Positive drilling results from Rainbow Rare Earths (RBW:AIM) on 30 April have triggered further investor interest in the stock, taking its share price to 21p which is more than double the 10p price at which Shares said to buy in January 2017.

Analysts had previously valued the stock at between 19p and 20p per share based on current guidance for 5,000 tonnes of annualised production by the end of 2018.

Chief executive Martin Eales last week told Shares that analysts’ valuations included no upside from potential exploration success. Therefore news that Rainbow’s drilling work at its Gakara project in Burundi has found multiple intersections of high grade rare earth elements appears to have convinced the market the shares should be valued at an even higher level.

Stockbroker Arden Partners has kept its target price at 19p but says the latest exploration news adds confidence to ‘upside scenarios’ of between 22p and 24p per share.

Rainbow currently extracts ore, crushes it and exports the material. It wants to increase production to 6,000 tonnes per year in 2019 and has a desire to start processing some material itself in time, in order to enjoy a higher profit margin.

Eales says the business should be breaking even once it hits the 200 to 300 tonnes per month production rate. (DC)

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