News & Analysis » UK

Rare Earth Minerals, Rio Tinto, Stellar Diamonds news briefs

Contributed by Fox-Davies Capital

Rare Earth Minerals has signed a Lithium farm-in agreement in Northern Mexico with TSX listed Bacanora Minerals.
The key terms of the Binding Memorandum of Understanding are:

- REM to acquire an initial 10% interest in the El Sauz and Fleur Concessions from Bacanora by paying Bacanora $250,000 upfront and spending $500,000 on exploration and drilling over a 6 month period
- After the first 6 month period, REM then has the right, at its election, to increase that interest to 30% by paying Bacanora another $500,000 and spending a further $1,000,000 on drilling and exploration over a further 6 month period
- REM will then have an exclusive right of first refusal to further negotiate terms to increase that interest in the Concession to a maximum of 49.9%, provided the terms comply with the Company's stated investment strategy.

FD Comment:
Bacanora released a PEA on the La Ventana concession in January which is close to these two concessions and is unlikely in the short term to develop these two concessions itself. One thing to note is that in the PEA it stated that the Fleur concession had only been applied for in December and had not yet been granted, although no issues were expected. REM raised £400k in December and now has commitments of £480k on these licenses alone over the next 6 months, with no allowance made for G&A and Greenland, so we expect the Company will have to raise additional funds in the short term.

Rio Tinto has released its FY'12 results which were down heavily on FY'11 but just beat consensus estimates.

In this news:
Revenue was US$50.97bn vs US$60.54bn YoY (-15.8%) & +0.1% vs consensus
Underlying profit was US$9.3bn vs US$15.55bn YoY (-40.2%) & +1.1% vs consensus
Net loss GAAP -$4.02bn vs US$5.826bn YoY (-151.3%) & +25.6% vs consensus
NPAT by division
- Iron Ore US$8.99bn vs US$9.24bn Yoy (-30.3%) & +2.9% vs consensus
- Aluminium US$3M vs US$442M YoY (-99.3%) & +102.7% vs consensus
- Copper US$1.092bn vs US$1.932bn YoY (-43.5%) & -9% vs consensus
- Energy US$283M vs US$1.074bn YoY (-73.6%) & 26.9% vs consensus
- Diamonds and Minerals US$119M vs - US$162M YoY (+173.5%) & - 72.5% vs consensus.

FD Comment:
Weaker prices (iron ore -27% YoY), rising costs and the US$14bn write down meant these results were well flagged, so much that the share price may be slightly up this morning. The 15% increase in dividend to US$1.67ps is to seek favour with investors after the scale of the write-downs took the market by surprise. The completion of phase one of the Pilbara iron ore expansion to 290 Mt/a will now be completed ahead of schedule in 3Q'13 and phase two to 360Mtpa expected in 1H'15. However, we see further pressures ahead this year, particularly in the key iron ore division with prices expected to weaken during 2Q/3Q and costs to be a key. The new CEO, formerly head of the iron ore division will continue driving this expansion which could put further pressure on prices as the Company along with its peers push for volume growth and market share in China over operating margins.

Stellar Diamonds PLC announced that the Company has raised approximately £1.1M before expenses through a placing and subscription of, in aggregate, 41,960,640 new Ordinary Shares of 1p each with directors, institutional and other investors at a price of 2.65p per Placing Share. The Placing Shares represent approximately 12.47% of the enlarged share capital.