Ticker Trax 'Free Friday': China Risks, Gold, and GeoMegA Resources (V.GMA)

Danny Deadlock Danny Deadlock, TickerTrax
1 Comment| February 28, 2014

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Stockhouse Ticker Trax is published to subscribers every Monday (annual cost only $195). We focus on best-in-class high growth small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.

Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.

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CHINA RISKS ARE FUEL FOR GOLD

In 2014 we face risks from China’s banking system and now it is coming to light that an estimated 40% of the 100 million tonnes of iron ore sitting in China’s ports has been put up by steel traders as collateral for loans – which are now being called. And you can guarantee iron ore isn’t the only industrial commodity this is being done with. Coal has not been tied to the rogue traders but there are many very large coal loans hedging on default.


This is only the tip of the problems for China’s shadow banking system but it means the 2014 outlook for industrial metals is very “questionable”. Here is an article referencing this:


China’s credit crisis could spell 2012-like iron ore price collapse

http://www.mining.com/chinas-loan-crisis-could-spell-2012-like-iron-ore-price-collapse-30146/


For Gold and Silver this is GREAT news. Gold in particular has been rising steadily the past month and much of it has to do with China. A brilliant strategist and money manager recently mentioned in the media that he believes the rising price of gold is either signalling another recession, deflation, or a serious crisis in China.


If you live in mainland China you must be more than a little worried about the banking system. Real estate resembles a bubble and with several hundred million (newly minted) middle class sitting on cash, where else do you “safely” park your money? For many they feel the only option is gold.


GeoMegA (TSX:V.GMA, Stock Forum) 63 cents) - www.ressourcesgeomega.ca


I started coverage of GMA back in January with Ticker Trax subscribers and featured the company publicly in this weekend report on February 15th at 37 cents:

 

http://www.stockhouse.com/opinion/ticker-trax/insights/2014/02/15/v-gma-37-cents-%E2%80%93-ree-game-changer


Last week the stock ran to $1.06 on a technology (REE Related) news release but it was then hit with very aggressive profit taking. That in itself is a long story so I won’t get into it here.

 

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For January and early February Ticker Trax subscribers, the short term gains were dramatic but even for readers of this free weekend report it could have generated gains well in excess of 100% since February 15th.

 

GeoMegA is not intended as a short term speculation for Ticker Trax subscribers but I know that is the nature of these small stocks so there is little anyone can do about price volatility.

 

This weekend I wanted to let free weekend readers (who own GeoMegA) know that the plan (at least at this stage) is to follow GMA a bit longer term and a bit more high profile because it is a unique and rather fascinating industry that surprisingly affects almost everyone - Super Magnets.


There are several high quality rare earth (REE) companies around but GMA has two sides to the story that spread risk and provide stronger “blue sky” potential - It would help to reference my February 15th article (link above)

 

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As the tech sector booms and the long term outlook remains very strong, I would like to target some exposure (diversification) to a different aspect of the world's insatiable demand for all things tech - the commodity side. In particular what metals are "critical" to technology overall and without them, world economies would grind to a halt?


While that sounds rather dramatic - it is very true.


Any one of us simply needs to take a look at our everyday life to see what would happen if we didn’t have Super Magnets also known as Neodymium Magnets or RE Permanent Magnets – these are specifically related to the Magnetic Elements known as Neodymium, Dysprosium and Praseodymium.


 

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As technology development and demand continues to grow, we will see the supply of these specific rare earths tighten up even further.

 

China has 95% of the world market and as a result has controlling influence over supply and pricing. But the primary usage of Magnetic Elements is motors and generators in windmills and electric vehicles.


As China continues to be over-run with incredible pollution problems, I have to think that in the years ahead they will be forced to accelerate the deployment of electric vehicles, trains, and wind-farms. This would strain an already tight market for Neodymium, Dysprosium and Praseodymium.


FEB 25 (BEIJING)—The World Health Organization on Tuesday called on China to improve its air quality and urged residents of Beijing to stay indoors as the capital city suffered a sixth day of hazardous-level air pollution.


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On Monday the 24th GeoMegA released news concerning the next stage of separation in their new (hopefully groundbreaking) process to produce commercial rare earth elements from the oxide. In the months ahead we will see more on this but Monday’s news was very positive and very important to the industry as a whole.


This morning GMA announced a $3 million financing at 60 and 70 cents with a 90 cent warrant. This was also an important development as it positioned funds or institutional investors who will work with them in the future. I refer to this as “having skin in the game”.


In March I will elaborate more on where the potential is with GeoMegA and why there may be an opportunity to capitalize on this GIANT Magnetic Elements industry – whether that is through GMA or some other public rare earth company – that will be up to individual investor.

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Disclosure: Danny Deadlock owns 75,000 shares of GeoMegA

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Tags: INDUSTRIAL METALS & MINERALS

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Before investing in China Companies, read this blog to understand Chinese Stock Scams: WWW.CHINASTOCKFRAUD.BLOGSPOT.CA
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February 28, 2014
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