The shares of Rare Earth Metals Inc. (CVE:RA), (PINK:RAREF) remain true to themselves. Last Friday, they produced another one of their periodic price jumps on the Canadian Venture Exchange (CVE). The surge was confirmed by the large turnover exceeding five times the average. There were no company news to explain the rise of the stock.
In the last session, RA gained 12.7% as the buyers clearly took advantage over the sellers. The shares ended at $0.40, noting a day-high of $0.425. This has been the first time since mid-March when the stock manages to climb over the $0.40 price level during the trading. The advance was accompanied by a solid volume, as more than 3.2M shares were turned over.
We can only guess what might have caused the progress of the shares as there are no new company announcements to be “blamed” for the performance of the stock. Maybe, this is a speculatively driven rise of the shares, but it is only a suggestion. How RA will behave in the future, is equally unclear.
The latest company’s financial reports reveal some not very positive figures:
- Rare Earth recorded a net loss of $0.86M for the last quarter of 2010, an increase of 195% over the corresponding number in 2009;
- Within one year, the share dilution has risen by almost 75%. The average number of outstanding shares rose from 45.1M in the end of 2009 to 78.7M in the end of 2010;
- As of Dec. 31, 2010, current assets had declined by over 17% compared to their amount nine months before that.
In addition, in its latest disclosure from end-March Rare Earth released an update on its 2011 exploration program. It shows that the company will require significant funds to fulfill its exploration activities.
This June, Rare earth plans to commence a 5,000 meter drill program on its Red Wine project; a 43-101 NI compliant resource report on the Two Tom deposit is expected to be completed in late 2011; an airborne survey for the Coldwell Complex is anticipated to be prepared till mid-2011; in addition, the drilling program on Clay Howells property continues. Does the company possess all the capital required for the 2011 exploration program?
There are also several positive factors about Rare Earth Metal that could also support the shares for a rise. In the end of 2010, the corporation looked relatively stable financially with over $8.46M in cash and short-term investments, and a working capital of $8.5M. Besides, Rare Earth is debt-free and its total liabilities were only $0.15M.
Finally, Rare Earth could profit from operating in the attractive rare-metal sector. The latter became much hotter after China imposed heavy export quotas on its rare-earth exports this year.
