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Pele Mountain Resources: Excellent Leverage to Uranium & Rare Earth Elements

November 12, 2010

Shares Outstanding: 123.5 million
Market Cap: $33.35 million
Website: WWW.PeleMountain.com
Flagship Project: Eco Ridge Mine
Uranium and Rare Earth Elements
Risk: High

By Mark Weaver

TORONTO, Nov. 12 /PRNewswire/ – Pele Mountain Resources (TSX Venture: GEM) and its Eco Ridge Mine
project, which hosts a large, uranium resource, provides investors with
excellent leverage to uranium. Not surprisingly, Pele’s 5-year trend
correlates closely to the spot uranium price which, in 2007, reached as
high as $138 with Pele stock trading as high as $1.50 per share.
Subsequently, when the uranium price dropped to around $40 per pound,
Pele’s share price also declined dramatically, ultimately
falling to less than ten cents.   

After forming a bottom around $40 per pound over the last two years, the
uranium price has ratcheted higher in recent months.  This price
increase is now accelerating, with last week’s closing of $57.50 per
pound marking its highest level since mid-2008. Likewise, Pele’s share
price has also increased during this period, roughly doubling in the
last two months.

As I’ve reported previously, Pele shares are also supported by current
strength in the market for Rare Earth Elements (REE), and the quest for
stable long-term supplies.  Pele’s Eco Ridge deposit hosts the full
suite of REE, including the highly-valued “heavy” REE, along with
uranium.  An updated NI 43-101 resource estimate including REE at Eco
Ridge is expected prior to year-end.

We view Pele shares as a timely speculative opportunity providing
excellent leverage to the rising uranium price along with significant
exposure to strategically critical REE.   The recent increase in Pele’s
trading volume and share price suggests that considerable new interest
is building for its uranium and REE project at Eco Ridge.

Overview

Pele Mountain Resources (TSX-V: GEM) is focused on the sustainable
development of its 100%-owned, Eco Ridge Mine uranium and rare earth
elements project, located in the Elliot Lake mining camp in Ontario,
Canada
. With well-understood geology, excellent infrastructure, and
strong local support, Eco Ridge provides an ideal location for a safe,
secure, and reliable long-term supply of uranium and rare earth
elements (“REE“). Pele Mountain’s 100 percent owned Eco Ridge Mine project contains
strategic metals for which the underlying market prices are rapidly
increasing: uranium and REE.

The Outlook for Uranium and REE

Uranium spot prices have risen over 20% since July. Much of this uptrend
occurred during the past month as price levels of U3O8 increased $5.50
per pound last week to $57.50 per pound which is the highest level
reported since November 2008.

On the demand side, many countries including China, India, Russia, and
Japan have publicly committed to the construction of nuclear reactors
over the next decade. The list of countries embracing nuclear power is
increasing as the global nuclear renaissance takes hold. Large uranium
deposits around the world, like Pele Mountain’s Eco Ridge Mine project
are the focus of increasing attention from countries striving to secure
long term reliable new sources of fuel to sustain their nuclear new
build programs. For example, France and China recently negotiated a
long-term, nuclear energy trade agreement covering everything from
constructing reactors to recycling fuel. Japan has already coordinated
its nuclear power industry under an association named JINED. This
group, comprised of Toshiba, Hitachi, Mitsubishi, nine nuclear
utilities (including TEPCO) and the Innovation Network Corporation of
Japan, is engaged in an effort to supply emerging markets with Japanese
reactors, technology and experience. Germany is currently seeking to
extend the operating life-time of its 17 reactors by an additional 12
years which, alone, has the potential of creating a demand for another
100 million pounds of uranium consumption. 

Supply-side constraints are becoming more frequent and pronounced. The
Megatons to Megawatts deal with Russia to down-blend its weapons-grade
uranium for use as nuclear fuel ends in 2012. Production targets were
missed by major uranium producers this year, most notably by
Australia’s ERA, which entered the spot market to buy uranium to offset
its production shortfall. In Canada, Cameco, which produces over 18
million pounds of uranium annually from its MacArthur River and Key
Lake mines, was threatened with a potential labour strike and their
giant Cigar Lake joint venture with Areva is still years away from a
possible start date. Suppliers expect prices to continue climbing and
thus, are under no pressure to sell. Therefore, spot uranium supplies
available for sale are extremely thin.

In the rare earth elements markets, concerns are rising around the
issues of sustainable supply and skyrocketing price levels as a result
of recent extraordinary export restrictions imposed by China, which
produces about 97 percent of the global supply. There are going to be
many challenges to overcome before new supplies, outside of China, can
come to market, including enormous costs and technological complexities
relating to REE metallurgy and refining.

Yet, Molycorp’s President, Mark Smith, said, in an October 28 interview,
“I don’t believe there is a bubble. These prices are absolutely
sustainable and that’s really based upon the very simple facts of
supply and demand….The Chinese are only exporting 30,000 tons of
material to the rest of the world right now and the rest of the world
needs 50,000 tons of this material a year.” Said Smith, “We don’t see
the fundamentals of this changing anytime in the near future. The
demand is like I’ve never seen it in 25 years in this business.”

Pele Mountain Resources

On September 28, Pele Mountain announced that based on the production
rate in its NI 43-101 Scoping Study, along with assays on 30 drill
holes and recovery data from leach testing at SGS Canada, its Eco Ridge
Mine leach solutions could contain up to 218,000 kilograms of
recoverable total Rare Earth Oxides (“TREO“) annually, in addition to 826,000 pounds of uranium oxide. These TREO
would contain about 50% heavy REE plus yttrium, which are among the
most valuable REE because they are in very short supply around the
world today. Another advantage of Pele’s planned mining and processing
designs is that the REE at Eco Ridge can be available in the uranium
leach solutions at no extra mining or milling costs and that Elliot
Lake
is the only mining camp in Canada where chemical extraction of REE
has been commercially successful in the past. In fact, Elliot Lake was
historically the most important source of heavy REE in North America.

Given the rapidly increasing global demand for uranium and REE and the
world class size of Pele Mountain’s Eco Ridge Mine deposit, it makes
sense for downstream users to seek out a partner such as Pele Mountain in order to secure long-term access to these strategic metals.
Likewise, it could be beneficial to Pele Mountain to align itself with
a partner that could facilitate participation in the value-added
production chain.

Bottom Line

Pele Mountain Resources is a timely, speculative opportunity that can
provide investors with leverage to the rising prices of uranium and
exposure to the strategically critical REE in a stable and
mining-friendly jurisdiction. We have every confidence in the excellent
management skills of this company and that the Eco Ridge Mine uranium
and rare earth elements deposit can be brought into production within a
reasonable time frame. We view Pele Mountain Resources as owning the
right commodities in the right place at the right time.

Mark Weaver, of MoneyinMetals.com, is an independent analyst working in association with Jay Taylor of
Taylor Hard Money Advisors. Mark Weaver began coverage on Pele Mountain Resources in October 2010, when its stock was trading in the market at
$0.17.

Disclosure:
This is an independent report. Pele Mountain Resources has not
remunerated Mark Weaver for these comments. 

Risks:
By its nature, exploration, development and mining are risky businesses
and there is no guarantee that current programs will result in
profitable and accident-free mining operations. The Company’s continued
existence is dependent upon the achievement of profitable operations,
and its ability to raise additional financing when needed. All phases
of the Company’s operations are or will be subject to environmental
regulation in any jurisdictions in which it does or may operate.
Environmental legislation is evolving in a manner which will require
stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed
projects and a heightened degree of responsibility for companies and
their officers, directors and employees. Pele Mountain Resources is
aware of and in compliance with these concerns.

Forward-Looking Statements:
Some of the statements contained in this article are forward looking
statements and not statements of facts. Forward looking statements are
subject to various risks, uncertainties and other factors that could
cause actual results to differ materially from expected results.
Readers must rely on their own evaluation of these uncertainties.

SOURCE Pele Mountain Resources Inc.


Source: newswire



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