$0.130
Opened: 30-Nov-2022
Shares Held at Open: 2,631,247
What does SLA do?
Solara Minerals (ASX: SLA) is a junior explorer focused on making a valuable metals discovery in Western Australia.
SLA is currently exploring for niobium, rare earths, nickel and copper.
What is the macro theme?
Niobium and rare earths exploration in the newly opened West Arunta region in WA. WA1 Resources recently made a discovery here, which saw it run from 13c to over $2.
Niobium, rare earths, copper and nickel, are highly topical “energy transition metals”. New supplies are needed to move the world away from fossil fuels.
Our Big Bet for SLA
"See SLA’s share price to re-rate by over 1,000% off the back of a new metals discovery, and the definition of a deposit significant enough to move into development studies."
This is our standard “Big Bet” for any early stage minerals exploration company with multiple projects.
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 a lot of work to be done, many risks involved - just some of which we list in our SLA Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true
Why did we invest in SLA?
Ground pegged before a region opening discovery
SLA holds a GRANTED Exploration licence in an emerging rare earths/critical minerals region. This means SLA can start firming up a drilling program over the project area immediately. SLA's project is ~94km north of WA1 Resources and Encounter Resources.
Similar drill target to WA1 Resources
WA1 Resources discovery was made after the company drilled into a distinct geophysical anomaly. SLA's project hosts a similar geophysical anomaly that warrants drill testing. We see this as a key drilling target for SLA.
Historic data confirming the right type of geology
In 1982, BHP ran a six hole drilling program on SLA's ground and intersected “intrusives and strong carbonate alteration” that may be prospective for rare earth carbonatite mineralisation. BHP’s intercepts came from only 6m below the surface. BHP at the time were attempting to drill for diamonds.
Low shares on issue & tight capital structure
SLA has only ~34.5 million shares on issue, with ~4 million in escrow until November 2023. If a new discovery is made, the supply of shares available to buy could be relatively low, which may increase the strength of a re-rate in the company’s share price, should it materialise.
Relatively low market cap leveraged to exploration success
SLA has a current market cap of $18M, with $3.3M in cash at Sept 30, 2022, and an enterprise value of $14.7M. If a successful discovery is made, the share price should re-rate significantly. For example a ~$70M market cap on the back of a discovery would see SLA trading at around $2.
What do we expect SLA to deliver?
Objective #1: Pre drilling work at its niobium & rare earths project in WA.
We want to see SLA complete target generation work to refine its existing data further. This work will help improve the company’s understanding of its project and help design a drilling program.
Milestones
Geochemical surveys
Geophysical surveys
Select Drill Target
Objective #2: Drilling at its niobium & rare earths project in WA.
We want to see SLA get on the ground and drill its project in the West Arunta region.
Milestones
Complete Heritage Surveys
Commence Drilling Program
Publish Assay Results
Objective #3: Target generation and then drilling at its Nickel/Copper/PGE projects
We want to see SLA complete target generation work across its other projects to identify the highest-priority drill targets. We want to see at least one of these projects get drill tested in 2023.
Milestones
Geophysical surveys
Geochemical surveys
Commence drilling
Assay results
What could go wrong?
Exploration risk
SLA is yet to make an economic discovery, with all of its projects considered early stage prospects. Inherently there is a risk that future drilling programs return nothing and SLA’s projects are considered stranded. There is plenty of time before drilling starts in 2023 - so there could be periods of share price weakness prior to drilling.
Macro Theme Risk
The West Arunta province is hot right now after WA1’s discovery and incredible share price run, but it could cool off before SLA drills its West Arunta prospect in the second half of 2023.
Nearology Risk
We have observed that Nearology plays rarely succeed - as we have seen over the years with failed investments in the Fraser Range Nickel rush, the Julimar Province PGE rush and the Earaheedy Basin lead-zinc rush. Whilst SLA’s current key project sits near existing discoveries and is prospective, the chances of the company actually making a discovery are low.
Funding risk
SLA is a junior explorer with no revenues to fall back on to fund its exploration. As a result, the company relies on new funding for future exploration programs. SLA may need to regularly raise new capital from investors to finance its exploration programs.
Market risk
SLA is an early stage exploration company chasing new discoveries. There is always a risk that a market wide sell off will hurt SLA’s share price the most, given investors will look to withdraw capital from the higher risk investments in their portfolios first.
What is our investment plan?
We are a substantial holder in SLA with 7.13% of the company. We Invested in the 10c pre-IPO, at the 20c IPO and again at 40c. Our average entry price over the last 18 months is 25.6c.
There are still at least three months before any drilling will take place (from the time of publishing this memo) - leaving plenty of time for a “pre-drill result speculation” price rise to creep in and probably also a few quiet periods where the share price may drift down.
The key goal is to hold a material position for discovery, but if the share price is trading at over $1.20 in March/April next year, we will consider selling around 15% of the position to de-risk, claiming some capital back for tax, operational costs and new investments elsewhere which is our general model.
Also see our trading policy here
Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 2,631,250 SLA shares and 300,000 SLA options at the time of publishing this memo. The Company has been engaged by SLA to share our commentary on the progress of our Investment in SLA over time.
LYN about to drop holes in West Arunta
Sep 16, 2024
Sep 16, 2024 |
8 min
Two years in the making. And we are almost there. Today our WA exploration Investment Lycaon Resources (ASX: LYN) received its long awaited heritage clearance…
LYN set to drill near West Arunta niobium runners WA1 and Encounter
Jul 12, 2024
Jul 12, 2024 |
8 min
Our Investment in the West Arunta region is Lycaon Resources (ASX: LYN). AND LYN is gearing up to drill its project in the coming months.
LYN drilling targets mid-year next to WA1's West Arunta discovery
May 1, 2024
May 1, 2024 |
7 min
The winter drilling season has just started in the region, and a handful of “next WA1” hopefuls are all about to start spinning the drill bit… Our Investment with ground in the West Arunta is Lycaon Resources (ASX: LYN).
“The Last Frontier”: LYN (finally) closer to drilling WA1 Resources look-alike target in the next few months
Apr 16, 2024
Apr 16, 2024 |
9 min
Our micro cap exploration Investment, ~$9M capped Lycaon Resources (ASX: LYN) is about to drill three look-alike magnetic features in the same region.
Potential for large nickel-copper mineral system
Sep 26, 2023
Sep 26, 2023 |
8 min
Our micro cap exploration Investment Lycaon Resources (ASX: LYN) has now completed its second drillhole at its Bow River nickel-copper project in WA hitting sulphides over 43m.
Tony Rovira joins the board of LYN.
Jan 10, 2025
Jan 10, 2025 |
2 min
LYN finished drilling its project in the West Arunta in mid-December. Off the back of that announcement LYN’s share price came off ~50% and LYN and closed at a low of 7.2c per share.
LYN's drilling starting in one week
Nov 18, 2024
Nov 18, 2024 |
2 min
Lycaon Resources (ASX: LYN) is now a week away from drilling its niobium project in the West Arunta, WA.
LYN Awards Drill Contract
Oct 15, 2024
Oct 15, 2024 |
1 min
Today, our microcap exploration Investment, Lycaon Resources (ASX: LYN) has awarded a drill contract to Topdrill for its maiden drilling program at the high-priority Stansmore prospect within its West Arunta project.
LYN set to begin drilling soon
Oct 14, 2024
Oct 14, 2024 |
1 min
Our microcap exploration Investment, Lycaon Resources (ASX: LYN) has received all the necessary approvals to commence its maiden drilling program at the high-priority Stansmore prospect within its West Arunta project in Western Australia.
LYN completes heritage surveys in the West Arunta
Jul 22, 2024
Jul 22, 2024 |
2 min
Our West Arunta exploration Investment Lycaon Resources (ASX: LYN) just completed a key permitting milestone on its project.
Rare Earths Sector Heats Up Globally
Apr 22, 2025
Apr 22, 2025 |
10 min
China bans rare earths exports critical to western defence supply chains. Rare earths stocks rip. The US launches investigation into critical metal supply chain risks.
Our 2025 Strategy
Jan 11, 2025
Jan 11, 2025 |
15 min
Happy New Year. New year, new market conditions…? We certainly hope so.
What Newsflow is left for this Year?
Dec 7, 2024
Dec 7, 2024 |
19 min
In the business world, the christmas break is often treated as an “artificial deadline” to get deals done and finish projects. Three weeks ago we said we are watching 16 companies that had guided the market to expect material news before christmas… Usually only a handful of companies that guide news actually deliver it on time.
Market Optimism Peaks Ahead of the Holidays
Nov 16, 2024
Nov 16, 2024 |
11 min
The world is still digesting what exactly the US election result will mean for the next four years. The weeks after an election is often a “honeymoon phase”.
Major Announcements Driving Volatility in Small Caps
Oct 12, 2024
Oct 12, 2024 |
15 min
The mood is good in small cap land. Cautious… but good. It was another positive week, with plenty of green across the board.
