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Peak Rare Earths is Upon Us.
When I first recommended the rare earths miners four months ago, I thought of them as stocks that you put on the back book and forget about, hoping that they would appreciate someday (click here for “Rare Earths are About to Become a Lot More Rare” , and click here for “China Puts the Squeeze on Rare Ears” ).
Last night I reviewed my positions in this space, and I was stunned by their performance, having exploded into my best trades of the year. Canadian Avalon Rare Metals (AVARF) is up 114% since then, Australia’s Lynas Corp. (LYSCF) has rocketed 282%, and Great Western Minerals Group (GWMGF) has gone ballistic, with a 191% rise. The new IPO for Molycorp (MCP), which I have been touting since well before its launch, has raced up 68% from its July launch price of $14.
Readers who had the guts to buy the out of the money calls are deluging me with emails reporting gains of several hundred percent (click here for my new testimonials page at http://www.madhedgefundtrader.com/testimonials ). I have to tell you that the two year renewals for my newsletter are coming in hot and heavy.
The smart money is pouring into companies with greater production of the more valuable heavy rare earths, like dysprosium, Dy, terbium, Tb, and europium, Eu. The Chinese, which control 97% of world production, dominate in the lighter end of the spectrum, such as in cerium, Ce, lanthanum, La, and neodymium, Nd. This is why Great Western has secured the rights to South Africa’s Steenkampslraal Mine, and Avalon is attempting to raise $844 million to develop the Nechalacho Mine in the far north of Canada, which is also rich in the heavies (click here for the link).
Some traders may blanche at the meteoric moves that have already occurred in this sector. In three years the most common rare earth, cerium, has soared 930% to $35/kg. But this is still a tiny industry, and it is early days. What price is your teenage daughter willing to pay for enough rare earths to keep an endless supply of cell phones coming? The potential answers boggle the mind.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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Rare Earths at Center of USW’s 301 Petition on China
CHICAGO – A trade case filed late last week by the United Steelworkers union against an array of Chinese policies and practices that the union says threaten the future of America’s alternative and renewable energy sector makes the country’s restrictions of access to rare earth materials a top complaint.
Export restrictions imposed by China on rare earths are “a clear violation” of commitments made by China when it joined the World Trade Organization in 2001, the USW said in an executive summary of the 5,800-page petition under Section 301 of U.S. trade law filed with the office of the US Trade Representative – just in time to make it an issue ahead of the US mid-term elections.
“When China joined the WTO, it committed to eliminate export quotas and export taxes on all but a select list of products,” the union’s summary said and added that rare earth minerals and other green technology inputs addressed in the petition were not included on that list.
Under the law, the Obama administration has 45 days from the date of filing to determine whether to accept the petition for further action. The administration will be required to respond by Oct. 24, the union said. Mid-term election day is Nov. 2.
http://assets.usw.org/releases/misc/section-301.pdf
Are those RE equities based in FRNs?
No thanks.
Peak air.....peak breathing...peak sunlight....
The peak stories are never going to end. As long as there is something to sell....someone wil always be screaming...HURRY...time is running out.
I wish we had peak politicians.....
Amen to that brother.
....and click here for “China Puts the Squeeze on Rare Ears” ).
I know those Chinese eat some weird things but are they cornering the market on rare ears?
PNMHF - check it out. Especially those six mysterious 'tubes' just found by aerial survey last fall on their northern Ontario property that sound a lot like Kimberlite to me. They are a Canadian penny stock with uranium, gold and RE, have processing facilities on the North shore of L. Superior, and are about to receive an updated NI 43-101 on their RE reserves. Disclosure - I own a bunch.
Is that even the right ticker? What is the name of the company?
Boy, somebody doesn't like the "rare earth metals are not actually rare" comments. Too bad those comments are true. Scarcity of rare earth elements is entirely an environmental cost issue, not an actual scarcity issue.
[awaiting my ding down]
Alls rare that ends rare.
"rare earth metals are not actually rare"
"you can not eat Gold"
Both maybe true but that doesn't mean they are right in a REAL market sense.
Maybe, maybe not a peak?
Regarding LYSCF, didn't the Chinese try to take a controlling stake in this company last year and the Australian government said no thanks? Maybe my numbers are wrong but didn't the math work out to 90c-$1/share? Perhaps this is a long term supply & demand issue? Based on this transaction, one would think that China is trying to corner this market. Oh, and who cares about how dirty these elements are. In addition to cell phones, aren't they also used in a bunch of stuff for the military.
Gotta love the shameless victory lap taken by the MHT.
Pretty much all of them have been up in the last year. James Dines says he is the Original Rare Earth Bug. LOL.
Its my understanding China control the RE markets/resources so China can shut down any competitive mines by simply flooding market for a short period of time. Its seems pretty risky to depend on China letting you make money. Not likely IMO.
You have to understand the processing and supply chain and how it works.
Raw materials in friendly countries?
REEs in the open market?
Strategic Elements !!!
SECURITY... SECURITY... SECURITY of very long term supply ???
I call BS on rare earths. First they are not rare. China is the only country that permits production because it lowers environmental standards.
The notion that rare earth's are rare is a scam. Rarity is being managed to enrich those managing it.
But 200% returns are rare!
Check out Rare Element Resources (REE) . Also, here's a pretty good newsletter: http://www.resourceinvestor.com/News/2009/9/Pages/How-to-invest-in-rare-earth-metals.aspx
This one has been on a tear too. Especially since the ticker change. (I think this one changed tickers)
Right, moved from the pink sheets to the AMEX
Rare earths are not the "rare". That is just the name given to them initially in the past when they were unknown or rare sources. According to Wikipedia:
http://en.wikipedia.org/wiki/Rare_earth_element
We are seeing investors pumping and dumping the stocks. All BS as the market runs these days. If you can make money off of the runup, good luck!
i've got my cerium foil hat on. I'm ready.
+1
Its ridicioulous that we still burn oil in the 21st century and coal??!!? After 2050 there wont be any of that stuff left to burn anyway
Preposterous! No oil or coal to burn in 2050? How do you think we will be able to drill or dig all of that stuff in a mere 40yrs?
Simple supply and demand tell me that we will never run out of oil or coal. It will simply become more and more expensive until some alternative is more economical.
That's the green revolution's dream isn't it? So we don't have to force any changes, we dont have to subsidize idiocy like ethanol. we can simply move on down the road and the market will most certainly fix our oil dependency "problem".
Nuclear bitchez...
Currently containment and security costs lower the EROEI to an unsustainable level. There is somewhat of an upside to nuclear still considering technology. I think solar voltaic has the biggest upside. Wind is what we've had for centuries. Thorium may prove useful.
MHFT, congratulations on your calls on the rare earth miners.
I have been looking into these as possible investments for some time. I too am amazed by the recent run ups in these companies. I think the better bets (longer term) are those who have their own facilities to separate and refine them, as that is where the possible bottlenecks are re N. American production of REs. I believe that GWMGF and LYSCF have (or will soon have) their own facilities to do that to some degree.
MCP and AVARF are talking with people to build or JV such facilities.
I think that I will wait, as the share price runs have been overdone. I may buy them using technical analysis. The four I am likely to buy (roughly equal $ amounts) would be the ones I mentioned: GWMGF, LYSCF, MCP and AVARF.
I get a rare earth metals email each day. One of today's articles says that the RE sector may be in a bubble now, so careful out there...
...
I, for one, would welcome more comments on the RE sector as I am no expert.
The What and How of Rare Earth
First what is the future for the world, and how will it come about? The future of the world's integration is one of absolute maximization; no more clogged highways in LA, let alone China. No more driving to get groceries that are a few blocks away. The future power will be determined by sustainability, and this has nothing to with climate change, it has to do with lifestyle differences based on easy energy.
The Hirsch report claims in order to mitigate the coming energy crisis, we will need to have made advancements and preparations for 20 years ahead for transition. Let us presume due to human diligence we have been on our craft a little, maybe we have prepared some, but at this point, considering that most people scoff at what is easily the most simple concept of our history (PEAK OIL PRODUCTION) goes not only undiscussed, but unrealized.
What will come of us then? For one thing, humans will work harder (animals, let alone humans, will make a big come back as an energy source, too). And I mean physically. We will work for our pay once again. And the life style changes for the respected areas of the globe will be engaging.
Through any struggle there is pay, small or as pain sure, but experience can not be bought, so what does that tell you about monie? It is something that exists outside of god's realm. Monie is of this world and nothing more. Gold will never bribe an angel. But here, where we walk the earth, gold is of value, as a medium of exchange. The most liquid, and the best value combines to make it what it is. There are still other ways to pay. Using a gold backed IOU is one, or an item represented as an IOU is another (equities/bonds). Still, there is nothing like the real thing, and this is why it holds such phenomenal value.
Systems develop by necessity and then branch with priority to leisure. While these necessities are absolute, the leisure is not. This is nothing new, but it will be very different in the coming years. Since there will be an energy crisis, how ever abrupt and large, certain ways of doing business and entertainment will lose value, while others will increase. Face to face interaction may continue to have importance, but at what cost? Internet connections may prove to be such a cost effective endeavor that people never leave their homes, except to get food. Entertainment at home will be so much more serviceable than going to a movie, it may change lifestyle. These vices, like they are now, will be only considerable to the considered rationale consumer.
There is always room for specialization of the mind and body. A craft is such that it demands rigorous attention, practice, and dedication. Minds souls and bodies uniquely peck at perfection like a river polishing a rock. While altogether we contribute, like it or not; tried or not. We all play roles; knowingly, and how accurately perceived as the play. Game theory, or for a while programmable crop circles, may box the trend, but at the end of the day, magnets rule, the earth's rareness is realized, and earnings are kept by those who hustle.
I think it depends on what China does (or continues to do with their export policy) and which RE mines you invest in...
Don't forget Uranium, have a look at Denison Mines (DML CN).
Uranium Energy Corp. is the one for me. Check it out: http://www.uraniumenergy.com/investor_info/news_releases/2010/index.php?&content_id=362
There is no shortage AT ALL! It's just a polution problem.
Another this is: how many producers do you know that actually still make battery's in America or Europe in a competitive way?
It's just a trade war from China against Korea and Taiwan.
its called conflict minerals my friend which is enough to create the shortage you believe does not exist.
Sudden Debt! Maybe my favorite European contributor here at ZH!
Good comments. I have also read elsewhere that the Japanese and Koreans are ahead os us Americans re battery technology.
commerce resources is my play...CCE...tsx
John Kaiser said he'll be posting new commentary by the weekend.
Having been a metals and mining investment banker for the past 7 years, I can tell you now, that mineralisation of this grade, consistency and strike length doesn't just occur at random. This complex is huge and the results of the other holes will confirm this. The whole on the other side of the lake hit mineralisation to a depth of over 300 metres! That's insane. Have a look at the other rare earth projects. Outside of the standouts, Lynas, Molycorp and Avalon, which are in a different league, Eldor looks to be the largest and highest grade complex known in the world.
These great grades and intersections will continue as we approach the end of the year. The key for CCE is to assist investors in understanding how vital the Upper Fir can be to the supply chain given there are no other projects even close with respect to progress and that Eldor has and will be a world-class Rare Earth deposit, with hundreds of millions of tonnes of open-cut resource.
CCE has the most advanced, highest recovery tantalum project on earth with a PEA down by world renowned AMEC (why the heck would AMEC waste a year of their time working on a crappy, non-profitable project? Look them up. The projects they've worked on are incredibly impressive and there's no way they're in this for the pay cheque. They're here to showcase their amazing work once the PEA is released and CCE gets the attention it deserves). A Rare Earth deposit in the hundreds of millions of tonnes at better grades then seen anywhere else (outside of the few mentioned above). Oh, and they're both in Canada, with Quebec being the best mining jurisdiction on the planet.
It's going to be interesting to see if CCE can deliver the PEA before year end and what prices will be used. Word has it they're working on a process to produce an oxide, not a concentrate. This sells for nearly double what tantalum in concentrate does and CCE has every piece of infrastructure it needs (rail, roads, power, water) with in a couple kilometres of the deposit.
Should the PEA actually have a positive NPV and IRR the institutions will take note. They aren't now because there isn't enough liquidity for them to get involved without driving the price through the moon. Additionally, learning about tantalum for a lot of these guys is just too hard. I say that from experience after approaching many sales and trading pro's around the globe on the subject). They need a liquidity event, which might be tough because CCE has $18 million in cash!
Should CCE rally hard and find some support, a financing next year to some long term investors will increase liquidity and send this thing flying. Money to be spent on resource delineation at Edlor while the current cash is used for further drilling, and feasibility at Upper Fir.
At somepoint in time the bigger and smarter money will realise you can get 100% of this company for $40 million given the cash on the books. A positive PEA will confirm this isn't all BS, and if someone else doesn't, I'll find the finance to take this thing out. $100 million to any serious player who wants to control tantalum supply to the west with a free option on a world class rare earth deposit is absolutely peanuts.
Insights of a "European"
CCE's management. The've buit an incredible team, and that's what counts.
The Chairman is basically "Mr. Tantalum", Axel Hoppe. Have you looked at the other boards of tantalum companies? There a bunch of nobody's in the tantlum world. Everyone's concerned with how to sell CCE's product or what product to produce. Hoppe ran the show at HC Starck the largest consumer of tantlum for years and years and would have every connection in the book.
Ian Graham build the Divak mine i.e. he knows conflict situations and there importance and most importantly how to move a mine from PEA to production, awesome!
Last, AMEC. Look at the projects they've built. http://www.amec.com/ And yes I've confirmed this is the same group. Does anyone really think they're here for a million bucks to produce a report? They're one of the best engineering companies out there, period.
Michelle Robert: Designed the flow sheet for the Niobec mine in Quebec (owned by IamGold), and he's desiging the flow sheet for CCE. I can only presume he picked up some shares in the private placement last year as a little motivation to get things cracking.
All in all, world class team with very solid reputations all interested in reducing association with conflict and driving CCE to the next level.
A little more research by the rest of the investment community and I wouldn't be the only one who knows how good these project looks.
CCE won't even be a one asset company. Upper Fir and Eldor will puke cash for years and years with suCCEssful execution!
Again, it is all about timing and this has been in the works for several years, this isn't just a play starting its first drill program. A lot of news to come over the next months.
Commerce Resources Corp. (TSXv: CCE)(FSE: D7H) is pleased to report that the results from the second hole of the 2010 drilling program at the Eldor Project in Quebec has further confirmed the potential for a significant new, and large tonnage, rare earth element discovery at the Ashram Rare Earth Zone.
The program's second hole, EC10-028 returned:
1.95% Total Rare Earth Oxides ("TREO") over 243.84 metres (2.53 to 246.37 m); including 2.41% TREO over 28.32 m (130.58 to 158.90 m)
Click Here to Read Today's News Release
The Eldor Project represents one of the largest carbonatite complexes known worldwide. Carbonatite-related deposits are a major host for rare metals such as niobium and tantalum, and rare earth elements.
CCE is focused on the development of its Upper Fir tantalum and niobium deposit in British Columbia, Canada.
Commerce is well positioned with sufficient capital to advance the commercialization of a prospectively lucrative mining operation for tantalum and niobium.
Commerce Resources is also focused on the exploration of its new deposit the Eldor carbonatite in Quebec, which is highly prospective for niobium, tantalum and uranium.
http://www.commerceresources.com/s/Home.asp
John Kaiser's Bottom Fishing Report on CCE is a real zinger !
Like I posted a few weeks ago...
"Snooze and you Lose" on this one.
yes sir/ma'am..ive been holding this one for about 18 months...got a few ridiculously cheap buys down around .22 as well...long term lotto ticket.
There are PP warrants @ $1.50/. (good for the next 18 months or so), Fair value on CCE is north of $2/... IMO.
Look for a 4-bagger from today for those willing to do the DD and act.
I've know the management over the past years and they have been totally upfront and honest with shareholders during this FU in the global markets.
Look for a continuing string of very positive NRs well into 2011 on both of the projects.
Give Chris or Kevin, (IR), a call. They would be glad to relate to any potential investors.
Tell 'em ... David sent ya!
Dude, if you're so good why are you selling a newsletter?
How long before we get a blog called "Newsletter bitchez!"?