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Rare Earth Mineral Prices Explode In Q3

Tyler Durden's picture





 

Ever heard of the oxides of Lanthanum, Cerium, Neodymium, Praseodymium and/or Samarium? With price surges between 250% and 600% in one quarter, you may wish you have. The recent pissing contest between Japan and China, which culminated with a temporary export ban in rare earth metals such as those named above, translated in ridiculous price jumps in some compounds most have never even heard of, let alone traded, yet which would have made not only the year, but the decade for hedge funds invested in them. And with China producing more than 90% of the world's supply of rare earth minerals, coupled with increasing probability of escalating global (and regional) trade wars, it is distinctly possible that the gains recorded recently in gold will be dwarfed by the imminent Samarium Oxide bubble, which 3 months ago was trading at $4/kg and is now over $30.

Moody's has some interesting commentary on the rare earth situation in the context of one of the biggest developers and producers of specialty chemicals in the world: Rhodia.

While Japan and China quarrelled last week about shipments of rare earth minerals, Rhodia (Ba3 positive), a European chemicals producer whose activities include the separation and formulation of rare earths, was sitting pretty and its credit was unaffected by China’s alleged export ban on rare earth minerals.

On 24 September, Japan claimed that China had halted shipments of rare earth minerals, vital in the production of high-tech products such as hybrid cars and smartphones. China’s Commerce Ministry denied that Beijing had imposed an export ban. By late last week, Japan acknowledged that deliveries from China had resumed.

China produces more than 90% of the world’s supply of rare earth minerals. While Japan’s claims of a supply disruption spotlighted China’s control over the rare earths market, Rhodia escaped any significant credit impact thanks to three main factors:

  • The minor contribution that the rare earths business makes to the group’s overall performance (around €200 million in annual sales, which is equivalent to about 4%-5% of 2009 group sales)
  • Rhodia’s rare earths separation facilities in China are supplied by domestic producers, ensuring supply security, which puts the group at a competitive advantage versus competitors with no China presence
  • Rhodia is in a position to pass on recent significant price increases (see exhibit below) to end-consumers thanks to their relative price insensitivity (rare earths account for a low percentage of end-product production costs), thus limiting any potential impact on Rhodia’s margins

In addition, Rhodia benefits from diversifying its supply of rare earths. Earlier this year, Rhodia signed a 10-year supply deal for rare earth minerals with Australia’s Lynas Corp. (unrated). Lynas’ Mount Weld project in Western Australia, which is currently being developed, is scheduled to be operable in 2011 and will over time supply 20,000 tons of additional rare earth products. According to Lynas, this will be the first rare earths supply project to come onstream outside China in recent years. Under the terms of the contract, Rhodia will provide technical support in the construction of Lynas’ Advanced Materials plant given that Rhodia operates similar plants.

Deposits of rare earth minerals exist in various regions of the world, including North America. However, several mines closed because of high extraction costs and environmental concerns. Given the recent price spike following the supply disruptions, several countries outside China are now considering restarting existing rare earth mines or developing greenfield mine deposits.

 


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Mon, 10/04/2010 - 09:37 | Link to Comment Rusty Shorts
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 - ever heard of the mineral "colton"?

Mon, 10/04/2010 - 11:58 | Link to Comment Agent P
Agent P's picture

Coltan?

Mon, 10/04/2010 - 20:55 | Link to Comment Rusty Shorts
Rusty Shorts's picture

Yes, sometimes I call it "Colton", just for the hell of it.

Mon, 10/04/2010 - 12:57 | Link to Comment DavidPierre
DavidPierre's picture

Tantalum ... an element found in our everyday lives, improving technology and material performance. Its many applications include uses in electronics, medicine, engineering and energy generation.

Tantalum has unique attributes that make it suitable for several specific purposes. It has an exceedingly high melting point (about 3,000° C), is highly corrosion-resistant, alloys well with other metals, is superconductive for electricity and, most importantly, has an excellent capacity to store and release an electrical charge.
About half of the tantalum consumed each year is used in the electronics industry, mainly as powder and wire for capacitors, owing to tantalum's particular ability to store and release electrical energy. This allows components to be exceptionally small and they are therefore favoured in space-sensitive high-end applications in telecommunications, data storage and implantable medical devices. Tantalum carbide's hardness makes it ideal for cutting tools.

Commerce Resources Corp. (TSX-V: CCE ... FSE: D7H) ...exploration and development company with a particular focus on tantalum, niobium and rare metal deposits with economic grades and large tonnages.

http://www.commerceresources.com/s/Home.asp

Mon, 10/04/2010 - 09:38 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

humm, i wonder what the spreads are on Samarium Oxide? Anyone even know how to get at these markets?

Mon, 10/04/2010 - 09:39 | Link to Comment b_thunder
b_thunder's picture

does China have 90% of all deposits?  unlikely.   there will be more suppliers, especially at these prices.  BUBBLE!!!!

 

Mon, 10/04/2010 - 10:00 | Link to Comment chunkylover42
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takes 2-3 years to get a mine up and producing.  suppliers are coming, but not for a while.

Mon, 10/04/2010 - 11:22 | Link to Comment TheDriver
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Not to mention the fact that the separation processes for REEs is complex and dirty (expensive). To date, the Chinese have been willing to overlook the enviro costs of processing REEs.

Mon, 10/04/2010 - 09:49 | Link to Comment Pladizow
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Tue, 05/10/2011 - 18:54 | Link to Comment zaknick
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Hey gorgeous mammaries!

Show us another angla or beautifully nipple cliséup!

Mon, 10/04/2010 - 09:52 | Link to Comment HedgeFun
HedgeFun's picture

China is currently manufacturing 90% of the supply.  It doesnt mean there is not rare earth elsewhere, but the mines are not set up.  There are virtually no producers outside of china.  MCP is the large producer in the US, and REE is a speculative miner play.  I think the important point to this story is the increasing USE of rare earth, which has only occured in the past 10 years.  So there is a huge increase in demand for the stuff.

Mon, 10/04/2010 - 13:04 | Link to Comment thesapein
thesapein's picture

Spot on. Unless technology is just a bubble too, this is not a bubble. Same goes for precious metals.

If both China and the US were to shed themselves of paper assets, we'd see China standing on a secure foundation of physical production geared toward a technological future. Sure, the paper dragon is still going to burn, but underneath is everything you need to build an advanced Dragon2.0

Mon, 10/04/2010 - 09:53 | Link to Comment espirit
espirit's picture

Japan has/or is working a deal with the Aussies for REE imports. Very serious situation for national interests, as most have been buying from China. Other projects here in the US and abroad quite reliant on REE's and other isotope containing ores, such as those needed for portable nuke generators and next generation battery development. Basic focus is POWER.

Mon, 10/04/2010 - 09:53 | Link to Comment gwar5
gwar5's picture

Damn.... yep, heard of them. Just didn't know the best way to partake.

Mon, 10/04/2010 - 09:53 | Link to Comment duo
duo's picture

Cerium Oxide is the main polishing compound for making glass lenses (e.g. military optics).  The oxide is up 10x in the past couple of months, if you can get it.

You want a trade war, you got it. 

Mon, 10/04/2010 - 09:54 | Link to Comment JacksWastedLife
JacksWastedLife's picture

Why on earth they want a useless pieces of green paper in exchange on something which is really rare and valuable?

This world is full of paradoxes. ^_^

 

Mon, 10/04/2010 - 11:25 | Link to Comment e_goldstein
e_goldstein's picture

why?

"there's a sucker born every minute"

comes to mind.

Mon, 10/04/2010 - 09:56 | Link to Comment Alfred E. Newman
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A few years ago China openly sent out 23,000 geologist around the world to find resources for there country.  Next was to gain control of those resources.

Mon, 10/04/2010 - 10:06 | Link to Comment DaveyJones
DaveyJones's picture

a few years ago we sent out even more soldiers. Their strategy worked a little better. Cost less too. 

Mon, 10/04/2010 - 10:10 | Link to Comment espirit
espirit's picture

Tried twice to purchase a closed U.S. mine of known REE deposits.

Mon, 10/04/2010 - 09:56 | Link to Comment Crabshack
Crabshack's picture

Ya sure, but you can't eat it.  ;)

Mon, 10/04/2010 - 09:57 | Link to Comment TheGoat
TheGoat's picture

Very happy with my position on Lynas corp Aus - NICE

Mon, 10/04/2010 - 10:18 | Link to Comment Apostle of Unknown
Apostle of Unknown's picture

What should be especially good are the heavier REEs, at least longer term. There is an interesting article with Patrick Wong of Dacha on the internets about how the pricing in this market is all skewed right now:

http://www.techmetalsresearch.com/2010/07/dacha-capital-a-discussion-wit...

Ironically, the lighter ones have increased most this summer, despite them being more common. Companies that focus on these heavier minerals are lagging; a REE play for the patient?

Mon, 10/04/2010 - 10:07 | Link to Comment redrob25
redrob25's picture

Nice article.

 

Check out an article I wrote for SA for background on rare earths.

Rare Earth Potential is Great .. If You Are Patient

http://seekingalpha.com/article/227291-rare-earth-investment-potential-is-great-if-you-are-patient

Mon, 10/04/2010 - 10:11 | Link to Comment Widowmaker
Widowmaker's picture

Hmm, it seems to me this is still a rush to physical (anything).

Mon, 10/04/2010 - 10:13 | Link to Comment Pladizow
Mon, 10/04/2010 - 12:03 | Link to Comment matthew1182
matthew1182's picture

Dines was talking about this in Q1 on Financial Sense with Jim Puplava!  He nailed it!

Mon, 10/04/2010 - 13:10 | Link to Comment thesapein
thesapein's picture

Thanks. It was bothering me, trying to remember his name. That interview was in the back of my head while reading the article, but I just couldn't remember his name... James Dines!

Mon, 10/04/2010 - 10:15 | Link to Comment aurum
aurum's picture

tantalum is the game for me...

Mon, 10/04/2010 - 10:17 | Link to Comment 99er
99er's picture

"Gold Bitchez!"

(Reuters) - The world's wealthiest people have responded to economic worries by buying bars of gold, sometimes by the ton, and moving assets out of the financial system, bankers catering to the very rich said on Monday.

Mon, 10/04/2010 - 11:27 | Link to Comment chopper read
chopper read's picture

this is hardly a junk and very relevant.  thank you, 99er. 

Mon, 10/04/2010 - 10:29 | Link to Comment Oh regional Indian
Oh regional Indian's picture

The rare earth market closely tracks certain technology segments. The alternative energy world is full of them.

Leo K might be laughing all the way to the bank. Chinese Solars will have no supply disruption of rare earths, I believe. Nor will chinese electric car manufacturers.

Watch the recently crashed Carbon Credit values start to creep up again.

That is the next bubble.

The implications of China holding even 50% or above known global reserves is a pincer grip. China, so many cards, dealt to them.

The playbook is opening up people.

ORI

http://aadivaahan.wordpress.com

Mon, 10/04/2010 - 10:31 | Link to Comment John McCloy
John McCloy's picture

Kicking myself for selling my Rare Element that I held for over 2 years with an entry at 1.25.

Sold at 3.30 before it went parabolic.

Mon, 10/04/2010 - 10:34 | Link to Comment Flakmeister
Flakmeister's picture

Got into GWG at 0.09 and AVL at 2.00.... heh, heh, heh

AVL is also interesting because of Tin-Indium mine they have

Lynas is nice, but the real money is to be made in the processing and thats why I really like GWG and their goal of vertical integration..

 

Mon, 10/04/2010 - 10:39 | Link to Comment AGORACOM
AGORACOM's picture

Flakmeister, looks like we posted 2 minutes apart regarding Avalon Rare Metals.  Have not looked into GWG until now but what a chart since mid-summer. Lots of spikes and drops in its chart, so prudent for me to wait for .25 - .28 range?

The Greek ... From Canada

Mon, 10/04/2010 - 10:51 | Link to Comment Flakmeister
Flakmeister's picture

yes, you can be patient, accumalate on limit orders. 

 

BTW my 0.09 position dates back to 10/08. I am very patient with this sector but I have taken some profits

Mon, 10/04/2010 - 11:01 | Link to Comment AGORACOM
AGORACOM's picture

Feedback mucho appreciated.

G

Mon, 10/04/2010 - 11:43 | Link to Comment TheDriver
TheDriver's picture

I hold Great Western as well. Their strategy is sound, especially now that they have an agreement in place to take 100% of the REEs from the Steenkampskraal mine in South Africa.

Mining, processing, production, and manufacturing through their subsidiary, Less Common Metals. Mine to market!

http://www.rareearthmarketnews.com/index.php/companies/detail/great-west...

Mon, 10/04/2010 - 10:36 | Link to Comment AGORACOM
AGORACOM's picture

One of my Rare Earth favourites is Avalon Rare Metals on the TSX. Also trades on OTCQX as well http://bit.ly/aNxScI

No position right now. Sold and booked profits in the mid $2's on macro concerns, now trading in the mid $3's - but plan to get back in and accumulate for the long term.

George

Mon, 10/04/2010 - 10:42 | Link to Comment Sherman McCoy
Sherman McCoy's picture

Interesting. So what are the companies to buy? REE?, MCP? They look parabolic.

Mon, 10/04/2010 - 10:57 | Link to Comment espirit
espirit's picture

I look for companies close to home in the event of supply chain interuptions, and lean toward ownership and exploration.

Right now I'm working the dips in URRE and DNN which favor the radioactive power producing aspect as well as identification of other valuable ores.

Mon, 10/04/2010 - 11:03 | Link to Comment Raymond K Hassel
Raymond K Hassel's picture

Dacha Strategic Metals - basically a mutual fund with a book consisting of Dysprosium, Terbium, Yttrium, Gadolinium, Lutetium, Eropium - trading at roughly book depending on the day. 

Mon, 10/04/2010 - 11:06 | Link to Comment clagr
clagr's picture

This is a real deal! There are (relatively) lots of REE around outside of China, but the environmental movement has crushed production of them outside of China. So they lead the world in technology advances in production and probably are ramping up their lead in processing innovations. Since it takes a long time to re-open closed mines there is a 2-10 year period facing us where a single, centrally controlled economy can squeeze the rest of the industrialized markets. They can play us like little fish on strong lines.

I developed a small holding portfolio of the following available US tradable stocks to force me to watch the movements. (Wish I had made it bigger, since we are way up.)

MCP, TCK, ROC, SQM, RES, AVARF and LYSCF

Clagr

Mon, 10/04/2010 - 11:18 | Link to Comment Ieetseelmeet
Ieetseelmeet's picture

The Chinese took the American Rare Earth processing capacity to China and are now charging the US for the privilege of allowing it.

http://www.bloomberg.com/video/63400346/

 

 

Mon, 10/04/2010 - 11:52 | Link to Comment Anarchist
Anarchist's picture

The factory in this segment did not process raw ore. It mixed the refined materials from other suppliers and made the magnets. It is not China's fault that US mine owners and ore processors decided to shut down. Without a domestic source of the raw materials in the long run this factory was cooked anyway. There are still other domestic suppliers for magnets used in expensive military HW. Consumer goods require cheap magnets.

 

Mon, 10/04/2010 - 12:02 | Link to Comment carbonmutant
carbonmutant's picture

We could certainly use a little "Cavorite"...

Mon, 10/04/2010 - 13:27 | Link to Comment DosZap
DosZap's picture

THis is one more example of China, just taking FASTER steps in everything.

The majority of these So called RE's,being in China & SA, is a crock.

WE have CONUS all we need and way more, with the exception of one or two. 

The ISSUE, is the prices these were bringing, were SO cheap less tha 6mos ago, it's never been worth our miners time, to even MINE them.

Guess that time is over.These prices are in a HUMONGOUS BUBBLE,and if you were fortunate to get in on the Chinese miners, at $0.27 a share, you made a KILLING.

Now, WE(as in the US), will have to crank up the miners, and get this crap CONUS.

Their is no shortage,most are by products of other mining ops.

Mon, 10/04/2010 - 13:53 | Link to Comment LoneCapitalist
LoneCapitalist's picture

Does anyone know how much REE reserves are in the U.S.?

Mon, 10/04/2010 - 14:37 | Link to Comment Alfred E. Newman
Alfred E. Newman's picture

Now is the time to go into the landfill reclaimation business,

pull old computers and electronics our and strip them for REE's.

Next is to take all the packing that came with all the cheap

China crap we bought andstart tossing them into sea trailers

back to China.

Mon, 10/04/2010 - 15:37 | Link to Comment djsmps
djsmps's picture

Neodymium is the material used in magnets for many professional speakers. I would expect this will cause a price increase in a market that has been devastated.

Mon, 10/04/2010 - 16:05 | Link to Comment DosZap
Fri, 02/25/2011 - 07:46 | Link to Comment george22
george22's picture

About half of the tantalum consumed each year is used in the electronics industry, mainly as powder and wire for capacitors, owing to tantalum's particular ability to store and release electrical energy. This allows components to be exceptionally small and they are therefore favoured in space-sensitive high-end applications in telecommunications, data storage and implantable medical devices. Tantalum carbide's hardness makes it ideal for cutting tools.
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