St George Mining (ASX:SGQ) Lands 18% Tax Break for Araxá- Is This Rare Earth Explorer a Buy?

St George Mining Surges on Brazil Tax Break, But Is It Still a Buy?

St George Mining (ASX: SGQ) has been one of the standout performers on the ASX over the past year, with shares surging more than 500% from around A$0.015 to trade near A$0.10. The latest catalyst came when Brazil’s Minas Gerais state signed a preferential tax regime exempting equipment and materials for the company’s Araxá rare earths project from state goods taxes of up to 18%.

For a pre-revenue explorer now valued at roughly A$360 million, the real question is whether government backing and a world-class resource justify the price, or whether the market has already run ahead of the fundamentals.

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Why Brazil Is Backing St George Mining’s Araxá Project

The tax concession isn’t just symbolic; it directly lowers the cost of building Araxá. Equipment, pilot plant materials, and any future processing facility will be exempt from taxes that would normally add up to 18% to procurement costs. For a capital-intensive mining development, that makes a real difference to project economics.

This builds on an existing MoU with the Minas Gerais government to develop domestic rare earth and niobium supply chains, and follows a joint venture with CEFET to build a pilot plant targeting operations by Q3/Q4 2026. Governor Romeu Zema personally signed the agreement, signalling genuine institutional support.

What makes Araxá compelling is the resource itself. The maiden estimate came in at 40.6 million tonnes at 4.13% TREO and 41.2 million tonnes at 0.68% niobium, the highest-grade carbonatite-hosted rare earth deposit in South America. The project sits next door to CBMM, which produces roughly 80% of the world’s niobium, so infrastructure is already in place. In our view, this growing government support goes a long way towards de-risking what would otherwise be investors’ biggest concern: sovereign risk in Brazil.

From Drilling to Production, What Still Needs to Happen

For all the excitement, investors need to be clear-eyed about where St George Mining actually sits. There is no feasibility study yet. The pilot plant is still being built. And while multiple drill rigs are running around the clock to expand the resource, the journey from explorer to producer is long and capital-intensive.

That said, milestones are stacking up. US-based REalloys has signed an MoU for a long-term offtake covering up to 40% of Araxá’s rare earth output, opening a pathway into the US defence supply chain. The A$72.5 million capital raise in late 2025 attracted Hancock Prospecting as a major shareholder, providing strong validation. Cash sat at approximately A$53 million as of December 2025, which provides runway, but further capital raises and the dilution that comes with them are almost certainly ahead.

Should Investors Buy St George Mining at These Levels?

The bull case writes itself: world-class grades, government backing, a US offtake partner, and the critical minerals tailwind. One analyst carries a target of A$0.21, implying roughly 100% upside.

But the bear case deserves equal weight. This is a pre-revenue explorer with no feasibility study. Execution risk in Brazil persists, commodity prices can shift, and the 500%-plus run means a lot of optimism is already in the share price.

We believe St George Mining offers one of the more compelling speculative stories on the ASX right now. The resource is genuinely world-class, and the combination of government support, strategic partnerships, and surging demand for non-Chinese rare earths creates a powerful narrative. However, at these levels, patience may be rewarded. Disciplined investors who wait for pullbacks could find better entry points, while those already holding have good reason to stay the course as development milestones progress.