Avalon Rare Metals Inc. (AMEX:AVL) rose nearly 7 percent yesterday on news that Mackie Research initiated coverage on the company with a “speculative buy” rating, according to Reuters Canada.
Avalon has long looked under-valued, particularly after news broke that the company had increased its indicated resources at its flagship Nechalacho or Thor Lake mine last month. “We think that the market is not anywhere close to where the valuation of the mine should be,” Mackie Research analyst Matt Gowing told Reuters. Mackie set a price target of C$10.50 on the stock.
The enthusiastic rating added to momentum in rare earth stocks after China announced plans for ‘stricter’ regulation of the sector earlier this week. China currently controls as much as 95 percent of the world’s supply of rare earth minerals, and the government there has capped exports dramatically over the past year. That’s led to a big rise in prices for rare earth stocks, and Avalon has been one of the primary beneficiaries. The stock’s up more than 80 percent since starting to trade on the AMEX in December. That’s not bad for a company that expects to start production at Thor Lake in 2015 after completing a C$1.3 billion rare earth processing facility. Initial output of rare earths will be around 10,000 tons per year.
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Tags: AVL, rare earths
