This morning I received an analyst report on Tantalus (Byron Capital Markets Ltd.) and an updated analyst report of Molycorp (Dahlman Rose). What we do with analyst reports here is we file them in our online REEWorld.com library. This is the same place where we have all of the latest corporate PPTs for many of the companies we cover here, and to which Sid informs me – we will have the Technology Metals Summit video series posted in the next week.
Here are the highlights of today’s reports…
Tantalus Rare Earths AG (TAE.DE): Tantalus is junior rare earth company focused on exploration and development of its properties in northwestern Madagascar. Deposits in Madagascar tend to contain a significant portion of heavy rare earths (HREE’s) and according to Byron Capital Markets Ltd. this would rank Tantalus among approximately 100 companies that have similar deposits. Further if the HREE deposits are easily extractable with weak chemicals these deposits could be considered a close relative to the highly coveted Chinese ionic clays. If this is the case for Tantalus then it would rank among ~4 companies holding similar deposits containing ionic clays outside of China. This is the most exciting aspect of Tantalus from an investor perspective as HREE’s are the only rare earths elements (REE’s) that could face chronic supply shortages depending on who you ask. As such, ionic clay resources outside of China represent a key opportunity to alleviate potential HREE shortages.
The report goes on to say that “Tantalus appears to have the potential to be the very first deposit outside of China with the characteristics of the so-called southern ionic clays. While there are many factors that can ultimately lead to failure of a project such as this one, the discovery of such a deposit represents a sea-change within the REE industry.” Bearing this in mind, Tantalus will appear even more tantalizing once certainty around the deposit’s characteristics and associated costs of extraction are confirmed.
Molycorp Inc. (NYSE: MCP): Dahlman Rose has a “Buy” rating and a target price of $50. Dare I dredge up the copy where they had it at $70 on 11-11-11 and if memory serves right, I have seen as high as $120? Molycorp’s management team has indicated that it anticipates higher capital costs at the Mountain Pass mine compared to previous estimates. This trend parallels the mining and metals industry in general which also experiencing higher costs resulting from higher prices for steel, labour and chemicals. Nevertheless, these increased costs will likely result in increased prices for rare earths which is ultimately good for investors.
On the flip side, higher costs may contribute to project delays and cancellations in the rare earth industry however over the long-term I remain optimistic on this one and here’s why…everyone in this sector has been correcting timelines and so this was predictable. Yesterday Molycorp released its fiscal 2011 results reporting net sales of close to USD$400 million. Last year was certainly a milestone year for Molycorp and this trend seems to be flowing into 2012. The official news release of fiscal 2011 results also highlights that Molycorps Phoenix Project rare earth manufacturing facility at Mountain Pass is ahead of schedule and targeting to achieve Phase 1 production by the end of Q3 2012, three months ahead of schedule. It also confirms that the new crushing facility is operational; steam testing of the initial cracking facility has commenced; and that feedstock from stockpiled material has been fed into the system successfully.
Molycorp CEO Mark Smith comments, “We kept Project Phoenix tracking to an accelerated timeline, and succeeded in becoming the world’s first company outside of China to assemble a fully integrated rare earth mine-to-magnets supply chain. We continue to produce and commercialize new products. And, we remain laser-focused on ensuring that we are operating at peak performance so we can meet growing global demand for rare earths for years to come.” There’s definitely more to come from Molycorp.
(Disclaimer: Tantalus is a sponsor of RareMetalBlog.)