Frontier Rare Earths plans to buy back shares through normal course issuer bid

Frontier Rare Earths (TSE:FRO) said Friday that it plans to make a "normal course issuer bid" to buy back some of its outstanding ordinary shares.

The company said that, through the facilities of the Toronto Stock Exchange, shares to be purchased during the period of the bid from May 29 to May 28, 2013 will not exceed 1.0 million.

This equates to around 5.2 per cent of the public float, or shares not held by insiders or related parties, and 1.1 per cent of the outstanding shares as of May 18.

Frontier said the move is due to the fact "that the market may materially undervalue the ordinary shares of Frontier from time to time, and that the ordinary shares may trade in a price range which may not adequately reflect the value of such shares in relation to the business, assets and future prospects of Frontier."

Frontier said that management will determine the actual number of shares purchased during the course of the bid, as well as the timing of such purchases.

As of last Friday, there were roughly 89.56 million Frontier shares outstanding, and the public float was approximately 19.31 million shares.

Under the terms of the bid, Frontier will not acquire on any trading day more than 25 per cent of the average daily trading volume of shares for the most recently-completed six month period, being 17,973 shares.

All buybacks made through the bid will be done via the facilities of the TSX, or any alternative trading system.

Frontier said it will hold any shares purchased in treasury for resale or cancellation.

The bid has been authorized by Frontier’s board to allow the company to buy shares if the purchases can be made on terms that will enhance the value of the remaining outstanding shares, according to management's opinion.

Frontier Rare Earths is a mineral exploration and development company exclusively focused on the development of rare earths projects in Africa. 

Its flagship asset is the Zandkopsdrift rare earth project, which is located in the Northern Cape Province of South Africa and is one of the largest undeveloped rare earth deposits worldwide.

Frontier has a direct 74 per cent interest and a current 95 per cent economic interest in Zandkopsdrift.

The company, which is aiming to become the next major producer of rare earths outside China after Lynas (ASX:LYC) and Molycorp (NYSE:MCP), said it is on track to complete a pre-feasibility study by the third quarter of this year, and a definitive feasibility report by next year's third quarter.

Zandkopsdrift's "key to success" is mineralogy - as the property contains conventional rare earth minerals, with 97 percent being monazite, for which commercial extraction processes already exist.

In February, the company announced the results of its preliminary economic assessment (PEA) for Zandkopsdrift, which gave a whopping net present value of $3.65 billion, after tax and royalties, at an 11 percent discount rate.

Internal rate of return for the project was seen at 52.5 percent, after tax and royalties, with a two year payback from start of production.

Average production was pegged at 20,000 tonnes of separated rare earth oxides per annum over a 20-year mine life with production due to start in the second half of 2015.