Cradle Resources (AX:CXX) has a 50% interest in the Panda Hill niobium project in Tanzania. Unlike other niobium projects, its geology and metallurgy are almost entirely conventional. The flotation process at Panda Hill is similar to Niobec, for example, while the leach process is based on Catalão and the converter process on some of the principles from the final stage of the CBMM pyro-metallurgical circuit.
On 20 April 2016, Cradle announced the results of a definitive feasibility study (DFS) on the project compiled by MDM, Coffey, SRK, SGS, SLR and Roskill (among others). Cradle is currently optimising the DFS before making a final investment decision in Q217. Assuming that it is affirmative, Panda Hill will then be poised to become only the world’s fourth producing niobium mine.
Cradle’s niobium unfairly discounted vs price/rarity
One of the disadvantages that besets Cradle is that it has effectively no peer group and hence there is no sample of niobium explorers from which an average in-situ value of niobium resources may be derived. Despite the fact that only c 40% of the Panda Hill carbonatite has been properly drill tested, Cradle’s current enterprise value equates to just US$91.49 per tonne of attributable contained niobium metal at Panda Hill – or 0.26% of the price of niobium.
Given its rarity on the earth’s crust (just 20ppm) and its consequently relatively high price (US$35.16/kg long-term Edison estimate), we would expect a rating in the range 0.51-0.93%, based on our statistical analysis. Applying a ‘worst case’ 0.5145% in-situ value relative to price ratio to Cradle’s 50% interest in the niobium metal content of Panda Hill instead implies a fair value attributable to the company of at least US$56.3m, or US$0.34 (A$0.46) per Cradle share. Applying the average 0.8057% ratio implies a value of US$88.2m, or US$0.54 (A$0.71) per Cradle share.
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