Pensana (LSE: PRE)
163p (160p- 165p)
Mkt Cap: £330m
Next Results: Y/e June est Oct
A World-Class Sustainable Supply of critical Rare Earths for the Green economy in Humber
The new economy needs electric vehicles and wind turbines and these and other strategic green economy industries need tonnes of permanent magnets. Pensana are developing a rare earth mine in Angola, which has an estimated 20 years plus mine life with an annual production of 12,500 tonnes of rare earth oxides. This includes 4,500 tonnes of strategically critical magnet metal rare earth oxides, which is forecast to be 5% of the projected world demand in 2025.
Today Pensana announced its Mine to Market Business Plan, to establish a rare earth separation facility in Saltend, Humber which will be the world’s first major separation facility established in over a decade and which would be one of only three major producers located outside China. The planned US$125m facility would create over 100 direct jobs in processing purified rare earth sulphates, which would be imported from the Company’s state-of-the-art Longonjo mine in Angola.
Once established this Mine to Market strategy will produce wallet expanding returns such as; a 2-year payback, a 57% IRR, a NPV ( Net Present Value) of $2.3billion and EBITDA of $359m per year. These are, however, projections and subject to funding. The plan does not, however envisage any funding issues; Saltend is already receiving grants from the UK Government’s £1 billion Automotive Transformation Fund, founded to support the national transition to electric vehicles. Pensana has already received indications of potential financial backing from its major shareholder, the Angolan Sovereign Wealth Fund, as well as approaches from a wide range of financial institutions..
Before the funding comes clearly into focus the current mkt cap of £145m will seem cheap at less than 8% of the NPV so the risk does seem to be missing on the upside. A strategic Buy
*The author has an interest in the company