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Rare Earths Are About to Become a Lot More Rare
Interest in Rare Earths is starting to heat up in a dramatic fashion, and it something you should keep on your radar. So named because they were hard to get in the 18th and 19th century, these once obscure elements have suddenly become the focus of several converging trends in the global economy, as they are the key ingredient of magnets. There are 17 in all, divided into light (cerium, Ce, lanthanum, La, and neodymium, Nd) and heavy (dysprosium, Dy, terbium, Tb, and europium, Eu).
It turns out that you can’t build a hybrid or electric car, a wind turbine, thin film solar, LED’s, high performance batteries, or a cell phone without these elements. One Prius uses 25 kilograms of the stuff. You also can’t fight a modern war without rare earths, being essential for radar, missile guidance systems, navigation, and night vision goggles.
That’s where things get interesting. China now produces 97% of the world’s rare earth supplies, much of it coming from small mines operating by criminal gangs where it is safe to say, concerns about environmental considerations are nil. Last year China announced that it may start restricting rare earth exports, possibly banning several, it is thought, in order to force foreigners to buy more of their downstream electronic products. Such a ban could begin as early as 2012.
The world market for rare earths is tiny now, amounting to only $1.4 billion a year. But Toyota intends on doubling its production of Prius’s from one million to 2 million units in the near future, while China and South Korea want to boost their combined electric and hybrid production by 1 million units by the end of next year. Demand for wind turbines is going off the charts, thanks to massive government subsidies in Europe and the US.
America was once the world’s largest producer of these elements, until it was undercut on prices by China (see chart below), and all US production ceased. The threatened Chinese export ban has prompted a group of investors to reopen Molycorp’s Mountain Pass California mine, a jackrabbit ridden, rattlesnake infested pit an hour southwest of Las Vegas. The mine was the world’s largest producer of cerium and neodymium, and provided the europium that was used to produce the first color televisions. The group has filed with the SEC for an IPO that seeks to raise $500 million to reopen the mine and a nearby refinery.
Now congress wants to get involved, proposing a rare earths strategic stockpile for the military, and offering subsidized loans to fund it. Remember what that did for oil? Every peak in oil prices in the last 30 years coincided with the government topping up its strategic petroleum reserve.
Rare earth prices have already started to move, with cerium doubling to $4/pound since 2007, and neodymium up 500% to $23/pound during the same period. Rare earths don’t have any futures or ETF’s to trade that I know of, so the only way to get involved is through the miners themselves, which involves an added element of risk. Take a look at the established players, which include Avalon Rare Metals (AVARF.PK), Great Western Minerals Group (GWMGF.PK), Rare Earth Metals (RAREF.PK), Lynas Corp (LYSCF), and Molycorp, after it goes public.
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 the “Today’s Radio Show” menu tab on the left on my home page.
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If indeed these are the actors set on setting the world ablaze, they are more than likely the same ones who are involved in Greece, Portugal, Dubai, and elsewhere. Presenting: Moore Capital, Brevan Howard and Paulson & Co... Oh and JP Morgan and, ahem, Goldman Sachs.1977 Toyota Pick-Up Truck AC Compressor
"One Prius uses 25 kilograms of Rare Earth elements."
What? I find that very, very hard to believe.
Lithium is not a rare earth element, and I am sure a Prius hasn't 25 kilograms of permanent magnets on board.
Links, or more detail, please!
Thanks, MHFT, excellent, eye-opening information.
China knows the strategic importance of mineral resources to its economy, military, and daily life. China is busy buying, investing, partnering, etc. around the world to secure the mineral resources that any nation needs to survive and prosper.
In contrast, the U.S. for years has been selling off strategic stockpiles, putting tens of millions of acres in Wilderness, prohibiting mineral exploration and development, and producing "financial products".
China knows the endgame is hard assets and a real economy, not "financial products" and a "service economy".
Thanks for the info MHFT.
What about lithium in Bolivia? It's reported they are the saudi arabia of lithium but don't have the infrastructure to tap it just yet, and they are a wild card government.
I don't see any companies with Lithium in Bolivia, but these below all claim to have some lithium resources (from a search in my database: http://miningalmanac.com/filters/ )
Avalon Rare Minerals Inc | AVL : TSX
Canada Lithium Corp | CLQ, CLQMF, 46B : TSX.V
Canasia Industries Corp | CAJ : TSX.V
Channel Resources Ltd | CHU : TSX.V
Consolidated Abaddon Resources Inc | ABN : TSX.V
Consolidated Spire Ventures Ltd | CZS : TSX.V
Dajin Resources Corp | DJI, DJIFF, C2U : TSX.V
Everton Resources Inc | EVR : TSX.V
First Gold Exploration Inc | EFG, FGEXF, F12 : TSX.V
Globestar Mining Corp | GMI, 34G : TSX
Gossan Resources Ltd | GSS : TSX.V
Marifil Mines Ltd | MFM : TSX.V
Panthera Exploration Inc | PNX : TSX.V
Romios Gold Resources Inc | RG : TSX.V
Sirios Resources Inc | SOI : TSX.V
Lithium companies were surprisingly prominent at the the big PDAC mining convention in March. I guess the battery biz is humming.
there was some special report on TV about bolivia's lithium cache and how they are trying to figure out how to tap it. Morales being a wild wild card doesn't attract much capital interest.
speculator:
Thanks for your list and link to your database.
You might want to add Western Lithium CDA to your list. They are developing the Kings Valley, NV lithium deposit.
We've added it:
http://miningalmanac.com/Western_Lithium_Canada_Corp_WLC/
Thanks again!
Thanks, will do.
Terbium & Europium for me.
After I finish buying more Au, Ag, Pt, Pb (& and associated lead delivery systems).
Lanthanum Rush!!
I'm gonna mine me some Prii.
dysprosium bitchez!
The "Original Gold Bug" at $35/oz, the "Original Silver Bug", coining the phrase "Silver is the poor mans gold" and the authortity on rare earth metals = JAMES DINES.
It's interesting that we have so many Green technologies dependent on the stuff China exports. In this situation, I wonder who would be impacted the most from a VAT ?
So far we have tires and chicken feet targeted for export duties and should expect more items to be added.
BTW, I had my dose of Rare Earth several years back and am still recovering from the effects. Can you believe they played live at an engineering school ?
Keep it Simple , go out and buy 200 oz. of Silver
not much time left .... Get out of Paper Assets ..
300 oz. is better...
OK, so at the risk of sounding like a total moron, how would one invest in, say GWMGF and/or AVARF?
Disclosure: I am not really interested in investing in either, I'm simply curious from an intellectual exercise as I assume you can't just fire-up an eTrade account and buy buy buy.
Actaully you can just fire up the E*trade account.....the stocks are traded OTC in the US. Use limit orders only and track the real price action on the TSX (available on any reasonable financial web site)
Interesting. Thanks.
Cheers -
If china bans exports, the EU and US will overtax the import of their stuff till compensation is met thus starting a tradewar and China backing off.
Also, when the price goes up a littlebit more, that stuff will suddenly also be found in Mongolia and India that share the same tectonic plate.
Also, if you ban the export, other stuff from the EU and US will get more expensive or also get a ban. If you look to US corn, soja exports... to china, we could just starve them. China would find itself with it's back against the wall here.
Unless Russia teams up with them, and then we have a world devided in 2 each bullying each other till we get a incident that creates a full scale war.
The only problem is that China can survive a trade war, the West can't. We are totally dependent on foreign manufacturing.
lolChina.
Why do we even pretend that they are a cooperative player in int'l trade?
Rare Earths are actually quite common. There are many deposits with exploitable grades (1-4% TREO). The trick is the refining and separation. There is limited expertise out there for that. It is labor intensive and, shall we say, not very green. Most of the listed companies have no infrastructure for producing commercial quality rare earths. GWG and AVL will likely be first to produce. GWG already has 20% of the worlds market for Samarium Cobalt through its subsiduary "Less Common Metals". AVL also has has one of the few Indium properties in North America.
Disclaimer: Positions in AVL, GWG, AZM, RES. (TSX listings)
GWG is the only one who can actually refine these metals, no? I tyhink they bought an outfit in England that does that.
If any other other miners does come on-line, I believe they have to send their concentrates to CHINA or Japan, as we do not (anymore) have that technology.
Please correct me if I am wrong!
A quick search of our mining stock database shows 25 companies with REE or heavy minerals. Here are a few off the top, in alphabetical order:
Acme Resources Inc | ARI, ARIZF, 34IA : TSX.V
American Manganese Inc | AMY : TSX.V
Avalon Rare Minerals Inc | AVL : TSX
Azimut Exploration Inc | AZM : TSX.V
BHP Billiton Ltd | BHP : ASX
Bolero Resources Corp | BRU : TSX.V
Commerce Resources Corp | CCE : TSX.V
Consolidated Abaddon Resources Inc | ABN : TSX.
Cornerstone Capital Resources Inc | CGP : TSX.V
To see the full list, go here and use the Minerals filter to select "REE" and "heavy minerals" :
http://miningalmanac.com/filters/
I don't mean to spam -- I read ZH every day and just happen to have a mining database site.
Personally I like commerce resources and tantalum..
Your almanac is a awesome resource....thanks for sharing.
Glad you like it. I'm self-interested though -- it's in beta now, but will be a business soon (ads and sponsors at first, then later selling subscriptions for the detailed resource data, which is laborious to gather). Right now we have 650 stocks with all resources data, adding about 100 per week. Lots of new stuff coming soon -- by the end of this week we should have pages showing the 43-101 resources, production & cash costs for every property that each company owns. Right now you can just see the company-wide totals and of course use the screener.
Thanks for the test drive of the Mining Almanac. Great tool!
Mining stocks: Many a slip between the cup and the lip.
All too true. How else do you invest in stuff like REE, though? Best you can do is look for companies with 43-101 compliant resources and reserves, or even better with producing mines and positive cash flow selling at decent multiples to asset values or earnings.
Interesting article.
Thank you for sharing.
Cerium (oxide) is used for polishing glass.
Almost all high power solid-state lasers use Neodynimium; most fiber optic amplifiers use Erbium.
Lanthanum is a key ingredient in lead-free glass. Interesting tidbit: most lead-free glass doesn't transmit UV light like leaded glass does, so the worldwide ban on leaded glass keeps getting pushed back. It seems the medical industry needs Pb.
I'm surprised that this is getting press so early. I would have expected a larger crisis so more draconian actions could be taken, or GS could position themselves for huge profits.
Terbium, another of the expensive rare earths, is used in high strength permanent magnets (think wind turbines).
These rare earths are an interesting bunch.
My initial thought would bve to buy the METALS themselves, at least the ones stable at room temp and typical humidity.
GS already has, they bought a huge stake in a former Chevron Mining rare earth property a few years back....
GS just sold their stake in the California mine about to IPO.
I don't buy what Goldman sells. One man's opinion.
Uhhh... I don't know about you guys, but with all the stuff happening in Greece, I don't think it's a good idea to invest in Europium.
Europium is an interesting metal. It is, I believe, the most expensive of the rare earths.
Like any red color on your screen? Thank you, Europium.
...can’t fight a modern war
That junk isn't the makings of a modern war. Try the words CDS (Cellular Delivery System), Epigenetics, nanoparticles...etc.
Shit, the consumer idiots swallow tons of crap every day without a care in the world.
Shhhhhhhhhh!!! Don't tell everyone!!!
Shutting down competition? What does this mean?