Either RareX (ASX: REE) and Iluka Resources (ASX: ILU) shareholders aren’t drinking from the same Kool-Aid, or the former cohort is simply looking at the watershed partnership announced yesterday between both miners through a different lens.
Shares in RareX were down around 13% heading into lunch today, after giving back most of yesterday’s 19.4% gain.
Given the stock’s share price meteoric ascent year to date, RareX shareholders may have simply concluded that all the good news was now fully priced in – leaving it highly exposed to profit-takers today.
Interestingly, while Iluka shares were down 2% on the same news yesterday, the share price jumped by around 4% today.
Mrima Hill is a globally significant RE project
Share price movements follow yesterday’s revelations that the Perth-based rare earth small-cap was potentially enhancing its role in the critical minerals space by entering a consortium agreement with Iluka to apply for the Mrima Hill rare earth project in Kenya.
Regarded as a globally significant rare earth project in Kwale County in Kenya, Mrima Hill is understood to be prospective for phosphate, niobium and manganese.
Assuming the partnership’s formal submission at Mrima Hill is successful, it will attempt to form a joint venture with Kenya’s National Mining Corporation (NAMICO).
The partners have also applied to form a special purpose vehicle (SPV) which would see RareX spearhead community engagement, environmental protection and technical derisking through studies and field work.
RareX is expected to deploy the skills and experiences from its Cummins Range project - Australia’s largest undeveloped rare earth project - near Halls Creek in the Kimberley region of WA, which is understood to be a similar style deposit.
RE deposits to feed Eneabba refinery
All going to plan, Iluka will receive 25% ownership in the SPV with RareX for at least a 20% economic interest in the project throughout the prospecting licence phase and until a Mining Licence is granted.
Included within the consortium agreement is a binding conditional offtake term sheet with Iluka for all rare earth and heavy mineral product from Mrima Hill.
Iluka expects these rare earth deposits to ultimately feed its Eneabba refinery, which is under construction in WA courtesy of a $1.65 billion federal government non-recourse loan.
RareX’s managing director, James Durrant, told investors that opportunities like Mrima Hill were exactly what the company was set up to capitalise on, namely large-scale rare earth projects that participate in the global supply chain.
“This agreement shows that RareX has got significant ambition in the rare earth space,” Durrant said.
“Iluka has got a great facility that’s taxpayer funded with that $1.65bn loan but it doesn’t have long-term quality feedstock. We’ve got a vision for the project and I think Iluka liked the vision.”
Win-win for RareX, Iluka, NAMICO
Overall, the proposal at Mrima Hill ids expected to be a win-win for RareX, Iluka and NAMICO.
While it would allow Australia to provide the complex rare earth value-add in a critical metals value chain, it would also provide Kenya with a domestic supply of manganese, niobium and phosphate for the local steel and agricultural sectors.
RareX has a market cap of $28 million; the share price is up 118% in one year and up 288% year to date.
The stock appears to be in a strong bullish trend, confirmed by multiple indicators.
Consensus doesn’t cover this stock.
Iluka has a market cap of $1.6 billion, making it an ASX300 stock; the share price is down 50% in one year and down 25% year to date.
The stock shares appear to be in a long-term bearish trend, confirmed by multiple indicators.
Consensus is Moderate Buy.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
