ARU - Arafura Rare Earths

[jonojpsg]

Bought in today at 1.28 as it seems like 1.25 may be good support and is not far away as a stop point - only thing I was looking at the chart and it looked a little double toppish?? Anyone care to comment technically?

Fundamentally, with supply controlled so significantly by the Chinese, unless they suddenly reverse their export restrictions to hammer the price of REs and hence RE companies in order to then take over those RE companies which they may well be capable of then ARUs sp has some major appreciation to do over the next couple of years leading into production.

Long time frame though, so we'll see whether my stop gets hit in the meantime

 

[laurie]

Amazing the price difference between ARU and LYC is still 50 cents! no matter how high or low LYC goes ARU brakes as it reaches the 50c difference, so it figures ARU will never overtake LYC

laurie

 

[jonojpsg]

Amazing the price difference between ARU and LYC is still 50 cents! no matter how high or low LYC goes ARU brakes as it reaches the 50c difference, so it figures ARU will never overtake LYC

laurie

Remember Laurie, sp comparison is irrelevant - need to compare market cap

Currently ARU MC is $476m - LYC is $2984m. So LYC is 6 times the value of ARU. LYC is also a couple of years ahead of ARU in reaching production so makes sense - am looking forward to ARU being valued at $3bn in a couple of years time though - on current no of shares issued would give SP of $8

 

[laurie]

MC don't always tell the story LYC has a dilution problem that can only be fixed with a say 5:1 consolidation if you had to choose which of the 2 will pay more in dividends it has to be ARU I understand MC=shares on issue x sp so it seems LYC has at least 2.1Billion shares on issue LYC issued more share as it had done more CR than ARU

laurie

 

[oldblue]

According to The Age, LYC has 1,662m shares on issue.

But there's a lot more to any value comparison between the companies, the main one of course being the size and composition of their resource/reserves.

I'll leave it to the experts to analyse that!

 

[Logique]

Both ARU and LYC are on my watchlist. Well off recent highs. I'm now watching them very closely.

 

[laurie]

According to The Age, LYC has 1,662m shares on issue.

But there's a lot more to any value comparison between the companies, the main one of course being the size and composition of their resource/reserves.

I'll leave it to the experts to analyse that!

oldblue you are correct I got Market Cap and shares on issue mixed up apologies for the mistake next time I will check before quoting figures

laurie

 

[jonojpsg]

Definitely more interest in ARU over the last week - up about 30% in that time - which makes sense given the numbers:

NPV with RE price $54/kg was about $6.5b
Current RE price $120+/kg which would have to make NPV at least $14b

Market cap $500m at current price - so really this is a NO brainer - must be a 10-20 bagger over the next 2 years. I'm in anyways

 

[Simpson]

Bought in today at 1.28 as it seems like 1.25 may be good support and is not far away as a stop point - only thing I was looking at the chart and it looked a little double toppish?? Anyone care to comment technically?

Fundamentally, with supply controlled so significantly by the Chinese, unless they suddenly reverse their export restrictions to hammer the price of REs and hence RE companies in order to then take over those RE companies which they may well be capable of then ARUs sp has some major appreciation to do over the next couple of years leading into production.

Long time frame though, so we'll see whether my stop gets hit in the meantime

What do you mean by Double Top? I've never heard this phrase before.

 

[jonojpsg]

What do you mean by Double Top? I've never heard this phrase before.

Just a chart pattern - Google it and you'll find plenty. Basically two peaks on the chart that hit the same level, separated by a trough, that CAN indicate a trend reversal.

 

[RedLion22]

ARU Premium REE Product - now $162/kg

I've been tracking the price of Nolans Bore product via the following site: https://sites.google.com/site/4lynasheads/

ARU's Nolans Bore price attracts a premium pricing compared to peers. Nolans Bore now commands almost a $12/kg premium in pricing than Lynas' Mt Weld product.

I see ARU's better product mix (containing more Heavy REE) as an important factor in sustaining higher margins and competing long term.

Prices and daily change from 6 to 7 April (AUS) and the daily change are noted below.

Most importantly for ARU, Nolans Bore is not only a premium product, its price is rising faster than its peers.

Prices on 6 April 2011:

Mt Weld $150.28
Mountain Pass $138.24
*Nolans Bore $161.00
Baiyun Ebo $144.61

Prices on 7 April 2011:

Mt Weld $150.48 +0.13%
Mountain Pass $138.28 +0.03%
*Nolans Bore $161.92 +0.57%
Baiyun Ebo $144.67 +0.04%

 

[RedLion22]

ARU Premium REE Product - now $162/kg

I've been tracking the price of Nolans Bore product via the following site: https://sites.google.com/site/4lynasheads/

ARU's Nolans Bore price attracts a premium pricing compared to peers. Nolans Bore now commands almost a $12/kg premium in pricing than Lynas' Mt Weld product.

I see ARU's better product mix (containing more Heavy REE) as an important factor in sustaining higher margins and competing long term.

Prices and daily change from 6 to 7 April (AUS) and the daily change are noted below.

Most importantly for ARU, Nolans Bore is not only a premium product, its price is rising faster than its peers.

Prices on 6 April 2011:

Mt Weld $150.28
Mountain Pass $138.24
*Nolans Bore $161.00
Baiyun Ebo $144.61

Prices on 7 April 2011:

Mt Weld $150.48 +0.13%
Mountain Pass $138.28 +0.03%
*Nolans Bore $161.92 +0.57%
Baiyun Ebo $144.67 +0.04%

Updating - Prices up substantially again. Arafura price up 6.1% to $171.77/kg.

Prices on 13 April 2011:

Mt Weld $160.41 +6.60%
Mountain Pass $147.90 +6.96%
*Nolans Bore $171.77 +6.08%
Baiyun Ebo $154.38 +6.71%

 

[jonojpsg]

Updating - Prices up substantially again. Arafura price up 6.1% to $171.77/kg.

Prices on 13 April 2011:

Mt Weld $160.41 +6.60%
Mountain Pass $147.90 +6.96%
*Nolans Bore $171.77 +6.08%
Baiyun Ebo $154.38 +6.71%

Holy Shmit batman, that is 3 times the HIGH level they assumed in their PFS. At $54 per kg the NPV was $6.6bn and now???? Can't see why the SP hasn't rocketed?? Surely a takeover must be a possibility given the low market cap and the tight supply situation?

 

[Simpson]

Jee Willikers indeed. I'd love to know why the shareprice hasn't reflected the price increases on nolans product. I'm no a analyst guru...hence why I'm here asking you guys.

 

[RedLion22]

Jee Willikers indeed. I'd love to know why the shareprice hasn't reflected the price increases on nolans product. I'm no a analyst guru...hence why I'm here asking you guys.

Arafura is pre-production. It all depends how investors see the price over the next few years. ARU gets into production in 2 years from now (H2 2013). If prices stay high or go higher, the closer ARU is to production, the share price will benefit.

On the price for Nolans Bore, not relying on lynasheads website anymore. Prices can be obtained weekly from http://www.arafuraresources.com.au/pricing.html (updated as soon as Metal Pages UK updates its prices). Lanthanum and Cerium up 8.0% and 7.6% respectively in the last week.

Latest price is ~$161/kg or $161,000/t, which would equate to $3.2Bn in revenue from 2013 at these prices from 20,000t or REO production alone, let alone all other by-products.

 

[exgeo]

I'd love to know why the shareprice hasn't reflected the price increases on nolans product

Probably the market is discounting the shares because they have to raise finance to build the thing, not sure exactly how much, but several hundred mill, or maybe over a billion dollars. That's one big hunk of debt/equity, or a mixture of both to be raised. Once that's put away, then something more like the "true value" of the shares might be realised. They also don't have contracts for offtake yet (intentionally, as the company has stated they wanted to take the best deal, not the first one; same with financing). Last I heard from the company they are in the early stages of sounding out financing options.

 

[jonojpsg]

Finance definitely a factor - BUT they have a Chinese co as major shareholder who always have access to capital...and when you look at $1b required then compare it to potentially $3bn in revenue (or around $2bn in profit!!!!) then that payback comes in 6 months. Can't see any problem in finding finance on that basis.

Pre-DFS, pre-production is the big factor, but they have most of the key processing/site/mine permits etc sorted so I can't see why that would prove an issue...and the way RE prices are going, it seems likely that $50/kg is going to be the bottom end of the price range, not the TOP.

All in all, a market cap of more like $1b seems reasonable by the end of the year. Probably worth jumping on LYC too given that they are only valued at $4b and will be raking in 11000000x150 (11k tonnes pa x $160/kg (current price) - $10/kg (cash cost)) = $1.65bn net revenue by end of this year. Given they are ramping up to 22k tpa by end 2012, that makes $3b revenue vs $4b MC.

Both worth getting on IMO.

 

[RedLion22]

US$ rare earth price up again $165/kg and Appointment of Financial Adviser

US$ rare earth price up again

Cerium and Lanthanum were up +2.24% and +5.07% in Metal Pages latest update (28 April), not reflected on ARU's website.

I calculate Arafura's basket price for Nolans Bore at US$165.56/kg up from US$162.12/kg (20 April), an increase of 2.12%.

I believe that price increases in rare earths currently more than outweigh the impact of a weaker US$.

Appointment of Financial Adviser

The Quarterly Report says that the assessment process of a corporate advisor is well advanced and selection is expected to occur in May

 

[RedLion22]

New York Times write up on Rare Earths

http://www.nytimes.com/2011/05/03/business/03rare.html?pagewanted=1&ref=global-home

Molycorp hitting all time highs tonight +8%

 

[RedLion22]

Arafura Interview - Sky News

Link posted by ARU today

http://vimeo.com/23196312