Kendrick Resources

A theory of numbers.

Good Morning Team.

I’ve covered Kendrick three times this year - each time saying the same thing.

The grade is exceptional, the management pedigree is real and the scale is broad. We are still early stage - metallurgy and similar questions remain to be answered, but it’s worth considering the potential numbers at this stage.

Large numbers.

But before we get to this, let me explain something that has been nagging at me since January — because the more interesting question is not what Teufelskuppe is worth today.

It’s why it was sitting there, unoptioned and unloved, for years after the geology was already in the public domain.

The answer is actually quite simple.

Nobody Wanted Rare Earths

The channel sampling data at Teufelskuppe was published in Geological Magazine in 2023.

Peer-reviewed, independently validated by Marlow and Palmer, showing average grades of 3.12 wt% TREO across 295 whole-rock samples — with the central calciocarbonatite zone averaging 4.47 wt% across 54 samples, and the dyke stockwork averaging 4.18 wt% across 45 samples. Less than 10% of all samples returned below 2.0 wt% TREO. Half exceeded 2.8 wt%.

The geology was sitting in the open literature for anyone to read.

Nobody moved on it.

That is not as strange as it sounds. Timing in junior mining is everything, and the timing was terrible.

Neodymium and praseodymium prices had been in freefall. After a 2021 EV boom sent rare earth prices to extraordinary highs — NdPr briefly breached the equivalent of over $100/kg — the correction was brutal.

Global EV sales growth slowed sharply in 2022 and again in 2023, just as new supply came online. By mid-2024, NdPr oxide had lost roughly half its value from the peak. Two years of declining prices had slashed margins across the sector and killed investor appetite entirely.

When the commodity you are selling is in a multi-year bear market, nobody is optioning Namibian exploration licences. The majors are cutting costs, not making acquisitions.

The junior market rotates to gold or copper or whatever the next narrative demands. Specialist rare earth investors are nursing losses on existing positions and have no appetite for early-stage risk.

So the asset sat there.

Then two things changed simultaneously.

The commodity turned.

NdPr has more than doubled from its 2024 lows. The combination of tightening Chinese export controls, accelerating EV and wind turbine demand, and a policy-driven scramble for western supply chain security has driven a price recovery that, in my view, has further to run.

And Colin Bird went hunting in southern Africa.

In defence of Colin Bird

When you put a large valuation number into the public domain you will inevitably prompt a fresh wave of scepticism (for what it’s worth, I’m generally in favour of multiple opinions in the market as it stress tests investment cases). But understanding who is running this company is material to how you assess it.

Bird is a chartered mining engineer and Fellow of the Institute of Materials, Minerals and Mining with more than 40 years of experience across Africa, Spain, Latin America and the Middle East.

He is the classic AIM serial entrepreneur: large personal stake, long track record, and a reputation built on one signature deal above all others.

That deal was Kiwara Resources. Bird founded it in 2007, proved a concept, sunk a few drill holes in northern Zambia, and sold the copper asset to First Quantum Minerals for US$260 million in November 2009 — at the height of the market. He understood exactly when to build and when to sell.

That asset became the base of Zambia’s largest copper mine.

He also co-founded Pan African Resources, which has since grown into a £2.8 billion gold producer. Bird built the foundations and stepped back.

The company thrived without him.

Jubilee Metals? Okay, going through a rough patch - but Bird brought it into the hundreds of millions in market cap before his departure as CEO in 2010 - and exited as Chair in 2022 with the share price around 15p.

He was also instrumental in bringing Nautical Petroleum to market through a shell vehicle — an AIM story that ended with Cairn Energy acquiring it for £414 million in 2012, at a 51% premium to the closing price. Nautical held stakes in the Kraken, Mariner and Catcher North Sea fields.

In the many conversations I have had with him, Bird has always been careful with language.

Precise with caveats. Reluctant to overclaim.

Possibly this is due to the more restrictive London environment, or the then perhaps overselling of Xtract’s Bushranger project (though this will come back into play with copper at record highs).

When he recently described Teufelskuppe as having the potential to be a Tier 1 project, that was not boilerplate promotional language. It was a considered statement from a man who has built and sold assets at this level before and knows exactly what the phrase means.

It’s been a while.

But he knows what they look like.

Managing Director Martyn Churchouse adds further weight. An MSc from the Camborne School of Mines and decades of African exploration experience behind him.

These are operators who have spent their careers in exactly this part of the world, doing exactly this kind of work.

More evidence? Colin has drilled more metres than anyone else in London over the past decade. Through the horrendous bear market - and yes dilution.

This will now pay off.

The Journey So Far

In January, when Kendrick announced its option over two Namibian rare earth licences — EPL4458 and EPL6691, covering the Teufelskuppe and Kieshöhe carbonatite complexes — the stock was trading at fractions of a penny.

Market capitalisation two potatoes and a carrot. The company was being written off as a failed vanadium play with no obvious path to relevance.

The rare earth pivot looked like desperation to most observers.

I disagreed.

The peer-reviewed channel sampling data was showing grades that matched the world’s best operating rare earth mines on the elements that actually matter.

The licences sit approximately 55 kilometres southwest of the town of Aus and — critically for any future development economics — around 65 kilometres from the deepwater port of Lüderitz, connected by existing road and rail infrastructure.

An environmental clearance certificate had already been issued in 2022. The previous licence holder had done substantial work. The entry cost to Kendrick was $300,000 cash plus 22 million shares for a 70% interest. For what the ground data was suggesting, that entry price was almost laughably low.

By 23 February, the option had been exercised and the definitive agreement signed.

The first drill hole — TWDD001, drilled on carbonatite body 1A to a depth of 80.66 metres — confirmed everything the surface data had suggested.

The headline intercept was 8.14 wt% TREO over 21.16 metres from 59.5 metres depth, with grades peaking at 10.7 wt% and never dropping below 6.0 wt% across that entire run. The hole ended in mineralisation at 6.09 wt% — the drill simply ran out of hole before the mineralisation ran out of grade.

The average combined neodymium and praseodymium oxide grade across all mineralised intervals was approximately 1.0 wt%.

The second hole, TKDD002, confirmed grade continuity at depth on a separate carbonatite body entirely, with peak values reaching 14.8 wt% TREO — the highest single interval grade reported from the project to date.

A third hole commenced on the TK2 carbonatite body. A second rig was acquired and deployed at the neighbouring Kieshöhe licence, where more than 2,500 metres of cumulative trenching had already been completed.

The stock re-rated from sub-0.2p to a peak of 8.85p. From a market cap of under £1 million to over £25 million.

These holes had never been assayed. Now they have been.

Right Elements in the Right Place

Before getting to the valuation, it’s worth considering why this deposit is structurally different from most rare earth projects — because not all rare earths are created equal, and the distinction matters to the economics.

The rare earth market is bifurcated.

On one side sit the heavy rare earths — valuable, but typically found in lower concentrations.

If you find heavies in higher concentrations (wink wink #SVML), you’re onto a winner.

On the other sit the light rare earths, and within that group two elements sit at the absolute centre of global industrial demand: neodymium and praseodymium.

These are the elements used to manufacture the high-intensity permanent magnets that go into electric vehicle motors, wind turbine generators and advanced defence systems.

They are the rare earths that the United States, European Union, Japan and the United Kingdom have specifically identified as critical to national security and the energy transition.

Most rare earth deposits are dominated by lanthanum and cerium — the abundant, cheap lanthanides that pad out total REO numbers but contribute almost nothing to project economics at current prices.

Lanthanum trades at around $1.5/kg. Cerium at around $2.5/kg. They are filler. They are what makes a headline TREO grade look impressive while the actual economics disappoint.

At Teufelskuppe, neodymium and praseodymium together account for an average of approximately 25% by weight of the total rare earth pool.

On a 3.12% average grade project, that translates to roughly 1.0 wt% combined NdPr oxide. Praseodymium is currently around $120/kg. Neodymium around $130/kg. The basket at Teufelskuppe is skewed heavily toward the elements that actually drive value — and that is before accounting for samarium at $15/kg, which also features meaningfully in the deposit.

The mineralogy reinforces the case.

The rare earths at Teufelskuppe are hosted primarily in fluorcarbonate minerals — fine-grained aggregates that make up to 40% of the rock in the highest-grade zones and are considered relatively amenable to processing compared to some of the nightmare mineralogy found elsewhere in the rare earth world.

Crucially, thorium content averages around 358 ppm in the central zone, with uranium at just 2-3 ppm. Elevated radioactivity is one of the primary factors that creates regulatory headaches and processing complications in rare earth projects. Teufelskuppe largely sidesteps this issue — as does the neighbouring Kieshöhe complex, where uranium concentrations are similarly low.

The Kieshöhe picture also deserves some attention.

The complex covers an area of 1,500 by 600 metres, hosts multiple cone sheets, dykes and sills, and has returned an average TREO of 1.54 wt% from 14 diamond drill holes and systematic channel sampling — with dolomitic and calcitic carbonatites averaging above 2.0 wt% when isolated from the lower-grade ankerite material.

The Nd and Pr contribution at Kieshöhe averages 27% of the rare earth pool — slightly higher than Teufelskuppe’s 25%. Three open pits have already been identified as potential satellite ore sources for a hub-and-spoke processing model, with Kieshöhe ore routing to a central processing facility within the Teufelskuppe project area approximately 30 kilometres distant via existing roads.

The architecture being contemplated is sensible - Teufelskuppe as the high-grade starter pit and primary resource, Kieshöhe as the tonnage contributor that extends mine life and supports plant utilisation.

Benchmarking

To understand where Teufelskuppe sits in the global context, you need to look at the projects against which it measures itself.

Again, caveats here. We’re early days and this is not a guarantee.

Mountain Pass in California is the only significant operating rare earth mine in the western hemisphere. Owned by MP Materials, it mines at 7.06 wt% TREO from an 18.9 million tonne resource, with a combined NdPr grade of 1.08 wt%.

It’s attracted substantial US government attention as a domestic critical minerals supplier and sports a market capitalisation of circa £8 billion.

Mt Weld in Australia, 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 NdPr grade of 1.50 wt%.

Also a recent beneficiary of US government investment.

Market capitalisation around £11 billion.

These are the two benchmarks against which all serious rare earth projects are measured. Below them sit the projects under construction: Longonjo in Angola at 3.04 wt% TREO and 22 million tonnes, with a 0.80 wt% NdPr grade — market capitalisation £319 million. Nolans in Australia at 2.60 wt% TREO and 56 million tonnes, NdPr of 0.65 wt% — market capitalisation £715 million.

Then come the resource-stage and feasibility-stage projects. Tanbreez in Greenland grades 0.55 wt% TREO from 28 million tonnes, with a NdPr contribution so modest it is not prominently disclosed — market capitalisation £910 million.

Phalaborwa in South Africa grades 0.44 wt% TREO from 35 million tonnes, NdPr of 0.125 wt%, currently at Definitive Feasibility Study stage — market capitalisation £163 million.

Tanbreez — 0.55 wt% TREO, a fraction of Teufelskuppe’s grade, with NdPr numbers that do not flatter — is valued at £910 million. Phalaborwa, at 0.44 wt% TREO and 0.125 wt% NdPr, is at DFS stage and valued at £163 million.

Teufelskuppe, on current drill data, sits at 4.18 wt% TREO with a combined NdPr grade of 1.0 wt%.

It grades ahead of every resource-stage and feasibility-stage project. On NdPr — the metric that actually drives economics — it matches Mountain Pass almost exactly and trails only Mt Weld among operating mines globally.

Kendrick’s market capitalisation is still pennies in comparison.

The total resource size remains the outstanding variable (other than proving up metallurgy, though initial indications are promising).

But the grade is established and the depth continuity has been confirmed on two separate carbonatite bodies. The peer-reviewed historical data provides an unusually strong foundation.

And the drilling programme is active across all seven carbonatite targets at Teufelskuppe simultaneously, with a second rig now commissioned at Kieshöhe.

A Valuation?

Now to the number.

The above-ground resource at Teufelskuppe is estimated at 14 million tonnes of rare earth-bearing carbonatite at an average grade of 3.12 wt% TREO.

At that grade and tonnage, you’re looking at approximately 448,000 tonnes of total rare earth oxide, of which approximately 100,000 tonnes is attributable to the high-value neodymium and praseodymium fraction.

Running the basket value against current spot prices and applying industry-standard haircuts for processing recovery — full-chain recoveries in the rare earth sector typically range from approximately 40% to 70% depending on mineralogy and flowsheet — the gross economics are strong.

You’re looking at a gross project valuation in the region of $400 million, applying a conservative 95% discount to gross in situ value to reflect development, permitting, processing geopolitical and pricing risks.

The 95% haircut to in situ value is, I think, fair. Industry-standard discounts for early-stage rare earth projects run in a similar range, and applying that level of conservatism to a project with this grade profile and NdPr weighting does not strike me as aggressive.

The comparable transaction methodology — benchmarking against actual deals done at equivalent stages globally — anchors the number to market reality rather than geological optimism.

What gives me additional confidence is the basket composition. A project where neodymium and praseodymium dominate the economics — on a 3.12% average grade deposit, peer-reviewed, with two drill holes confirming depth continuity — is not a typical rare earth project, and it should not be valued like one.

The caveat?

There is no JORC resource yet. The 14 million tonne figure is an above-ground inventory estimate, not code-compliant. And the methodology is internal and unaudited, not independently verified.

But what I keep coming back to is that the current valuation excludes all mineralisation beneath the calcrete and sand cover that dominates the Teufelskuppe landscape.

Two boreholes have already confirmed geological continuity to at least 100 metres below the datum plain. The technical team’s interpretation of the system — sub-vertical plunging emplacement structures suggesting the exposed carbonatite hills represent a relatively shallow cap of a much larger intrusive system — means the first drill hole ending in mineralisation at 6.09 wt% is not a ceiling.

It’s a data point on the way down.

My $400 million figure is therefore a floor on the above-ground case as the subsurface story has not been priced in, and neither has Kieshöhe.

Neither has the strategic premium that a project of this grade, in this jurisdiction, with this NdPr profile commands in the current geopolitical environment.

Of course, you may also see an AIM discount, and while we’re seeing a much, much better market - you can apply your own haircut to the $400 million figure as you wish.

But it’s worth a lot more than the market is valuing at present.

Strategic Context

China accounts for approximately 61% of global mined rare earth supply and 91% of refining and processing capacity.

That concentration has moved from a niche industrial concern to a matter of explicit government policy across the western world in a very short period of time.

The United States has the Inflation Reduction Act and a series of executive actions targeting domestic and allied-nation critical mineral supply. The European Union has the Critical Raw Materials Act. The UK has its own critical minerals strategy. Japan has been investing in rare earth supply chain security for nearly two decades, following China’s 2010 export restrictions.

Every one of these policy frameworks identifies neodymium and praseodymium as priority materials. The permanent magnet supply chain — currently dominated almost entirely by China — is the single most discussed critical minerals vulnerability in western defence and energy transition planning.

And China has continued tightening the screws, with additional export controls adding friction to supply chains that were already stressed.

Against that backdrop, a project sitting at 4.18 wt% TREO with 1.0 wt% combined NdPr, peer-reviewed historical data, active drilling, fast-track development planning, a 70% interest, a deepwater port 65 kilometres away and an environmental clearance certificate already in hand — in a stable, mining-friendly democracy with an established regulatory framework — is exactly what strategic buyers are trying to secure right now.

The company has confirmed in podcasts that discussions with potential counterparties, both private sector and sovereign, are ongoing.

I will not read more into that than is warranted at this stage. But the breadth of interest is consistent with the asset’s strategic profile.

The pathway to value realisation here does not necessarily require Kendrick to build a mine.

A trade sale of the project or the company outright, a joint venture with a rare earth producer or government-backed vehicle seeking assured NdPr supply, or a step-by-step resource definition process that progressively re-rates the market capitalisation as scale becomes clearer — all three remain live options, and the company has been explicit that it is keeping all doors open.

What Comes Next

The maiden JORC-compliant Mineral Resource Estimate remains the single most important near-term catalyst.

When it arrives — and the digital elevation model has been completed, the drilling programme is active across all seven carbonatite bodies, and verification work is underway — it will attach a compliant tonnage figure to the grade data for the first time.

Grade without tonnage is a geological story.

Grade with tonnage is a resource.

And a resource opens the door to a conventional valuation framework.

Beyond that: permitting workstreams are advancing, starter pit optimisation studies are underway targeting early cash flow potential, metallurgical and petrological test work is ongoing, and the company is targeting development activity commencement in late 2027 under its Mine to Magnet strategy.

The subsurface story, the Kieshöhe story, and any strategic transaction process all remain entirely ahead of us.

The Bottom Line

The asset was overlooked because the commodity was in a bear market, the company was invisible, and nobody was watching. The geology was in the public domain the entire time.

Then the commodity turned, Bird arrived, and the drill bit confirmed what the surface data had been saying all along.

NdPr has more than doubled from its 2024 lows. The first hole graded 8.14 wt% TREO over 21 metres. The second hit 14.8 wt% peak grades on a separate carbonatite body.

A credible valuation framework — conservative, internally derived, stress-tested — produces a number in the region of $400 million for the above-ground resource alone, before the subsurface, before Kieshöhe, before a JORC resource, before any strategic transaction premium.

Tanbreez, at 0.55 wt% TREO, is worth £910 million. Longonjo, at 3.04 wt% TREO, is worth £319 million under construction. Mountain Pass, the closest NdPr analogue in the world, is worth £7.8 billion in production.

Bird has done this before. Multiple times, across different commodities, across four decades.

It’s been a while since the last bird strike.

But watch this space.