RE: Rns20 May 2026 10:54
Was out at my daughter's assembly this morning so only got the chance to read and digest the RNS in full. First off, credit where credit is due, Will and Alex look like they have done a great deal here and have gone a long way to rebuilding the trust that I lost in them after the highly discounted raise and Tyseley 25tpa capacity utilisation restriction bombshell.
Some thoughts from me after a detailed read of the RNS:
- We are now the German government's, and arguably the EU's, go to rare earth magnet recycler / producer. Having a double footprint in Germany, and covering short and medium loop recycling (and potentially long loop in time). The RNS mentions synergies around grant funding applications and the German government in particular is clearly going to have no other option than to back us as the clear market leader in Germany. I would be very surprised if we do not secure some juicy grants for our German business over the next 12 months.
- 300 tonnes of rare earth magnet and alloy feedstock will cover our three plants (Tyseley, Pforzheim and Bitterfeld) until at least H2 2027, even if we secured no new feedstock during that period (which we clearly will given our connection with ILS, EMR Group and the Inserma units we have already installed). It's such a strategic move and regardless of the exact $ value of the feedstock, it is clearly worth at least a substantial portion of the purchase price, with its strategic value being even higher.
- The staff and expertise that we acquire with the Remloy business will be very beneficial for the wider business. We are starting to develop economies of scale and learning, which will make each of our businesses stronger and the sum of the parts more productive.
The UK / European recycling business is starting to look like a bit of a monster in the making: Tyseley name plate 100-350tpa (currently restricted to 25tpa) with expansion to 1ktpa looking highly likely (potentially with matched grant funding), Pforzheim 100-350tpa with expansion to 750tpa (probably with the help of 1.5/1 matched grant funding) very likely and Bitterfeld at 500tpa nameplate capacity without significant further capex. You can then add in the long loop process (we currently have a pilot plant in development at Tyseley) to each of these plants for further capacity expansion.
So we could be looking at up to 2.25ktpa production of rare earth magnets by 2029-2030 (not including long loop), right when the EU's 25% recycling mandate comes in. If we take the German margins (conservative given they don't reflect economies of scale from larger plant) we get a high level profit of just under $75m, of which about 80% is attributable to us, so say $60m profit per annum. Stick on a low ball P/E of 15 and we're talking a market cap for the European recycling business attributable to Mkango of about $900m, at a P/E of 20 we are talking $1.2bn.
We are so undervalued...
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