Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Avalon Retains SNC-Lavalin to Complete Nechalacho Feasibility Study
DEC 21, 2011 - 13:07 ET
TORONTO, ONTARIO--(Marketwire - Dec. 21, 2011) - Avalon Rare Metals Inc. (TSX:AVL)(NYSE Amex:AVL) ("Avalon" or the "Company") is pleased to announce that the Company has retained SNC-Lavalin to complete the Feasibility Study ("FS") for its Nechalacho rare earth elements project (the "Project").
Brian Chandler, Chief Operating Officer, commented, "This is an important milestone for Avalon as we move into the final stage of project evaluation and preparation before we formally commence construction at Nechalacho."
Mr. Chandler continued, "SNC-Lavalin's capacity and broad experience in all aspects of project development from engineering to, procurement, logistics, contracts administration, safety and risk management, as well as tendering for construction, will be invaluable to successfully developing the Project".
Scope of the Feasibility Study
The FS will build on the updated Prefeasibility Study ("PFS") of July 7, 2011, which demonstrated the technical and economic viability of the Project. The main purpose of the FS is to support raising the capital required to bring Nechalacho into commercial operation, by confirming the technical and economic viability of the Project to a degree of certainty satisfactory to a bank. It is scheduled for completion around the end of 2012.
The Project consists of an underground mine and backfill paste plant; flotation concentrator including tailings facilities; mine site utilities and infrastructure including power plant, accommodations, airstrip and docking facilities; hydrometallurgical plant; and a rare earths separation plant. SNC-Lavalin is already involved in the prefeasibility study design of the proposed separation plant.
SNC-Lavalin will be responsible for completing the overall FS including technical aspects of the hydrometallurgical plant and separation plant, as well as for integrating all other components of the Project assembled by Avalon and other subcontractors.
For further detailed information regarding the Project, please refer to the Technical Report of August 25, 2011 on our website at http://www.avalonraremetals.com/projects/thor_lake/prefeasibility_study/. All project technical reports are also available on www.sedar.com.
About Avalon Rare Metals Inc. (TSX and NYSE-Amex:AVL)
Avalon Rare Metals Inc. is a mineral development company focused on rare metals deposits in Canada. Its flagship project, the 100%-owned Nechalacho Deposit, Thor Lake, NWT, is emerging as one of the largest undeveloped rare earth elements resources in the world. Its exceptional enrichment in the more valuable 'heavy' rare earth elements, which are key to enabling advances in green energy technology and other growing high-tech applications, is one of the few potential sources of these critical elements outside of China, currently the source of 95% of world supply. Avalon is well funded, has no debt and its work programs are progressing steadily. Social responsibility and environmental stewardship are corporate cornerstones.
Shares Outstanding: 103,136,986. Cash Resources: Approximately $60 million
To find out more about Avalon Rare Metals Inc., please visit our website at www.avalonraremetals.com. For questions and feedback, please e-mail the Company at ir@avalonraremetals.com.
This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Avalon to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are based on assumptions management believes to be reasonable at the time such statements are made. Although Avalon has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Such forward-looking statements have been provided for the purpose of assisting investors in understanding the Company's plans may not be appropriate for other purposes. Accordingly, readers should not place undue reliance on forward-looking statements. Avalon does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.
Emerging Heavy Rare Earth Deposits
November 21, 2011 @ 3:07 am In Feature Articles,Rare Earth Articles
By Michael Montgomery—Exclusive to Rare Earth Investing News [1]
http://rareearthinvestingnews.com/5477/emerging-heavy-rare-earth-deposits-molycorp-mcp-lynas-lyc-prices/
Recently, heavy rare earth prices [2]Recently, the prices of rare earth elements and company share prices have been exhibited downward pressure. Even companies like s Molycorp [3] (NYSE:MCP [4]) and Lynas Corp. [5](ASX:LYC [6]) have not escaped the dip in share price.
In an effort to garner more support for their projects, rare earth companies have started to highlight the importance of heavy rare earth elements (HREE) in an effort to differentiate themselves from the crowd. While the total market demand for the heavy rare earths may be smaller than some light rare earth elements such as neodymium, the HREE's are of higher value.
The importance of heavy rare earth elements
Molycorp and Lynas will be the first two non-Chinese rare earth producers to sell new supply to the market. However, both of the companies have been criticized for the lack of heavy rare earth concentrations in their deposits. Many analysts have feared that once both come to production a glut of light rare earths may flood the market, hurting the profitability of the firms. Let's take a look at the variety of applications in which heavy rare earths are essential.
Dysprosium is most commonly used in tandem with neodymium in the world's most powerful magnets essential for wind turbines, and electric motors used in electric and hybrid vehicles. It is also used in hard disk drives, as well as a stabilizer in nuclear reactors. According to Metal-Pages [7] the current price of dysprosium oxide FOB is $2,000-2020 per kg, as compared to neodymium oxide FOB priced at roughly $108 per Kg.
Europium, ytterbium, and Terbium are commonly used as a glass doping agent for lasers, night vision, as well as sonar and radar systems that are essential for military applications. Europium oxide FOB is currently priced at $3,780-3,800 per Kg.
Erbium is used in fiber optic cables that bring high speed internet to the worlds computers. Recently, researchers at Arizona State University [8] created an erbium fiber optic ‘nano-wire' capable of dramatically increasing the amount of data across through the cable as well as increasing the efficiency of solar panels.
Companies highlight HREE's
Ucore Rare Metals [9] (TSXV:UCU [10]) owns the Bokan Mountain deposit in Alaska. The deposit has been called “the most significant heavy rare earth deposit in the US,” by Luisa Moreno [11], an analyst at Jacob Securities. According to the company's NI-43-101 resource estimate the “Bokan hosts an Inferred Mineral Resource of 3.7 million tonnes grading 0.75% TREO, with 39% of the TREO being the higher value HREO (heavy rare earth oxides),” stated the press release [12].
The company is working towards their Preliminary Economic Assessment which they expect to be completed by Q1 2012. There is still no date set for the start of production.
After Molycorp's prices took a nose drive, the company announced that it was exploring a heavy rare earth deposit adjacent to its existing Mt. Pass mine. Dr. John L. Burba, Molycorp's Executive Vice President, announced that historical exploration of the area discovered deposits with over 4 percent TREO, with a significant proportion of HREE content [13]. If proven to be true, the deposit could become world class, but there is some apprehension to the validity and timing of the announcement [14].
Other companies hoping to cash in on their heavy rare earth deposits include, but are not limited to, Great Western Minerals Group [15] (TSXV:GWG [16]) which is working to start production on their Steenkampskraal Mine in South Africa and Avalon Rare Metals [17] (TSX:AVL [18]) which owns the Nechalacho [19] project in the Northwest Territories.
Bloomberg BusinessWeek
Features October 27, 2011, 5:00 PM EDT
Alaska’s Billion Dollar Mountain
The story of one man who used a little persuasion—and a lot of luck—to win the rights to millions of tons of rare earths
By Daniel Grushkin
The helicopter took off, the wooden city of Ketchikan slowly receded, and the mountainous rain forest approached. It was an unseasonably warm day in February 2007. Through circles of moisture on the windows the passengers watched the choppy gray ocean off the southern Alaska coast roll by underneath. In the back seat, Jim McKenzie, a 45-year-old Canadian entrepreneur with a swoop of salt-and-pepper hair, tried to relax as he stared out the window with the eyes of an excited 12-year-old. On the green edge of the horizon was the mountain he’d bought the mineral rights to, sight unseen.
Beside him sat Harmen J. Keyser, the geologist who first told him about the mountain. Keyser, a dour, blond 6-foot-6 Dutchman, was now a vice-president of McKenzie’s company. Beside the pilot sat the man who sold the rights to the mountain, a 78-year-old prospector who’d waited 50 years to make the deal.
First, McKenzie saw the forested edge of Prince of Wales Island, a sparsely populated piece of Tongass National Forest about the size of Delaware. Then he spotted his mountain for the first time—Bokan—just a shadow, then a soaring, knobby granite peak punching up through the dense spruce. On most days, Bokan Mountain hides behind mist. This day was clear. They could see scars on the mountain where prospectors had searched for uranium for half a century.
The helicopter touched down at the base of a path at the head of Kendrick Bay. The three passengers stepped out and hiked up to the open pit where the first miners had scooped out 315,000 pounds of uranium. In 1957, Climax Molybdenum (FCX) opened the pit, named it the Ross-Adams mine after the discovering geologists, spent a year digging, and left. There was still a layer of radioactive dust on the road.
The three walked up the path to a root-filled hole. Crews called it “the 700” after its height above sea level. Miners for Standard Metals had started a tunnel there in 1959. Traces of mining life remained—a collapsed shack and boxes of rock samples. The three went down to the other side of the mountain and picked through rocks on the beach at Moira Sound.
Eight mining companies had held claims on Bokan Mountain before McKenzie came, and all had closed. They were looking for uranium, and most cleared out before they ever sold an ounce of ore. Theirs was poor luck and poor timing. Based on a resource assessment performed for McKenzie’s company Ucore by Aurora Geosciences, Bokan may contain mineral deposits worth $6.5 billion. That figure is not for uranium, though, but a group of elements called rare earths.
Rare earths are crucial to modern and developing technologies but were little discussed until a temporary embargo in 2010 by China, which produces about 97 percent of the world’s supply, sparked a global prospecting frenzy. The cheaper and more abundant of these elements, such as lanthanum and cerium, catalyze reactions and “crack,” or refine, petroleum in the chemical industry. Neodymium, praseodymium, and dysprosium are used in electronics, jet engines, and missiles. “If you’re looking at a technology and you think there’s some kind of magic component to it, it’s rare earths,” says Daniel J. Cordier, a mineral commodity specialist at the U.S. Geological Survey.
There are 17 rare earth metals on the periodic table, divided between “heavy” and “light” based on their atomic weight, the heavies being far more rare and expensive. Together they’re referred to as technology metals. In the 1980s research in rare earths led to the revolution in electronic miniaturization. Scientists figured out how to fuse them with other metals to make permanent magnets 200 times more powerful than magnets made of steel alone. That allows for the tiny neodymium magnets in headphones and hard drives, and the servos that make cell phones vibrate. In display screens, yttrium phosphors create the reds, terbium the greens, and europium both the blues and reds. They’re in military technology and in electric cars, too: About two kilograms of neodymium and dysprosium make the motor run in a Prius. They’re also an important part of the green revolution. The gearbox of a 300-foot-tall, two-megawatt wind turbine contains 372 kilograms of neodymium and 60 kilograms of dysprosium. At today’s prices, those rare earths alone cost $301,680.
McKenzie’s climb up Bokan Mountain, as he tells it, came about through luck and because he was semi-retired at the time and a bit bored. During the Internet boom, when Canadians first installed cable modems in their households, he owned Mediapro, a 150-operator call center in Nova Scotia that guided new subscribers into broadband. He sold to AT&T (T) in 1999 for an amount he won’t disclose. He does say that the deal made him a multimillionaire.
McKenzie had befriended Wade Dawe, a founder of Birchpoint Capital, based in Halifax, which represented investors looking to invest in uranium. Dawe shared stories about mineral hunting, which sounded exciting to McKenzie, real hands-in-the-dirt stuff, unlike the telecom business. McKenzie eventually went to work for his friend.
Just two months into the job, in October 2006, Birchpoint sent McKenzie to the Vancouver office of Harmen Keyser, a geologist and helicopter pilot. Keyser owned mineral interests around the world; he knew his rocks. Surrounded by cardboard tubes filled with geological maps, they completed the last details of a deal for a uranium deposit at Carroll’s Hat in Newfoundland. McKenzie had been counseled by Dawe always to inquire about mineral leads. Just before leaving his meeting with Keyser, McKenzie remembered to ask, “Do you know of any other good properties?” McKenzie recalls this as his “Columbo moment,” as if he were Peter Falk surprising a murderer with his final, telling question.
Keyser paused: “I do have one.” He described a visit to an old prospector in Alaska who owned mineral rights on Bokan Mountain. The prospector was an enigma; he’d refused Keyser’s $1.7 million offer for the rights. Keyser shrugged it off—not his business. But the mystery intrigued McKenzie. Why would a man with few years left turn down the most lucrative sum he’d ever been offered?
“I’m going to go there and get to know this guy,” McKenzie said. “If I sign the deal, I’ll give you a piece of it.” Keyser accepted. He’d already spent a year trying to close a deal and had given up. He was not optimistic.
A month later, McKenzie endured the 12-hour Halifax-to-Vancouver-to-Seattle-to-Southeast-Alaska flight. The prospector met him at the airport in an old green Pontiac and brought him home. For his entire life the man had been called Red for his ginger hair. Now he was just Bob, Bob Dotson. His hair had been replaced by liver spots.
Inside his house a few miles outside the only city in the area, Ketchikan, population 8,000, Dotson sat in a La-Z-Boy while his wife, Irene, fixed coffee. He’d built the house, and the road outside, too, which he named Dotson’s Lane. He talked about the closing of both the cannery and timber mills. The only business in town came from tourists on cruise ships, which was no business at all. He had this vision, he said, that Bokan would one day become a large-scale uranium mine and bring hundreds of jobs to Southeast Alaska. But so many companies had disappointed him by pulling out before production that he’d become suspicious of mining executives and their contracts.
To close the deal, McKenzie felt he had to get to know the Dotsons. “I was willing to go down a turkey trail and not really know where it would end,” he says. “Maybe it was the situation. I did have the time to do it, but I don’t know how many people would have.”
A hierarchy exists within the mining world, and prospectors like Dotson sit at the bottom, lacking the status brought by geologists’ degrees or investors’ money. They piece together the science and the trade by themselves. To his advantage, McKenzie carried none of the industry’s prejudices. So when Dotson explained his theories about the mountain’s geology, rather than dispute him, McKenzie just wanted to know more. Within two days, he checked out of his hotel and moved into Dotson’s basement. He woke up with the Dotsons, drank coffee, and watched Fox News with them. Occasionally he whipped up eggs and sausage for the couple.
He relished Dotson’s stories about living in Alaska when it was still a territory, about being stalked by wolves in the snowy woods, about claim jumpers and gunfights and nuggets of gold. “Bob made me feel like this was treasure hunting,” McKenzie says.
The only digging they did took place in Dotson’s home office, among its 51 years of records about the mountain. They rifled through file cabinets and enormous stacks of reports. McKenzie took notes as Dotson poured over hand-drawn maps and enormous aerial photographs of southeastern Prince of Wales and Bokan. They examined piles of rocks, gravel in jars, and long transects cut from bedrock. At one point, McKenzie found an old radiation detector under some papers. He pulled it from its leather satchel. When he turned it on it began to squeal.
“Bob, this is broken,” McKenzie said.
“It’s not broken,” said Dotson, pointing to the rocks. “You’re surrounded by uranium, brother.”
Dotson explained how he’d joined the first landing party as a surveyor to stake the mineral claims on Bokan in 1955. One of the geologists, Don Ross, of the Ross-Adams mine, had found the deposit by dangling a radiation detector outside the window of a tiny Piper Cub propeller plane while he skimmed the peaks of Prince of Wales Island. When they finished surveying and staking, Dotson believed they had missed some of the uranium, and Ross let him do some exploring on his own. Following lines of radiation along the ground with his detector, he staked his own claims toward the base of the mountain.
Mining crews came and went, but they finally abandoned Ross-Adams and let the claims expire. Dotson’s site, however, remained untouched. For a half-century, between weeks at sea as a ferryboat pilot, he worked on Bokan, trying to gather enough data to attract investors. Dotson dug trenches with Irene, and later his son, Ray, and two daughters, Mary and Susie. The children grew up among the rocks. “They used to catch salamanders. They thought there were baby alligators,” Dotson said. Beneath the forest, black and tan stripes run through granite. The Dotsons used saws and rock hammers to cut inch-deep channels into these stripes for sampling. But Dotson’s radiation detector picked up more thorium, a radioactive element associated with rare earths, than uranium.
Dotson told McKenzie about rare earths, how every rocket ship and missile needed them, but he wasn’t initially that interested. He was there for uranium. China was building nuclear power plants, and the West was pushing for alternatives to fossil fuels. Dotson and McKenzie both pictured uranium from Bokan feeding that global hunger.
“Ultimately,” McKenzie says, “he just wanted someone to really care for the project.” After two weeks, Dotson agreed to lease McKenzie his claims, but to complete the deal, McKenzie had to delve into the Dotson family psyche.
The federal government allows prospectors to own no more than 10 claims without having to pay extensive fees. To avoid those fees, Dotson had split his claims among his grandson Derek and his two daughters, Susie and Mary. The sisters no longer spoke to each other and hadn’t sat down with their father in several years. It had been a long time since investors had shown interest in their claims, so the family agreed to hear McKenzie’s proposal. At 4 p.m. on a December afternoon, they all checked into a roadside motel in Mount Vernon, Wash., midway between the daughters’ homes. McKenzie and Dotson, who’d flown in together from Alaska, sat on one bed. Susie and Mary sat on the bed across from them. They negotiated for seven hours.
“Bob had put his whole life into it,” says McKenzie, “and even the kids were half raised out there.” They weren’t just debating a contract, they were trying to work out a happy ending to a family saga. They’d all spent most of their lives trying to make the mine a reality. “It’s like an American pioneer family and they’re all obstinate. That’s what makes for good prospectors,” McKenzie says. “But they’re so used to fighting that they don’t know when to stop, even when they’ve won.”
Long past nightfall, they signed a simple letter of agreement. Susie and McKenzie stepped out to smoke. Bob went for a walk alone in the dark. McKenzie wrote a check for the down payment the next morning. They agreed that Dotson would receive $320,000, Susie and Mary each $100,000. McKenzie also granted each a 2 percent royalty on the value of any ore extracted from their claims. If the mine goes into production, as expected, the family will become rich.
In the end, Ucore, a company formed by Birchpoint and now traded on the tiny Toronto Stock Venture Exchange, paid $995,000 for the entire site. Birchpoint provided C$1.65 million (about the same in U.S. dollars) of capital, and McKenzie invested C$100,000 of his own for a 6 percent share. After he signed Bokan, he invested another C$400,000 of his own money. Keyser became vice-president, and McKenzie, with no mining experience, became the chief executive officer.
That winter, when the legal contracts were settled, Keyser set out to mark the limits of their claim. To the underside of a helicopter he strapped metal stakes tagged with claim numbers registered with the Bureau of Land Management. Keyser’s crew flew the helicopter to the corners of Bokan and dropped one stake from the air at each corner, which crews then dug in properly, creating a rectangle that eventually grew into 9,421 acres. Having staked their claim, they would register it with the BLM. It is a system that has been around since the 19th century.
The following summer, McKenzie contracted a mine exploration crew to begin plumbing the veins of uranium under the mountain. They lived on a barge on the south side of Kendrick Bay, protected from the weather. Every morning and afternoon, a team took skiffs across the bay to drill holes hundreds of meters into the bedrock with a two-story-high diamond tipped drill. When one team finished its shift, another replaced it, so that the drill spun at all times. From each site they extracted a core sample, a smooth cylinder of rock used to track the passage of mineral veins. These would provide data on the concentrations of ore at different depths. With enough core samples they’d be able to project the vein’s path. By 2010, after three summers on-site, they had almost 9,000 meters of core, some scavenged from previous mine explorers, and 143 drill holes.
Concentrations of rare earths ran alongside the veins of uranium, but the uranium deposit appeared to split from the rare earths at a site on the mountain called the I&L zone, after old claim holders Irma and Lester Hollenbeck. McKenzie faced a literal fork in the road—follow the uranium vein up the mountain or chase the rare earths to the southeast. The answer became obvious in 2009, when China said it would cut rare earth exports over the next six years. “When China made their announcement it was like, ‘O.K., we’re definitely going to the southeast now,’?” McKenzie says. “I put a press release out and we traded 6 million shares that day.”
Aurora Geosciences, Ucore’s exploration consultants, believes that there are at least 3.7 million tons of rare earths under the mountain, 40 percent of which are the more valuable heavies. They say these bundles of narrow veins, many no thicker than the length of a hand, descend at least 200 meters into the bedrock and run northwest at least 2,000 meters across. Though it appears to be a small deposit, no other verified deposit in the U.S. matches the purity of its grade. “It’s the most significant heavy rare earth deposit in the U.S.,” says Luisa Moreno, an analyst at Jacob Securities, a Toronto-based investment bank.
As with any resource play, Ucore faces a wild market. The value of the publicly traded company stood at C$72 million in mid-October and has swung with the values of the metals. Christopher Ecclestone, a mining strategist at financial adviser Hallgarten, in New York City, notes that any billion-dollar figures for the value of the minerals in the mountain neglect the massive cost of removing and purifying the ore, and can be “pretty bogus.”
“It’s just like walking into a cotton field and saying this cotton field is worth $20 million of Hanes underwear,” he says. Still, he concedes, “Ucore pulled the lever on the machine and came up with the right number of cherries.”
In September 2010, three months after McKenzie had changed the company’s name to Ucore Rare Metals, a Chinese fisherman crossed into waters contested by Japan and rammed his boat into two Japanese Coast Guard vessels before he was arrested. China retaliated by cutting off the supply of rare earths to Japan, and then the U.S. and Europe, for five weeks. China never officially announced its reasons for the halt, or that there even was one. Effectively an embargo, it accentuated what was already coming to pass. In the past five years, China has cut export quotas by nearly half, while imposing a tariff of 25 percent on the four most expensive rare earths and a 15 percent tariff on the rest. Unsurprisingly, rare earth prices have exploded, some more than twentyfold. Dysprosium, which had been $185 a kilogram on June 1, 2010, reached $2,850 on the world market in August. It has since fallen nearly 30 percent, but remains far higher than it was five and 10 years ago.
“I think it’s problematic that China, or one country, is controlling so much of the market,” says Senator Mark Begich (D-Alaska), a member of the Senate Armed Services Committee. “It’s incumbent upon us from a national defense, national security, and an economic security perspective that we recognize that we have to have a broader approach to our minerals.”
At the end of 2010 the U.S. Energy Dept. declared five rare earths to be most critical to the future of the green energy economy. Dysprosium, a metal found in high percentages at Bokan, topped the list. Congress has proposed five bills regarding rare earth metals; some offer loan guarantees for miners, others suggest stockpiling the metals. “A domestic rare earth supply is very important,” says David Sandalow, assistant secretary for policy and international affairs at the Energy Dept. “Security rests above all in diversity of supply, and domestic supplies are the most secure.”
The crisis also led to a deluge of rare earth exploration companies; in 2009 there were only a handful, “and those companies were mainly starving to death,” says Ecclestone. According to Technology Metals Research, 244 different companies have fanned out into 35 countries, searching in 381 sites in places like Greenland, the Mojave Desert, and the Australian outback. In July a team of Japanese scientists proposed vacuuming up rare earth-rich sands off Hawaii. The only problem is that they’re 11,500-20,000 feet underwater, virtually unreachable with today’s equipment.
Molycorp (MCP) owns a rare earth mine in an open pit in the Mojave Desert at Mountain Pass, Calif. The mine was closed in 2002, partly because tailings contaminated a dry lake bed with thousands of gallons of water containing thorium, and partly because China sold rare earths for less. Seven years later, Molycorp announced plans to reopen the mine, aiming to produce 19,050 tons of light rare earths oxides a year, which would make it the world’s largest producer. Though the deposit mainly contains the less-desirable light rare earths, Molycorp announced in October that it has found a deposit of heavies, though further investigation is needed to confirm whether the site has concentrations worth mining.
“The only source of heavy rare earths that the U.S. has that could come online in this decade would be Ucore’s,” says Jack Lifton, founder of Technology Metals Research. “Ucore should be able to produce 180 tons a year of dysprosium. If they get to that, they’ll be the largest producer of dysprosium outside of China—ever.” At current prices, 180 tons of dysprosium would be worth $367.4 million.
McKenzie expects to begin production in 2015, and is hoping to raise $100 million from the state of Alaska and manufacturers who need a stable supply of rare earths. He says Ucore plans to build a mine complex on Bokan, including a mill, a conveyor belt to the shore, a base camp for the miners, and a dock so that processed rock can be loaded straight onto barges.
At the close of this year’s summer season, drill crews pulled 43 more core samples from Bokan. In some ways, the operation has been easier than McKenzie expected. When the U.S. Forest Service threatened to slow drilling over road permits, a whirlwind of political support materialized. Politicians rallied around Bokan because it offers a source of good jobs. “We are at the brink of a new promise, a promise of rare earth minerals,” Alaska Governor Sean Parnell declared at a minerals summit in Fairbanks in September. “Our state is going to play a vital role to enhance our nation’s security, and in improving our nation’s economy.”
When China took over the rare earth industry 10 years ago, it also took over the associated supply chain. For U.S. manufacturers to use rare earths from Bokan, the country must rebuild industries in rare earth separation, metalmaking, alloying, and magnet production. Alaska is now weighing whether to underwrite a rare earth separation plant on nearby Gravina Island, the site of Ketchikan’s airport. Thus McKenzie finds himself selling not just the construction of a mine, but likely a $25 million to $35 million rare earths separation facility.
“What Ucore has in the ground is valuable, says Jacob Securities’ Moreno. “The question is, is it economic to remove?” Mineral exploration is an obstacle course with a finish line that most never cross. Still, McKenzie plunges ahead, perhaps optimistically, maybe naively.
McKenzie is as surprised at the results of his venture as anyone. “I didn’t think I’d get into the minerals business,” he says. “It looks like I orchestrated this brilliant move, right? But it’s just inadvertent luck.” McKenzie acknowledges that this good fortune rides on the shoulders of people who devoted their lives to the mountain.
On McKenzie’s first helicopter journey to Bokan in February 2007, after three hours at the site, the sun was low in the sky. It would be night by 4:30 p.m. at that latitude, so McKenzie, Keyser, and Dotson loaded into the helicopter and flew back to Ketchikan. Keyser would be back in a few days to finish scoping, McKenzie would return in the summer with a drill crew. The helicopter took off, and the mountain grew smaller with distance. Dotson, now in a wheelchair, frequently on oxygen, has yet to return.
Grushkin is a Bloomberg Businessweek contributor.
Heavy Rare Earth Space: Molycorp May Grab Headlines, But Other Companies Offer More Upside
By: Matthew Smith
http://seekingalpha.com/article/299043-heavy-rare-earth-space-molycorp-may-grab-headlines-but-other-companies-offer-more-upside
October 12, 2011 | includes: AVL, GWMGF.PK, HREEF.PK, MCP, QRM, TASXF.PK, UURAF.PK
The recent announcement by Molycorp (MCP) that it had “found” heavy rare earths (HREEs) near its Mountain Pass Mine and could potentially mine this area and produce HREEs from the same facility as its LREEs (Light Rare Earth Elements) pushed the stock higher. If MCP could do this, yes, it would be a game changer; the real story is whether it can do this, which seems a long shot, at least in the timeframe it has laid out. If investors are finally starting to recognize the real value of the HREEs, then we believe that they should probably look elsewhere for the most ‘bang for their buck’.
Quest Rare Minerals (QRM)
QRM is probably one of the most misunderstood stocks in the rare earth arena by Americans. The company has traded at a significant discount to Avalon Rare Metals (AVL) despite having a project not nearly as remote and open pittable. QRM also has not used the most inflated REE prices when formulating the economics of its project, something AVL has been accused of doing. We believe that this is part of the reason QRM traded at such a steep discount to AVL, with the rest attributable to AVL having begun trading in the US prior to QRM and in the midst of the ‘Rare Earth Craze’ at the end of 2010.
The company still has a solid capital structure with only 60.4 million shares outstanding, and 69.9 million outstanding on a fully diluted basis. This tight structure in the past has enabled shares to really fly on big news, and this should continue to be the story in the near-term. With the deposit at Strange Lake open in all directions and to depth, we should expect further announcements of the company’s exploration drilling at the project to be successful.
QRM, in its latest investor presentation, also maintains that it expects to be in production at the B-Zone in 2016, which indicates to us that it has not run into any issues with lab work to this point. The Preliminary Economic Assessment (PEA) released in September 2010 indicated that the project was economical at very cheap prices from years before. When it publishes its latest report (Pre-feasibility expected before year end, followed by a Feasibility Study in early 2012), we imagine that it will only appear better due to the addition of resources (from infill drilling and increasing the boundaries of the deposit) and the realization of the higher prices of recent years being factored into the historical prices.
Avalon Rare Metals (AVL)
We recognize AVL’s merits as a HREE deposit and its large size. We also acknowledge the fact that the project is in a very remote area of Canada, will be almost twice as expensive as QRM’s Strange Lake to develop, and will be an underground mine and thus cost more to operate and face serious operational hazards. Investors need to look no further than Cameco (CCJ) and its experiences with underground mine floods in Canada. Of all the REE companies pushing projects forward, AVL is the only large one focused on an underground mine.
The company has been issuing shares to fund its exploration and development activities. The current share structure consists of 102,796,736 shares outstanding and 109,301,986 shares fully diluted. Capital costs for the mine are projected to be C$901.9 million.
Although Avalon, we believe, has a project that is second to Quest’s when compared to each other, we recognize that if HREEs are finally given their due among investors, then AVL shares will rise alongside the other HREE focused entities and outpace most.
Stans Energy Corp. (HREEF.PK)
Stans has a past producing mine in Kyrgyzstan which used to supply the former Soviet Union with all of its REE needs. The composition of the deposit is roughly 50/50 HREE/LREE and the deposit was previously mined via open pit methods. The Kutessay II deposit represents an interesting play on the REEs for investors as Stans seeks to increase the production capacity of the mine and deliver a Prefeasibility study by Q4 of 2011.
The surrounding area which Stans controls around the Kutessay II deposit should prove to hold further REE reserves as the Soviets never needed to further test and develop these areas because of the 80 year supply of REEs they had from the operating mine. We do know at this time that there is a Beryllium deposit next to the past producing REE mine, and that Stans will publish a JORC soon. Based off of what the Soviets found years ago, we would not be surprised if Stans were to find base metals and/or gold and silver associated with any new REE discoveries.
Investors should also watch to see if Stans adds one of the monster HREE deposits in Russia to its portfolio via its joint venture with its Russian partners, which could provide a boost to shares.
Ucore Rare Metals (UURAF.PK)
Ucore claims in its latest investor presentation that it is the only US deposit which is capable of being developed in the next five years, which mirrors what many in the financial and political communities have stated. Ucore has a deposit, Bokan Mountain, which is heavily skewed to the HREEs and located in a mining friendly area of Alaska. Unlike many of the other deposits, Ucore’s is a vein-like deposit which lacks the depth many projects possess, but it has its mineralization spread out over a large area.
Ucore has been rumored as an add-on for MCP in order to diversify into the HREE space and be able to fully integrate into their mine-to-magnets strategy.
Ucore has excellent infrastructure and uranium onsite which could also be mined. It will be interesting to see how the company moves forward with this project.
Tasman Metals (TASXF.PK)
Tasman Metals has the only HREE deposit on continental Europe. Located in southern Sweden, its flagship Norra Karr project has HREO exceeding 50% of the TREO. The mineralization starts at the surface and the drill intercepts have exceeded 100m at various spots throughout the deposit. The company has a tight share structure with insiders owning 16% of the shares and only 58,000,000 shares outstanding with 64,027,343 shares fully diluted.
Should Tasman’s plans play out, the company would be producing REEs in late 2015 or early 2016. Based off of 2015 estimates, in full production Tasman would produce 15% of the world’s yttrium AND dysprosium needs. According to its latest corporate presentation, investors can expect Tasman to release a PEA and complete its AMEX listing by the end of 2011, both of which should help prop up the shares.
Great Western Minerals (GWMGF.PK)
A company that MCP was a breath away from buying, Great Western essentially is the magnets part of MCP’s ‘mines to magnets’ strategy. GWG is, however, bringing on a HREE mine in South Africa and has indicated that it believes it will be first to market, although one has to imagine most of that initial production will go to its own needs for production and stockpiling efforts.
Although some have praised the projects the company has in the pipeline in Canada, it is our opinion that those are too far down in the pipeline to get to market fast, and the fact that they are located in Canada indicates to us that getting fast tracked is likely an outside possibility.
Although Molycorp’s announcement of the HREEs and its “plan” to get into production in maybe a year sound great, these above listed companies are much further along in the process of having their projects actually produce REEs of any kind, let alone the HREEs. Investors buying into MCP’s thinking are forgetting that although a processing plant is quite important, you cannot simply put through any kind of ore and expect significant or even economical production. All REE deposits are different and require adjustments in your processing of the ore; it is even possible to have to adjust the processing technique for the same deposit while in various parts of the ore.
To play the HREE space, stick to these HREE focused companies with some of the best HREE deposits in the world. They are years ahead of anything that is discovered today, let alone anything that is simply grab samples at this time. MCP may steal the headlines these days, but as investors realize the importance of the HREEs and the economics behind these projects, the crème should rise to the top.
Disclosure: I am long QRM, HREEF.PK.
6 Rare Earth Element Stocks: Recent Correction Leads to Cusp Of Bull Market
StockMarketPundits
http://seekingalpha.com/article/296223-6-rare-earth-element-stocks-recent-correction-leads-to-cusp-of-bull-market?source=yahoo
| September 27, 2011 | includes: AVL, HREEF.PK, MCP, QRM, REE, UURAF.PK
“May you live in interesting times.” - Unknown.
Some would have you believe that this expression is meant as a blessing but we (like most) think the saying originated as an ancient Chinese curse that means “may you experience much disorder and trouble in your life.” Since our topic is rare earth element (REE) stocks in the current market environment the Chinese curse connection is apropos.
Confidence is a necessary ingredient in bull markets and in the proper functioning of the economy at large. Due to the actions (and inactions) of our government and that of the Eurozone, confidence has been eroding from the marketplace over the past six months. The result is a stock market on the verge of entering bear market territory and an economy on the brink of a double dip recession.
As a result of the foregoing, both the stock market and commodities have been hammered as the so called “risk off” trade prevails. While all commodity/mining stocks have suffered steep declines perhaps no sector has suffered more than the REE space.
Although we are “bowed and bloodied” from our personal exposure to the REE sector we think the REEs are just in a major correction within the context of a bull market. Not that that diminishes the pain in any manner. We have examined (and re-examined) our original reasons for our entry into the sector and feel they remain valid.
With the percentage increases in the underlying REE prices as well as the related stocks the correction isn’t really surprising in its scope or timing. If you were early to the space like we were you still have profits. With that reasoning in mind we think now may be an opportune time to average in to the REE space
While we are a firm believer that “a rising tide lifts all the boats in the harbor” (and its converse) we think that REE prices and the related stocks should not be impacted by a recession nearly as much as other commodities/metals (such as copper, zinc, lead and iron ore) which are more economically sensitive. The REE shortage is not going away anytime soon (although stockpiling by users may decline) and if we go into a recession the products that REEs go into will still continue to grow for the most part.
Query – does one think iPad sales will decline or that the military will dial back their need for smart weapons? We think the market will begin to recognize this after we work through the current “waterfall” stage that we are in. After all, markets are rational over the medium to long term.
With the “risk off” trade increasing and the impending sovereign and banking crises in Europe we think it best to concentrate on REE companies that have projects that look feasible from not just an examination of their ore body but its geographical location and required infrastructure needs.
That leads us to the six REEs detailed herein:
Molycorp, Inc. (MCP)
Molycorp – no discussion of REE stocks is complete without Molycorp. Molycorp is so well known to REE investors we do not feel the need to get into details about their Mountain Pass, California LREE project, suffice it to say Molycorp actually has both revenues and earnings from processing their old tailings.
Molycorp is believed to have enough cash on hand to bring their entire mining operation into full production. We feel this sets Molycorp apart from the rest of the field and while we have no financial interest in Molycorp we feel strongly that Molycorp should be the first choice of most REE investors now that the possible downturn in the worldwide economy and subsequent stock market decline threatens (or at least delays) project financing for the rest of the field.
Avalon Rare Metals, Inc. (AVL)
Avalon has the 100% owned Nechalacho HREE deposit located at Thor Lake in the Northwest Territory of Canada. The big draw here is the roughly 28% heavy REE component of their deposit. The drawback is the remote location and that it will have to be mined via underground. The company also has the advantage of having raised some cash via a secondary at much higher prices so the treasury stands at $70 million.
We are skeptical that Avalon will be able to arrange project funding for the projected $900 million capital costs of the project in the current environment. One additional positive for the stock is that Avalon is one of Jim Dines REE picks.
Rare Element Resources Ltd (REE)
Rare Element has the 100% owned Bear Lodge REE/Gold Project in Wyoming, USA. The property has a robust preliminary economic assessment that calls for a very modest capital cost of $88 million for a 1,000 tpd operation. The project received a boost early last month when rare element announced they had encountered some of the highest heavy REE grades reported in North America from three separate areas within the Bear Lodge Project.
This project with its favorable geographic location and low capital cost (and a possible gold credit to top it off) should receive more attention from investors if the financing environment continues to tighten thereby threatening the funding of competing capital intensive projects. Rare Element is also on the Jim Dines list of favorite REE stocks.
Quest Rare Minerals Ltd (QRM)
Quest has the 100% owned Strange Lake HREE Project located in northeastern Quebec. Major advantages for the project are its heavies, favorable political jurisdiction and that the deposit should be mineable via open pit. The Quest PEA calls for capex of $563 million with a 4,000 tpd operation.
Quest has a higher HREO as a percentage of TREO than Avalon. With the current market environment Quest appears to have the best in class North American HREE project but will face mounting doubts about its ability to proceed if the equity financing market closes. Quest is yet another Jim Dines favorite.
Stans Energy Corp. (HREEF.PK)
Stans has the 100% owned, fully permitted Kutessay II HREE Project which is the only past producing HREE mine in the world outside of China. The mine produced the vast majority of the Soviet Union’s REEs from 1960 – 1991. The project benefits from good infrastructure and electrical power on site from its past producing days. Stans also owns the related Kashka rare earth processing facility and rail terminal.
A final feasibility study should be in place prior to year end. Perhaps this project’s greatest attribute is that the Soviets have already deciphered the metallurgical aspects. With all infrastructure in place including the processing facility and rail terminal the capital costs will be very moderate. We think this open pit project proceeds on its own merits.
The only drawback of course is the project is not located in North America but rather Kyrgyzstan (if the project was located here the market cap would be increased by a factor of 10). We see plenty of potential here. We would note that Stans is a favorite of Byron King/Agora Financial.
Ucore Rare Metals, Inc. (UURAF.PK)
Ucore has the 100% owned Bokan Mountain HREE project which is located on the southern tip of Prince Wales Island, Alaska. Contained within the project is the former producing Ross Adams uranium mine. Ucore has among the highest known HREE vs. LREE skews. Other positives include that there is significant infrastructure in place and prior permitting is still intact as well as this is the only HREE project on American soil.
The project appears to have significant geopolitical support on both the state and federal level. Like Stans, Ucore is a favorite of Byron King/Agora Financial. We feel it is likely that Molycorp will purchase Ucore to secure the HREEs needed to complete their “mines to magnets” program.
So, although we may be residing in interesting times, we feel that the REE sector will provide significant financial returns to investors that have the fortitude to enter the fray. It should go without saying that Molycorp is the “safest” choice of the companies profiled here although Stans and Ucore may have the most explosive potential if they can see its projects through to production.
Please keep in mind that the entire sector is speculative in nature and that none of the projects (including Molycorp) would be economical if the Chinese reverted to subsidizing REE prices and production.
Disclosure: I am long HREEF.PK, UURAF.PK.
Jack Lifton: Profit from Really Critical Rare Earth Elements
Source: Jack Lifton, special to the Critical Metals Report (9/13/11)
http://www.theaureport.com/pub/na/10875
Jack Lifton Despite the important sounding name, not all rare earth elements are critical or in short supply compared to the ultimate demand. In this exclusive article for The Critical Metals Report, Jack Lifton, a senior fellow of the Institute for the Analysis of Global Security, shares the secrets for determining if a company has a chance of growing into a viable, profitable venture that will benefit both investors and host countries.
Companies Mentioned: Alkane Resources Ltd. - Arafura Resources Ltd. - Commerce Resources Corp. - Frontier Rare Earths Ltd. - Great Western Minerals Group Ltd. - Lynas Corp. - Matamec Explorations Inc. - Montero Mining and Exploration Ltd. - Quest Rare Minerals Ltd. - Rare Earth Metals Inc. - Rare Element Resources Ltd. - Tantalus Rare Earths AG - Tasman Metals Ltd. - Ucore Rare Metals Inc.
My colleague at TMR, Technology Metals Research LLC, Dr. Gareth Hatch, recently published a seminal survey on a subset of the rare earth elements he deems to be the critical rare earths in which he both analyzed and assessed the weight of the data currently available about the markets for the individual rare earth elements. He concluded that just a limited number of rare earth elements are critical components of today's technologies and devices—elements for which there are no substitutes either due to their unique physic-chemical properties or to economics.
I think that in doing so Gareth has set a high standard for others to follow. He makes it clear that he does not wish to speculate upon, but rather to analyze the data and make projections of future supply based on the stated production volume intentions and delivery dates published by the involved junior miners as well as by the Chinese domestic rare earth mining industry. Gareth has chosen to adopt conformity to Canada's NI 43-101 regulations on the verification and economic credibility of mineral resources as an entry-level barrier to company data being utilized in his analysis and projection. The onus is therefore on the individual companies to live up to their projections of future supply.
The same high standards were held by Gareth for assessing present demand and future demand. Gareth's perspective on the demand for rare earth permanent magnets is unique among sector analysts in that he recently concluded more than a decade as a manufacturing manager for an American rare earth permanent magnet design and manufacturing firm.
I am going to rely on the market supply and demand analysis thus published by Gareth to make the following critique of the present focus of the junior rare earth mining sector: Institutions and individuals make investments either to secure (hold) value or to make profits.
Definitions of value are broad; it is, for example, of value to a nation-state to make sure its heavy industry is always prepared to make the implements of war, so a nation-state may pay for tooling to be in place or raw materials inventory, to be purchased and held in excess, that is otherwise un-necessary and would never be funded by private capital. By contrast to this definition of value, the definition of profit is narrow. It is simply the recovery of the original invested capital plus a surplus in as short a time as possible. The stock market can provide a method for making profits by this definition. The IPO of any company trades ownership for capital; it is a sale of an asset. After that event the trading of the shares does not help the company to make a profit; rather it buoys up the value of the shares of the company either issued or authorized and remaining in its treasury that were not sold in the IPO. In order to move forward to operation, the company must either have sufficient proceeds from the IPO to do so, or must get long-term (strategic) investments by selling more shares, or claims upon more shares, or by selling future output.
After profitable operations have been accomplished on a steady basis with the same management, corporations can operate on a cash basis, maintain "credit" lines (borrow against assets) or issue corporate bonds directly. None of these options is yet available to any non-Chinese rare earth junior miner. They must rely on:
The proceeds of their IPOs and subsequent "financings," which all dilute the founders' ownership and thus reduce his interest in the future of the company proportionately,
The sale of early production or of near-term promised production to end users or speculators who pay some portion presently of the future value for the right to the physical materials. NOTE: Letters of intent and memoranda of understanding almost always bring no present value (cash) to the company (in the junior rare earth sector such agreements are for promotional not financing purposes), or
Loans from public entities (subsidies).
Rare earth junior miners are now being culled by their inability to raise enough capital to carry their projects forward to a place where either the product produced directly or the value to be gained from the company's development to that point by a buyer can be more profitable than a less risky investment.
The majority of the rare earth junior miners do not understand the supply chain through which the critical rare earth metals become industrial or consumer products. Additionally, they do not seem to recognize the value chain issue, which can be stated as "How far downstream in the supply chain do I need to take my rare earths in order to be able to sell them at a profit?"
It is very important for the small investor to understand that the share market does not directly benefit the listed company unless the company either sells more of its ownership or pledges future production for present, almost always sharply discounted, revenue.
My judgment of the probability of commercial success of a junior mining venture has nothing to do with its share price or the volatility of that price. Most junior rare earth company stock price volatility comes from market conditions that have nothing to do with anything relevant, or from promotional hype, or the attribution to the value of the company of perceived rare earth prices in an opaque market or from geopolitical factors impacting the market.
I am appalled by the judgment of mining analysts and managers in the rare earth space. The primitive state of the economic analysis of the rare earth supply and demand sector (the rare earth market) is indicative of the poor understanding of resource economics prevalent today among not only the general "educated" public but, in particular, among the credentialed classes of pundits, industrialists and financiers.
Survivors
Here are the self-evident axioms of the calculus of the value of a rare earth deposit as a metric for assessing the probability of commercial success of a junior rare earth mining venture
There is not an infinite demand for rare earths, nor can there ever be.
There is a finite, quantifiable, supply of rare earths that can be produced in the near- and mid-term and the volume of supply will ultimately be determined by the demand for only some of the rare earths, not, in fact, by any demand for the majority of them, because
The production (supply) of the rare earths individually is not congruent with their demand (some rare earth elements are produced in excess of demand and others in deficit of demand).
It is ONLY the critical rare earth metals for which there is or can be a demand deficit.
The non-Chinese junior mining industry has for the most part mistaken quantity for quality. The development of large rare earth deposits has been given priority over the development of necessary rare earth deposits.
Rare earth prices will go generally up to mistakenly reflect specific supply deficiencies AND ultimately go down when production rates for a critical rare earth exceeds its demand use even though speculation will keep prices distorted and will mask the actual permanent ratcheting up of specific prices due to possibly structural supply shortages, currency appreciation in one country, and currency depreciation in another.
The most important rare earth producers will be those who produce the most valuable critical rare earths. The ones that survive will be producers that learn to market products in profit maximizing related groups such as:
Neodymium and dysprosium,
Terbium and yttrium, or
Europium and yttrium.
Above all, the survivors will be those entities that are the low-cost selling production so as to avoid building inventories of ANY critical rare earth except as prepaid stockpiles against capitalized (fully funded) offtakes.
Size doesn't matter and there can be too much of a good thing. There is never enough of the right thing.
Public Consciousness
The supply of the rare earths issue erupted into the public consciousness about two years ago when, as part of the current agenda for China's planned economy—officially cited as the twelfth five-year plan. It subjected the export of the rare earth elements to strict export controls. The export of the rare earths as raw material forms had been declining since at least the year 2000 when China exported 75% of its rare earth production. By 2010 that figure had slipped to some 30%, although that was calculated upon a much higher production volume than the 2000 figures. Nonetheless, this type of event—the sharp reduction in export quotas—would normally have been arcane and gone unnoticed by Wall Streeters, but two clever groups seem to have foreseen the value in outing this process by bringing it to the world's attention by publicizing it, accurately, as a threat to the technological manufacturing dominance of the West, Japan, and Korea.
The non-Chinese junior rare earth promoters even cleverly managed to bring the U.S. military into the story by simply pointing out that many military weapons platforms and even some weapons used rare earth-based motors, generators, sensors, phosphors and lasers.
These promoters, however, did not understand the demand side of the rare earth market in detail. Not at all. They set out to promote the largest highest-grade deposits of what they called the rare earths as the best investments without regard to the mix of rare earths present in the deposits. As Gareth Hatch's recent seminal paper has shown, the demand for most rare earths has already exceeded the supply from and within China! And rare earths are not all critical.
The future of, and certainly the geographic location of all technological manufacturing dependent on these critical rare earths (CREs), is now limited by the non-production of the CREs outside of China.
The most important rare earth projects are thus those that are either:
The lowest cost producers of the light rare earths, and
The producers of the most heavy rare earths per-unit of production.
Low-cost producers must, by definition, have low or distributed overheads, so that China's Bayanobo iron mines with their massive rare earths (light) production as a by-product can be considered to be the world's lowest cost light rare earths.
Nevertheless, due to resource nationalism by China, it is reasonable to capitalize free market access to light rare earths as a significant cost reduction for the production of these materials. Thus, a very large deposit such as at Mt. Weld in Australia or Mountain Pass in California can be profitably brought into production if the junior miners can base their product on actual demand.
The ideal production mix of the critical rare earths for a single producer would be projects that can meet the needs of magnet-making, phosphors, and fluid cracking catalysts used in refining oil. Such mixes of projects brought to development could create regional total rare earth supply sectors that would destabilize the Chinese supply monopoly. But such a development will not alter the supply chain issue. Until non-Chinese total rare earth processing, refining, metal and alloy fabrication, and end-use product manufacturing is recreated and made competitive with that of China, the production of rare earths outside of China only serves to supply the Chinese (and Japanese if China so chooses) total supply chains. The one exception to this is the fluid cracking catalyst industry, which is predominantly a western monopoly, although it is today totally dependent on the Chinese for its supply of raw materials.
The following is a regional list of companies that either have the lowest cost production potential or the highest value of critical rare earths in their mixes or both. I have created this list from my own work product. I have visited the rare earth related mine sites of most of the following companies, and I have had privileged (subject to non-disclosure agreements) looks at data and open and frank discussions with both administrative and technical management. Even in natural resource production, some master chefs can make lemonade from lemons. For some of the ones I have not visited I admit that I have been swayed by the technical analyses of distinguished colleagues.
There are many of you who will want to tell me that I have made mistakes in judgment and errors of omission. That is always so, but please don't tell me about short-term share prices. I am a metal trader at heart and a long-term strategic investor, not a day trader or a short seller. My picks for rare earth junior ventures most likely to become profitable producers in the long term are listed below by the location of their deposits in parentheses
Europe
Tasman Metals Ltd. (TSM:TSX.V; TASXF:OTCPK; T61:Fkft) (Sweden)
AMR Minerals Ltd. (Turkey)
The United States
Rare Element Resources Ltd. (RES:TSX; REE:NYSE.A)(Wyoming)
Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX)(Alaska)
Canada
Matamec Explorations Inc. (MAT:TSX.V) (Quebec)
Quest Rare Minerals Ltd. (QRM:TSX.V; QRM:NYSE.A) (Quebec)
Rare Earth Metals Inc. (RA:TSX.V) (Ontario)
Commerce Resources Corp. (CCE:TSX.V; D7H:Fkft; CMRZF:OTCQX) (Quebec)
Southern Africa
Great Western Minerals Group Ltd. (GWG:TSX.V; GWMGF:OTCQX) (Western Cape Province, Canada, the USA)
Frontier Rare Earths Ltd. (FRO:TSX) (Western Cape Province)
Tantalus Rare Earths AG (TRE:CE)
Montero Mining and Exploration Ltd. (MON:TSX.V) (Tanzania)
Australia
Alkane Resources Ltd. (ALK:ASX)
Arafura Resources Ltd. (ARU:ASX)
Lynas Corp. (LYC:ASX) (Duncan deposits)
They can be further distinguished by criteria such as producing REEs as byproducts of valuable primary materials. For example:
AMR (magnetite, zirconium, niobium)
REM (magnetite, zirconium, niobium)
Alkane (zirconium, niobium)
And by business model such as:
Partially vertically integrated and already cost competitive at their selling point in the supply chain against Chinese/Japanese competition:
Great Western Minerals Group (rare earth permanent magnet alloy producer already)
I am intrigued by the fact that although it is well known that the Soviet Union collapsed economically due to its inability to distinguish necessary from sufficient production, which led to massive overproduction of commodity metals simply to meet arbitrary goals, it is nonetheless deemed a measure of strength to announce goals of massive production of the rare earths (measured as a percentage of existing production). This is only reasonable if the growth of the rare earths market in general is immense or open-ended. It is neither the one nor the other.
We need the production of enough of the critical rare earths to ensure the supply meets the demand. For the most common of the rare earths, lanthanum and cerium, which together make up between 70% and 80% of the total production of the rare earths, we need far less new production.
Some of the above listed junior rare earth ventures are primarily destined to be producers of the light rare earths. I have included them because I think they will be lowest cost, profitable, ventures.
Jack Lifton has more than 47 years of experience in the global OEM automotive, heavy equipment, electrical, electronic, mining, smelting and refining industries. His background includes sourcing, manufacturing and sales of platinum group metal products, rare earth compounds and ceramic specialties used to make catalytic converters, oxygen sensors, batteries and fuel cells. Jack is knowledgeable in locating and analyzing new and recycled supplies of "minor metals," including tellurium, selenium, indium, gallium, silicon, germanium, molybdenum, tungsten, manganese, chromium and the rare earth metals. He is a senior fellow of the Institute for the Analysis of Global Security.Want to read more exclusive Critical Metals Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators and learn more about critical metals companies, visit our Critical Metals Report page.
DISCLOSURE:
1) The following companies mentioned in this article are sponsors of The Critical Metals Report: Tasman Metals Ltd., Rare Element Resources Ltd., Ucore Rare Metals Inc., Matamec Explorations Inc., Quest Rare Minerals Ltd., Rare Earth Metals Inc., Commerce Resources Corp., Montero Mining and Exploration Ltd.
2) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
Rare Earth Elements New Trend
http://seekingalpha.com/article/290181-rare-earth-elements-new-trend?source=yahoo
Rare Earth Sector Sees Major Developments This Week
Jeb Handwerger
http://seekingalpha.com/article/262552-rare-earth-sector-sees-major-developments-this-week?source=yahoo
There have been major developments occurring this week in the rare earth arena, which could hold significance for the expansion into Europe of Molycorp (MCP) and the development of a US domestic supply chain of rare earths (Market Vectors Rare Earth/Str Metals ETF (REMX).
Molycorp is fast becoming the Stella Polaris of the rare earth complex. It announced its takeover of a little-known Estonia-based producer called AS Silmet, purveyor of niobium and tantalum. The move involving acquisition of this unlisted production company is quite significant. It reveals the awareness on the part of the European community to secure rare earth finished products. Europe is embracing clean, carbon-free energy and independence from Middle Eastern oil. This requires an increase of fuel-efficient hybrid or electric vehicles. In fact Renault is planning four new electric vehicles to introduce to the market and expects demand will increase significantly by 2020.
Now Molycorp will increase production and supply the European market with valuable rare earth oxides to help with the growing demand for clean, carbon-free energy.
Niobium -- which is what Molycorp will be producing in Europe -- is used to make vehicles more fuel-efficient. Rising gas prices and the crisis in the Middle East are showing an increased demand in fuel-efficient, clean vehicles. The rising price of a gallon of gas drives the consumer to hybrid cars, which require huge amounts of rare earths and lithium (Global X Lithium ETF (LIT)). Japan and South Korea automakers are seeing soaring niobium prices and are concerned about future cuts from China. Only a few weeks ago, Japan and South Korea invested $1.8 billion in a Brazilian mining group that is the largest producer of niobium. These two countries are concerned about a shortage of several commodities used to make specialty steels. Europe is in desperate need of clean energy and lowered carbon emissions.
Countries throughout the Western Hemisphere are looking for ways to become independent from Middle Eastern oil. There is no cease-fire negotiated yet with Gadaffi and now unrest haunts Nigeria and Algeria to add to the plentiful list of countries seized by revolution. Oil (iPath S&P GSCI Crude Oil TR Index ETN (OIL) prices are soaring but this crisis may be different than in the late '70s. Fuel-efficient vehicles and the use of rare earths and lithium have significantly advanced and are no longer a far-off dream. The costs for these vehicles had been prohibitive with cheap oil, but that may change more quickly than many may think. We are witnessing a crucial time where energy independence and fuel-efficient vehicles are no longer a luxury. With gas prices soaring the demand for hybrid and electric cars will increase. This should be quite beneficial to our rare earths and lithium investments. These commodities are what I consider 21st century gold and the precious metals for the next century.
This week a new bill was introduced to try to assist US rare earth miners to fast-track their mines. This action was predicted in my article “Rare Earth Prices Soaring: Will Miners Play Catch Up?” four weeks ago. Colorado Congressman Mike Coffman introduced the Rare Earth Supply-Chain Technology and Resource Transformation (RESTART) Act of 2011, which will give loans to the industry and speed up permitting. On March 9, I wrote the following as I was surprised that no US elected officials had proposed legislative action to build a US supply chain:
This shows the inaction of our elected officials, who have been more concerned with bailing out failed banks than securing a supply of precious heavy rare earths needed for our most crucial defense technologies.
I am glad legislators are becoming aware of this national security threat as this should have been done years ago so we wouldn’t be in the situation today of groveling to China a la Oliver Twist. I applaud Coffman’s actions as it will help many of the North American producers who may have had difficulties with the costs associated with such projects. It has certainly helped some of the rare earth investors who are witnessing huge gains from North American rare earth developers such Rare Element Resources (REE), Molycorp, and Avalon (AVL).
The key to this rare earth crisis is not just finding and producing the ore, but separating the rare earths into valuable refined products. Today’s action is a step toward building a separation facility outside China and revitalizing a crucial and vital industry.
Disclosure: I am long AVL.
Rare Earth Metals Stocks
http://seekingalpha.com/article/244728-top-rare-earth-metals-stocks?source=email_the_daily_dispatch
Rare earth metals, also known as rare earth minerals or rare earth elements, have made headlines during the last couple weeks after China, which produces over 95% of the metals, reported that it would reduce its export quotas by more than 10% during the first six months of 2011. The news caused rare earth metals stocks to explode. As an example, Rare Element Resources Ltd. (REE) moved from 9.34 on December 17 to 17.16 on January 3, an 83% increase in just a little over two weeks.
Rare earths are used for such applications as superconductors, magnets, electronic polishers, car batteries, luminescent materials, lasers, optical-fiber communication systems, welding, night vision goggles, rangefinders, and radar. The rare earth metals are:
Scandium
Yttrium
Lanthanum
Cerium
Praseodymium
Neodymium
Promethium
Samarium
Europium
Gadolinium
Terbium
Dysprosium
Holmium
Erbium
Thulium
Ytterbium
Lutetium
Other metals and elements, such as lithium and manganese, are often incorrectly referred to as rare earth metals. However, many of the companies involved in the mining of the rare earth metals are also involved in mining some of the other scarce elements.
Rare Element Resources is a Vancouver-based company that explores and develops mines in Canada and the United States, including the Bear Lodge property located in northeast Wyoming. This debt-free company has 32 cents per share in cash; however the company reported a 6 cents per-share loss for the quarter ended September 30.
Molycorp, Inc. (MCP) is another company involved in the rare earth industry, based in Greenwood Village, Colorado. The company has $5 million in debt, and over $351 million in cash, with $4.27 in cash per share. Latest earnings were a loss of 97 cents per share.
Another way to play this market is through the processors of rare earth metals, such as Neo Material Technologies, Inc. (NEMFF.PK), which trades on both the Pink Sheets and the Toronto Stock Exchange. This Toronto, Ontario-based company processes rare earths, magnetic powders, and other metals. The company distributes cerium, lanthanum, europium, neodymium, dysprosium, yttrium, and other materials. The stock has a price to earnings ratio of 17.9 with a forward PE of 14. It also has an extremely favorable price earnings growth ratio of 0.31. Earnings for the latest quarter were up 53.4% on a 68.7% revenue increase.
A more conservative approach to rare earth investing is through the Market Vectors Rare Earths/Strategic Metals Exchange Traded Fund (REMX). This ETF has gone from 19.51 at the end of October to 25.63 now, a 31% increase in a couple months.
To see a free list of over 25 rare earth metals stocks, which can be downloaded, sorted, and updated, go to WallStreetNewsNetwork.com.
Disclosure: Author did not own any of the above at the time the article was written.
How to Play Rare Earth Metals
Markos Kaminis in Seeking Alpha, 12-31-2010
Rare earth dealing stocks took off this week, reviving a year-long climb. By Tuesday the popular press was well focused on the gains, as a report that China would be limiting exports of rare earth elements found the wire. At this point, investors are most interested in learning if it is too late to benefit, and we think we have uncovered a couple ways you still might.
In case you were unaware, rare earth elements are of strategic importance to our defense industry, and China has quietly amassed a 96%+ majority of the world's supply of the scarce stuff. We are talking about dysprosium (vital to clean energy), terbium, europium, neodymium, and yttrium. These are not household names, but the iPhone and other mobile phones, flat screen televisions, compact fluorescent light bulbs, and rocket guidance systems they are used in are, and clean energy initiatives involving wind turbines and electric cars will need them too if we are to seriously move toward energy independence.
Showing us how China will deal with the world in a future in which it becomes more important, the country has imposed criminal export taxes on these and less expensive rare earths like lanthanum and cerium, which are used in oil refining and glass manufacturing. The World Trade Organization has banned export taxes, but China has imposed them on these elements for the last four years - simply because it can. In some cases, materials that cost a few dollars a pound in China, cost $40+ elsewhere, due to the tariffs. That's called giving it to ya good where I come from. Imagine how China will deal with us when it is a more important military and economic power.
Dysprosium helps magnets retain their magnetic properties under extreme temperatures (for permanent magnets), which makes it important to clean energy industries. Its near complete current production in China, and the strong push for clean energy including within China, has some experts worried the limited supply of the resource could stymie development for five years or so. Because of this, along with China's unfair currency policy and low cost labor, alternative energy companies are basing operations in China, which nearly ensures the US manufacturing base will find no benefit from the shift toward energy independence. That's a bummer for President Obama and his big hopes to revive the Midwest.
The Chinese seem to have legitimate reasons for controlling supply, starting with their own burgeoning domestic demand derived from multiplying middle class development. It seems the strategic importance of the elements will ease legislative and regulatory restrictions that had helped to shut down US production previously, in favor of cheaper Chinese sources. However, for now, the demand/supply equation has been wildly swayed, and prices have rocketed. For instance, in 2003, you could get a pound of dysprosium for $6.50, though I don't know where. Today it runs upward of $132 a pound. Thus, capital is running to rare earth miners and companies whispering of moving some of their mining resources to rare earth production.
Thus, over the past month or so, a creeping of the rare earth stocks has shifted back into high gear once again. Molycorp (NYSE: MCP) has reinvigorated its year-long trend higher, rising 70% thus far in December alone. Rare Element Resources (NYSE: REE), another name getting plenty of attention, was up 14% Wednesday alone and is up 49% since the start of the month. This stock was less than $2 back in the summer, and now trades near $15! REE is a North American like Molycorp, based in Canada, and has operations in Wyoming. It mines gold and rare earth elements, so it is doing okay despite gold's lag... Trading volume was almost seven times normal Wednesday for this debt free company, and REE has been active this month raising money for E&P, since it can at will now.
If you are seeking exposure at less risk, you might try the Market Vectors Rare Earth Metals ETF (Nasdaq: REMX), though it is not a pure play on the squeezed resources out of China. The ETF was only up 7% Wednesday and is up 20% this month. General Moly (AMEX: GMO) was up 10% Wednesday, and is a development stage company focusing on molybdenum through a property in Nevada. It's a money loser and cash burner, but with prices on the rise and supply constrained, the economics of operation are changing for all of these companies.
"This move has all the components that a stock frenzy needs, as it includes China and a mysterious good that nobody understands."
This move has all the components that a stock frenzy needs, as it includes China and a mysterious good that nobody understands. The quick profits are sending capital into more speculative names as well, including stocks of companies that have little or no currently proven resources in the commodities of interest, but are prospecting hopefuls or at least people are saying they might be. The latter is implied by the movement in the shares of Qiao Xing Universal Resources (Nasdaq: XING), up 46% Wednesday to $2.71.
The company is a zinc and copper miner with resources in Mongolia, but is somehow finding frenzied capital interested from rare earth seekers. Whether something pans out or not probably will not matter to the traders pushing this stock up, when they pull the rug out from under you later. And it is probable also that unsophisticated investors in China are helping fuel the rise too, which makes for an unreliable support base.
Shares of China Shen Zhou Mining & Resources (AMEX: SHZ) has most of the hot keywords in its name, and so led all gainers Wednesday, rising 69%. This company also focuses on copper and zinc, but has mysterious properties in inner Mongolia that smell good to frenzied capital. Buyer beware, and take a close look at the company's 10K or Chinese facsimile to see if it has rare earth possibilities. We are guessing by the movement Wednesday that a few investors might have discovered this to be true, or were saying so anyway.
We went through the last 10K issued for March-end and saw only copper, zinc and fluorite within its portfolio, and one location indicated further exploration might find more minerals, but did not expand as to whether those would be more of the same or something magical. So, is it speculation driving the shares, or inside knowledge or unfounded rumors? Whatever the case, it's not enough to trade on from my perspective. And be careful if you find information in the latest 10Q that did not exist in the 10K issued for March, because this is China we're talking about, the land of legend.
Then there are companies like Avalon Rare Metals (AMEX: AVL), which have it all together. The company was formed in 1991, but changed its name in February 2009 from Avalon Ventures to Avalon Rare Metals (so you would better notice it). What I like best about it is that it makes everything even more mysterious by looking for the alien goods beneath a dark Canadian lake. This stock stopped taking part in the fun after a Monday morning spike higher, and though it may eventually dig up something, I'm not excited about it right now.
Australia based Lynas Corp. (OTC: LYSCF.PK) is a tiny company active in rare earth and other mining in Australia and Asia. Lynas' Australian shares (ASX: LYC.AX) gained about 8% Wednesday, while its ADRs in the US (OTC: LYSDY.PK) gained about 14% and are up 30% through December. A look at the company's website seems to indicate it has all the right stuff, and after reviewing comparable info from the US State Department's December Report, it appears to have relative importance. The company claims to have the richest deposit of rare earths outside of China, and the US State Department Report I checked seems to agree. Lynas expects to be first to market outside of China in Q3 2011, and I'm officially interested.
You can be sure that given the new economies of the sector, the big boys, those being Rio Tinto (NYSE: RIO) and BHP Billiton (NYSE: BHP), are paying attention to the ones worth noting. If you catch a whiff of who they're sniffing up, you might have a lead on which stocks make best long-term sense; and I'm talking about if they're not bought out. There are also going to be a bunch of worthless miners that might stumble upon an opportunity and create some millionaires in the process. This is an interesting place to prospect, but it's the most dangerous treading, so be careful. As for the group generally, the stocks have run up so much, and there is so great uncertainty (outside of this blog anyway) about which ones will really produce the key rare earths over the next five years, that I would look for a January pullback for the group broadly before considering long-term stakes using perhaps LEAPS. You might use the REMX ETF for that. Of the stocks, Australia's Lynas has my interest right now (I'm calling it a "Buy"), and Australia's other projects look promising as well.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Can you re-post the link? It seems to be shortened.
Fortunately, I re-established my REE basket shortly after selling. It's been an interesting couple of weeks. I'm looking to hold this time and shrug off any volatility.
Current positions include MCP, REE, LYSCF, AVL.TO, MLLOF, and UURAF.
Major news on REE & MLLOF.PK partnership am
This is big news for REE and bigger news for Medallion Resources, MLLOF.PK, (MDL.V in Canada).
http://www.marketwatch.com/story/rare-el...
I actually sold out of REE, MCP, and MLLOF this morning, but will look to get back in on a dip. They are just too compelling to not consider moving forward. I'm usually a LONG, but the run had been so swift that I had to take some profits.
Thank you very much - good fortune with your picks - you made great choices
You were spot on with this call. Only took me a year to get on board :). This sector is booming with speculation given the recent wake up call provided by the China/Japan conflict. Question is will the boom continue, or will we see a pullback. IMO, with so few players in this sector, and China's strangle hold on the bulk of the resources, this sector is just heating up. There may be some short term profit taking, but I'm looking to go long. Taking a basket approach at the moment with REE, MCP, AVL, GWMGF and MLLOF.
Very surprised that this board is so silent with the recent moves.
Bullish on Uranium and Rare Earths
http://www.theenergyreport.com/pub/na/6186
Rare Earth Stock and DD Resource
http://www.kaiserbottomfish.com/s/Education.asp?ReportID=362761
Hanglong.
Hanglong,
My priorities are:
GWMGF
AVARF
LYSCF
SRSR
There are others in addition to the ones you mentioned :
QSURF
ARAFF
Molycorp in California is private and has the largest ore body - perhaps it will come public at some point.
Now that REEs are hot - expect many more companies to start boasting of their properties - of these I will be very skeptical.
Hope this helps - please post your research here - we will all benefit.
Tommy,
Let me introduce myself and ask you something...These are some very interesting articles on rare earth mining companies. I am eager to start some DD on rare earth miners...The only ones I have found thus far are GMWGF AVARF LYSCF RRLMF CMRZF and SRSR?...With the exception of SRSR, these others are foreign ordinaries and cost me more to trade due to all of my trades being "broker assisted"...Tommy, do you know of any domestic rare earth miners that are on US stock exchanges (not TSX)??? I read were Jack Lifton suggested/recommended GMWGF(only rare earth smeltering ops outside of China) and AVARF(large supply of rare earth "heavies")...Do you have any preferences? Hanglong...
On the Rare Earth Crisis of 2009
by Jack Lifton
http://seekingalpha.com/article/178225-on-the-rare-earth-crisis-of-2009?source=yahoo
Jack Lifton: Safeguarding Our Future Supply of Rare Earths
Source: The Gold Report; interviewed by Karen Roche, Publisher 12/11/2009
http://www.theaureport.com/pub/na/3394
and they added a Prime Minister to their board.
chart is ripe!
news is good!
might be time for an entrance.
Keith
Great Western Minerals Group Reports a 123% Increase in the Resource Estimate at Hoidas Lake http://finance.yahoo.com/news/Great-Western-Minerals-Group-iw-2889892280.html?x=0&.v=1
SASKATOON, SASKATCHEWAN--(Marketwire - 11/20/09) - Great Western Minerals Group Ltd. ("GWMG" or the "Company") (TSX-V:GWG - News) (PINK SHEETS:GWMGF - News) is pleased to announce the results of the Company's new NI 43-101 Technical Report for its Hoidas Lake project prepared by Barr Engineering Company ("Barr").
The Company reports that the overall resource estimate increased by 123% to 2,560,835 tonnes from the previous value of 1,150,000 tonnes. This includes an increase of over 1200% in the Measured category to 963,808 tonnes from the previous estimate of 80,000 tonnes, and an increase of 49% in the Indicated category to 1,597, 027 tonnes from the previous estimate of 1,070,000 tonnes.
This new Technical Report incorporates the results of 32 drill holes completed in the spring of 2008 and includes drilling results from four separate drilling programs conducted from 2001 through to 2008 for a total of 120 core holes located along a strike length of 1150 metres. These core holes, some of which extend to a depth of 398 metres, total 15,222.8 metres of drilling. The rare earth mineralization is open along strike and at depth.
The resource estimate used ordinary kriging, and inverse distance interpolation methods, with the ordinary kriging values used for reporting. Based on preliminary economics generated by the Company, a cut-off grade of 1.5% Total Rare Earth Elements ("TREE") was applied for summary reporting purposes. The resource model uses the assay data provided by the Company.
?
The tabulated resource data for the Hoidas Lake JAK Zone as calculated by
Barr is as follows:
----------------------------------------------------------------------------
Category Cut-Off Grade Tonnes TREE WT.%(1) TREO (2)
WT.% TREE WT.%
----------------------------------------------------------------------------
Measured 1.5 963,808 2.142 2.568
----------------------------------------------------------------------------
Indicated 1.5 1,597,027 1.958 2.349
----------------------------------------------------------------------------
Total 2,560,835 2.027 2.431
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Inferred 1.5 286,596 1.784 2.139
----------------------------------------------------------------------------
(1) Total Rare Earth Elements include lanthanum, cerium, praseodymium,
neodymium, samarium, europium, gadolinium, terbium, dysprosium, holmium,
erbium, thulium, lutetium, yttrium and ytterbium.
(2) Total Rare Earth Oxide-calculated from TREE for comparison purposes by
the Qualified Person (as defined below).
Eighty seven percent of the average value of TREE is made up of lanthanum, cerium and neodymium with neodymium grades averaging 0.42% of the measured and indicated resource. This high proportion of Nd (used in permanent magnet electric motors) supports the economics of the Hoidas Lake project and moving forward with a preliminary economic assessment report.
John Pearson, MSc., P.Geo., Vice-President Exploration for GWMG, is the qualified person responsible for reviewing the contents of this news release (the "Qualified Person").
Jim Engdahl, President and CEO of Great Western Minerals Group said "We are certainly pleased to report these results to our shareholders. Our belief always was that we could at least double the resource estimate for this project and this report certainly confirmed that. This reinforces our belief that this could be a much larger deposit since we have drilled a relatively small portion of the property. Once we receive the results of our ongoing metallurgy we will be able to complete the remaining items for a preliminary economic assessment report."
About Great Western Minerals Group Ltd.
Great Western Minerals Group Ltd. is a Canadian-based company with six rare earth exploration and development properties in North America with an option on a sizable additional property in South Africa. In addition, as part of the Company's strategy to pursue a vertically-integrated business model, the Company's wholly-owned subsidiaries of Less Common Metals Limited located in Birkenhead UK, and Great Western Technologies Inc., located in Troy, Michigan, produce a variety of specialty alloys for use in the battery, magnet and aerospace industries. These "designer" alloys include those containing copper, nickel, cobalt and the rare earth elements.
Certain information set out in this News Release constitutes forward-looking information. Forward-looking statements (often, but not always, identified by the use of words such as "expect", "may", "could", "anticipate" or "will" and similar expressions) may describe expectations, opinions or guidance that are not statements of fact and which may be based upon information provided by third parties. Forward-looking statements are based upon the opinions, expectations and estimates of management of the Company as at the date the statements are made and are subject to a variety of known and unknown risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. Those factors include risks, uncertainties and other factors that are beyond the control of the Company, risks associated with the industry in general, commodity prices and exchange rate changes, operational risks associated with exploration, development and production operations, delays or changes in plans, risks associated with the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. In light of the risks and uncertainties associated with forward-looking statements, readers are cautioned not to place undue reliance upon forward-looking information. Although the Company believes that the expectations reflected in the forward-looking statements set out in this press release or incorporated herein by reference are reasonable, it can give no assurance that such expectations will prove to have been correct. The forward-looking statements of the Company contained in this press release, or incorporated herein by reference, are expressly qualified, in their entirety, by this cautionary statement.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contact:
Contacts:
Great Western Minerals Group Ltd.
Ron Malashewski
Manager of Investor Relations
(306) 659-4516
Great Western Minerals Group Ltd.
226 Cardinal Crescent
Saskatoon, SK S7L 6H8
info@gwmg.ca
www.gwmg.ca
Rare Earth Elements in the Periodic Table
http://www.periodictable.com/Elements/RareEarthMetals/index.html
RRLMF - Rare Earth Elements - Video
http://www.b-tv.com/features/watch-now/watch-now-enlarged.html?clip=RareElementsOct09.wmv
Information - excellent source for REEs
http://www.americanelements.com/rare-earths.html
.... and, all elements
http://www.americanelements.com/
Final Newsletter: October 21, 2009, Jim Kingsdale
http://www.energyinvestmentstrategies.com/2009/10/21/final-newsletter-october-21-2009/print/
I’ve decided to stop posting to the Energy Investment Strategies web site and to take the site down eventually. There are two reasons. One is that I need to concentrate my efforts on fighting my cancer. The other is that I think to a large extent my original aims for this site have been accomplished. The site was started to educate investors about “peak oil”, its implications for potential future energy shortages, related increases in the importance and value of energy-related equities, and ways investors can best participate .
It’s hard to remember what enormous change there has been in public energy-awareness since the EIS site was begun in June, 2007. It’s not that I deserve any credit for that, which I don’t. Rather, I no longer have any “new news” to offer. Over the past 28 months the public saw the price of oil go from $30 to $140, energy suddenly become a source of great public awareness and anxiety, and Peak Oil theory become well known and widely understood. So the original message of EIS has been received.
The other reason I started EIS was for my own education, and in that regard the site has been a huge success. The commentary and information provided to me by many EIS readers has often been fascinating and sometimes even financially rewarding for me. I also feel like I’ve made some “internet friends” in the process. I’m delighted that some readers have found information on the EIS site to be useful and interesting and I’m deeply appreciative of the many messages readers have sent me indicating they found value at the EIS site. I’m also gratified with a degree of professional recognition the site has received as various web sites having chosen to cite my writings, including Seeking Alpha, where my readership has been robust. So writing and operating the EIS site has been a great joy for me.
At some point, we’ll take down the EIS site. I’ve removed the part of the home page where people can sign up to get e-mail notices of new posts and I will soon destroy the e-mail list of which you are a part.
Let me sign off with a brief discussion of some of my current thoughts on energy equities:
Rare Earth Elements
The popular press suddenly focused on [1] rare earth elements over the past few months in response to China’s most recent reduction in its REE export quotas and the growing understanding among western governments and investors of the strategic importance of REEs, particularly for energy conservation, communications and military applications. As you know, China currently supplies 95% of global REE demand.
Demand is growing rapidly for REEs. Industry is working hard to find alternatives to scarce REEs, but often that’s not possible. New mines will be opened but that process takes many years so new supply coming to market is not likely to be rapid. If China grows 10% a year - or 33% in three years - and if China is now using the great bulk of it’s production domestically and if China is working to shut down and/or re-engineer small, environmentally toxic REE mines which are an important share of their total REE production, then it seems pretty likely that there will be a global shortage of REEs at some point in the foreseeable future.
One impact of the increased REE-awareness has been a dramatic spurt in the price of many REE stocks. Some have increased by seven-fold, all have increase greatly. There is some thought that the REE equities are now ahead of themselves, and I would not argue with that. Nonetheless, I think the attractive supply/demand outlook for REEs over the intermediate term of, say, the next four years justifies being invested in the sector.
My favorite is Lynas (LYSCF) which has the world’s largest REE supply and has now secured sufficient equity financing without Chinese domination. I also like Avalon (AVARF) which has North American reserves that emphasize the especially valuable “heavy REEs.” I also own some Great Western Minerals (GWMGF). It would not be surprising to see some additional pullback in these stocks beyond the 10% or so we’ve seen lately. But over a two or three year holding period I think they have room to be rewarding.
Natural Gas
My initial view of natural gas was wrong. Back in June, 2007, I believed that natural gas would peak some time after oil did, but not that much later. I was thinking that such a peak would come in perhaps 20 - 30 years. But recent developments in shale gas and new horizontal drilling techniques have radically changed the outlook for natural gas. There now appears to be enough natural gas for at least another 100 years - if not a lot longer - before any shortages begin to appear. Therefore, I now think gas prices will trade in a fairly narrow range and I would expect natural gas E&P equities, as a general rule, to be not very interesting as long term value plays.
As natural gas prices stabilize and as gas becomes ever cheaper than oil (per BTU) demand for gas will probably rise - both for electrical generating and for transportation. Increased demand for natural gas could well be a positive for gas pipeline and processing companies. Such stocks could be of particular interest to income-oriented investors. It could also be a positive for drilling and service companies.
Oil and the Global Economy (you can’t know one without the other)
Over the next five years the price of oil is likely to rise due to three factors:
1. supply/demand: increasing decline rates for old fields (peak oil) and growing automobile-related demand from developing countries will outweigh new field production opportunities and consumption saving in developed countries from new technologies for high mileage vehicles.
2. higher marginal production costs: new supplies are overwhelmingly coming from increasingly expensive deep water fields. Such fields are a substantial challenge to drilling technology and some have cost structures that can only be estimated today, but which are clearly above the current price of oil. Also, from a longer term perspective, such deep sea fields tend to have higher decline rates and far fewer work-over possibilities than land-based fields.
3.the declining value of the U.S. dollar.
The recent global economic melt-down has created a temporary glut of spare oil capacity. My most recent [2] supply/demand projection analysis posted last March incorporated an assumption that excess spare oil capacity will peak at 5.8 mb/d in 2010. That projection still seems to be in the ball park. If the global economy has begun to start growing as recent reports seem to indicate and if it continues to experience moderate growth, my projection of oil supplies becoming tight by 2012 and extremely tight by 2014 should still be valid. So I continue to think we’ll see $100+ oil prices within a year or two and perhaps $200+ prices within five years, based only on supply and demand considerations. Of course the fact is that speculators tend to expand price ranges in anticipation of trends, as we are currently seeing with the price of oil. So the above high range could be conservative.
The greatest threat to global economic growth, I think, is the potential of a currency crisis related to excessive government debt creation. The U.S., Japan, and Britain in particular are operating at unsustainable levels of public deficit and debt. Achieving a “soft landing” to the problem of expanding government deficits will be a substantial challenge. Success would require one or more, perhaps all, of the following conditions: higher economic growth, higher tax rates (particularly on the wealthy), or lower government spending.
I know many people believe higher taxes are not compatible with higher economic growth, but I doubt that such is always the case. The experience of the Clinton tax increases followed by outstanding growth is an important contrary example. Much of our current debt/deficit problem was caused by reducing taxes on the wealthy under Bush. There is no reason why bringing those taxes back to where they were in a previously healthy economy would not help restore fiscal balance and thereby improve the U.S.economic outlook. It would take some money out of financial markets (which is largely where the wealthy allocate their ample excess funds) but it would not impact consumption to a noticeable degree.
If U.S. deficit problems are not resolved in short order (maybe two more years to start turning the corner) - or if the currency markets come to believe they may well not be resolved in time - there could be a U.S. dollar free-fall that could have drastic negative implications for global growth. A dollar crisis could require higher U.S. long term interest rates to support the currency, and that would hamper or defeat economic growth. A dollar crisis could result in another global downturn.
I doubt there will be a dollar crisis or a U.S. debt crisis because I think the center of gravity in the global financial system has shifted from New York to New York/Beijing. A dollar crisis would not be in the interest of the Chinese because they are opposed to anything that could interrupt their own steady and solid growth rate. If the dollar were to begin a precipitous fall, I suspect the Chinese would likely step in to support it both directly and by altering the exchange rate of the yuan. In return they would pressure the U.S. Congress and President to work toward reducing deficits through spending and taxing policies. I believe the Obama team would welcome such Chinese pressure and with or without Chinese pressure the administration will work hard to reduce government spending as soon as the U.S. economy starts to produce job growth. I think they believe, as Clinton did, that a balanced budget is a vital economic goal.
Even if there is no dollar crisis, the dollar is headed lower. One result will be to bring some jobs back to the U.S. Such an outcome will be acceptable to the Chinese in part because the Chinese have started to see the success of their own policies to stimulate domestic demand. Their economy is now growing at 10%+ in the face of falling exports because their domestic demand has become so strong, e.g. car sales up 85%.
There are two hiding places for people who are concerned about a falling U.S. dollar. One is gold. The other is all other commodities, primary among which is oil. Therefore, it is likely that over the next five years higher oil prices in terms of dollars will be aided by investors fleeing a lower dollar, adding impetus to the impact of tighter supply/demand conditions. One can see the process of investors fleeing the dollar for oil starting to happen in the behavior of China. That very canny country is trading as much as it can of its huge vault of dollars for stockpiles of commodities, including a plan to double its strategic oil reserve capacity over the next few years.
In sum, we should see higher oil prices resulting from higher marginal production costs for oil that are baked in and from sufficient global economic growth that demand for oil will rise to challenge the world’s ability to supply it. But if for some reason global growth becomes weak or even negative, that would strongly imply that the U.S economic growth had failed, which would clearly exacerbate the U.S. debt/deficit problem and thus implies a significant likelihood that the dollar will have depreciated substantially. That would also drive up the dollar price of oil.
I am aware that during the most recent period since the fall of Lehman, U.S. economic weakness and global risk-averseness actually resulted in a higher dollar as funds sought the “safety” of the dollar. That may not always be the case. With the U.S. debt and deficits approaching a dangerously high level, the world may start to change its mind as to the “safety” of owning dollars. That change would become a moving fault line in global finance. It would require rapid international agreement on a new reserve currency, a Bretton Woods on steroids. Such discussions are already happening in public and no doubt more intensively in private.
Higher oil prices do not guarantee gains in oil related stocks. Either of two very general economic outlooks would likely result in higher oil prices over the next five years but they could have very different implications for oil equities. In the first case, decent global growth (3% - 4%), stocks are likely to be quite strong, particularly oil related equities. But in the event of poor global growth, which implies particularly poor performance by the U.S., the dollar may fall precipitously thus tending to increase the price of oil, but stocks in general, including oil stocks, might not do well at all.
I am inclined to the optimistic view, that we will see decent global growth and that the U.S. will come to grips with its debt and deficit problems. Of course it is possible that some other economic future awaits us. There are obviously no guarantees. So good luck to all of us. Best wishes for our health and our prosperity. I’ve enjoyed writing and editing Energy Investment Strategies. I could not have done it without the help and encouragement of many readers, so to you go my thanks, along with my
Best wishes,
[3] image
More on this topic [4] (What's this?)
[5] 4 Energy Stories for Monday (Red Hot Energy and Gold - Global..., 10/19/09)
[6] Seasonality Of Crude Oil (market folly, 10/14/09)
[7] One Natural Gas Company Worth Looking Into… Now And Later (Investment U, 9/25/09)
Read more on [8] Oil, [9] Energy at [10] Wikinvest
Article printed from Jim Kingsdale’s Energy Investment Strategies: http://www.energyinvestmentstrategies.com
URL to article: http://www.energyinvestmentstrategies.com/2009/10/21/final-newsletter-october-21-2009/
URLs in this post:
[1] rare earth elements: http://www.energyinvestmentstrategies.com/category/company-info/rare-earth-element-miners/
[2] supply/demand projection analysis: http://www.energyinvestmentstrategies.com/2009/03/07/when-will-the-oil-price-pop/
[3] Image: http://www.energyinvestmentstrategies.com/wp-content/uploads/2009/10/image.png
[4] (What's this?): http://www.wikinvest.com/blogger/wikinvest_wire
[5] 4 Energy Stories for Monday: http://blogs.uncommonwisdomdaily.com/red-hot-energy-and-gold/4-energy-stories-for-monday
[6] Seasonality Of Crude Oil: http://www.marketfolly.com/2009/10/seasonality-of-crude-oil.html
[7] One Natural Gas Company Worth Looking Into… Now And Later: http://www.investmentu.com/IUEL/2009/September/one-natural-gas-company-worth-looking-into.html
[8] Oil: http://www.wikinvest.com/commodity/Oil
[9] Energy: http://www.wikinvest.com/industry/Energy
[10] Wikinvest: http://www.wikinvest.com
3 Mining Stocks to Hedge China's Rare Earth Policies
by: David Fessler October 21, 2009 | about: AVARF.PK / LYSCF.PK / RRLMF.PK
http://seekingalpha.com/article/167794-3-mining-stocks-to-hedge-china-s-rare-earth-policies?source=email
What do your cell phone, a Euro banknote, superconductors, fiber-optic communications systems and the motor for your car’s windshield wiper all have in common? They (and thousands of other everyday products) contain minute quantities of some of the most obscure chemical elements on the planet.
They’re known as “rare earth metals” or simply “rare earths.”
What’s the big deal about them?
Simply put, trillions of dollars of modern devices wouldn’t be possible without their existence. These “rare earths” are critical elements in many industrial processes and the United States Geological Survey (USGS) has identified 17 of them.
Let’s take a quick look at “rare earths” to get an idea of just how pervasive and critically important they are and, of course, how to do something that very few other investors even consider, profit from them…
Little-Known, Rare Earths… Critical to Everyday Life
The term “rare earths” comes from the fact that the minerals that contain these unusual elements were quite rare when first found in Ytterby, Sweden.
And occupying slots 21, 39 and 57-71 in the periodic table of the elements, here are a few of the most commonly used “rare earths”…
* Cerium is the most abundant of the “rare earths.” It’s found in automobile catalytic converters and other pollution control equipment. And it helps to reduce sulfur oxide emissions. It’s also added to diesel fuel to help it burn better.
* Neodymium is used in magnets to make the magnetic field incredibly strong. Cell phones, computers and audio speakers wouldn’t exist without neodymium magnets. And miniature motors wouldn’t be possible at all without it.
* Holmium has the greatest magnetic strength of any element, and is used in medical and dental lasers and nuclear control rods. It’s also a colorant for glass.
* Dysprosium’s magnetic strength properties make it a useful material for certain lasers, fuel injectors for diesel engines, compact discs, and other various data storage applications.
* Thulium is one of the rarest and most expensive of the “rare earth” metals. It has unique properties that make it ideal for laser-based surgical tools.
* Yttrium is primarily utilized to make red phosphors for use in red LED’s and superconductors.
* Europium is a key ingredient in certain types of lasers and is a part of the chemical process to screen for Down’s Syndrome.
* Erbium is a silvery white metal created for use in photographic filters and as a coloring agent in cheap sunglasses and jewelry. It’s also a key element in optical amplifiers widely used in fiber-optic communications systems.
Rare Earth Elements and The China Factor – Again…
While found in relatively high concentrations in the Earth’s crust, until 1948 most of the world’s “rare earth” supply came from sand deposits in Brazil and India.
But in the 1950s, South Africa became the primary source, with U.S. supplies ramping up and continuing well into the late 1980’s.
And while there is still some residual production from those sources, China has stepped to the front of the pack. Its “rare earth” metal production dwarfs everyone else. As you can see on the chart, the Red Dragon is responsible for nearly 95% of the world’s “rare earth” production.
Global Production of Rare Earth Elements
Over the past decade or so, rare metal usage has increased dramatically, which has resulted in a significant strain on supplies. In fact, there’s growing concern that the world may soon face a shortage that could rise to over 40,000 tons annually.
With China using nearly two-thirds of what it produces, it’s naturally keen to protect its own interests. The country is stockpiling its supplies and continuing to reduce annual exports of “rare earths.” The real concern is that within a few years China may decide to keep everything it produces.
As a result of this threat from China, the “rare earth” sector is on fire, with a worldwide flurry of “rare earth” exploration. A mine in California is set to reopen by 2012 and Australia is currently developing the richest “rare earth” deposits outside of China.
Three Mining Stocks for “Rare Earth” Element Speculators
Unfortunately, the Chinese haven’t yet converted the state-owned Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Company into a publicly traded entity, so you can’t buy shares. Moreover, it’s unlikely that it ever will become publicly traded, given the strategic nature of “rare earths” and China’s dwindling reserves.
But many other “rare earth” mining stocks are up over 100% since China announced a change to its “rare earth” export quotas in August. Here are a few to consider…
* Lynas Corporation (OTCBB: LYSCF.PK): The company is behind the big Western Australian “rare earth” deposit at Mt. Weld and has seen its shares soar by 141% over the past six months.
* Avalon Rare Metals (OTCBB: AVARF.PK) and Rare Element Resources (OTCBB: RRLMF.PK) are two other rare element miners that have enjoyed a huge surge over the past six months. Their share prices are up 510% and 596%, respectively.
A note of caution, however: like most junior gold mining stocks, all three are highly speculative. As such, they’re subject to wild price swings.
That said, “rare earths” are in short supply and that means there will be profitable opportunities, as new suppliers emerge and try to offset the dwindling supply from China.
Disclosure: None
A Good Overview of Rare Earth Investments REE
Posted By jkingsdale On September 12, 2009 @ 11:42 am In Rare Earth Element Miners | 7 Comments
Jim Jubak just published a very useful survey course on Rare Earth Element investment opportunities. The good news is that he nails the facts. The bad news is that if he’s writing about REE’s, then the knowledge of this unusual investment niche is no longer very rare.
Jubak’s sense is that the stocks have become pricey. He’d like to buy Lynas (LYSCF) if the Chinese fund it but get less than control shares. (Who wouldn’t?) That surely must be what the Australian government wants too. With the new interest in REE’s as well as the global recovery going full swing, one would think there may well be new financing opportunities that would allow Lynas to move forward as an independent company rather than as a Chinese puppet. Meanwhile, if the Chinese deal were to happen as now proposed, there would be about 1.4 billion shares out, giving the company a current equity value of about $900 million. Given that Lynas controls the worlds largest REE deposit and has developed a sophisticated processing infrastructure, Lynas is clearly the class act of the group, but it is also priced that way.
As readers know I’ve owned Lynas and another Aussie company, Arafura (ARAFF) for about a year. With about 222M shares out, Arafura carries an equity valuation of about $175M.
My other holding in the field is Avalon (AVARF), a Canadian miner with ore that has a particularly attractive mix of the more economically advantaged of the 17 rare earth elements. As the company’s web site notes: “The Lake Zone is particularly notable for its enrichment in the more valuable heavy rare earth elements (HREE) such as europium, terbium and dysprosium, relative to light rare earths (LREE) such as lanthanum and cerium.” There are about 75 million shares outstanding giving the company a roughly $225M capitalization at the current $3 price.
All the REE stocks have had multiples of appreciation in recent months. They may be fully priced in the short term. On the other hand, the pricing of the minerals has an enormous leverage on the earnings potential of these companies. A substantial shortfall in REE supply is projected by Jubek by 2015. In fact, with China reducing exports, it would not be unlikely for REE prices to start rising much sooner than that. If the REE prices were to grow substantially, there could be a good deal of upside potential still in these stocks.
Here is Jim Jubak’s analysis:
A Rare Opportunity in Mining Stocks
Alternative energy and other new technologies are driving demand for rare earth elements, but China’s near monopoly on supplies is jacking up prices for Western mining companies.
Lanthanum. Neodymium. Dysprosium. Terbium.
The names don’t exactly roll off the tongue, but these are four of the 17 rare earth elements. You can’t build a Prius, an accurate missile, or a wind turbine without them.
And thanks to the threat of an export boycott by China, which controls about 95% of the current global supply of rare earth elements, the stocks of the few non-Chinese companies with rare earth mines under construction are some of the hottest stocks on the world’s most speculative stock markets:
* Great Western Minerals Group (OTC: [1] GWMGF), a company developing four rare earth projects, is up 948%, to 33 cents a share, in 2009.
* That’s a sluggish performance compared with Ucore Uranium (OTC: [2] UURAF), which is developing a rare earth mine in southeastern Alaska. Shares of Ucore are up 4,181% in 2009, to 83 cents per share.
My advice, at this point, is to stand back and let the rockets cool. The speculators will move on to some other sector fairly soon. Use the time to separate the mining stories from the real mining companies.
Because behind all this speculative smoke, there is a story of global demand that’s real enough to make a few of these companies very profitable long-term investments.
Here’s the story in a nutshell:
In my September 9 column, “[3] Plug Into Electric Car Batteries,” I explained how the growing need for batteries used in hybrid and electric cars would cause demand for lithium, the key ingredient in the next generation of batteries, to surge from a projected 11,000 metric tons in 2012 to almost 90,000 metric tons in 2020.
Well, the same need to develop less-polluting, more energy-efficient cars is driving demand for the rare earth elements. And so is the growing market for wind turbines. And the ever-present market for military guidance and control systems.
A Little Doesn’t Go a Long Way
Adding a bit of one of the 17 rare earth elements to a magnet in the engine of an electric or hybrid car increases the power and efficiency of the engine, because rare earth magnets are the strongest type of permanent magnets now made. Rare earths—numbers 57 to 71 on the periodic table of elements—improve the color in TV screens and in lasers. You’ll also find rare earth elements in tunable microwave resonators, and terbium, number 65, is a key ingredient in low-energy light bulbs.
And we’re not talking about trace amounts of these elements either. The electric motor in a Toyota Prius uses about two pounds of neodymium in its permanent magnets. Each Prius battery also uses 20 to 30 pounds of another rare earth element, lanthanum.
Because the magnets in wind turbines are so huge—you need big magnets to maximize the amount of electricity generated from each revolution of the relatively slow-moving blades-these generators need large amounts of rare earth elements. It takes about a ton of neodymium for every megawatt of generating capacity from wind turbines.
Fortunately, despite their name, rare earth elements aren’t especially rare. They’re found in relatively high concentrations in the earth’s crust. One, cerium, is the 25th most-abundant element in the crust.
Global production came to about 140,000 metric tons of refined rare earths in 2008.
Compare that with projected lithium production of 11,000 metric tons by 2012.
But supplies of the rare earths that can be profitably mined aren’t distributed evenly across the globe. Partly, that’s the luck of the geologic draw. But mostly, it’s a function of the huge environmental costs of mining these rare earths. The traditional method has been to bore holes into promising rock formations, pump acid down the holes to dissolve some of the rare earths and then pump the slurry into holding ponds for extraction of the rare earths. That extraction leaves behind a lake of water mixed with acid and various sundry-dissolved minerals.
Mom and Pop Mining
It’s much, much cheaper if a company can get away with spending just about nothing on controlling and treating the resulting sludge. The world’s low-cost producers of rare earth elements are not huge and efficient open-pit mines, but small, completely unregulated mom and pop mining companies in China.
The Chinese government is trying to force many of these companies out of business. The motive is a combination of desire to limit environmental damage in China and to exercise greater control over exports. I’d say the latter dominates.
Over the past 20 years, the accidents of geology and the realities of unequal regulation gradually led to the closure of most of the rare earth mines outside China. The world’s richest proven reserve of rare earths, a mine in Mountain Pass, California, stopped production in 2002, for example.
But rising demand is starting to change that picture. Companies such as Lynas and Arafura Resources in Australia, Avalon Rare Metals, Great Western Minerals Group and Ucore Uranium in Canada, and Molycorp Minerals in the US have crept back onto the stage with plans to start mines or resume production at old mines.
It took the Chinese overplaying their hand, however, to turn that modest trend into a speculator’s dream come true. The Chinese, remember, control about 95% of global production for all rare earths. They also control about 99% of the production for rare earth metals, such as dysprosium and terbium, and 95% of neodymium. Recently, China started to reduce the amount of rare earth metals that could be exported, and this year, the plan is to reduce exports further. The Chinese Ministry of Industry and Information Technology has cut authorized production targets this year by an additional 8.1%.
Companies outside China face the very real possibility not only of paying higher prices, but of not being able to buy the raw materials they need at all.
Forcing Relocation
This seems to be a key goal in China’s strategy. By restricting exports, China would force high-technology companies that need these rare earths to relocate production to China, accelerating the transfer of intellectual property to Chinese companies. It’s no secret that China wants to create major wind, solar, and hybrid car industries.
That’s made it possible once again to raise money to start or restart a rare earth mine outside China. For example, Chevron sold Molycorp Minerals, which it had acquired when it bought Unocal, to a group of investors that included Goldman Sachs in 2008. Molycorp will need Goldman’s deep pockets, since it has to drain 95 million gallons of water out of the open pit mine in Mountain Pass and then strip away tons of rock before it can begin mining in 2012. Initially, Molycorp will process 1,000 tons of ore a day—enough, the company estimates, to produce 20,000 metric tons of rare earth oxides annually.
In Australia, Lynas and Arafura were relatively close to production until the global economic crisis pulled the financial rug out from under them. A planned bond offering by Lynas failed, and Arafura raised less money than it had hoped in its initial public offering.
The Chinese stepped into the gap, buying 25% of Arafura and offering to buy 51.7% of Lynas. That second offer, which would give the Chinese majority control, has sent Australia into a frenzy, coming as it does on the heels of the detention in China of four staffers from miner Rio Tinto on charges of stealing state secrets. The Australian government has until September 17 to rule on the bid.
Elsewhere, Ucore Uranium is at work on a project in Alaska, and Great Western Minerals is working to refurbish the Steenkampskraal mine in South Africa.
Caution Advised
Be very careful when you evaluate any of these highly speculative stocks. Great Western Minerals submitted its application to update the mine’s paperwork only in April, and it is still updating its feasibility study. The risk is very real that some of these projects will never get to actual production.
Why bother? Because Chinese production is projected to reach 160,000 metric tons a year by 2015 or so. That would be up from 139,000 tons in 2008. But global demand is projected to rise even faster, resulting in an annual shortfall of 40,000 tons by 2015.
The two companies that I’d be most interested in watching are Molycorp, should it ever go from a private to public company. The Mountain Pass mine is a huge proven reserve, and the group of private investors is solid.
And I’ll keep an eye on Lynas Corporation (OTC: [4] LYSCF), provided the deal with China is for something less than majority control.
More on this topic [5] (What's this?)
[6] The Top 10 Reasons Why the China Sell Off Will Continue (Investment U, 9/1/09)
[7] US Tire Tariffs: Will China Retaliate? (naked capitalism, 9/12/09)
[8] Jim Rogers on China (The Mess That Greenspan Made, 8/11/09)
Read more on [9] Investing in China, [10] Lynas Corporation at [11] Wikinvest
Article printed from Jim Kingsdale’s Energy Investment Strategies: http://www.energyinvestmentstrategies.com
URL to article: http://www.energyinvestmentstrategies.com/2009/09/12/a-good-overview-of-rare-earth-investments/
URLs in this post:
[1] GWMGF: http://stocks.moneyshow.com/intershow.moneyshow/?Page=QUOTE&Ticker=GWMGF
[2] UURAF: http://stocks.moneyshow.com/intershow.moneyshow/?Page=QUOTE&Ticker=UURAF
[3] Plug Into Electric Car Batteries,: http://jubakpicks.com/?s=plug+into+electric+car+batteries
[4] LYSCF: http://stocks.moneyshow.com/intershow.moneyshow/?Page=QUOTE&Ticker=LYSCF
[5] (What's this?): http://www.wikinvest.com/blogger/wikinvest_wire
[6] The Top 10 Reasons Why the China Sell Off Will Continue: http://www.investmentu.com/IUEL/2009/September/the-chinese-stock-sell-off.html
[7] US Tire Tariffs: Will China Retaliate?: http://www.nakedcapitalism.com/2009/09/us-tire-tariffs-will-china-retaliate.html
[8] Jim Rogers on China: http://themessthatgreenspanmade.blogspot.com/2009/08/jim-rogers-on-china.html
[9] Investing in China: http://www.wikinvest.com/industry/Investing_in_China
[10] Lynas Corporation: http://www.wikinvest.com/stock/Lynas_Corporation_(LYC-AU)
[11] Wikinvest: http://www.wikinvest.com
http://www.energyinvestmentstrategies.com/2009/09/12/a-good-overview-of-rare-earth-investments/print/
GWMGF +52% @ $.40 print
Rare Earth Elements Portfolio
GWMGF +20% from price pivot low made yesterday - http://investorshub.advfn.com/boards/read_msg.aspx?message_id=41655543
viking69 - thank you - please return often - your trader friends are also most welcome
SRSR - Thank you iamadog - SRSR is featured on my Pivot Points Reversal Board - http://investorshub.advfn.com/boards/read_msg.aspx?message_id=41458136
Also, chart is posted on the SRSR Board - http://investorshub.advfn.com/boards/read_msg.aspx?message_id=41656307
I am sure that you will have an srsr following this board I know its on my favorites list
"Making Sense of the Emerging Rare Earth Mania" by John Kaiser - http://www.resourceinvestor.com/News/2009/9/Pages/Making-sense-of-the-emerging-rare-earth-mania.aspx
"Rare Earth Elements Not So Rare But Valuable" by Hard Assets Investor - http://seekingalpha.com/article/103972-rare-earth-metals-not-so-rare-but-valuable
Periodic Table of the Elements - http://www.periodictable.com/index.html
Rare Earth Metals: How to Invest - by Jason Hamlin
http://seekingalpha.com/article/161136-rare-earth-metals-how-to-invest
Rare Earth Resource Center - by John A. Kaiser - is an excellent source for information related to publicly traded companies and online resources for rare earth elements.
This is the link - http://www.kaiserbottomfish.com/s/Education.asp?ReportID=362761
Rare Earth Elements (REE) are key to the technological advances being made in the automotive, energy, entertainment, military, space, and telecommunications industries.
Currently, China produces over 95% of the world's rare earth elements.
Worldwide, there is a vigorous search for new sources of rare earth elements to ensure that they will be available in the future to western companies that are producing or expect to produce the 21st Century technologies that depend upon reliable sources of rare earth elements.
This board is founded upon the belief that there will be world class opportunities to prosper in the global search for new sources of rare earth elements.
I invite you to participate in making rare earth elements information as well as investment and trading opportunities available to the readers and posters who come here to explore this exciting new world.
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |