Cyclone Metals [ASX:CLE]
Metals & Mining
A World-Class Iron Ore Development with Scale and Tier-1 Infrastructure Advantage
We initiate coverage on Cyclone Metals (ASX: CLE) with a 12-month fair value estimate of A$0.224 per share, representing a 387.7% upside from the current share price of A$0.046. This valuation reflects the world-class scale, quality, and strategic significance of the company’s flagship Iron Bear Project in Labrador, Canada, one of the world’s largest undeveloped magnetite deposits with a JORC Resource of 16.66 bn tonnes at 29.3% Fe. Metallurgical test work has confirmed the project’s ability to produce a premium blast furnace (BF) concentrate grading ~69.1% Fe and a direct-reduction (DR) magnetite concentrate grading ~71% Fe, with pilot-scale DR pellets grading ~68.4% Fe, all characterised by exceptionally low impurities (P₂O₅<0.01%, Al₂O₃<0.1%), placing its products among the highest-quality magnetite ores globally. Critically, Cyclone has secured a strategic joint venture with Vale, one of the world’s most respected iron ore majors, which provides credibility, funding support, and materially reduces development risk. With access to low-cost hydropower, established rail and port infrastructure, and the ability to deliver a low-carbon, direct reduction–grade product aligned with the green steel transition, Cyclone Metals offers investors rare exposure to a globally significant project at a fraction of its intrinsic value.
Scoping Study and Vale JV Confirm Project Economics
The Scoping Study outlines a compelling investment case, delivering a post-tax NPV₈ of US$9.79bn, a project IRR of 18.6 %, and a payback period of less than five years from a pre-production CAPEX of US$4.64bn. Cyclone’s partnership with Vale S.A., one of the world’s largest and most respected iron ore producers with a market capitalisation of over A$80bn. Vale has already committed substantial capital to the project and has the capacity to carry Cyclone through to production, materially reducing funding pressure, capital risk, and potential shareholder dilution. With annual iron ore production exceeding 300Mt, Vale also brings unmatched operational expertise to the project. Supported by renewable hydropower and a product suite of premium, low-impurity concentrates and DR pellets, Iron Bear stands at the forefront of the global shift toward low-carbon iron supply.
DCF Valuation Highlights Significant Upside Potential
Our DCF valuation underscores Cyclone Metals’ significant re-rating potential, driven by the world-class scale, quality, and economics of the Iron Bear Project. In our Base Case scenario, we derive an equity valuation of A$247.5m (A$0.162 per share), increasing to A$436.4m (A$0.286 per share) in the Upside Case. This represents a 12-month potential upside of 253–523% from the current share price of A$0.046, with a midpoint target price of A$0.224 per share. The valuation is supported by robust project economics, including EBIT margins near 60%, reflecting the high-grade nature of Iron Bear and its ability to command premium pricing.