Just the words, "Rare Earth" brings back memories: “My old MG TC. A blond girl, tan from the summer sun, in the Hamptons, beer on the beach, ‘Unchained Melody,’ the little bar in the Village.”
Uh, wait. That was Adam Smith in our 2012 post "Adam Smith on Oil Shale (Now with Voodoo Beach Bunnies)". Ahem. Never mind.
Our memories are more like trading Molycorp for three triples, short and long, on the blog, in public, from IPO to bankruptcy or if you will "From tombstone to tombstone".
Or commenting on the passing parade: Luxembourg-based Rare Earth Company Hoping to Mine in South Africa by 2014 Does Oversubscribed IPO in Toronto (FRO.tsx), or quoting one of the, if not the, best books on investing and life:
...Words like "uranium", "rare earths", etc. seem to be magic to
those unsuspecting who are often fleeced...
Gerald M. Loeb
The Battle for Investment Survival
Simon & Schuster, 1935
From the Financial Times, December 4, 2015:
In September 2010, a longstanding territorial dispute between Japan and China turned nasty. A Japanese coastguard vessel caught sight of a Chinese trawler off the coast of the uninhabited, Japanese-controlled Senkaku Islands in the East China Sea. The coastguard ordered the trawler to leave. But, within moments of the order, the two boats collided. A second collision followed 40 minutes later, leading the coastguard to seize and arrest the captain of the Chinese ship: in retrospect, not a wise move.
China’s response was furious and immediate. The government moved to cut off Japan’s supply of rare earths, a peculiar set of elements located deep in the periodic table, which form the bedrock of much modern technology. Such was Japan’s reliance on these materials that merely days after the export ban, which Beijing maintains it never imposed, Japan relented and the Chinese captain was released.
“The strategic importance of rare earths is huge and will only grow,” says Gareth Hatch, founding principal at Technology Metals Research, a provider of market intelligence and analysis on rare earths. More and more elements such as cerium, praseodymium and europium are being used to power and perfect everyday gadgets, from iPhones and headphones to microphones. Even in tiny quantities, they are also used as the driving force behind certain cancer treatments, nuclear reactors and X-rays.
“They fulfil a similar role to that of yeast in pizza,” writes David Abraham, author of The Elements of Power: Gadgets, Guns and the Struggle for a Sustainable Future in the Rare Metal Age. “While they are only used in small amounts, they are essential.
“Whole industries are built on just a few rare metals,” he adds. “The magic in [Steve] Jobs’ glass screen was due to a dash of the rare metal indium [a minor metal rather than rare earth], which serves as the invisible link, a transparent conductor between the phone and your finger. A dusting of europium and terbium provides brilliant red and green hues on the screen. Cerium buffs the glass smooth to the molecular level.”... MORE
...“The conventional wisdom is that if Molycorp can’t make it, then how can anyone else? But that’s overly simplistic. [Rare earths] are not a lost cause, but investors must be more discerning.”
Compared with the boom of 2011, opportunities for rare earth investment are today few and far between. The Market Vectors Rare Earth Strategic Metals ETF remains a small possibility, with assets of just $33m, and its price has fallen 36 per cent since the start of the year.
Lynas Corp is regarded by many to be one of the few safer options in a sector beset with risk, though it is currently trading at A$0.08 against a high of A$2.60 in 2011.
As the obscure elements that sparked yet another dispute between Japan and China continue to fall in price at a greater rate than the rest of the commodities market, many are unsure where to turn.
Their low prices are attractive, particularly as their importance grows. For others, however, they pose too great a risk and the tremors of the 2011 crash are still too strong to ignore.
Cerium Ce (58)
The most abundant of the rare earths, cerium is a silvery metal that oxidises easily and is used in catalytic converters, alloys and magnets.
Gadolinium Gd (64)
A silvery-white and toxic metal, gadolinium is used to target tumours in neutron therapy. It is also used in MRI scans to make certain tissues and abnormalities more clearly visible.
Lanthanum La (57)
One of the most reactive rare earth elements, lanthanum is used to make carbon arc lights and to reduce the phosphate levels in the blood of patients with kidney disease.