO).

Below is a map showing how FNT’s new rare earths project (brown) is located relative to Australian Rare Earths’ projects (green):

We think this licence is similar in approach to FNT’s WA rare earths project - snap up tenements near existing deposits of rare earths in an emerging rare earths district.

But instead of ironstone hosted rare earths, FNT will be looking for closer to surface ionic clay hosted rare earths.

FNT flagged that they will look to use auger, push tube and aircore drilling.

What’s next for FNT: The big one for us as investors, the 65 hole, 5,000m drilling program at their WA rare earths project. The program is scheduled to begin later this month/early May.

Trading halt pending assay results

ASX:FNT Mar 18, 2022

This morning we saw our rare earths exploration investment FNT enter a trading halt pending some assay results.

In our latest FNT note, we mentioned that after uncovering 12 “priority 1” EM targets, the FNT team was on site conducting some “ground-truthing”. This is basically having the team on-site collecting rock chip samples in and around the target areas, looking at outcroppings, and pinpointing exactly where they intend to drill.

This forms part of the target generation works, whereby a junior explorer pinpoints high priority EM targets, checks if there are interesting outcroppings/high grade rock chips in that area so as to rank them from highest to lowest priority ahead of drilling .

For FNT to enter a trading halt ahead of announcing assays from these rock chips, we suspect the team must have picked up some interesting results.

FNT’s rock chip sampling is another step towards the maiden drilling program expected in the upcoming quarter.

Next week could make for an interesting one for FNT, with the results due. We also note that the share price of next door neighbour Dreadnought Resources moved from ~2.5c to a high of ~6.2c off the back of its rock chip sampling results (adding ~$91M to Dreadnoughts market cap).

One reason that we invested in FNT was to see it drill its rare earths project next door to Hasting's rare earths project, which is due to come into production in 2023.

To see all of the reasons why we invested and what we want to see FNT achieve in 2022, click here to see our 2022 Investment Memo.

Critical mineral processing nabs $243M in government grants

ASX:FNT Mar 17, 2022

Prime Minister Scott Morrison yesterday announced that the federal government has committed $243m in grant funding for the processing and refinement of critical minerals, as listed in Australia’s 2022 critical minerals strategy.

This is the first grant as part of the federal government's $1.3 billion Modern Manufacturing Initiative.

The $243m in grant funding will be split across four projects, including vanadium and rare earths.

Of the four projects that received funding, we were most interested in the $30M grant that Arafura Resources received for its rare earths (NdPr) project in the NT. Here the company plans to construct a “first of its kind” rare earth separation plant - only the second of such plant outside of China.

With the government stepping in and providing capital to develop a rare earths processing and refining industry in Australia, the future for local rare earths explorers and producers looks bright.

All of this affirms our macro thinking behind the latest addition to the Catalyst Hunter portfolio - Frontier Resources (ASX: FNT). FNT is preparing for a drilling program right next door to another Hastings technology metals “Yangibana project”, which is expected to come into production 2023 and has the highest grade resource of its peers in the rare earths space.

Interestingly, Hastings was also a recipient of a government loan of ~$140M which is being used to develop its project.

Click here to view our 2022 Investment Memo and see why we invested in FNT and what we want the company to achieve in the year ahead.

More outcropping ironstones found at FNT's REE project

ASX:FNT Mar 03, 2022

Today FNT’s field sampling program yielded what we think are good early signs that Rare Earths could be present on their tenements.

154 rock chip samples were taken and have been sent to the lab for assays.

FNT is getting the rocks classified into potential groupings of monazite, carbonatite and ironstone.

Ironstone is particularly interesting, as ironstones played a key role in the discovery that ~$500M market capped Hastings Technology Metals made at the next door Yangibana project.

The presence of carbonatite is also worth noting as Australia’s only Rare Earths producer, ~$10B market capped Lynas Corp, found their massive Mt Weld discovery in carbonatite.

For conext, the total grade of Rare Earths across Hasting’s project is ~1% and the nearby Dreadnought Resources re-rated in June-July 2021, in part, on the back of ironstone rock chip sample assays of 11.2% Total Rare Earth Oxide (“TREO”).

We think FNT is well placed in an emerging major Rare Earths district in WA, and we’re looking forward to what they come back with in terms of assays from the labs.

We wanted to see FNT advance their Rare Earth’s project by drilling (Key Objective #2) - and we now know that FNT is planning drilling for Q2 2022, which is just around the corner.

Here is why we invested in FNT and what we expect them to achieve in 2022 - FNT Investment Memo.