PEK 9.09% 20.0¢ peak rare earths limited

you are all clowns, page-29

  1. 12,484 Posts.
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    G'day Travelbug - you write

    "but ask yourself what PEK would be. If its current market cap should be 1% of its in ground value, then it is only undervalued by 3 times".



    You are out by a factor of 10. PEK's market cap is 0.03% of IGV (Global resource, 1% cut-off). But with REE's there is the other side of the story re: benefication, processing and big capex which means that these deposits can't be valued akin to precious and base metals at say 2 - 5% IGV.

    So all we have left is comparison with other REE deposits. If you do a check on similar deposits undergoing resource development, as I have, you may find, that they trade up to 10x+ higher than PEK on an IGV basis.

    We have management telling us that this is a Tier 1 asset and one of the best REE shows outside of China. There is nothing in the resource numbers to dispel that. We know that even if REE deposits might not make perfect sense economically, they do politically whilst China maintains a monopoly. We know that China itself may be a net importer shortly and certain key REE's such as neodymium will probably always be in supply deficit. So the most potentially viable deposits would be expected to be hotly coveted, if not by traditional mining houses, then at least to ensure security of supply, IMO by European, Japanese or Chinese interests.

    So on a purely fundamental basis, I see this as well under done. Normally when I trade and get it wrong the mistake becomes apparent and I quickly sell. But on this one I'm still scratching my head and I'm going to keep them even if I end up looking like a clown. But my clown outfit is still on hold as my punt was for $1.30 by end of next week. And given the large disparity in the valuation of like-for-like REE deposits regarding PEK, then IMO, none of the numbers punters suggested will prove to be clownish if PEK can achieve valuation parity with its peers.

 
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