Locksley Resources Limited (ASX: LKY)

rare earth elements

Jul 16, 2025

Executive Summary

Locksley Resources Limited operates as a speculative exploration company focused on critical minerals, with flagship assets in rare earth elements (REE) and antimony in both Australia and the United States. The company is positioned at the intersection of two rapidly expanding commodity sectors—rare earths and antimony—both experiencing significant price surges and supply chain disruptions due to geopolitical tensions and increasing demand for clean energy technologies.

Investment Recommendation: BUY
Confidence Level: Medium
Expected Timeframe: 12-18 months

1. Fundamental Analysis

Financial Performance

Revenue and Profitability Trends1 2 3

Revenue declined 50.4% from A$66,540 in FY2023 to A$32,986 in FY2024
Net loss increased 42.0% from A$1.50M in FY2023 to A$2.13M in FY2024
Gross margin remains at 100% (typical for exploration companies with minimal operational revenue)
Operating margins are deeply negative at -6,468% in FY2024, reflecting the pre-revenue exploration phase

Cash Flow Analysis3 4

Operating cash flow deteriorated from -A$1.41M in FY2023 to -A$2.03M in FY2024
Free cash flow declined from -A$1.41M to -A$2.06M, indicating increased capital requirements
Cash burn rate of approximately A$1.31M over the trailing twelve months ending December 2024
Cash position remains adequate at A$2.3M as of June 2024, providing runway for operations

Balance Sheet Strength5 6

Total assets increased 17.9% to A$8.63M, primarily driven by exploration asset additions
Total equity strengthened 28.5% to A$8.46M, reflecting successful capital raising activities
Debt-to-equity ratio of 0.02 indicates minimal financial leverage
Current ratio of 12.13 demonstrates strong short-term liquidity position

Valuation Metrics6 7

Current Trading Multiples

Market capitalization: A$22.0M (at A$0.12 per share)
Enterprise value: A$19.7M
Price-to-book ratio: 1.96x
Price-to-sales ratio: 360x (not meaningful for exploration companies)
EV/Sales: 176x (elevated due to minimal revenue)

Sector Comparison7

P/E ratio: Not applicable (loss-making)
P/B ratio: 1.96x vs sector average of 1.6x
Price/LTM Sales: 360x vs sector average of 1.2x
Beta coefficient: 1.84 (highly volatile relative to market)

Insider Trading Activity8 9

Recent Insider Transactions

Nathan Lude (Non-Executive Chairman): Purchased 1,563,646 shares at A$0.022 in June 2024 (A$34,400 investment)
Stephen Brockhurst (Former Director): Purchased 950,000 shares at A$0.041 in October 2023 (A$38,959 investment)
Multiple option grants to directors and management in 2023, indicating continued commitment

Current Insider Ownership9

Individual insiders hold 17.8% of outstanding shares
Institutional ownership: 13.0%
Private companies: 8.69%
General public: 60.5%

2. Thesis Validation

Bullish Arguments

1. Critical Minerals Exposure to Unprecedented Price Surge10 11

Antimony prices have surged 1,000% from US$5,500/tonne in 2019 to US$57,000-60,000/tonne in 2025
China's export restrictions have created a supply crisis, with international buyers paying double domestic Chinese prices
Rare earth elements market projected to grow from US$12.4B in 2024 to US$37.1B by 2033 (CAGR of 12.83%)

2. Strategic US Asset Positioning12 13

Mojave Project strategically located adjacent to the only producing rare earth mine in the US
Recent drilling permit approval for the Desert Antimony Mine provides clear development pathway
US advisor appointment (Viriathus Capital LLC) to facilitate government relationships and funding opportunities
Potential beneficiary of US critical minerals policy supporting domestic supply chains

3. Strong Balance Sheet with Operational Flexibility5 6

Minimal debt burden (debt-to-equity ratio of 0.02) provides financial flexibility
Strong cash position of A$2.3M provides operational runway
Recent successful capital raising of A$1.47M in May 2025 demonstrates investor confidence
Low-cost exploration opportunities with high-grade surface samples already identified

Counter-Arguments and Key Risks

1. Commodity Price Volatility Risk14 15

Rare earth prices historically volatile with significant downturns in 2023 (praseodymium oxide fell 34%)
Antimony price surge may not be sustainable long-term without sustained supply disruptions
Geopolitical tensions with China could normalize, reducing price premiums

2. Execution and Development Risk16 17

Permitting delays possible despite recent approvals, particularly for US operations
No established production or revenue stream beyond minimal exploration-related income
Significant capital requirements for development phase may necessitate substantial dilution
Technical risks in transitioning from exploration to production phases

Final Verdict: Bullish

The convergence of extreme commodity price appreciation, strategic asset positioning, and supportive policy environment creates a compelling investment opportunity. While execution risks remain significant, the potential upside from successful development of high-grade antimony and REE deposits substantially outweighs the downside risk, particularly given the company's strong balance sheet and minimal debt burden.

3. Sector & Macro View

Sector Overview18 19

Australian Mining Sector Context

Mining contributes 15% of Australia's GDP and employs over 1.1 million people
Critical minerals focus driven by energy transition and supply chain security concerns
Government support through tax incentives and expedited permitting for strategic minerals
Copper and gold prices expected to drive exploration activity, though financing remains challenging

Macroeconomic Trends20 21

Global Rare Earth Elements Market

Market size: US$12.4B in 2024, projected to reach US$37.1B by 2033
China dominance: 58.3% market share, creating supply chain vulnerabilities
Demand drivers: Electric vehicle production, renewable energy systems, defense applications
Critical supply gap: Dysprosium demand projected to rise 2,600% over next 25 years

Antimony Market Dynamics10 22

Market size: US$4.76B in 2024, projected to reach US$6.54B by 2029
China controls 75% of global antimony production
Supply deficit emerged in 2021 for the first time in history
Growing applications in lithium-ion batteries, solar panels, and flame retardants

Competitive Positioning23 12

Locksley's Strategic Advantages

Dual commodity exposure to both REE and antimony markets
Geographic diversification across Australia and US assets
Early-stage development with potential for significant value creation
Strong government relations through experienced leadership team

Competitive Landscape

Lynas Rare Earths (ASX:LYC): Market cap A$9.35B, established producer
Mandalay Resources (TSX:MND): Only antimony producer in Australia (1,282 tonnes in 2024)
Limited competition in combined REE/antimony space creates differentiation opportunity

4. Catalyst Watch

Short-Term Catalysts (3-6 months)

Operational Milestones

Drilling commencement at Mojave Project (expected Q3 2025)
Quarterly activity reports (next due July 29, 2025)
Initial drilling results from Desert Antimony Mine (expected Q4 2025)
Permitting updates for additional exploration areas

Market Catalysts

Antimony price movements driven by Chinese export policy changes
US critical minerals policy announcements and funding opportunities
Rare earth price recovery as market supply-demand balance stabilizes

Long-Term Catalysts (6-18 months)

Development Milestones

Maiden resource estimate for Mojave Project antimony deposits
Preliminary economic assessment for development scenarios
Additional land acquisition or strategic partnerships
Potential off-take agreements with US government or industrial users

Strategic Catalysts

US government investment or strategic partnership (similar to Pentagon's 15% stake in REE companies)
Major mining company joint venture or acquisition interest
Technology developments in REE processing or antimony applications
Geopolitical developments affecting China trade relationships

Risk Events

Permitting delays or regulatory changes
Commodity price corrections in either REE or antimony markets
Funding shortfalls requiring dilutive equity raises
Technical challenges in exploration or development phases

5. Investment Summary

Investment Thesis (5 Key Points)

Exceptional commodity exposure to antimony (1,000% price surge) and rare earth elements (12.83% CAGR market growth) during unprecedented supply chain disruption
Strategic US asset positioning with drilling-ready Desert Antimony Mine and high-grade REE prospects adjacent to America's only producing rare earth mine
Strong financial foundation with A$2.3M cash, minimal debt (0.02 debt-to-equity), and recent successful capital raising providing operational runway
Supportive policy environment with US critical minerals strategy, expedited permitting, and potential government partnership opportunities
Significant value creation potential from early-stage exploration to resource development in high-demand, strategically important commodities

Final Recommendation: BUY

Price Target: A$0.18-0.22 (50-83% upside potential)
Confidence Level: Medium
Expected Timeframe: 12-18 months

Investment Rationale: Locksley Resources offers exceptional exposure to two of the most rapidly appreciating commodity sectors (antimony and rare earth elements) through strategically positioned assets in stable jurisdictions. The company's strong balance sheet, experienced management team, and supportive policy environment create a compelling risk-adjusted opportunity for investors seeking exposure to critical minerals essential for energy transition and national security. While execution risks remain significant, the potential for substantial value creation through successful resource development substantially outweighs the downside risk at current valuation levels.

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This report is based on publicly available information as of July 16, 2025. Past performance does not guarantee future results. Investors should conduct their own due diligence and consider their risk tolerance before making investment decisions.

https://locksleyresources.com.au

https://www.insidermonkey.com

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