Critica Ltd [ASX:CRI]
Metals & Mining
Australia’s largest & highest-grade clay-hosted Rare Earth Resource
We initiate coverage on Critica Limited (ASX: CRI) with a fair valuation of $0.086, representing a 562% expected upside from the current share price of $0.013 and a 197% upward rerate from our last coverage note on Critica from Jan 24'. Over the last year, CRI has successfully executed on a strategy pivot to focus on the exploration and development of rare earth element (REE) assets in a well-situated part of Western Australia. Reflecting its new strategy that focuses on critical minerals, Critica changed its name from the earlier Venture Minerals and undertook a rapid, well-targeted exploration drilling program at its Jupiter project, with Critica successfully completing ~ 40km of drilling in a period of just over a year. These drilling works culminated in the announcement of JORC 2012 compliant maiden resource estimate at Jupiter of ~1.8 billion tonnes @ 1,700 ppm TREO-Inferred.Given that the high-grade subcomponent(2,200 ppm) of this MRE itself is at 520 tonnes and 499 ppm MREO and given that a commercial at-scale REE processing plant processes 5 mtpa of ore, it is no surprise that the Jupiter project is Australia’s highest-grade and largest, rare earths discovery. What’s more is that the Jupiter project sits within Critica’s wider Brothers REE project, which is many times larger in size than Jupiter, with Critica already having found 5 additional Jupiter-like deposits at Brothers that could each be as prospective as Jupiter itself, adding significantly to exploration upside and valuation support for a Company that owns what is likely a strategic mining asset for Australia.
Many positive factors support a valuation re-rate
Apart from best-in-class grade and scale, other factors support Jupiter's attractiveness and the wider Brothers REE project’s. These include excellent proximity to well-established infrastructure, such as sealed highways and the port of Geraldton. Proximity to two planned processing plants that effectively derisk Critica’s path to revenue generation via toll treatment optionality and add to the scope of valuation upside from a potential M&A. The REE mineralogy at Jupiter is highly consistent and shallow in nature. It contains a sizeable section that contains very high MREO grades. CRI’s management is astute to recognise the strategic optionality that the prospectivity of Jupiter and the wider Brothers REE endow it with and have created additional levers of valuation support by way of the very impressive metallurgical results achieved thus far - TREO grade upgrade factor of approximately 830%. Additionally, the Company has ample cash to support its 2025 drilling and metallurgical works programs. Hence, later in 2025, investors should expect more upcoming positive news relating to a resource upgrade and improved metallurgical results. This all occurs within the context of an upturn in the REE market based on both demand and supply side factors, with Western nations increasingly looking to secure non-China-based sources of supply.
Conservative Valuation finds significant upside potential.
We have valued CRI using several conservative assumptions, such as using the peer set median trading $ EV/ TREO tonne multiple (not the higher peer set average multiple) to value Jupiter despite it outperforming its peers on several relevant valuation factors apart from just significantly outperforming on grade and scale.