Tuesday, July 12, 2011

UPDATED--Frontier Rare Earths in Partner Talks for South African Mine and an Interview with the CEO (FRO.tsx)

 UPDATE: "Well this is Timely: Frontier Rare Earth and Korean Government-owned Corp Sign Development Deal (FRO.tsx)"
Original post:
The stock was up 16 cents yesterday and another 9 cents today, currently $2.10 Cdn.
See the "Mom I Was Kidding" post for Investor Risk Tolerance (basically "Wanna cut the cards for a thousand?" No? it's not for you)
We've mentioned this one a few times:
Luxembourg-based Rare Earth Company Hoping to Mine in South Africa by 2014 Does Oversubscribed IPO in Toronto (FRO.tsx)
Alrighty then. 
Rare Earths: Pssst, You Want a Hot Tip in the Market? (FRO.TO; FRO.WT)
On page 254 of Edwin Lefevre's Reminiscences of a Stock Operator (online version) we read:
...At the same time I realise that the best of all tipsters, the most persuasive of all salesmen, is the tape....
Read the book, it's the best tip I've got.
Livermore understood markets.
Mr. Lefevre also wrote a short story called The Tipster, published in 1901.

If, on the other hand, monsieur et madame should be in the market for say, a wild-ass mining speculation, I would like to draw your attention toward:

A Luxembourg based company with
An undeveloped South African rare earth deposit whose stock
Trades on the Toronto stock exchange.

I'm thinking the warrants...
Frontier Rare Earths Ltd.: "Mom I Was Kidding" (FRO.tsx)

The reason for this attention? A comment that Jack Lifton made:
Rare Earth Metals: "Chinese Institutional Investors Look At Rare Metals Overseas" (AVL.TO: LYC.AX; MCP; UCU.V)

...America’s needs for light rare earths will be oversupplied by Molycorp as will Australia’s by Lynas in a massive way. For the heavy rare earths, America’s needs can be meet and exceeded  by Ucore Rare Metals and Rare Element Resources. The needs of China, Japan, Korea and India for heavy rare earths can be met by the Canadian and African operations of Great Western Minerals Group, the Canadian operations of Avalon Rare Metals or Quest Rare Minerals, and the southern African operations of Frontier Rare Earths and Tantalus Rare Earths...
Here's the latest. First up, Reuters:
* Sees economic assessment of Zandkopsdrift project to complete by Q4
* Sees partnership soon (Follows alerts)
(Reuters) - Frontier Rare Earths Ltd said it would complete a preliminary economic assessment of its Zandkopsdrift project in South Africa in the fourth quarter and was in talks with potential partners for the mine.

The Toronto, Ontario-based miner said it expects discussions to lead to a partnership being agreed upon soon.

"The results of this study will confirm that Frontier has the potential to not only be one of the first new large scale producers of rare earths outside China after Molycorp and Lynas , but also become one of the world's most economically viable," it said in a statement....MORE 

And from Highgrade Review:
The completion of an IPO earlier in late 2010 marked the arrival of a new late-stage player on the Canadian listed rare earths scene, Frontier Rare Earths. Frontier began trading on the TSX exchange on November 17th, 2010 after the completion of a $60 million unit financing at $3.40 concurrent with the company’s IPO. The unit offering consisted of 1 share and 1/2 share purchase warrant at $4.60 expiring after 2 years. Since then, the company's shares have been trending down hitting a low of $1.86 earlier this month and are now trading at $1.97.

Frontier's flagship project is the Zandkopsdrift rare earth element deposit in the Northern Cape province of South Africa. The company's NI 43-101 technical report states that Zandkopsdrift is one of the largest known undeveloped rare earth deposits outside China. The independent report, prepared by South African consultants MSA Group in October, 2010, identifies an indicated resource of approximately 23 million tonnes at an average grade of 2.32 percent TREO, representing 532,000 tonnes of contained TREO. In addition, the report identifies an additional inferred resource of approximately 21 million tonnes at an average grade of 1.99 percent TREO, representing 415,000 tonnes of contained TREO. Frontier hopes to supply up to 20,000 tonnes per year of REO and is working on validating the production potential from the ongoing prefeasibility study projected to be completed towards the end of this year. The company is quick to point out that their Zandkopsdrift B Zone, which is contained within the overall Zandkopsdrift resource estimate, is the third highest grade rare earth deposit outside of China after Lynas and Molycorp.

Jacob Securities Analyst Luisa Moreno likes Frontier Rare Earths, she has a price target of $9.83 on the stock. In a report from June 8th, 2011, she states, "Although Molycorp's grade at Mountain Pass deposit is 8.28% compared to Frontier's with 2.16% TREO, Frontier's critical heavy element grades (dysprosium, europium and terbium) are higher, which means that Frontier will be able to produce more of these critical materials (circa 370 tonnes) and generate higher sales for these elements than Molycorp (circa 80 tonnes) despite Molycorp's overall production target being twice that of Frontier."

The Prospecting Right for Zandkopsdrift is held by Sedex Minerals, a South African company that is 74% owned by Frontier while the remaining 26% of Sedex is held by South Africa's Black Economic Empowerment (BEE) through which 21% ownership is extended to Namaqualand Empowerment Trust (NET). NET is a broad-based community trust established for the benefit of historically disadvantaged South Africans principally in the Namaqualand region of the Northern and Western Cape Provinces of South Africa. From the BEE Commission Report in 2002, the post-apartheid program is aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer ownership, management and control of South Africa's financial and economic resources to the majority of the citizens. It seeks to ensure broader and meaningful participation in the economy by black people to achieve sustainable development and prosperity. An interesting approach that has proven to be successful in South Africa.
Although Frontier has a direct 74% interest in Zandkopsdrift, company Chief Executive James Kenny noted that the provisions of  Sedex’s shareholder agreement in fact gives Frontier an effective 95% economic interest in Zandkopsdrift when he connected with Highgrade Editor Kirk Exner.

Frontier recently completed an IPO on the TSX raising $60 million via a unit offering at $3.40 per unit on the strength of your rare earth project in South Africa. Could you talk about the genesis of the project prior to your IPO?