The company came into possession of claims, prospective for rare earths (REE), in Montviel Township in Quebec. The property is just 5 km far from the Geomega Resources Inc. (GMA) REE discovery border. Only several days ago, GMA announced results from the commenced drill program on its Montviel property. As stated, they confirm “the potential to define a large, near surface REE deposit”.
It is a real achievement for Atocha Resources to acquire claims in this highly prospective Montviel region. The announcement seemed to have greatly stirred investors too. On hearing the news, they immediately set their eyes on the company’s stock. As a result, yesterday ATT jumped 20% up on a record volume of 5.77M shares traded.
The chart suggests that ATT may find support at $0.100 and at $0.090, while it could meet resistance at $0.13.
Atocha has joined the Rare Earth Elements sector, which is currently very hot and attractive. REEs are widely discussed across the media, including through on-line presentations.
China is the country producing 95% of the worldwide supply of REE. Recently, it declared its intention to reduce export quotas of REE by more than 10% in 2011. This will lead to a large increase in the demand for rare-earth metals. Atocha could profit from such a situation in the future.
However, the skies are not so blue for the company as they seem. Several negative factors must be taken into consideration. They might have a negative impact on the shares’ performance in the months to come.
The REE sector is not only hot, it is also very risky and highly speculative. It might actually bring heavy losses, instead of gains, to rare earth companies.
Atocha has no solid enough financial background to support a significant rise of the share price in the future. At the end of October, 2010, it had a modest working capital of $452K. Besides, Atocha has accumulated operating losses of $847K since inception, and “has not yet determined whether its properties contain mineral reserves that are economically recoverable”.
