Greenland Minerals and Energy (ASX: GGG) has received a buy recommendation with a price target almost four times the company's current price in a report by an Australian broker.
The report is based on the recently announced maiden JORC Resource for Zone 2 at the Kvanefjeld complex in Greenland, where the company has discovered another massive area of contained metal.
The broker has placed a price target of $1.80, which compares very favourably to the company's most recent closing price of $0.47.
In issuing the report, the broker asked the question, "What's 1 billion tonnes of uranium and rare earth ore worth?".
The following is an excerpt from the report.
Maiden JORC Resource for Zone 2 at Kvanefjeld complex
• GGG has announced its maiden JORC-compliant resource for Zone 2 of 242M tonnes @ 304ppm U3O8 and 1.1% TREO (Total Rare Earth Oxide). This adds 46% to the existing uranium inventory, bringing the total to 512M lbs and over 39% to its total rare earth resource, bringing the total to 9.2M tonnes. GGG has also announced that a higher grade area within Zone 2 has been identified and drilled. This high grade area contains 119M tonnes of ore at 400ppm U3O8 and 1.2% TREO.
• Zone 2 is only 6 km away from the existing Kvanefjeld deposit which has 619M tonnes @ 257ppm U3O8 and 1.05% TREO. It now seems that the mineralogy of Zone 2 is similar to Kvanefjeld with metallurgical synergies expected. Zone 2 is still open towards the Kvanefjeld deposit with the possibility that the two deposits may indeed be one giant deposit.
• A total of 23 holes have been drilled in Zone 2, totaling 10,351m. These were used for the independent calculation of the JORC-compliant resource by SRK Consulting.
• GGG's rare earth resource inventory now includes 330,000 tonnes of heavy REO, 740,000 tonnes of Yttrium.
• We are now waiting for drill results for Zone 3 and Steenstrupfjeld, two other deposits in the region. It is now likely that we could see over 1.0 billion tonnes of ore in the region at +250ppm U3O8 and +1.1% TREO making this deposit the largest in the world with over 10M tonnes of rare earths.
GGG's Kvanefjeld rare earth and uranium complex is now growing to mega proportions. Indeed, there is probably little added drilling required as the deposit contains over 70 years' the entire global consumption of rare earths.
The game plan appears to be uranium and a major push by GGG in seeking a relaxation to the "Zero Tolerance" stance to uranium by the Greenland Government. With outstanding metallurgical recoveries achieved and very strong beneficiation results via atmospheric leaching, the next stage in the company's history will be a positive move by the government to give uranium exploitation on the Island the go-ahead.
The fact that the Government has only ever issued one licence for the exploration of radioactive materials (to GGG), we believe this is a positive sign to future relaxation to the Zero Tolerance stance. We have a $1.80 price target on GGG and a Buy recommendation.
One of the Great Accumulations of Rare earths & Uranium
The Kvanefjeld complex consists of the main Kvanefjeld orebody, Zone 2 & 3 and a smaller deposit called Steenstrupfjeld. A JORC-compliant resource now exists of 861M tonnes containing 9.22M tonnes of rare earths and 512.8Mlbs of U3O8. Over 340,000 tonnes of "Heavy Rare Earths" also exist in the main deposit.
Zone 3 & Steenstrupfjeld resources are expected to be released over the coming weeks with a high chance to extending the total deposit past 1.0 billion tonnes. Chart 1 outlines the location of the four (4) mineral deposit on-site.
Zone 2 is 6km away from the main Kvanefjeld deposit and has now added 242M tonnes to the overall resource of the area. The ore appears to be similar to Kvanefjeld and metallurgical testing is expected to see similar results. The important aspect to Zone 2 is the grade, where the grade of rare earth is 5% higher and that of uranium is 18.3% higher. Zone 2 contains 162Mlbs of uranium at a grade of 304ppm. At a valuation of US$1-2/lb, this would underpin the valuation of GGG in itself.
GGG is expected to complete the buyout of its joint venture partner in Kvanefjeld by June 2012. Currently, GGG has 61% of the project and Westrip has the remainder 39%. A cash payment of $35m or equivalent remains.
Recent metallurgical and beneficiation test-work by GGG has revealed that the ore can be beneficiated to <15% of its original mass. This will have a dramatic reduction in mine site infrastructure requirements. The leaching of this concentrated ore under atmospheric conditions has yielded a recovery of between 90-95% of both uranium and rare earth products. These results will form part of the pre-feasibility work on Kvanefjeld project expected to be released by the company in the next 3-4 weeks.
GGG is now looking at a staged development of the project up to 40,000 tonnes per annum of rare earth product and 4-6M lbs of uranium production per annum. A feasibility study is expected to be released in the June quarter 2012. GGG and its joint venture partner have the only licence in Greenland to explore for radioactive minerals.
We see this as a positive move by the Government of Greenland towards the granting of a future Exploitation Licence, subject to all Environmental and Social Impact Studies being completed and endorsed by the Government.