Area 51: Byron King Returns

Byron King, editor of Agora Financial’s large-cap newsletter Outstanding Investments and small-cap newsletter Energy and Scarcity Investor, has just returned from Stans Energy’s Kyrgyzstan site visit.

We managed to get our hands on an excerpt, of his report, and are naturally extremely enthusiastic about REE potential in Russia and Central Asia (such as with my colleague Robin Bromby’s excellent piece, Russia’s REE Potential).

With no further ado, Mr. King:

Stans Update

I’m busy in Serbia, of course. But I also noticed that shares of Stans Energy (HRE: TSX-V) took a nasty tumble over the past couple of days. What’s going on? I asked around and here’s what I heard.

Stans management took a group of analysts on a trip to Russia and Kyrgyzstan last week. It’s a similar trip, more or less, to the one that I took in April to Moscow and Bishkek. Except none of the people on this most recent trip were permitted and privileged to conduct the Federal Security Bureau Youth Symphony, like me.

I suppose all I can say at this stage is that some people are capable of understanding what they see in an exotic land, where much happens in languages other than English. Some people can look at a large industrial opportunity and envision how it all comes together. And some people just don’t get it.

For example, Clarus Securities just put out a report that misstates the capital expenditure to get the Kyrgyz facilities up and running. Clarus got it wrong, period. I won’t dignify the misstatements by repeating them. Suffice it to say that Clarus way overestimated the upfront costs.

Here’s what you need to know. According to Stans management, the approximate cost to restart the Kyrgyz operation is about $100 million. That’s a small fraction of what you hear for startup costs for every other possible rare earths operation from other companies.

The relatively low cost for Stans is due to its strong relationships with the Russian Leading Research Institute of Chemical Technology (VNIIHT). That, and the low cost for acquiring existing facilities in Kyrgyzstan. Plus, Stans can quickly refurbish and reuse all that incredible former Soviet equipment that I’ve described in so-called Area 51. Stans is already years ahead of the competition, just in terms of having long-lead equipment in hand. It saves hundreds of millions of dollars.

From our perspective, the Stans sell-off is a strong buying opportunity. If somebody else wants to get it wrong, I guess we just have to let the chips fall. It’s a chance to capitalize on the mistakes of others.

Sorry to cut this short, but I have to run along and participate in more of that Serbian hospitality.

We will have another update about the Stans site visit shortly, so stay tuned.