BPM picks up WA rare earths project
Our micro-cap exploration Investment, BPM Minerals (ASX: BPM), just picked up options to acquire a rare earths project in WA.
The deal is for ~494km^2 of ground in the East Kimberly targeting rare earths (REE), zircon and titanium.
The project is prospective for heavy mineral sand (HMS) and monzanite hosted rare earths - similar to projects owned by $2.8BN Iluka Resources and $130M Astron Corporation.
The key characteristic of projects hosted in this type of geology is that they typically host giant tonnage projects.
For context, Iluka’s Wimmera project has a 1.38Bt resource, and Astron’s a 2.63Bt resource.
Considering BPM has over 100km of prospective strike, the target will be a bulk tonnage rare earths discovery.
We think the project is a good pick-up by BPM for two key reasons:
- The deal is structured so that the upfront cost is low - BPM isnt blowing up its capital structure or spending a huge chunk of cash on the deal. Instead, the payments are made when the projects are ready to be explored and even then are relatively modest.
- Rare earths are near the bottom of the market cycle - rare earths are fairly beaten up at the moment and so we think its a good time to be picking up interesting rare earths exploration assets.
The projects are still in the application stage which means we are unlikely to see much newsflow from the assets for a while.
BPM expects the projects to be granted before the end of 2024 and exploration work to start in 2025.
4 reasons why we think the deal is interesting:
- Iluka has been stockpiling its Monzanite ore - once thought of as worthless, the stockpiles have the potential to deliver Iluka a huge windfall gain. For a long time there was no market for the monzanite ore but now with Iluka looking to build its own rare earths refinery the ore can be processed into high value rare earths products. BPM’s project is prospective for the same type of ore.
(Source)
- Iluka is building its owns rare earths refinery - Iluka has committed to building its own rare earths refinery which would produce high-value rare earths neodymium, praseodymium, dysprosium and terbium. The refinery will be fed by ore from Iluka’s own operations and other third party ore across WA. Once the plant is up and running projects like BPM’s should start to get more market interest.
(Source)
- Iluka has shown an interest in third party ore already - Iluka has agreed to a ~$73M funding package for supply from Northern Minerals Browns Range project in the East Kimberly. That is from a project in a similar part of WA to BPM’s new assets and one that sits on similar geology.
(Source)
- The Federal government is backing the domestic rare earths sector - the federal government has given out funding to Iluka worth ~$1.25BN to kick start a domestic rare earths production/processing industry.
(Source)
Deal terms
Another aspect of the deal we liked was the way the deal was structured.
BPM isnt making any huge upfront cash payment OR huge upfront share issue.
Instead all of the payments are deferred to when the projects are granted and when/IF a discovery is made.
BPM is paying $90k cash for the option and ~6M BPM shares once it is exercised.
The remaining payments are all subject to discoveries being made and JORC resources being defined across the different tenements.
What’s next for BPM?
In the short term we want to see BPM drill its gold project - next door to $1.8BN Capricorn Metals.
BPM recently ran its first round of drilling on that project, looking to make a gold discovery adjacent Capricorn’s Mount Gibson mine.
We covered the results in a Quick Take here: BPM RC drilling next to $1.9BN Capricorn Metals in June/July
The next phase of drilling is expected to happen in July.
Below is the timeline for that program:
