A 3,800m diamond drilling campaign will begin this month at Power Minerals’ (ASX: PNN) ultra high-grade Morro do Ferro REE project in Brazil, following up on outstanding assays such as 60.85m at 89,177ppm (8.92%) TREO – and right as the US$368 million IPO of Rare Earths Americas (NYSE REA) hit the boards with a flagship project in the US that has high grades but tiny widths with best assays of just 0.86m at 131,600ppm (13.16%) TREO from 3.51m, as well as a broader Brazilian portfolio. America is going full throttle on its investment in Brazilian rare earths, with the US government providing the Serra Verde mine with a US$565 million financing facility, which was then followed by USA Rare Earth Inc (NASDAQ: USAR) buying the entire operation for US$2.8 billion. The market has pushed NdPr prices to US$125/kg in Europe and the US, well above the US$110/kg guarantee given to MP Materials (NYSE: MP) by the Department of War. At $0.115/share, PNN is currently trading at an effective $44 million market cap upon factoring in the settlement of the second tranche of the recent placement, which will leave it with a robust $10 million cash balance and a $34 million enterprise value. With a portfolio of advanced and highly prospective rare earths assets in very favourable jurisdictions – and with Morro do Ferro being one of the highest grade projects in the world – PNN has potential to significantly rerate upwards if this drilling campaign proves extensions in mineralisation, and the company has set a key acquisition payment milestone of defining a resource of 20Mt at 40,000ppm (4%) TREO.
US demand for high-grade rare earths investment opportunities has proven to be extremely robust through the REA listing, with the initial offer size being increased to US$63.3 million from US$52.8 million due to strong demand, and trading on IPO day pushing the valuation to a peak of 58% higher to reach a US$581 million market cap. A meaningful portion of REA’s valuation is likely being driven by its Brazilian projects, which include the 201.7Mt at 1,520ppm TREO Alpha Project, and the 266.2Mt at 2,637ppm TREO Constellation Project, and PNN has its Santa Anna carbonatite complex which has an MRE pending, as well as its JV deal with Summit Nanotech for the Salta Lithium Project. However, it’s likely that market sentiment is placing a huge premium on REA’s Shiloh project for its high-grades, hopeful extension possibilities and US location. Brazil has the largest rare earth reserves outside of China, and the US is treating it like the tier 1 mining jurisdiction that it is, so the projects there should be entitled to increased location premiums as well – and many are.
There were 3 drilling campaigns undertaken at Shiloh across 2021, 2022 and 2025, and of the 3,056 drilling samples collected and verified for laboratory analysis – only 65 samples exceeded the low-grade zone cutoff above 2% TREO. While demonstrating excellent grades that the market is clearly hoping will be able to be replicated across the project, these 65 intercepts were all extremely narrow – with the best high-grade samples ranging from just 0.09m to 0.86m at grades between 10.4% TREO to 20.01% TREO. Shiloh and Morro do Ferro aren’t geological analogues, with the former being a monazite-hosted hard-rock/saprolite rare earth system, while the latter is a supergene/lateritic rare earth system developed over an alkaline/carbonatitic source – but they are typically benchmarked to much higher grade requirements than ionic clay deposits. Morro do Ferro has a whole litany of eye-wateringly wide and high-grade assays such as 70.9m at 79,997ppm (8%) TREO, 60.6m at 70,217ppm (7.02%) TREO and 100.44m at 49,910ppm (4.99%) TREO – which were all from surface and diamond drilled. Within these intercepts are intervals with insanely high grades such as 2m at 241,301ppm (24.13%) TREO from 14m, and tremendously strong percentages of Nd, Pr, Dy and Tb with 2m at 34,835ppm (3.48%) MREO.
PNN’s current campaign is segmented into 3,000m of diamond drilling to target strike and depth extensions – with mineralisation being open in numerous directions – and 800m of larger diameter diamond core drilling, which will be used to collect samples for the advancement of metallurgical test work. Morro do Ferro is a very well validated asset that has been subject to a solid amount of drilling, including 50 diamond drill holes for a total of 4157.59m and 106 auger holes for a total of 846.5m. There are numerous high-priority targets for PNN to follow up on given the existing drilling has been focused on 20% of the total tenement area – with a particularly high concentration in a corridor representing around 10% of the 3km2 project. There is plenty of room for expansion to the existing 3.58Mt at 3.9% TREO resource, and this drilling campaign should reveal the near-term extent of it.
There is a heightened sense of urgency surrounding the American US$12 billion critical minerals stockpile initiative, which is getting underway at the same time there are intense negotiations going on between Washington and Beijing about removing the rare earth export restrictions that have disrupted US aerospace and semiconductor manufacturing. The deal that was struck in October which was supposedly going to allow for the export of certain rare earths has in practice not eventuated, and the outcome of Trump’s recent visit to China has resulted in the country that controls more than 90% of global processing capacity ultimately defending the legality of its export controls while loosely agreeing to address US concerns about their impact.
While domestic Chinese NdPr prices are elevated to near ex-China levels – having this week slightly pulled back to a historically elevated US$106/kg – heavy rare earths have seen catastrophic price explosions. The export controls imposed in April 2025 have driven Terbium, Dysprosium and Yttrium to insane prices – with the latter rising a mind boggling 14,000% since. After also suffering disruptions due to inadequate supply and prohibitively high pricing, Europe has been progressing its own stockpile – which has rare earths on the shortlist – and is being led by France, Germany and Italy after being announced in December.
PNN recently completed its due diligence and formally executed the project acquisition, and has reaffirmed the accuracy of the historical drilling database with samples up to 14.03% TREO and 2.64% MREO from the hole that recorded 70.9m at 8.00% TREO (MFSR-44). A cross section looking northwest at Morro do Ferro below shows a few of the project’s assays with MREO percentages, as well as three of the new verification analyses that PNN took from one of the drill holes, which confirmed the excellent grades previously demonstrated at the project. This round of drilling will be testing the significant depth potential shown in the image, where most holes have ended in extremely strong mineralisation and with good prospects of continuing:
Source: PNN
Another cross section below which is also looking northwest, but is 380m away from the one above, demonstrates continuity of mineralisation along strike and is highly encouraging for the broader targets at the project that PNN will shortly be drilling:
Source: PNN
Below is a cross-section from REA’s Shiloh Project, showing the shallow, narrow, high-grade mineralised trend that has been enough to ignite the US market, and will soon be followed up with diamond drilling. While the grades reported from Shiloh are exceptional, the current valuation appears to be pricing in a high probability that REA can extend this style of mineralisation across a much larger portion of its project area, and importantly, prove materially thicker and more continuous zones than those shown in the early shallow drilling and trench-defined sections:
Source: REA
Around 97% of the magnet rare earth content at Morro do Ferro is attributable to high-value NdPr, and the remainder is Dy and Tb – while there is also Y present. The chart below depicts how much volatility China’s export controls can inflict upon on the prices of these commodities, which often have no substitutes and force buyers to keep paying perpetually higher prices:
Source: Reuters, Argus
With the first assays from PNN’s campaign due in June, and further results expected to follow progressively thereafter, Morro do Ferro is entering a newsflow-heavy period that should give the market a clearer read on how much of the project’s upside is yet to be unlocked.
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