I sometimes forget that many of our current readers weren't with us in the last rare earths mania/depression, that they don't share our memories of trading Molycorp (Mountain Pass mine, now resurrected as MP Materials) for three triples, short and long, on the blog, in public, from IPO to bankruptcy or if you will "From tombstone to tombstone".
Or a quaint little quote from a depression-era book that we posted every few months; one of the, if not the, best books on investing and life:
So, here's some background. From Mining.com, June 19, 2012:
There is no single rare earth element market. Instead, the rare earth universe is made up of four or five distinct “critical rare earth” markets that should be the focus for investors today. Even with new mine supply and refining capacity coming on-line over the next four years, these elements will remain in short supply, with hefty price tags attached. In this exclusive interview with The Critical Metals Report, Institute for the Analysis of Global Security Senior Fellow Jack Lifton explains how investors can play a crucial role in building a supply chain outside of China.
The Critical Metals Report: Can you give us an overview of the rare earth element (REE) market today? What are the most important trends you’re following?
Jack Lifton: The REE market today is going through a shakeout. We had a bubble last year—an anomalous speculative blip—that ran REE prices to the sky. It happened just as the junior miners were coming into full bloom. At that time, I would say most of the junior REE exploration companies were overvaluing their projects something fierce. Then the market herd jumped in and ran the prices way up.
Now that the speculative bubble has burst—and I think a lot of it had to do with China repositioning itself—we’re back to earth. I would guess that of the 250–260 listed REE public companies, there’s just one that is in production: Molycorp Inc. (MCP:NYSE). All of the valuations are coming down to earth.
Between 90–95% of the remaining junior miners will be wiped out. Investors should understand there is no single REE market. There is a market for some of the individual REEs—the critical REEs. But for at least half of the REEs, production and usage are tiny and there is no “market” to speak of.
For many REEs, production exceeds demand and will for the foreseeable future. Cerium is a good example of the fact that not all rare earth demand is equivalent. When you produce dysprosium, you are always producing much more cerium than dysprosium. That doesn’t mean that there is a market for cerium. In fact, it is more correct to say that some cerium/lanthanum/neodymium deposits contain recoverable dysprosium. Saying it this way really defines the problem.
I follow four or five critical REEs that each have individual markets. One of them is neodymium, because it’s the most important REE used in permanent magnets. The others are heavy rare earth elements (HREEs), including europium, terbium, dysprosium and yttrium. The latter isn’t really an REE, but it’s associated with them. As the market corrects to reasonable prices, people are coming to understand this....
....MUCH MORE
