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Special report: Pensana in Chinese means “giant rock” and that’s exactly what the junior explorer is optimistic it has at its neodymium-praseodymium (NdPr) project in Angola.
NdPr is used in the manufacture of high-strength permanent magnets that are used in the automotive industry for electric components such as seats, mirrors, wipers, steering and braking, as well as in the traction motors of hybrid and electric vehicles.
Pensana’s (ASX:PM8) “Longonjo” project already has a resource of 11.6 million tonnes at 4.3 per cent rare earth oxides (REO), with a good composition of NdPr at around 20 per cent.
The company believes it can grow the resource by at least four times and has set itself an initial resource target of 50 million tonnes at 4.6 per cent REO, which would give it 2.3 million tonnes of contained REO.
“A fivefold increase would make it a 50 million tonne deposit,” Graeme Clatworthy, the general manager of Pensana’s Angolan subsidiary Ozango Minerais, told Stockhead.
“This would make Longonjo one of the world’s largest NdPr deposits with the distinct advantage of being located adjacent to a major rail link to the Atlantic port of Lobito.”
And there is plenty more exploration upside in Pensana’s project, with the current resource just 10 per cent of the total 6 sq km mineralised area that is currently being drilled.
The first 14 holes of the ongoing drilling program all intersected mineralisation, with the majority showing mineralisation starting from the surface and extending up to 50m in depth.
Several high-grade intersections have been returned, including up to 30m at 7.72 per cent REO including 1.21 per NdPr from surface, that significantly extend the NdPr mineralisation.
Several new zones up to 50m in thickness have been intersected across the highly weathered carbonatite — the host to high-grade mineralisation in the resource area — compared to the average 20m of thickness in the area of the resource.
The east-west extent of the horizontal blanket of weathered mineralisation has increased from 450 to over 1400m and remains open in all directions.
“These are very encouraging first results as they confirm that the blanket of highly weathered mineralisation extends well beyond the known resource, is thicker in places and has some very good grades,” chairman Paul Atherley said.
“We look forward to a regular flow of drill results over the coming weeks as we build up a better understanding of the scale and grade of this very promising deposit.”
Pensana says the first drill results support the potential to significantly expand the maiden resource, which remains open in all directions and extends over just 6 per cent of the total area of the Longonjo carbonatite.
Shortfall on the horizon
There is plenty of global demand to drive projects like Longonjo into production.
The NdPr market is expected to grow at an annual rate of 8.9 per cent to $US87 billion ($121.8 billion) by 2019.
Demand is expected to double by 2025 with a supply shortfall emerging as early as 2020.
Right now, China controls well over 96 per cent the world’s NdPr production.
But by 2025 the Asian powerhouse is predicted to become a major net importer as its continued pollution crackdown sees the closure of more unsustainable operations.
This means emerging producers like Pensana will be in prime position to help fill the shortfall in supply.
First mover advantage as Angola opens up
With a change in president in September last year, Angola is now working to diversify its economic wealth from just oil and diamonds to other minerals as well.
Angola neighbours the Democratic Republic of the Congo, Zambia and Namibia and the mineral endowment in those countries is massive.
On top of that, Angola has had very little exploration for minerals other than diamonds.
“We are one of the first companies in there looking for minerals,” Mr Clatworthy said.
“Mineral exploration and development is fledgling over there, but the new president is pushing for this to happen and we’re seeing this with regards to the incentives you get given over there and import exemptions and the help at government level.”
And Pensana has established solid relationships with its state-owned partner, Ferrangol, and the government over the past four and a half years.
The Longonjo project has many advantages including a large shallow resource, proximity to recently refurbished infrastructure including a road, railway and deep-water port, and access to hydro power.
Strong management and cashed up
Pensana has a new and experienced management team and recently raised $5.5 million to advance the Longonjo project.
The company is headed by UK-based senior resources executive Paul Atherley as chairman.
Mr Atherley has held numerous senior executive and board positions, including with banking giant HSBC.
David Hammond is chief operating officer and a geologist with over 25 years of international experience.
He is well versed in developing rare earths projects in Africa, having spent seven years as technical director with Peak Resources working on the Ngualla rare earth project in Tanzania.
Neil MacLachlan and Mark Hohnen have joined the board as non-executive directors.
Mr Hohnen was the founding executive chairman of Kalahari Resources, which listed on London’s AIM exchange in 2006 for ￡15 million ($27.5 million) and was taken over in a ￡651 million deal in 2012.
Mr MacLachlan is an internationally experienced investment banker, funds manager and public director.
He was also a director of Kalahari Minerals, as well as Extract Resources, which was swallowed up in a US$2.2 billion ($3.1 billion) deal in 2012.
Meanwhile, Mr Clatworthy has over 28 years of experience in the stockbroking industry and is an experienced public company director.
Drilling continues
Pensana has already started a 9000m drilling program and plans to undertake further drilling in January next year.
The company is aiming to deliver an updated resource by July next year.
The drill program, which is covering an area approximately 10 times that of the initial resource is progressing well with 75 holes completed.
The program is expected to be completed towards the end of this month with results flowing through over the next few weeks.