US Rare Earth Minerals Inc (OTCMKTS:USMN) Becomes the Victim of a Costly Mistake

We’ve said numerous times how important due diligence is, especially in the world of penny stocks. We’ll now do some due diligence on US Rare Earth Minerals Inc (OTCMKTS:USMN) and we’ll use it to emphasize its significance once again.

USMN is an OTC listed company that originally started in 2008. Since then it has gone through two name changes and the same number of reverse splits. It has some mining activities in Nevada, but instead of being a typical mineral exploration company, USMN wants to use what it digs out of the ground in order to produce its EXCELERITE line of products which, apparently, could have a positive effect on the health of plants, animals, and human beings. Unfortunately for the management team, this business plan didn’t prove too popular with investors. In fact, USMN spent the last few months flying mostly under the radar.

That said, the appalling volumes might not be due entirely to the peculiar business strategy. They might also be connected to the company’s financial situation. The figures in the latest 10-Q should give you an idea of what we’re talking about:

• cash: $776
• current assets: $41,118
• current liabilities: $405,652
• quarterly revenues: $59,400
• quarterly net loss: $1,916,005

So, there you have it – a few minutes’ worth of research will show you that while it does have some mining operations, USMN isn’t exactly the prime candidate for supplying Tesla Motors Inc (NASDAQ:TSLA)’s massive Gigafactory with lithium. Or is it?

Well, Javier Hasse, a contributor for a financial media outlet called Benzinga, said that it is. In fact, he wrote an article on Friday which claims that an agreement between TSLA and USMN has already been signed.

Despite the lack of any confirmation from either Tesla or US Rare Earth Minerals, investors were in a hurry to grab as much shares of the OTC company as possible. In a matter of a few short hours, USMN managed to gain an absolutely astonishing 1,700% and it ran to a close of $0.70 per share. A lot of people were eagerly awaiting the start of the new week. Others, however, reckoned that something’s amiss.

They said through the social media and discussion boards that there was a mistake in Mr. Hasse’s article. They told whoever wanted to listen that TSLA‘s new partner is called Rare Earth Minerals PLC, a British company traded on London’s Stock Exchange, and not US Rare Earth Minerals Inc from OTC land.

The market didn’t really react on Friday, but yesterday, USMN themselves said that they haven’t signed anything and the stock crumbled to the ground. In a matter of just six and a half hours, it managed to wipe out a colossal 87% of its value and it stopped at just under $0.09 per share.

Benzinga quickly corrected their article and it now quotes the right company, but that is of little condolence to the people who lost money during the whole malarkey.

And this is not Benzinga’s first mistake, either. A few months ago, the website was involved in the rumors surrounding the acquisition of Riviera Tool Company (OTCMKTS:RIVT). Curiously enough, TSLA was involved in that incident as well. As you can see from our article, it didn’t end well.