Frontier Rare Earths announces new normal course issuer bid share buyback

Frontier Rare Earths (TSE:FRO) says it plans to make a new normal course issuer bid (NCIB) to buy back roughly 1.7 per cent of outstanding shares as of April 17. 

The rare earths company cited the fact that it believes that the market "may  materially undervalue" its shares "from time to time" as the reason for the bid, and that its share price may not "adequately reflect" its assets and future prospects. 

The new NCIB will replace the existing normal course issuer bid, which has been terminated and was due to expire on May 28. 

Under the prior bid, the company bought a total of 1 million shares during the period that began May 29, 2012, at a weighted average price of 60.55 cents each. All purchases under this bid have ceased and the bid has been terminated, the company said in its release Friday. 

The new NCIB will see not more than 1.5 million shares purchased during the period from April 30 2013 to April 29, 2014. The actual number of shares to be purchased, and the timing of the transactions will be determined by management, the company said. 

As at April 17, there were 89.56 million shares outstanding. Under the terms of the new bid, Frontier cannot acquire on any given trading day more than 25 per cent of the average daily trading volume of shares for the most recently completed six month period. 

The share purchases, which will be made through the Toronto Stock Exchange, will be held in treasury for resale or cancelled. 

Last year, Korea Resources Corp (Kores) - the state-owned mining and natural resource investor - officially acquired the initial 10 per cent stake in Frontier's Zandkopsdrift rare earth project in South Africa. 

Kores also has the option to increase its interest in the project to up to 50 per cent, becoming an equal partner with Frontier on completion of the definitive feasibility study, with an off-take right and obligation for up to 50 per cent production from Zandkopsdrift.

Frontier lauds itself as being the only junior in the rare earth business to get a strategic partner for offtake. It also has around $50 million in cash, excluding amounts owing by Kores. 

Zandkopsdrift is considered one of the largest undeveloped rare earth deposits worldwide containing approximately 950,000 tonnes of total rare earth oxides (TREO). The Zandkopsdrift B Zone has the highest TREO grade and the highest grade of high value heavy rare earth oxides of significant advanced deposits outside of China.

Since the preliminary economic assessment report released last year and even since the last update in November 2012, the company has told investors that a number of improvements have been made to the flow sheet for the processing plant. 

A confirmatory pilot-scale metallurgical test program covering all major process steps was successfully wrapped up this quarter. 

The company said in late March that the most important piece of work left that is required for the prefeasibility study is the finalization of engineering design, and capital and operating cost estimates. 

This is expected to be finished in July, with the results of the prefeasibility report expected in the third quarter.