Thursday, August 18, 2011

A Timeline For Eroding China’s Rare Earth Chokehold (MCP; REE; AVL; LYSCF) FREE Report

It seems like it was only last week that Molycorp hit $63.50 intraday and we chickened out of our calls.
[it was six days ago, hotshot -ed]
With the stock at $51.71 we may get another chance to own it under $50.
In the meantime here's some reading material from the Wall Street Journal's China Real Time Report:

Bloomberg News
An undated handout photograph shows Mount Weld in Western Australia, the richest known deposit of rare earths in the world according to a new report from Technology Metals Research.
How long can China sustain its near-monopoly on the global supply of rare earth?

For the high-technology companies around the world that use the elements to make magnets, store electricity and produce specialized lasers, there is hardly a bigger question.

With geopolitical tension over the minerals still elevated (pdf), government actions aren’t helping provide clear answers. China itself warns it could be on the brink of needing to import rare earths, while noises out of Washington suggest the U.S. is so concerned about unbalanced trade it will try to pry open Beijing’s market at the World Trade Organization.

Now, a new report — “Critical Rare Earths” by expert Gareth P. Hatch of Illinois-based Technology Metals Research LLC — offers some answers to the pivotal question of when the rest of the world will begin filling the gaping supply and demand gap.

“Within the last few years there has been an explosion in the number of new rare-earth exploration and development projects around the world,” says the report. By last count, Technology Metals was tracking 381 projects outside China and India, under development by 244 companies in 36 countries.
The report estimates China produced 118,900 metric tons of rare earth in 2010, well above the 89,200 metric ton official production quota. That production figure exceeded 96% of estimated global output for the year.

Interestingly, a focus of rare earth traders – Beijing’s export quotas – gets pooh-poohed by Technology Metals as a factor in Chinese production. Output of rare earths in China, the report says, “is driven by overall demand for these materials, within China and in the rest of the world, not the export quotas.”
As new mines open, global output of rare earths and related elements should rise. The average production estimates in the report put global output of rare earth minerals at 163,458 tons by 2013 and 327,244 tons by 2017.

One finding of Technology Metals report that’s likely to be controversial among investors and corporate executives is its ranking of the top five mines for “relative” quantity of individual critical rare earth oxides, a way of comparing mine reserves. It ranks Australia’s Mount Weld as the largest, followed by Steenkampskraal in South Africa, with Alaska’s Bokan and Canada’s Strange Lake tied for third, trailed by Sweden’s Norra Karr. The Mountain Pass Mine in California being revived by Colorado’s Molycorp Inc. didn’t make the top five.

So, how long until the rest of the world kicks in to actually offset China and meet growing demand?
In a simplified presentation of its calculus, Technology Metals projects individual rare earths will transition into “permanent surplus with respect to supply” as follows: Lanthanum Oxide: 2012-2013; Cerium Oxide: 2012-2013 ; Neodymium Oxide: 2014; Europium Oxide: 2015-2016; Terbium Oxide: 2015-2016; Dysprosium Oxide: 2017; and Yttrium Oxide: 2016....MORE
Here's TMR's Critical Rare Earths Report (Complimentary)
See also:
Rare Earths: What's in Your Mine? (MCP; REE; RES.tsxv; AVL.TO)