MoneyTalks: Why Cygnet Capital is backing Heavy Rare Earths and critical minerals

News.com.au

2 days ago

MoneyTalks is Stockhead's drill down into what stocks investors are looking at right now. We tap our list of experts to hear what's hot, their top picks, and what they're looking out for.
Today we hear from Cygnet Capital founding director Jonathan Rosham.
Cygnet Capital describes itself as a hybrid between a traditional stock broking firm (with a limited number of high-net worth clientele) and a fund manager.
The privately owned boutique investment and advisory group has been around for 25 years, focused on two sweet spots of the ASX – tech and resources micro-cap stocks.
Within the resources space, Cygnet Capital is particularly bullish on gold, silver, copper and critical minerals, with the latter topical of late following executive orders from US President Donald Trump urging an immediate boost in domestic mineral production.
In June, Trump announced a deal with China to resume exports of rare earth minerals and magnets after a two-month period of severe export restrictions that had disrupted critical supply chains across the automotive, robotics and defence industries.
Those export restrictions amplified the urgency for countries to secure alternative, domestic or allied sources of supply.
At the same time, demand for critical minerals is skyrocketing but supply isn't keeping pace, raising alarm bells for future shortages.
Top picks
Heavy Rare Earths (ASX:HRE)
Cygnet Capital assisted HRE with its acquisition of three assets from Havilah Resources (ASX:HAV) in one of the world's premier uranium producing jurisdictions, South Australia.
Australia leads globally in uranium reserves and ranks fourth in production, with South Australia standing out as the core of the nation's uranium sector, housing 80% of its economic demonstrated resources and close to a quarter of the world's uranium supply.
Rosham reckons the market is unaware of the potential world-class characteristics at Radium Hill and believes that the best place to find economic deposits are next to old ones.
'We note the historical mining undertaken at Radium Hill as a good indication of the potential,' he said.
'The historical information on Radium Hill highlights the contents of the tailings of mining from Radium Hill at Port Pirie, which gives valuable insight of the waste material from mining uranium in the 1950s/'60s.
'It shows extremely high quantities of scandium and rare earths,' he said.
'There were a number of studies carried out in the '90s and focused on extracting the scandium and rare earths but were constrained at the time with prices and capital.
'Now, in 2025, we are in a very different environment both in prices for the critical minerals and the future demand.'
Most importantly, Rosham says HRE already knows what is in the rocks at Radium Hill, which is a massive advantage for any junior.
'Their job now is certainly to go and drill and find sufficient enough quantities to be able to potentially prove up an economic deposit and build a mine,' he said.
'The interesting part is that 50 to 60 odd years ago the market for those materials – being a lot of the lanthalites and scandium – was very different in that now, they are in demand.
'Radium Hill has been totally overlooked from a critical mineral point of view, and the company does have to do some work on the metallurgy, but metallurgy could really unlock the scandium potential,' he added.
'We do think there's a treasure chest there, they need to drill but we feel like the company has a nice head start.'
Cygnet Capital is also backing Warriedar, having recently acted as one of two joint lead managers, alongside Bell Potter, in a $20 million capital raise.
The firm was drawn to the company based on the scale of its Ricciardo mine, the antimony potential and the large, underexplored tenement package.
'The previous owner encountered a problem with the ore, which eventually sent it broke – the company focused on oxide material at Ricciardo, with the transition and primary sulphides mineralisation not systemically explored,' he said.
'As a consequence of that, the ground was totally underexplored, and we took the view internally and came up with a valuation well in excess of 20 cents and still maintain that view today.
'Warriedar has been well-funded to go and drill and create value for shareholders, and we think the takeover bid by Capricorn Metals (ASX:CMM) has come in at an interesting time – we think there's more to potentially happen there before that game plays itself out.'
In May, the company announced what it believes is Australia's largest open-pit antimony resource at Ricciardo, totalling 12.2Mt at 0.5%.
Warridar also reported a 107% increase in the projects' total resource estimate to 1.96Moz of gold equivalent at an average grade of 2.5g/t.
Carnaby Resources (ASX:CNB)
A Queensland copper play, Carnaby – like many players up near Mt Isa – took a bit of a hit following Glencore's news that it was going to close its smelter.
But Rosham likes the look of the stock due to its substantial resource base and highly attractive portfolio, including the recently acquired Trekelano copper-gold deposit from Chinova Resources.
Trekelano is within a 20km radium of Carnaby's Greater Duchess project, making it a highly complementary acquisition.
'Trekelano looks really interesting… it was an old mine, high-grade and Glencore previously owned it,' he said.
'We started taking a position in the company about 12 months ago but they recently reported an intersection of 150 metres at well over 1% of copper, which says to me that the project has a lot more scope and scale than perhaps the market is giving it credit for.
'The company is set to benefit if the government help Glencore out with the smelter up in Mt Isa, they will benefit a lot,' he said.
'They are looking to get into production, they have access to all transport, it's a low capital cost to get into production and if copper continues going the way it is, this is one company that could definitely bubble from here.'
Petratherm (ASX:PTR)
Cygnet Capital identified Petratherm before it made its high-grade, titanium-rich heavy minerals sands discovery at the Rosewood and Claypan prospects within the Muckanippe project in South Australia's Gawler Craton.
Petratherm has quickly become a hot topic among fundies and investors, who see the $130 million explorer as a possible takeover target for heavyweights like Iluka Resources (ASX:ILU), Tronox Minerals, or even Rio Tinto (ASX:RIO).
Muckanippie is yet to host a resource estimate and unlike Iluka's nearby Jacinth Ambrosia mine is not expected to be a major zircon producer, but early drill hits suggest it's rich in titanium-dioxide-bearing material, which should translate to a premium basket price.
Titanium dioxide is a key material for paint pigments, but is also a critical mineral used in welding, aerospace, aviation and defence.
Rosham likes Petratherm for the titanium content at Muckanippie.
New drilling results include 9m at 15.1% heavy minerals (HM) from 10m, including 26.4% HM from 12m and 12m at 12.7% HM from 4m, including 7m at 17.1% HM from 5m.
'Obviously it's just huge grade, there's still a lot of work to do but that grade is amazing if they can actually come up with some continuity,' he said.
'The material looks like it's a direct shipping ore, high titanium content, very big scale at surface, very low strip – it's a world-class discovery, we think there's massive scale and fairly easy to treat.
'We definitely think it's a takeover target for one of the big boys who would be paying a lot of attention to what they are doing,' Rosham added.
'They are currently in the process of drilling, they are going to do some metallurgical testwork, which we will hear about shortly, but if they continue with what they doing and can demonstrate the scale which we think they can, we can see multiples from here.'