Food for Thought, for Rare Earth Investors
In the global race to develop new sources of Rare Earths (REs), there are now hundreds of companies jostling for attention and recognition amongst investors. With all this competition in the Rare Earth Element (REE) space, it becomes much more difficult for the better companies to stand out from the pack.
While many companies claim to be in the RE business, most of them are a long way off from getting their REEs out of the ground and into a processing facility, due to the regulatory quagmire and tremendous costs and complexities associated with mining and processing.
Yes, how does an investor begin to separate the valuable companies who are real players in this space from the other companies who want to ride the Rare Earth wave? One of the best ways to narrow your search is to follow the people who are very good at finding value in crowded markets.
Taking stock, in Rare Earths
In a recent issue of Money Sense magazine, you’ll see a list with the Hulbert Financial Digest’s top performing investment newsletters in North America. At the top of the list is Outstanding Investments, with 21.8 % annualized return on stock picks over the past 10 years. Mr. Byron King, a former geologist and business lawyer, authors the widely-read newsletter.
Here’s a sample of what the Mr. King had to say in his latest release about a company Kidela Capital Group Inc. works with, Stans Energy Corp (TSX-V:RUU)
‘With Stans, you’re getting the real McCoy. Stans has the Right Stuff. Stans has real rocks, a real mine, a real processing plant, real technical people and — most importantly — unduplicable sets of real relationships with the right people in the right places.’
‘Stans is a country mile ahead of the non-Chinese competition. There’s Stans. Then there’s everybody else.’
‘When word hits Wall Street about this tiny Canadian company’s giant $14 billion discovery of rare earths in the former Soviet Union, it’s likely to send its stock price into the stratosphere!’
Another way to ferret out the great new stocks is to follow the successful fund managers. Canada’s best performing hedge fund manager of the past year is Mr. Steven Palmer. Mr. Palmer is the president of Toronto-based AlphaNorth Asset Management Inc. He credits Stans Energy for helping his fund earn triple-digit gains from surging resource stocks.
‘This is what we did with rare earths,” Palmer told the Globe and Mail newspaper, on January 26. “We were positioned last summer with our biggest weightings in a couple of rare-earth names — Stans Energy Corp. and Ucore Rare Metals Inc. — and they have been star performers.’
Why the buzz about Stans Energy? With the demand for Heavy Rare Earth Elements (HREEs) anticipated to outstrip supply by 2014, it is the only company poised to become a leading producer of HREEs.
Stans has 100% ownership of an open pit mine that historically produced 50% HREEs and 50% LREEs, and it’s just purchased an REE processing facility nearby. This REE complex in Kyrgyzstan in the former Soviet Union supplied 80% of all REEs for the Soviets for almost 30 years, and was only 1/3 mined using historical estimates.
Moving Rare Earths by rail
Stans has a number of other advantages in addition to their most likely being the first HREE-focused producer. The company recently purchased a HREE production complex which is close to a skilled labour pool – the town of Orlovka. Many of the people who worked at the mine and facility still live there. And even more interesting is that the purchase agreement included a rail terminal – a critical link to the extensive Asian train network that Stans will use to supply its REE complex and transport its finished products out to the world.
There is an old adage: do what successful people do and you will increase your chances of success. In the Rare Earth space, Byron King and Steve Palmer are two very successful people who are worth following.
