You could be forgiven if you haven’t heard of Rare Earth Minerals (LSE: REM) — a risky miner, just the kind of thing most long-term investors would ignore.
But people started to sit up and take notice when its shares spiked up a few months ago, and at 1.4p today the price has trebled in just over four months! But it has been even higher, briefly peaking at over 2p in July before falling back a bit.
3 million tonnes!
And now, the miner with a big interest in the search for lithium is set to commence a major expansion of its Sonora Lithium Project in Mexico. REM’s partner in the venture, Bacanora Minerals (in which REM has a 12% stake), will commence “a significant drilling and exploration programme in early November“.
Plans are afoot for a new mining and processing plant with a capacity of 50,000 tonnes per year of lithium carbonate equivalent. Bacanora has described the site as ranking among “the largest bedrock lithium deposits in the world“, with indications already suggesting deposits of 3.26 million tonnes of the stuff. The new plant should be busy for a few years.
What does it mean?
Lithium is the stuff of which batteries are made, and the big market for it is in lithium-ion batteries for powering electric vehicles — but the stuff is also widely used in all manner of mobile computing devices, too, and that market still has many years of growth left.
Demand from the vehicle market is predicted to grow fourfold by 2020, according to REM’s own forecasts, with overall worldwide demand expected to double in around the same timescale.
REM also has interests in the Yangibana Rare Earth Prospect in Western Australia and, perhaps crucially, the company has a number of rare earth metal and gold targets covered by its exploration licence in Greenland — and that one is 100% owned by REM.
A good investment?
So is REM a good place for some investment cash?
It’s impossible to say on fundamentals as there have been no profits yet, and there are no forecasts. So, as with anything like this, you’d be taking a significant risk if you plonk down some of your cash. Many prospectors have poured millions into exploration and have come out empty handed, but those who find the precious dirt in sufficient quantities can become multi-baggers in a surprisingly short time.
At the moment, I think it’s the lithium that adds confidence to REM, and its near-proven reserves have a good chance of providing fat profits for investors — but you need to do your own research, and be fully aware of the risks.