CIBC target on FRO at $1.50/share.... Getting back to Matthew Gibson's [CIBC World Markets] $1.50 target and buy rating on FRO.....
https://www.stockhouse.com/bullboards/messagedetail.aspx?p=0&m=31694929&l=0&r=0&s=fro&t=LIST
....Gibson makes reference to Frontier's CAPEX of $1.2 billion. Rare Earth Element [REE] investors need to be conscience of the difference between mining and producing a RE concentrate, and "separated" RE elements. For most of our junior peers will only be producing the concentrate, such as RES, QRM, TSM and ARAFF.
Rare Earth Concentrate could possible sell for $13 - $17/kg, while separated and enriched Rare Earth Purities could garner $58/kg, as in the case of Frontier. Therefore, the costs associated with this separation process is more substantial, thus raising the CAPEX and OPEX for this added facility. BUT, at the same time, the margins increase even more substantially, due to the much higher market price for the separated and purified finished product.
Frontier could easily drop the Separation Plant and just market a concentrate, and the capital/operating costs associated with this added process and the economics would then reflect a much lower CAPEX of $300 million. And then you would have a CAPEX more in line with our peers like RES and QRM for example. But at the same time, FRO's NPV would be reduced to say $1 billion, without this added market value of separated elements. The return on equity is much more favorable with the Separation Plant.
Separating and purifying rare earth elements can be quite a tedious task, but fortunately for Frontier, their ore consists of "monazite", and the processes involved for separation are already historically proven. Perhaps our peers have had difficulty finding an economic processing method and thus marketing a concentrate only. Or for the reason I just stated in my previous post.....in that the waste material of REE processing will not be overly welcomed in many [green conscience] Western countries. And thus they would be missing out on the larger cash flows that Frontier and Kores are looking forward to.
Auto, battery and defense manufacturers do not have much use for RE concentrate! Someone is eventually going to have to process it. And once again, perhaps this is the very reason why Frontier has a large and strong financial backer......as a partner on Zandkopsdrift!