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Heya caltrials can you explain what the pr disaster was? I'm new to this stock and although i'm down i'm also seeing the march report very positive. If the p3 passes then we must be worth more than the current market cap for just the ip.
righty i've taken the plunge.
PLURISTEM THERAPEUTICS INC COM USD0.00001 8,000 14/06/18 14/06/18 £8,950.45 Executed
Sweet that seems more reasonable. I may just buy some stock after lurking here for a while.
jesus that seems a lot. presumably the cost will come down with the volume of cells they're making. Presumably they have to pay something for a placenta. How many doses can one placenta make for instance?
Can anyone explain how much money they think psti can make? 150m seems a low market cap if they have patents and manufacturing tech. How much does 2 injections cost for instance?
I'm thinking about buying some. If the phase 3 trials pass is there any figures on how much cash they can make from the drugs and how long do the patents last, if there are even patents for this sort of thing...
Wow thank you for the reply that has really cleared up my queries on it. I'm still not sure about investing as I think this Nash drug is muddying the water here. Once that's cleared if it drops I may grab some more. The sarm makes sense to me at least.
VKTXW warrants
I'm wondering if someone can help explain the warrants to me as I don't really understand what benefit they bring. I thought they were a geared investment somehow:-
person a buys warrants at 5$
5 x 10 = $50
person b buys shares at 6.5$
6.5 x 10 = $65
share price goes to 20$ warrants expire
person a converts warrants to shares and sells them
20 x 10 = $200
person b sells shares
20 x 10 = $200
So the warrant holder only gets $15 more profit. The part I don't get is the share entitlement price which I think is 1.25$. How is this factored in?
Well I'm now a holder..
Quantity: 40,000
Book Cost: C$16,634.30
Market Value: 16,800.00
Gain: C$165.70 (1.00%)
what do we make of the new board member? are this chinese firm moving in to take over?
My question has always been if this drug was such a cert, why did ligand hand it over and ask for only a 6% cut of the revenue.
What's the chance of the test passing?
I'm not sure what measure they're using to show a statistically significant change in muscle mass:-
https://clinicaltrials.gov/ct2/show/NCT02578095
Presumably the risk is that the drug doesn't work in older and sedentary adults unlink the young body builder types who have been taking this drug online.
Large fall yesterday
Any ideas why?
nsi-189 patent
Surely the fact they have issued this patent means they are confident in the nsi-189 drug. Combined with the continued reports of people taking the drug online how confident can we be that the phase 2 trial will pass?
I've never invested in a biotech stock so I don't have much to measure this against. I can see the pain some people are suffering here is similar to the sort of dilution of explorers in the mining sector trying to prove up a mine. With all biotech taking a hit of late is it not a good time to invest here?
Well I emailed Ryan and they are new warrants. I hope this isn't going to become a habit.
Dilution
"Company has agreed to increase the number of warrants to be issued to Waterton in connection with the drawdown of the fourth tranche from 650,000 warrants to 1,000,000 warrants, each exercisable into one common share of the Company for a period of five years."
Does this mean dilution?
Ah heh, I need to get some alerts setup for this stock :( this is my first tsx purchase so I'm a bit of a novice!
no news on the huldra site yet though.
Ooo nice one kabee, I wonder if it's true. I was googling this news and came across this board which has some interesting info on:-
http://www.stockhouse.com/Bullboards/SymbolList.aspx?s=HDA&t=LIST
Thanks for this, I only just saw the recent RNS today. More decent grades. I noticed Ryan's other firm got another permit granted, hopefully ours should be arriving soon.
Size of trades?
Hi All,
I've bought some more HDA, sadly after the 25% rise but hey I still think it's a good investment. I'm based in the UK here anyone with level2 access on this exchange know what is going on? No RNS's about II's holdings going over a certain percent so it's all a bit confusing, unless someone has got wind of the permitting going through.
Hi Kabee,
I've been emailing Ryan with the intention of investing here.. looks like I've missed the rise today but I've bought 4000 at least. Have to see how things go tomorrow to see if I can buy some more. AGQ has had some odd movement recently too, doubt they're connected but anyway it may be of interest.
g.
Anyone have any idea why it went up 15% yesterday??
tipped
Rare Earths - going to war
If you throw enough darts, metaphorically speaking, one of them will
inevitably land in the “Treble Twenty”
– and so it seems with rare earth stocks since the last Thunder Road
Report (continued on next page).
© Thunder Road Report - 6 September 2010 19
The world’s greatest sportsman, Phil “The Power” Taylor (15 times
World Champion)
The timing was good, but I have to acknowledge the pioneering work of
the “original rare earth bug”, the
one-and-only Jim Dines, who identified this sub-sector before most
people knew what rare earths are. Rare
earth prices, which were already on a rising trend, have surged since
China announced substantial cuts to
export quotas on 8 July 2010.
Rare earth prices 2008-10 (US$/kg)
Rare earth oxide Mount Weld 2008 2009 1Q10 21/6/10 6/9/10
Lanthanum oxide 25.5% 8.71 4.88 6.08 8.10 39.00
Cerium oxide 46.7% 4.56 3.88 4.46 7.00 39.00
Neodymium oxide 18.5% 31.90 19.12 27.56 34.50 75.00
Praseodymium oxide 5.3% 29.48 18.03 26.13 34.50 70.50
Samarium oxide 2.3% 5.20 3.40 3.40 3.40 32.40
Dysprosium oxide 0.1% 118.49 115.67 156.50 210.00 286.00
Europium oxide 0.4% 481.92 492.92 512.40 520.00 605.00
Terbium oxide 0.1% 720.77 361.67 478.90 506.00 620.00
Avge Mount Weld price 14.87 10.32 13.13 16.72 50.52
Source: Lynas Corporation
The Chinese Ministry of Commerce cut back its latest batch of export
quotas for 2010 by 58%. For 2010 as
a whole, the export quota of 30,258 tonnes is a 39.7% reduction on the
50,145 tonnes level in 2009. At the
same time, the Chinese are taking steps to unify pricing and reduce
competition by establishing “a unified
transportation and sales system and are expected to consolidate
production into 3-5 conglomerates in the
long term.” Reuters quoted China Daily as saying:
“China’s central government plans to publish monthly prices for rare
earth metals to avoid producers
engaging in cut throat competition.”
Dudley Kingsnorth of Industrial Minerals Company of Australia (IMCOA)
outlined the consequences:
“Chinese rare earth export quotas are now significantly less than rest
of the world consumption. The quotas
for 2010 total 30,250t REO (rare earth oxides – Paul) compared with
ROW forecast demand of 50-55,000
t. Total ROW production capacity is currently 10-12,000 t at best,
which indicates a shortfall this year of
10-15,000 t at least.”
© Thunder Road Report - 6 September 2010 20
According to China Daily, the plan for the unified pricing mechanism
covers five provinces, Fujian, Jiangxi,
Guangdong, Hunan and Guangxi. What I thought was very interesting was
Gareth Hatch’s (of Technology
Metals Research) point that the five jurisdictions to be combined into
a unified pricing system are all in the
southern part of China. Industry estimates suggest that around half of
the rare earth mines in southern
China are unlicensed and up to one third of export volumes from the
region were smuggled out of the
country illegally. It is these regions which produce the majority of
the “heavy” rare earths (like dysprosium,
europium and terbium), with most of the light rare earths being
produced in Inner Mongolia in the north.
As Gareth noted:
“It would thus appear that the change is an attempt by the authorities
to specifically control the prices of
the more valuable heavy rare earths.”
If this was the idea, it has backfired somewhat. While the prices of
the heavy rare earths have also risen
sharply since the announcement, the price rises of the light rare
earths have far outstripped them. It seems
that profit-maximising Chinese exporters have reduced sales of the
light elements in favour of the higher
added value heavier rare earths. Responding to the Chinese action, the
US lobbyist Jeff Green noted that:
“This is exactly the situation we’ve been warning the US government
about for several years…and will very
likely lead to a strong political response from the US over the next
12-24 months.”
It didn’t take 12-24 months, the US and Japan are already whinging
about the Chinese move. While China
now controls over 95% of world production, the US has only itself to
blame for its cataclysmic decline
from being the world’s largest producer. During the China/Japan
economic discussions in Beijing in the last
week of August, Japanese foreign minister, Katsuya Okada’s, protests
were rebuffed according to the Daily
Telegraph (thanks Dylan G.):
“China’s commerce minister Chen Deming said that Beijing would not
back down over the export quotas.
‘Mass-extraction of rare earth will cause great damage to the
environment, that’s why China has tightened
controls,’ he said, repeating the official line.”
The US is trying to establish that China is breaching WTO rules by
giving preferential treatment to domestic
companies. Even if the US gets some traction on this, the Rare Metal
Blog made the following observation:
“Most outside of China believe that the environmental protection
argument holds little credibility in the
defense of export controls, which only serve to create distinct price
advantages for domestic end-users and
manufacturers. However, production controls, which limit the annual
amount of rare earth production and
are also currently applied by the Chinese government, do not create
the same unequal economic conditions
as export controls and have been recognized in other industries as
acceptable under the WTO. Assuming
the dispute settlement panel does find China’s export controls to not
be in accord with WTO rules, it is very
likely that China will shift towards greater reliance on production
controls. Such a change would satisfy the
WTO by creating a more level playing field for domestic and
international purchasers and allow China to
escape financial penalties or the imposition of countervailing duties.
It would also allow China to maintain
control over the primary supply and global prices for many raw
materials, including rare earths.”
My sense is that the Chinese have embarked on a trade war - and a very
clever one indeed:
BB They have an almost total monopoly on both the mining of rare
earths and downstream processing
capability. It’s going to take western nations years to catch up
obviously;
BBHypothetically, if China sought to benefit in the same way from an
equally dominant position in something
like beer, bread or bras, all (fairly) vital to everyday life,
billions of people would already be VERY p*ssed
off. There would be demonstrations, Obama would be droning on from his
autocue and it would be all
over the media. In the case of rare earths, 99% of people don’t even
know what they are, never mind
appreciating how vital they are in things we take for granted like
iPods, mobile phones, laptops, flat
screen TVs, etc.
However, it seems that China’s intent to stiff the rest of the world
on rare earths might be more longstanding
© Thunder Road Report - 6 September 2010 21
than I realized. I’d read the alleged quote attributed to Chinese
leader Deng Xiaoping that:
“There is oil in the Middle East, but there is rare earth in China”
Recently I read Cindy Hurst’s report “China’s Rare Earth Elements
Industry: What Can the West Learn?”
published by the Institute for the Analysis of Global Security.
Cindy’s day job is being an analyst for the
US Army’s Foreign Military Studies Office. Ms Hurst quotes the Deng
comment and notes that he made it
in 1992 – so maybe it is true.
The report is also interesting because it puts an entirely different
slant on Chinese oil company CNOOC’s
attempted US$18.5bn acquisition of US oil company, Unocal, in 2005.
While the US blocked the deal on the
grounds of energy security, Ms Hurst speculates that the real
motivation behind the takeover bid was to
take control of the Mountain Pass rare earth mine – then owned by
Unocal (and recently listed as Molycorp
on the NYSE). Last year, China failed in an attempt to take a
controlling 51.6% stake in Lynas Corporation,
but did take 25% in Arafura Resources – both Australian-based rare
earth developers. On 9 August 2010,
the East China Exploration & Development Bureau took a 51% stake in
Northern Uranium, a uranium and
heavy rare earth exploration company in…Australia (again). In military
jargon, I think this is called “full
spectrum dominance”.
If China refuses to back down on exports, the question is how long a
drawdown in inventories can persist
until we reach a “crunch point” in supply. According to industry
consultant, Jack Lifton, there will be a
period of calm before what could be a storm:
“In the short-term, the end-users’ supply of rare earth metals and
alloys from China will not be affected
because they have been building inventory in Japan, the majority (sic)
direct user of rare earths outside
China.”
With tiny amount of rare earths needed for iPods, mobile phones, TVs
and computers, I wonder if anybody’s
told Apple’s Steve Jobs what’s going on? When I was a mining analyst
and there was a global shortage of
the huge tyres used on the giant trucks and earth movers back in
2006-08, I was told that BHP Billiton had
approached a reluctant Michelin and told its bosses that if they
didn’t build new capacity their company
would be taken over. I wrote that last comment several days ago and
then saw this on the Rare Metal Blog
on Sunday:
“I think we will be in the late innings of this story, when finally a
tech company or a conglomerate
of tech companies finally (sic) reach upstream to secure their
supplies of REEs. The lack of
vision that J. Lifton is always talking about really is astounding,
but I guess that makes it a
good potential investment. They could have a 50 year secure supply of
materials for a rounding
notation on a lot of these companies’ balance sheets, and yet it still
goes unaddressed.”
In June, Alaskan senator Lisa Mekowski introduced a bill aiming to re-
establish a competitive rare earths
industry in the US - the “Rare Earth Supply-Chain Technology and
Resource Transformation (RESTART)
Act”. This is similar to legislation introduced to the House by
Republican Representative, Mike Coffman, in
March this year. The US Government Accountability Office (GAO)
published a report on 14 April 2010 which
highlighted the near-term need for a sustainable supply chain of rare
earths in the US for critical American
national defense and industrial applications.
The two western producers with projects at an advanced stage both have
deposits skewed heavily towards
light rare earths. Lynas Corporation’s Mount Weld deposit has a heavy-
to-light rare earth ratio of 5%-
95% and recently IPO’d Molycorp’s has a 9%-91% ratio. For this reason,
I bought some shares in Ucore
Rare Metals, which is a much earlier exploration play, but does have a
heavy-to-light ratio of 50%-50%.
Its deposit is also on, or rather under, US soil in Alaska. Last
Thursday, the company issued the following
announcement:
© Thunder Road Report - 6 September 2010 22
“the United States Geological Survey (USGS), a division of the US
Department of the Interior,
has moved to increase its involvement at the Company’s Bokan Mountain
Heavy Rare Earth
project in Southeast Alaska…the USGS has now sent a team of
geoscientists to Bokan for the
purpose of advancing the US government’s understanding of the area’s
unique Heavy Rare
Earth (HREE) mineralogy, believed to be the largest historically
documented HREE deposit in
the United States…Of particular interest are terbium and dysprosium,
which are among the
most scarce and valuable metals in the world, and which have been
found in anomalously high
grades in the Bokan area. ‘The U.S. government is quite interested in
these minerals because
they are of military importance,’ said Dr. Mariano. China has moved to
decrease the export of
these essential metals to the U.S. and elsewhere, thereby increasing
interest in securing short
and long term domestic supplies within the U.S.”
The timing of the Ucore announcement is interesting since we have the
prospect of another positive
catalyst for rare earth stocks coming in September. The US Department
of Defense is due to publish its
assessment of its dependency on these elements by the end of this
month. For a country which spends
the same amount of money annually as the rest of the world combined,
has 737 overseas military bases in
60 countries, and is at war, it’s hard to imagine it is going to take
any risk with regard to supply. Two key
findings from the GAO’s study of rare earths were:
BB The use of rare earths in defense systems is widespread including
precision-guided munitions, lasers,
communications systems, radar systems, avionics, night vision and
satellites;
BB The US military began to recognise the rare earth supply issue as
long as seven years ago, but did
nothing about it. The Air Force’s Materials and Manufacturing
Directorate prepared a report in 2003
which raised concerns about the dependency on China. In 2006, the Navy
considered funding Molycorp’s
Mountain Pass mine, but subsequently lost interest.
In broader terms, the GAO report also highlighted that mining rare
earth ore is merely the first step in a
number of downstream processing steps:
BB separating the rare earth ore into individual rare earth oxides;
BB refining the rare earth oxides into metals; and
BB forming the metals into rare earth alloys.
In her report, Cindy Hurst remarked:
“Dr John Burba, Chief Technology Officer at Molycorp Minerals, the
company that runs the only rare earth
mining operation in the US pointed out that, ‘a lot of people don’t
quite understand why rare earth operations
are different (from other mining operations)’. Mining gold, for
example, is a much simpler procedure than
mining rare earth elements. One method of processing gold ore, simply
put, is to mix the ore with sodium
cyanide. The gold is then leached right out. Rare earth metals are far
more complicated and costly to
extract…Each element has its own unique extraction steps and chemical
processes and at times, these
elements will require reprocessing to achieve the ideal purity.”
According to the GAO “refined rare earth metals are almost exclusively
available from China”. Lynas
Corporation, for example, is developing a rare earth processing
facility in Malaysia and Molycorp is also
pursuing an integrated strategy. I searched for a junior rare earths
play with reasonable exposure to the
more valuable heavy rare earths while also having downstream
processing expertise. At the end of my
search, I bought some shares in Canadian-listed Great Western Minerals
Group (GWG) and “as giraffes say,
you don’t get no leaves unless you stick your neck out”. In darts
throwing terminology, the GWG purchase
is an “UNDERSTACKER”.
GWG has a fully diluted market cap of US$81m and owns the rights to
100% of the production from the
Steenkampskraal deposit in South Africa which should be in production
in 2013. This project is a pastproducing
mine and will only require about US$30m of capital expenditure – a
VERY big positive in my
© Thunder Road Report - 6 September 2010 23
view. Coming behind this deposit, CWG has four further exploration
projects, three in Canada and one in
the US. Hoidas Lake, in Saskatchewan, Canada, is the most advanced of
these and CWG estimates that
it will require c.US$115m of capital expenditure but could be onstream
in 2015. Due to a combination of
high ore grade in the case of Steenkampskraal, for example, or due to
very high levels of heavy rare earths
themselves in the case of the Douglas River deposit (also in
Saskatchewan), the investor presentation
argues that GWG’s revenue per tonne of ore will compare favourably
with its peers.
The President and CEO of CWG, James B. Engdahl, was interviewed on Jim
Puplava’s Financial Sense news
hour a few weeks ago. He also emphasised the importance of processing
the mined rare earth ore:
“There is a tremendous process downstream in this whole rare earth
business and that’s one
of the things that the market also doesn’t understand. Most of these
other companies outside
China, the only thing that they have is a deposit. They do not have
the downstream processing
capacity, which is one the things which makes Great Western unique
outside China. We have a
plant in England and we have a plant in Michigan, both of which are
capable of processing oxides
into powders and making alloys and metal materials.”
And discussing the vision of the company’s Executive Chairman, Gary
Billingsley, Engdahl commented:
“He also understood that you couldn’t just get into mining, because
there was a high probability
that just mining itself wouldn’t make money. And that’s one of the
things we’ve been focusing on,
a fully integrated mine-to-market model…the project we have in South
Africa, Steemkamskraal,
it will produce only about 2,700 tonnes based on the historical
resource calculation over the
next ten years, but we think there’s a high probability of expanding
that…we will take that
material and separate it in South Africa and we’ll process it at our
plant in England and we’ll
sell it then to the end users…from the mine to the market, to the end
users, 2,700 tonnes will
generate for us about S$160m in revenue and about US$65m in cash flow.
But only 15% of that
is attributable to the actual mining entity, the rest of it is all
downstream.”
The fully diluted market capitalisation of GWG is currently US$81.4m
(US$0.28 x 290.8m shares), net cash
is about US$2m, but the capital requirement for Steemkamskraal, is
VERY modest as I emphasised.
I’m waiting to see what the US Department of Defense comes up with
later this month. I can’t see how they
can disagree with the US military’s Cindy Hurst:
“With so much at stake, it is imperative that the US develop methods
to acquire a secure, longlasting
source of rare earth elements.”
I bought on the canada exchange through tdwaterhouse..
Tipped in the thunder road report, I've just bought in.
Rare Earths - going to war
If you throw enough darts, metaphorically speaking, one of them will inevitably land in the “Treble Twenty” – and so it seems with rare earth stocks since the last Thunder Road Report (continued on next page).
© Thunder Road Report - 6 September 2010 19
The world’s greatest sportsman, Phil “The Power” Taylor (15 times World Champion)
The timing was good, but I have to acknowledge the pioneering work of the “original rare earth bug”, the one-and-only Jim Dines, who identified this sub-sector before most people knew what rare earths are. Rare earth prices, which were already on a rising trend, have surged since China announced substantial cuts to export quotas on 8 July 2010.
Rare earth prices 2008-10 (US$/kg)
Rare earth oxide
Mount Weld
2008
2009
1Q10
21/6/10
6/9/10
Lanthanum oxide
25.5%
8.71
4.88
6.08
8.10
39.00
Cerium oxide
46.7%
4.56
3.88
4.46
7.00
39.00
Neodymium oxide
18.5%
31.90
19.12
27.56
34.50
75.00
Praseodymium oxide
5.3%
29.48
18.03
26.13
34.50
70.50
Samarium oxide
2.3%
5.20
3.40
3.40
3.40
32.40
Dysprosium oxide
0.1%
118.49
115.67
156.50
210.00
286.00
Europium oxide
0.4%
481.92
492.92
512.40
520.00
605.00
Terbium oxide
0.1%
720.77
361.67
478.90
506.00
620.00
Avge Mount Weld price
14.87
10.32
13.13
16.72
50.52
Source: Lynas Corporation
The Chinese Ministry of Commerce cut back its latest batch of export quotas for 2010 by 58%. For 2010 as a whole, the export quota of 30,258 tonnes is a 39.7% reduction on the 50,145 tonnes level in 2009. At the same time, the Chinese are taking steps to unify pricing and reduce competition by establishing “a unified transportation and sales system and are expected to consolidate production into 3-5 conglomerates in the long term.” Reuters quoted China Daily as saying:
“China’s central government plans to publish monthly prices for rare earth metals to avoid producers engaging in cut throat competition.”
Dudley Kingsnorth of Industrial Minerals Company of Australia (IMCOA) outlined the consequences:
“Chinese rare earth export quotas are now significantly less than rest of the world consumption. The quotas for 2010 total 30,250t REO (rare earth oxides – Paul) compared with ROW forecast demand of 50-55,000 t. Total ROW production capacity is currently 10-12,000 t at best, which indicates a shortfall this year of 10-15,000 t at least.”
© Thunder Road Report - 6 September 2010 20
According to China Daily, the plan for the unified pricing mechanism covers five provinces, Fujian, Jiangxi, Guangdong, Hunan and Guangxi. What I thought was very interesting was Gareth Hatch’s (of Technology Metals Research) point that the five jurisdictions to be combined into a unified pricing system are all in the southern part of China. Industry estimates suggest that around half of the rare earth mines in southern China are unlicensed and up to one third of export volumes from the region were smuggled out of the country illegally. It is these regions which produce the majority of the “heavy” rare earths (like dysprosium, europium and terbium), with most of the light rare earths being produced in Inner Mongolia in the north. As Gareth noted:
“It would thus appear that the change is an attempt by the authorities to specifically control the prices of the more valuable heavy rare earths.”
If this was the idea, it has backfired somewhat. While the prices of the heavy rare earths have also risen sharply since the announcement, the price rises of the light rare earths have far outstripped them. It seems that profit-maximising Chinese exporters have reduced sales of the light elements in favour of the higher added value heavier rare earths. Responding to the Chinese action, the US lobbyist Jeff Green noted that:
“This is exactly the situation we’ve been warning the US government about for several years…and will very likely lead to a strong political response from the US over the next 12-24 months.”
It didn’t take 12-24 months, the US and Japan are already whinging about the Chinese move. While China now controls over 95% of world production, the US has only itself to blame for its cataclysmic decline from being the world’s largest producer. During the China/Japan economic discussions in Beijing in the last week of August, Japanese foreign minister, Katsuya Okada’s, protests were rebuffed according to the Daily Telegraph (thanks Dylan G.):
“China’s commerce minister Chen Deming said that Beijing would not back down over the export quotas. ‘Mass-extraction of rare earth will cause great damage to the environment, that’s why China has tightened controls,’ he said, repeating the official line.”
The US is trying to establish that China is breaching WTO rules by giving preferential treatment to domestic companies. Even if the US gets some traction on this, the Rare Metal Blog made the following observation:
“Most outside of China believe that the environmental protection argument holds little credibility in the defense of export controls, which only serve to create distinct price advantages for domestic end-users and manufacturers. However, production controls, which limit the annual amount of rare earth production and are also currently applied by the Chinese government, do not create the same unequal economic conditions as export controls and have been recognized in other industries as acceptable under the WTO. Assuming the dispute settlement panel does find China’s export controls to not be in accord with WTO rules, it is very likely that China will shift towards greater reliance on production controls. Such a change would satisfy the WTO by creating a more level playing field for domestic and international purchasers and allow China to escape financial penalties or the imposition of countervailing duties. It would also allow China to maintain control over the primary supply and global prices for many raw materials, including rare earths.”
My sense is that the Chinese have embarked on a trade war - and a very clever one indeed:
BBThey have an almost total monopoly on both the mining of rare earths and downstream processing capability. It’s going to take western nations years to catch up obviously;
BBHypothetically, if China sought to benefit in the same way from an equally dominant position in something like beer, bread or bras, all (fairly) vital to everyday life, billions of people would already be VERY p*ssed off. There would be demonstrations, Obama would be droning on from his autocue and it would be all over the media. In the case of rare earths, 99% of people don’t even know what they are, never mind appreciating how vital they are in things we take for granted like iPods, mobile phones, laptops, flat screen TVs, etc.
However, it seems that China’s intent to stiff the rest of the world on rare earths might be more longstanding
© Thunder Road Report - 6 September 2010 21
than I realized. I’d read the alleged quote attributed to Chinese leader Deng Xiaoping that:
“There is oil in the Middle East, but there is rare earth in China”
Recently I read Cindy Hurst’s report “China’s Rare Earth Elements Industry: What Can the West Learn?” published by the Institute for the Analysis of Global Security. Cindy’s day job is being an analyst for the US Army’s Foreign Military Studies Office. Ms Hurst quotes the Deng comment and notes that he made it in 1992 – so maybe it is true.
The report is also interesting because it puts an entirely different slant on Chinese oil company CNOOC’s attempted US$18.5bn acquisition of US oil company, Unocal, in 2005. While the US blocked the deal on the grounds of energy security, Ms Hurst speculates that the real motivation behind the takeover bid was to take control of the Mountain Pass rare earth mine – then owned by Unocal (and recently listed as Molycorp on the NYSE). Last year, China failed in an attempt to take a controlling 51.6% stake in Lynas Corporation, but did take 25% in Arafura Resources – both Australian-based rare earth developers. On 9 August 2010, the East China Exploration & Development Bureau took a 51% stake in Northern Uranium, a uranium and heavy rare earth exploration company in…Australia (again). In military jargon, I think this is called “full spectrum dominance”.
If China refuses to back down on exports, the question is how long a drawdown in inventories can persist until we reach a “crunch point” in supply. According to industry consultant, Jack Lifton, there will be a period of calm before what could be a storm:
“In the short-term, the end-users’ supply of rare earth metals and alloys from China will not be affected because they have been building inventory in Japan, the majority (sic) direct user of rare earths outside China.”
With tiny amount of rare earths needed for iPods, mobile phones, TVs and computers, I wonder if anybody’s told Apple’s Steve Jobs what’s going on? When I was a mining analyst and there was a global shortage of the huge tyres used on the giant trucks and earth movers back in 2006-08, I was told that BHP Billiton had approached a reluctant Michelin and told its bosses that if they didn’t build new capacity their company would be taken over. I wrote that last comment several days ago and then saw this on the Rare Metal Blog on Sunday:
“I think we will be in the late innings of this story, when finally a tech company or a conglomerate of tech companies finally (sic) reach upstream to secure their supplies of REEs. The lack of vision that J. Lifton is always talking about really is astounding, but I guess that makes it a good potential investment. They could have a 50 year secure supply of materials for a rounding notation on a lot of these companies’ balance sheets, and yet it still goes unaddressed.”
In June, Alaskan senator Lisa Mekowski introduced a bill aiming to re-establish a competitive rare earths industry in the US - the “Rare Earth Supply-Chain Technology and Resource Transformation (RESTART) Act”. This is similar to legislation introduced to the House by Republican Representative, Mike Coffman, in March this year. The US Government Accountability Office (GAO) published a report on 14 April 2010 which highlighted the near-term need for a sustainable supply chain of rare earths in the US for critical American national defense and industrial applications.
The two western producers with projects at an advanced stage both have deposits skewed heavily towards light rare earths. Lynas Corporation’s Mount Weld deposit has a heavy-to-light rare earth ratio of 5%-95% and recently IPO’d Molycorp’s has a 9%-91% ratio. For this reason, I bought some shares in Ucore Rare Metals, which is a much earlier exploration play, but does have a heavy-to-light ratio of 50%-50%. Its deposit is also on, or rather under, US soil in Alaska. Last Thursday, the company issued the following announcement:
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“the United States Geological Survey (USGS), a division of the US Department of the Interior, has moved to increase its involvement at the Company’s Bokan Mountain Heavy Rare Earth project in Southeast Alaska…the USGS has now sent a team of geoscientists to Bokan for the purpose of advancing the US government’s understanding of the area’s unique Heavy Rare Earth (HREE) mineralogy, believed to be the largest historically documented HREE deposit in the United States…Of particular interest are terbium and dysprosium, which are among the most scarce and valuable metals in the world, and which have been found in anomalously high grades in the Bokan area. ‘The U.S. government is quite interested in these minerals because they are of military importance,’ said Dr. Mariano. China has moved to decrease the export of these essential metals to the U.S. and elsewhere, thereby increasing interest in securing short and long term domestic supplies within the U.S.”
The timing of the Ucore announcement is interesting since we have the prospect of another positive catalyst for rare earth stocks coming in September. The US Department of Defense is due to publish its assessment of its dependency on these elements by the end of this month. For a country which spends the same amount of money annually as the rest of the world combined, has 737 overseas military bases in 60 countries, and is at war, it’s hard to imagine it is going to take any risk with regard to supply. Two key findings from the GAO’s study of rare earths were:
BBThe use of rare earths in defense systems is widespread including precision-guided munitions, lasers, communications systems, radar systems, avionics, night vision and satellites;
BBThe US military began to recognise the rare earth supply issue as long as seven years ago, but did nothing about it. The Air Force’s Materials and Manufacturing Directorate prepared a report in 2003 which raised concerns about the dependency on China. In 2006, the Navy considered funding Molycorp’s Mountain Pass mine, but subsequently lost interest.
In broader terms, the GAO report also highlighted that mining rare earth ore is merely the first step in a number of downstream processing steps:
BBseparating the rare earth ore into individual rare earth oxides;
BBrefining the rare earth oxides into metals; and
BBforming the metals into rare earth alloys.
In her report, Cindy Hurst remarked:
“Dr John Burba, Chief Technology Officer at Molycorp Minerals, the company that runs the only rare earth mining operation in the US pointed out that, ‘a lot of people don’t quite understand why rare earth operations are different (from other mining operations)’. Mining gold, for example, is a much simpler procedure than mining rare earth elements. One method of processing gold ore, simply put, is to mix the ore with sodium cyanide. The gold is then leached right out. Rare earth metals are far more complicated and costly to extract…Each element has its own unique extraction steps and chemical processes and at times, these elements will require reprocessing to achieve the ideal purity.”
According to the GAO “refined rare earth metals are almost exclusively available from China”. Lynas Corporation, for example, is developing a rare earth processing facility in Malaysia and Molycorp is also pursuing an integrated strategy. I searched for a junior rare earths play with reasonable exposure to the more valuable heavy rare earths while also having downstream processing expertise. At the end of my search, I bought some shares in Canadian-listed Great Western Minerals Group (GWG) and “as giraffes say, you don’t get no leaves unless you stick your neck out”. In darts throwing terminology, the GWG purchase is an “UNDERSTACKER”.
GWG has a fully diluted market cap of US$81m and owns the rights to 100% of the production from the Steenkampskraal deposit in South Africa which should be in production in 2013. This project is a past-producing mine and will only require about US$30m of capital expenditure – a VERY big positive in my
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view. Coming behind this deposit, CWG has four further exploration projects, three in Canada and one in the US. Hoidas Lake, in Saskatchewan, Canada, is the most advanced of these and CWG estimates that it will require c.US$115m of capital expenditure but could be onstream in 2015. Due to a combination of high ore grade in the case of Steenkampskraal, for example, or due to very high levels of heavy rare earths themselves in the case of the Douglas River deposit (also in Saskatchewan), the investor presentation argues that GWG’s revenue per tonne of ore will compare favourably with its peers.
The President and CEO of CWG, James B. Engdahl, was interviewed on Jim Puplava’s Financial Sense news hour a few weeks ago. He also emphasised the importance of processing the mined rare earth ore:
“There is a tremendous process downstream in this whole rare earth business and that’s one of the things that the market also doesn’t understand. Most of these other companies outside China, the only thing that they have is a deposit. They do not have the downstream processing capacity, which is one the things which makes Great Western unique outside China. We have a plant in England and we have a plant in Michigan, both of which are capable of processing oxides into powders and making alloys and metal materials.”
And discussing the vision of the company’s Executive Chairman, Gary Billingsley, Engdahl commented:
“He also understood that you couldn’t just get into mining, because there was a high probability that just mining itself wouldn’t make money. And that’s one of the things we’ve been focusing on, a fully integrated mine-to-market model…the project we have in South Africa, Steemkamskraal, it will produce only about 2,700 tonnes based on the historical resource calculation over the next ten years, but we think there’s a high probability of expanding that…we will take that material and separate it in South Africa and we’ll process it at our plant in England and we’ll sell it then to the end users…from the mine to the market, to the end users, 2,700 tonnes will generate for us about S$160m in revenue and about US$65m in cash flow. But only 15% of that is attributable to the actual mining entity, the rest of it is all downstream.”
The fully diluted market capitalisation of GWG is currently US$81.4m (US$0.28 x 290.8m shares), net cash is about US$2m, but the capital requirement for Steemkamskraal, is VERY modest as I emphasised.
I’m waiting to see what the US Department of Defense comes up with later this month. I can’t see how they can disagree with the US military’s Cindy Hurst:
“With so much at stake, it is imperative that the US develop methods to acquire a secure, long-lasting source of rare earth elements.”
Surely it's the ratio to public shares that's important.
I've been thinking about buying this on the Austrialian market as GGG. But the stock structure is pretty scary:-
Shares 225,008,555
Options Ex (20c) 167,445,425
How many more options are they going to exercise like they have done today to finish all their exploration work.