Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Rare Earth Metal Stocks

Commodities / Metals & Mining Jun 03, 2011 - 02:35 PM GMT

By: Zeal_LLC


Best Financial Markets Analysis ArticleNearly a year has passed since Molycorp hit the stock markets with its IPO.  And considering this stock’s popularity today, it’s astounding that this IPO had flown under the radar for most investors.  Last July MCP shares debuted below the pre-IPO targeted price range, and traded on the low side of that range for weeks before it finally caught a bid.  MCP didn’t quite have the fanfare as say LinkedIn or other IPOs over the last year.

Though the rare-earth sector was getting some play in commodities circles, with the mainstream media even providing a bit of coverage, investors weren’t all that familiar with the strategic importance of Molycorp’s end product.  Most investors didn’t think twice about its unique niche, and by its name they presumed MCP was just another base-metals miner.

But boy how quickly things have changed with some light now shined into Molycorp’s corner.  Over the past year more and more investors have been educated on the significance of what is contained in MCP’s booty, and this understanding has translated into some serious gains in the rare-earth-stock sector.  I doubt even LinkedIn will be able to boast a 400%+ gain after only 10 months of trading like Molycorp!

So what is so special about Molycorp’s product?  Molycorp produces rare-earth elements (REEs), and these minerals are special thanks to their growing importance in high-tech manufacturing.  REEs are indispensable in gadgets ranging from iPads to laser-guided missile systems.  They are also essential in the growing “green technology” movement, with usage in such things as hybrid vehicles and wind turbines.

As an investor, knowing REEs as “tech metals” will get you by.  But if one truly wishes to be successful in leveraging the newly-illuminated bull market in these exotic commodities, a deeper understanding of REEs is imperative.  And this understanding is as unassuming as knowing what a rare-earth element actually is.

In scouring the markets for REE stocks I’ve seen many investors mistakenly buy or waste time researching companies that they thought were REE-centric, but actually weren’t.  Countless folks have been fooled by the “rare” tag, mistakenly thinking a company’s “rare-metal” deposit is a “rare-earth” deposit.  Now I can see how this may be confusing since rare-earths can in fact be referred to as rare-metals.  But interestingly a rare-metal is not necessarily a rare-earth.  Confused yet?

Various mining companies tag their lithium, beryllium, niobium, tantalum, and even platinum-group-metals deposits as rare-metals deposits.  While this isn’t necessarily incorrect, none of these are actually rare-earths.  Rare-earth elements (often referred to as rare-earth minerals) hold a specific place in the periodic table of elements, something most of us are familiar with from our high-school chemistry days.

Specifically this REE group is comprised of the entire lanthanide series (atomic numbers 57 through 71), along with two other elements that were added to the mix based on their similar chemical properties.  Most folks have probably never heard of the individual REEs.  In fact, if they were shown the list they’d probably think they were fabricated names from comic books (neodymium, promethium, europium, ytterbium).

Most folks would also be amused to find that rare-earths are not actually rare.  Provocatively many REEs are as common as the base metals.  According to the U.S. Geological Survey, even the least-abundant REEs are nearly 200x more common than gold!  “Rare” comes into play in these elements’ geological concentrations.  Oddly enough, it is quite difficult to find a deposit with a high-enough concentration of REEs that is economically feasible to mine.

This rarity is one reason why Molycorp’s Mountain Pass deposit has been getting so much attention.  Mountain Pass is one of only a handful of REE deposits in the world that has proven economics.  And this deposit is even more special because it is one of the only sources of reliable REEs outside of China.

For many years China has essentially been the world’s only source of REEs.  This transpired as a result of its ability to completely price out the competition in the small rare-earths market.  The low-cost and unregulated production from China’s large deposits had forced the closures of nearly all non-China REE mines in recent decades.  As a result, China is now responsible for over 95% of the world’s REE supply.

Interestingly China’s global rare-earth monopoly hadn’t presented too much of a problem on the consumption front.  There were plenty of REEs to go around, with the demand appetites of high-tech countries like Japan, the US, and others well-satiated.  But this happy balance has recently come to a grinding halt, and folks are now clamoring to figure out where they will get their next dose of REEs.

Over the last several years a perfect storm of fast-growing demand and China supply cuts has sent shock waves through the once-reliable REE market.  On the demand front, this modern age of technology has quickly made REEs quite-relevant commodities.  To put this in perspective, consider that global demand has grown from about 1k metric tons per year in the 1950s to about 135k metric tons in 2010.

And this demand growth doesn’t look like it will let up anytime soon.  I’ve seen estimates that annual REE demand will rocket by another 50%+ by 2015 (to around 200k metric tons), and then to 250k metric tons by 2020.  This huge increase in demand puts a lot of pressure on the sole source of REE supply.  Unfortunately, China doesn’t have the production bandwidth to meet these needs.

But China’s infrastructure and capacity limitations are only part of the problem consumers are faced with today.  The biggest problem is China itself, as this mineral-rich country has recently decided to place a stranglehold on the rare-earths market by slashing exports.  And we’re not talking a modest pullback here.  In 2010 China dropped its annual REE export quota by a staggering 37%.  It then announced an additional 35% haircut in the first tranche of its H1 2011 export quota.

So why did China do this?  Well, it depends on who you ask.  If you ask China, it’ll tell you one of the big reasons for these export cuts is to preserve its own natural resources, which allows it to stockpile for its own consumption.  And this seems reasonable since China’s internal demand growth is actually rising at a faster clip than the rest of the world’s.

China also claims it wants to get its arms around the environmental damage REE mining has caused, while in unison cracking down on illegal mining.  And indeed some of its mines have laid waste to their surroundings.  Even its “permitted” mines are notorious for poor environmental management, which is of course one of the big reasons why it was able to produce its REEs cheaper than the rest of the world.

Though I’d like to believe China cares for its environmental welfare as much as it claims, most folks are able to read between the lines.  There may be some smidgen of truth to its official REE-export-reduction rhetoric, but let’s be honest.  China recognizes the growing strategic importance of REEs, and also understands that it’s going to take years for other countries to develop enough REE mines to remove dependence on its hoard.  So why not take advantage of the situation by strong-arming the rest of the world?

China’s massive reduction in exports has produced two main effects that have certainly been to its benefit.  First, REE prices have gone through the roof.  In February 2011 China REE exports had fetched north of $100k per metric ton, an all-time record and a 600%+ price increase over just 7 months.  And prices are still going higher today!

The second effect is that China now has a major strategic advantage over its high-tech competitors.  The consumers that have relied on China’s REEs for new-tech manufacturing and R&D are in dire straits.  Not only are they forced to pay the going rate for REEs since most have no substitutes, many are finding reduced inflow and/or an outright cutoff.  These consumers must either throttle back their production or build their factories/products in China.

Overall China has effectively usurped control of all facets of the REE market.  And regardless of the reasons, not much can be done about it.  Unfortunately many non-China REE consumers are dead in the water.  All they can do is snatch up China’s export scraps, and anxiously await supply from newly-developed REE mines elsewhere in the world.

The first of these newly-developed mines will come from the likes of Molycorp and Australian miner Lynas Corporation.  But while the REEs from their operations will provide much-needed relief, they will only partially fill the widening supply deficit.  And because the cat is already out of the bag on these mines, the investor in me is particularly interested in the next generation of mines that will follow.

Fortunately higher prices always entice new players onto the scene, players that will take on the task of developing these next-generation REE mines.  And with a whole slew of miners that have recently added REE projects to their portfolios, stock investors now have a lot of choices.

Unfortunately the REE supply that some of these emerging miners will deliver can’t get to the markets soon enough.  Developing any mining operation takes a lot of time and capital.  And due to their complexity, REE mines tend to fall on the right side of the time/cost bell curve.  Not only is it harder to find economically-feasible deposits, even at today’s prices, it is much more difficult to process the ore.  It is going to be a long and hard journey getting these next-gen mines online.

REEs are a fickle group by geological standards.  Interestingly one big hurdle that must be overcome is an REE deposit’s inherently-radioactive nature.  All REE deposits contain some level of thorium and/or uranium.  And since many have higher-than-desired levels of these contaminants, they require extra permitting from a national nuclear regulatory agency for disposal, storage, and transportation.  This extra step is of course time-consuming and expensive.

Rare-earth deposits also tend to have very complex metallurgy.  REEs are found in different rock types, with each deposit housing a unique composition of the individual elements.  And it is quite difficult to crack a deposit’s metallurgical code to where the processing recoveries are high enough so there is minimal loss of the individual elements.  Once a workable concentrate is produced, then comes the arduous task of actually separating it into individual oxides.  Finally the REE oxides must be refined into alloys that consumers can actually use.

Unfortunately there aren’t many metallurgical facilities outside of China that are capable of doing this complex separation and refining.  Therefore many of the miners are forced to build their own facilities, which requires significant capital.  Considering these challenges, most newly-discovered REE deposits won’t see the bottom side of a shovel.  The miners either won’t be able to figure out the metallurgy, or they won’t be willing to commit the capital it takes to develop a vertically-integrated operation.

Another factor vexing the miners is saturation.  Provocatively even though the REE market is desperate for more supply, there’s only so much room for it.  Demand is indeed skyrocketing, but the raw volume required to meet this demand isn’t all that much.

Unlike larger mining sectors where volume from new mines hardly makes a dent in the economic balance, any volume from new REE mines will be material in closing the gap.  In actuality it will only take a handful of new REE mines coming online to catch up with demand.

And it is this reality that is absolutely essential for investors to understand if they seek to successfully leverage this REE bull market.  Even though there are hundreds of companies around the world entering the race to develop the next generation of REE mines, only the first handful to cross the finish line will thrive.

It’s also important to realize that outside of Mountain Pass and a couple of other mines that will achieve commercial production in the near term, these next-generation mines are still 5+ years out.  Investors must exhibit keen foresight in choosing the companies that possess the right combination of quality and timely projects.

At Zeal we were interested in which mining companies are capable of developing these next-gen mines.  And this compelled us to embark on a mission to uncover the best of the best.  In our latest round of expert research we examined the universe of stocks that hold REE projects in the US and Canada, and whittled them down to our favorite half-dozen that are profiled in our newest report.

Surprisingly you won’t find Molycorp in this report.  Even though MCP is a great company with a bright future that has opened investors’ eyes to the potential that exists in this small commodities sector, it doesn’t fit the bill of next-gen mines.  What does fit the bill are some elite juniors that will likely round out the non-China REE infrastructure build-out that MCP got started.

In this report you’ll learn that not all REE deposits are created equal.  You’ll also learn that a deposit like Mountain Pass doesn’t come close to possessing the full gamut of individual REEs that various high-tech manufacturers require.

As mentioned REE deposits vary greatly in their individual element weightings.  And interestingly Mountain Pass’s resources have a greater than 99.5% weighting in what is called the light rare-earths (LREEs) category.  These light elements (by atomic weight) are more common, and are thus less expensive.  The real sweet spot of REE deposits are those that contain a higher concentration of the rarer and more expensive heavies (HREEs).

Though Mountain Pass’s lights are still in high demand, there continues to be a huge void in HREEs available to the market.  This means those next-gen mines that hold higher concentrations of heavies will have off-take customers lining up at their doors.  And we don’t overlook this fact in our report, with several of our favorites rich in HREE resources.  Buy your report today to learn about some high-potential next-gen REE-mining companies that should deliver both LREEs and HREEs to market.

This brand-new REE stocks report along with our other recent reports that focus on gold and silver stocks will serve to build our shopping list for when the markets favor capital deployment.  And these deployment decisions are made in our acclaimed weekly and monthly subscription newsletters.  Subscribe today, we have a stellar track record with all 583 of our stock trades in the last decade or so averaging annualized realized gains of +52%.  You won’t be disappointed!

The bottom line is with fast-growing demand and major disruptions in the supply chain, REEs have quickly become hot commodities.  And the alarming economic imbalance that has emerged has caused prices to skyrocket.  These higher prices, strong future demand-growth prospects, and the desperate need for non-China REE mines has brought REE-mining companies out of the woodwork that are now in a fast-and-furious race to bring new supply online.

Even though the next-generation REE mines are still well out on the horizon considering the complexities that go into mine development, some well-executed research should bring investors to those mining companies that are best-positioned to capitalize on this REE bull.

By Scott Wright

So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence , that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research as well as provides in-depth market analysis and commentary. Please consider joining us each month at …

Thoughts, comments, or flames? Fire away at . Depending on the volume of feedback I may not have time to respond personally, but I will read all messages. Thanks!

Copyright 2000 - 2011 Zeal Research ( )

Zeal_LLC Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules