After the release of a Definitive Feasibility Study Refresh for flagship Goschen Rare Earths and Mineral Sands project, revealing a pre-tax A$1.525 billion Net Present Value (NPV) and a 44% Internal Rate of Return (IRR), VHM Limited (ASX:VHM) has also discovered a new high grade rare earth, titania and rutile ore body at their Cannie prospect area – 13.5km south of Goschen. 

As of yesterday (4 April 2023), VHM is trading at a steep discount to its NPV compared to peers. At $0.79/share, their $160 million market cap is just 10.49% of Goschen’s pre-tax NPV. This compares to Arafura Rare Earths Ltd (ASX: ARU), which at $0.485/share and a $1.025 billion market cap, trades at 43.46% of its post-tax NPV. There is also Hastings Technology Metals Ltd (ASX: HAS), which at $2.43/share and a $314 million market cap, trades at 31.02% of its post-tax NPV.

VHM’s Goschen presents as a globally significant rare earths and mineral sands project with 413,107 tonnes of Total Rare Earth Oxides (TREO) and a  629Mt mineral sands resource. 87% of Goschen’s rare earth minerals basket value are derived from high value rare earths that are critical for electric vehicle motors and wind turbines, including neodymium (Nd), praseodymium (Pr), dysprosium (Dy) and terbium (Tb).

The 20 year mine life is based on 99Mt of ore reserves, only half of the Company’s 199Mt reserves and a fraction of their mineral resource inventory. Phases 1 and 1A come with a  capex of A$500 million (plus an additional $106 million in ancillary pre-production mining start-up costs), which is certainly on the lower end of the scale as far as rare earths mines go, and are expected to produce average annual EBITDA of A$291 million during the first 10 years of mine life. The payback period is just 2.8 years.

Rare earths will make up 76% of total revenue, while mineral sands will account for the remaining 24%. The Goschen project is most sensitive to the AUD/USD exchange rate and rare earths. prices, but is far less sensitive to mineral sands prices, capital and operating costs. The company’s operating costs will be just $57/tonne of ore.

VHM has completed their 137 hole, 5,482m drilling campaign, with initial analytical results of the first 17 holes indicating high-grade Total Heavy Mineral (THM) content near surface. The high-grade intercepts across the 17 holes average 4.9% THM with an average interval width of 2.7m. Results indicate a near surface total mineralised package averaging 17m in width at a depth of 10m – 20m below surface.

Mineral assemblage analysis was completed on two disparate high-grade samples comprising 6.6% and 4.2% THM respectively. This data indicates a high proportion of heavy minerals (HM) with concentrations of zircon between 24% – 35%, rutile between 16.8% – 17.5%, and leucoxene between 16.6% – 19.1%. Early results indicate the zircon grade is comparable to the Goschen Project, but with elevated rutile and leucoxene grades.

Additionally, the mineral assemblage data within the sand fraction (key indicator of heavy mineral (HM) assemblage) indicates a high proportion of rare earth elements (REE) with concentrations of 2.82% – 4.25% TREO + Yttrium Oxide (Y2O3). The TREO +Y2O3 results indicate similar elevations to the Company’s Goschen Project, further supporting indications of a significant high-grade ore body at Cannie.

Global TREO demand is expected to grow at 6% CAGR all the way through to 2035, driven primarily by the permanent magnet sector. This will be 5 times the amount that China can supply.

Reach Markets has been engaged by VHM Limited to assist with their investor communications and may receive fees for its services.

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