PNN acquires Brazilian rare earths project

Our Investment Power Minerals (ASX: PNN) just completed the acquisition of a Rare Earths Project in Brazil.

Next door to $346M capped Viridis Mining and Minerals and $503M capped Meteoric Resources:

(source)

(completing the deal that was first announced in March)

(source)

Here is a brief overview of why we like PNN’s new asset:

• Exceptional high grade drill results over 60m+ of primarily magnetic rare earths
• Located near peers which could act as a reference point to catch up to
• Recent $10.25M capital raise was "strongly supported by US institutional investors."
• Favorable permitting on the project due to the "Manifesto" status

See our deep dive into the asset here: PNN: New Brazil rare earths project. 156 drill holes. High grade hits. SGQ 2.0?

Next we want to see PNN get drilling on the project focusing on two main areas:

• Deeper drilling near the historical results, and
• AC drilling to scout out new mineralised zones

The Morro do Ferro (MDF) project has a “manifesto de mina” permit, meaning PNN has direct ownership rights over the land and doesn’t need to apply for the usual permits to get drilling underway.

We think that any replicates of the old results from the project could bring with it a lot of market interest into the asset.

Here is a reminder of the historical results from drilling on the project:

(source)

Terms of the the deal

The headline acquisition terms (~$25.4M total in cash, shares and milestone payments) carry over from the Binding Letter of Intent we covered back in March.

But there are a few additional or refined terms worth flagging from today’s announcement:

• Share sale structure: the acquisition has gone through as a 100% share sale of MTR, rather than a direct project asset acquisition.
• New resource milestone on the first deferred instalment: the first deferred payment ($2.5M cash + $2.5M in PNN shares) is now payable on the earlier of 12 months from completion OR PNN delivering a maiden JORC resource of 10Mt at 2.5% TREO.
• VWAP floor on scrip issues: if PNN’s 20-day VWAP is below A$0.09 immediately before any scheduled share issuance, the relevant instalment is paid in cash instead. So PNN’s shareholders are protected from being diluted should the share price be low.
• Vendor scrip election on cash instalments: the vendors can elect to take up to 80% of any cash instalments as PNN shares (at A$0.09), subject to shareholder and ASX approvals - meaning the vendors stay aligned with PNN if they want to.
• Security package: the deferred consideration is secured by a pledge over the shares issued and a mortgage over an associated rural property, with pre-signed release instruments held by an escrow agent.

The latest from the PNN team

Power Minerals (ASX: PNN) Investor Webinar - South American Project development

Just last week, the PNN posted a video of Alistair on site at this project, Morro do Ferro (following on from visits to PNN’s other rare earth and also lithium projects in the week prior.

You can check this out on LinkedIn or X

What we want to see next from PNN

🔲Drilling to get under at the recently acquired rare earths project (Morro do Ferro)

Now that due diligence on the project has been completed and the project formally acquired, we would expect drilling to be not far away.

Today PNN confirmed that it “plans to commence expedited fieldwork programs”:

(source)

So we should get an update on the timelines for this getting underway soon.

🔄Drilling at it’s existing Brazilian rare earths project (Santa Anna)

We want to see PNN doing deeper RC drilling and PNN commenced this program in late January. (source)

We also want to see PNN drill out and define a maiden JORC resource estimate in Brazil to enable comparison to peers, a maiden JORC resource estimate is expected this quarter. (source)

Here are the milestones we are tracking on PNN’s Brazilian rare earths project:

✅ Geophysics/Geochemistry work (geophysics results recently)
✅ Drilling starts (Auger drilling started, RC drilling commenced - today)
🔄 Drilling results
🔲 Maiden JORC resource estimate

🔄Lithium JV deal with Summit for lithium assets

PNN has entered into a non binding term sheet which it aims to turn into a binding agreement within 90 days which would see it form a JV with Summit with PNN retaining 41% control of it and possibly 3 additional projects Summit may bring into the JV.

Summit is capable of providing the DLE extraction and would be tasked with constructing a pilot plant to produce a 5,000t DLE plant and take the JV through to a PFS.

Summit would be able to take entire control of the projects for US$50M, so we await during the 90 day period to see if this deal completes and the final terms of the agreement.