We have been long the rare earth element ("REE") stocks since the summer of 2009. If you were fortunate to be early to the REE space like we were you are still sitting on outsized profits even though most REE stocks have corrected at least 50% from the top. That being said we can personally attest that the correction has been longer and more painful than expected. At any rate count us as believers, as we still see a bright future ahead for the REE space.
We have detected a positive uptick in the REE stocks over the past month and today (Feb. 2) REE World's Technology Metals Summit 2012 concludes in Toronto, Canada. This rare earth conference may be the catalyst that is needed to get the REE stocks moving. The conference will be attended by many of the leading industry participants and stock analysts. Since the rare earth space is relatively new on the investment horizon many of the stocks are under followed and under exposed on Wall Street. We think this conference could have the same impact that Semicon used to have in the good old days on the semiconductor equipment space.
In view of the foregoing, we thought this an opportune time to review some of the rare earth stocks that we follow:
Molycorp is the elephant in the room with its Mountain Pass, California, REE project. The stock is down 60% from its 52-week high of $79.16. We find it rather laughable that Wall Street already obsesses over Molycorp's reported quarterly results even though the revenue and earnings are solely from processing its old tailings. As far as we can ascertain Molycorp is progressing relatively on schedule and on budget. With a market cap of $2.60 billion and scheduled to be "first to market" Molycorp is suitable for any investor interested in the rare earth space. We might add that Dahlman Rose just reiterated its buy rating on Molycorp.
Avalon has the 100% owned Nechalacho heavy rare earth deposit located at Thor Lake in the Northwest Territory of Canada. The big attraction here is the 28% heavy rare earth component of the deposit. On the downside the project has a remote location and will have to be mined underground. Avalon gains exposure by being one of five rare earth stocks listed on a U.S. stock exchange. Avalon is a favorite of Jim Dines and Dahlman Rose has just reiterated its buy rating on Avalon. The stock is down 66% from its 52-week high of $10.11 and has the capacity to really move once the sector heats up. Avalon will be having executives at the conference serving as both moderator and panelist.
Rare Element has the 100% owned Bear Lodge REE/Gold Project in Wyoming, USA. The property has a great preliminary economic assessment that calls for a modest capital cost of $88 million for a 1,000 ton per day operation. The project has a favorable geographic location and with a low capital cost this project should continue to receive lots of attention from investors. We would also note that Rare Element gains additional exposure by being listed here in America. The stock is down 55% from its 52-week high of $16.55.Dahlman Rose has just reiterated its buy rating on Rare Element. With its small float this stock can really move when the sector heats up.
Quest has the 100% owned Strange Lake heavy rare earth project located in northeastern Québec. Advantages for Quest are its heavy rare earth composition, the favorable political jurisdiction provided by Quebec and that the deposit should be mineable via open pit. We feel Quest has the best-in-class North American heavy earth project. The stock is down 65% from its 52-week high of $9.30. Quest also benefits from being listed here in America like Avalon and Rare Element. Peter Cashin, CEO, was scheduled to be a panelist at the conference. Quest stock can really levitate upward when the sector heats up.
Stans has the 100% owned Kutessay ll Heavy rare earth element project, which is the only past producing HREE mine in the world outside of China. The mine produced the vast majority of the former Soviet Union's REEs from 1960 to 1991. The project benefits from good infrastructure and electrical power on site from its past producing days. Stans also owns the related Kashka rare earth processing facility and rail terminal and has recently optioned the existing mill. Although not the highest grade this is an open pit project and with all infrastructure in place capital cost will be moderate. The greatest attribute of this project is that the Soviets have already deciphered the metallurgical aspects. If this project were in America rather than Kyrgyzstan the stock would be selling for multiples of its present price. The stock is down 56% from its 52-week high of $3.45 although the stock has exploded upward over the past few weeks. The stock is a favorite of Byron King of Agora Financial. We would note that Stans is presenting at the conference this morning (Feb. 2) and that Robert Mackay, the CEO of Stans will also be moderating a panel discussion at the conference. We think it likely that with Byron King also participating in the conference that Mr. King will update and reiterate his Buy on Stans post conference. We are personally invested in Stans and think this company could ultimately be the biggest winner in the REE space.
Ucore has the 100% owned Bokan Mountain heavy rare earth element project on Prince Wales Island, Alaska. The project has good existing infrastructure and prior permitting is still intact from its days as a producing uranium mine. The project is located in a favorable mining jurisdiction and appears to have substantial geopolitical support on both the state and federal level. Ucore recently announced results of its 2011 drill program and will be upgrading its NI 43-101 report. Importantly, Ucore recently added Ken Collison as COO. Collison was part of the team that took over Blue Pearl and turned Thomson Creek into one of North America's premier moly producers. The stock is down 65% from its 52-week high of $1.33. Ucore is also a favorite of Byron King/Agora. Ucore will present at the conference today and its CEO will also be a panelist at the conference. We think Ucore will also likely benefit from an updated recommendation from Agora post conference. We are personally invested here and think Ucore has explosive upside potential.
Hudson has the 100% owned Sarfartoq rare earth project in Greenland. The project has a NI 43-101 compliant mineral resource of 14.1 million tones averaging 1.51% TREO for the ST1 zone from January 2011. Just this month it announced that assays from a 5-ton bulk metallurgical sample collected on surface at the ST1 zone graded 2.5% TREO. This material should take the metallurgy through to pilot scale testing. In December Hudson released a positive preliminary economic assessment prepared by Wardrop on Sarfartoq. It has $12.5 million of cash, which will allow it to accomplish the entire 2012 work program with the current treasury. The stock is down 74% from its 52-week high of $1.79. Hudson will be represented at the conference by its president who will be a panelist. We recently picked up a stake in Hudson as we think this is one of the premier junior REE stocks.