These are good points and I do agree.
The approach I took was similar to the $/oz metric often applied for the valuation of junior gold exploration companies. Non-producing junior gold explorers on average fetch a market cap of $50 for each compliant oz of gold discovered. There is of course variation based on other factors (e.g. grade, infrastructure, whether the resources are close to surface and amenable to low-cost open pit mining or deeper underground, etc.) -- but the average is typically $50/oz, or ~3% of the current spot price of gold (~$1600/oz).
As you mention REE's are more complicated and there is a spectrum of different elements requiring separation. However, just as an exercise it's interesting to see how REE companies might be valued using the same metric as junior gold explorers.
Taking the grades described in the NI 43-101 for Montviel, and a 3-year moving average spot price for the individual REEs + Niobium, I arrive at $149.42 billion worth of resources in the indicated category and $53.86 billion worth in the inferred category, for a total of $204.28 billion worth of resources based on their respective individual spot-prices.
That's around 128 million oz AuEq. Using the ~3% (or $50/oz metric) typical of junior gold explorers, that would suggest a fair market cap of $6.38 billion.
We can be conservative and ascribe value only to the critical rare earth oxides (CREOs), which would reduce this number to $2.35 billion (or $2.69 billion including Niobium). Given the current market cap of $10m, this still represents a discrepancy of more than 2 orders of magnitude relative to valuations seen in the gold sector.
I see this as an enormous opportunity. Investors are happy to fall over each other in paying $50/oz AuEq for junior gold explorers while neglecting the opportunity to buy REEs for a fraction of that ($0.08 / oz AuEq) using the same metal equivalent metric. |
