Is The Critical Rare Earth Sector Making A Positive Turn?

I have just returned from the Vancouver Resource Investment Conference where I presented on the critical need for many different strategic metals.  The rare earth sector is beginning to attract interest as the U.S., Chinese and Japanese markets hit new 52 week highs after the changes in leadership in both countries.  The rare earth/strategic metals ETF (REMX) has crossed the 200 day for the first time since 2011 and I am monitoring for a bullish golden crossover.

A rebound in high tech and the automobile industries could spark further interest for heavy rare earth supplies outside China which are critical to today’s latest cutting edge technologies. We are bullish on the monetary metals such as gold, silver and platinum but also believe investors should diversify into the strategic rare earths, tungsten, antimony and uranium which will grow increasingly important as society requires high tech and clean energy solutions.

The growth in the use of smart phones, tablets and clean energy will put more demand on heavy rare earth production which China currently dominates. Japan, Europe and the U.S. must develop their domestic assets and may need to accelerate investment as the economy rebounds.

Rare earth prices have been pulling back and consumers have been reluctant to buy due to fears of an economic slowdown.  However, that trend may be ending as investors realize that global stimulus by Central Banks may be sparking an inflationary rally.  Many world markets are hitting multi year highs including the U.S., China and Japan.  Sentiment is growing bullish for the rare earths as the ETF reverses above the 200 day moving average.

This may put pressure on industrial end users especially car manufacturers who are seeing increasing sales especially in Asia.  For instance, General Motors sells more cars in China now than in the United States.  New fuel efficient cars require dysprosium and there are no substitutes without major costs.

I expect increasing amount of end users to partner with junior rare earth miners who may be trading at significant undervaluations.  The rebound in this sector may be phenomenal as the heavy rare earths have the greatest short term supply risk of any metal.
Over 14 months ago, we commented on Molycorp’s CEO Mark Smith’s testimony in front of the House Foreign Affairs Committee.  At that time we needed a true visionary to promote U.S. rare earth independence.

Instead, in my humble opinion, we got a little leaguer.  Molycorp should’ve differentiated between the heavy and light rare earths.  At that time we believed that Mark Smith’s testimony omitted some important facts.  We asked the following question at that time.

“Where does Molycorp get its heavy rare earths? Smith claimed Molycorp possesses a complete suite of rare earths at their Mountain Pass property. Assays have shown that this mountain possesses predominately light rare earths with little or no heavies.”

Not once were the members of the committee informed of the importance of the highly critical dysprosium, yttrium and terbium minerals, or the serious consequences China’s supply monopoly poses for American industry or U.S. national security.  It was an opportunity lost to educate the public.

 By Jeb Handwerger

Rare Earth Manufacturer & Supplier: Chinatungsten Online - http://www.chinatungsten.com
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