Rare Element Resources Outlines Cash Burn Rate With Wider Loss (REE, MCP)

Rare Element Resources Ltd. (Amex: REE) is hardly an earnings story in the controversial and fluid story of rare earth elements and minerals.  The emerging-stage company showed that the loss widened out to -$10.1 million or $0.23 per share.  For the same period a year earlier it posted a loss of -$7.5 million.

The reasons cited for a wider loss were based upon increased exploration spending at the Bear Lodge property, increased stock-based compensation expenses, a write-down of the Nuiklavik mineral property, and increased expenses from more employees.

The emerging stage mineral company also said that its cash and cash equivalents were $59.5 million at the end of 2011, down from $64.2 million as of September 30, 2011 due to exploration and general & administrative spending.

Rare Element Resources intends to update the mineral resource estimates from January 4, 2012 by the end of the fourth quarter of 2012 and it also expects to complete the PFS during the first quarter of 2012. It plans this year to begin the formal Environmental Impact Study process followed by the 2013 start of the formal mine permitting process with Wyoming Department of Environmental Quality; and it noted that it plans to start construction immediately after the successful completion of the feasibility studies, environmental impact studies and permitting.

This company trades wildly along with Molycorp, Inc. (NYSE: MCP) and it is often on news or speculation about of China’s rare earth policies.  Unfortunately, Rare Element Resources is not likely to be a production story until at least 2013 if not a year later (or more).  The difference between Molycorp and Rare Element Resources is that Molycorp has claimed on numerous occasions that its business model is fully funded.

If the company’s cash burn rate of the last quarter remained static at roughly $4.7 million without construction and application costs factored in, the year-end cash balance burn rate gives the company 12.6 quarters of capital barring no new capital raises.

JON C. OGG