Pantera Minerals Ltd (ASX:PFE)

Investment Memo:

Pantera Minerals Ltd (ASX:PFE)

- LIVE

Opened: 23-Feb-2022

Shares Held at Open: 2,467,000

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.

Our Big Bet for PFE Big Bet Tooltip

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.

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.

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.

What do we expect PFE to deliver?

Objective #1: Drilling of the Flagship Yampi Iron Ore project.

✅ Heli-portable rig built and drilling set to commence
✅ First drilling starts next week
✅ PFE intersects 14m of Hematite sandstone on first drill campaign
😔 Inclement weather: Only 3 of 5 planned holes are drilled
❌ Assay Results

[Objective Assessment, 23-Jun-2022] Grade F:

Analysis of results from 60 half core samples from 3 diamond drill holes last year returned only modest grades and widths of hematite (iron ore). This is disappointing, as our initial interest in investing in PFE was the hematite potential at Yampi. The focus now shifts to PFE's other projects including Hellcat and Manganese Project, which we hope will provide a better result.

Objective #2: Drilling of the newly acquired Lead/Silver project.

VTEM surveying leading-up to diamond drilling in Q2-22.

✅ Drilling commences at Hellcat [04-Jul-2022]
Drilling completed at Hellcat, assays next month [06-Sep-2022]
Not much doing from initial Hellcat assays [18-Nov-2022]

Objective #3: Drilling at PFE’s Manganese project.

Geochemical sampling program leading up to RC Drilling in Q2-22.

High grade manganese confirmed ahead of first drilling [01-Aug-2022]
Drilling to commence at WA Manganese Project [10-Oct-2022]
PFE Completes Manganese Drilling - Visuals Identified [14-Nov-2022]
Consolidating land position around WA manganese project [06-Dec-2022]
More manganese samples bodes well for future drilling [30-Jan-2023]
Drilling underway at WA manganese project [20-Apr-2023]
Drilling completed, assays in six weeks [04-May-2023]
PFE announce manganese assays as neighbour scores big [27-Jun-2023]

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.

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.

Not much doing from initial Hellcat assays [18-Nov-2022]

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.

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.

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.