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Rare Earth Mineral Prices

Shown below is part of the Great Western Minerals Group web site that compares the market value per tonne of their Hoidas Lake deposit of rare earth elements with other deposits as of February, 2008. 

 

 

If we assume that REE prices will rise somewhat as the recession ends, it is not unlikely that the Lynas Mt. Weld deposit would be worth $17,500 per tonne.  The company plans to reach 20,100 tpa by phase 2 with half that achieved in phase 1.  Therefore, gross revenues in Phase 1 would be roughly $184 million and $367 in Phase 2.  It would not be unreasonable to think that in a few years when Phase 2 is achieved the company might have revenues of $400M.  If the company can bring half of that to the bottom line in terms of cash flow, the cash flow would be about $200M or about $0.15 per share.   At a multiple of 7, the stock would be worth about $1 per share, about 2.5 times it’s current price.  

The above is pure speculation on a number of fronts of which the most important are the price per tonne down the road and the per cent of revenue that sticks in the form of cash flow.   I really have no basis for backing up either of these guesses.   They are really just “what if” numbers.

If anyone has any ideas on how a REE mining company should be valued in the market, please don’t be shy.

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This entry was posted on Friday, May 8th, 2009 at 3:44 pm and is filed under Rare Earth Element Miners. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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8 responses so far ↓

  • 1 Jimp // May 8, 2009 at 6:02 pm

    Jim Kingsdale,
    Did you see this on seekingalpha.com?
    http://seekingalpha.com/instablog/65370-jack-lifton/3363-rare-metals-investment-news-updates-today-s-edition-rareminutes-050709-neodymium

    Are you still buying Lynas at current price, or just potential dips? Are you buying any more Arafura?

  • 2 Karol // May 9, 2009 at 4:40 am

    As I see things there is less cost pressure and less speculation on rare earth minerals then on rare earth oil.

    Thus it seems to me that energy investors will place their bet on oil.

    Why?

    The impact of a world without oil is better understood.

  • 3 Jimp // May 9, 2009 at 1:42 pm

    Watching the new Star Trek movie made me think of rare earths, and all the future possibilities. Not sure if thats naive, since I really don’t know the history or where these metals fit in.

    Would anyone say that we are at the beginning of a new cycle or boom for rare earths metals?

  • 4 Canon Bryan // May 9, 2009 at 9:33 pm

    Multiples applied to mining stocks, or more generally, speculative stocks, depend significantly on the cycle.

    As Jimp asks, are we at the beginning of a new cycle? The question is valid. It seems to me that REE, unlike any other major metal group, has historically experienced very long cycles, as compared with most other industrial sectors.

    I believe it’s been a sleeping giant.

    I don’t know what the trigger will be. Maybe a US declaration of REE as strategic element — who knows? But when the trigger hits, REE will reach prices it has never known.

    But back to multiples. When REE slips into its bull phase, the multiples applied to REE mining stocks may go from the aforementioned 7 to perhaps 20 or 30. REE exploration stocks may have speculative multiples of 50 or 100x discounted future cash flow.

  • 5 Sinzinkayo Jen Marie // Aug 5, 2009 at 2:13 am

    I’am a memorad of Professeur MIDENDE Gilbert in BRUNDI.I’am searching somes news of production,marchet,consommation and how to replay the exploitation.Would you tray to send me somes perspectives of varolisation of the GAKARA rares earth elements.

  • 6 lou fiano // Aug 10, 2009 at 5:31 am

    excellent website

    thanx

  • 7 Norm // Aug 16, 2009 at 4:30 am

    REE’s are going to become in such short supply that future prices are almost impossible to predict.

  • 8 Jan Martin Opsahl // Oct 4, 2009 at 12:58 pm

    Our company, Euroscan OU in Balticum has in our deposit different kind of rare earth metals, Scandium, Europium, Beryllium, Copper Powder, Nickel Wire in Drums all in extra high purity with spec. and certificates. We need support for trade, deposit, evaluation or to find companies who deals with this kind of materials. Please respond to my mail if you have information. best regards, Jan M. Opsahl

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