Rare Earth Elements
Research for Online Investors

by John Dalt

9/02/10

Rare Earth elements are an area of investment you need to be aware of. “Rare Earths” are a collection of seventeen chemical elements. They are scandium, yttrium and the fifteen lanthanoids. Bet you never heard of them. That needs to change and I will tell you why.

Rare Earths are critical in modern technology.  Their use has increased dramatically in the last few years.  If you want to build extended range deep cycle batteries, flat screen televisions, wind generators or electric cars, you need rare earths.  Here are some of the elements and their uses:

Cerium (Ce)---Catalytic Converters for Diesel engines
Praseodymium (Pr)---alloying agent for aircraft engines
Neodymium (Nd)---High efficiency magnets & hard disk drives
Lanthanum (La)---Hybrid car batteries
Samarium (Sm)---Lasers and nuclear reactor safety
Promethium (Pm)---Portable X-rays & nuclear battery
Gadolinium (Gd)---Compact Discs & shielding for nuclear reactors
Dysprosium (Dy)---Electric motors
Terbium (Tb)---low energy light bulbs
Erbium (Er)---Fiber Optics
Europium (Eu)---Flat screens and lasers
Holmium (Ho)---Powerful magnets and nuclear control rods
Thulium (Tm)---Lasers & portable X-rays
Ytterbium (Yb)-monitoring equipment
Lutetium (Lu)---Oil refining

Virtually every “green” or renewable energy product involves rare earths.  Wind Turbines, hybrid vehicles and electric vehicles, LED lighting, Thin-Film Solar and Batteries are all dependant on rare earths for their efficiency.  Rare earths were discovered by a Swedish scientist in 1787 and are abundant in the earth’s crust.  High mining costs require we look for high concentrations to make the mining profitable.

In the 1990s China lowered the prices on rare earths, driving most non-Chinese mining and processing companies out of the business.  MolyCorp (MCP) mothballed Mountain Pass, Ca. in 2002.  After others were out of the business, China started raising prices on rare earth metals in 2005, and imposing export tariffs.  In 2006, China began limiting exports.

China has the high concentrations that make mining profitable, and lack environmental laws that make mining expensive.  95% of the world’s current supply of rare earths comes from China.  China has exported much of their rare earth mineral production, up to 75% in the past.  This summer they announced exports in the second half of 2010 would be cut 72%.

China will allow exports of 7,976 metric tons of rare earth metals in the second half of 2010, down from 28,417 tons shipped in the last half of 2009.  This has thrown the U.S. into a race to restart mining at Mountain Pass, California; else our military and alternative energy initiatives will grind to a halt.

Global demand for rare earths is estimated at 134,000 tons per year, with total production at 124,000 tons.  The difference is supplied from previously mined surplus supplies.  The Congressional Research office estimates that the U.S. holds 13% of the world’s reserves in rare earths, Russia 19% and China 36%.

Below are a few Rare Earth Element companies you may want to explore that operate outside of China.  Most are very small and would be considered “speculative.”  There appears to be good market interest in the last two; MCP and REE.

Argentx (AGXM)
Avalon Rare Metals (AVARF)-Thor Lake project in Canadian Northwest Territories
Hudson Resources (HUDRF)---Greenland-500 sq. mile highly concentrated rare earth metals deposit
Molycorp (MCP)---Mountain Pass, CA mine holds more than 2 billion pounds of rare earth oxides, scheduled to resume production in 2012.
Rare Element Resources (REE)-Bear Lodge property in Wyoming.

The market is waiting on employment data Friday morning. We don’t know but are suspicious it may “beat the street” expectations. Whatdoyathink, the true believers in Oh! Bama at the Labor Department aren’t going to do everything they can to “seasonally adjust” the numbers to look good?

Initial jobless claims were released this morning before market open, they beat predictions by 3,000 souls but we still had 472 thousand first time claims for unemployment last week.  Wow, that sounds like a recovery.

Productivity was down, we would suspect some impact from vacations and distractions with back to school.  Companies tend to "push it out the door and get it delivered", this causes end of summer supplier pipelines to fill. When the pressure is off, productivity slows down. Both of these are temporary.

A quick follow up on Tuesday’s MarketToday on crude oil. China’s total energy consumption jumped 11.2% during the first six months of 2010. Their crude oil demand increased 22% in the first quarter and 15% in the second quarter of 2010. China now imports 55% of its crude oil. The International Energy Agency (IEA) predicts China will account for more than 40% of the growth in global crude oil demand in 2010. Their consumption will rise 761, 000 barrels of crude per day this year to 9.13 million barrels per day, with use of more than 9.3 million barrels per day next year.  Watch inventories!

To the mailbag:
You're so right (about Oh! Bama), and I enjoyed your newsletter today. Cloward-Piven is at work, and if we don't do something soon to stop it, our country will never be the same.-subscriber G.C.

John’s reply:  That is his goal.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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