Investors imagine what it would be like to invest in the companies that first discovered or hit it big in new mining districts. The discovery of a district means substantial future opportunities and potential for a company to grow.
Randy Scott, President and CEO of Rare Element Resources at PDAC
That is the situation facing Rare Element Resources (TSX: RES and NYSE: REE). They believe they have discovered a world-class rare earth district while exploring its Bear Lodge project in Wyoming.
At the recent PDAC Conference (held in Toronto Canada on March 3rd to 6th) we spoke to Randy Scott, President and CEO of Rare Element Resources about the progress the company has made so far, what their plans are for the future, and the exciting developments, decisions, and discoveries the company has made.
"It's been a very busy year for us," said Mr. Scott. "In 2012, our major accomplishment was that we produced a preliminary feasibility study [in April]. The feasibility study was very successful – it demonstrated the economic and technical merits of the project, however it only included about half of the drilling from the 2011 drilling program. So in May we updated the resource estimate and we also found some very interesting things about our resource as we stepped out into some target areas very close to our main high grade zone."
As they explored further out from their main high grade zone, they discovered heavy rare earth enrichment. "We changed our drilling program for 2012 to put more emphasis on these three different areas; we began to drill those in more earnest. As a result of that [heavy rare earth enrichment], we are very confident that we are now a developing world class rare earth district, and not just a high grade project around the Bull Hill area."
Distribution of Bull Hill plus Whitetail Oxide Zone REEs
The company has other great news as well: Along with the potential discovery of a world-class rare earth district, they are also taking a closer look at what they can do to transition from exploration to production, and how these new findings will influence that decision: "We are also very confident that we are going to be a producer of a suite of rare elements, which we call the 'critical rare elements' – the ones in the highest demand with the best forecast for the future, including Neodymium, Praseodymium, Europium, Terbium, Dysprosium, and Yttrium. In fact, we now know that the Bear Lodge area has one of the highest Europium contents of any project in the world. That's important because Europium happens to be the highest priced rare earth element at this particular point in time. The value of the Critical Rare Earths combines to generate approximately 79% of the total value in the resource."
Mr. Scott continued: "When the preliminary feasibility study was published, we talked about producing our first marketable product, which was a rare earth bulk carbonate concentrate. We knew at the time that it would be beneficial for us to investigate the possibility of moving further downstream in the value chain and produce a more desirable, more valuable product. So since that time in April, we've had metallurgical test work going on at laboratories all over the world. Today [at PDAC] we have announced what we believe is proprietary technology that improves our process substantially and gives us the opportunity to produce a +90% bulk oxide concentrate, which will be much more desirable for customers. This is all in testing right now (we've tested it successfully and it has been corroborated by an independent laboratory) and our plans are to move it into pilot plant testing within the next couple of months. All of this is climbing toward the start of a definitive feasibility study in the middle of this year."
They have other options for finished products that they are researching as well. Mr. Scott reported: "We are considering strategic alliance partners with the new product that we'll be producing. However, we have not precluded the possibility that we would go downstream further to produce a separated product and sell it ourselves. Our preference at this point is to look for good partners to work with and share in the total value of the project based on what we think is a great resource."
Along with a positive plan and outlook, and an increasing number of options, the company is also in an enviable financial position – something that many other junior resource companies are lacking right now: "At the end of 2012, we ended the year with about $40 million of cash in the bank," said Mr. Scott. "We're very fortunate to have that kind of a balance sheet at this time. Our budget has been approved for approximately $20 million for 2013. Our intention is to move ahead with the project quickly. We have a lot of work we want to make sure we get done in a timely fashion and stay on the schedule that we're talking about."
With money in the bank, Mr. Scott knows that they have a couple of years funded right now and if they ever need additional financing, he said: "I believe that our ability to produce this suite of critical rare earths is what really differentiates us; puts us very high on the value side of things for additional financing and additional partners."
Even with all this good news, Rare Element Resources has been dragged down by the overall declining market in recent months. While some investors might worry about further declines, Mr. Scott pointed out that this is a good time to start putting money back into the low-priced stocks. "Rare earth stocks (and other junior mining stocks) have taken a bit of a beating over the last couple of months, particularly. So I think it would be a good time to consider getting back into the market," he said. After all, if buying low and selling high is the secret to successful investing, today's market provides many opportunities to buy low.
In an uncertain market, companies with the biggest opportunities (as well as cash in the bank) have the best chance of surviving. Investors may want to take a closer look at Rare Element Resources – which may have found a world-class district, has plans to produce cash flow from products, and has money in the bank to get them through this difficult economic period.
REFERENCES
Rare Element Resources
225 Union Blvd, Suite 250, Lakewood, CO 80228
720.278.2460
http://www.rareelementresources.com
PDAC: http://convention.pdac.ca/pdac/conv/