Kimberley Rare Earths valued at nearly four times its current share price by broker

Kimberley Rare Earths (ASX: KRE) has attracted a Speculative Buy recommendation from a broker and a price target nearly four times is current share price.

The following is an extract from the report.


WELL FUNDED, RARE EARTHS FOCUSED JUNIOR COMPANY


Investment Perspective: KRE offers a fundamentally sound and cheap entry into the rare earths sector. Results of the recent drilling program have confirmed the geology and extended the existing JORC resource. The grade should also be lifted.

Complementing Cummins Range, KRE has acquired the Malilongue project in Mozambique. The Malilongue REO project is large and samples of the pegmatite have returned outstanding TREO grades with a good proportion of Heavy Rare Earths (HREO). Mineralogical examination has found an exceptional concentration of xenotime.

Overall, this project represents excellent value complementing the Cummins Range project in Western Australia.

Having suffered from a negative market momentum globally and within the rare earths sector, KRE is now trading well below its cash backing. Rare earths prices are still about 10 times what they used to be when Lynas secured funding to develop the Mt Weld project.

KRE remains well funded, far beyond any of its peers with $14m cash to progress and add significant value to its projects. We rate KRE as a SPECULATIVE BUY with a target price of $0.30.


Investment Highlights


Cummins Range REO Project Mine, Western Australia

KRE owns 25%, is fully funded to earn 55% ($4m expenditure required) and has the right to earn up to 80% through the completion of a feasibility study.

The existing JORC resource amounts 4.17 Mt at 1.72% TREO for 71,700 t TREO. The recent drilling programme has confirmed and extended the mineralisation.

An updated resource estimate is expected in Q1 2012.

The open-pit mining scenario has enviable characteristics.

Metallurgical testing is underway and the design of the process flow chart should the benefit of three advanced REO project developments within Australia.

Malilongue HREO Project, Mozambique (earning 90%)
KRE owns 40%, is fully funded to earn 80% ($4m expenditure required) and has the right to earn up to 90% by sole funding expenditure to production.

The Malilongue intrusion is a large 7 km x 3 km pegmatite over which 65 separate artisanal workings are currently exploiting gemstones.

Past rock chip samples have returned excellent grades in the pegmatite with 3 assays out of 4 in the order of 20% TREO.

The proportion of HREO is high, in the order of 26% of the TREO mineralization.

Exploration activities include geophysics reprocessing, mapping, rock chip sampling and stream sediment sampling.

The Malilongue pegmatite presents many similarities with the Strange Lake deposit in Quebec, owned by Quest Rare Minerals (QRM.TSX).

QRM has an enterprise value of $140m, equivalent to $149/t REO based on a resource of 51 Mt @ 1.15% REO.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/23974/kimberley-rare-earths-valued-at-nearly-four-times-its-current-share-price-by-broker--23974.html