www.ggg.gl
Greenland Minerals and Energy Ltd, is a mineral exploration and development company, focused on unlocking the mineral riches of Greenland, one of the world’s last natural resource frontiers. Our aim is simple; to identify large mineral deposits with the potential to underpin long term, economically robust mining operations. This is achieved through technically-focused exploration, aggressive resource development programs, and a strong understanding of the fundamentals that drive the business of mineral exploration and development globally.
Our flagship project is Kvanefjeld, a multi-element deposit located near the southwest tip of Greenland. Through focused exploration, Kvanefjeld is rapidly growing to become one to the world’s largest undeveloped deposits of rare earth elements, uranium and naturally occurring sodium fluoride, commodities with long term forecasts for strong demand increases.
Research group places price target of A$1.46 on Greenland Minerals and Energy
Resource Capital Research has conducted an analysis of Greenland Minerals and Energy (ASX: GGG), finding the Greenland explorer's assets and projects are worth approximately A$1.46 per share, 56% above the current share price of A$0.82, and sees considerable upside.
ASX Code: GGG
Cash: $6.3m (Sep Qtr)
Market Cap: $220.4m
Total Issue: 270.4m
12m High/Low: $0.31/$1.10
A 33% one-month gain for GGG is the result of a buoyant REE market and the Greenland's official nod to uranium exploration at the giant Kvanefjeld Project (forecast REE 43.7kt/yr, U3O8 3.9kt/yr).
Greenland Minerals and Energy listed on the ASX in June 2006 and is evaluating the uranium-rich Kvanefjeld multi-element project in Greenland.
The project (80km2) is located on the SW tip of Greenland, at Narsaq. Within the Ilimaussaq alkaline intrusive igneous complex, it is one of the world's largest rare earth elements and uranium deposits.
Other elements and minerals include zinc, tin and sodium fluoride. GGG‟s 61% ownership is moving to 90% with A$10m payment, and 100% with A$50m.
The deposit is a flat-lying slab of disseminated mineralisation, open at depth and in three directions. Current JORC resource (Jun 09) is 457mt @ 0.028% U3O8 for 283mlbs, 1.07% REO for 4.91mt (includes yttrium) and 0.22% Zn for 0.99mt, with 79% of these in the Indicated category.
There is also 363mt @ 0.85% NaF for 3.09mt. The resource covers 2km by 1km and extends from surface to 280m depth.
There is resource upside within the ~6km x 4km Ilimaussaq intrusive. Regional and resource development drilling (~11,000m from Jun ‟10) has intersected black lujavrite at Zone 2 (6km SE of Kvanefjeld), which is similar to mineralised rocks to the resource.
Modelling suggests the lujavrite is present as a continuous layer at depth between the resource and Zone 2 and assays are expected 4Q10.
Metallurgical and mineralogical tests are at an advanced stage. Current process flow sheet includes alkaline pressure leach (CPL) to remove uranium, recovering 84%, followed by flotation and acid leach to produce REE carbonate (rec. 34%).
There is potential to improve recoveries, and to beneficiate the ore prior to the CPL circuit and reduce costs. There is also the possibility of generating a zinc concentrate (ZnS).
Fluorine and thorium can both convert to insoluble compounds during CPL. A recently started mineralogical study at UBC (Uni British Columbia) should help refine the processing methodology.
The Pre-Feasibility Study (updated January 2010) calls for open cut mining and 10.8mtpa processing, for 43.7kt REO and 3.9kt (8.6mlbs) U3O8. Total capital cost is US$2.31bn including contingency.
Operating costs are US$3.83/t mining, US$23.55/t for the CPL uranium circuit (US$29.61/lb at head grade 365ppm U3O8), which includes some of the REO flowsheet, and a further US$13.62/t for the REO circuit (US$3.36/kg at head grade 1.19% REO).
Construction is scheduled for 2013 and production for 2015. The study places mid-point NPV (10% disc) at US$2.18bn (pre-tax). Base commodity prices are US$80/lb U3O8 (current LT contract price is ~US$62/lb) and US$13/kg REO (which could now be +US$30/kg).
Break even U3O8 is US$37.47/lb. A definitive feasibility study could start in mid 2011 if approved by the Greenland Government.
GGG raised working capital in 2Q10, placing A$6m in equity at A$0.34/share, and has organised a further A$15m equity facility that can be drawn down when needed over the next 5 years.
An NPV of US$2.18bn for a PFS-stage project, even pre tax, compared to the market cap of A$220m suggests GGG is undervalued. The gap is due to investor uncertainty, over Greenland's attitude to uranium mining, the metallurgical process and the large capex.
In September 2010, the Greenland Government amended the Standard Terms for Exploration Licences to include radioactive elements as exploitable minerals for the purpose of evaluation and reporting.
This allows further development of Kvanefjeld and signals the Government's willingness to talk about uranium mining – the next positive sign would be approval to start a DFS in mid 2011. As the share price chart shows, this news and the strong rare earths market have been well received by investors.
Assuming GGG raises 50% of project capex at A$2/share, pre-tax NPV is A$1.46/share: a likely mid-term price target if the DFS goes ahead and good progress continues with the flowsheet and Kvanefjeld exploration.
