Initiation of Coverage
28 April 2014
COMMERCE RESOURCES CORP V-CCE
Commerce REO Speedwagons its Ashram Rare Earth Project
Rare earth element (REE) Supply Remains Limited, Concentrated, and Vulnerable. China connues to dominate world REE producon, controlling approximately 90% of the market, despite progress made by Molycorp and Lynas. Although China provided the world with arficially “cheap” REEs for years, its labour costs are increasing, its reserves are depleng, and its mines have been abused to the limit. The costs of producing “cheap” rare earths are becoming increasingly unsustainable in terms of the environment, the availability of reserves, the health of its communies, and the polical ramificaons. China can no longer afford the costs associated with “cheap” rare earths and is beginning to worry about its own domesc supply, as China is its own biggest customer.
The Bottom of the Curve? REE prices have decreased considerably in recent years, although they are generally sll above where they were in 2009, before fears of constrained supply sent prices sky-rockeng. Very lile producon has since come online, implying that REE prices may have over-corrected. Increasing environmental standards, decreasing reserves in China, and minimal new supply indicate that REE prices cannot stay this low indefinitely.
Commerce Resources is one of the most advanced REE juniors in regards to metallurgy, which in the REE space, is everything. The Ashram Project hosts a substanal resource with a well-balanced rare earth oxide (REO) distribuon. The deposit is enriched in light and heavy rare earths, including all five of the crical elements. The mineralogy is simple due to the presence of the minerals monazite, bastnaesite, and xenome which currently dominate commercial processing. Unlike many of its competors, Commerce is able to produce a 43.6% total rare earth oxide (TREO) mineral concentrate due to the deposit’s simple mineralogy, allowing significant cost reducons.
Valuation. A net present value (NPV) per share of CAD$1.44 was calculated for the Ashram Project based on a 10% discounted cash flow (DCF) model. In addion to Ashram, Commerce has an advanced niobium- tantalum project in BC, named Blue River, which was not evaluated in this report. Blue River is compelling in its own right due to recent developments in the tantalum space, however, given that Commerce Resources currently trades at around CAD$0.20 and Ashram yields an aer-tax NPV per share of CAD$1.44, including project financing, Commerce Resources is a stock of interest on the merit of Ashram alone...
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