Member Info for M.McNulty

Mkango’s mkt cap at US$113m is a complete mystery. Just to be at par with USAR, Mkango’s 40% share of HyP USA could be valued at circa $500m, were it listed on NASDAQ. And then what value for its 80% share of the global business? And what about the impending $400m listing of MKAR?

It is straightforward to see how this stock could 10x from its current price in relatively short order.

One easy answer is surely to list HyProMag USA on NASDAQ (failing an offer in the near-term from MP). Ideally, I’d like to see the HyProMag group companies all listed on NASDAQ in a single consolidated entity – but my feeling is that management just doesn’t want that to happen yet, for whatever reason.

Anyway: it’s ridiculous to think that a mere switching of listings could see Mkango’s mkt cap increase by 10 fold – but that is AIM for you, and the weakness of the UK investment community.

Value will out inevitably!

So HyP is (near-)recession proof, and will enjoy superior margins up until the basket price has increased a good 4-5x from its current level.

Not only does HyP USA completely destroy USAR on margins, but it will not face supply constraints that USAR might (at least, geopolitically). USAR will have to source NdPr from MP’s Mountain Pass and from Australia (it claims that it will not use feedstock from China). But the heavy REEs, Dy and Tb – which are key to providing certain properties and thus producing high quality magnets – are largely absent from Mountain Pass, and there is a large queue for the HREEs sourced from Lynas’ Mountain Pass in Australia.

HyP USA may well struggle with sourcing its own e-waste feedstock – but the fact that earlier this year the company stated its intention to evaluate options to open a second and third circa 1,600 tpa plants, suggests that it is very confident that there is no shortage of available feedstock. Assuming there is no shortage of feedstock, then HyP will be essentially tapping into an as yet untouched, NATIVE source of NdFeB material in the US.

Another key advantage: HyP USA has patents in place to ensure that it’ll be the only business in the US for the next decade that is able to use the hydrogen process in the recycling of permanent magnets. This will give it time to lock in that e-waste supply, and consequently by far the lowest cost supply in the country of NdFeB alloys (much of which will include the rare and highly valuable heavy REEs, Dy and Tb).

……

CoTec Group is now valued at US$51m, Mkango at US$113m. US$164m mkt cap, combined.

USAR is valued at US$1.12bn, having increased by $195m over the past three sessions.

I would argue that HyProMag USA as it stands should be should be valued at at least double USAR.

Yet HyProMag USA is only one division of the HyProMag group companies. The group is currently operating, building or planning the rollout of its magnet recycling and production plants in another FIVE countries.

USAR has no such plans to expand beyond its single site in just the US.

Moreover, Mkango is spinning out its upstream assets – its proposed mine and separation plant – into NASDAQ at a valuation of $400m.

Since market open on Thursday, USA Rare Earth has ADDED almost US$200m to its mkt cap. Its cap now stands at $1.12bn.

That increase alone (in just three sessions) is more than Mkango’s and CoTec’s ENTIRE combined mkt caps (the joint owners of HyProMag USA).

Now consider this: USAR is approximately 9 months ahead of HyProMag USA, in terms of commencing commercial production (it’s now on for mid-2026). USAR's first magnet production line at Stillwater, Oklahoma will produce circa 1,200 tpa. It will then incrementally scale that to 4,800 tpa (let's assume commissioning in 2028/29). It has published its internally forecast cost of sales figures of circa 100-110/kg. It uses price forecasts for its NdFeB magnets of $165/kg to $200/kg.

It has no proprietary technology. It does have an early stage HREE deposit in Texas ("Round Top"), but that is many years from production. There has been no Scoping Study or PEA produced as yet on the project (let alone PFS, and not to even mention DFS or BFS). The entire value of USAR at its IPO was based on the proposed magnet manufacturing facility (a multiple of forecast EBITDA, when nameplate capacity were to be hit).

Until such time as Round Top is producing, USAR will be reliant on securing light REEs (Nd and Pr) from Mountain Pass and abroad; and heavy REEs (Dy and Tb) purely from abroad (China, Myanmar or Australia).

Finally, USAR is only a manufacturer of new magnets. It has no recycling capability. Neither does it have any proprietary tech for its proposed magnet manufacturing operation. It will use off-the-shelf equipment in its plant.

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HyProMag USA expects its first almost 1,600 tpa plant to come online in H1 2027. 70% of the $132m capex is already secured by a LoI from the US Govt’s EXIM bank, in the form of a low-cost loan. HyP USA has plans to scale up production via modular expansion (a second and third plant) to circa 4,700 tpa, by 2029/30.

So - purely on a production basis, HyP USA and USA are extremely close in scale and timelines.

But the similarities end there.

HyP USA has openly published two sets of operating costs (N.B. not just Cost of Sales, but expense lines beneath as well), under two different pricing scenarios. Under a forecast basket price of only $55/kg, its operating costs would be a mere $19.43/kg. Under a basket price of $94/kg, operating costs would be $31.66/kg.

If one examines Mkango’s RNS of 25/11/2024, one can see in the table labelled “operating costs” that feed supply increases with the weighted average price of the end product. Both scenarios suggest a cost for the feed supply of around 29.5% of the weighted average basket price. Accordingly, on anything below a weighted basket price of circa $300/kg, the HyP plants are going to boast superior margins to the USAR plant.

$300/kg is a long, long, LONG way off.

GLR, I appreciate that you have provided a logical and sensible answer below, but please please please do not respond to that poster below again. On the contrary, I urge you to green box it.

It is a dedicated troll, interested only in spreading negativity and clogging up the board. Your rational responses will simply fall on deaf ears, and actually encourage the animal to post more nonsense. If everyone green boxes it, it’ll eventually stop positing.

As a change of subject - I do hope we see both the UK and EU introduce major financial support mechanisms to promote their domestic REE / NdFeB magnet industries, as the US has just done. Without similar support provided for European operations, they’ll be left out in the cold.

For me, today's actions by the US government are industry changing, on a global stage. It is at long last doing what China did to boost its domestic industry in the 1990s and 2000s. Heavy subsidies, mega equity and debt investments.

MP is the flagship of the US industry, as it has a huge and unrivalled primary mine.

HyProMag however has the proprietary technology to gradually reduce the requirement, year-on-year, for primary mined feedstock to go into the magnet making industry.

With 1) new NdFeB magnets pumped into the economy each year (thus creating greater available feedstock for HyP); and 2) recycling sorting (boosted by AI) rapidly improving each year... Then new (recycled) magnets as a percentage of total new magnets should rapidly increase over the coming decades.

And this brings me to my own investment(!), @MkangoResources #MKA (and its US Joint Venture partner in HyProMag USA, namely

@CoTecCorp $CTH).

The HyProMag group companies hold the patents across all the key territories outside of China, for recycling NdFeB magnets using hydrogen. It is by a considerable distance the lowest cost and most efficient magnet recycling technology on the planet (all the others use chemical processes).

Consider this: the feasibility study for HyP USA's almost 1,600 tpa permanent magnet recycling and manufacturing operation (with plans being drawn up to treble that to circa 4,700 tpa) suggested a basket price of only $55/kg. Only half of the price that the DoD has just guaranteed for MP's product, for a decade.

At that $55/kg price, HyP US would still have been on a circa 65% EBITDA margin across the 40-year project life.

Since November last year when the feasibility study was published, we've seen a 10% increase in NdPr pricing, as well as a 15-30% premium now being applied to ex-China manufactured NdFeB magnets - courtesy of extreme geopolitical developments.

And of course there's the bipartisan bill moving along, which would provide a $30/kg tax credit to US-based NdFeB magnet manufacturers and who use 100% raw material sourced from within the US.

Now with the $110/kg floor price provided to MP, support for HyP USA would appear an absolute no brainer for the DoD, to complete the integrated supply chain for domestically manufactured NdFeB magnets. Recycling is the missing link.

HyP USA has already secured a $92m loan commitment (letter of intent) from the US Government's EXIM Bank, for its initial $132m capex requirement - so there is evident very strong interest from government in the project already.

By 2028, US domestic consumption for NdFeB magnets will be approaching 40,000 tpa.

So: even with MP expanding its finished magnet output from the current 1,000 tpa to 10,000 tpa, it'll still only be able to meet around a quarter of US demand for NdFeB magnets.

HyP USA will be bringing almost 1,600 tpa online in 2027, and thinks it could reach almost 4,700 tpa within a handful of years after that (with two more replica plants up and running).

The operation would create a native source of terbium and dysprosium for the US that it is presently sorely lacking (by extracting it from the tens of thousands of tonnes of NdFeB magnets already in circulation in the US)... and still be hugely profitable with an average product sales price of only half that which the DoD just ensured for MP.

I have just posted this on X:

https://x.com/MylesMcNulty/status/1943289091254010054

For those who don't use it, here's the text:

......

MP Materials Announces Transformational Public-Private Partnership with the Department of Defense to Accelerate US Rare Earth Magnet Independence

A truly monster development in the global rare earths industry, particularly so in the US permanent magnet market - and an incredible read-across for #HyProMag USA (owned by #MKA and $CTH).

- @MPMaterials $MP will construct its second domestic magnet manufacturing facility (the “10X Facility”) at a soon-to-be-chosen location to serve both defense and commercial customers. Once the new facility is completed, expected to begin commissioning in 2028, MP’s total US rare earth magnet manufacturing capacity will reach an estimated 10,000 metric tons.

- DoD has entered into a 10-year agreement establishing a price floor commitment of $110 per kilogram for MP’s NdPr products stockpiled or sold, reducing vulnerability to non-market forces and ensuring stable and predictable cash flow with shared upside.

- For a period of 10 years following the construction of the 10X Facility, DoD has agreed to ensure that 100% of the magnets produced at the 10X Facility will be purchased by defense and commercial customers with shared upside.

- MP has obtained a commitment letter from JPMorgan Chase Funding Inc. and Goldman Sachs Bank USA to provide $1.0 billion of financing for the costs of constructing and developing the 10X Facility

- In addition, within 30 days, MP expects to receive a $150 million loan from DoD in connection with its plan to expand its heavy rare earth separation capabilities at Mountain Pass.

- DoD agreed to purchase $400 million of a newly-created series of the Company’s preferred stock convertible into shares of the Company’s common stock, and a warrant permitting DoD to purchase additional shares of the Company’s common stock. The initial conversion price and exercise price are $30.03 per share of common stock.

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Firstly, the hugest congratulations to MP. An astonishing deal. MP now has immense US Govt support, and will run substantial operations across the entire rare earths supply chain... except for recycling.

Besides the very obvious numerous benefits associated with recycling in general, recycling of NdFeB magnets unlocks the two heavy rare earths, Dy and Tb, which are key input materials for creating high quality permanent magnets.

MP's Mountain Pass does not produce these two metals (in any significant volume, at least). Other potential mines that contain these heavy REEs are 7-8 years away (minimum!) from commencing production.

Personally, I would like to see a mix of all three: say $25m in grants, $5m from CoTec, and $10m from a single new investor at subsidiary level.

That would provide an updated valuation to the project ( I suspect that Julian would demand a pre-new money valuation of at least 40% of the current NPV of $593m, so $237m). That of course would further help the rather dim-witted UK investment community in understanding the sum-of-the-arts valuation for Mkango.

Moreover, the $25m in grants (from US govt, both State and Federal) need not be repaid out of cash flows, so MKA would start receiving its share of divis, as soon as only $107m is repaid to the debt and equity investors.

Hugely looking forward to seeing the completed Detailed Engineering from HyProMag USA, due out in the next 1-3 months.

Some points to consider.

Firstly, NdFeB pricing. In the Feasibility Study RNS, the company provided two NdFeB pricing scenarios: prevailing prices, and forecast prices. Remember that these are basket prices for a range of products (the highest value product in the basket being finished magnets; and the lowest value product being the unsieved alloy powder, a picture of which Mkango posted on X yesterday).

The basket price for "current weighted average market prices of NdFeB products" was $55/kg, at the time the FS was published on 25 November 2024. Since then, neodymium has increased by circa 9.5%. So - without any tax credit or other government support mechanism, NOR any geopolitical premium - basket pricing for a fully operational HPMS plant will be around $60-$61/kg, as of today.

Now we include the circa 25% markup that ex-China NdFeB magnet producers are currently enjoying on their sales prices. That's a markup to circa $75/kg.

Now consider in the US, the bipartisan bill to provide tax credits of $30/kg to US-based magnet manufacturers that use raw materials sourced entirely from within the US (this is what HyP USA will be doing).

Already HyP USA will be close to the weighted average price of $94/kg, which is the forecast basket price over the 40-year life of asset used in the FS.

Using the $94/kg pricing scenario, the base-case NPV for the initial HyProMag USA project(s) is $593m, with an upfront capex of $132m. That’s one production plant (‘the hub’) with two separate pre-processing facilities (‘the spokes’). The currently ongoing detailed engineering is evaluating options for creating three standalone hubs, i.e. three $593m projects. This was confirmed (by implication) in a recent interview with the CoTec CEO, when he suggested an “NPV of $1.8bn” (i.e. circa $600m x3).

What’s not clear is whether MKA’s non-dilutable 40% free carry will extend to the potential second and third hubs. That would be pretty marvelous, if so…!

For now though, we can rest easy on the fact that we have a 40% free carry on a $593m NPV project, which equates to 53.7p per MKA share. Of the capex, a US govt bank, EXIM, is supplying up to $92m in a low-cost loan, leaving only $40m for CoTec to find.

CoTec could dilute their 50% direct equity interest by bringing in new investors at the HyP USA level (which would leave HyP UK with an unchanged 50% stake; and CoTec’s 50% stake reducing in line with the new investor’s stake (e.g. 40% stake for CoTec; 10% stake for new investor in HyP USA)).

Alternatively, the $40m could be secured from a mix of grants and CoTec injecting the cash directly. Grants are preferable for us MKA shareholders, as they will not need to be repaid out of initial surplus cashflows (as will be the case for equity investors, be it CoTec or any new investor).

We are all wasting time in responding to it. These paid trolls (and yes, they do exist) cannot be reasoned with. They will ignore any factual info or rationale explanation provided to them.

We are simply clogging up the board with responses (I am guilty myself of it in recent weeks). If newcomers arrive, we should kindly explain the situation and urge them to block the troll too.

With hope, the troll will stop posting, when it realises it has zero audience.

Hi Esduk, Flundra - no problem.

Flundra - yes, I don't think cash will be an issue for MKA going forward. In 12 months, possibly less, Germany and UK HPMS plants should be generating v healthy FCF for the group. Between now and then, MKA has hit enough milestones and grown large enough to now no longer rely upon retail / HNWs. Please do remember this when trolls inevitably pop up and start shouting about a discounted placing. It's just not happening anymore!

There will likely be a good chunk of warrants exercised shortly.

I intend to exercise mine in the next month - but I won't be selling any existing equity to pay for them, nor will I be selling the exercised warrants, once in play.

My rationale is twofold: firstly, to extend the company's cash runway (which will be a concerted effort by warrant holders), so that the company need not consider going to PCBs / retail investors again for cash. Any equity placing (which won't be in the near term, IMO, but after the summer) should be exclusively with instos, who will be happy to pay the prevailing share price (which by then, we all hope is at least double of where it is now!!). Secondly, so I can get those exercised warrants into tax efficient wrappers ASAP, so as to minimis that 24% CGT future liability.

Hope that helps people. FYI - a couple of other large existing holders and I offered money repeatedly to management at the 16-8p level, when the SP was stuck in that range between April and June. Nil discount (and at one point a premium to the then prevailing SP) - but they repeatedly turned the offers down. Our management cares deeply about minimizing dilution and only accepting cash injections when absolutely necessary, and then at the best possible price. Wonderful to see. The future is gloriously bright here!

It looks as though this madness selloff is coming to an end.

At 28p, the share price is trading at:

- 30% of the proposed listing value of MKAR (i.e. 90p per share)

- 47% discount to its 40% non-dilutable share of the first (N.B. FIRST) $593m NPV HyProMag USA project (53.7p per share)

- And just throw in the UK and Germany projects for free (combined will be generating up to $70m revenue, >$35m EBITDA annual run rate, in less than 18 months)

- And the 80% controlling shareholding in the global HyProMag business that will be rolling out operations in multiple other territories in the coming 2-5 years.

We have seen huge, huge churn over the past four sessions... but this SP will gravitate toward 100p in the run up to December.

For me, hands down the best buy on the LSE at present.

There's inevitably panic from many holders, when they see paper profits disappearing before their eyes.

There's a race to lock in profits, that escalates really rapidly and accelerates the downward spiral.

The time to be locking in profits was when people were paying 36p yesterday morning, not selling at 26p this morning.

Is anyone old enough to remember that time when the Australian government invested, granted and loaned over $1bn total to Arafura, to develop its Nolans Project, at a time when the project was uneconomical at the NdPr price? N.B. - that time was the past 18 months...!

Anyone else remember that time when a China and US partnership picked up the Mountain Pass mine out of Molycorp's bankruptcy, and spend hundreds of millions of $ refurbishing it, again when the mine was economical at the then prevailing NdPr price?

Peterperfect11 is one of those very dim trolls that does not comprehend the nuances of geopolitics and the rare earths industry.

Dismantling this amateur deramping is child's play!

Once again, my sincere apologies, fellow shareholders, for being invested in this stock.

I inevitably seem to attract my dedicated online trolls to any company I take a serious interest in...!

It's blindingly obvious you are a RBW bull, and are more than a little bitter about MKA obliterating RBW in 2025 YTD performance.

Word of advice: if you really insist on being one of life's losers and deramping shares you're not invested in out of sheer spite, then do try and learn the subject matter beforehand. Not only do you look like a bitter troll, but also now an imbecile.

Sorry, that's *$75-80/kg, *$100 and $200/kg, $150/kg.

Missed out all the dollar signs!

Morning SmartPunter, that's incorrect - NdFeB magnet per kilo is currently trading at around 75-80/kg. Not for the NdPr content, but for the magnet as a whole. The 28% figure quoted in the RNS is just a technical description for magnet quality.

So the annualized revenue run rate towards the end of next year should be around the $28m mark, assuming they hit 350 tonnes per annum, and assuming NdFeB prices don't drop from here. Most analysts think it could now be somewhere between 100 and 200/kg by mid next year, given the significant geological events of the past six months on a global stage.

150/kg at 350 tpa would put the Birmingham operation on an annualized run rate of $53m, with an EBITDA margin of >50%.

Wonderful to read of confirmation of expansion plans beyond 350 tpa - great news. Equally wonderful to see South Korea being quoted in RNS now.

That's SIX geographies that the company is now operating in, or planning to operate in - in addition to the two countries of the upstream operations (Malawi and Poland).

Mkango has the largest footprint of any rare earths company worldwide, across the entire value chain.

Expecting another mega week!

In my view, this is arguably the worst possible time to be dumping shares in Avacta's history.

I suspect by by end of next week, in just six sessions, we'll be mid 40s at the least.

So no, I am not selling, but thinking about what to sacrifice elsewhere in the portfolio to add (much) more here.