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Digging into the Songwe NPV more, I really do think they've gone pretty conservative in order to make sure this gets through the SEC review, which my previous research suggests can be very tough on forecast prices and will reject some reports on the basis of them being overoptimistic.

They have not published an updated breakdown of the TREO basket value, but if I were to make the assumption that other rare earth oxide prices have stayed still since the original 2022 DFS (I know they haven't), using the updated TREO basket value of $28.40/kg I can back solve a Neodymium price assumption of $73.09/kg and a Praseodymium price assumption of $69.34/kg. Today the Chinese price for Neodymium oxide sits at $112.10/kg, which is down 16% from recent highs. So the updated DFS valuation appears to be on the basis of a Neodymium price which is $43/kg or 38% lower than today's price.

If we take into account that the price of heavy rare earths has increased since the original 2022 DFS then that means the Neodymium and Praseodymium prices assumed in the updated DFS numbers are even lower. As I said, I think the conservative pricing will be due to ensuring we pass the SEC review, and because Neodymium prices were about 30-35% lower in December than today, but it does under represent the Songwe NPV significantly imo.

Having done a bit more digging on discount rates I can see that the 10% used for Songwe is more typical of base and speciality metals, compared to the 5% used for precious metals. But if we were to get a price floor then I think you could argue that the discount rate should be lower, particularly when our pricing assumption for Neodymium appears to sit around 35-40% below the current MP price floor of $110/kg for NdPr oxide (which normally trades at a bit of a discount to separate Neodymium oxide). An 8% discount rate gives an NPV of $461m for Songwe. Alternatively, applying an NdPr price floor of $110/kg and using the 10% discount rate I can do a rough and ready back solve to estimate an NPV in the region of $500m.

Yeh, was about to say the Pensana fans won't like your post given that Longongo is in construction too.

Mrs Robinson, I spotted this in a more detailed review of the RNS regarding the Pulawy PFS:

· Rare earth carbonate feed purchase discount: 15% discount on the contained REO value in the rare earth carbonate purchased from the Project at Songwe Hill, 25% discount on the rare earth carbonate sourced from market

Looks like they are assuming a 15% discount on rare earth oxide prices (read TREO basket value) paid by Pulawy for Songwe MREC feed and a 25% discount for MREC sourced elsewhere. So there is a little bit of sharing of the pie going on here i.e. Pulawy is paying more for Songwe MREC than it would for non-Songwe MREC.

Great news today! Sorry been very busy this morning so haven't had a chance to analyse properly, but will try to later today. Funny giving the timing of my analysis yesterday.

One thing I have picked up from a quick scan (sorry if it has already been mentioned), the base case pricing from Adamas is from their December report, when Neodymium prices were over 36% lower than today. This, in my view, partly explains the lower basket value they give of $28.40/kg vs my calcs yesterday. I think the other reasons for the discrepancy may be that no Western premium is being applied to the numbers, which knocks another 15% off the NdPr price (compared to what I used in my analysis) and reduces the achieved Heavy Rare Earths pricing substantially (there is currently a massive mark-up for Heavies in the West). I understand why Adamas will have used the China prices as their reporting benchmark, as there is currently no credible alternative and we need strong references for the purposes of passing SEC review.

The assumption for updated Songwe DFS still appears to be that we are selling the MREC to Pulawy at the 27% discount to TREO basket value, so the benefit of Pulawy is not captured in the Songwe NPV. They also say that the cost of processing at Pulawy is $2.14/kg, which we can compare to the discount to TREO the original DFS applied of $17.50/kg ($64.81/kg starting basket value multiplied by 27% discount). So Pulawy is picking up a substantial operating margin which is probably why its NPV is so high. So effectively we have allocated the full benefit of the integrated mining and processing to Pulawy, rather than reflecting it is the Songwe NPV, as my numbers did yesterday.

All to say, I think the joint base case NPV of $1.12bn is very conservative, as it is based on out of date rare earth pricing, and I don't think reflects the Western premium. It also doesn't reflect grant funding and cheap financing. So $1.12bn is very much a base value, with enormous room for upside. The future is bright here guys and I have topped up a few times already this morning.

I think my point was more that given the size of resource, we could produce more than the market can take on an annual basis, but may not want to do this as we are keen for high prices (read old Opec). Given we are likely a lowest 10% cost producer for rutile we could and may want to knock off more marginal players, but I don't think there is a case for us producing our maximum capacity every year and creating a lower price environment unless we are doing this to destroy the competition as Bonker says. I think they'll look to right size production to maximise profits, and this will change as the supply / demand dynamics evolve, with old mines going offline and demand increasing.

Of course, we will also have cheap financing and likely also government grants that will further improve the picture. I think its safe to assume that with Pulawy and Mkango together, both receiving US and / or EU support, our NPV for MKAR assets would be closing in on a billion $, if not more.

And that's on base case pricing assumptions. If rare earth prices continue to take off, we could be looking much higher. The NPV for Songwe in the DFS using Adamas' upside pricing scenario was $801.4m, so 43% higher than the base case $559m. So you can apply a 43% increase to my figures below if you want an upside pricing case for just Songwe, without any grants / government support.

Biffa, I haven't constructed a financial model to calculate the NPV for the project, so can't at present look at the impact of $100m grant. I'm going to have a look over the weekend at whether there is enough info in the DFS / other sources for me to reconstruct an NPV model and if I can do this I'll have a crack at your scenario, amongst others.

We can do a bit of an updated back of f*g packet NPV calc:

Our base case NPV for Songwe was $559m, which by the way used a very high 10% discount rate (gold miners end to use 5-7%). FYI, The DFS sensitivity shows that at a discount rate of 8% we get an NPV of $719m.

We also applied a 27% discount to TREO prices as we weren't taking into account Pulawy. Reducing the MREC discount from 27% to 15% to take into account the benefit of processing the ore into rare earth oxide at Pulawy, we get $635m NPV (at 10% discount rate) or $817m NPV (at 8% discount rate).

You can argue that we need to increase the cost allowance, though reagent costs have come down, particularly if we use Pulawy, where we have access to cheap resources. I can't get an accurate picture here without a model. But a reasonable high-level assumption may be to knock off 5-10% from the NPV, giving a range of $572-603m (at 10% discount rate) or $735-776m (at 8% discount rate).

All to say that we are massively undervalued, on Songwe alone, not even taking into account Pulawy, Hypromag UK and Germany, Hypromag USA or anything else!

Managed to find the time to do some more detailed analysis on our TREO basket value. The DFS quotes the average basket value as $81.73/kg, starting at $64.81/kg in 2022 (read 2026 for us now given the delays) and increasing to $102.77/kg in 2035 (which would now be 2039).

My calcs for the updated basket value as of today, sold into Western markets (using AI to help with current rare earth pricing assumptions) is $64.25/kg. So nearly exactly the same as the starting assumption used in the DFS.

Notably, Terbium, Dysprosium and Yttrium have gone from 11.9% of the basket value in the DFS, to 35.2% of the basket value in my analysis based on current Western prices. That has offset the drop in Neodymium and Praseodymium prices from the DFS pricing.

If I had done this analysis a couple of weeks ago at Neodymium's recent high, our current basket value would be c. $69.35/kg, nearly $5/kg higher than the starting basket value in the DFS.

I am very pleased by my findings today, I was expecting our current basket TREO value to be lower than the starting point for the base case due to Neodymium and Praseodymium prices still being lower than those used in the DFS base case. So I was pleasantly surprised that we are matching that value on today's prices, having been above it a few weeks back. Caveat here that I have used the help of AI to determine prices for most of the rare earth elements and have used the middle of the range provided for Western prices. For the Heavy Rare Earths there is a very high Western premium compared to the Chinese prices, which if removed would reduce their share of the basket value significantly.

Nice top up velcro! I think the monazite resource is probably quite a while away and won’t be included in the DFS from what I understand. Therefore I expect the next major “expected” news may be the DFS, which today’s Resource estimate obviously feeds into.

The resource is a monster, the only constraining factor is the size of the rutile market, which will determine the limit of how much we can produce annually without tanking the market. Based on Saipan’s previous comments, this mine has a 100 year life, and resource estimates like this start to back that statement up.

What a nice Tuesday night surprise. Feeling like all my top ups in the last few days were luckily timed! Let’s see how ASX reacts but should be a good day here tomorrow.

Sorry, not on FB, what does it say please? Thought we already had the licence in place for Songwe?

I don't even want to go and look Bonker! Will bring be back to a more frustrating point in my Mkango journey. Let's just say it was a bloomin long time...

Sorry to rain on the parade, but I did think the numbers quoted seemed high, so went back and read the pricing section of the DFS again (probably read this about 10 times in total so should have it memorised by now!).

Bob has got himself a bit mixed up it seems. The $64/kg-$102/kg price he is quoting from the DFS is the basket value / price for our TREO not the NdPr price. NdPr oxide (Neodymium oxide and Praseodymium oxide) makes up a large part of this basket price, along with Terbium, Dysprosium, Yttrium and lower value oxides like Lanthanum and Cerium (which make up 39% and 18% of the volume respectively).

The actual NdPr assumptions used to price the basket of rare earth oxides are as follows (directly from RNS): "The base case basket value and MREC price forecasts reflect underlying neodymium oxide (Nd oxide) and praseodymium oxide (Pr oxide) price forecasts of US$165.0/kg and US$156.8/kg in 2022 increasing to US$215.5/kg and US$204.7/kg in 2025 and US$266.0/kg and US$252.7/kg in 2035." Given the delays to the project you obviously need to treat 2022 price as the 2026 price. So for weighted NdPr the DFS pricing assumption we are looking at is around $162/kg for 2026.

Now, we know that the value of Terbium, Dysprosium and Yttrium have all increased massively since the time of the DFS. I did some calcs last year (when they weren't as high as today) and had these elements going from a c.3% share of the basket price, to c.20% of basket price. So we will get a substantial boost from these elements, but the NdPr assumptions used in the DFS are higher than current NdPr prices, even if you apply a Western premium.

I have little doubt that the prices are heading towards those used in the DFS, but Bob's calcs mixed up NdPr prices and basket prices, so is overstating the NPV. I may try and do my calcs again this week in order to provide an updated basket value that takes into account changes in NdPr, Terbium, Dysprosium and Yttrium prices since the DFS. We also have to remember that if we want to remove the 27% discount, we need to add in the capex and opex costs for Pulawy, it's not as simple as removing the discount.

I think that updating for pricing, Pulawy and capex / operating costs we are probably looking at a joint NPV in the region of $600-800m. When we add in grant funding and subsidised financing the numbers will improve substantially imo. Hopefully will be able to provide something more concrete later in the week / this weekend.

Busy with work at the moment, but when I get the time I'll look at those prices properly Drantley. On first viewing I think the Western premium is overstated, I have certainly not seen anything as high as a $50/kg (c. 45%) premium and from memory it was more in the 5-15% range. I also feel like the DFS pricing assumptions were higher than presented in the post, but will check properly when I have the time. We applied a [27%] discount to achieved sales price from memory, to account for the fact we were selling MREC rather than oxides, but now we will have Pulawy so won't need to apply such a big discount.

Couple of small top ups for me in the 45’s. Painful viewing right now but we know what’s coming so it was an easy decision to top up. Will continue to do so as funds become available if it stays here or goes lower.

Another top up from me, thanks very much Mr market.

I have not contacted them, as I have not previously got much back when asking for updates, so wouldn't expect to this time. Things haven't gone smoothly in the sense that they had originally planned to start production before the end of 2025. But I am not particularly worried as we had the same thing with Tyseley, which was operational much later than initially planned. Commissioning any large scale industrial process is difficult, and we have a very complex process.

The things I am a little disappointed about is that they didn't learn from Tyseley and set their timelines / manage expectations accordingly, and that they haven't communicated more proactively on German progress. But they are small gripes, and I have confidence they'll just be minor bumps in the road to becoming a market leading company.

Having the Inserma units commissioned in Germany will be good, but agree with others that the market is focussed on wider German plant commissioning. So while commissioning of Inserma units is welcome news and shows intent, it isn't the complex part of the process and won't move the dial in terms of SP. Hopefully we get an update on wider German commissioning in the next two weeks.

Yep, got a few top ups in there just above and just below £6. Miners having a bad day today, most are doing worse than GGP. Thesis hasn't changed at all, value hasn't changed, price has = compelling opportunity to increase stake.

Apparently it will be announced post US market close. I think I saw 10pm GMT mentioned somewhere.

Couple of points / questions on this. The MoU, while useful, would not be enough to secure project finance imo. We are unlikely to progress the project financing much before we complete the DFS imo. For FID to happen financiers will likely be looking for offtake contracts, not just MoU's. It's possible that we may also need to complete a FEED study for the mine before taking FID. It sounds like we are planning to get most of our debt from IFC, though I assume they will also bring in some commercial lenders, so I think we are in a good place financing-wise.

Are you suggesting that the MoU will be translated into a firm offtake contract in the next few weeks? If so, that timetable appears optimistic imo. We signed an offtake MoU for the Graphite with Traxys four weeks ago, and there hasn't been any follow on offtake contract announced yet (nor did I expect there would have been). My experience of timetable from MoU to offtake contract would be substantially longer than a few weeks, though I'd be very happy to be proven wrong in this regard!

Good to hear that Mitsui are a good / reliable partner.