most undervalued rare earths company

For valuation purposes its best to view this company as two separate parts 1) Investments in listed companies 2) The flagship project of NORNICO.

1) From the last ASX presentation & recent announcement the value of the companies investments and cash is around $53.4m or $0.45 per share

With shares currently trading at around $0.33 this means that you are effectively getting 27% discount on the underlying value of the company.

However, there is still the flagship project of NORNICO, which as shown above you essentially get for free.

2) NORNICO is the companys flag ship operation which it is focussing its attention on developing. If they proceed with the project it will be in production in 2013 (same time frame as Arafura ARU).

The focus of recent presentations by MD Andrew Gillies has shifted from the nickel-cobalt resource to the Rare Earths component.

As a result of potential improvements identified by the initial scoping study in the proposed processing flow sheet, Metallica has moved immediately to generate an enhanced version of the study by years end to take into account the additional potential now to process high grade (>200g/t Sc) scandium ores discovered by Metallica earlier this year at the Lucknow deposit at the southern end of NORNICO. Scandium is a valuable rare earth element used in aluminium alloys, fuel cells and lighting.

This means that before years end the will additional testwork and subsequent announcements about the rare earth scandium resource and value of the project.

A very modest stage one development has a NPV of $75m or $0.64 per share.

With upcoming rare earths project scoping study, the current fundamentals and rally behind rare earths, the market will not be assigning a zero value the NORNICO project for long.