SUMMARY
- The Fund rose 12.9% in May, supported by improving market sentiment and strong performance from several holdings.
- IperionX was the standout contributor, rising 42% following positive operational updates, US Army validation of its titanium fasteners and the release of a feasibility study highlighting the value of its Titan mineral sands project.
- Brazilian Rare Earths gained 33% after announcing the demerger and planned IPO of its bauxite project, while Artrya rose 25% following the appointment of the former Pro Medicus CFO and expectations of further contract wins and FDA approvals.
COMMENTARY
The Fund rose 12.9% in May, buoyed by expectations of a peace accord between the US and Iran.
Titanium metal producer IperionX rose 42% following several positive announcements and a recovery from depressed levels in prior months. We visited the company’s facilities in the US last week and came away more confident than ever about its prospects.
The new GenX continuous process is expected to significantly improve the company’s economics, which will not only allow it to gain significant share in the titanium market but also in the high-value stainless-steel applications. The stainless-steel market is approximately 100 times larger than the titanium market due to its much lower price. However, titanium offers compelling advantages, including being around half the weight and significantly more corrosion-resistant than stainless steel.
As discussed in the company’s market release on 21 May, IperionX recently commissioned a large six-axis press that enables the mass production of complex-shaped components, along with other equipment that should support a meaningful ramp-up in revenue later this year and into next year.
In early June, the company also announced that the US Army had validated its fasteners as being stronger than equivalent Grade 8 steel bolts and 15% stronger than aerospace-grade titanium benchmark fasteners. This could pave the way for titanium fasteners to be adopted across a wide range of military vehicles and also highlights the potential for broader adoption in aerospace, marine and chemical industry applications.
Finally, the company released a definitive feasibility study (DFS) for its Titan mineral sands project, which also contains heavy rare earth elements. The study highlighted attractive economics, including a net present value (NPV) of US$813 million, which compares favourably with IperionX’s total market capitalisation of approximately US$1.1 billion. The company has stated that it will only proceed with the project if it secures external funding, potentially including government grants, which appears quite likely given the strategic importance of the project’s critical minerals.
Brazilian Rare Earths rose 33% after announcing the demerger of its bauxite project into a new company, Alurion, which is expected to occur alongside Alurion’s IPO in July. Brazilian Rare Earths will retain a 20% stake in the new company, whose tenements are contiguous with its rare earth holdings. Alurion has an estimated NPV of US$630 million (A$940 million) and, over time, could trade at 0.4–0.5x NAV, implying a valuation of approximately A$380–470 million, although it may initially trade below this range. With Brazilian Rare Earths currently valued at around A$1.5 billion, the transaction has the potential to unlock significant shareholder value.
Australian AI-based CT scan software company Artrya rose 25% after appointing the former CFO of Pro Medicus as its Chief Financial Officer. Pro Medicus is one of Australia’s most highly valued healthcare technology companies, with a market capitalisation of approximately A$17 billion and forecast FY2027 revenue of only around A$330 million. Investors are hopeful that some of the expertise and operational discipline that contributed to Pro Medicus’s success can be brought to Artrya. In addition, the market is anticipating further contract wins and FDA approval of the company’s final software module in the coming months.