2015 is set to be an extremely important year for Rare Earth Minerals (LSE: REM). Indeed, this year the company is planning to conduct a pre-feasibility study at its world-class Sonora Lithium project, and the results of this study will make or break the company.

However, according to initial figures, the two prospects at the Sonora Lithium project — La Ventana and El Sauz, Fleur — already have highly attractive economics.

The results of the pre-feasibility study should not only confirm these numbers, but a new set of concrete figures should attract institutional funding and support that will help Rare Earth, and its partners, develop the mines and push forward to unlock value for investors.

How much is it worth?

Of course, the key question here is, “how much is Rare Earth really worth”? A question any serious investor should always try and find the answer to before making a trading decision.

According to the figures already published by the company, the net present value, or NVP of all Rare Earth’s interests in the Fleur – El Sauz, Ventana, Yangibana and Western Lithium projects amounts to $1.2bn.

The NPV is used in capital budgeting to analyse the profitability of an investment or project. Simply put, NPV is a profit figure that the company — in this case, Rare Earth — expects to receive over the life of the project after deducting investment costs and the company’s required annual return. Or, to put it another way, this is the profit attributable to Rare Earth’s shareholders over the life of the mining projects.

With this in mind, a NPV of $1.2bn indicates that Rare Earth’s shareholders will receive a profit of approximately £800m over the life of the company’s mining projects.

Undervalued

As Rare Earth’s market capitalisation is only £61m, it’s easy to see that the company is severely undervalued at present levels. Indeed, you could argue that Rare Earth is worth at least half the NPV of its mines, which would give the company a valuation of £400m. Slightly more than six times the company’s current market value — on a per share basis, slightly over 6p per share.

Still, even though these figures suggest that Rare Earth is undervalued at present levels, I strongly recommend that you do your own research before making a trading decision.

Rare Earth could be one of the market's best hidden gems, something we're always on the lookout for here at the Motley Fool. And while searching for the market's next multi-bagger, our analysts have recently identified a stock that could drive a three-fold increase in sales in just 5 years.

Unlike Rare Earth, which still has a long way to go before it unlocks its full potential, the company our analysts have recently uncovered is already profitable. What's more, this undiscovered gem has a proven advantage over its peers.