Rare earth stocks such as Rare Element Resources REE, Molycorp MCP and Avalon Rare Metals AVL have been hot. Some bulls on these stocks have justified the valuation of some of the companies based on the estimates of rare earth deposits in their properties. In their zeal, bulls seem to have ignored how unreliable such estimates can be. And how rapidly prices can fall.
Rare Element Resources has just filed a 10-Q with the Securities and Exchange Commission. The SEC requires companies to disclose in the filing all relevant information regarding their operations and finances.
Buried in Rare Element Resources’ 10-Q are a few nuggets of interest to investors.
For background on rare earth minerals, please see Rare earth stocks set to fall .
Rare Element Resources’ 10Q illustrates the unreliability of the estimates by claiming that deposits at one project are 40% higher than those published not long ago. This unreliability is a double edge sword, i.e., estimates can be revised downwards as easily as upwards.
On January 4, 2012, the company announced the results of an updated National Instrument 43-101 (“NI 43-101”) compliant mineral resource estimate of REE plus yttrium contained in three deposits located in the Bull Hill deposit. The updated estimate consists of 6.8 million tons (6.2 mm metric tons) averaging 3.75% REO in the measured and indicated (“M & I”) mineral resource categories, increased from 4.9 million tons (4.4 mm metric tons) averaging 3.77% REO last year, both using a 1.5% REO cutoff grade.
Rare Element Resources also admits that prices of rare earth minerals have declined…Read more at MarketWatch
