Altona Rare Earths Plc (REE) Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to the Altona Rare Earths plc Investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However the company can review all questions submitted today and we'll publish those responses where it's appropriate to do so. We'll shortly submit a poll, and I'm sure the company will be most grateful for your participation. I'd now like to hand over to the management team today. Cedric, good morning.

Good morning, ladies and gentlemen. My name is Cedric Simonet. I am the CEO of Altona Rare Earths. I've been with Altona for about four years now, initially as Chief Operating Officer. I was appointed CEO when we moved to the main market about two years ago. I am a geologist by profession with a PhD in geology and about 30 years' experience in mineral exploration, mining and business management, mostly in Eastern and Southern Africa. This is our disclaimer page. Please have a look at it later in the recorded version. So Altona is listed on the main market. Our ticker is REE. We currently have about 209 million shares in issue for a market cap of about GBP 2.5 million. So the company is called Altona Rare Earths. But since early last year, we have started to implement a diversification strategy. The rationale behind this is that a carbonatite rare earth project like Monte Muambe is complex, CapEx heavy. The scoping study estimate for CapEx is $275 million, and it's a long-term project. So we think that beside the rare earths at Monte Muambe, we should also give attention to assets or projects that present opportunities for short-term monetization, either through disposal of an exploration asset or through the rapid development of a small low CapEx mining operation. We already have two such assets in our portfolio, and I will take you through this. We are currently operating in Mozambique and in Botswana. So we consider that Monte Muambe is actually two separate projects located on the same mining license on the same geological structure. So we have the rare earth project, which is currently at pre-feasibility stage. It already has a JORC maiden mineral resource estimate of 13.6 million tonnes with 2.42% total rare earth oxide. A scoping study has been completed in late 2023. We have the mining license granted. And then on the same license, we also have high-grade Fluorspar deposits. They are smaller in size, but they are very high grade. And this offers an opportunity to potentially develop them very rapidly and to create cash flow for the company. So this is something that we are putting a lot of attention on at the moment. And then on top of rare earths and Fluorspar, we also have recently discovered gallium occurrences at Monte Muambe, which are currently being assessed, and I will tell you more about this. And then in Botswana, we are active in the Kalahari Copper Belt, which is a very hot new copper province of Africa. We have a copper silver exploration project, which we call Sesana, and I will also tell you more about this. So our Board has four members. We are trying to be as lean as possible in terms of overheads and corporate G&A costs. So we've got two executive directors and two non-execs. I'm the CEO. Louise Adrian is our CFO. She's a qualified chartered accountant, and she's been with the company for now about four years, same as me. Our Chairman, Simon Charles is a senior partner with Simon Charles is a senior partner with Marriott Harrison. And then Kris Andersson is the CEO of Ironveld, which is an AIM mining company. Louise and Simon are based in the U.K. I am based in Kenya, and Chris is based in South Africa. So when we talk about critical minerals, we are talking about minerals which have been put on lists by different governments or intergovernmental organizations like the European Commission. And each of these entities has got its own list. It's very interesting to see that the -- most of the minerals we are looking at, especially fluorspar, copper and rare earths are on all the existing lists. These minerals are on the critical mineral list of China. They are on the critical mineral list of the European Union and also of the United States. Gallium is out, but it is still on the list for China, but it is still on the list for the EU and the U.S. In terms of market, rare earths at Monte Muambe are mostly what we call magnet rare earths, neodymium, praseodymium, terbium, dysprosium. These materials are very important for the green energy transition and for high-tech applications. But now there is an emerging new consumer market, which is arising, and that is a market for robots. When you see a robot on a TikTok video or in real life, every single joint in that robot is using a rare earth magnet. I will tell you more about the fluorspar market on another slide. In terms of gallium, gallium is a metal which is used in high-performance electronics. There are alternatives to gallium, but those components made with gallium have very high performance characteristics. And as a result, as usual, they are used mostly in defense systems. So that makes gallium a very critical mineral for the U.S. and for the EU. Let's go to Monte Muambe. Monte Muambe is located in Northwest Mozambique in province near the border with Malawi. In the same part of Mozambique, there is a lot of coal mining. We are near the large coal mines of Vulcan and ICVL. It's a very safe and major mining region of Southern Africa. We have access to infrastructure and international airport, service providers, equipment suppliers, et cetera. We also have access to clean green energy from the Cahora Bassa hydropower plant, which is located nearby. And we have access to two different railway options to Indian Ocean ports, the Nacala corridor that goes to Nacala and the Sena line that goes to the Port of Beira. The mining license for the project was granted in December and is valid until 2049. That was a very important milestone for us to contribute to derisk the project. We have an earn-in agreement in place with the original owners of the prospecting license. We currently hold 51% of the prospecting license through the local subsidiary -- sorry, -- we currently own 51% of the mining license through the local subsidiary. The mining license covers the entire carbonatite intrusion. As you can see on the photo, nobody lives there. So there are no resettlement issues. It's actually an excellent location for a mining project. So as far as the rare earths are concerned, as I said, we are looking for a strategic partner to support the development of the project. When we say a strategic partner, what we mean is an entity, whether a company or a government involved in the midstream or downstream rare earth supply chain or interested in securing access to a responsible source of rare earths in the long term. We have several active work streams to achieve this objective. If you have read our recent analysis, you will know that we are currently very actively engaging with U.S. government agency, which has expressed interest in contributing to funding the pre-feasibility study for a ground. This is very interesting because we've been engaging with the U.S. government for about two years. And initially, they wanted to work with projects that were more advanced than ours, closer to production. But recently, they called us back and explained to us that now they have facilities for projects which are at our stage. And obviously, we said that we were very interested, and we have a process actually ongoing to be able to access this facility. We are also -- besides the rare earths and the strategic investor, we are also following up on the gallium discovery. I will give you more information about this in a minute. And in terms of our operations, our main focus is the development of the high-grade fluorspar deposits, which we are going to talk about right now. So this leads us to the Fluorspar project, again, located on the same mining license at Monte Muambe as rare earths. Fluorspar is a very interesting mineral. You may not be familiar with it. So I've decided to put this market slide first. It's a mineral that I know very well because I used to mine fluorspar myself in France about 20 years ago, both underground and open cast. So the fluorspar market is very interesting because fluorspar is, at the same time, an industrial mineral and a critical mineral. It's an industrial mineral because it has been used by the industry for hundreds of years, and there are literally thousands of applications. There are different types of grades. One is called metallurgical spar. That's when you use actual fluorspar as a smelting agent for metals. There is another grade called ceramic grade fluorspar. And very importantly, there is a grade called acidspar, which is used to produce hydrofluoric acid. And this hydrofluoric acid is used as a precursor for every single chemical application that uses the element fluorine. So if in the morning, you brush your teeth with a toothpaste that says contains fluorine, that fluorine came from hydrofluoric acid that came from fluorspar. More importantly, every single device that you use, which contains a lithium battery, the electrolyte of the battery uses fluorine and hydrofluoric acid is also used in the processing of some of the components of the battery. So basically, it takes about 1 kilo of fluorspar per kilowatt hour of battery. In terms of a cell phone, we are talking 10 to 20 grams of fluorspar. In terms of an electric vehicle, depending on the size, we are talking 20 to 100 kilograms of fluorspar. So as a result, fluorspar is not just an industrial mineral, it is also a critical mineral. That's why it's on the critical minerals list. And this blend of industrial and critical results in a market which is steadily growing, a well-established mature market, which is steadily growing. If you want to sell a ton of fluorspar acid grade fluorspar today, it's very easy. The demand is huge. There is a well-established market. You just talk to the traders and you sell your fluorspar. But the prices are increasing also steadily, and you don't see the sort of very sharp peaks ups and downs that you would see with rare earths and lithium, which are more recent newer commodities. So an excellent market to be on in our opinion. So Monte Muambe originally was known as a fluorspar deposit. It is actually during the course of fluorspar exploration that rare earths were found for the first time in 2011. Since that time, the prices of fluorspar have more than doubled. So the economics of fluorspar are completely different. Since October last year, we have been reviewing the Fluorspar production potential. The results that we have obtained so far show us that the fluorspar deposits at Monte Muambe could sustain a production of 50,000 tonnes per year of acid grade fluorspar over a life of mine of more than 12 years. This project has attracted a lot of attention, not just from the market in London, but also from different segments of the fluorspar industry, including traders, producers and even a possible offtaker in Mozambique. The next step for us to derisk the project and advance it towards production is to do resource drilling. As you know, we have just raised funds, and we are now in the process of mobilizing our resources to the site to start this resource drilling in a couple of weeks. This resource drilling is going to give us a fresh resource estimate for the fluorspar project now. The estimate I mentioned earlier was for the rare earths. Our objective initially is 4 million tonnes of fluorspar ore at 30% CAF II, which would sustain that anticipated production of 50,000 tonnes per year. And the drilling will also provide us ore samples to finish the metallurgy. The advanced metallurgy will allow us to produce a flow sheet and also to provide samples for offtakers. All this is going to be done by the end of this second half of 2025. So a lot of very exciting news flow on the fluorspar project can be expected over the next weeks and months, including a resource estimate. Another interesting thing is that I'm coming to the gallium, but the gallium soil geochemistry has proven to be useful to find new fluorspar deposit, new high-grade fluorspar deposits as a pathfinder. We've discovered one new Fluorspar ore body, which was unknown until now that was in May, and we expect that the field work that we are starting now is going to allow us to discover even more fluorspar ore bodies. So gallium is a very critical mineral, again, for high-performance electronics, in particular, for the defense industry and some specific applications also for lasers and for radar systems. So gallium is usually recovered as a byproduct of alumina during the extraction of alumina from bauxite. Gallium in association with rare earths in carbonatite, it's a very new geological concept. You will find that some rare earth exploration companies have reported gallium occurrences, but you will not find scientific papers about this because it's completely new. And as such, it's very exciting because that can open the door for a lot of good surprises. So far, the work we have done has shown gallium grades of up to 550 grams per tonne, which is very, very high. The discovery hole had 77 grams per tonne over a length from surface to minus 100 meters of 100 meter, including 15 meters at 141 grams per tonne of gallium. So this is all very exciting. So far, we found gallium in two different contexts. Initially, we found gallium associated with rare earths, and we are currently having metallurgical testing done at SGS Lakefield in Canada to check whether gallium will follow the rare earths in the flotation process and therefore, can be recovered in the concentrate with the rare earths. And more recently, we have reported that we found also gallium in association with fluorspar in a different type of rock called prehnite. And this is very interesting because this rock, this prehnite contains about 30% fluorspar, which is ore grade as far as fluorspar is concerned. So what that means is that when we process this rock to extract the fluorspar, the gallium is going to go to the flotation tailings and the concentration of the gallium in the tailings is going to be higher than that of the original rock. So one more potential opportunity to concentrate gallium minerals and to extract them. It's a very early stage project, the gallium project, but very exciting because we may be able to produce gallium concentrates also from Monte Muambe, possibly as a byproduct of the rare earths and/or as a byproduct of the far. So something that you will want definitely to follow. And there will be also news flow about this over the next weeks and months. So let's go to the Sesana copper silver project in Botswana. It's a very exciting exploration project. It's grassroot exploration, but with very high potential. The Kalahari Copper Belt is an emerging copper province, which has seen a lot of M&A activity over the past years. The beauty of the KCB, as we call it, is that all copper silver deposits are systematically located along the contact between two sedimentary formations, D'Kar and Ngwako Pan. You can see it's shown on that little chart. And on airborne -- regional airborne magnetic survey maps, these two formations have got very contrasted features. So what that means is that the location of the contact zones, which have potential for copper can be identified easily on a regional scale. And this is very important. When we acquired the Sesana license, we made sure that the license was on one of these contact zones. And it was actually pretty much the last available ground on the contact zones in the KCB. If you look for available ground in the KCB today, you will find available ground, but not on the contact zone. So we are very happy we are able to snatch this license. The acquisition mechanism from the original owner is a low-cost earn-in agreement, and we get 51% ownership right from the start of the earning. We have already registered a 51% held special purpose vehicle in Botswana. The license is currently being transferred to it in parallel with environmental permitting process. We need to do an EIA before we can hit the ground. As soon as we have the green light, we'll start a high-resolution airborne magnetometer survey, followed by ground geophysical surveys, and we expect to be drilling by early 2026. So a potential discovery by early 2026. Now Sesana is not just interesting as far as the geological and prospectivity is concerned, but also the commercial context is very interesting. On this map, you can see in gray the location of the Sesana license marked Altona. The blue lines represent the contact zones. We have about 11 kilometers of contact zone on our license. We are located on strike with Cobre's Kitlanya East project, which is now under AUD 40 million JV with BHP. And we are -- more importantly, we are also 25 kilometers away from the Khoemacau Zone 5 mine, which belongs to a large Chinese company called MMG. MMG bought this mine for over $1 billion a few years ago. And it is now expanding the mine, the capacity, the production capacity of the mine from 60,000 tonnes per year of copper contained in concentrate to 120,000 tonnes per year. So to do this, to achieve this expansion, MMG is using its existing ore resources. But it's very clear that they are looking for more ore. And if we have a discovery at Sesana, it doesn't have to be large enough for a stand-alone project. As long as the grade is right, MMG will be knocking at the door to acquire the license. So potentially, again, a very short time line to monetization, which is very important to our current strategy. A few words about time lines and news flow. I know that this is very important for everyone. 2025 is going to be a very busy year for us. We expect that we will have drilling targets defined at Sesana by the end of this year with news flow on geophysical activities and initial drilling results by the end of the first quarter next year. At Monte Muambe, the fluorspar project will progress in parallel with gallium exploration. We expect news flow from drilling updates from a fluorspar mineral resource estimate, process flow sheet, metallurgy, product sample and commercial engagements with offtakers and a scoping study by the end of the year, beginning of 2026. If that scoping study is positive, which we expect, we will then fast track a definitive feasibility study to get to a final investment decision by mid-2026. So Monte Muambe, the fluorspar project, again, it's a relatively small mining operation. So it can be constructed very quickly. The construction time is expected to be about one year, which means that we could get into production by mid-2027. And the CapEx for the operation is going to -- is estimated to be about USD 10 million, so very moderate. And from the engagement we've had so far with potential offtakers and partners, we are very confident that we will be able to organize offtake and debt funding to cover the largest part of the CapEx. So we don't expect that this CapEx is going to be very dilutive for existing shareholders. In terms of the pre-feasibility study, our focus for the -- sorry, the pre-feasibility study for the rare earths. Our focus right now is to complete this engagement with the U.S. government to obtain their support. Immediately, this is done. PFS activities will focus initially as a priority on advanced metallurgy. Metallurgy is very important at Monte Muambe, and there are lots of possible gains in improving the metallurgy in terms of costs and to reduce the anticipated cost of the project, both OpEx and CapEx. So this is going to be our focus initially. And then you can expect drilling to get to a resource upgrade, all the normal studies, geotechnical studies, mining studies, et cetera. And in parallel with the PFS, we will do the environmental impact assessment work and study and approval. In terms of diversification, we are still looking around at possible opportunities. As you know, we are largely based in Africa. We see a lot of possible opportunities. And if we see an opportunity that fits our strategy of short-term monetization opportunity, we will look at it very carefully. However, we do not expect that this will interfere with our current focus on the fluorspar project, which is our priority in terms of operations and development. So I'm getting to the end of my presentation. In terms of implementing our strategy and building the momentum towards monetization, we can summarize our short-term plans in three words: develop, discover and diversify. We will advance the Sesana project towards the discovery, and we will continue to assess the potential of the recent gallium discovery at Monte Muambe. At Monte Muambe, we will put a lot of attention on the fluorspar project and its development. That's a short-term project and on the long term, also, obviously, the rare earth project. And then as I've just said, we are still looking at potential opportunities to continue diversifying the portfolio of projects, focusing on assets that can generate cash in the short term, but being careful not to be overambitious and not to interfere with the existing projects, especially the Monte Muambe fluorspar project. Thank you. That concludes my presentation.

Cedric, thank you very much indeed. [Operator Instructions] Firstly, thank you to everybody for your engagement. Cedric, as you can see, you've had a number of questions from investors. So thank you very much indeed for that this morning. If I may, Cedric, just ask you to read out those questions where it's appropriate to do so, and then I'll pick up from you at the end.

Thank you, Mark. So there is a first question, which is a question from an existing shareholder about -- as I mention in the fundraise RNS that existing shareholders should contact either Oberon or the company in case they want to join the blended placing offer. And there is a deadline for this, which is tomorrow. So if you have not been able to contact your broker or if you have not got any response, I would suggest that you contact Louise Adrian, our CFO. Her e-mail address shows on the slide, which is on the screen now, la@altonare.com. So please contact Louise, and she should be able to assist. There is a question about the existing GBP 1 million loan which is due to mature in two months. We are in discussions with the loan, the lenders to extend the maturity date and to look at ways to address this debt. I can't tell you more about this now, but this is something that has all our attention, and we are working on it. All right. Let me make sure that I address all the questions. There's quite a long list. What is the estimated value of the known resources? So we've not done a formal valuation and rare earths are new commodities. So it's not like gold or copper where you can ascribe a certain value to each tonne of material in the ground. If you look at the scoping study, there is a discounted cash flow model with an NPV. The NPV of the project in the scoping study is GBP 283 million. It's an NPV 8. So that gives an idea of the value of the project. If you multiply the current price of neodymium and praseodymium by the quantity of minerals in the ground as per the resource, you get to about $4 billion. But that is not a figure that is representing anything tangible because they are also costs. So the NPV figure is better for this. As part of the pre-feasibility study, and I mentioned the importance of the metallurgy, we will look at ways to reduce the cost profile of the project. So I'm expecting that we will provide a revised NPV when we complete the pre-feasibility study. How do you find working in Mozambique? Is the legislation clear and supportive? Altona has been in Mozambique since 2021. I have working experience in Mozambique since 2013, so about 12 years. What I like with Mozambique is that there is a recent regulatory framework for mining, the mining law of 2014. It's currently being reviewed. And from what we have seen through the engagements with the government, it's going to be improvements. What I like with Mozambique is that as long as you do your paperwork right, there is no possible issue. Everything is going to happen as per the book. And the other thing is that Mozambique issues licenses, which is very important. You have some countries which don't issue licenses rapidly, including mining licenses. Altona through its subsidiary was able to benefit from this to get the mining license at an early stage of the project, which helps a lot to derisk projects. So all in all, we think Mozambique is a good mining jurisdiction, and we are happy to have our project in Mozambique. How advanced are discussions with potential fluorspar offtakers and could agreements be signed before the resource estimate is published? So we have several nondisclosure agreements in place with potential offtakers. We have been contacted in total by a dozen of potential offtakers, most of them from Europe, some from Asia. These discussions are currently ongoing. It's likely that there will be more momentum once the resource estimate has been published. That's what I expect. But even as we drill and as we prepare this resource estimate, there will be some engagement and there could be some agreements signed before the resource estimate is published. Okay. Another question. Beyond Monte Muambe, are you actively assessing additional acquisitions in critical minerals or is focused firmly on delivery here? So definitely, we are focusing on delivering with Monte Muambe, especially on the short-term fluorspar project because it is potentially cash generating in the short term, and that's what we are very interested in. I've also mentioned that we are continuing on Sesana. And I've also mentioned that we are still looking at potential additional acquisitions. These acquisitions would need to have the characteristics that we are looking for, which are very well defined, potential for short-term cash flow generation. And the time line of acquisition and spending on such an acquisition would have to be in such a way that it will not interfere with our current focus on Monte Muambe. So the answer -- the short answer to the question is yes, but the long answer is that we are not looking at filling a basket with many projects. We are looking at being very selective and making sure that this project fits exactly our strategy and our capacity. There is another question about the ownership of the Monte Muambe project. Who owns the other 49% of Monte Muambe? So the owners of the other 49% are the original owners of the prospecting license with whom we signed the earn-in agreement. 51% ownership for Altona is the current level we are at, at the end of the scoping study, the end of Phase 2 of the earning. We started with 1%, climbed up to 20%, now 51%. The earning can take us up to 70% on completion of the next phase, which is a pre-feasibility study for the rare earth project. And beyond this, we can buy into an increased ownership. Okay. Why does Altona only apply 12 months expiry on warrants? Well, this is because we are confident in the news flow that we are going to produce and its impact on the share price. And we want to -- these warrants to provide an opportunity to warrant holders to make money, obviously, but also to provide an opportunity for the company to continue funding through our projects, especially the Monte Muambe fluorspar project. I think that's all with the questions for today.

Thank you very much once again to everybody for your engagement this morning. Cedric, if any other questions do come in, I'll make those available to you. But before I redirect investors to give you their feedback, I wondered if I may just ask you just finally for a couple of closing words. And then as I say, I'll redirect investors to give you their feedback.

Thank you, Mark. So in conclusion, I think we are in a very good position now in terms of assets to -- and in terms of engagements with strategic partners, both for the rare earths and the strategic and the fluorspar project. We are in a very good position to deliver on our objectives of early monetization for some of our assets like the Monte Muambe fluorspar project through putting it into production and like the Sesana project through adding value to the project through exploration activities. And at the same time, we are in a good position to advance further the Monte Muambe rare earth project to take advantage of the current geopolitical situation between China and the U.S. And we, as we've seen, the support from the U.S., which is increasingly tangible. I look forward to report on all these activities during the remaining part of this year and early next year, obviously. As you've understood, a lot is going to happen. So a lot of potential news flow and good news over the next months. Thank you.

That's great, Cedric. Thank you once again for updating investors. If I could please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. It's going to take a couple of moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Altona Rare Earths plc, we'd like to thank you for attending today's presentation, and good morning to you all.