Yes, I think the price drop is due to profit taking by short...

Yes, I think the price drop is due to profit taking by short term traders.

You get a lot of traders who work on momentum. Rare Earths got some short term momentum, so they look at stocks within the Rare Earths sub-set that are exploring for the elements that are fetching the highest price at the moment, i.e. NdPr.

They even troll Hot Copper regularly, often without commenting. It's easy to see when 200 or 300 HC posters suddenly comment on a stock and the forum goes ballistic, in line with the stock price taking a rise.

They buy, knowing like all bubbles it will over stretch like an elastic band, and then they sell some or all. There has been nothing more than a classic pattern here, so you see the drop from 11c to 9c, but this will form the new base.

While the trade war persists, and especially if Trump ramps it up, ARU will trade around this area now for a while, rather than the old 5c area.

ARU has everything going for it, except for one item - Capex.

Quite simply, if they could build the mine for $350m AUD then this thing would 50c, but unfortunately it takes a lot of money to bring a Rare Earths plant into operation, and in ARU's case, with contingency, it's going to take about $1.2 billion AUD, and in the current economic climate, no-one is willing to lend or risk that amount of money, otherwise ARU would be on top of the world. It's a shame.

The other problem is that it takes many years to pay off the debt and become cash flow positive, for instance, many new gold mines are paying of the initial capex in 1.5 to 2.5 years, while it would take ARU probably 7 years or more. This deters lenders, like the big banks. Finance at this level requires a consortium, which is not easy or quick to organise.

This is the only thing putting investors off, nothing else really.

If it wasn't for the $1.2 billion dollar build, I'd have bought here long ago. As it is now, I will potentially buy into this company, but only when all funds have been secured for the build, I need that risk completely taken out of the equation before buying. I have bought into another Rare Earths company with high grade NdPr, but a smaller deposit, who will be producing in 2021, with an capex of $400m and strong connections with the German auto industry and listed on the German stock exchange.

But I am also watching ARU closely for news on funding, it's the last crucial factor, and then I'm in.

On reflection of course, it would have been very prospective to buy a heap at the bottom near 5 cents, sell a portion at 10 cents, and then be virtually free-carried for the rest of your holding. However, hindsight is a wonderful thing, and not something we can do much about now.

Gw