Altona Rare Earths Plc (REE) Earnings Call Transcript & Summary

Good afternoon and welcome to the Altona Rare Earths Plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself; however, the company can review questions submitted today, and provide appropriate responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Cedric Simonet, CEO. Good afternoon, sir.

Good afternoon, and thank you for the introduction. Good evening, ladies and gentlemen. As you know, Altona Rare Earths is listed on the London Stock Exchange on the main market under the ticker REE. My name is Cedric Simonet. I'm the CEO. We are currently busy with different projects, including a copper project in Botswana, copper exploration project in Botswana and the Monte Muambe Rare Earths and Fluorspar project in Mozambique. But this presentation today is going to be focused on one particular topic, which is the recent discovery of gallium at Monte Muambe in association with Rare Earths. We've published already 2 RNS on the 1st of April and on the 17th, and there will be more soon. So today, we are going to focus on this matter, the gallium. This is our usual disclaimer. You can access the presentation later to read it in details. Now before we dive into the matter of the gallium, just a small update on the status of the Monte Muambe Rare Earth and Fluorspar project, for those who have not seen it. So we acquired the Monte Muambe project under an earning agreement back in 2021. Currently, we have reached an ownership of 51%, and we can get to 70% upon completion of the pre-feasibility study. The project is located in Northwestern Mozambique near the border with Malawi, very safe and mature mining region of Southern Africa, near the coal mines around Moatize. So far, we've drilled about 8,000 meters. We've produced scoping study, including a maiden JORC Mineral Resource Estimate with 13.6 million tons at 2.42% total rare earth oxide. And there is still room for more resources because we have drilled only 2 targets out of -- or rather we've included in the resource only 2 targets out of 11 targets within the license. The license -- prospecting license has been converted to a mining license, which was granted in December. It's valid until 2049. So that's very important in terms of security of tenure. And beside rare earths, Monte Muambe also has fluorspar deposits. We will talk a little bit about this, plus this recent gallium discovery. We are currently in the pre-feasibility study stage. We are focusing a lot on the metallurgical aspects of the project, and we are seeking a strategic investor to come on board of this project at the level of the local company to support the project on the long term. We've lodged an application for the strategic project status with the European Union under the European Union Critical Raw Material Act. The EU has published the list of strategic projects in Europe, domestic projects, and we expect the list of strategic projects outside of Europe, potentially including ours, will be published very soon. On the side of the PFS for the Rare Earth project, we are also looking at high-grade fluorspar deposits, which exist in association with the same carbonatite intrusion. And our objective is to develop these fluorspar deposits as soon as possible to generate cash flow for the company. So we also have metallurgical studies ongoing currently with a laboratory in Zimbabwe aimed at seeing how we can extract the fluorspar and turn it into a commercial product. So gallium, I think, all of us right now are hearing a lot about rare earths, gallium, germanium, antimony because these are metals which normally come from China, and China has closed the top up at least for the United States on these minerals. So they've become very important strategic minerals. Gallium is a metal. It's a metal which is quite interesting because its melting point is actually close to room temperature. So if you have a piece of gallium metal on the table and you hold it in the palm of your hand, it will melt in your hand, a little bit like mercury, but it's otherwise solid. Gallium is used mostly in electronic applications. And for this reason, the market is relatively small. The estimate for 2024 was about 760 tons of gallium produced in the whole world. So it's not much, but this is growing, and these are high-value applications. So the main applications are high-technology applications, including semiconductors, light emitting diodes, LEDs and lasers, microwave radio frequency power amplifiers. These are used for telecommunications, radar systems, especially in the military, especially for radars used on board of military aircraft and also solar panels. There are different types of products, which are traded. The basic product, the primary product is low purity gallium, 4N gallium, four 9s, 99.99% pure. But then you have the next grade, which is more valuable, which is a high-purity gallium, 99.99999, 7N gallium. And then you have all sort of compounds such as gallium arsenide, gallium phosphide, gallium nitride, which are used in electronics. What's important to know about all these compounds is that the performance of gallium compounds versus the performance of alternatives is much better, higher temperatures, higher frequencies. And this is why these compounds are not used in cheap day-to-day application, but rather in high-end applications, especially in the military, where they want to have the best possible performance. The production of gallium is concentrated in China, about 97% to 98% of the gallium is produced in China. The current price is about $256 per kilo that was as of yesterday. The chart that you have on the right-hand side of the slide shows the evolution of gallium prices over the past 6 years. But just pay attention that this chart is in U.S. dollar per pound, not per kilo. So if you want the price per kilo, you have to multiply by 2. And I've talked about high-purity gallium being more valuable than low-purity gallium. The difference of price is basically high-purity gallium is about double the price of low purity gallium and the prices, which are given in this chart are for low purity gallium. So where is gallium normally found? Most of the world's production of gallium is recovered as a byproduct of alumina in the Bayer process. Bauxite is a main ore of aluminum through alumina. So the Bayer process, you take bauxite, you leach it with a very high concentration, basically caustic soda, sodium hydroxide solution. And what happens is that the aluminum minerals contained in the bauxite gets dissolved. Gallium is present in substitution with aluminum in bauxite. So it also gets dissolved. It gets into the solution. And in the Bayer process in the next step, when you precipitate alumina to recover it, gallium does not precipitate together with the alumina. So it stays in the solution and its concentration builds up in the solution. And ultimately, it can be recovered through different chemical processes. So this is the main source of gallium in the world. Gallium is also recovered from zinc concentrates or refinery residues together with germanium. And very rarely, there has been historical mines where gallium was mined as almost a stand-alone product together with germanium. And one example is the Apex Mine in Utah, which had a grade of 320 gram per tonne of gallium and 640 gram per tonne of germanium. There is also in Africa, a historical mine called Tsumeb, which was a polymetallic mine, but also with some high grades in gallium and germanium. Looking at the grade of this source material in bauxite, typically, the grade is around 50, 60 grams per tonne. It can go up to over 150 gram per tonne. In zinc concentrates, it's between 60 and 120 grams per tonne of gallium and in coal ash is 20 to 50 grams per tonne. In case you've seen in publications, in announcements, presentations, different units like PPM to measure the grade of gallium [indiscernible] grams per tonne. 1 PPM is 1 gram per tonne. Also, you need to pay attention if gallium is reported as elements like we do, just gallium or if it's reported as an oxide, Ga2O3. In that case, the concentration is slightly different, sorry. Now we are coming to the interesting point. The interesting point is that recently, there has been several reports of gallium present in association, not with bauxite or zinc concentrates, but with rare earths in carbonatite. And this is what prompted us to look into this matter, to relook into our data, and to start doing some work on gallium. So typically, in carbonatite deposits, the average grade seems to be around 50 grams per tonne, but there has been record in some carbonatites of peak grades of several hundred grams per tonne and sometimes several thousand grams per tonne, which opens the question, maybe there could be some gallium ore in carbonatite where gallium could be recovered not as a byproduct, but as a main product. And this is a very legitimate question because the geology, the mineralogy and the metallurgy of gallium in carbonatite right now is very poorly understood. If you do research, if you look for scientific papers on gallium in alumina, you will find -- sorry, in bauxite, you will find many. If you look for scientific papers on gallium in zinc concentrates, you will find many. If you look for gallium papers in carbonatite, you will not find any. It's a completely new topic. And for this reason, we could expect some surprises and potentially some good surprises. So for this reason, we are giving it a lot of attention. We started to review our geochemical data. And we noticed that in some of our drill holes, they were high grades of gallium. And we've reported the results for whole MM039 and whole MM040. And these results are very, very encouraging. MM039 from 0 to 100 meters, from surface to 100 meter below, it's gallium all the way at 77 grams per tonne with an intercept of almost 15 meters at 141 grams per tonne of gallium. So this is very exciting. Now how does that fit with what we know of the rare earth mineralization at Monte Muambe. So most of our resource -- well, all of our resource, JORC resource is based on the results for Target 1 and Target 4. At Target 1 and Target 4, there is not a lot of gallium. There is some. The average for the samples above 1% total rare earth oxide, which was our cutoff grade is 30 grams per tonne. And there are some samples which peak up to 159 grams per tonne. But the holes where we found the highest gallium intercepts, MM039 and MM040, they are not located on these targets, but some other targets, especially Target 6, which is located in the northern part of the intrusion on which we have done some drilling, but not yet enough to declare a resource on this target. This will happen later in the near future. And if you look at the sort of grades that you have in the section of these holes where the total rare earth oxide is above 1%, so rare earth ore, the average total rare earth oxide grade is 2.8% and the average gallium grade is 82 grams per tonne. So we have some rare earth ore bodies where the gallium grades are quite high. So this leads us to the big question, can we recover this gallium as a byproduct of rare earths in the same process? And can we -- can gallium be counted as a credit when we will be selling rare earth products. So we are just at the beginning of checking this possibility. But so far, it looks very, very encouraging. If you look at the chart on the right-hand side of the slide, you will see that there is an excellent correlation in geochemical data from hole 39 and hole 40 between the gallium and the light rare earths. And we do not see any correlation between gallium and the other elements that you would traditionally see associated to gallium like zinc. There's no zinc anyway at Monte Muambe. Aluminum, iron, phosphorus, there is no correlation between gallium and these elements. So what this tells us is that gallium is most likely contained in one of the rare earth mineral present at Monte Muambe. There are several rare earth minerals present at Monte Muambe. There is bastnaesite, synchysite, florencite and monazite. And one of them carries a gallium. And this is very interesting because this means that when we do flotation to recover our rare earth concentrate, most likely the gallium is going to follow the rare earths. And we will be -- when we will be leaching this concentrate, there are ways if we put the gallium in solution, there are ways we can recover the gallium. So this is very encouraging, but we are currently doing metallurgical studies at SGS Lakefield to confirm this, and I expect we will have a confirmation in just a few weeks. So some very exciting news ahead. Now let's step back a little bit, and let's look at the distribution of gallium at the scale of the wall intrusion. On the map on the right-hand side, you can see clearly the shape of Monte Muambe with the carbonatite intrusion being in the middle of the basin. And to look at this distribution, we use the soil sampling data that we have. We did a very comprehensive soil sampling survey to identify the location of the rare earth targets, and we also assayed gallium in these samples. And when we look at this data, we can see very clearly 3 anomalies with high gallium grade in soil above 70 ppm, above 70 grams per tonne. And what is very interesting is that the shape and the size of these anomalies shows that they correspond to actual geological structure. They are not random. They are not just patches here and there, but you can clearly see the western one follows the edge of the carbonatite. The southern one follows the curve structure, which is about 2.2 kilometer along. The northern one is also located along the edge of the carbonatite on the northern side. And very interestingly, it's located just a few hundred meters from whole MM040. So what we expect in that area is rare earth ore associated to gallium just at the border with the finite zone of the intrusion. Now looking closer towards MM039 on the western side, there is something very interesting. That northernmost patch, let me see if I can draw it for you. Right here, oops, that was not what I meant to do. Let me try again. Yes, right. Okay, wrong one. Anyway, you see the one I just circled, look at the one,, which is just north of it. Between the one I circled and whole MM039, that small red patch that gallium anomaly in soil is exactly where we have the fluoride zone, where we have the high-grade fluorspar. And that's very interesting because if there is an association between gallium and the presence of the high-grade fluorspar, it doesn't mean that the gallium is in the fluoride. As we said, the gallium is in the rare earth mineral, but it can be in the same geological structure in the same geological system. Then what that means is that in turn, the gallium anomalies could indicate not only the presence of gallium ore, but also the presence of more high-grade fluorspar ore. And this is something that we need to check, and we actually started today. Our project manager, Luis Veloso arrived at Monte Muambe yesterday, started field work today, and he has started to ground check some of these gallium anomalies for the presence of fluorspar. And so far, they are indicated the presence of fluorspar. I will explain why this is important in a few minutes. All right. So in summary, at Monte Muambe, we have 3 angles to the gallium matter. And these angles are all very important. The first angle is that there is gallium in rare earth ore and some of the rare earth ore bodies have even higher levels like at Target 6. So there is a good possibility that gallium can be added as a byproduct of rare earths, can be recovered with the rare earths. We are currently doing metallurgy at SGS Lakefield in Canada to confirm whether gallium follows the rare earths in the flotation process. We are also doing mineralogy with the University of Leicester in the U.K. to confirm exactly in which of the rare earth minerals gallium is present and to understand better its distribution at the scale of the drill holes where it was found. This metallurgical testing, this mineralogy are going to be integrated into the pre-feasibility study. And if gallium is recoverable, it will be included in the pre-feasibility study. What will be the impact on the economics of the pre-feasibility study of the project? We don't know yet. It's too early to tell. It depends on different parameters, including the price of these commodities, but also recoveries and also processes required to recover these elements. But so far, the indication -- the technical indication is that gallium is going to follow the rare earth at least in the flotation concentrate. So this is one very exciting angle on which we are working and which is going to generate some news in the very near future. The second angle is the gallium anomalies that we have seen on the map of the previous slide may indicate gallium ore. And what will be the grade of this gallium ore, we don't know yet. The maximum we've seen at Monte Muambe is slightly over 200 grams per tonne, but we know from other carbonatites that grades of several thousand grams per tonne are possible. To give you an element of comparison, a grade of 3,000 grams per tonne of gallium in terms of value contained would be equivalent to about 7 grams per tonne of gold. 7 grams per tonne of gold is minable. Of course, gallium is not the same thing. The recovery may not be different. The process may be more costly. We don't know yet. But the possibility of finding ore -- gallium ore, which could be mineable on its own is open. It's very exciting. We need to check this. We need to follow up these anomalies, and this is what we are doing. Our project manager with his team is going to start doing infill soil sampling so that we can narrow down on exactly where the anomalies are. Right now some of them are quite broad, so we are going to narrow down. And this is going to enable us to decide where we are going to do trenches and later drill holes to check these possible occurrences of gallium ore. And the third angle, which is also very exciting for us in the context of our Fluorspar project is that gallium seems to act as a pathfinder for fluorspar. The observations we did in the field today seem to confirm this. So we are going to continue ground proofing over the next few days. And the infill soil sampling, the trenching and the drilling that we will do for the gallium will also give us some information on the possible presence of more high-grade fluorspar ore. So what would that mean for us if we find more high-grade fluorspar ore? It would be very interesting because, as you know, we are looking at producing fluorspar from the existing deposits. Right now we were considering to produce metallurgical grade fluorspar. But if we have more ore, we might be able to produce even acid-grade fluorspar. And acid-grade fluorspar is a higher value product. So it's very interesting. We currently have metallurgical testing again ongoing on the fluorspar, both for gravity concentration, which is suitable for metallurgical grade fluorspar and for flotation, which is suitable for acid-grade fluorspar. And this exploration program that we are running at the moment within the next few weeks is going to tell us whether we have potential for more high-grade fluorspar ore or not. So I think that's it for this presentation. As you can see, the gallium discovery at Monte Muambe has a lot of different potential impacts on our project, positive potential impacts. We need to follow up on this discovery. We need to answer the questions about the metallurgy, the mineralogy, the distribution, the possible presence of very high-grade gallium ore and on the impact on the Fluorspar project and this is what we are going to do over the next few weeks. Thank you.

Fantastic Cedric. Thank you very much, indeed, for the presentation. [Operator Instructions] Just while Cedric takes a few moments to review those questions submitted today, I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q&A can be accessed via our investor dashboard. Cedric, as you can see, we've got a number of questions, which come in throughout today's presentation, and thank you to the investors for submitting those. If I may just ask you to click on that Q&A tab and where appropriate to do so, read out the question and give your response, and I'll pick up from you at the end.

Thank you. So I will read the questions. The first question, which was pre-submitted is to develop a mining operation to produce fluorspar cheaply, what type of infrastructure would need to be built in terms of power connection and access to water? So this is not too difficult. There is a power line coming to within 20 kilometers of the site. So we can extend this power line, and we would need to have a backup generator on site. But the sort of power requirements for a metallurgical-grade or even an acid-grade flotation plant are not huge. So that wouldn't be too complicated. And as far as access to water is concerned, that's also not difficult. There is groundwater at Monte Muambe. We have been using this groundwater for our pump, for our drilling purposes. So several of the RC holes that we drilled in the past have water. We just need to install pumps in them, maybe to widen a bit the diameter, and we will have access to sufficient water for the process. So that's not complicated. The next question, what are the plans to involve strategic partners or investors to accelerate both assessment and potential development? So we've been focusing on getting a strategic partner for the Rare Earth project because this is a large project, which is a long -- and a long-term project. And we thought it was better to involve a party. When we say a strategic investor, what we mean exactly is someone who is in the rare earth supply chain downstream of mines. Someone who uses either mixed rare earth carbonate or rare earth oxides or someone who is producing magnets or someone who is using magnets and who wants to secure an upstream supply of rare earths, which can be certified as being a responsible source and which can be secured on the long term. So this is the sort of strategic partners we are looking for. And we have several avenues. As I've mentioned previously, we are working with the U.S. government to see possible partners in the U.S., but we are also looking in Europe. We have recently hired a consultancy firm called DGWA, which has got excellent connections with different possible partners on the European markets, and that has led to some conversations already. And we are also looking in China. We recently had a visit on site from a potential partner. And again, there are also conversations ongoing. So nothing yet that justified doing an announcement in RNS, but there is a lot of progress, and we are looking at these different avenues. The next question. Following this, have you initiated or planned any discussions with off-takers or downstream processors? So with respect to the rare earths, the answer is yes. But in the context of the strategic investor discussions, the project being in the pre-feasibility study, it's still a little bit too early to have serious discussions with offtakers, although we had some. However, for the Fluorspar, we've been very active talking to offtakers and potential buyers who are very supportive in helping us understand exactly what are the specifications of the products that will be needed so that we can feed that into the metallurgical studies and ensure that we don't just have success in producing a concentrate, but that we have success in producing a sellable concentrate. So for the Fluorspar, the answer is yes, we are already talking with offtakers and downstream processors. I think these were the only questions.

Yes, we've covered all of those questions. So thank you very much indeed for that. And of course, any further questions that do come in, the team will be able to review those and we can publish the responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, it's particularly important to you and the team. Cedric, can I just ask you for a few closing comments, please?

Thank you. So again, this gallium discovery opens different opportunities, different avenues to bring more value into this project. We are following all these avenues very keenly, very rapidly. So this will mean some news flow over the next few weeks. And we are not neglecting the Fluorspar development project, which is very important for us. We are also not neglecting the Sesana Copper project in Botswana, which is advancing through environmental permitting, and we are hoping to be able to start the airborne survey very, very soon. Thank you.

Fantastic. Thank you very much indeed. Could I please ask investors not to close the session to be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This only takes a few moments to complete, and it's greatly valued by the company. On behalf of Cedric and Altona Rare Earths Plc, I would like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.