Investment Analysis for Intelligent Investors
Siddharth Rajeev, B.Tech, MBA, CFA
Analyst
Chris Porter- BSc.
Research Associate - Mining
September 12, 2011
 2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Commerce Resources Corp. (TSXV: CCE) – Winter Drilling at the Ashram Zone Almost Doubles Area
and Depth of Known Mineralization
Sector/Industry: Junior Mining/Exploration www.commerceresources.com
Market Data (as of September 9, 2011)
Current Price C$0.48
Fair Value C$2.00 (↓)
Rating* BUY
Risk* 5 (Highly Spec)
52 Week Range C$0.36 - C$1.08
Shares O/S 147.65 mm
Market Cap $70.87 mm
Current Yield N/A
P/E (forward) N/A
P/B 1.61
YoY Return 29.7%
YoY TSXV 13.6%
*see back of report for rating and risk definitions
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
10-Sep-10 9-Jan-11 10-May-11 8-Sep-11
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Investment Highlights
• Commerce completes the winter/spring drilling program at
the Ashram Zone with 3,656 metres of drilling.
• Drilling approximately doubled the size of the area and
depth of known mineralization used to calculate the initial
NI 43-101 resource estimate.
• Drill intercepts confirm mineralization of near-surface
middle and heavy rare earth oxides.
• The Ashram Zone remains open to the north, south, east,
west and at depth, and has excellent potential for
expansion.
• The summer exploration program has commenced with
7,500m of drilling planned.
• Advanced mineralogical as well as metallurgical and
environmental studies are in progress to provide baseline
parameters for a future updated resource estimate and
economic study.
• Completed a $7.58mm financing in June 2011. We slightly
adjusted our fair value estimate from $2.13 to $2.00 per
share due to the share dilution since our previous report.
Key Financial Data (FYE @ Oct 31)
(C$) 2010 2011 (6 mo)
Cash and cash equivalents 7,128,737 4,476,809
Working Capital 11,451,888 8,360,673
Mineral Assets 26,748,208 31,048,450
Total Assets 44,235,587 45,817,450
Net Income (2,372,288) (3,721,120)
EPS (0.03) (0.02)
Commerce Resources is an exploration company whose primary asset is the Blue River tantalum and niobium project in
central BC. The company is also aggressively exploring its Eldor rare earth project in northern Quebec and the Carbo
rare earth project in northern British Columbia. The Ashram Zone at the Eldor project has an NI 43-101compliant
inferred resource of 117.34 Mt grading 1.74% TREO. Commerce Resources Corp. (TSXV: CCE) - Update Page 2
 2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Eldor Project
Update
In our previous report of March 2011, we had detailed the newly published resource estimate
for the Eldor Project. The estimate gave an inferred resource of 117.34 Mt grading 1.74%
TREO for the Ashram REE Zone. Following the 2010 drill program, CCE stated that they
intended to continue exploration at the Ashram Zone. The resource has excellent potential
for expansion, remaining open to the north, south, east, west and at depth.
In March 2011, Commerce commenced a new winter/spring program of drilling on the
Ashram Zone. Drill targets were selected with two primary aims as follows;
• Expand the depth extent and footprint of known mineralization focusing on the
northeastern half of the zone.
• Confirm and define areas with near surface middle and heavy rare earth oxides
(MHREO) that were encountered during drilling in 2010, as detailed in our previous
report.
The locations of the winter/spring drill holes are presented in Figure 1 below.
Figure 1. Winter/Spring drill location plan, Ashram REE Deposit.
(Source: Commerce Resources Corp.) Commerce Resources Corp. (TSXV: CCE) - Update Page 3
 2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
The latest drill program comprised eight holes totaling 3,656 metres, seven of which were
located in the Ashram Zone. Select highlights from the drill program are presented in Table
1 below.
Table 1. Highlights from winter/spring drilling at the Ashram Zone.
(Source: Commerce Resources Corp.)
Hole ID
From
(m)
To (m)
Interval
(m)
TREO
(%)
Neodymium
Oxide (% of
TREO)
EC11-048 6.83 593.75 586.92 2.10 17.0
Incl. 491.37 499.22 7.85 3.00 13.2
Incl. 523.67 560.66 36.99 3.00 14.4
EC11-052 6.85 243.84 236.99 1.67 17.6
Incl. 126 243.84 117.84 1.99 17.2
Incl. 202.89 227.91 25.02 2.25 15.1
EC11-053 39.56 384.05 344.49 2.06 17.1
Incl. 133.24 172 38.76 2.35 16.1
Incl. 250.92 273.54 22.62 2.44 16.4
Incl. 367.46 372.36 4.9 2.95 15.5
EC11-054 9.93 305.1 295.17 0.73 21.6
305.1 548.64 243.54 1.99 16.4
Incl. 468.95 474.62 5.67 2.97 14.0
Incl. 511.46 548.64 37.18 2.83 13.2
Or 526.37 548.64 22.27 3.00 13.1
Of particular note is hole EC11-053 which was located to target the near surface MHREO,
that were previously encountered in the central northern area of the deposit. This hole
intersected 2.06% Total Rare Earth Oxides (TREO) over a length of 344.49m, including
12.4% MHREO and as well as 21.1% Nd2O3 (neodymium oxide) over 32.75m at 1.37%
TREO from 6.81m to 39.56m. The hole ended in mineralization at a depth of 344.49m,
suggesting the possibility for further depth expansion.
A further highlight is hole EC11-048 which encountered REE mineralization over its entire
length of 586.92m returning 2.10% TREO, including an interval of 36.99m of 3.00% TREO.
The hole ended at 586.92m as it was the maximum depth limitation of the drill.
In addition to confirming near@surface middle and heavy rare earth enriched
mineralization, latest drilling also confirmed an expansion of the main resource area.
As seen in Figure 1 above, hole EC11-054 is the most northerly hole drilled to date. This
hole encountered one intercept of 1.99% TREO over 243.54m, and bottomed in
mineralization at a depth of 548.64m. There was a general increase of grade with depth,
with the final sample tested grading at 5.36% TREO. This hole has expanded the known
extent of mineralization used to calculate the resource estimate by over 275m to the
northeast. Commerce Resources Corp. (TSXV: CCE) - Update Page 4
 2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Future
Development
Update on Blue
River
Financials
We believe the results of the latest drill program are very positive and have allowed
CCE to greatly expand the area of known mineralization at the Ashram Zone.
Mineralization has now been confirmed over an area of 600m east-west, by 650 metres
north-south, and to depths greater than 600m. This has approximately doubled the size of
known mineralization used to calculate the existing NI 43@101 resource estimate.
It should be noted that grades have generally increased to the north and at depth. In addition,
all of the holes were collared in, and bottomed in mineralization which suggests the potential
for further mineralization in these areas.
As stated above, the Ashram Zone remains open at depth and in multiple directions. Any
future exploration program will be targeted to delineate mineralization in these areas.
Commerce recently commenced a summer drilling program which aims to drill a total of
7,500m, the majority of which will be targeted at the Ashram Zone. Specific aims of the
drill program are as follows;
• Upgrade a portion of the existing resource estimate from the “inferred” to “indicated”
category.
• Continue and test for areas of higher grades and middle and heavy rare earth
enrichment, and expand the total area of known resource at the Ashram Zone.
• Test additional REE targets within the Eldor Carbonatite Complex.
CCE is also conducting metallurgical and environmental studies with a view to producing an
updated resource estimate and Preliminary Economic Assessment in the future.
CCE currently holds a resource estimate for the Ashram Zone which represents one of
the world’s largest REE deposits outside of China with an NI 43@101 or JORC
resource. In addition, the recent winter/spring drill program successfully expanded the
known area of mineralization. With the announcement of the summer drill program
and additional studies, CCE continues to define baseline parameters for an updated
resource estimate and a Preliminary Economic Assessment.
The company is currently waiting for the results of the ongoing PEA at Blue River.
Management indicated to us that, "While the company waits for the release of the PEA, there
is a significant program underway currently at Blue River which will be detailed shortly".
At the end of April 2011, the company had $4.48 million in cash and cash equivalents.
Working capital was $8.36 million. The company reported a net loss of $3.72 million (EPS: -
$0.03) in the first six months of FY2011 (ended April 2011). We estimate the company had a
burn rate (spending on its operations and exploration) of $0.57 million per month in the first
six months of FY2011 versus $0.74 million per month in FY2010 (12 month period ended
October 2010). The table below shows a summary of the company’s cash and liquidity
position. Commerce Resources Corp. (TSXV: CCE) - Update Page 5
 2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Valuation and
Rating
Risks
(In C$) 2010 2011 (6 mo)
Working Capital 11,451,888 8,360,673
Current Ratio 5.86 10.64
Monthly Burn Rate (incl. Exploration) (740,752) (566,254)
Cash from Financing Activities 198,975 2,444,356
LT Debt / Assets - -
Subsequent to Q2@2011, the company raised $7.58 million by issuing 10.39 million
shares at $0.73 per share.
The company is now in a solid cash position with about $12 million in cash and
investments. The CAPEX estimate for the next 12 months is $10 million.
Stock Options and Warrants: We estimate the company currently has 10.94 million stock
options (weighted average exercise price - $0.52) and 7.33 million warrants (weighted
average exercise price - $0.63) outstanding. 6.80 million options and 5.32 million warrants
are currently 'in-the-money'. The company could raise up to $5.32 million if all these 'in@
the@money' options and warrants are exercised.
Our overall valuation on CCE shares dropped slightly from $300.42 million to $297.26
million due to the drop in cash and investments since our previous report in March 2011. We
did not make any other significant changes to our valuation models. The value per share
estimate dropped from $2.13 per share to $1.98 per share due to the share dilution that
resulted from the recent equity financing. A summary of our valuation is shown below.
Valuation Summary Revised Previous
Blue River
DCF $0.78 $0.83
Real Options $1.02 $1.09
Average $0.90 $0.96
Eldor $1.01 $1.09
Working Capital + Investments $0.07 $0.09
Fair Value $1.98 $2.13
We reiterate our BUY rating and slightly adjust our fair value estimate from $2.13 to
$2.00 per share.
The following risks, though not exhaustive, may cause our estimates to differ from actual
results: Commerce Resources Corp. (TSXV: CCE) - Update Page 6
 2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
• The company currently has no operating mines.
• Commerce is particularly leveraged to the prices of tantalum, niobium and rare earth
elements, which are not traded on public markets and are hard to track.
• Success of economic studies and resource expansion are important to the long-term
growth of the company.
• Access to capital and share dilution.
We rate the company’s shares a RISK of 5 (Highly Speculative). Commerce Resources Corp. (TSXV: CCE) - Update Page 7
 2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Fundamental Research Corp. Equity Rating Scale:
Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk
Hold – Annual expected rate of return is between 5% and 12%
Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk
Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events.
Fundamental Research Corp. Risk Rating Scale:
1 (Low Risk) @ The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry.
The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is
conservative with little or no debt.
2 (Below Average Risk) @ The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive
to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash
flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt.
3 (Average Risk) @ The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive
to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and
coverage ratios are sufficient.
4 (Speculative) @ The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a
turnaround situation. These companies should be considered speculative.
5 (Highly Speculative) @ The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products.
Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding.
These stocks are considered highly speculative.
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