Uranium explorer Neo Energy Metals is listing in London on Thursday (9th November), bringing to the market a company which is actively investigating what could be a considerable uranium resource in southern Africa. What is more, it has had much of the early exploration homework done for it.
Neo Energy has an up to 70% interest in the Henkries Uranium Project in South Africa, with the remaining 30% held by Wavecrest Investments. Henkries is an advanced, near term and low cost uranium production project that is capable of becoming a new uranium producer with immediate exposure to the sector.
One of the things we like about the project is that millions of dollars of historical exploration has already been carried out, including drilling, test-pitting, metallurgical analysis and some pilot plant work. Anglo American has completed a feasibility on the project previously.
CEO Sean Heathcote told us that funds raised through the London IPO will be channelled into the completion of further studies to establish an increase in reserves and resources.
Henkries Uranium Project discovered by Anglo American in 1975
Henkries was first discovered by Anglo American in 1975. The uranium mineralisation is hosted in soft, very shallow paleochannel sediments. The prospective channel extends for 37km on the license area with scope for further extensions regionally. At Henkries Central, 80% of the uranium is in a continuous layer 3.6km long and up to 1.1km wide.
There is massive potential exploration upside here, with uranium entering what looks like a sustainable bull market phase. Investors coming into the stock already benefit from the positive Feasibility Study that Anglo American completed. Neo Energy has also filed a JORC and 43-101 compliant Mineral Estimate (completed in January 2022).
The mine is a free dig prospect with no blasting or crushing required. Simple scraper operations mean that mining costs will be very low. The deposit looks well suited to mining targeted grade profiles from multiple shallow pits at the same time.
The project is located immediately south of the Orange River with access by tar and gravel roads. It has a 22kVA power line and water from the Orange River basin is available on site.
The below picture is illustrative of the Henkries Central resource, showing that while considerable exploration work has been carried out already, there are still some big gaps and scope for considerably increasing the size of the resource. The relationship between the hard rock of the neighbouring mountains with the largely sandy basin the company is exploring is also starkly illustrated.
Basically, there is major potential here to add further shallow uranium to existing resources, beyond the initial area of exploration.
Neo Energy Metals IPO
A few other items from our call with the company it is worth noting:
- The IPO in London looks to be quite heavily oversubscribed, demonstrating the interest in uranium resources in what is a quite challenging market for miners at the moment
- Q Global Commodities Corp of South Africa is backing the company; this is a major mining investor currently in the process of diversifying away from a coal portfolio into new economy metals
- The company is listing with a market cap of GBP 20m at 1.25p per share on admission
- Neo Energy Metals compares very favourably against close peer Tiris, owned by Aura Energy in Mozambique, which has a market cap of approx £74m
- There is still more to come we feel, with an enormous amount of historic samples still to be analysed before drilling commences, and management seem quietly confident they can beat the published IRR figures
