The senior
officers of rare earths miner Northern Minerals Ltd. (NTU: ASX or NOURF:
OTC/PK) were recently in New York City, meeting
with investors and mining industry leaders. Chief executive officer, George
Bauk, and chief financial officer, Mark Tory, offered assurance of progress in
the company’s plan to become a major supplier dysprosium, one of the exotic
minerals that give high-performance metal alloys their ‘magnetic’ appeal.
Headquartered in Perth, Australia, Northern Minerals is developing mineral
resource assets in the Browns Range in north Western Australia.
The chemist who
discovered dysprosium in the late 1800s named it from the Greek word dysprositos
meaning ‘hard to obtain.’ The name should provide investors insight into the
work days of Bauk and Tory. Their team is currently perfecting a value
creating step to ‘separate’ the dysprosium and other rare earths into oxide
forms. An electromechanical contract
manufacturer K-TECHnologies
is helping with a bench scale testwork.
K-TECH has also been enlisted to complete a scoping study that will
ultimately help inform an effort to find more customers for Northern’s dysprosium.
What makes
dysprosium appealing to customers? The mineral has that ubiquitous shiny,
silvery appearance that seems to characterize every metal destined for
electronics and metal alloys. Even if it
looks the same as the next shiny rock, dysprosium is set apart by its
performance.
Dysprosium
tarnishes slowly in the air and ties with another rare earth called holmium as having
the most magnetic strength of any of the elements. Alloyed with terbium and
iron it expands and contracts in the presence of a magnetic field, making it
useful in marine sonar applications as well as sensors and transducers.
Dysprosium is also capable of absorbing neutrons. Teamed up with nickel it is
used as cement in the control rods used in nuclear reactors.
Inspired by a wide range in use-cases and a rising selling price, the Northern team is anxious
to get to market. The company’s
engineers have found a few bottlenecks in a pilot processing plant built in
2018. Bauk’s presentation includes a
laundry list of tweaks and twists that must be completed to bring the plant to
nameplate capacity. A budget of AUS$2.1
million (US$1.4 million) is needed to get the work done by October 2019.
Fine tuning the processing
pilot plant is not the only capital investment in Northern’s budget. The company’s geologists are also still
exploring the Brown’s Range for more rare earth deposits. Over the next three years at least AUS$9.5
million (US$6.4 million) is needed to support additional drilling and resource
estimation work.
Northern Mineral
is actively raising capital to support its capital budget as well as reduce
debt on its balance sheet. The story
management tells is made more interesting by the successful shipment in December
2018 of rare earth carbonate from a pilot plant. Reaching the maiden production milestone might
have helped secure in August 2019, an
off-take agreement with Thyssenkrupp AG (TKA: DE or TYEKF:
OTC/PK). The
German industrial engineering and steel production company is a strong
reference customer and more importantly a reliable payor.
Some investors
might be put off by the appearance of NOURF as a penny stock. Granted the company remains at an early stage
and there is still plenty of risk in the business -
production bottlenecks, dilution from new capital raises just to mention
two. However, the share price is also a
function of the Australian preference for a low stock price and a large number
of shares outstanding - in Northern’s case 2.5 billion shares at
AUS$0.06 (US$0.05). In the U.S. market
the same company would probably have 25 million shares outstanding and a share
price of AUS$6.00. One way or the other
the market capitalization is still AUS$150 million (US$101.2 million).
Neither the author of the Small Cap Strategist web
log, Crystal Equity Research nor its affiliates have a beneficial interest in
the companies mentioned herein.
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