In case you missed it, the most explosive action on the OTC this week appears on the chart of RARE ELEMENT RESOURCE ORD (OTCMKTS:REEMF). If you haven’t been following the macro news, you may be wondering what the big driver was for such a dramatic power pop higher – shares launched 150% higher on 26x average volume on Wednesday. It just so happens that, in the wild twists and turns of the intense trade war now underway between the US and China, the Chinese have landed on a brand new piece of negotiating leverage.
Rare earths are rare, just like the name says. These are trace minerals critical to the production of many of the world’s most important goods, including many high-tech chips and transistors. It turns out that China has a kind of monopoly in the market for producing these trace minerals – accounting for over 95% of the world market in rare earths. Well, on Wednesday morning, Beijing put out word through media intermediaries that it was considering banning US companies from accessing China’s rare earth production as part of a response to new tariffs from the Trump administration. This immediately introduces a huge premium for producers of rare earths outside of China. Enter REEMF.
RARE ELEMENT RESOURCE ORD (OTCMKTS:REEMF) bills itself as a company that explores for mineral properties in the United States.
It holds a 100% interest in the Bear Lodge property that comprises the Bear Lodge REE project and the Sundance Gold project located in central Crook County, northeast Wyoming. Rare Element Resources Ltd. is headquartered in Littleton, Colorado.
Moreover, this is a strategic materials company focused on delivering rare earth products for technology and defense applications by advancing the Bear Lodge Critical Rare Earth Project in northeast Wyoming.
Bear Lodge is a significant mineralized district containing many of the less common, more valuable, critical rare earths that are essential for high-strength permanent magnets, electronics, fiber optics, laser systems for health and defense, as well as many evolving technologies like hybrid cars, solar panels and wind turbines.
In addition to the Bear Lodge Rare Earth Project, the Company controls the Sundance gold project which is located on the same property in Wyoming.
According to company materials, “Rare Element Resources Ltd. is a publicly traded, strategic materials company focused on delivering rare earth products for technology, energy and defense applications by advancing the Bear Lodge Critical Rare Earth Project in northeast Wyoming. Bear Lodge is a significant mineralized district containing many of the less common, more valuable, critical rare earths that are essential for high-strength permanent magnets, electronics, fiber optics, laser systems for health and defense, as well as many evolving technologies like hybrid cars, solar panels and wind turbines.”
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As noted above, REEMF is in the rare earths business outside of China. If China does impose a ban on US access to Chinese rare earths, then producers of these minerals outside of China would stand to benefit from a massive dive in competitive supply.
Now, it does beg the question of how long such a Chinese ban would last, and how well REEMF would be able to take advantage with real sales. But the direct potential is certainly now being factored into the valuation equation for shares.
Traders will note just under 450% tacked on to share pricing for the company in the past month. Furthermore, the company has seen a growing influx of trading interest, with the stock’s recent average trading volume running greater than 640% above the average volume levels in play in this stock over the longer term.
At this time, carrying a capital value in the market of $47.68M, REEMF has a store ($2M) of cash on the books, which must be weighed relative to about $248K in total current liabilities. The company is pre-revenue at this point. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $REEMF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $REEMF, either long or short, and we have not been compensated for this article.