Blencowe, Harena & GreenRoc

Let's get strategical

Good Morning Team.

I wanted to quickly touch on something perhaps critical (pun intended) for Blencowe, Harena and GreenRoc.

On Tuesday, as anyone paying attention to the world of minerals will know, the European Commission published a list of 47 strategic projects deemed essential to boost the EU's production of 14 out of the 17 materials it deems essential for both its energy transition and security.

This long-awaited publication is the latest derivation of the Critical Raw Materials Act, which was signed off in 2023, and by which the bloc plans to mine 10%, process 40% and recycle 25% of its needs by 2030.

As a target this is concomitantly wildly ambitious and wildly unambitious given the current state of affairs. The EU barely covers any of its needs, and is not capable of upping production with any speed - simply because of the layers of bureacracy.

AKA, we want our net zero, but not in our backyard. We will see if this actually changes.

Anyway, EU industry commissioner Stephane Sejourne tells us that ‘For a long time, raw materials were the blind spot in our industrial policy...Europe has often preferred to buy most of the raw materials it needs almost exclusively outside its borders.’

Now these 47 projects (located in only 13 member states: Belgium, France, Italy, Germany, Spain, Estonia, Czechia, Greece, Sweden, Finland, Portugal, Poland and Romania) will get access to grant funding, expedited permitting, attractive capital loans….

It’s a big deal.

Interestingly, while a casual observer might think this is all mining - only 25 involve extraction, while 24 are processors and 10 involved in recycling.

It’s also worth noting that the largest number of projects awarded the status was for lithium (22) - 12 were for nickel and 11 for graphite. Cobalt got 10 and manganese 7. Given the slumping prices for lithium, nickel and graphite, it’s worth considering that the bloc is taking a longer-term view.

Perhaps investors should be too, whilst these metals are on the floor.

We’re going to need a lot of lithium. A lot of nickel. A lot of graphite.

And the prices today do not matter when you’re planning for decades of investment. There’s also a magnesium project - and three tungsten assets on the list - specifically due to their need in defence.

For your edification, strategic projects get prioritised for permitting - a maximum of 27 months for mining and 15 months for processing or recycling.

This is important when you consider many of these assets can be stuck in permitting hell for decades - in the US, for example, Rio Tinto has spent 30 years (yes, years) attempting to develop the Resolution copper project in Arizona.

It’s as bad in the EU - because you have to fight at the local community level, then at the country level, and then make sure you’re complying with EU legislation both on environment/permitting but also inter-state competition rules.

Read Articles 101 & 102 - it’s complex stuff.

Here’s the thing

The EU is creating a financing group (who doesn’t love a quango) to advise

hang on

quango stands for quasi-autonomous non-government organisation

sorry, it’s a common pub quiz question.

…to advise on how to jump-start these projects with public guarantees from national banks, the European Investment Bank, and the European Bank of Reconstruction and Development to encourage private investment.

The general idea is that strategic projects make a significant contribution to the security of the European Union’s supply of strategic raw materials AND importantly, are able to come online ‘within a reasonable timeframe.’

Now consider the share price reactions of several companies on Tuesday. Many of them barely moved, because the expectation that they would be granted this status was baked in - and their stocks had already priced in the good news, having risen steadily over the past few weeks.

Two that did move, that I want to highlight, are European Metals and Zinnwald.

EMH shareholders blasted off on the award, while ZNWD dropped sharply when it became apparent (via RNS and deduction) that they hadn’t gained the coveted status.

I would say to Zinnwald investors at this juncture that the ZNWD price movement was probably an overreaction given its location and value and significant size - but the key point is that a stock (EMH) where investors were broadly not sure whether they would be awarded rocketed, while one where it was seen as a given due to positive noise from both the company and state of Saxony, suffered.

A further necessary point to make is that the projects awarded thus far are only the initial projects. ZNWD could well get into the next list as applications for the next round open up.

And if you look at the application form, it might be that management are given a list of things to do to unlock strategic status for next time, perhaps as soon as later this year.

But for now…

Consider within Tuesday’s EU statement:

‘The Commission also received applications for projects located in third countries. The Decision on the potential selection of such projects will be adopted at a later stage.’

These projects HAVE NOT been considered yet. They have not been accepted or rejected.

My best guess is that this will come next quarter.

Blencowe, Harena and GreenRoc all stand a decent chance.

For clarity, I am not saying that any or all of them will be approved. Some perfectly decent projects in Europe missed out on this round.

What I’m saying is that (a) there is a very good chance and (b) their market caps are low for the potential, so a sizeable rise is possible and (c) as far as I can tell, investors in all three are not shouting about this potential from the rooftops.

Consider this throwaway statement from Blencowe’s RNS of Valentine’s Day - which was mainly about the ongoing 7,000 metres of new drilling:

This was two weeks before the AFC interest was made public - and Orom-Cross just got ESIA approval. Consider that the US DFC - which has just been told by Presidential Executive Order to go hell for leather - is still on board and retains the first right to provide cornerstone debt funding for Orom-Cross.

BRES is continuing discussions with the AFC and ‘other institutional partners’ to finalise a financing structure that enables Phase 1 development in 2026…

but the chance of strategic project status being awarded is high, and this could well be a 100% day. FWIW, the company raised capital in Q4 so should be fine for cash for now.

Then consider Harena. The stock dropped immediately after the recent RTO, but this may well present an opportunity. The company owns a strategic rare earths play, the Ampasindava Ionic Clay Project, which is one of the largest ionic clay rare earth deposits outside China, and hosts key minerals Nd, Pr, Dy & Tb.

The project is well advanced and contains a defined mineral resource of 699 million tonnes at 868 ppm Total Rare Earth Oxides (TREO) containing 606 kt of TREO.

Ionic clay rare earths are the ones you want.

Consider the Chairman’s statement on admission a few days ago:

These rare earths are essential for the defence sector: F-35 fighter jets and missile guidance systems use them. Nuclear submarines and advanced radar systems need them. AI-driven robotics & EVs can’t function without them.

And you just know how much Trump loves ‘rare’ earths.

Harena’s flagship asset is geopolitically valuable (ex-China matters) as Madagascar is positioned to supply both the US and the EU. It’s also signed a non-binding offtake with United Rare Earths and is cashed up from the RTO.

The company is now completing its feasibility study - and is perfectly positioned for strategic project status - reading between the lines, it’s clear this is an ambition.

Finally GreenRoc - the company raised £735,000 in February so again is fine for cash - and in late August announced it had applied:

That alone was a cracking day for the share price. Imagine what granting of the award would do. Then there’s these:

And finally, from the CEO on LinkedIn:

You can lead a horse to water, right?

Place your bets.