ASX:PNN

- Power Minerals Ltd

Rare earths are a group of 17 metals, a small group of them - neodymium, praseodymium, dysprosium and terbium - are used to make the strongest permanent magnets on earth.

Those magnets are in EV motors, wind turbines, robots, drones, fighter jets, guided missiles, smartphones and the cooling systems of AI data centres.

There are no commercial substitutes.

An F-35 contains ~400kg of rare earth materials. A single EV uses 1-2kg of rare earth magnets. A humanoid robot is expected to use more.

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PNN’s project has passed the exploration stage with ~156 holes drilled into it.

It has already had 50 drill holes for a total of over 4,000m of diamond core drilling AND 106 holes for a total of 846.5m of auger drilling.

The existing discovery de-risks the asset from an exploration perspective and gives PNN something to expand.

Historic drilling at Morro do Ferro returned 60.85m at 8.92% TREO, 70.9m at 8.00% TREO and 100.44m at 4.99% TREO - all from surface to the end of the hole.

For context $18BN Lynas Rare Earths project (which is the highest grade on the ASX) has a resource with an average grade around ~4.1% TREO.

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PNN’s due diligence confirmed MREO values up to 3.53% of whole rock - and one hole averaged 1.47% MREO over its entire 60.85m length, a higher magnet rare earth grade than the total rare earth grade of many deposits globally.

The four magnet rare earths (MREO) - Nd, Pr, Dy, Tb - account for more than 80% of the market value of all rare earths.

They are the ones that go into humanoid robots, drones, jet fighters, missile guidance systems, naval propulsion, next-gen submarine sonar, AI data storage & displays.

A "Manifesto de Mina" is a legacy Brazilian mining title with no expiry date that already grants the right to mine, with only environmental permitting required to move to production. (source)

PNN also owns the freehold land above the deposit, so there are no third-party landholders to negotiate with.

We think the special type of license means IF PNN can define a large enough resource to put the project into production it can get to a decision point a lot quicker than other rare earths projects globally.

PNN says that its project's mineralisation is hosted in bastnäsite - the same well-understood mineral processed for decades at MP Materials' ~A$14BN Mountain Pass operation in California.

That gives the metallurgical workstream a meaningfully better starting point than most early-stage rare earths projects.

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Morro do Ferro is in the Poços de Caldas complex alongside the ~$494M capped Meteoric Resources and the ~$463M capped Viridis Mining & Minerals.

PNN is capped at ~$44M.

We think that with some drilling, PNN can close the gap to its neighbours (assuming exploration is successful).

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Brazil has an established mining industry - Minas Gerais (the state where PNN’s project sits in) literally translates to "General Mines" - the state was founded on mining and has hosted it for over 300 years.

This is not a frontier jurisdiction. The workforce, the drilling contractors, the labs, the infrastructure and the regulator all exist at scale.

Some of our biggest wins have come from companies with projects in Brazil (both of them also being in Minas Gerais):

• Latin Resources - which made a lithium discovery in Brazil and went from ~3c to a high of ~45c per share - at its peak LRS returned 2332% for us. Eventually the company was taken over by Pilbara Minerals in a deal worth ~$560M.
  
  
• St George Mining (ASX: SGQ) - We Invested in SGQ at 2.5c when it first acquired its rare earths project in Brazil. At its peak SGQ was up 620% for us - now it trades at 11c per share - still 340% above our Initial Entry Price.
  

China still controls ~90% of the world's rare earth magnet supply chain.

For the heaviest, most valuable rare earths like dysprosium and terbium, China controls ~98-99% of refined supply.

The US is pouring capital into Brazil to try and solve its domestic rare earth supply chain dependency issue.

Brazil is home to the world's second biggest rare earth reserves (behind only China).

So far committed more than US$565M to Brazilian critical minerals projects and just last month US listed USA Rare Earths agreed to a US$2.8BN takeover of a producing rare earths mine in Brazil. (source)

Both of PNN's Brazilian projects sit in states (Minas Gerais and Goiás) that have been in talks to sign critical minerals cooperation agreements with the US. (source)

We think more of these type deals between the US and Brazil are possible for rare earths assets.

PNN's deal has a lot of similarities to the deal our Investment SGQ did for its asset in 2024.

SGQ paid a similar amount for its project AND the same corporate advisor behind SGQ is behind PNN.

SGQ re-rated from ~2.5c to a high of 18c and is now capped at ~$435M.

We are hoping some of the capital from people who had a winner with SGQ finds its way into PNN as it proves out its asset.

Parts of PNN's ground trend toward its neighbours' ionic clay deposits - the style of rare earths mineralisation the ASX understands well with PNN’s two neighbours - $463M Viridis and $494M Meteoric.

IF PNN defines an ionic clay resource on top of its existing discovery then it could all of a sudden draw comparisons to its project and that of Viridis and Meteoric.

PNN’s US project is 195km away from A$20BN MP Materials. More importantly, it's got heavy rare earth exploration potential (the less common and more valuable type of the rare earth materials). Both types of rare earth are needed for advanced magnet production the USA is seeking to onshore.

We think PNN’s US rare earths project could attract increased capital flows into PNN.

We have seen this play out in other stocks where they list on the OTC, attract US attention and eventually capital.

PNN also has a rare earths asset in Brazil that we think could mirror a project that the market is really liking right now (SGQ’s project)

We have had success with Brazilian rare earths assets before with SGQ which is up 500% in the last 9 months, and there will be investors who have made cash (and ones who missed SGQ) looking for “the next SGQ”. We think some of this cash could come into PNN.

(the past performance is not an indicator of future performance)

IF PNN can attract enough capital with its current portfolio of assets, it can use its re-rated valuation to acquire more advanced assets.

Tribeca has come into three of our recent Investments - LKY (up 626% at its peak), AVM (up 250% at its peak) and RCM (up 151% at its peak).

We like their approach to resources investing and they have deep pockets.

The past performance is not an indicator of future performance.

We think it's the right time to get set in junior explorers with new assets.

We think the next 6-9 months will see institutional capital finally coming back into the exploration sector after years of a capital drought.

We expect those capital inflows to increase the valuation of explorers with projects in the right commodities and the right parts of the world (like rare earths in the US or Brazil).

PNN has advanced lithium projects in Argentina with one of them even having a Preliminary Economic Assessment done that shows an after-tax Net Present Value of US$308.8M.

We think that IF sentiment improves in the lithium sector these assets could justify PNN’s current valuation.

All of the old exploration was focused on uranium - mind you that old drilling found uranium over at least 2km with grades as high as 1.3% in drilling and 1.786% in rock chips.

PNN’s new US asset was initially explored for gold. We could see PNN go back and look at the gold potential of the project.