Ben Kramer-Miller – Medallion Resources: Our Top Stock For 2016

In an update to the September 11, 2015 article, Ben-Kramer Miller highlighted Medallion Resources Ltd. (TSXV:MDL, OTCQX:MLLOF) as his top stock for 2016
As quoted in the article:

1: Overview
Medallion Resources (TSX.V: MDL) (OTCPK: OTCPK:MLLOF) has the lowest risk non-producing project in the REE-space, and we believe that its is the only viable project in the REE-space that isn’t dependent on new technology or by-product credits.
Medallion is developing a business based on extracting REEs from the monazite sand found in heavy mineral sands tailings. Monazite sand is a rich source of REEs, yet large mineral sands mining companies don’t find it worthwhile to extract the REEs themselves because the market is small and specialized (such a pursuit would be akin to BHP pursuing a $50 million project that takes years to develop-it simply won’t happen). So it makes perfect sense for small entrepreneurs to come in to do this processing.
Despite this observation, the proposed strategy is uncommon among REE juniors, who are exploring and developing hard rock deposits. Nevertheless it should be: generally speaking, the monazite sands strategy is superior to the conventional mining strategies.We cite the following reasons:

• Monazite sand has a very high REE content relative to every single known REE deposit. While grade doesn’t correlate exactly with operating costs it is a very good indicator.
• Medallion can be flexible in ways one cannot be when mining a deposit. First, the company can source monazite from several sources. Second, it can locate its processing plant based on the relative ease with which it can comply with regulations, hire qualified workers, easily obtain reagents…etc. Practically speaking, this last point means that it can place its plant in an area where it is easy and cost-effective to comply with radioactive waste disposal regulations (This should be far and away the top deciding factor). Meanwhile, mining companies cannot simply ship raw 1-3% TREO Eq. ore across the world without one or more beneficiation steps, which greatly restrict where they can do their mineral processing. Third, Medallion can scale its project according market conditions when it looks for financing. This last point reveals a source of hidden leverage that is limited when operating a mine.
• The strategy is less expensive to finance than mining projects since it requires no mining or beneficiation. These initial steps are carried out by the supplying parties as a part of their other operations (the monazite ore will be delivered to Medallion as a high grade sand).
• The operations can be expanded very easily because the proposed project is more akin to a chemical plant than a mine. While a mining company can develop a second mine, it will have to go through the entire process (exploration, resource definition, PEA, PFS, FS, advanced engineering and then development). All Medallion has to do is secure an additional monazite sand supply and permit/build the second facility (and there’s no reason why it can’t be next door working with the same engineers, regulators, construction workers…etc.). This provides incredible optionality that goes well beyond REE-price leverage and that is unique to Medallion’s monazite strategy.

We can make all of these points with respect to Medallion Resources in spite of the relentless bear market we’ve seen in REE-prices. Prices are unsustainable at these levels since the vast majority of the industry is uneconomical. Yet this market reality doesn’t change the fact that there is very little REE-production outside of China. All of these factors combine to create a strong fundamental bull case for REEs, along with the real possibility for a shortage to develop should geopolitical tensions escalate. By extension the bullish factors that will drive REE prices higher longer term also serve to strengthen the bull case for Medallion Resources.

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