Mining Insights #5

September 23, 2008

Trip to Rare Element Resources’ Wyoming Property

& where we are in the Mining Stock Investment Cycle

I won’t waste time regurgitating the genesis of the previous, three, historic weeks. I’ve been on record since at least November 2006, yelling for people to “wake up and smell the coffee” and get real about the real estate crisis.

Suffice it to say, that the resolution of all these engendered economic disasters, will be longer, the nadir deeper and the recovery more uncertain then any downturn except, hopefully, the Great Depression.

“We are all communists, now,” said one wag with whom I correspond.

Would, it were otherwise.

I don’t like it when investment pros wear their politics (or religion) on their sleeve. However, I don’t think you’ll find it so political if I may say, “A plague on both their houses”. Also, while my lawyer friends (yes, I have some) tell me that no crimes were committed (by that large number of folks who ran these huge companies), having been an investment bank CEO, myself, I believe what the heads of these huge financial entities allowed was criminal. “There ought to be a law” and they should “not pass go; go directly to jail.”

Before turning to the Rare Element trip, I know most of you are anxious to hear my current “take” on Animas Resources.

On Animas Resources (ANI: ANIMF)

We are waiting on “pins & needles” for the first release of drill-holes from the Animas’ 20,000 meter 2008-early 2009 program. We expect to see 2 to 4 result releases between now and year-end. The first seems to have been delayed past our expected mid-August date by the assay lab taking 9 weeks instead of the 3 weeks that we had expected in June.

However, there is more.

While I have no proof to offer, I believe a further delaying element is the announced (July 21) acquisition of the Lixivian property that lies within Animas’s claims. If you wanted to buy (at the seemingly “high” price of $650K) a property within your claims, you would certainly not want the seller to have positive data points. (Furthermore, nor might you want to even know them yourself, to avoid any indication of impropriety – in fact, a good attorney might counsel you to not intentionally discover ANY significant, new information until an agreement was signed).

We hope that the deal will be finalized within days.

The market participants in Animas shares (ANI – ANIMF) are keeping fingers crossed for the great drill news that we believe is imminent. In the current market ($1.18), US $ purchases between $1.05 and $1.35 should be a great trade for 3-6 weeks and unbelievable investment, long-term.

Rare Element Trip

Earlier in September, the Rare Element team invited me and some noted mining folks to visit their extraordinary Bear Lodge Property in Wyoming. From left to right below: Kevin Graham of GrahamAnalytics.com, Frank Quinby of Small Cap Catalyst, yours truly, Brian Fagan of StocksandSpeculations.com, now-retired mining share guru (and major Rare Element shareholder), Bob Bishop, Bob Moriarty of 321Gold.com, Don Ranta, Ph.D., CEO of Rare Element, Gordon Holmes of TheAuReport.com, James Clark, Ph.D., VP Exploration of Rare Element, Jeff Phillips, financial PR maven of Global Market Development, Mickey Fulp, MS Geology of MercenaryGeologist.com and Greg McKelvey, MS Geology, Rare Element Director.

We could make this very complicated, but I believe folks pay me to keep it simple. I learned several VERY important new things by going on the tour. I will lay them out in a simple, short outline below.

One thing you definitely don’t need from me is an explanation of the geology or the fine details of the potential metallurgy. This is a big (really HUGE) “back of the envelope” story, and there’s no need to make it any more difficult.

So, let me start this way:

If you have not previously read or want to re-review my complete, pre-trip write-up & recommendation, you should immediately visit HERE: http://www.nanotechnology.com/blogs/blognano/2008/04/mining-with-nanotechnology-twist.html

If you want to read Rare Element’s new and enlightening Corporate Profile, visit HERE: http://www.rareelementresources.com/s/Presentations.asp

Exceptional and quite useful and informational, additional resources on the company website are available HERE: http://www.rareelementresources.com/s/QwikReport.asp

Here’s what the huge Bear Lodge property in northeast Wyoming looks like.

Pretty hospitable, right? (except when 60 degrees below zero in January!)

Here’s a view of a reclaimed meadow, that, believe it or not, was once full of unsightly trenches. (Those tiny black dots in the sunny distance are grazing cattle!) We’re ALL environmentalists. . . . You may show this to your friends who believe that mining HAS to ruin the land forever. “It just ain’t so.”

Yours truly, at a steeply inclined hole under the Bull Hill feature - an attempt to intersect highly mineralized, ore-grade rare earths.

That crumbly charcoal-colored stuff appears to be “the goods” and it started at around 10 ft.

LESSON #1 from the trip

The U.S. Geological Survey’s gross, geological, potential resource, ESTIMATE (my description of what the number indicates - think of all the caveats that are in that description – wow, a lot) of rare earths in Bull Hill are around 80 million tons at more than 4% rare earth minerals.

My “back of the envelope” is that 60% of that is there, and only 60% of that will end up in a kind of mineable reserve. Then, due to “difficult” metallurgy (ALL rare earth deposits have “difficult” metallurgy), only 70% of that will be recovered on an economically equivalent basis as a typical gold deposit (so, we’ll say 55% will drop to the gross line). Using a low average value per ton of $25/lb of rare earth, that’s 28.8 million tons carrying, get this - 2.3 Billion pounds of rare earths (with assumed poor recoveries) ! Worth . . . hmmm . . . .at least 3.15 million ozs of gold!

Reminder: Newmont earns into a large percentage of the gold at Bear Lodge . . . . . . none of the rare earths.

Lesson #2 from the trip

Really this is a reminder, not a lesson: when major mining companies develop a junior’s property they have NO incentive to: A. release the big news as fast as they can, nor B. to promote the property or its development (fear of competitive bidders), nor C. to develop the property even one ounce beyond the point at which they want to negotiate the junior “out” of the property.

Count on Newmont to disappoint, and you won’t be disappointed.

How will Rare Element “fight”? Count on Ranta, Clark and McKelvey, all steeped in the ways of the Majors, to know all the tricks and to make sure that as many majors as possible are paying attention.

Lesson #3 from the trip

Know the negatives in advance.

Receipt of the disturbance permit is now not expected until around November.

Due to the harsh winter weather (and the muddy spring), the delayed disturbance permit will ensure that Newmont’s development gold drilling will not start until May or June 2009. I would not expect to see any gold results until July or August 2009.

On rare earth’s: Drill is turning right now, and we would expect to see some very good results and further definition and outlining of the main resource this year, but this not a significant or expensive program.

Bottom line: Buy Rare Element (RES – RRLMF) NOW between US$ 0.50 and $0.80 and over the next few months while things are practically dead. RES is truly “a second half of 2009 story”, but sophisticated investors will be accumulating while the typical, retail traders are looking elsewhere – like now.

Lesson #4 from the trip

The 200-acre disturbance permit is a HUGE DEAL.

This allows, for example, seven drills to be turning on seven different 28-acre sites! Then, every single acre that is “reclaimed” from disturbance goes back to the 200-acre total. In other words, this permit assures the potential for the very most aggressive drilling and development program imaginable.

Lesson #5 from the trip

This is a Cripple Creek-style deposit/property. It is significantly larger and significantly more gold-anomalous, over a much larger area at surface than Cripple Creek. What is there at Bear Lodge? We won’t know for years . . . decades. Cripple Creek has produced 24 million ounces of gold and still has another 7 – 10 million ounces. Given its geological setting, deposit style, size and gold occurrences everywhere, in every rock type . . . Is it possible that Bear Lodge contains multiple, multi-million ounce deposits at surface and depth for a total of 20-40 million recoverable ounces?

Yes, it is.

Of course, it is unlikely that Rare Element itself will ever actually mine a single ounce of gold or pound or rare earth minerals, but, to the sharp investor, that is of no consequence. In my opinion, minimally, there will be proven to be ore with 3 million gold-equivalent ounces of rare earth’s and 2 million gold ounces to Rare Element’s credit (all exclusive of Newmont’s share). Again, in my opinion, we’ll have a high degree of confidence that this is so before the end of 2010.

Ore (rock containing economically recoverable mineralization) containing 5 million gold-equivalent ounces at even $80/oz (and don’t rule out $130/oz in the proper environment) would value Rare Element at $400 million.

That’s a really long way from today’s valuation of only about $17 million. That “distance” is what will protect us, whether the “real” number two years from now is 1 million, 3 million or 7 million ounces!

Back in Rapid City, SD, some very happy Rare Element shareholders reflect on the huge and dramatic property we have all learned much more about that day.

Where we are in the Mining Stock Investment Cycle?

In the intermediate-term: Our proprietary system indicates that a strong 5-week to 5-month rally began last week. Use this rally to exit from all junior mining shares that do not have the potential for at least 5 million gold-equivalent ounces and good financing capabilities (NB: these are extremely rare; we’re going to trim down to only 4 - 7 stocks – of course, Animas and Rare Element being two of those).

Tax loss selling will absolutely pressure junior mining shares this year between mid-October and the end of December. Hopefully, this will be a rally of the 5-month variety and not the 5-week type. We’d rather be sellers of these “weak sister” stocks in February 2009 strength rather than in October 2008.

In the long-term: We have changed our long-term opinion of the precious metals markets. Our technical indicators now show possible long-term tops in gold and silver were put in-place March 2008. Highs that are achieved in gold and silver over the next 2 years may well be identified as “bear market rally” highs.

Prior to this, we were confident that new, all-time highs would be made in gold and silver and that mining shares would not top until January 2010 to April 2012.

We are no longer confident about the metals (unless they break above the old highs by the time you get this . . . ha ha .. . gold is at $909 as I write!), but our opinions are unchanged on the mining shares most likely topping timeframe.

With the benefit of hindsight, of course, it would have been so much better to limit all our buying of mining shares to the last week or so.

Unlike many other newsletter writers, I’ll “tell it like it is.” Unfortunately, many of the purchases have proved to be atrocious so far (but we still see all of the companies dramatically higher over the next two years, yielding great profits). We are glad that these shares represent only a small 3-7% portion of our readers’ assets.

That said, we still believe that the average of the late-April 2008 prices and the mid-August 2008 prices (where we entered the market) will look FANTASTIC when compared to the highs that we expect to be reached between October 2008 and October 2010 (even more so, whenever the all-time high is eventually hit, between January 2010 and April 2012).

Any new high intraday trades in gold or silver (less likely, but should they occur) will trigger nearly immediate 7% + additional rallies beyond the “old” highs.

What would make us “wrong”?

The TSX Venture Index should not have two consecutive closes below 1446.90 . . . but any single trade in the XAU Index (representative of big-cap mining shares) below the recent, multi-month, intra-day low at 110.70 (VERY unlikely) would scare the heck out of us and turn us very bearish on mining shares.

Reminders: Most folks should have no more than 3-7% of their assets in precious metals mining shares, and, depending on net worth, you may use the $237K model portfolio to identify the “pro-rata” position right for you.

Here is how we expect our $237,515 model portfolio appears for those who followed our inputs (US$):

Reminder: To receive these Mining Insights along with our subscribers send a note to darrell@resourcedevelopment.com - FREE, for the time being

26,000 Animas Resources @ $1.40 - $36,400

23,000 Rare Element Resources @ $0.78 - $17,940

2,760 Freegold Ventures @ $1.45 - $4,005

3,000 Pediment Exploration @ $1.80 - $5,400

2,225 Entrée Gold @ $1.80 - $4,005

3,000 Canplats Resources @ $3.10 - $9,300

7,500 Silvermex Resources @ $0.95 - $7,125

2,500 Silvercorp Metals @ $5.75 - $14,375

4,500 Coeur d’Alene Mines @ $3.05 - $13,750

500 Silver Standard @ $28.90 - $14,450

1,500 Hecla Mining @ $9.60 - $14,400

1,000 Silver Wheaton @ $14.55 - $14,550

1,500 Apex Silver @ $7.45 - $11,175

2,400 New Gold @ $5.60 - $13,440

7,500 Midway Gold @ $1.80 - $13,500

12,000 Orko Silver @ $1.35 - $16,200

15,000 Riverside Resources @ $0.90 - $13,500

]

10,000 Intl. Tower Hill @ $1.40 - $14,000

Disclosures and Disclaimers

GENERAL TERMS*

No investment opinion or other advice is being rendered on any stock or company. All of the trading stocks we recommend should be considered highly speculative; you can lose some or all of your money. It should be assumed that the Author and editor and their associates may hold or dispose of or trade in positions in any securities mentioned at any time. No fee in cash, shares or options was paid for this report. Please be responsible for understanding the terms and vocabulary of stock market investing. Here is an unaffiliated glossary site that may be useful:

http://www.traders.com/Documentation/RESource_docs/Glossary/glossary.html

Disclaimer

The Nanotech Company, LLC, Darrell Brookstein and/or Resource Development are not registered investment advisors nor broker/dealers. Readers are advised that the material contained herein should be used solely for informational purposes. The

Author does not purport to tell, or suggest to, readers which investment securities they should buy or sell for themselves. Readers should always conduct their own research and due diligence and obtain professional advice before making any investment decision. The Author will not be liable for any loss or damage caused by a reader's reliance on information obtained in any of our newsletters, special reports or on our web site or sent by email or mail. Our readers are solely responsible for their own investment decisions. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase or sale of securities. Our opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in our newsletters or on our web site should be independently verified with the companies mentioned. The editor and publisher are not responsible for typographical or other errors or omissions. There is no guarantee of investment results herein whatsoever, either explicit or implied. Past results are no guarantee of future results or even profitability. Investors are cautioned that they may lose all or a portion of their investment if they make a purchase or short sale in these speculative stocks.

Nanotech Investing - Part III

This article was published at www.Stockhouse.com on August 8, 2008.

If you are not an “accredited investor”, should you begin investing for the long term in “small” and advanced tech stocks, now?

If so, how and in what should one invest?

Unbelievably, for the first time, ever, we say – yes!

We would begin to “dollar cost average” monthly, over the next 20 months. We would divide the total amount we wanted to invest in these type shares over the next few years – let’s say $20,000 – into 20 and invest the same amount monthly on the same day (in this case $1,000), every month for 20 months starting now.

What stocks would we choose and how many shares of each would we buy?

Simply, we would buy The Nanotechnology.com Small Tech Index using the stocks and the ratios we present there. (Remember to use the footnotes at the bottom of the page. They are very important.)

Now some words of caution, especially for the well-heeled, “accredited investor”-types with which we work closely:

A few months ago, 60 Minutes did a very interesting take on nanoparticles used in cancer therapeutics: a technology with which our team is quite familiar. You can view it now if you missed it and read the accompanying article.

The changes in science and technology are coming so fast that one noted scientist recently stated, “things change faster than you can publish them.”

Let this be “a word to the wise”, when, as an investor, you think you are on to something unique. Finding a “robust” technology, one that keeps working efficiently and economically, no matter what you throw at it is usually good enough, if you have the right team.

The U.S. economy is now faced with the choices of a man atop a burning, two-story building. He can make a terrible choice with known consequences by jumping and breaking his legs (inflate, regulate, and bail out, which will cause significant and harmful, but fairly well understood, consequences), or he can face the unknown and wait or run into the fire, hoping for it to be put out before reaching him or finding an opening to an escape. The results would likely be catastrophic, but he might survive (this equates to doing more tinkering around the edges or letting the weak markets crash and hoping for positive results – the outcomes are unknown but could range from all kinds of “nastiness” like Japan in the early 1990s and forward, to Germany’s hyperinflation prior to World War II).

Luckily, as of now, we’re only standing on the top of a one-story building! Unfortunately, that could change, and many stories added, if we continue down the path on which we have been.

Here are the resources you need to be a successful investor in nanotech and other “small” and advanced technologies. They are all free (except for the book, listed first below):

Nanotech Fortunes – the first and only book written on successful investing in “small technologies” – available on www.Nanotechnology.com or Amazon.com.

Nanotech Insights at BlogNano – start here and read up to the current date.

The Small Tech Prospector archive – you’ll have to register for free and provide your e-mail address, but this is an incredible trading diary and information source.

Nanotechnology.com itself – the four or five most important nanotech stories in the world posted daily on the home page. Interviews with the giants of nanoscience in easy-to-understand for the non-scientist format; constant update of The Nanotechnology.com Small Tech Index, The Best of the NanoWeek archive, and much more; some require a short email registration.

Scientific & Technological Commentary on stocks for the non-scientist – again, quick, free registration required. This will gave you a great sense of how our scientists do due diligence on nanotech companies.

Of course, our company seeks and values relationships with accredited and institutional investors, financiers, and CEOs of private, “small,” and advanced technology companies that can achieve a high ROI for investors, capital needs of less than $12 million, and an interest in immediate access to public markets via the regulatory auspices of the TSX Venture Exchange. Readers are welcome to contact us per the note below to receive our regular updates.

Nanotech Investing - Part II

Opportunity only knocks once, and this is what nanotech investors have been waiting for.

This is a continuation of Part I, published on Stockhouse.com on August 1, 2008.

When the bottom in “small technology” (nano, MEMS, microelectronics, and microfluidics) stocks and private companies comes, we expect you’ll find:

Coatings – good

Catalysts – good

Advanced materials – excellent

Lubricants – good

Filtration – good

Insulation – good

Photovoltaic companies – questionable

Since the nanotech tales of woe, detailed in October 2007, there has been more woe (but you’ll see in Part III there is more than room for optimism, now):

From mid 2007, one single, “unlucky” investment bank raised Arrowhead Research Corporation (NASDAQ: ARWR, Stock Forum) $16.5 million at $5.78 per share with ¼ warrants at $7.06 (it’s now $2.02). They raised Nanophase Technologies Corp. (NASDAQ: NANX, Stock Forum) $10.6 million at $5.92 (now $1.95). Oddly (not), they were unable, for whatever reason (amazed neither the company itself nor the underwriter have yet to release details at this late date), to bring private company, Nanodynamics, public on the Dubai Exchange a few months ago.

Consider more woe: Considered by some a superstar, Nanosphere Inc. (NASDAQ: NSPH, Stock Forum), went public only in early November 2007 at $14 – today $8.82.

Sorry, but this continues a pretty darn bad record for nanotech investing and investments, and you know what they say about those who continue repeating the same activities while expecting different results.

As we’ve been saying and writing publicly since 2004, the “VC to IPO or M&A model” (nothing against VCs) is “broken” (it’s the wrong model) for “small” tech investing, largely because it requires more capital than can be efficiently put to use by these type of companies. A merchant banking model (read the Hambrecht & Quist, Petrie/Parkman, or Allen & Co. model) wedded to the public venture capital stock markets and going public early is a better formula for success.

All that said: We are certainly closer to a long-term bottom than at anytime in the last 10 years, and, properly structured for return on investment, nanotechnology and other advanced tech deals, companies, and stocks will prove incredible investments over the next three to seven years.

Especially when the investments are made at pre-public, private placement valuations.

With these nanotech insights, it is my hope that kindred spirits, including accredited investors, VCs, investment bankers, angel investors, analysts, scientists, hedge and private equity fund managers, high-tech entrepreneurs, public and private “small” tech companies, and family office execs will gravitate toward The Nanotech Company, LLC.

Our vision of using the TSX Venture Exchange to finance and create liquidity for “small” and advanced technology companies and our deep expertise in successful employment of Canadian public venture capital markets are unique.

To be clear: Our firm, supported by our eminent Scientific Advisory Board, is going to be building “small” and advanced tech companies via the TSX Venture Exchange. The main reason we are communicating with this relatively small group and fraction of our list of Nanotechnology.com subscribers is that some of the “accrediteds” among you may have the opportunity to participate at a ground-floor stage in these investments and others may assist us in growing this process.

Again, opportunity and history knock only once.

Patience pays off. Valuations are down. Money is tight. Success stories have been few.

This is what we have been waiting for. What a great time to be a nanotech investor.

Part III to follow shortly.