Pensana: Loosening China’s grip on rare earths

Pensana plc

Liberum’s renewables analyst, Sam Wahab initiates coverage of Pensana plc (LON:PRE) with a BUY rating and a target price of £2.01 – a 230% upside from the current share price.

Pensana is uniquely positioned to benefit from the transformational demand for permanent magnets necessary for the ongoing global energy transition. The company aims to become an alternative source for European automotive and wind turbine original equipment manufacturers (OEMs), and ultimately disrupt the current Chinese monopoly on rare earth supply. Pensana benefits from significant policy-backed tailwinds in Europe, underpinned by potentially world-class feedstock from Africa, which we believe will lead to a re-rating in its valuation on successful financing. We initiate coverage with a BUY rating and 201p/share TP.

Key points

  • Saltend will be a globally recognised independent and sustainable supplier of key rare earth magnet metal oxides

Value drivers

  • Total magnet rare earth demand is forecast to grow by a CAGR of 8.3% to c.250kt by 2035

What market misses

  • Supply of c.12.5kt pa., of which 4.5 – 5.0kt will be NdPrO
  • Europe overtook China as the world’s largest EV market for the first time in 2022

Is there value?

  • Our SOTP valuation infers c.230% upside from the current share price
  • Based on a 12.2% WACC and 40% Chance of Commerciality

SOTP Waterfall Chart

Source: Liberum

Source: Liberum, Bloomberg

Pensana plc (LON:PRE) explores and mines neodymium, praseodymium, and rare earth minerals. The company is looking to establish the world’s first fully sustainable magnet metal rare earth oxide producer at the Saltend Chemicals Park in the Humber Local Enterprise Partnership Yorkshire, UK.

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