December 10, 2009
In our experience of investing in new trends, it always pays to own those companies which were first movers in the industry. In the past few years our readers have learned this firsthand in the uranium industry and then later in the potash industry. In both of these instances it paid to invest in those companies which had pounds in the ground and the best projects before the masses had their epiphany moment. It is our belief that investors should seek out those companies with pounds in the ground and some experience while being far more cautious when considering the newcomers to the field.
One company in the rare earth elements field that is one of the best buys is Mawson Resources Ltd. The company is much like Quest Uranium and Ucore Uranium in that it is a uranium company with exposure to rare earths. Where the three differ is that Mawson’s stock has not moved up in unison with Quest or Ucore and the stock trades around cash on hand. In short, an investor can get all this exposure to uranium, rare earths and phosphate for free. With roughly 38 million shares outstanding, when investors discover this stock and its merits as an explorer it should be able to move. Already it is undervalued based on its rare earth exposure, but with recent events in Sweden indicating that the government has warmed up to uranium mining and the company working diligently on getting Spain to lift the state reserves on the Don Bonito project we believe that the uranium segment is vastly undervalued as well.
Mawson Resources Ltd. is a company many of our readers should be familiar with as it was one which we devoted coverage to during the uranium boom. Numerous times we updated investors about the company through articles and interviews and became very intimate with their projects and prospects, including the humongous Tasjo Project in Northern Sweden which has uranium, rare earth and phosphate mineralization (http://www.mawsonresources.com/s/Tasjo.asp). We had forgotten all about the rare earths until the rare earths craze began a few months ago. Mawson has focused on Tasjo primarily as a uranium project due to the large potential for that resource at the project. However, with Tasjo’s total contained metal within the field estimated between 104 to 116 million pounds of U3O8, 165,000 to 180,000 tonnes of REE and 5.63 million tonnes of P2O5 we feel that this is an undiscovered rare earth element play. Also note that the company’s website notes that, “The magnitude of the exploration target has been confirmed in a recent independent NI43-101 technical report by Geosynthesis Pty Ltd following a review of the SGU documentation, a field visit and check analysis of core samples.”
Using the company’s numbers, we can come up with a conservative estimate for the total lbs in the ground of the REE and Phosphate of 363,000,000+ for the REE content and 12,400,000,000+ for the Phosphate content. The Tasjo Project’s mineralization is near surface and vast- two very important facts (although certainly not the only) when looking at a project. In conversations we have had with Michael Hudson, President and CEO, he indicated that there are 40km of the Lycophoria host at Tasjo and that only about 2km has been drill tested at this point, thus leaving it open to further drilling.
In past articles and interviews we have made some predictions about certain gurus picking stocks to add to their newsletters. It is not something we like to do often, nor something we take lightly but there are some stocks which fit perfectly with some of their strategies. We are told from industry sources that Mawson is still a Jim Dines recommendation for uranium, our bet is that he will come around and recommend it for rare earths as well. If he did not recommend it for rare earths with his supposed backing of the stock for uranium we would be very surprised (if he did not recommend it because we included it in this article we would argue he was most certainly in the low state of denial because we beat him to it, which would have to be in violation of some guru rule). We were correct that he would warm to Silver Spruce back in the uranium hey-day when we wrote about it in our article titled “The Silver Bullet” back in March 2007.
Focusing on the uranium segment of the company, Mawson is currently planning drill programs in both Spain and Sweden. The company is very excited about their prospects in Spain where they have the surrounding land to the past producing Don Bonito Mine (open-pit). They are going to continue to drill around the project while they work with the Spanish government to lift the state reserves on the mine. Michael Hudson also told us that the company would be able to assume the mine based on case law because they currently hold the lease for the property. When these state reserves are lifted, it could play out much like the events for Berkeley Resources which is now a A$150 million company. Mawson does not have a mill for the project now, as it was dismantled, but the mine is ready to go and was only depleted by about 20% when it was actively mined.
Mawson is very undervalued at current market prices, and with C$11 million on hand, there is no foreseeable dilution ahead providing investors plenty of leverage with only 38,000,000+ shares outstanding. Management has been diligent in protecting shareholder value and not awarding themselves tons of options or engaging in activities which are not the focal point of the company. The company’s peers have market caps of C$51 million for Ucore and C$82 million for Quest Uranium, and for Mawson to reach a market cap of approximately C$38 million the stock would only have to go to C$1 due to the low float which would provide a return to investors now of approximately 200%! With the potential news flow regarding the projects in Spain and Sweden as well as investors’ discovery of the rare earths portion of the business, one has to believe that the stock has plenty of room to grow.