VANCOUVER, BRITISH COLUMBIA (Commodity Online): Quantum Rare Earths (TSX.V – QRE, FSE – BR3, OTCQX – QREDF) prospects have improved on a new resource estimate for the main niobium zone at the Elk Creek Carbonatite project in Nebraska, USA.
Fundamental Research Corp continues to give a BUY rating for the company and increased its valuation from $0.85 to $1.04 per share. " In April 2011, the company announced the filing of an independent NI 43-101 technicalreport with an initial resource estimate prepared by Wardrop for the main niobium zone at the Elk Creek Carbonatite project in Nebraska, USA. The base case scenario states an inferred resource of 80 million tonnes grading 0.62% Nb2O5, at a cut-off grade of 0.40% Nb2O5, for total contained Nb2O5 of 493,240 tonnes. This estimate is significantly higher than the historic resource of 39.4 million tons of 0.82% Nb2O5 on the project," Fundamental Research Corp said in its assessment of Quantum Rare Earths.
The company has laid out plans for further mapping, sampling as well as drilling of the site in 2011. The drill program will be the initial drilling performed on this property and the goal is to test previously identified targets and to define the extent of the Rare Earth Elements (REE) mineralization at depth below the historic trenches.
At the end of March 2011 (Q3-2011), the company had $3.94 million in cash. Working capital was $3.79 million. The company reported a net loss of $2.63 million (EPS: -$0.05) in the first nine months of FY2011. We estimate the company had a burn rate (spending on its operations and exploration activities) of $0.34 million per month in the first nine months in FY2011.
Fundamental Research Corp estimates Quantum Rare Earths has 5.93 mn stock options options (weighted average exercise price - $0.48) and 16.27 million warrants (weighted average exercise price - $0.37) outstanding. 2.25 million warrants and 0.29 million options are currently in the money. The company currently has about $3.20 million in cash. The CAPEX estimate for the rest of the year is $5 million depending on cash on hand and drilling/metallurgical testing results.
"We continue to believe that increasing global demand for steel and increasing applications for niobium in the steel industry will be the main demand drivers of niobium. The consensus long-term price on niobium is maintained at US$15 - US$20/lb," Fundamental Research Corp assessment said.
" We have maintained our BUY rating and raise our fair value estimate from $0.85 to $1.04 per share. (Risk 5: Highly Speculative).The following risks, though not exhaustive, may cause our estimates to differ from actual results:
- The company currently has no operating mines.
- The value of the company depends heavily on commodity prices.
- Access to capital and share dilution."
