RE:? ...Starting a Position in GeoMega ?BeeInveSTING wrote:
I've contemplated starting a position in GMA in the very near future. Statistics aside, i like the potential this company has and their CEO seems to be very switched on. The fact that they are able to tout "green" processes is a feat all the more appealing in todays industry. If anyone follows uranium companies in the U.S. they will likely know about Section 232. I feel as though REE is in a similar situation, being that China controls the vast majority of mining. Could this not also pose a National Security risk? If anyone follows what is going on with Lynas and their situation with the Malaysian gov't... this makes the situation even more critical. Either way I am kicking myself for not buying in at .10$ the other day! Did i miss my window?? Any thoughts? Cheers.
Thoughts...Well mabe many thoughts.
Starting with the first one that comes into my mind. Personally, I do not like the macro type of analysis for REE juniors. REE is getting hot again, so time to inves? In fact, if you read the board of GMA's competitors, they are full of macro reasons to invest in their companies. Electric vehicles, electronic, wind turbine and so on. Personally,again, I feel that when you do not have much things to brag about, you fall back on the macro analysis. Please read about CCE, UCU, AVL, and so on. I do not think that the fact that REE sector is getting good again is a sufficient reason to invest in GMA. In fact, I will let you consider the macro factors and assume that you like REE for whtever reasons.
Then why GMA over the others. Again, all in my opinion only. In a nutshell, share structure, market cap, non-traditional mining and common sense.
Please start with the number of shares. CCE has over 300 millions, AVL 280 millions, UCU 283 millions, GMA 90 millions. Not sure fully diluted, but about right on stockhouse.
The market cap now: CCE: 15.52M GMA 13M, UCU:32.55M AVL: 15.3
The biggest issue with the competitors is their approach to mining REE. In my opinion, REE mining is even more risky then some other sectors, as there is one step that you do not control, namely the separation process. Companies can extract, doing the flotation, metallurgy and so on, but needs to send it to China to get a pure REE oxide. So, REE companies are at the mercy of China to do the actual separation (except few exceptions) and at the mercy of China for the prices.
So, if I am not mistaken, Avalon CEO mentioned in an interview that the CAPEX could be $1B. Let's assume it is that number. So you have a market cap of $15 M, 280 M shares outstanding (about), you need $1 B to build the mine, there is one step that it is controlled by China and if the REE prices do not stay within a reasonable range, you operate at a loss...Does not seem like a very solid business plan to me!
CAPEX to traditional REE mining could be let's say between 500M to 1B. Question: who will finance you? With 15M market cap, you think that a bank will lend you the hundreds of millions of dollars missing or more particulary $985 without guarantes)? A private placement maybe? Matamec is out as well as Quest.Ucore is caught in a legal dispute on the ownership of a separation technique that may or may not work.
And then you have GMA. A company that I criticized for many years as nothing was happening. Suspended the PEA (first 43-101 report) and was advancing slowly. GMA decided that traditional mining was illogical for the reasons mentioned above. It decided to invest on the missing link: the separation technology. They are now investing on a green technology that can separate the most expensive and most valuable rare earth elements. They do not have to mine, they intend to buy the REE waste of other companies as feed. Proove that they can do it and then think about bigger. One step at the time. Oh and by the way, they also have the land to mine. One of the biggest in the world. But I will pass on if for now as a mine is realy really expensive.
CAPEX for the separation plant: between 1 and 2 millions. Timeline: end of year for production. Only question: financing. Are we talking about dilution, debt, warrants coming, KTR shares, other? What all these means: GMA might be an operating companiy with huge margin starting maybe at the end of this year.
Last question: are you too late? I guess that it depends. L2 seems stronger every day. A lot of buyers at $0.14 to $0.12. Dilution is possible, but a market maker was just hired. Oh, and as well as a marketing firm. And offtakes might be coming and what else?
My conclusion is that GMA is still a risky junior REE company. A lot of good things are coming and sincerly, GMA is very well positioned compared to its peers. It can certainly go back to 0.10. But I think that the odds are pointing higher and in the short term. The chances to save a few pennies may cost you a dime shortly. But who knows...
Good luck with your investment.
Moulouk