Following up on our latest article entitled “Rare Earth Deposits: A Simple Means of comparative Evaluation”, Toronto-based Secutor Capital Management Corp. has initiated coverage on Commerce Resources Corp. on April 28, 2014.
Secutor’s analysts, geologist Liliana Paoletti and Arie Papernick, value Commerce‘s Ashram REE Project in Quebec with an after-tax NPV of $1.44/share, a difference of 747% from its current share price of $0.17. Their 28 page report also includes a compelling case for higher REE prices in the foreseeable future by discussing supply and demand, and shedding light into the strategic paramountcy for the western world not only to secure future REE supply but, more importantly, to establish its own processing facilities outside of China.
Below we present excerpts from Secutor’s analysis:
“The Chinese are likely struggling with their rare earth assets due to decades of inefficient, wasteful processing and non-existent environmental standards. No one really knows the full extent of the damage done by China’s rare earth industry, and the shape these mines are in. Could it be that China will have to secure both a supply of heavy rare earths and a supply of light rare earths sooner than the rest of the world anticipates?"
“As China begins to look elsewhere to secure new REE feedstock, perhaps the rest of the world should do the same, given the strategic importance of these metals to military and to industry. To that end, why not look to Quebec?“
"Rare earth projects outside of China with feasible metallurgy and exposure to the critical rare earth oxides are quite limited. Many rare earth juniors, though they may have this exposure, are not capable of producing a saleable mineral concentrate, making their projects extremely risky. Commerce is one of the most advanced juniors simply because it meets this key development requirement, even though a feasibility study has not yet been completed."
Considering the stage of development that Commerce is in at the very moment, we assess the time being ripe for a joint-venture partner or off-taker to strategically transact with Commerce, especially in light of current low market valuations and that Commerce succeeded recently (December 2013) to advance to one of the world’s few REE development projects with a chance to be brought into production no matter if REE prices remain low.
“Commerce Resources is one of the most advanced REE juniors in regards to metallurgy, which in the REE space, is everything.“
“Commerce is currently evaluating several options for end-products including a mixed REO concentrate, a mixed REC concentrate, and a partial separation. Ultimately, the end-products Commerce produces will depend on the needs of a JV partner or other strategic partner. REE processors, such as Rhodia, would look to buy REO concentrates, whereas end-users are more interested in buying specific oxides.“
FerroAtlantica, a Spanish multinational that is one of the world’s largest producers of silicon metals, plans to build a $375 million silicon plant in Quebec that is excpected to start operations in late 2016. FerroAtlantica’s Director General said that “very favourable” conditions attracted the company to Quebec including discounted rates for hydroelectricity, a 10-year tax holiday, and financial support from Investissement Quebec which could amount 5-10% of the project’s capital costs.