License Decision Gives Stans Energy a Pop

Stans Energy (TSXV:HRE) had a good day in the markets on Friday due to some positive news on the legal front regarding its Kutessay II rare earth project in Kyrgyzstan.

Investors rewarded the Toronto-based company with a 14.7-percent rise in its share price, boosting its market cap to $30.67 million, on an announcement that a court challenge to its Aktyuz exploration license has failed.

Back in April, the Krygyz State Prosecutor’s Office applied to lift a three-year statute of limitations that would allow it to nullify the minutes of a 2009 meeting that granted mining licenses for the Kutessay II and Kalesay rare earths deposits.

On Friday, however, Stans said the District Court of Bishkek “denied a motion by the State Agency for Geology and Mineral Resources of Kyrgyzstan (SGA) to terminate the proceedings initiated by Stans Energy against the Agency with regard to its Aktyuz exploration licence,” meaning that “the most likely outcome of these proceedings will be that a decision will be made by the SGA regarding the extension of the licence.”

Stans has been applying since 2011 to extend the Aktyuz license area, which surrounds its Kutessay II rare earth project. It acquired a 20-year mining license for the former producing mine in 2009, and in 2011 bought the rare earth processing plant that for 30 years produced 80 percent of the rare metals for the former Soviet Union, according to the company.

“Management is extremely pleased to receive yet another positive court ruling in the Company’s favour. This ruling further demonstrates that Stans Energy adheres to the rule of law and the extension of our exploration licence for the Aktyuz Licence area will confirm our business practices,” President and CEO Robert Mackay said in a statement.

Rare Earth Investing News picked Stans Energy as one of three rare earth juniors to watch in 2013. While the total rare earth oxide (TREO) grade at Kutessay II is not a high as other REE projects under development (between 0.178 percent and 0.308 percent), it is the only past-producing heavy rare earth element mine in the world outside China. The open-pittable project already has infrastructure in place, meaning Stans’ capital costs are considerably lower than its competitors, REIN pointed out last December.

The company has completed a JORC-compliant mineral resource estimate as well as a supplementary REE distribution report that identifies the primary commercial components of the open-pit mine. Stans has also released a metallurgical study that shows how the light and heavy rare earth elements will be processed into rare earth oxides.

Mackay said in a 2012 video that it has a cracking technique that strips the radioactive elements out of the rare earth mineralization and cleans it for solvent extraction. “That is where everybody in the rare earth business has found a roadblock,” he told ProEdgeWire. “We’re the only heavy rare earth company that I know of … that’s got the processes right from the ore to the final metal.”

Stans said in a corporate update in February that it is planning engineering and field programs this year to resume fast-tracking of production at Kutessay II — although it did not mention an estimated timeframe for production to commence. That includes pilot-scale testing of new processing techniques, the design of a new 1-million-tonne-per-year mill and cracking facility, resampling of historic stockpiles and a 1,000-meter drilling program. Stans will also start an environmental impact assessment for inclusion in a feasibility study.

Stans Energy is not the only foreign mining company to meet resistance from government officials in the former Soviet Republic of Kyrgyzstan. Centerra Gold (TSX:CG) has one of the highest operating gold mines in the world, the Kumtor mine in the Tien Shan mountains of Central Asia, but the Canadian company has been pressed by Kyrgyzstan to pay more taxes. The mine accounts for a whopping 12 percent of the impoverished country’s GDP and more than half of its exports, according to BBC News, making it a tempting target for resource nationalism. Some have called for an outright nationalization of the mine. The situation turned ugly last week when around 1,000 protesters seized government buildings and cut power to the mine, forcing Centerra to shut down operations. Several people were injured when police fired tear gas at the protesters who were hurling stones at them, prompting the government to declare a state of emergency, reported the BBC.

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.

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3 Rare Earth Stocks to Watch in 2013