Kendrick Resources

If I told you that a flower bloomed in a dark room, would you trust it?

Good Morning Team.

In March, I closed my last piece on Kendrick Resources with a caveat: the rise so far had been explosive, but more could be to come.

Since then, the market has bought the rare earth narrative now waits to see whether the drill bit agrees with the geology.

The drill bit’s opinion appears to be encouraging.

In the weeks since my last piece, Kendrick has published four material RNS releases: a Kieshöhe project update on 26 March, a broader Namibia project update on 9 April, a Teufelskuppe drilling update on 14 April, and yesterday, a full strategic development and operational delivery plan.

A second drill rig has been acquired and commissioned. A Digital Elevation Model has been completed across Teufelskuppe. And a maiden Mineral Resource Estimate is being actively worked towards.

Colin has used the phrase ‘Tier 1’ in an RNS.

Bird can perhaps be accused of talking his own book at times (don’t we all!), but in my many interviews with the man, he has always been careful with caveats and forward looking views.

So this is significant.

Let’s consider where we are.

26 March: Kieshöhe Gets Serious

When I wrote about Kendrick in January and then again in March, the narrative was dominated by Teufelskuppe - where the peer-reviewed channel sampling data lived and where the first inherited drill core came from.

It’s also where the exceptional grades — 3.12 wt% average TREO across 295 whole-rock samples, central zone averaging 4.47 wt% — had been independently validated.

Kieshöhe was always described as the second licence. Promising, less intensively explored, average TREO of 1.54 wt% from 14 diamond drill holes and systematic channel sampling across an area of 1,500 by 600 metres.

The 26 March RNS began the process of upgrading that assessment.

The headline from that update saw more than 2,500 metres of cumulative trenching completed and sampled at Kieshöhe.

Evidence of mineralised breccia between high-grade carbonatite cone sheets is under active investigation — this breccia material will be trenched, channel and bulk sampled for both grade assessment and ore sorting sighter test work.

Samples have been submitted to an independent international specialist facility for detailed petrological studies, with the specific objective of guiding the next phase of metallurgical test work optimisation.

The historical data inherited by Kendrick at Kieshöhe, as summarised in the 26 March release and attributed to Walter et al. (2022) in a scientific journal, says it all.

Across all whole-rock channel samples and drill core, the combined KH carbonatite samples returned 1.6 wt% TREO with a peak value of 10.1 wt%.

Breaking that down by rock type:

• dolomitic carbonatites averaged 1.9 wt% TREO across 22 samples calcitic carbonatites averaged 2.1 wt% TREO across 11 samples ankerite carbonatites averaged 0.5 wt% across 4 samples

When you focus on the dolomitic ferrocarbonatite outcrop and xenolith-free core sections — the material that dominates the complex — the average TREO rises to 2.0 wt%.

The Nd and Pr contribution at Kieshöhe averages 27% of the rare earth pool across all three carbonatite categories — slightly higher than the 25% figure at Teufelskuppe.

Individual peak values include 1.55 wt% neodymium oxide and 0.55 wt% praseodymium oxide in single samples. These are not average figures, but they indicate the ceiling that this system can reach in its highest-grade expressions.

A key feature repeated from the January analysis was that uranium concentrations at Kieshöhe are low compared to carbonatites elsewhere globally.

This matters because elevated uranium is one of the main factors that complicates rare earth processing economics and creates regulatory headaches.

Kieshöhe, like Teufelskuppe, appears largely to dodge this issue.

Three open pits have already been identified as potential satellite sources of ore supply to complement the high-grade resource expected from Teufelskuppe.

The ore would route to a central processing facility within the Teufelskuppe project area, approximately 30 kilometres distant and connected by existing road access. The architecture being contemplated is a hub-and-spoke model - Teufelskuppe as the high-grade starter pit and primary resource, Kieshöhe as the tonnage contributor that extends mine life and supports processing plant utilisation.

9 April: DEM Completed, Second Rig Acquired, Resource Work Begins

Three things to consider here.

First, the diamond drill programme targeting all seven carbonatite bodies at Teufelskuppe — TK1 through TK7 — is ongoing.

Second, a new drill rig has been acquired and is being commissioned at Kieshöhe.

Third, and most significantly for near-term catalysts - work is underway to generate a Maiden Mineral Resource Estimate based on historic data supplemented by the new DEM completed on 5 April.

DEM completion is the key.

Commissioned by KEN using satellite imagery to create detailed high-resolution maps of the eight most prominent plugs, dykes and cone sheets at Teufelskuppe, it provides the foundation for converting the above-ground mineralisation into a JORC 2012 compliant resource estimate.

The previous in-house estimate from Bonya — described as unverified but encouraging — used a proprietary modelling tool with nearest-neighbour gridding methodology.

The new DEM is a more statistically precise and independent assessment. With that survey now complete, the updated volumetric and tonnage estimate of above-ground mineralisation was described as expected shortly.

That maiden MRE is now the single most important near-term catalyst for the stock. When it arrives, it will for the first time attach a tonnage figure to the grade data that has been driving the narrative. Grade without tonnage is a compelling geological story.

Grade with tonnage is a resource.

The 9 April release also contained important structural commentary on why the Company expects grade to persist at depth — and why the current drill programme is designed to prove that hypothesis across all seven targets rather than just the two holes already completed.

The technical argument runs as follows.

At Teufelskuppe, REE enrichment in the central zone is associated with sub-vertical plunging emplacement structures — flow banding, shearing and folding — which suggests the high-grade mineralisation persists at considerable depth.

The system is interpreted as the cap of a diatreme (meaning the exposed carbonatite hills represent a relatively shallow expression of a much larger intrusive system). In contrast to weathered and supergene-enriched carbonate systems where grade typically degrades with depth, the late-magmatic mineralisation at TK is not expected to follow that pattern.

The first drill hole — TWDD001, results released 16 March — provided the first empirical test of this hypothesis.

It passed.

That hole ended in mineralisation at 6.09 wt% TREO at 80.66 metres depth, with the headline intercept of 8.14 wt% over 21.16 metres from 59.5 metres.

As the Company noted in the 9 April release, the borehole results show the exact opposite of grade degradation at depth.

The geological confidence underpinning that statement — the well-exposed flow banding, the well-defined gravity anomaly associated with the high-grade TK1A outcrop and the structural interpretation of the system — is what gives the current seven-target drill programme its significance.

Each hole that confirms grade continuity at depth adds another data point to the resource model and another layer of confidence in the scale argument.

At Kieshöhe, the 9 April update reinforced what the 26 March release had begun to suggest.

Trenching extending for more than 2.5 kilometres in cumulative length has exposed a large number of mineralised carbonatite sheets and dykes over an extensive area.

The Company’s observation is that while Kieshöhe has fewer large structures than Teufelskuppe, it potentially hosts multiple closely-spaced dykes and sheets with the potential to contribute significantly to total project tonnage.

Hence the decision to acquire a dedicated second rig for the site.

14 April: TKDD002 — The Second Hole

The 14 April release covered pXRF analysis from TKDD002, drilled to a final depth of 116 metres on a different carbonatite body to TKDD001.

As a caveat, the pXRF was calibrated using pulps from certified analysis of the drill hole alongside external third-party standards, but the results are indicative rather than final.

Assays are pending.

But still, TKDD002 returned a high-grade LREE intercept of 3.4 wt% over 7.0 metres from 109 metres depth, confirming significant mineralisation at depth on a second carbonatite body.

Peak values within the hole reached 14.8 wt% TREO, with additional high-grade intervals of 9.80 wt%, 6.50 wt%, 5.20 wt% and 3.90 wt% LREO.

The mineralised zone between 76.5 metres and 116 metres was described as a weathered and strongly mineralised system comprising partially consolidated clay-carbonatite fill.

Two things stand out.

First, grades at 109 metres are consistent with surface sampling results, which returned an average of 3.16 wt% TREO across all eight carbonatite bodies.

The pattern from TWDD001 — grade continuity at depth — is repeating on the second hole.

Second, the peak value of 14.8 wt% is the highest single interval grade reported from the project to date.

Bird’s commentary introduced something new: the Company is actively considering the use of reverse circulation drilling alongside diamond drilling.

The reason is practical — RC drilling improves sample recovery and productivity in highly weathered systems, which the intersected zones at depth appear to be.

TKDD003 has commenced on the TK2 carbonatite body, targeting depth extensions beneath previously defined high-grade zones.

6 May: Development Plan

Yesterday’s release is the most strategically significant piece of news flow since the first drill results back in March.

The Company has published what it describes as a Strategic Development and Operational Delivery plan — a sequenced work programme from current resource definition through to Preliminary Feasibility Study.

This is their milestone-by-milestone commitment to a specific sequence of technical and commercial activities.

The work programme in sequence:

1. Active and targeted drilling across all seven TK targets and in parallel at Kieshöhe

2. Conversion of above-ground resources to JORC 2012 compliance using the DEM data

3. Comprehensive metallurgical testing covering comminution, beneficiation and the separation of Nd-Pr oxide from mixed rare earth concentrates

4. Development of conceptual open pit mine shell plans including a high-grade starter pit

5. Associated environmental, permitting and commercial studies

6. Engagement with strategic, development and trading off-take partners

7. Development of an updated financial model and project valuation

8. And finally, completion of a Preliminary Economic Assessment and Preliminary Feasibility Study in the shortest possible timeframe

That phrase ‘shortest possible timeframe’ is doing some heavy lifting. The company is not managing timelines conservatively but moving at pace on multiple workstreams simultaneously.

Consider the benchmarking table.

Mountain Pass — the only significant operating rare earth mine in the western hemisphere, owned by MP Materials — mines at 7.06 wt% TREO from an 18.9 million tonne resource, with a combined Nd/Pr grade of 1.08 wt%.

Market capitalisation: £7.8 billion.

Mt Weld, owned by Lynas Rare Earths and one of the largest rare earth producers outside China, mines at 6.4 wt% TREO from a 32 million tonne resource, with a combined Nd/Pr grade of 1.50 wt%.

Market capitalisation: £10.7 billion.

Teufelskuppe, on current drill data, sits at 4.18 wt% TREO with a combined Nd/Pr grade of 1.00 wt%.

Resource size: unknown.

Market capitalisation: £11 million.

Then the projects under construction:

Longonjo in Angola at 3.04 wt% TREO, 22 million tonnes, Nd/Pr of 0.80 wt%, market capitalisation £319 million.

Nolans in Australia at 2.60 wt% TREO, 56 million tonnes, Nd/Pr of 0.65 wt%, market capitalisation £715 million.

Then the resource-stage and feasibility-stage projects:

Tanbreez in Greenland at 0.55 wt% TREO, 28 million tonnes, Nd/Pr of 0.55 wt%, market capitalisation £910 million.

Phalaborwa in South Africa at 0.44 wt% TREO, 35 million tonnes, Nd/Pr of 0.125 wt%, at Definitive Feasibility Study stage, market capitalisation £163 million.

Teufelskuppe grades ahead of every project in construction on this table. It grades ahead of every resource-stage and feasibility-stage project on this table.

On current (and yes, limited) drill data it is behind only the two premier producing mines in the world. Its Nd/Pr grade of 1.0 wt% matches Mountain Pass almost exactly, and trails only Mt Weld among operating mines globally.

Tanbreez — 0.55 wt% TREO, a fraction of Teufelskuppe’s grade, no Nd/Pr breakdown available because the numbers don’t flatter — is valued at £910 million.

Kendrick, with grade data that benchmarks against the world’s two best operating mines, is valued at £11 million.

The resource size is the unknown variable. But with the DEM completed, the maiden MRE imminent, seven carbonatite bodies being drilled simultaneously, a second rig now commissioned at a separate licence with 2.5 kilometres of trench data already in hand, and a PEA being targeted in the shortest possible timeframe — the unknowns are resolving faster than the market appears to currently appreciate.

Today’s release also contains the Company’s clearest commercial statement yet.

Bird stated explicitly that the Company remains flexible and listens to parties interested in partnering. The dual-pathway model — advancing an in-house production plan in parallel with receptiveness to external approaches — is the correct posture for an asset of this quality at this stage.

The three most plausible near-term value realisation scenarios have not changed:

• A trade sale or outright acquisition by a larger entity

• A joint venture or strategic partnership with a rare earth producer or government-backed vehicle seeking assured Nd/Pr supply

• Or a progressive resource definition and PEA process that re-rates the market capitalisation as scale becomes clearer

What has changed is the company’s confidence. Colin has said that in his opinion, TK ‘has the economic potential to become a Tier 1 project in this sector’.

The Bottom Line

Kendrick is no longer making the case for what Teufelskuppe might be but executing a sequenced technical and commercial programme designed to prove what it is, attract the strategic partners that a project of this grade warrants, and deliver a PEA ASAP.

The consolidation since March is not a sign that the thesis has weakened but a predictable pause that occurs when a market has re-rated on a narrative and is waiting for the data to catch up.

And the data is catching up.

Two drill holes have confirmed grade continuity at depth on two separate carbonatite bodies. A third hole is underway. A second licence is being drilled simultaneously. A DEM-based resource estimate is imminent. A formal development roadmap has been published.

And Colin Bird — a man who sold a Zambian copper asset to First Quantum for $260 million and is heading for his Swan Song — has publicly stated his belief that this is a Tier 1 project.

Kendrick is still priced as though the question is whether the project is any good.

Two drill holes, 2,500 metres of Kieshöhe trenching, a peer-reviewed geological database and a benchmarking table that places Teufelskuppe behind only the world’s two best operating rare earth mines suggest that question has a provisional answer.

The outstanding question is now how big.

That answer is approaching.

When it arrives — and if it confirms even a fraction of the scale that the carbonatite geology, the dual-asset footprint and the sub-surface structural interpretation suggest — the market capitalisation of £11 million is going to look, in retrospect, like the pause before the second act.