Highlights
- Pensana Plc obtains $268 million in financing for its Longonjo rare earth project in Angola.
- Funding is provided by Africa Finance Corporation and Angola’s Sovereign Wealth Fund.
- The project aims to produce 5% of the world’s magnet metal rare earths.
- Significant risks include market uncertainties and lack of confirmed offtake agreements.
- Despite strategic positioning and potential benefits, the project remains high-risk.
- Ongoing challenges exist in financing, production, and market penetration.
Pensana Plc (opens in a new tab) (PRE.LSE) has announced the approval of approximately $ 268 million in financing for the development of its Longonjo rare earth project in Angola. The financing package includes a $160 million syndicated loan facility led by Africa Finance Corporation (opens in a new tab) (AFC) and Absa Bank Limited (opens in a new tab), alongside $92.9 million in equity and convertible loans from AFC and Angola’s Sovereign Wealth Fund ( (opens in a new tab)FSDEA). While this announcement marks a significant milestone for Pensana in developing one of the world’s largest undeveloped rare earth deposits, several key risks and unanswered questions remain for investors.
Financing Rare Earths
The financing approval is a positive step toward the project’s development, providing roughly 60% of the funds required for Phase 1 construction. However, the loan facility is still contingent on final loan documentation and meeting preconditions—leaving uncertainty about when these funds will be available.
Similarly, the equity and convertible loans from FSDEA and AFC remain subject to conditions precedent, meaning that Pensana has not yet secured full access to the capital needed to advance construction. Investors should ask: What is the conditions precedent, and how long will it take to meet them? What happens if Pensana fails to secure all necessary approvals?
Positioning of the Project
The Longonjo project is strategically positioned in the rare earth supply chain. Pensana claims it will produce around 5% of the world’s magnet metal rare earths in its second phase. This is a bold assertion, given that Pensana has yet to bring the mine into production. The company has spent over $70 million in exploration and feasibility studies, outlining a JORC-compliant reserve of 30 million tonnes at 2.55% TREO.
While this is a substantial resource, production and commercialization risks remain high. The mining industry has seen numerous cases where projects with promising reserves struggle due to unforeseen operational challenges, cost overruns, or delays. Investors should be asking: What is the expected cost per tonne of production? What benchmarks does Pensana have for its processing efficiency compared to established rare earth producers?
Execution Matters
A critical factor in evaluating Pensana’s future viability is how it plans to monetize its rare earth carbonate production. The company has not disclosed offtake agreements with end users, such as EV manufacturers or magnet producers. This is a significant gap in its business plan—without confirmed customers, Pensana faces exposure to rare earth price fluctuations and market oversupply risks.
Given China’s Dominant position in rare earth refining and magnet production, Pensana will need to demonstrate a viable path to market. Investors should ask: Has Pensana secured any long-term offtake agreements? Who are the potential buyers for its product? How will it compete with Chinese rare earth suppliers?
Don’t Forget All Those Other Pesky Contingencies
Environmental and logistical considerations also play a role in the project’s feasibility. The company touts access to hydroelectric power and direct rail connections to the Lobito Port, claiming that these will contribute to significant carbon savings. While these factors may offer logistical advantages, Angola remains a complex jurisdiction for mining investments, with potential regulatory and political risks. The presence of Angola’s Sovereign Wealth Fund as a major investor suggests government support, but investors should consider whether local bureaucracy or infrastructure limitations could lead to delays. What are the long-term risks of operating in Angola? How does the political and regulatory environment impact the project’s timeline?
Pensana’s management has emphasized the social and economic benefits of the Longonjo project, citing job creation and local development. However, the company remains in a high-risk stage of development, and with a market capitalization significantly below its total financing needs, dilution risk remains high for shareholders. The equity and convertible loan structure suggests that Pensana may have to raise additional capital or issue more shares, potentially reducing shareholder value. How much additional equity dilution should investors expect? What impact will the financing terms have on future profitability?
While the announcement of financing approvals is a significant step forward, investors should remain cautious until final loan documentation is signed, offtake agreements are secured, and clear financial projections are provided. Without these key elements in place, Pensana’s Longonjo project remains a high-risk, high-reward investment in the rare earth sector.
The Company
Pensana Plc, formerly known as Pensana Rare Earths Plc, was incorporated on September 13, 2019, and changed its name to Pensana Plc in February 2021. It’s based in London.
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