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Would I Buy, Sell Or Hold Rare Earth Minerals PLC?

Shares in Rare Earth Minerals (LSE: REM) have been given a boost today with the release of an upbeat drilling update from the company.

As previously announced, Rare Earth Minerals has been undertaking a drilling campaign on the southern half of an estimated 6km strike extent of lithium bearing clays on the Buenavista concession in the Sonora Lithium Project in Northern Mexico, in which it has a 38% stake. The campaign was targeting a new and previously untested deposit type in the project, and the results of it confirm significant thickness of lithium bearing clays at greater than 1,000 ppm Lithium values.

In fact, the drill results showed that 13 of the 24 reverse circulation holes reported significant lithium values (more than 1,000 ppm Lithium), with 11 of those 13 reporting significant thicknesses and grades of lithium-bearing clays.

This is clearly positive news for the company and, in addition, the deposits are relatively accessible, which should keep mining costs to a minimum moving forward. The results also prove that there are additional continuous lithium deposits within the Sonora Lithium Project and these will add to the already significant Indicated Lithium Resources of 3.28 million tonnes of Lithium Carbonate Equivalent that have previously been defined at La Ventana, Fleur and El Sauz.

Would I Buy, Sell Or Hold?

Shares in Rare Earth Minerals have performed extremely well over the last year, being up 56%. As such, it could be argued that much of the company’s potential could be priced in, since shares in Rare Earth Minerals are up just 1% following today’s update.

However, the company clearly has huge potential, with the Sonora Lithium Project continuing to deliver positive news flow and having a significant amount of good quality lithium deposits. Investors, though, now seem to be switching their attention to the longer-term future of the company, where it is likely to require significant refinancing in order to pay for its contribution to the building of a mine and all the required equipment that goes with it. This may be a reason why shares in Rare Earth Minerals have been held back in recent months even though news flow has generally been positive.

So, while today’s update is yet another step in the right direction for Rare Earth Minerals, it could be the case that substantial share price rises do not take place until further detailed developments regarding mining activities at the Sonora Lithium Project are announced (alongside a detailed feasibility study).

Although a report was released recently by Rare Earth Minerals, it appears as though investors are now waiting for the company to press ahead with mining and, until then, it could be the case that shares in the company fail to make worthwhile gains. As such, and despite having a bright long-term future, it could be worth watching, rather than buying, Rare Earth Minerals at the present time.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.