Titanium metal producer IperionX fell 25%, giving up December’s gains on little news. The company needs to sustain an approximate $1.5bn to $1.6bn market cap for 6 months to enter the ASX200, which is currently $1.4bn. Predicting which companies will enter benchmarks has become a popular market trade, given vast pools of passively managed funds that must then buy. This may explain some of the volatility as this approaches.
The company released a quarterly report that highlighted its strong cash balance of USD77 million and the first end to end production at its new plant in Virginia.
Subsequent to the month’s end, IperionX has announced a USD47mln US Department of Defence grant, which we view as an important validation of the company’s technology and road map. This grant will enable them to accelerate their production plans and to restore the US titanium industry using its highly patented low cost process. Despite rising 4.5x from our initial investment, we see enormous potential for this company, which is our largest holding.
MTM Critical Metals, a critical metal processing company discussed last month, also gave up some of December’s gains, falling 15% on little news. The company released an update confirming its first US plant will be online by the end of 2025, which expects to recycle Gallium, Germanium and Indium for partner Indium Corp.
We remain excited about the prospects for the company.
Brazilian Rare Earths fell 8% despite reporting more excellent drilling results. The average grade across all 69 holes drilled to date is 14.2% TREO (Total Rare Earth Oxide) grade, according to Petra, but with some holes as high as 45%, generally at depths of 30-40 meters. Also of note is very high grade Monazite sand that overlies this of up to 10.8%. Essentially, this means that the company will earn substantial profits from removing what is just valueless overburden in most mining operations. We look forward to seeing the mine plan mid 2025.
The chart below highlights how much higher the company’s grades are than the two current global leaders, Lynas and MP materials whose grade is approximately 6%. The red line highlights Petra’s calculated average for BRE at 14% – 2.3x higher than Lynas but with some intercepts that are 10x higher.
The company is expected to release further drilling results from its vast 1800sqkm tenement in the coming months. The Pelle deposit is 20x the area of the initial Monte Alto deposit.
On the positive side, the Australian listed company EBR Systems rose 61% as it approached the expected FDA approval in April for its heart left ventricle leadless pace making device.
Australian and US dual listed Opthea rose 40% as it approaches the readout of two major global phase 3 studies in Wet Aged Macular Degeneration (Wet AMD), the leading cause of blindness in the elderly globally, the first expected early in Q2 and the second mid year.
UK listed Australian gold producer Greatland Gold rose 18% after releasing a very positive first production report for the recently acquired and restarted Telfer mine. Gold and copper production and recovery exceeded expectations, as did cash on hand. Importantly, these production levels allayed concerns around technical risks associated with restarting the mine. Greatland also continued to benefit from a rising gold price and should benefit from listing on the ASX slated for Q2. We note that only a few Australian funds that can invest offshore have disclosed substantial positions. We would expect more buying post ASX listing, given the company’s size, quality and management experience.
Portfolio Manager
Portfolio Manager
The Pengana High Conviction Equities Fund (the Fund) invests globally in a concentrated portfolio of up to 20 stocks. The Fund can invest in both small and large cap stocks and is diversified across countries and sectors. We avoid investment in companies that are currently, in our opinion, unnecessarily harmful to people, animals or the environment.
1. Net performance figures are shown are those of Class A Units, after all fees and expenses and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 11 December 2014.
3. Annualised standard deviation since inception.
4. Relative to MSCI World. Using daily returns.
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