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Stans Energy Corp V.HRE

Sector: Metals & Mining | Sub-Sector: Industrial Metals & Minerals
Alternate Symbol(s): HREEF

Stans Energy Corp > Got that Warm and Fuzzy feeling yet?

January 05, 2013 - 01:49 PM 401 Reads
Post# 20801708
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Got that Warm and Fuzzy feeling yet?


Miners ready to take punt on rare earths

Please read this article and comment on the author's assessment that it is time to "punt" the REE space. Doesn't give shareholders a warm, fuzzy feeling.  You might also note my comment at the end of the article.

(Financial Times) -- Rare earth elements, as every commodities nerd knows, are in fact not very rare at all. Some, such as cerium and lanthanum, are among the more abundant elements in the earth's crust.

But it is unusual to find the 17 elements that are classified as rare earths in sufficient quantities for economic extraction.

In 2011, however, concerns over the scarcity of these elements -- which are now used in everything from mobile phones and lightbulbs to weapons systems -- sent prices skyrocketing.

"There was a bubble in 2011, after demand for rare earths had rebounded from the financial crisis and the Chinese cut export quotas, reducing supply," explains Carolyn Dennis, analyst at Dundee Securities. "Fears of a shortage caused stockpiling, driving prices to unsustainable levels."

Since then they have plunged, with prices for some rare earths falling as much as 90 per cent in international markets. This year alone, prices for the most important elements have fallen between 50 and 70 per cent, according to Industrial Minerals, a specialist publication that monitors rare earths trading.

Nevertheless, a number of mining companies are still hoping to capitalise on the strategic importance of these rare raw materials.

China currently accounts for more than 90 per cent of global supply -- partly because their production can be a messy and environmentally problematic business -- but some miners are trying to develop rare earths projects to meet demand for production outside China, particularly from countries such as Japan and Korea.

It has not been an easy 12 months for the sector's leading companies, though.

Molycorp and Lynas -- the most advanced in terms of developing commercially producing mines -- have had a torrid year.

Molycorp's share price has fallen nearly 60 per cent this year and, earlier this month, its chief executive resigned, following a range of operational and financial difficulties.

Australia's Lynas, shares in which have lost more than 40 per cent of their value, has been hit by delays to its processing plant in Malaysia, which faces local opposition.

Analysts suggest that they will not be the only companies to run into problems.

"The supply chain does not need the several hundred companies that are vying to bring projects along," says Gareth Hatch, the founding principal of Technology Metals Research. "At present, we are tracking 45 projects that are at a more advanced stage of development but I doubt that more than seven or eight will be standing in a few years time."

The relatively small market for rare earths is one constraint for would-be miners, with the elements used in only small quantities in end products. Global demand of 115,000 tonnes this year is forecast to rise to 200,000-240,000 tonnes by 2020, according to rare earths consultancy Imcoa.

Depressed equity markets have also put pressure on so-called resources juniors -- the exploration and early stage development companies -- across the sector.

"For resources juniors, the belief is that as many as 500 small-cap exploration companies will disappear over the next 12 months, unless there is an improvement in their ability to raise equity capital," says Peter Cashin, chief executive of Quest Rare Minerals.

In trying to pick rare-earth miners with better long-term prospects, investors and analysts are increasingly focusing on projects that target production of the so-called "heavies" -- a rarer subset of the elements.

In particular, the US Department of Energy has designated five of the 17 rare earths as "critical", with supply deficits expected until 2018.

Neodymium, a light rare earth, and dysprosium, a heavy, are used in permanent magnets for wind turbines or electric vehicles.

Europium, terbium and yttrium, all heavies, are used in flatscreen electronics and energy-saving lightbulbs, areas projected to have strong demand growth.

Molycorp and Lynas look set to satisfy demand for light elements, with room for a third operator, such as Canada's Iamgold, which could quickly start up byproduct production at an existing mine.

But analysts point to Quest's Strange Lake project in Quebec, as well as projects run by Tasman Metals in Sweden, Matamec Explorations and Avalon Rare Metals in Canada and Alkane Resources in Australia, as those nearest to going in to production of heavy rare earths.

"Most of the deposits that are richer in the heavy rare earths contain rare-earth-bearing minerals that have never been processed before," notes Mr Hatch at Technology Metals Research. "With enough time and money, companies can eventually find a technical solution. For some of these projects, however, the cost of production could outweigh the value of the material that you produce."

Also of concern is the extent to which new technology or alternative materials will reduce manufacturers' usage of rare earths -- especially if their prices start to rise again.

Investors will therefore be looking for companies that can crack the metallurgy of processing heavy rare earths and secure investment or offtake agreements with end users.

"The difference this time round is that there is increased investor knowledge about the lights versus the heavies and which elements are really critical," says Ms Dennis at Dundee Securities.

"Investors understand that the end markets for these elements are small and there are more companies available for investment than will be needed by the market at the end of the day."



Leave a message...
    Dave Lowe  5 minutes ago

    There is absolutely nothing new here in this article, with the exception for the update that prices of REEs have fallen and are down at the moment.

    Other than that this is the same information that has been out there for months. And of course, the company that is CLOSEST to production with HREEs, Stans Energy, was completely ignored. Meanwhile, companies like Matamec, Quest, Avalon, and Tasman, which may have wonderful deposits but lack either the metallurgy or the processing facilities, or both, are trumpeted as the “leaders” in the HREE race.

    Stans Energy has BOTH the historic metallurgy and the processing facilities – right now. They lack some of the finishing tailings, but that’s it. But while all of these companies lack funding and strategic off-take agreements Stans Energy announced that before the end of the first quarter 2013, they will announce “binding off-take agreements.”

    So, I’m not sure what the purpose of this article was. Perhaps the bubble is completed deflated now that outlets like CNN are announcing the DOOM of the REE space. For a contrarian, that is probably the perfect time to start buying the best companies in the space.

    jura5423  5 days ago

    Too bad the author missed the one firm that will most likely be the very first non-Chinese vertically integrated operated mine to market operation. Its name is Great Western Minerals Group Ltd (GWMGF) of Canada and it's about to reveal its latest PEA (Preliminary Environmental Assessment) report stating its material and financial situation among others.

    jura5423  5 days ago

    Those who have not invested in GWG upon the publication of this article have lost big. Stock went up nearly 20% today.

    Anti-AntiUSPropaganda  4 days ago

    China has no use in the world. So they try to force us to need them by buying our free market resources with their gigantic government shell corporations.

    This would be like the US government buying up Russia's Uranium supply and then telling Russia they need us to make nukes.

    This is absurd. All free countries must divorce this fascist monstrocity immediately.

    Anti-AntiUSPropaganda  4 days ago

    All nations need to remove Chinese companies from their mines. Chinese don't own the world's rare earths, they are trying to buy them all. This is an illegal practice in the free world, to buy all the resources to set a monopoly on them.

    All free nations need to remove Chinese companies from their mines. There are plenty of rare earths in the world. Chinese are trying to create a shortage where there was none, by buying up mines and give themselves a reason to exist.

    China is unneeded in the world. From 1949 to 2002 China did not participate in the world and no one missed them. Now they come to find that the world has no need for them, besides cheap labor, which can be had anywhere. So they are trying to artificially create a need for themselves, where before there was no need for China. China doesn't need to exist. Go back to sleep China, the world will continue without you like we did for most of the modern age.