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Date : 26/10/2022

Dreadnought Resources

ASX :

DRE

Market Cap : $332.67 Million

Buy

52 Week Range : $0.032 - $0.155

Share Price : $0.12

DRE is a quality exploration company offering exposure to a diversified range of commodities in high demand. We retain our speculative “Buy”.

Company Analysis

We initially recommended Dreadnought Resources (ASX: DRE) whilst its shares were trading for 4 cents five months ago. As of the time of writing, DRE is changing hands for 11.5 cents. This represents a lucrative 187.5% upside since our first recommendation. To read our previous report, click here.

On Monday, the 24th of October, Dreadnought started the last week of the month with another great piece of news. The Company reported new discoveries at its Mangaroon 100% owned Project in the Gascoyne Region of Western Australia. Following the news, Dreadnought’s shares immediately jumped 10% to 15% intraday.

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Source: Tradingview

Dreadnought, a very active West Australian mineral explorer with three high-potential Projects

Dreadnought Resources currently has highly-prospective interests in three Projects in Western Australia. The Company focuses on finding a range of demanded metals in:

  1. Tarraji-Yampi Cu-Ag-Au-Co,
  2. Mangaroon Nickel-Copper-PGE (Ni-Cu-PGE), Rare Earth Element (REE) and Gold (Au)
  3. the Central Yilgarn Project.

Source: DRE

The Mangaroon Project, DRE’s flagship Ni-Cu-PGE, Gold and REE mine

The Mangaroon is a first-mover opportunity covering approximately 4,900 square kilometres, located 250 kilometres southeast of Exmouth in the vastly underexplored Gascoyne Region of Western Australia. The Mangaroon site is a historical undrilled high-grade gold mine, which has the potential to deliver minerals such as Ni-Cu-PGE and highly demanded resources such as gold and REE. The Project is well-diversified in terms of mineralisation. Thus, a good part of the Project focuses on Ni-Cu-PGE, subject to a joint venture with First Quantum Minerals (earning up to 70%). The joint venture area contains outcropping high-tenor Ni-Cu-PGE blebby sulphides in the recently defined Money Intrusion.

Overall, the Mangaroon is an excellent site. Dreadnought owns 100% interest in areas with outcropping high-grade gold-bearing quartz veins along the Edmund and Minga Bar Faults and outcropping high-grade REE ironstones comparable to those under development at the Yangibana REE Project. Recently, six potentially REE-bearing carbonatite intrusions have been identified, which may also be the source of rare earth in the region.

Company Update

DRE’s Yin rare earth element discovery continues to grow steadily

We were pleased by Dreadnought’s announcement on the 24th of October, which revealed amazing new discoveries with more broad and high-grade intercepts. The findings have been made at the Company’s flagship Mangaroon Project, which has unveiled continuous growth of the Yin rare earth element with assays uncovering more thick and high-grade mineralised zones. Dreadnought has collected assays from seven Reverse Circulation holes completed at the ironstone REE discovery.

The Discovery includes the following:

  • A broad 54 metres intercept grading 2.07% total rare earth oxides (TREO) from 24 metres, containing 17 metres at 4.1% TREO from 41 metres. Pleasingly, the more valuable mineral neodymium-praseodymium (NdPr) accounted for 30% of total rare earth oxides.
  • Other holes returned 38 metres at 1.84% TREO from 48 metres, comprising 2.7% TREO at 31% NdPr from 57 metres.
  • Dreadnought also found 30 metres at 1.82% TREO from the surface, including 17 metres at 2.87% TREO at 31% NdPr from 8 metres.

This was positive news. Thus, the neodymium-praseodymium-to-total-rare-earth-oxide ratio reported strong growth to the north, with values up to 46% uncovered, which is more than double the global average. Yin continues to reveal exceptional Rare Earth Element results.

So far, Dreadnought has reported assays from 91 out of 120 Reverse Circulation holes completed at the prospect. This proves that the Company is efficient and capable of delivering on time its maiden JORC resource for Yin in the current quarter. A diamond rig is currently operating at the target, drilling twin holes. The opportunity is significant in the long run, as the initial JORC resource will only cover approximately 3 kilometres of the interpreted 16 kilometres of the strike of Yin.

What is Dreadnought’s Yin?

Yin is part of the Company’s wholly-owned Mangaroon Project. It is an area with high-potential mineral resources. Dreadnought has recognised that and is currently planning a further 13 Kilometres of extensional drilling along the untested strike. Moreover, the area and its adjacent Sabre and Y8 prospects are well mineralised with Rare Earth Elements. Accordingly, the Company is planning for a JORC resource onward June 2023 quarter.

An eventful start of FY23

Solid exploration progress and more resources unveiled

The recent Yin Rare Earth Element discovery was not the only recent and important event. Since the beginning of this fiscal year, Dreadnought has made a few key announcements. On top of the latest discoveries, Dreadnought identified seven carbonite targets (C1-C7) also from the Yin ironstone complex. Pleasingly, the Company initially hit Rare Earth Elements in 13 out of the 14 holes. The extracted samples are now dispatched for analysis. Additionally, Dreadnought has confirmed REE at a further 22 outcropping targets at the Project, with another ten requiring further work.

The Company continues undertaking Reverse Circulation drilling at C1, C2, C3, C4 and C5. Solid progress has been made with a 14-hole fence line drilling pattern, covering 2.3 kilometres across C3 and C4. The site could reveal more REE potential, which Dreadnought is currently assessing an additional 100 targets.

Source: DRE

Dreadnought restarts the auger at the Tarraji-Yampi site

The Company also decided to recommence its low-impact auger sampling program at its Tarraji-Yampi Project, located about 80 Kilometres from Derby. The resumed activity is an extension of the initial auger program, which was completed earlier this year. The initial work revealed nine high-quality targets with similar geochemical signatures to the high-grade copper-silver-gold-cobalt-zinc Orion discovery made in 2021. Out of these nine targets, six new gossanous and mineralised outcrops were identified. We are very confident about this expanded program’s progress and eventual outcome. Thus, this will allow the Company to further define drill targets for Reverse Circulation and diamond drilling to start as soon as in the 2023 field season. According to the Company, the program will last about two months and produce about 3,000 samples, with assays expected to return in December and January.

We have big expectations from the restart of the auger program, which is intended to sample through the thin and geochemically inert black soil plains adding a baseline geochemical dataset to generate targets under a shallow cover that are similar to Orion. The Orion discovery made last year successfully returned the following:

  • 16 metres at 2.2% copper,
  • 38.7 grams per tonne of silver,
  • 6.6 grams per tonne of gold, and
  • 0.4% of cobalt from 77 metres.

Furthermore, the initial auger program during April – June period returned:

  • 37% copper,
  • 163 grams per tonne of silver,
  • 1 gram per tonne of gold,
  • and 0.03% of cobalt.

We expect solid progress in the next few months. Hopefully, the produced samples through the black soils plains and geochemical and geophysical datasets will deliver a pipeline of robust copper-silver-gold-cobalt targets for further discoveries of critical metals in high demand.

Source: DRE

Investment Thesis

DRE offers a solid diversified exposure to highly demanded metals

We like DRE because the Company is not targeting just one mineral but a variety of highly needed materials for today and future economies. To achieve this objective, the Company has interests in three geographically diversified Projects:

  1. Kimberley Ni-Cu-Au Projects: The second largest land holding in Western Australia’s highly prospective West Kimberley region is an excellent site with its main area, Tarraji Yampi, a Defence Reserve since 1978. The Tarraji Yampi is a rare first-mover opportunity. Thus, the site presents many similarities with Mt Isa in Queensland and Tennant Creek in the Northern Territory with a large-scale, Proterozoic Cu-Au-Ag-Bi-Sb-Co system.
  2. Mangaroon Ni-Cu-PGE JV and REE Au 100% Project: The Mangaroon is Dreadnought’s flagship Project, a joint venture with First Quantum Minerals, which contains outcropping high tenor Ni-Cu-PGE blebby sulphides in the recently defined Money Intrusion. What is good about this Project is Dreadnought’s 100% ownership of areas containing high-grade gold-bearing and outcropping high-grade Rare Earth Element ironstones, similar to those under development at the Yangibana REE Project. More importantly, Dreadnought has potentially six REE-bearing carbonatite intrusions identified, which may also be the source of rare earth.
  3. Central Yilgarn Gold, Base Metals, Critical Minerals and Iron Ore Project: The Central Yilgarn is another Project with interesting resources. It is prospective for typical Archean mesothermal lode gold deposits, Volcanogenic Massive Sulphide base metals, and komatiite-hosted nickel sulphides. But most importantly, this site hosts critical metals, including Lithium-CaesiumTantalum. This area also contains highly prospective iron ore deposits.

DRE has an adequate and conservative Capital Structure mix to support further growth

Despite achieving great progress in its exploration activities since the beginning of the year, Dreadnought continues to exhibit a rock-solid balance sheet. The Company continues to maintain a low conservative debt-to-equity ratio. Dreadnought currently holds a fair amount of cash on its balance sheet of $2.6 million, which is ample to support its ongoing exploration activities. Debts remain very low and are just 7.2% of the Capital Structure.

Successful $7.91 million capital raised and Directors topping up

In September last year, Dreadnought successfully completed a placement at 3.5 cents per share to institutional and sophisticated investors raising $7.91 million. We also like that its Directors contributed a further $90,000 to the placement. In addition to participating in the placement, the Directors exercised more than 8.47 million options.

Substantial acquisition and assets growth

During the fiscal year 2022, Dreadnought also acquired an additional tenement at its flagship Mangaroon Project, and as a result of this acquisition, 750,000 shares were issued. The Company also expanded their interests in Central Yilgarn, exercising its option to acquire 100% ownership of E29/965 and E30/485 tenements. These tenements cover parts of the Kings and P1 Iron ore occurrences, including significant magnetite banded iron formations, the Central Komatiite nickel sulphide belt, the eastern extensions of the Peggy Sue pegmatite field, as well as several Volcanogenic Massive Sulphide (VMS) and gold prospects. The exercise provided 100% ownership over the highly prospective 75 kilometres long Illaara Greenstone Belt. For that, Dreadnought disbursed $1 million to settle the transaction.

Furthermore, Dreadnought completed a purchase with Arrow Minerals (ASX: AMD) to acquire a 100% interest in seven tenements and has settled the deal with a $280,000 cash payment and 2.35 million shares. Dreadnought is expected to finalise the transaction in November with a further payment of $300,000.

FY23 Outlook: Exploration continues

Ongoing work at Tarraji-Yampi

With the restart of the auger program at the Tarraji Yampi, Dreadnought is expected to produce assay results from 3,000-sample by December to January. This will be followed by trial-induced polarisation (IP)/resistivity surveys scheduled for March 2023 onward. Electromagnetic surveys will also take place later in the coming calendar year. Reverse Circulation drilling could occur as early as in the 2023 field season.

Drilling continues at the Yin ironstone complex with the Mangaroon Project

The Yin ironstone complex has been quite a busy place. Thus, Dreadnought started exploring with a Reverse Circulation rig at the first five of seven carbonatites (C1-C7) considered a regional source of Rare Earth Elements. Through this program, which will last about eight weeks, Dreadnought started to drill in September with the objective of 83 holes for 6,600 metres. Furthermore, the Company is also preparing for an initial mineral resource estimate due by the end of the year.

Upcoming key events

  • October to December: Further updates and assays from REE drilling at Yin Ironstone Complex and C1-C5 Carbonatites at the Mangaroon Project.
  • October:
    • Assays from Peggy Sue pegmatite sampling in Central Yilgarn.
    • Assays from RC drilling at Nelson, Trafalgar, Metzke’s Find, Spitfire in Central Yilgarn.
    • Results from Central Komatiite Belt target generation work in Central Yilgarn.
    • Assays for Ni-Cu sulphides at the Money Intrusion in Mangaroon, First Quantum Earn-in.
  • November:
    • Initial JORC Resource for Metzke’s Find Au, Central Yilgarn.
    • Noosa Mining Investor Conference 30 November: Annual General Meeting.
    • Results from Kimberley Auger sampling in Tarraji-Yampi.
    • RIU Resurgence Conference.
  • December Quarter: Initial Yin JORC Resource at the Mangaroon Project.

Three reasons why we consider Dreadnought a highly compelling exploration Company

  1. Recent discoveries of high-grade intercepts at its Mangaroon Project: The Company may soon unveil further high-grade and high quantities of Rare Earth Elements. Thus, the opportunity is significant in the long run, as the initial JORC resource will only cover approximately 3 kilometres of the interpreted 16 kilometres of the strike of Yin.
  2. Well-planned and well-executed exploration activities: Dreadnought has shown its ability to execute and achieve its milestones on time. We like the fast pace progress and precise execution.
  3. Well-diversified and quality assets: We also like the low-risk profile of the Company. First, it has a conservative low-debt balance sheet, and second, it is well-diversified. We like the exposure to various highly needed minerals for today and future economies.

Recommendation

Since our first recommendation, Dreadnought continues to demonstrate its ability to execute and achieve its ambitious milestones on schedule. The Company’s exceptional performance has been well reflected in its share prices, which have gained more than 190% year-to-date. In the last few months, activities have accelerated with some key acquisitions and discoveries of a range of critical commodities, each with a genuine commercial appeal to large Corporations. We also like that Dreadnought is well-diversified with three scalable projects with proven mineralisation in highly prospective terrains.

Overall, DRE is a quality exploration company offering exposure to a diversified range of commodities in high demand. We retain our speculative “Buy”.

 

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