Spectrum Rare Earths' (ASX:SPX) trial pitting has proved that rare earth mineralisation and host geology is present along the full 6 kilometre strike length at its Skyfall Magnetic End Use Rare Earth Prospect in the Northern Territory.
This has provided for a significant mid-point Exploration Target of 19 million tonnes at 0.5% Total Rare Earth Oxides (38% MEU REO).
Shares in the company should trade higher today.
The rare earth mix remains predominantly higher demand Magnetic End Use (MEU) type, which continues to set the project aside from other rare earth projects globally.
Based on the mid-point Exploration Target, a theoretical 80% recovery and Skyfall's unique MEU rare earth mix, this would account for approximately 722,000 kilograms of neodymium, 152,000 kilograms of dysprosium and 152,000 kilograms of praseodymium per annum over a conceptual 20 year mine life scenario.
Trial pit samples are currently being tested at laboratories both in Australia and overseas to investigate lower cost mineral processing options. Mineralogy and metallurgical results are pending.
This follows earlier work last month that significantly increased grade and extended mineralisation to over 350 metres in cross section.
MEU's are experiencing the strongest growth rates across the sector due to their demand in efficient energy technologies.
The confirmation that rare earth mineralisation is present across the full 6 kilometre strike length at Skyfall is based on results from new trial pits TP7 and TP8.
These results add confidence to the Skyfall Exploration Target of between 17 million and 21 million tonnes at 0.4% to 0.6% TREO.
Mineralisation is present over the full depth of TP7 and remains open with further work including diamond drilling and trial pitting planned.
TP8, located at the northern end of Skyfall, is very significant to Spectrum's understanding of mineralisation at the project. Grade at the pit increases at the bottom and remains open.
Difficult digging meant that the pit could not be extended and therefore follow-up drilling is planned.
The entire pit grade is over the 0.1% TREO cut off and Spectrum believes this has the potential to increase with depth as the target horizon is further explored.
The previous TP5 had intersected 2 metres at 0.66% Total Rare Earth Oxide (42% Magnetic End Use Rare Earth Oxide), providing a higher grade profile than the grade profile from recent drilling, which returned 0.34% TREO.
Skyfall has an unusually high distribution of Magnetic Rare Earths when compared to other rare earth prospects around the world.
It is located about five hours drive south of Darwin in a district that is home to multiple heavy and magnetic end use rare earth prospects
Three types of mineralogy testing have concluded that rare earth phases have high associations with clay minerals, which have potential for lower cost processing options including the leaching of absorbed species.
Mineralisation at Skyfall is located in a weathering profile above volcanic rocks where its shallow nature allows for targeting of rare earth mineralisation with backhoe trial pit excavations as well as with drilling.
Magnetic Rare Earths are experiencing the strongest growth rates across the sector due to their demand in efficient energy technologies, primarily in the automobile industry.
Demand had hit almost 120,000 tonnes in 2013 and is expected to grow to more than 160,000 tonnes in 2016.
Spectrum Rare Earths continues to rack up the successes at its Skyfall prospect with trial pitting now confirming that rare earth mineralisation and host geology is present along its full 6 kilometre strike length.
This also provides support for the mid-point Exploration Target of 19 million tonnes at 0.5% Total Rare Earth Oxides (38% MEU REO), which could support production of approximately 722,000 kilograms of neodymium, 152,000 kilograms of dysprosium and 152,000 kilograms of praseodymium per annum over a conceptual 20 year mine life scenario.
These current grades are likely double those that Chinese companies are believed to be currently mining (ionic type clays).
Spectrum has a much higher % of magnetic and heavy rare earth oxides to the Chinese companies (and these are the most valuable).
Spectrum has estimated they now have 19 million tonnes to only 4 metres depth (so, with value of REO X $500 per tonne in situ = $9.5 billion in situ value estimate).
This could likely prove to be conservative - and the current market capitalisation of Spectrum - is less than $7 million.
The mineralisation is open at depth and grade indicates improvement at depth to the North.
Metallurgy test work is now concentrating on the cheapest/best concentrating method (to then consider mining/shipment overseas to a processor)
So there are significant share price catalysts and milestones ahead that should result in upward valuation inflexion points:
- Results from the trial pit samples that are currently being tested at laboratories both in Australia and overseas to investigate lower cost mineral processing options; and
- Mineralogy and metallurgical results are due in coming weeks.
Given that Skyfall has a very high distribution of Magnetic Rare Earths when compared to other rare earth prospects around the world, we would not be surprised to see significant interest from potential industry partners, wanting an "in" to this project.
With good road access and located close to the port of Darwin, the project ticks the box in terms of proximity to Asian markets.
Despite this, Spectrum has one of the lowest market capitalisations when compared against a peer group of REO-focused companies.
The Magnetic Sector is one of the fastest growth segments for Rare Earths, where the drivers are clean energy expansion and miniaturisation i.e. hybrid and electrical vehicles.
Its market capitalisation is decidedly light at a share price of $0.044. In comparison, Northern Minerals is capitalised at $65.12 million and Lynas at $303.98 million.
Proactive Investors estimates potential for strong price growth from current $0.044 to $0.12 - $0.16 within 12 months.
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