Opened: 23-Feb-2022
Closed: 04-Mar-2024
Shares Held at Open: 2,467,000
Shares Held at Close: 9,916,667
Reason Memo Closed: New Project Acquired
What does PFE do?
Pantera Minerals (ASX:PFE) is an early stage minerals exploration company based in Western Australia. PFE has a diverse suite of commodities within its tenements, including Iron-Ore, Lead, Zinc, Silver, Copper and Manganese.
What is the macro theme?
PFE is an exposure to what we believe will be a coming commodity super-cycle leading to sustained high prices across several commodities. With the US & the EU looking to increase fiscal stimulus to spur economic growth, we think decades of under-investment in new mines will lead to higher demand and therefore higher commodity prices.
In particular, iron ore - the primary raw-material for steel - will benefit the most from increased construction and infrastructure activity, which are almost guaranteed through new stimulus programs across many nations worldwide. However, it is the higher grade iron ore that will be even more desired as steel producing nations (in particular China) also look to mitigate greenhouse and environmental issues caused by using lower grade materials.
[Memo Assessment - 04-Mar-2024]: Sentiment = Weak
Rising interest rates have impacted construction activity worldwide. As a result the iron ore price has cooled from ~US$150 per tonne when we launched our PFE Investment Memo to now trade at ~US$109 per tonne.
Our Big Bet for PFE
PFE to return 10x by making a discovery and defining a deposit significant enough to move into development studies.
Why did we invest in PFE?
Nearology
PFE’s Yampi project sits right next door to Australia’s highest grade iron ore operation, Koolan Island (owned by $503M capped Mount Gibson) & all of its deep water port infrastructure. In December 2021 PFE acquired a lead/silver project with nearology to Galena Mining’s Abra project, a globally significant lead/zinc/silver mine currently in development.
[Memo Assessment - 04-Mar-2024]: Grade = F
Whilst the nearology looked good, and despite some exploration by PFE, to date no economic discovery has been madea at Yampi or Abra.
Takeover target if a commercial discovery is mad
Any successful discovery made by PFE would make it the ideal takeover target for nearby producers who may seek bolt-on acquisitions to their assets.
[Memo Assessment - 04-Mar-2024]: Grade = N/A
PFE did not make a discovery big enough to capture the interest of any nearby producers.
Tight capital structure and low EV
Relatively low Enterprise Value with a large portion of the stock in escrow (majority of our holding is escrowed for 2 years) means that exploration success is likely to lead to strong market re-rating.
[Memo Assessment - 04-Mar-2024]: Grade = B
On IPO the PFE share price moved from 20 cents to a high of ~53 cents before settling around the ~30 cent mark for the remainder of the iron ore drilling campaign.
Poor drilling results, and a lack of material results on any other project has seen PFE’s share price fall to as low as 5 cents.
Although our theory was correct initially, that PFE was a tightly held stock, the company did not have exploration success and a sustained market re-rate never eventuated.
What do we expect PFE to deliver?
Objective #1: Drilling of the Flagship Yampi Iron Ore project.
[Memo Assessment - 04-Mar-2024]: Grade = F
Analysis of results from 60 half core samples from 3 diamond drill holes in 2022 returned only modest grades and widths of hematite (iron ore).
Also due to inclement weather, only 3 of 5 planned holes were drilled.
This was disappointing, as our initial interest in investing in PFE was the hematite potential at Yampi.
[Published 22, June 2022.]
Objective #2: Drilling of the newly acquired Lead/Silver project.
VTEM surveying leading-up to diamond drilling in Q2-22.
[Memo Assessment - 04-Mar-2024]: Grade = C
[November 2022] Although PFE did identify two targets worthy of drilling - with overlapping VTEM and gravity anomalies - no economic mineralisation was intercepted from 4 diamond drill holes.
We grade this objective as a C given the exploration program was done on time and on budget, but can’t grade any higher than this given no economic mineralisation was found.
Objective #3: Drilling at PFE’s Manganese project.
Geochemical sampling program leading up to RC Drilling in Q2-22.
[Memo Assessment - 04-Mar-2024]: Grade = B
PFE found some medium grade manganese at its Weelarrana project from one of four key areas of interest.
This first drilling was in line with our “Base Case” expectations.
While PFE was drilling, its regional neighbour Element 25 signed an offtake and investment agreement with Stellantis - highlighting the interest for manganese in the region.
PFE consolidated its land position in the area and went for a second round of drilling.
This second round of drilling however did not show that the first area of interest materially extended at a high-grade.
We graded this one a B due to the success of the first round of drilling, but couldn’t grade any higher due to the lack of scope for the project.
What could go wrong?
Regulatory Risk
As with all other junior exploration companies there is a risk with ELA's that the necessary approvals/agreements like land-access, heritage & native title agreements are not reached and permits can go un-granted.
[Memo Assessment - 04-Mar-2024]: Risk = Unchanged
PFE’s drilling programs were largely unaffected by issues with land access, native title or heritage surveys.
Exploration Risk
PFE’s projects are relatively early stage exploration assets and the company is still refining high-priority drill targets. With early stage explorers there is a risk that the targets identified return no mineralisation.
[Memo Assessment - 04-Mar-2024]: Risk = Materialised
On all three of PFE’s projects, none of them returned economic mineralisation.
Funding Risk
As a junior explorer with early stage projects, the company does not have revenues, meaning it needs to be able to tap the markets for funding in-between major exploration programs. Markets may lose momentum and funding for early stage higher risk exploration like this could dry up.
[Memo Assessment - 04-Mar-2024]: Risk = Materialised
We first invested in PFE at the IPO price of 20 cents in August 2021. Since then, it has become harder for small cap companies to raise capital with PFE raising $2M at a 7 cent down round and again $2M at a 5 cent round.
What is our investment plan?
Our investment strategy for our exploration investments is to take a position during the quiet periods before speculation around drilling results. This is when we typically see share prices run upwards - at this stage we aim to take some profit and possibly free carry, holding the rest of the position into the drilling results.
Our original plan for PFE was to sell 20% prior to the first results IF the share price ran, BUT after the heat came out of the iron ore market, PFE share price didn’t really move as much as we had hoped, so we ended up holding nearly all of (~94%).
Our revised investment plan for PFE is to hold onto 94% of our position into the assay results from the first drilling program at the iron ore project, we will reassess completing the top slice (i.e. taking some profits) going into potential step-out/extensional drilling in 2022.
[Memo Assessment - 04-Mar-2024]: Grade = F
The assay results of the first drill program showed now economic mineralisation.
On reflection, we should have stuck to our original investment plan and sold ~20% of our holdings to de-risk against this eventuality.
The company has fallen ~75% since our Initial Entry Price and we are still holding on to 94% of our original position.
Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 2,467,000 PFE shares at the time of writing this investment memo. S3 Consortium Pty Ltd has been engaged by PFE to share our commentary on the progress of our investment in PFE over time.
Opened: 04-Mar-2024
Shares Held at Open: 9,916,667
What does PFE do?
Pantera Minerals (ASX: PFE) is a micro cap lithium brine exploration and development company which is operating in the Smackover Formation in South West Arkansas, USA.
The Smackover Formation is home to large lithium companies such as Standard Lithium, Albemarle as well as oil giant, Exxon Mobil - which are all investing large amounts of money, seeking to produce lithium from this area.
At the time of writing, PFE controls over 10,000 leased acres directly next door to Exxon’s Arkansas lithium brine project, and is aiming to expand this land holding quickly.
What is the macro theme?
Lithium is a critical material used in Electric Vehicle (EV) battery cathodes.
We believe battery metals are the most compelling investment theme of this decade. A lithium supply deficit is anticipated between 2024-2030.
Lithium rich brines and the complementary technology, Direct Lithium Extraction, are an emerging option for addressing this anticipated supply deficit.
In addition, we think that domestically sourced lithium will be a top priority for the US, in the wake of the US$370BN Inflation Reduction Act which creates strong incentives for critical minerals production.
Our Big Bet for PFE
PFE to return 10x by making a discovery and defining a deposit significant enough to move into development studies.
Why did we invest in PFE?
PFE right next door to $643BN Exxon
Exxon reportedly spent >US$100M acquiring its project and just started drilling its first well 6 weeks ago with a view of getting to first production by 2027.
Surrounded by (much) bigger players
PFE is also in the same neighborhood as $25BN Albermarle, $383M Standard Lithium, $790M Tetra Technologies.
Cheap re-entry into historical oil wells
PFE doesn't have to drill new wells, instead, it can just re-enter old oil and gas wells and extract lithium brines. This is cheaper to do than drilling whole new wells.
Direct Lithium Extraction (DLE) tech advancing
All over the world, DLE tech is progressing extremely quickly. PFE is in a unique position where it gets to benefit from the work and investment Exxon is doing next door - Exxon is working on DLE technology.
Supportive local government and regulations
We attended the inaugural Lithium Innovation Summit in Little Rock, Arkansas and saw firsthand how much the state wants to make lithium a key pillar of its economic agenda.
Federal government incentives
The US government is looking to incentivise critical minerals production inside the US. The $370BN IRA includes incentives that reward producers inside the US/friendly countries.
Arkansas already has a brine processing industry
Arkansas is a globally significant brine processing hub. Arkansas produces ~40% of the world’s bromines by extracting it from brines.
Small market cap of ~$11M
PFE’s market cap is well below its regional peers & has a lot of room for growth as it delivers catalysts at its project.
Fast mover into the Smackover
PFE’s ground was picked up BEFORE Exxon Mobil entered the Smackover Formation & put the region on the map as a US lithium hot spot.
Large JORC exploration target released
PFE’s exploration target is between 436,000 and 2,966,000 tonnes of Lithium Carbonate Equivalent (LCE) - big enough to host a resource the size of its neighbour Standard Lithium’s project.
We have had previous success with a DLE stock
We built our position in Vulcan Energy Resources in a down lithium market and then at its peak during the lithium bull market had a return from our Initial Entry Price of 5,420%.
PFE Strategic Advisor previously sold a project to Rio Tinto for US$825M
PFE recently appointed Tim Goldsmith as its strategic advisor. Tim sold the Rincon lithium brine assets to Rio Tinto for US$825M in March 2022.
What do we expect PFE to deliver?
Objective #1: Rapidly increase acreage in Smackover Formation
PFE, is aiming to rapidly grow its footprint in the Smackover Formation. This could make the company attractive to majors in the area or another company looking to gain exposure to the region. To do this PFE will need to continue leasing acreage quickly.
Milestones
10,000 acres leased
15,000 acres leased
20,000 acres leased
+25,000 acres leased
Objective #2: Convert exploration target into a maiden JORC resource
PFE has already defined a 436,000 to 2,966,000 tonnes of Lithium Carbonate Equivalent (LCE) exploration target. We want to see PFE convert that into a maiden JORC resource estimate.
Milestones
Release an exploration target
Acquire existing 2D seismic/geophysical data
Re-enter old oil and gas wells
Sample the wells for lithium brines
Maiden JORC resource estimate
Objective #3: Secure brine samples for further analysis and pilot plant DLE testing
We want to see PFE secure a brine sample to test in a DLE pilot plant to see if the brines on the company’s acreage are amenable to producing lithium (i.e they have a high concentration of lithium and/or low levels of contaminants).
Milestones
Secure brine sample
Analyse sample
DLE pilot plant testing
What could go wrong?
Leasing risk
There is a chance that PFE is not able to lease acreage quick enough or securing further mineral rights in the Smackover Formation proves to be more difficult than expected. This could be due to increased competition from other companies fighting to get a hold of acreage.
Alternatively, the exclusive agreement with the abstract provider expires before enough acreage is leased.
Exploration risk
PFE has said it intends to secure a lithium brine sample on the company’s acreage - there is no guarantee that lithium bearing brines are found or the brines are of economic concentrations.
Alternatively, if brines are found, they could contain contaminants that reduce or eliminate the value of PFE’s brines.
Funding risk
PFE held $1.8M in cash at the end of 2023. PFE is a micro cap stock and will need to raise more capital to continue expanding its foothold in the Smackover Formation. Capital raises can lead to dilution and may take place at a discount to market prices, reducing the value of PFE shares.
Technology risk
PFE is relying on Direct Lithium Extraction (DLE) technology to be proven viable and then being capable of producing lithium from PFE’s brines. There is no guarantee that a DLE tech will be advanced enough to effectively extract lithium from PFE’s brines.
Commodity price risk
Lithium prices have pulled back relatively strongly recently and that is impacting investor interest in small cap lithium companies. There is a chance the lithium price stays low for an extended period of time which would impact PFE’s share price negatively.
Market risk
There is always the possibility that broader market sentiment gets worse and shares as a whole trade lower, taking PFE’s share price with it. Alternatively, there could be further sector specific pain ahead where junior explorers suffer a lot more than the broader market.
What is our investment plan?
We will apply our standard plan for early stage exploration Investments.
We invest early, hold on to our position in anticipation of a major catalyst and Top Slice/Free Carry ~20% of our position.
For PFE, the major catalyst is likely to be more land acquired or the results of the brine sampling for DLE.
Disclosure: Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 9,916,667 PFE shares, 2,994,167 PFE options. The Company has been engaged by PFE to share our commentary on the progress of our Investment in PFE over time.
New PFE Investment Memo - and did lithium sentiment just return?
Mar 4, 2024
Mar 4, 2024 |
18 min
While the lithium market waned, Pantera Minerals (ASX: PFE) has been quietly acquiring oil fields that are rich in lithium brines, in the Smackover Formation of Arkansas, USA…
PFE announces exploration target… and we are going to Arkansas to see it.
Jan 29, 2024
Jan 29, 2024 |
9 min
Pantera Minerals (ASX: PFE) has been busy, quietly acquiring old oil fields in the Smackover that have no more oil, but are rich in lithium brines.
PFE to own 100% over 10,000 acres in the Smackover Formation: USA’s new lithium hotspot
Dec 14, 2023
Dec 14, 2023 |
10 min
Our Investment Pantera Minerals (ASX: PFE) just signed a deal that will give it full control over 10,000 acres (plus a further 9,000 acres under negotiation) in the Smackover.
Pantera enters the Smackover- Next to $435BN “lithium hopeful” … uhhh Exxon Mobil?
Aug 24, 2023
Aug 24, 2023 |
14 min
Our investment, Pantera Minerals (ASX: PFE) has strategically acquired a 35% stake in Daytona Lithium, placing itself in the high-stakes lithium land rush of the Smackover Formation—right next to industry heavyweights like Exxon Mobil—highlighting the region's burgeoning importance in the race to meet the rising demand for lithium.
PFE Hit Manganese Mineralisation in Maiden Drilling
Jan 23, 2023
Jan 23, 2023 |
9 min
Today our exploration Investment Pantera Minerals (ASX: PFE) announced results from its maiden drilling campaign at its WA manganese project - the drill results demonstrated manganese mineralisation to be open in two directions and strong enough results to plan a second drilling campaign in the area.
PFE now has a bigger lithium project
Apr 17, 2024
Apr 17, 2024 |
4 min
Our lithium Investment Panterra Minerals (ASX: PFE) just put out an update on its now large lithium project in what could be the US lithium production heartland in just a couple short years.
PFE increases acreage at its US lithium project
Mar 5, 2024
Mar 5, 2024 |
4 min
Our US lithium Investment Pantera Minerals (ASX: PFE) just increased its project area in the Smackover, Arkansas USA by 26%.
PFE Completes Daytona Acquisition, 20K Acre Mark Within Sight
Mar 1, 2024
Mar 1, 2024 |
3 min
Yesterday, our US lithium Investment Panterra Minerals (ASX: PFE) completed the acquisition of Daytona Lithium.
PFE increases lithium acreage in the Smackover, USA
Feb 5, 2024
Feb 5, 2024 |
2 min
Our US lithium Investment, Pantera Minerals (ASX: PFE), just increased its acreage position in the Smackover Formation in southwest Arkansas, USA.
PFE gets even more land in USA lithium hotspot
Jan 12, 2024
Jan 12, 2024 |
3 min
Our USA lithium Investment Pantera Minerals (ASX: PFE) released new acreage lease numbers from its rapidly expanding project in the Smackover Formation which is located in south west Arkansas, USA.
Lithium report filed by our international correspondent and roving reporter
Mar 2, 2024
Mar 2, 2024 |
13 min
By pulling lithium bearing brine to the surface from old depleted oil wells in the Smackover Formation, PFE intends to use Direct Lithium Extraction (DLE) technology to produce a product that can then be put into US electric vehicle batteries.
Arkansas Lithium Summit - lithium come back?
Feb 17, 2024
Feb 17, 2024 |
18 min
PFE has been busy over recent months, quietly acquiring old oil fields in the Smackover that have no more oil, but are rich in lithium brines.
Drill race is on and what is happening in the lithium market
Aug 26, 2023
Aug 26, 2023 |
7 min
In this weekender, we explore the race to initiate major drilling campaigns, the fluctuating landscape of lithium prices, and how cash-rich companies are strategically positioning themselves in the mining sector."
5 Battery Materials Stocks for 2023
Apr 22, 2023
Apr 22, 2023 |
10 min
In this article we shine a light on five NON-LITHIUM companies we are holding in the battery materials space.
Market Mood Swings, Price Discovery & Enterprise Value
Jun 27, 2022
Jun 27, 2022 |
26 min
Market mood swings. Down on low volumes, now up. What is price discovery? What is Enterprise Value? Current lowest Enterprise Values in our Portfolio. Cash is king. Current biggest cash balances in our Portfolio.
