If you are wanting to gain exposure to the rare earths industry, then the ASX stock in this article could be worth considering.
That's according to analysts at Bell Potter, which see potential for major upside for investors over the next 12 months.
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Which ASX rare earths stock?
The stock that Bell Potter is bullish on is Meteoric Resources NL (ASX: MEI). It owns the Caldeira ionic clay rare earth project in Brazil, as well as two non-core gold projects in Brazil and Western Australia.
Bell Potter notes that the company's license hearing has been postponed. While this is disappointing and has led to a significant share price decline, the broker was pleased with management's comments. It said:
Both VMM and MEI had their license hearing (scheduled for the 28th of Nov) postponed allowing for the State Foundation for Environment (FEAM) to respond to the questions brought forward by the Federal Public Prosecutors Office (MPF). For MEI, the questions focus on 1) proximity to the Caldas Decommissioning Unit nuclear facility, 2) engagement with local stakeholders and indigenous groups, and 3) operations within the Pedra Branca Buffer Zone.
The suspension in trading was lifted during today's session, and whilst the decline reached -27% intra-day, the stock ended only -11% down following the investor call. Management's response to questioning stressed the fact that this is a procedural process, which helped calm investors.
Not insurmountable
Bell Potter also highlights that it believes this is a procedural process and could just delay project progression rather than end it. The broker adds:
MEI anticipates inclusion in the Dec-19 council hearing, subject to the MPF responses being addressed. At this stage we don't necessarily see this as an insurmountable risk, rather a procedural process which may take longer than initially anticipated. If the COPAM request additional environmental baseline monitoring, this may further delay progression of the project until those timelines are satisfied. Separately, the commissioning of the processing plant is underway, with MREC production anticipated in early December.
Speculative buy
According to the note, the broker has retained its speculative buy rating and 25 cents price target on the ASX rare earths stock.
Based on its current share price of 14 cents, this implies potential upside of almost 80% for investors over the next 12 months.
Commenting on its speculative buy recommendation, the broker said:
Our valuation is unchanged at $0.25/sh, and we maintain our Buy (spec) recommendation. Given MEI's advanced project stage, and the current demand for heavy rare earths, we believe the project and company may garner some attention from Western nations seeking to diversify the China dominant rare earth magnet supply chain.
