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Investment Memo: Ragusa Minerals (ASX:RAS)
Published on May 23rd 2022
What does RAS do?
Ragusa Minerals (ASX: RAS) is a junior exploration company focused on its hard rock lithium project in the Northern Territory.
RAS also holds gold prospects in the USA and a halloysite project in Western Australia.
What is the macro theme?
Lithium is one of the most critical raw materials that go into producing lithium-ion batteries. These batteries are specifically required to power electric vehicles (EV’s). Lithium is considered a critical material for the transition away from fossil fuels by the USA, AUS, India, EU and Japan.
Halloysite has traditionally been used in ceramics and the energy sector. Halloysite is expected to be a critical mineral in up and coming technologies including – energy storage, batteries, supercapacitors, carbon capture, and cancer therapeutics.
Gold has historically outperformed during times of market volatility (e.g market bubble crash, inflation taking hold). We believe gold provides a good hedge to a portfolio of longer term investments.
Why do we continue to hold RAS in 2022?
- Lithium projects along strike to Core Lithium (currently capped at $2.3 billion): RAS holds ground along strike Core Lithium’s hard rock Finnis deposit which has a 15mt JORC resource with lithium grades of 1.03%. RAS’ project also sits next door to explorer Lithium Plus’s (Currently capped at $61M) NT lithium projects.
- Gold projects neighbouring ~16 million ounces of gold resources: RAS holds a portfolio of gold projects which sit next door to Nova Minerals (currently capped at $116M) ~9.6m ounce gold resource as well as GoldMining Inc’s (currently capped at $234M) 6.5+ million ounce gold resource in Alaska, USA.
- Halloysite next door to Latin Resources: The company’s Halloysite project in WA borders Latin Resources’ Cloud Nine Halloysite-Kaolin deposit which has a 207 million tonne inferred mineral resource. We think the Cloud-Nine deposit extends into RAS grounds.
- Low enterprise value (EV) means leverage to a discovery: Company has 125 million shares on issue with ~2.2 million currently escrowed. With a current market cap of $10M and $3.2M cash in the bank, the enterprise value is only $6.8M. This makes the stock highly leveraged to any discovery.
What do we expect the company to deliver in 2022?
Objective #1: Complete due diligence on NT lithium project:
RAS will have a 12 month due diligence period over these projects. In that time we want to see the company do enough exploration work to be informed enough to make a decision on whether or not to proceed with the acquisition.
🔲 Geochemical mapping
🔲 Geochemical sampling
🔲 Define high priority drilling targets
🔲 Undertake at least one drilling program
🔲 Complete due diligence and proceed with farm in agreement
Objective #2: Drilling results from the Halloysite project in WA
With drilling recently completed (4th May 2022), we want to see the results from the drilling program confirm that Latin Resource’s deposit does in fact extend into RAS’ grounds.
🔲 Drilling results
Objective #3: Define a maiden JORC resource at its WA halloysite project
Pending a successful drilling program, we want to see RAS put together a maiden JORC resource estimate at its WA halloysite project. This will be contingent on Objective #2 being successfully completed.
Objective #4: Drilling at the company’s Alaskan Gold project
Initial desk-top studies leading to sampling and other target generation work early in 2022 hoping to see the assets drilled in Q3-4 2022.
🔲 Desktop studies
🔲 Geochemical sampling/geophysical surveys
🔲 Define high priority drilling targets
What could go wrong?
Exploration risk - A large part of the investment thesis in RAS is based on “nearology” with little in the way of exploration drilling conducted to date. This means the company’s assets are all highly speculative at the moment. There is a risk that once further drilling is completed, RAS may make no discovery & the valuation of the company goes down as a result.
Commodity risk - Lithium markets are still in the relatively early stages of growth, with demand mostly based on electric vehicle (EV) uptake. The price of lithium could stay volatile as end user markets continue to evolve. Halloysite is considered a mineral for the future. If the use-cases don't scale there is a risk that halloysite deposits are not considered important by the markets and RAS’s project is not of interest to investors.
Funding risk - RAS is a very early stage exploration company and is reliant on continuous funding of high-risk exploration programs. There is a risk that market conditions deteriorate and investors shun high-risk explorers like RAS.
Market risk - RAS is an early stage exploration company chasing new discoveries. There is always a risk that a market wide sell off will hurt RAS’s share price the most, given investors will look to withdraw capital from the high risk high reward investments in their portfolios first.
What is our investment plan?
Our investment plan for RAS is the same as for all our early stage, exploration investments:
- Invest early (way before the main, initial drilling event)
- Patiently wait till the drilling event approaches
- Free carry and take some profit prior to the initial drill results
- Hold a position into the result
- Reassess the plan based on the initial results.
Disclosure: The authors of this article and owners of Catalyst Hunter, S3 Consortium Pty Ltd, and associated entities, own 2,610,000 RAS shares at the time of publication. S3 Consortium Pty Ltd has been engaged by RAS to share our commentary and opinion on the progress of our investment in RAS over time.
We have revised our 2022 RAS Investment Memo to incorporate RAS’s new project acquisition.
We periodically revise our Investment memo’s when key material events take place that impact the Investment thesis - see our Investment Memo revision policy for more details.
Our Past Commentary on Ragusa Minerals
|Type||Date||Share Price $||Title|
|23-May-2022||$||RAS Picks up Prospective Lithium Ground Near $2.3BN Core Lithium|
|11-Apr-2022||$||RAS Now Drilling for Halloysite - Directly Next to Open Resource|
|24-Feb-2022||$||RAS to drill WA halloysite project in coming weeks|
|23-Nov-2021||$||WA halloysite tenements granted - Drilling Plan Now Unlocked|
|12-Oct-2021||$||We Got Lucky - RAS’ Next Door Neighbour Delivers World Class Drill Intercept|
|Article||06-Oct-2021||$ 0.086||Surely there must be RAS news coming soon…|
|14-Jul-2021||$ 0.089||RAS Side Bet Delivers Early High Grade Gold Result (221g/tonne)|
|05-Jul-2021||$ 0.079||Tiny Ragusa Minerals (ASX: RAS) Acquires Two Nearology Projects - We Have Invested|
Most recent catalysts for Ragusa Minerals
Catalyst Hunter 23/05/2022
RAS Picks up Prospective Lithium Ground Near $2.3BN Core Lithium
Our $10M capped explorer Ragusa Minerals (ASX: RAS) has picked up more lithium ground near $2.3BN capped Core Lithium’s and $61.1M capped Lithium Plus in the Northern Territory.
Catalyst Hunter 11/04/2022
RAS Now Drilling for Halloysite - Directly Next to Open Resource
RAS has ground either next door (or very close to) to three much larger ASX companies, each with well defined resources. That includes RAS’s latest nearology acquisition, when it picked up lithium ground next door to $2.2B Core Lithium in the NT.
Catalyst Hunter 24/02/2022
RAS to drill WA halloysite project in coming weeks
Last year we made our initial investment in Ragusa Minerals (ASX:RAS) because we liked its newly acquired WA halloysite and Alaskan gold projects. RAS has a tiny EV of $3.7M and is expected to start drilling next week.
Catalyst Hunter 23/11/2021
WA halloysite tenements granted - Drilling Plan Now Unlocked
Today we got confirmation that both RAS’ WA halloysite tenements have been granted - which is a key milestone we had been waiting for, as it allows RAS to plan its maiden drilling campaign.
Catalyst Hunter 12/10/2021
We Got Lucky - RAS’ Next Door Neighbour Delivers World Class Drill Intercept
RAS’s Alaskan gold neighbour Nova Minerals just hit a gold intercept that has been regarded as “in the top 40 best high grade gold intercept in the past 10 years”.
Catalyst Hunter 06/10/2021
Surely there must be RAS news coming soon…
We recently invested in Ragusa Minerals (ASX:RAS) at 6.5c. now that a few months have passed since news of the new project acquisitions, and after taking another closer look at RAS’ September 2021 investor presentation
Catalyst Hunter 14/07/2021
RAS Side Bet Delivers Early High Grade Gold Result (221g/tonne)
Today Ragusa Minerals (ASX: RAS) released some underground sampling results, and we were quite surprised by the good grade. RAS’ exploration work has confirmed priority drill targets at its Tiberius prospect.
Catalyst Hunter 05/07/2021
Tiny Ragusa Minerals (ASX: RAS) Acquires Two Nearology Projects - We Have Invested
We are kicking off the new financial year with a brand new investment we just made in Ragusa Minerals (ASX: RAS). RAS has just a acquired halloysite project right next to one of our favourite investments Latin Resources.