Macquarie says this Gina Rinehart-backed miner could pile on more than 150% in value

Shares in St George Mining Ltd (ASX: SGQ) are up more than 130% over the past 12 months, but the analyst team at Macquarie thinks they’ve got a way to go yet.

Macquarie has just released a new research note on St George, with an outperform recommendation and a bullish price target, which we’ll get to shortly.

First, let’s look at the catalyst for the new report.

Major new resource upgrade from this ASX rare earths company

St George last week released a new resources statement for its Araxá rare earths project in Brazil, where it upgraded the measured and indicated resource by 155%.

The company said it now had the world’s largest undeveloped niobium resource, with 75 million tonnes of ore containing 435,000 tonnes of niobium pentoxide.

The company said:

The updated mineral resource estimate includes a higher-grade subset with a very substantial volume of both rare earths and niobium mineralisation – 830,000 tonnes of total rare earth oxides above 6.29% grade and 120,000 tonnes of Nb₂O₅ with grades above 0.90% – providing optionality for mine scheduling including targeting high-grade zones in initial years of potential mining.

The East Araxá discovery is also not included in the figures to date, and the company has five drill rigs operating at that site.

St George Executive Chair John Prineas said at the time:

Today’s announcement of such a major upgrade to the size and quality of the resource at our 100% owned Araxá Project further stamps the credentials of the project as the most significant undeveloped rare earths and niobium project worldwide. Our Araxá mineral resource estimate now compares even more favourably in scale and grade to the two largest producing rare earths mines outside of China – the Mountain Pass mine of MP Materials (NYSE: MP) and the Mt Weld mine of Lynas Rare Earths (ASX: LYC) – both of which have the same carbonatite-hosted style of mineralisation as our Araxá deposit.

Mr Prineas said the ability to mine from an open pit and the favourable logistics of the site “underpin our potential to build a globally significant business in niobium and rare earths.”

Shares looking cheap according to broker

Macquarie said the resource upgrade converted a substantial portion of the resource into categories suitable to support mine planning and economic studies.

The broker added that the company has strong financial backing, including from mining magnate Gina Rinehart.

They said:

SGQ’s recent $60m capital raising, including investment from Hancock Prospecting, highlights strong institutional and strategic support. Ongoing rare earth supply chain disruptions and Chinese export restrictions continue to increase demand for non-Chinese critical mineral projects. Post the completion of the placement, Hancock holds an interest in SGQ of ~10.5%.

Macquarie has a price target of 23 cents on St George shares compared to 9 cents currently. The company is valued at $385 million.

Should you invest $1,000 in St George Mining right now?