Pensana: a strategic issue for the future
Pensana (LSE: PRE)
163p (160p to 165p)
Mkt Cap: £ 142m
Next results: Y / th June is Oct
A world-class sustainable supply of critical rare earths for the green economy to Humber
The new economy needs electric vehicles and wind turbines and these industries and other strategic sectors of the green economy need tons of permanent magnets. Pensana is developing a rare earth mine in Angola, which has an estimated life of 20 years and a mine life with an annual production of 12,500 tonnes of rare earth oxides. This includes 4,500 tons of strategically critical magnet metallic rare earth oxides, which should represent 5% of the global demand projected in 2025.
Today, Pensana announced its Mine to Market Business Plan, to establish a rare Earth separation plant in Saltend, Humber which will be the world’s first large separation facility established in over a decade and which will be one of only three major producers outside of China. The planned $ 125 million facility would create more than 100 direct jobs in the processing of purified rare earth sulfates, which would be imported by the company. state-of-the-art Longonjo mine in Angola.
Once established, this Mine to Market strategy generate portfolio expansion returns such as; 2 years ROI, 57% IRR, NPV (Net Present Value) of $ 2.3 billion, and EBITDA of $ 359 million per year. However, these are projections and subject to funding. The plan, however, does not contemplate funding problems; Saltend is already receiving grants from the UK government’s £ 1bn Automotive Transformation Fund, founded to support the nation’s transition to electric vehicles. Pensana has already received indications of potential financial support from its largest shareholder, the Angolan Sovereign Wealth Fund, as well as approaches from a wide range of financial institutions.
Before the funding is clear, the current £ 145million mkt cap will look cheap at less than 8% of NPV, so risk appears to be missing on the upside. A strategic purchase
* The author has an interest in the company