February Report

The Fund fell 5.4% in February, with markets impacted by concerns over US tariffs. Given that tariffs are constantly changing, it is difficult to predict the economic impact of the proposed tariffs. We note that two of our largest holdings, IperionX and MTM Critical Metals, should benefit, while a third, Brazilian Rare Earths, could well be an indirect beneficiary if China restricts rare earth supply as they have with Gallium and Germanium.

Medical imaging AI company Enlitic rose 73% after announcing a collaboration with GE Healthcare, one of the largest providers of medical imaging equipment. GE has generated 9bn PACs (Picture Archiving and Communications Systems), most of which are stored on the premises. Some of these need to be moved to the cloud, which is a huge opportunity for Enlitic. We also hold shares in Australian listed Artrya, which is expecting approval from the FDA for its heart AI scan over the next several weeks.

Greatland Gold rose 12% after releasing its quarterly results. The results highlighted production from its newly acquired Telfer mine, which we discussed last month. The gold price continues to rise, which is supportive of the sector.

Australian listed Alzheimer’s drug developer Actinogen rose 48% after reporting its quarterly results, highlighting that its 200 patient randomised phase 2 trial has started recruiting in the US along with 15 sites in Australia. 40 patients have already been enrolled, with 300 patients pre-screened, which should lead to rapid recruitment. We expect a futility readout in Q4 of this year from the first 100 patients after they have been followed for 36 weeks. Although all trials of this disease are very high risk, we believe a small position is justified based on earlier data. Although it is just 0.7% weight of our Fund, there is enormous potential if they succeed given the current market value of AUD$94mln. The current market size is USD5bn based on drugs that have shown a small amount of efficacy (2-3 months delay in disease development) and some dangerous side effects, including strokes.

On the negative side, the Fund’s largest holding, IperionX, fell 11.5% on little news. In February, the company received a USD47mln grant from the US Department of Defence, which is a strong validation of the company, especially given the change of administration. We continue to be very confident in the outlook for this company given that it has fundamentally lowered the cost of making titanium metal and provides a solution to the US, which currently has no titanium mineral sand mine or titanium sponge capacity. Import tariffs make imported sponge more expensive.

Brazilian Rare Earths -15%, Opthea -16% and Genetic Signatures -9.7% fell on little news.

We note that the USA Rare Earths (USAR) back door was listed via a SPAC structure in the US in March. The current share price implies a USD1.7bn market value (95mln shares on issue post deal). The Total Rare Earth Grade (TREO) of their Mountain Top deposit in Texas is just 0.05%. Brazilian Rare Earths average grade of intercepts at the Monte Alto deposit is at 15%, with some strikes as high as 45%. While USA Rare Earths are also building downstream processing and magnetic making capacity, this does not seem to justify such a market value. Neo Performance Materials, a long-time magnetic producer that is building a large facility in Estonia and 20% owned by Andrew Forrest’s Wyloo, is valued at just CAD325mln. Possibly, Trump’s discussion of rare earths is leading to wild overvaluation of the company, but USAR is certainly an interesting comparable given Brazilian Rare Earths are now valued at just AUD$430mln (USD270mln).