Thanks for responding. I still haven’t managed to explain myself very well. I’m not talking about technical chart analyses (which I have very limited faith in). I’m just talking about the difficulty (at least for me) of taking companies widely different share structures into account when trying to evaluate fundamental analyses such as the one that started this thread. Company A may have a project that has fundamental qualities that are twice as good as Company B’s project, but if Company A has 10 times the number of shares outstanding as B, it would seem the fundamental advantage has been rendered meaningless. The REE sector in particular seems to have widely varying share structures, from Lynas’ 1.6 billion shares outstanding to juniors with 50 million shares or less.

In relation to your above comment regarding technichal analysis, would just like to say that whilst I do use TA for larger companies, I do not think it can be accurately applied to small-cap junior miners.

However, I think technical analysis can sometimes be useful at looking at short-term patterns, for example looking at moving averages for an entry price

I think that share prices in the junior REEs are shaped by newsflow, and the inferred value in their projects (which, as you say, can be somewhat deduced) by the metrics above. I say ‘decuded’ in the previous sentence as I feel that the junior miners are very open to speculation at this stage – indeed I have read more than once in the last month that REEs are in a bubble- and the share prices of the individual companies are being affected by general market sentiment.

In fact I think it is very hard to value any of these companies at this stage, other than to say most are still quite speculative, as there are so many variables: Will China change there export quotas; how long will it actually take to bring these mines on-line; what will be the effect on the supply and demand dynamic when companies begin producing?

Just like to take the opportunity to say that it is a nice community on here, I like the intelligent debates and the chance to speak with experts like Gareth and Jack – thanks for taking the time to reply

Cheers,
Kyle

The issue that you raise here perhaps pertains to the schools of thought among stock analysts concerning fundamental vs. technical analysis. Although I am not a stock analyst, I have never really bought into the argument of technical stock chart analysts that a company’s stock price captures all of the important details of a particular company, and that the price of a stock reflects those details – thus “allowing” analysts to use such charts and accompanying concepts such as “support” and “resistance” and so on, as the sole means of determining value and future stock behavior. If you subscribe to this school of thought, then it is unlikely that the metrics I described above, are of going to be much use to you. They are aimed at folks wanting to go the fundamentals route.

These metrics are just some of the many facets of the fundamentals of the particular projects mentioned, and the companies that are operating them. I see them as helping to inform observers on the issues of consistency and risk for a given project, and to rate accordingly. I’m talking in the sense of comparing what a company says about a project, to the “reality” of a given project in terms of objective public-domain descriptors. When combined with all of the other public-domain metrics out there (including those that account for the costs and likelihood of technical / metallurgical success), they can also help observers get a sense of which projects are more likely to succeed than others.

One might hope that market cap (and value per share) would reflect the “assigned” value and risk of a company’s portfolio of company, but in this sector especially, analysts and commentators are quick to point out that the general competence of the management team, and the share structure of the company they are managing, are also big factors, and I would agree with them.

Metrics such as those above are independent of these latter two factors, and can be helpful, I think, in trying determine the overall potential value of a project (and thus the risk / reward profile) without a company’s PR fluff , before then going on to look at management and share structure.

http://www.theanchorsite.com/2010/08/05/are-rare-earths-being-produced-outside-of-china/