Rare Earth Elements: Fund recommendations?

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Rare Earth Elements: Fund recommendations?

I've been following this industry and some individual stocks have began to explose in the Rare Earth element industry with growing concerns regarding China cutting back exports to US etc. I don't have the time or stomach for individual stocks, but curious if anybody on site follows this industry and has any fund recommendations?

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Re: Rare Earth Elements: Fund recommendations?

I'm interested in the individual stocks as well if anyone has info.  This looks like a promising but risky area to invest in.  Travlin 

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Re: Rare Earth Elements: Fund recommendations?

Here's a REE fund.  I would tread carefully in this area though.  It's liable to become the new corn ethanol investment area.  The retail investors will be taken to the cleaners.  Also, if you're in the US, you won't be able to invest directly in it. 

http://www.ree-fund.com/index.php?navanchor=2110000

Here are some approximate alternatives:

http://seekingalpha.com/article/228484-rare-earth-metal-etf-substitutes

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Re: Rare Earth Elements: Fund recommendations?

Maybe you can find some fund related info here:

Lithium Investing News

Or maybe its just snake-oil.....Jeff

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Re: Rare Earth Elements: Fund recommendations?

check out this company. If China is indicating that they will cut back exports of REEs, wouldn't a company like this have upside?

http://www.marketwatch.com/story/dacha-acquires-rare-earth-operating-lic...

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Re: Rare Earth Elements: Fund recommendations?

I looked into this six months ago and found that MolyCorp was reopening the Mountain Pass Mine in California and that the Canadian Junior, Avalon Rare Metals, has discovered a huge deposit in the North West Terriories that has restricted access. It seemed to me that significant North American production was several years away. I decided that any stock was at that time too speculative and too far from being profitably for my taste when there were other opportunities. I decided that it might be worth investing in an ETF from a reliable provider if and when one was floated. That has not yet happened.

This area was reviewed a couple of weeks ago. http://www.proactiveinvestors.com/companies/news/9051/eleven-rare-earth-companies-to-watch-including-molycorp-lynas-greenland-minerals-avalon-arafura-and-more-9051.html

Lithium is the lightest metal known (atomic number 3) hence its value for mobile battery applications and while in great demand is not one of the rare earths (atomic numbers 57-71). The world's largest known lithium reserve lies in a brine lake in Bolivia which has the lowest production cost. Most other lithium producers are from more expensive hard rock although dried lake deposits are being investigated and could produce a significant, large, low cost deposit.

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Re: Rare Earth Elements: Fund recommendations?

So at this point, there are no ETF funds of rare earth metals?

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Re: Rare Earth Elements: Fund recommendations?

The tricky part here is that the "rare earths" (REs) are not all that rare.  They happen to exist in decent quantities all over the place.  While someone could easily start a fund that promises to invest in producers of REs the real value lies elsewhere.

The real trick is getting the REs separated from each other, and then combined into their alloyed forms that have the most use (think of the difference between an unseparated RE slurry and a pure neodymium magnet ready for use in a Prius and you've got the idea).

The analogy here is that you've just discovered that corn chips are really, really essential and valued by bar patrons everywhere and therefore decide to get financially exposed to corn production.  The issue is that the corn itself represents only 3% of the input value to the final retail cost of a bag of corn chips.  The major value proposition lies elsewhere.  

The problem here is that I cannot find any way to gain pure exposure to the better parts of the RE value chain.  Still looking...any and all ideas welcome, of course.

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Re: Rare Earth Elements: Fund recommendations?

A stock Steven Leeb has been recommending for a year or more is Lynas Corp LTD (symbol is LYSCF). It is up 170% since I purchased it. He still feels it has plenty of room to grow.

Real World Investing issued a Buy Lynas Corp. (LYSCF, LYC.AU), an exciting speculation on rare earth elements. 
 
This small ($240 market cap) Australian mining company is in possession of one of the world’s largest deposits of rare earth elements, a group of minerals used in a wide array of both low- and high-tech applications. China dominates the market with a 90-percent share and they recently make a substantial investment in Lynas. And with good reason: Worldwide demand for these vital elements should soon outstrip supply, causing prices to soar.

Lynas’ stock is traded in Australia under the symbol LYC and here in the U.S. on the “pink sheets” under the symbol LYSCF. For more details on Lynas, head over to the Leeb’s Real World website, where we’ve just posted the latest issue.

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Re: Rare Earth Elements: Fund recommendations?

Waterboy wrote:

A stock Steven Leeb has been recommending for a year or more is Lynas Corp LTD (symbol is LYSCF). It is up 170% since I purchased it. He still feels it has plenty of room to grow.

With all due respect, after Stephen Leeb sung the praises of Enron (just before it tanked), I lost all respect for him.

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Re: Rare Earth Elements: Fund recommendations?

bcc87 wrote:

So at this point, there are no ETF funds of rare earth metals?

Not that I'm aware of.  There is a relatively new lithium ETF though, LIT.

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Re: Rare Earth Elements: Fund recommendations?

Interesting Article

Rare Element Resources: Potential Short Opportunity We have witnessed a fair share of bubbles over the past 15 years: internet stocks, housing, crude oil, and Chinese stocks. We have had some success in identifying "bubbles" in individual stocks and warning the investment community about specific issues (including HUSA at $20.35 see here and PCBC at $5.11 see here). Possibly the most voracious bubble in recent memory is occurring with Rare Earth Element ("RE" or "RE elements") stocks. We have done some work framing the opportunities and risks within the RE elements space. After sifting through the hype, we believe there is tremendous risk in RE stocks and highlight Rare Element Resources (AMEX: "REE" $12.74/ TSX: "REC") as a potential short opportunity, or at least a stock investors should avoid.

 

Rare Element is a Canadian based company that owns the Bear Lodge mine located in the northeastern corner of Wyoming. The stock price is up over 500% since early July and over 65% in the past three days. With the euphoria of the strong move in RE element stocks, speculators have bought first and asked questions later. We believe Rare Element investors will wish they had done more diligence before piling into a company with a potentially worthless plot of land. We believe Rare Element is a heavily promoted stock with questionable management and massive risks to a business plan that under the rosiest scenario will not be at full production until 2015 or 2016. By that time, we expect the world could suffer from a glut of RE supplies. As a result, we believe current investors face at least 70% downside from current levels.

Rare Earths - Not That Rare

"Rare earth elements" are 17 minerals on the periodic table. The elements are used in various applications, typically in miniscule quantities. There is a reason many investors had not heard of the RE elements since middle school science class. Simply, rare earth elements represent a very small market. According to the USGS, a mere 124,000 tons of RE were consumed worldwide representing a market size of LESS THAN $2 BILLION (source: Reuters and USGS).

Over a year ago, stories began to appear about China's dominance in RE mining with 97% of the world's production and exploration efforts in South Africa, Brazil, Canada and the United States (see this story dated September 2009 here). As with most hyped spaces, this story has been recycled on a daily basis by news agencies, internet chat rooms, and even company IR firms. Following the IPO of MolyCorp (NYSE: MCP) in July and recent Chinese export quotas, RE element prices and stocks have skyrocketed. China is now using its market clout in RE as a political statement, increasing export quotas and withholding exports to Japan. The result has been a further spike in RE element prices.

We believe elevated RE prices are a temporary phenomenon for two reasons. First, we believe China will likely concede and begin exporting RE elements again as political pressures mount. The Chinese have a history of flooding markets with a massive supply of raw materials or end products, and could resume exporting and crush RE prices at any time.

Second, the term "rare earth" is a misnomer. According to the USGS: "despite their name, most rare earths are not particularly rare." The USGS estimates that the total worldwide reserves of RE are 99 million tons, or 800 years of supply at current consumption rates.

Tons of Rare Earth Reserves

China 36,000,000 United States 13,000,000 Soviet Union 19,000,000 Total Worldwide 99,000,000 Source: USGS  

In addition, most rare earth consumption takes place in China, which consumed 65% of supply according to the USGS. Most of the goods produced in China with RE element inputs actually end up as exports to the rest of the world (and these products are not subject to any quotas). Japan consumes another 26% of supply, meaning these two countries consume over 90% of worldwide supply. According to the USGS, the U.S. imported less than 7,000 tons of RE in 2009 and actually exported a greater quantity than it imported. (see here .pdf).

When MolyCorp's Mountain Pass mine is running in 2012, management has stated that they expect to produce 20,000 tons of RE. This represents THREE TIMES the amount of RE imported to the U.S. in 2009. The U.S. Geological Survey estimates that China's Bayan Obo mine has more than 40 million tons of RE elements (see here), which is enough to supply the world for over 300 years alone. Congress and the U.S. military have also expressed concern for RE element needs for certain weapons. We estimate that the demand by the U.S. military is likely less than 1,000 tons a year, and will easily be addressed by Mountain Pass.

In addition, most rare earth consumption takes place in China, which consumed 65% of supply according to the USGS. Most of the goods produced in China with RE element inputs actually end up as exports to the rest of the world (and these products are not subject to any quotas). Japan consumes another 26% of supply, meaning these two countries consume over 90% of worldwide supply. According to the USGS, the U.S. imported less than 7,000 tons of RE in 2009 and actually exported a greater quantity than it imported. (see here .pdf).

When MolyCorp's Mountain Pass mine is running in 2012, management has stated that they expect to produce 20,000 tons of RE. This represents THREE TIMES the amount of RE imported to the U.S. in 2009. The U.S. Geological Survey estimates that China's Bayan Obo mine has more than 40 million tons of RE elements (see here), which is enough to supply the world for over 300 years alone. Congress and the U.S. military have also expressed concern for RE element needs for certain weapons. We estimate that the demand by the U.S. military is likely less than 1,000 tons a year, and will easily be addressed by Mountain Pass.

Tons of RE elements extracted

China 120,000 India 2,700 Brazil 650 Total Worldwide 124,000

Tons of RE elements consumed

    % extracted China 80,000 65% Japan 32,000 26% Other 8,000 6% Source: USGS    

We expect the world to be awash in RE supply when/if Rare Element's Bear Lodge is producing in 2015 or 2016. Currently, the worldwide demand for RE outside of China is a meager 44,000 tons, and only 12,000 tons excluding Japan. While we view RE elements as a growth market, we believe RE recycling and RE alternatives could mute market growth. We reviewed plans for six pubic companies in the RE space, and combined, they plan over 82,000 tons of production of RE per year [Lynas (LYSCF.PK) (22k), Arafura (20k), MCP (20k), Avalon (AVARF.PK) (5k), Quest Rare (5k), Rare Element (10K)]. This represents almost two times the current demand outside of China and excludes massive private projects in India, Brazil, South Africa, Australia and the US. One estimate suggests that over a year ago there were 120 RE element mining projects globally at various stages (see here). And this was BEFORE the recent spike in prices. Given the massive expansion of worldwide RE mining, we expect the world to experience a glut of RE elements by the time Rare Element's mine is up and running. As a result, we believe it is a faulty assumption to extrapolate "bubble" pricing into future projections.

Red Flags at Bear Lodge

Turning our attention to the tiny Canadian speculative outfit, we could not help but find the ticker amusing: REE. Sadly, we had immediate memories of the pain Internet.com created near the top of the dot.com bubble. Rare Element currently has a market cap of over $400 million. Their latest financials show about $10 million of assets and zero revenues. They had $5 million of cash on balance sheet at their last filing. According to their last 20-F, Rare Element has two full-time employees and five part-time employees (see here). This "exploration and development" company has spent less than $7,000.00 over the past three years (see here). The management team has put out a steady stream of press releases, but we have little doubt that these promotional releases will ultimately be irrelevant for Rare Element until we are much closer to the middle of the decade.

The name of the property where Rare Element is conducting its RE element testing is Bear Lodge, located in the northeast corner of Wyoming. Spartacus Capital, the predecessor company to Rare Elements, acquired the Bear Lodge mine in 2002 for less than $1 million. The company expects production of the plant to begin in 2015. According the Rare Elements own documents, over the past 38 years, three highly sophisticated mining companies, MolyCorp, Hecla Mining (HL), and Duval Corporation, owned and explored Bear Lodge for RE elements. After 44 drill holes, none these sophisticated miners continued to drill, all choosing to abandon their efforts and eat the sunk costs. We believe one of the reasons is the low ore grade of Bear Lodge. According to Rare Element's investor presentation, Bear Lodge has an ore grade of 3.5%, less that half of MolyCorp's Mountain Pass (8.2%) and a third of Lynas' Mount Weld (13.6%). Based on our research (we ask readers to conduct their own research on this topic), this makes Bear Lodge's prospects for successful operation extremely dependent on RE element prices staying at existing levels. If our earlier assumption is correct (along with the apparent conclusion of three highly sophisticated miners), and prices of RE elements normalize, it will be uneconomical to mine Bear Lodge (assuming the asset even possesses enough to participate in the future of this over supplied market). So while many RE stocks have increased significantly on higher RE prices, most, including Rare Elements, will never be in a position to take advantage of today's prices.

Given the abundance of RE elements worldwide, access to RE may not be that problematic, but processing RE elements into usable raw materials is expensive, difficult and environmentally destructive. In fact, Mountain Pass was originally shut down not only due to a flood of cheap RE elements from China, but also for environmental concerns. To justify Rare Element's lofty current market cap, we believe prices of RE not only need to stay extremely high, but Rare Element must build processing capability. A Bryon Securities report estimates this would cost Rare Elements $350 million. In addition, Rare Elements would have to overcome significant permitting and environmental concerns, along with significant start-up expenses. With two full employees, a tiny balance sheet, and prospects for significant dilutive equity deals, common sense suggests something does not pass the smell test.

We put little value on Rare Element's other projects: gold mining at Bear Lodge and Eden Lake. Eden Lake is a property Rare Element acquired recently for less than $1 million. Rare Element management also claims potential for gold mining. Earlier this year, Newmont (NYSE: NEM) walked away from a JV they had with Rare Elements on this property for a sum total of $27,000 worth of paid expenses (6/8/2010 filing outlines the termination of their JV). Newmont will receive a net smelter royalty should anything be found, but cut their losses on development and exploration (they spent almost $3 million in development and refused to spend more). So Bear Lodge was basically given to them for free by Freeport in exchange for a net smelter royalty, which they repurchased for a total of $50,000 from Freeport and Newmont. Given the sophistication of Newmont, we believe gold project offers little value.

Red Flags Around Management

The quality of a management team is extremely important for any small cap company. But when your management bench is as small as Rare Element's, assessment of management is vital. We found it curious that Rare Elements shares its address in their filings (325 Howe St., #410, Vancouver, British Columbia, Canada V6C 1Z7) with at least six other businesses (Pacific Opportunity Capital run by Chairman and CEO Donald Ranta, CFO Mark T. Brown and Secretary Winnie Wong; Animas Resources [ANI.V]; Tenant Payment Systems; Avrupa Minerals LTD. [AVU.V] formerly Everclear Capital; Cordova Industries; and Sutter Gold Mining Inc. [SGM.V].

Our concern was already elevated given the commingled nature of the office address, but nothing could have prepared us for the shock of seeing management's bios and history. Most management teams we talk to are consumed with running one company. We believe it is a significant red flag that critical members of Rare Element's management team are engaged with more than five companies currently. It is our understanding that Rare Element's secretary Winnie Wong and CFO Mark T. Brown are principals of something called Pacific Opportunity Capital LTD that shares office space with Rare Elements. Mark T. Brown's bio in the 20-F lists 18 companies where he is the current or former CFO or director. Almost all of these companies are Canadian-traded penny stocks. A simple google news search reveals that Mark T. Brown has issued press releases for at least three other companies in the past two weeks, including Pitchstone Exploration, Avrupa Minerals and Tarsis.

Chairman and CEO Donald E. Ranta was previously with Greenstone Resources, a mining play that is currently trading in the penny territory. Mr. Ranta is also on the board of Avrupa Minerals, along with the CFO Mark T Brown and secretary Winnie Wong. Secretary Winnie Wong was (until recently) also the secretary of Portal Resources [PDO.V], an oil and gas penny stock. She is also the CFO for something called Avrupa Minerals, currently trading in the 41 cent range in Canada. Then there’s Apoquindo Minerals, of which she is also the corporate secretary, and there is Animas Resources LTD [ANI.V] of which she is CFO (another 43 cent stock). She’s also been associated with Fox Resources as their CFO, Deal Capital as President, and Mediterranean Minerals as CFO.

Conclusion

One recent rational voice in RE elements is the CEO of Neo Materials [TSX: NEM], Constantine Karayannopoulos. As a company with 85% market share in processing neo powders, Karayannopoulos is heavily incentivized to promote RE elements. However, in several recent presentations, he has expressed concerns around the bubble in RE elements. By way of background, Neo Materials has exclusive access to mine heavy rare earths at the Pitinga mine in Brazil, a fact investors have seemed to overlook when comparing NEM's stock to other RE names. On September 15, 2010, Karayannopoulos stated:

It's very, very dangerous for people to be committing hundreds of millions of dollars to projects that will take another five years or more to see the light of day.

He went on to caution, as if he were specifically alluding to Rare Elements:

At the end of the day, rare earths are not that rare. Bubble economics aside, there just isn't enough value in the ground to justify digging the stuff up and processing it.

While it is refreshing to hear a CEO talk candidly about the market, we believe Karayannopoulos warning to investors has gone unnoticed.

We have recently begun our research on Rare Element Resources and are disturbed by the red flags we have found. We believe momentum investors face significant risk in speculating in shares at unjustifiable price levels. We view Rare Element's stock as the definition of the greater fool's theory. When it breaks, there will not be one reasonable investor to provide liquidity to the sellers on the way down. If RE element prices remain high in five years, Bear Lodge could have some value. If we are correct and RE prices drop given a glut in supply, the Bear Lodge mine could be worthless. We expect to report back after conducting further due diligence.

Disclosure: Short REE

http://seekingalpha.com/article/231266-rare-element-resources-potential-short-opportunity

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Re: Rare Earth Elements: Fund recommendations?

Another negative on REE.....that was written today.

http://seekingalpha.com/article/231484-thursday-options-update-hlf-ree-xlb-bidu-dal-rsh-mot?source=yahoo

Rare Element Resources, Ltd. (REE) The Canada-based company that was the target of bullish options trading just 24 hours ago has transformed into a hub of bearish activity. Shares in Rare Element Resources, which own the Bear Lodge mine in Wyoming, fell as much as 27.05% from yesterday’s high of $13.71 to an intraday low of $10.00. Despite the substantial decline today the current price of the stock is still up roughly 260% since August 20, 2010, when shares were around $2.80 each. Pessimistic players took to the options field on REE to place bearish bets on the stock. Investors expecting shares to continue lower picked up put options and sold call options in the November and December contracts. Traders picked up approximately 2,500 puts at the November $10 strike at an average premium of $1.12 each, and purchased another 1,500 puts at the lower November $7.5 strike for an average premium of $0.37 apiece. Put buyers make money if REE’s shares slip beneath the average breakeven points at $8.88 and $7.13, respectively, by November expiration. Other traders sold 1,200 calls at the November $12.5 strike to receive an average premium of $1.07 per contract. Call sellers at this strike are indicating they do not expect Rare Element Resources’ shares to recover above $12.50 before the contracts expire next month. Investors short the calls keep the full premium pocketed on the transaction as long as the calls expire worthless. Pessimism spread to the December $10 strike where bearish investors scooped up 1,800 puts for an average premium of $1.42 a-pop. Put buyers make money if, by December expiration, the price of the underlying stock falls another 14.2% to breach the average breakeven point to the downside at $8.58. Options implied volatility on REE jumped 27.6% to 129.42% in late-afternoon trading.

Be very careful in these waters. I feel very frustrated at this moment since there seems to be little that I can get a handle on. I have pulled out of so much of this market. Gold & Silver seem so high & the ETFs in commodities can we trust the front running? Cash sounds like it will be trash so where to go now....hum maybe it is time to look at a farm but I really don't have much time to mess with it.

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Re: Rare Earth Elements: Fund recommendations?

Nice find on the REE article, idoctor.  As I said, the retail investors will get taken to the cleaners.  Hang in there with the gold and silver.  And a farm in farm country can usually be leased out.

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Re: Rare Earth Elements: Fund recommendations?

Idoctor

Thanks for the article.  It is very persuasive.  Expands on what Chris said. 

Travlin 

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Re: Rare Earth Elements: Fund recommendations?

FWIW, I made 54% this year on a palladium ETF - North Americal Paladium (PAL) in my self-directed IRAI'm planning to liquidate my holdings there (35% tax hit for early withdrawal covered by earnings)  and use the money to buy physical silver.

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Re: Rare Earth Elements: Fund recommendations?

Safewrite thanks for sharing your ideas. I am looking at more Silver also. What form of silver are you looking at? I thought the Canadian Silver Maple Leaf might be better than the Eagles since it has $5 legal tender value as compared to the one dollar on the Eagle. The more I think about how corrupt things have become I rather hold physical whatever than let someone confiscate, devalue or use my hard earned money & pay me next to nothing in return.

My plan is pretty simple to never stop working til I die (I like what I do). People generally rust up before they wear out without a purpose driven life.

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Re: Rare Earth Elements: Fund recommendations?

idocor,

We have a little half-ounce pure silver, in rounds--from APMEX, whom I highly recommend. We chose sillver in small rounds because we thought they would be more negotiable. In a SHTF scenario, you might not need a gold piece for much of anything, but silver-sized transactions could be more commonplace.

We also have a small amount of pre 1964 "junk" silver, which are 90% or higher silver -content American coins. Those we purchased though Northwest Territotial Mint, who are really brokers so they ask you to allow a lot of time for them to find what you order and promise to pay you the market difference if they cannot find it. If they cannot get some for you but the price of silver goes up you make money, but have no physical silver. If the price of silver goes down, you LOSE money, and still have no physical metal.  We will not be using them again.

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Re: Rare Earth Elements: Fund recommendations?

check out this article about an ETF coming...

http://247wallst.com/2010/10/27/rare-earth-etf-impact-the-tail-wags-the-...

thoughs?

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Re: Rare Earth Elements: Fund recommendations?

here is ETF symbol; link...

http://www.streetinsider.com/ETFs/Rare+Earth+ETF+Has+Speculators+Droolin...

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Re: Rare Earth Elements: Fund recommendations?

Here's The Truth About The Rare Earth Stocks That Are Surging Right Now

Provided by The Business Insider, October 28, 2010: 

The rising global demand for rare earth metals - the elements needed to make items like hybrid electric cars and laptop batteries - have caused the value of rare earths mining companies to soar in just a few months.

We've told you about one company, Rare Element Resources, that saw its stock surge 1200% in the last year.

But China's outright monopoly in the industry, along with fears that it will cut down on its rare earth exports, are driving plenty of other stocks higher too.

But some of these companies have not even generated any revenue yet or lack the adequate facilities to even mine rare earths.

So what's the reality? A lot of these stocks are rising right now based on a narrative. That narrative is as follows:

  • China, which controls the rare earths market, decides to export less.
  • Demand continues to rise globally for the good at the same time.
  • Hey, we have this land! With rare earths in it! And we're gonna mine it.
  • But it's not open just yet, you have to trust us, it's going to be great.

So, there are clear macro problems with this thesis.

  • China doesn't cut off supply, and many of these mines can't break even on their mine investments because prices don't go high enough.
  • Demand declines due to a global slowdown.
  • There's rare earths all around the world, and if production ramps up quickly, prices could easily collapse, just like it has before.

Many companies also have serious problems on a micro level. So if you believe in the thesis, you may want to look deeper at each company and see what the truth about their mines looks like.

Click here to see the companies >

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Re: Rare Earth Elements: Fund recommendations?

Rare-Earth ETF Launches http://online.wsj.com/article/SB10001424052702304316404575580522593097444.html?ru=yahoo&mod=yahoo_hs

By MATT WHITTAKER

Van Eck Global launched the first U.S.-listed fund investing exclusively in producers of strategic metals including so-called rare earths.

These metals, used in electronics and military applications, have come under the spotlight recently as China, which produces virtually all of the globe's rare earths, has cut back exports of the materials.

The new fund—Market Vectors Rare Earth/Strategic Metals ETF (trading symbol REMX)—aims to track the performance of companies that have the capacity to derive at least half of their revenue from producing, refining or recycling the metals.

It seeks to replicate the price and yield performance of the Market Vectors Rare Earth/Strategic Metals Index. Companies in the index include Australia's Iluka Resources Ltd. and Lynas Corp., U.S.-based Molycorp Inc., Canada's Avalon Rare Metals Inc. and Hong Kong-listed China Rare Earth Holdings Ltd.

As of Oct. 13, Australia had the largest weighting in the index, with 23.9%, followed by Canada with 19.81%, the U.S. with 18.77% and China with 14.84%. Even though China produces 97% of the world's rare earths, the index is limited to equities available to foreign investors.

Strategic metals include manganese, titanium and tungsten. Rare-earth metals are a subset of this category and include neodymium, used to make lightweight magnets, and cerium, used in LCD polishing powders. They have more specialized uses and are often more difficult to extract in economical quantities than base metals like copper, tin and lead.

The Van Eck fund joins a growing number of ETFs seeking to capitalize on the boom in commodities in recent years. The most popular have been physically backed versions that track gold. Physical base metals ETFs have also recently been announced. ETFs that track indexes have also proliferated, including in more-obscure metals, like the Global X Lithium ETF.

"We believe REMX offers investors balanced exposure to the sector first by including strategic metals as well as rare earths and second by including processors and recyclers, not just mining companies," Jan van Eck, a principal with Van Eck Global, said in a statement accompanying the release of the fund.

There are few immediate alternative sources of rare earths than China. The price of some of the 17 rare-earth materials has risen as much as 10-fold in the past two months alone as some Japanese companies reported delays in receiving shipments from China due to more-stringent customs checks by Chinese authorities.

Japan said China is using an unofficial ban on exports to the nation as a bargaining chip in some territorial disputes. The country is scrambling to find new sources, and has already held talks with India, Vietnam and the U.S.

Germany has been the most publicly vocal critic of China's actions within the European Union and says it plans to raise the issue with the World Trade Organization as well as at the forthcoming G-20 meeting in Seoul next month.

China denies any wrongdoing.

In July, Beijing announced a 72% cut in its rare earths export quota for the second half of the year to 7,976 metric tons, from 28,417 tons during the same period last year.

Write to Matt Whittaker at matt.whittaker@dowjones.com

http://seekingalpha.com/article/233006-rare-earth-metals-rare-commodity-or-inflated-bubble

Even as commodities and base metals seem to be the flavor of the season especially with the falling US Dollar, a lot of traders and investors have been excited about the investment opportunities in rare earth metals, amid rising demand and geographically concentrated supplies. Rare earth elements, or rare earth metals, are a collection of seventeen chemical elements in the periodic table, namely scandium, yttrium, and the fifteen lanthanoids. The use of rare earth elements in modern technology has increased dramatically over the past years. The story of rare earth metals is mostly one of China producing and exporting while Japan, America and everyone else is importing.

Rare earth metals are vital to new technologies such as iPhones and flat screen televisions, green energy technology such as wind, solar and geothermal and critical to the future of hybrid and electric cars. The price hikes in rare earths has been meteoric: Cerium, widely used in glass making, is up nearly tenfold since 2009. Prices of neodymium and terbium, needed to make magnets, are up more than 40 %. In fact, rare earth metals play a vital role in cutting edge technology, from hybrid cars and catalytic converters, to superconductors, and precision-guided weapons.

RE Metals And China: Rare Earth Elements and Heavy Rare Earths are a strategic choke point held in China’s hands, as they produce 97% of REEs. The near-monopoly China has in producing 97 % of the world's supply of rare earths has long been known among industrial users, but it came under the international spotlight after reports that Beijing halted shipments to Japan over a territorial dispute with Tokyo last month.

A Case Of Rare Earth Metals Bubble: Rare Earth Metals have held up well during the financial crisis, as they aren’t exchange traded commodities and aren’t subject to speculative trading like gold, silver and other metals. This removes much of the manipulation concern akin to precious metals, especially Gold and Silver.

Meanwhile, China's increasing reluctance to supply the rest of the world with rare earths is whipping up a gold rush-like frenzy to find new producers of the elements. The ultra-quick global push to find alternative supplies also has investors asking if a classic commodities bubble is in the making. After all, China is well know to manipulate trade to its advantage and with a geographical kick start with a majority of RE resources under its control, the Rare Earth metals could very well be the big story in the coming years. China has manipulated its currency in the past in its well-known Chinese Currency Drama. China, from its earliest civilizations, has always been a clever economy and it's certain that it would not enter into economic suicide by blindly imitating the west. It is also quite clear that the Chinese government would not allow their currency to go down with the dollar ship, as most of the export dependent companies of China, which form a big chunk of the current Chinese economy may lose steam as most of them work on very thin margins. Although economists continue to be skeptical about the goodness of the Chinese currency moves, there is no doubt that China is ready to resume greater flexibility with its yuan.

Meanwhile Thompson Reuters has quoted Jonathan Barratt, managing director of Commodity Broking Services in Sydney, as saying that eventually U.S. policy will determine whether the bubble bursts in rare earths with a Pentagon report due, on its plans for securing rare earths to U.S. Congress this month.

They have the metal in the ground and if they decide they can cope with the environmental impact and start digging it up, you will see prices adjust quite rapidly.

The United States does hold a relatively small amount of rare earth metals and one such holding, Molycorp (MCP), is publicly traded. It has its hands in everything from green energy to electric vehicles, to high tech, to defense. In fact, shares of Lynas Corp. (LYSCF.PK) and Molycorp Inc., the biggest non-Chinese rare earth firms, have more than doubled since July, when China announced it was reducing exports by 72 % in the second half.

India To Export RE Metals: It seems that we can't keep the Asian giants out of any commodity or sector specific equation. Even as China is cutting back 72% of its exports of Rare Earth metals citing environmental issues as the reason for the cutbacks, India aims to restart production and exports of rare earths late next year for the first time since 2004 . The Indian government is reportedly spending 1.4 billion rupees ($32 million) on a 5,000 MT capacity plant in Orissa, amid global concerns China may be taking advantage of its dominance of resources to squeeze export supply.

Disclosure: No positions

See Molycorp CEO here..video. http://www.washingtonpost.com/wp-dyn/content/video/2010/10/27/VI2010102708268.html

I shorted Molycorp today at 39.83 & still holding it short.

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idoctor
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Re: Rare Earth Elements: Fund recommendations?

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idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Rare Earth Elements: Fund recommendations?

How Rare Earth elements are used nice slide show.  http://www.cnbc.com/id/40027130?slide=1

 China's quest for a green future built on rare earths metals seems a world away from Ren Limin as he casts lumps of one of the metals in a chemical-spattered shed thick with acrid fumes.

Stringer | AFP | Getty Images

Ren tends cauldrons of sputtering acid, additives and ore in a shed in north China's Inner Mongolia region, smelting lanthanum, one of the 17 rare earths that Beijing hopes will power the nation up the clean technology ladder.

Yet Ren and a workmate use few safety protections as they stir and poke the red-hot cauldrons. Holes in the roof and windows act as main ventilation.

"This place doesn't have anything but it's got mines. We live off the rare earth mines," Ren, who gave his age as 32 but looked years older, told Reuters journalists who visited Baotou, a city of 1.8 million people about 650 kilometers (404 miles) west of Beijing that calls itself the "capital of rare earths".

"It's not that dangerous. You get used to the smells, but there's also the heat," he said.

China says it must curb rare earth ore sales abroad for the sake of its environment, though its own rare earths industry is marked by pollution and primitive production that tightening export quotas alone appears unlikely to staunch.

China supplies 97 percent of the world's rare earths, used in computers and clean energy technology such as wind turbines and electric cars. The battery of a Toyota Prius hybrid car uses 10 to 15 kg (22-33 lb) of lanthanum.

Beijing has sparked international concerns by curbing exports of rare earths which it says it needs for its own green growth.

Ren was unaware of the diplomatic fuss and met questions about environmental and health problems linked to production with gruff bemusement.

"We sell it on. That's all I know. I'm not sure who buys it or what it's for," he said of a pile of lanthanum bricks lying on the floor, among discarded cotton gloves and scrap.

He worked without a mask but wrapped a towel around his face and donned a visor when pouring the molten compound into molds.

He said they made 1,100 yuan ($165) a tonne, working 12-hour days, with a few days off every two weeks.

The plant he works in lies in a northern corner of Baotou, a city and surrounding expanse of Inner Mongolia that produces more than half of the world's rare earths, especially the lighter ones, from the fenced-off Bayan Obo mines.

The government says it wants to end unfettered exploitation of rare earths, and has been shutting unlicensed mines and smelters. But China's biggest producers still pollute at levels far beyond what would be allowed in the United States, Australia and other countries now looking to ramp up production as Beijing curbs exports.

Near Baotou city, where Baotou Steel Rare-Earth Group processes the metals on a vast scale, villagers said the resulting toxins were poisoning them, their water and air, crops and children. At least one official has backed that claim.

"If we take into account the resource and environmental costs, the progress of the rare earths industry has come at a massive price to society," Su Wenqing, a Baotou rare earths industry official wrote in a study published last year.

The "Middle East" of Rare Earths

Baotou wants to remake itself as a crucible of China's ambitions to turn its rare earths into green-tinged gold.

The city has a rare earths high-tech zone, a shiny Rare Earths Tower for officials and investors, and Rare Earths Street.

The city's Rare Earths Park features carvings of scientists and leaders who pushed China to turn its reserves into an engine for economic growth, including Deng Xiaoping, the revolutionary veteran who guided the nation to market economic reforms.

"The Middle East has oil, and China has rare earths," a carving records Deng as saying in 1992.

"China's rare earths resources can be likened in importance to the Middle East's oil. They have immense strategic significance and we must certainly deal with rare earths issues with care, unleashing the advantages they bring."

The Baotou Steel Rare-Earth Group is at the heart of China's ambitions to turn rare earths into a lucrative ingredient of growth. It dominates rare earths production in Inner Mongolia, where most of the ores come out of the ground mixed with iron ore, which is the parent company Baotou Steel's main business.

China wants enough rare earths for its expansion into clean technology, especially advanced wind turbines, hybrid and electric vehicles and other innovations.
  
Minutes from the mines of Bayan Obo north of Baotou city, hundreds of wind turbines jut above the grasslands, their three blades and parts using rare earths in compounds that give them strength and lightness.

"Mother Ship" Beset By Pollution

At the heart of Baotou's rare earths smelting, those environmental aspirations are blighted by pollution that can cut visibility around the main plants to a few dozen meters.

Su Wenqing, the Baotou industry official, wrote that companies there had dumped tailings, including mildly radioactive ore scrap, into local water supplies and farmland and the nearby Yellow River, "creating varying levels of radioactive pollution."

Repeated faxes and phone call inquiries to Baogang city authorities and Baotou Steel Rare-Earth Group were not answered.

The outer walls of the Huamei plant proclaim its ambitions to become the "mother ship" of Chinese rare earths production.

But villagers near the rare earths plant live in a blanket of fumes, a constant reminder of how much China still allows near-unfettered industrial growth.

Separating out the minerals is usually done by dousing the rare earths in acids and other chemicals. The tailings from Huamei and other nearby metals plants end up at a 10 square kilometre dam.

The reservoir can hold 230 million cubic metres of the dark, acrid waste. That, according to a sign on its banks, is equal to 92,000 Olympic-sized swimming pools.

The residents of Xinguang village said the chemicals from the dam have been seeping into the underground waters that feed their wells, crops and livestock, including fluoride.

They complained of nausea, dizzy spells, arthritis, migraines, wobbly joints and slow-healing injuries.

"The pollution is too much for even our crops to grow, and a lot is from the rare earths plants," said Wu Leiji, a ruddy-faced farmer. "It's not getting any better. In fact, it's worse."

"Look at the kids. They're the worst off. What will all this pollution do them?"

A report last month in a Chinese newspaper, the Yangcheng Evening News, cited experts supporting the villagers' complaints of damaged health from rare earths and other smelting pollution.

"When we boil the water to drink, this white scum forms on top and it tastes bitter," said Guo Gang, a 58-year-old farmer.

"We used to grow vegetables, but now all we can grow is corn, and even the crops for that are far smaller than 10 years ago."

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New sources of supply

Looks like the Japanese have been planning for their future REE supply. Apparently a major source is the bottom of the Pacific Ocean. So the only remaining considerations are the technological challenge, the economics of production and the international agreement on deep ocean mining. Almost a done deal. Wink

Quote:
The Japanese team estimated the size of the discovery at around 80 billion to 100 billion metric tons (88 billion to 101 billion short tons), nearly a thousand times more than current proven reserves of 110 million tons as estimated by the U.S. Geological Survey.
Despite their name, the minerals are not particularly rare, with the British Geological Survey identifying 53 separate deposits around the world, of which just half a dozen are either in production or development.

Some deposits are considerably larger than those identified by the Japanese team. A 0.39 square mile section of ocean floor near Hawaii containing 25,000 tons of rare-earth elements is dwarfed by Lynas Corporation Ltd.'s Mount Weld deposit in Western Australia, which contains 1.4 million metric tons of rare-earth oxides in a comparable area.

http://online.wsj.com/article/SB10001424052702304760604576425230759407002.html

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Beware Rogue Pricing In REMs Market

Some firms operating in the alternative assets market are being accused of ‘rogue pricing’ in Rare Earth Metals (REMs), selling kilo bags of REMs at hugely inflated prices as an ‘investment’ to hundreds of retail buyers.

One such firm, operating out of rented offices in Canary Wharf, is handing out commissions of 60% and more on any monies their sales desks persuade out of investors. The firm – London Metal Group – can afford to be generous to its staff, as it is currently offering a kilo of samarium at over £190, when the FOB wholesale price out of China is less than £25 a kilo. LMG today is also offering cerium at over £102 a kilo, when the latest China wholesale price puts it at less than £14 a kilo. LMG’s prices are displayed clearly on its website.

Salesmen for the firm are telling investors (if any of them notice) that the price differential is due to add-on costs of transport, storage and wholesale market pricing, but most brokers in fact are able to obtain REMs at sizeable discounts to the prices quoted by Metal Pages, so the true differential between LMG’s prices to investors and the price paid for metals is likely to be very much bigger. As the brokers also fail to explain how they can give away 60% of investors’ money in commissions, then investors need to steer clear – at least 70% of your money could be going straight into a broker’s pocket, so that any ‘investment’ potential for the future is already wiped out.

Apart from the enormous price gap between the latest market prices quoted on Metal Pages and the LMG offers, gossip amongst traders in the REMs market also raises concerns about verification and security of the metals being sold to retail investors by LMG. The usual slick sales operation is telling ‘punters’ that their kilos of everything from cerium to samarium are safely tucked away in secure vaults in places such as Switzerland, but one of LMG’s ‘suppliers’ is a Seychelles-based company on which little material information exists, so that the quality and security of the metals is far from guaranteed.

Furthermore, gossip in the City suggests that the people behind these companies have been involved in previous scam trades and already face charges from the SFO – with some of them expected back in court in January as part of the ongoing ‘Operation Steamroller’ case. Meanwhile, traders are openly saying in the coffee bars around Canary Wharf that those who were scamming in the dud shares and carbon credits markets are now active in REMs.

Any scandal in the metals market – where the FSA does not have jurisdiction, and which can only be dealt with initially by the police or DTI – will come at a bad time for those firms trying to operate legitimately in the REMs market, and who are currently trying to get REM investments accepted for SIPP holdings. A scandal in rare earth metals will knock back those attempts, and hurt more ethical broking firms.

As we point out in our overview of REMs, “Beyond equity or fund based investments, involvement in the REM market is difficult for the private investor, and any ‘alternative’ offerings in this area need to be treated with real caution, if not scepticism. It is a difficult and complex area of precious metals because of the scientific and end-user complexity, the relatively opaque pricing, and changing variables of supply and demand”.

That’s not to say there aren’t solid offers out there for retail investors – just that LMG probably isn’t one of them.

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