Appia Energy (CSE:API, OTC:APAAF) – Critical Rare Earth Grades Among the Highest in the World
Share Price: C$0.18
Shares Outstanding: 52.3M
Market Capitalization: C$9.4M
Total Liabilities: C$0.7M (which’s owed to company insiders)
Tesla’s shift to a magnetic motor using the soft, silvery metal neodymium has added enormous strain on an already volatile supply.
Making matters worse – China is the dominant producer that accounts for over 85% of the world’s production of rare earths. Thus, making the supply situation just that much more perilous.
Nonetheless – the World’s Powers push to significantly reduce emissions overtakes any supply problems. And the demand for electric vehicles – and especially the metals that make them – have been on a tear.
Just look at the performance of lithium and cobalt over the last three years. . .
Neodymium is a component used to make high-strength permanent magnets. These magnets can be found in computer hard disks and headphones, but most importantly are used for electric motors.
The magnets created with neodymium are the industry standard – meaning its demand will follow the same exponential growth trajectory as electric vehicles. Currently, there are no substitutes that compare with a neodymium permanent magnet – nor are there any on the horizon that will be able to replace them.
And like lithium and cobalt – neodymium has seen a surge in its price.
However, the market’s much more controlled and manipulated. . .
The spike in price was tapered because of traders releasing the metal back into the market – as well as China ramping up production.
It’s important to note that this wasn’t the first time China influenced the neodymium market.
Back in 2011, China banned all exports of rare earths. And within only a couple of months – the price of neodymium soared 450%.
The ban was eventually lifted by the World Trade Organization’s (WTO) Dispute Settlement Body – but the massive increase in price caused a supply boom. And prices quickly collapsed from all the excess supplies and has traded sideways – until recently.
As demand quickly outpaces supplies and a trade war with China looms – we believe neodymium is in the early stages of a huge run. . .
Alces Lake, Saskatchewan – A North American Lynas Corp. in the Making
Appia’s Alces Lake property, located in Saskatchewan Canada, hosts some of the highest-grade total – and critical – rare earth’s in the world.
And so far – the Alces Lake samples have shown uniformly high concentrations of critical REEs, especially those that are required for permanent magnets; neodymium (Nd), praseodymium (Pr) and dysprosium (Dy)
In fact, Alces Lake’s rare earth elements (REE) grades are comparable to those currently being mined from Lynas Corp.’s Mt. Weld CLD open pit mine in Australia. And as of 2017, Lynas Corp. is number two in the world for REE production, accounting for 20 – 25% of the neodymium-praseodymium supply.
Appia’s discovered seven high-grade critical REE showings at the surface – ranging from an average 2.5 to 47.2 weight% total rare earth oxide (TREO).
All samples have shown uniformly high concentrations of critical REEs – especially neodymium.
Critical REEs are often called the “seeds of technology” – it includes neodymium, praseodymium, dysprosium, yttrium, europium, and terbium. All are vital in high-tech applications, clean energy, transportation and communication. And all are in scarce supply outside of China.
At Alces, these critical REEs account for 26% of Total REEs; with neodymium accounting for 20% of total critical REEs.
Appia’s summer exploration program is already underway.
The exploration work camp has just been fully established, and a vehicular trail to the REE occurrences is almost complete.
Continuation of Phase I of the program consists of a detailed ground radiometric survey covering 300 by 150 meters of the REE occurrences, as well as further prospecting to follow-up the 2017 prospecting results in the Danny and Hinge zones.
An excavator will also be brought to the site for stripping and trenching a 200-by-100 meter area in the Wilson and Ivan zones.
Phase II of the program will consist of 2,000 metres of diamond drilling on selected high-priority targets over a 200-meter strike length defined during phase I.
The company will be releasing geochemical and radiometric results as they’re and reviewed by the company.
Appia anticipates producing a NI 43-101-compliant mineral resource estimate by year-end 2018, to be followed immediately with a PEA by end of Q1 2019.
If Appia can successfully produce a bulk sample for test work in the coming year, it might be able to start generating enough cash-flow to help further fund exploration and development without diluting the company.
Conclusion. . .
For a company with a market cap less than C$10 million – Appia has many noteworthy catalysts on the horizon. They have also established very exciting early grade results showing high content of neodymium.
The projects are in politically safe – and mining friendly – jurisdictions. This is an often-overlooked point. Think about cobalt today for example – almost all supplies are mined from The Democratic Republic of the Congo (DRC) and miners are facing heavy problems.
Putting it simply – it doesn’t matter how great your deposit is if you won’t be able to get any of it out of the ground. . .
The company also has a successful team of exploration geologists – especially James Sykes. This man is responsible for discovering over 450 million pounds of uranium in the Athabasca Basin in the past decade.
It won’t take much to send the share price through the roof. That’s the kind of optionality you want in a junior resource company – where a nice discovery can reward shareholders significantly. Appia has little downside since they are debt free – this allows them to continue exploring without worry of default.
The company is a great way to play the coming neodymium price rally. As the demand for electric vehicles grow at a rapid pace world-wide – you should also be betting on the materials that go into building them
First lithium. . .
Then cobalt. . .
Soon it will be neodymium.
Palisade Global Investments Limited holds shares of Appia Energy. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report’s from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence.