George Maniere: The term Rare earth is an oxymoron. Rare Earths are all around us and indeed are very common. What is rare is to find high concentrations of Heavy Rare earths in a mining friendly area, mines that are the open pit variety, sites that have the basic infrastructure needed for mining (electric and water) and finally mines that have the roads or waterways to move massive amounts of these earths to separation plants at a cost effective rate. This is indeed a rare combination.
Until the 1970’s North America were the miners of the world. When the mining companies found that they could outsource the mining to China and quadruple their profit margin they jumped at the chance. From that time the Chinese became miners of 97% of the world’s heavy rare earths. About a year and a half ago the Chinese declared that they would be cutting their exports of heavy rare earths by 50% and to add insult to injury they would be adding a hefty tariff to what they did export. This produced two results. First, it left the rest of the world scrambling to find the heavy rare earths that would be needed to continue the manufacturing of flat screen TV’s, I pads and who knows what secret high tech projects the military uses these heavy rare earths for. Secondly, seemingly overnight, it created a glut of these companies as worries of the Chinese stranglehold lit a fire under the mining industry. This sent the price of these stocks soaring trough the roof and worse it created a new stable of gurus that used their technical analysis to project prices for these companies and call for ridiculous valuations on these companies. Sadly my free site has seen people wiped out by these “gurus” as they saw a chance to make a quick buck from the fear of a world without the materials necessary for the creation of high tech products. In the last few months the mania has worn off and these companies have seen their share prices come back to realistic valuations.
While there are companies that can look forward to impressive gains, the problem in the rare earth sector is that there are 17 different rare earth elements and some are far more expensive than others. Each company must be looked at individually to determine the value of the element that is mined is worth and how quickly each of these companies will be able to get their mines into production. There is a realistic concern that there could be a glut of some of these rare earths as early as 2014.
After having studied the myriad of companies that have been created and in my opinion there are only two companies that have all of the necessary components to be successful – Tasman Rare Metals (TASXF) and Quest Rare Minerals (AMEX:QRM).
Tasman’s Norra Karr heavy rare earth element project in Sweden has been declared a property of “National Interest” under the Swedish Environment Act. This classification is highly significant in that it protects Norra Karr from any land use that may compete with future mining. This definition is based on the strategic value of the asset, the quality of its documentation, and whether the deposit represents a unique, natural asset.
The Swedish Geological Survey (SGU) considered the European Union’s (EU) raw materials initiative, proposed to gain long term access to raw material supply for Europe. Rare earths are identified as one of 14 critical metals and minerals for the EU within the next ten year period, and Norra Karr is one of the few potential sources for domestic production. The Norra Karr project is the only NI 43-101 compliant REE resource in mainland Europe.
Norra Karr is particularly enriched in dysprosium (one of the most coveted and expensive heavy rare earths) and can provide a secure supply to expanding green-tech and high-tech industries for many years to come
My other pick is Quest Rare Minerals (QRM). Quest is located in a mining friendly region of Quebec. Quest Rare is an exploration company focused on the identification and discovery of new world-class Rare Earth deposit opportunities. The Company is led by CEO Peter Cashin and a highly-respected management and technical team with a proven mine-finding track record. Quest is currently working on several high-potential rare earth projects in Canada’s premier rare earth exploration areas. The Flagship project of the company is the Strange Lake Project. The current scope of the project plans for the excavation of HREE material by means of an open pit mining and will provide 4,000 tons per day to a plant that is located in the vicinity of the deposit. While Quest has two other projects the Misery Lake project of north-eastern Québec and the Plaster Rock area of north-western New Brunswick. Quest continues to pursue high-value project rare earth opportunities throughout North America.
In conclusion, according to Premier Jean Charest, Quebec is more than ready to meet Japan’s metal needs. Charest will be visiting Japan to meet with business leaders and politicians to try to persuade them to participate in the ambitious development of northern Quebec.
Speaking to a contingent from Tokyo, Charest said that Japan has major needs. They are a prosperous country. They are leaders in technology, and, like other countries, they have a private sector that has accumulated a lot of money for investment.
Like much of the world Japan has been frustrated by Chinese control over a number of rare earth used in high-tech and military applications and is looking for a new source of supply. Charest said Quebec is a perfect option.
If my readers want to invest in two companies that have what it takes to be profitable I suggest they take a long hard look at these two companies because no matter how many PR firms are hired by the hundreds of companies, these two companies are the ones that have all of the ingredients to be successful and profitable.
Related ETF: Market Vectors Rare Earth/Strategic Metals ETF (REMX)
I have an MBA in Finance and 38+ years of market experience. In 2009, I knew the market was seriously oversold and committed a serious amount of capital to the market. Needless to say things went quite nicely but I always remebered 2 important things. Hubris equals failure and the market can remain illogical longer than you can remain solvent. Please feel free to email me at [email protected].