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Why VHM is a must-buy

VHM critical minerals

VHM has established itself as one of the most promising critical minerals stocks on the ASX.

There is plenty to be excited about with the VHM story, whether it’s the company’s future dual revenue stream, or the fact that its Goschen rare earths and mineral sands project in Victoria is one of the world’s largest critical minerals deposits.

VHM is also favoured geologically, with Goschen comprising what former VHM chief executive officer and current non-executive director Graham Howard has called an “incredibly pure rare earth matrix”.

The purity of the Lake Boga granite which forms the basis of the Goschen project supports a conventional, low-cost processing method. This in turn produces in-demand heavy mineral concentrate (HMC), rare earth mixed concentrate (REMC) and mixed rare earth carbonate (MREC) products.

Small cap researcher MST Access believes VHM – currently trading at around $0.55 per share – has a valuation of $1.67 per share.

“The current focus is on 98.8Mt (million tonnes) of the 198.7Mt ore reserves in Areas 1 and 3, and an initial mine life of 20 years,” MST said in its initiation report.

“The total mineral resource provides potential for material production scale up and mine life extension beyond 40 years. The 100 per cent ownership provides strategic flexibility, including enhancing funding options via the partial sale of the project to a strategic partner.”

MST highlighted Goschen’s potential as a high-value asset, with the project’s definitive feasibility study (DFS) demonstrating a $1.5 billion pre-tax net-present value (NPV) and a potential annual pre-tax cashflow of $270 million.

The dual revenue stream is also a plus.

“The diversified product stream reduces revenue risks and VHM’s three-stage approach to developing Goschen lessens up front capital spend and capital risk,” MST said.

Phase 1 of Goschen development will involve the production of REMC and zircon-titania while Phase 1A sees a hydrometallurgical circuit installed to refine REMC to a higher-value MREC product.

If pursued, Phase 2 would involve constructing a mineral separation plant to further value-add the zircon-titania product.

Goschen has the potential to produce the four core rare earths needed for permanent magnets – neodymium, praseodymium, dysprosium and terbium – all of which are set to be in deficit in the years to come.

“VHM’s products are key inputs into decarbonisation and electrification, especially EVs (electric vehicles) and wind farms,” MST said.

“Market analysts estimate an undersupply of 90,000 tonnes of rare earth oxide by 2040, with the magnet rare earth oxide market predicted to grow five times by 2040.”

VHM also has the backing of a memorandum of understanding (MOU) with Shenghe Resources, which, if converted to a binding agreement, would see the leading Chinese rare earths mining and processing company purchase 60 per cent of Goschen’s product.

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