Last July, the WTO opened an investigation into whether China is unfairly restricting the export of rare earth metals - the substances vital not only to your iPod and smartphone, but also to so many other important things, from missiles to cars to wind turbines to light bulbs.

So how has China responded?

In the quiet of the Western world’s Christmas holiday, it blew a raspberry, tightening export restrictions once again.

“China, the world’s biggest rare earths supplier, cut the first-batch export quota for next year by 27 percent as overseas demand for the elements waned,” Bloomberg News reported in the Taipei Times on Dec. 29.

China’s Ministry of Commerce sets rare earth export limits twice a year. It pegged the first allotment for 2013 at 15,501 tonnes, down from 21,226 tonnes for 2012’s first setting.

To be fair, China had loosened restrictions last August, soon after the WTO began its investigation after the U.S., European Union and Japan complained about Chinese limits and tariffs on the metals. The 9,700 tonnes that China allowed in 2012’s second half brought the full-year limit to a three-year high of 30,996 tonnes, Bloomberg noted.

RARE DOMINANCE

For historical reasons including a disregard for environmental concerns in toxic rare earth mining and processing procedures, China controls about 95 percent of the world’s rare earth market.

Change is afoot in the industry. As Bloomberg noted, one of the reasons China curtailed exports is that worldwide demand has dropped off. You can probably attribute that to the sluggish global economy. Also, companies in Japan and elsewhere are finding ways to reduce their reliance on rare earths. And Western companies like Molycorp in the U.S. have started up rare earth operations, although Molycorp has faced criticism for selling to China rather than to the U.S.

With demand down, prices have fallen. China is not only limiting exports, but it has also limited production - all of which should choke supply and in the rules of supply and demand, help lift prices.

China has also started a massive consolidation of its rare earth industry, led by Baotou Steel Rare-Earth. It says it is doing this for among other reasons, to assert more control over cleaner industrial practices. With China’s central planning prowess, it should also give it greater ability to control the global market that it already dominates.

This year will be a busy one for rare earth developments in China and internationally. Rare earths are of double importance to the economy, not only for their direct use in products, but also because they occur in minerals that  contain thorium and uranium, two nuclear fuels that could help move the world off of CO2- emitting hydrocarbons.

Rare Earth Manufacturer & Supplier: Chinatungsten Online - http://www.chinatungsten.com
Tel.: 86 592 5129696; Fax: 86 592 5129797
Email: sales@chinatungsten.com
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Frontier Rare Earths shares picked up Tuesday as investors eagerly await the preliminary feasibility study for the company's Zandkopsdrift rare earth project in South Africa - expected out in the first quarter of this year.

Shares in the junior rare earths company were up almost 7 per cent to 80 cents Tuesday afternoon.

In December, the company said that Korea Resources Corp (Kores) - the state-owned mining and natural resource investor - offically acquired the initial 10 per cent stake in Zandkopsdrift.

Along with the 10 per cent interest, Kores has also acquired an off-take right and obligation for 10 per cent of Zandkopsdrift rare earth production, for a total cash payment of C$23.8 million.

The acquisition is part of a strategic alliance agreement initially signed between the two parties in December 2011, with an expanded deal announced in late October last year.

Under the expanded deal, Kores has the option to increase its interest in the project to up to 50 per cent, becoming an equal partner with Frontier, with an off-take right and obligation for up to 50 per cent production from Zandkopsdrift.

Frontier said the acquisition makes it the  only junior company in the rare earths sector to have signed and  completed a definitive agreement with a significant strategic partner.

The option to increase Kores' interest will be given when Frontier files its definitive feasibility study for the project - currently slated for the fourth quarter of next year.

As of late December, the company had $52 million of cash under its belt, which is expected to suffice for both the preliminary and definitive feasibility studies, as well as work on other exploration programs.

The junior rare earths company started the prefeasibility study on the Zandkopsdrift property in April of this year, and says that "good progress" has been made, with most requisite studies now either completed or at an advanced stage.

The report is targeted for the first quarter of this year, after which the company expects to immediately start work on the definitive feasibility study.

Frontier's preliminary economic assessment (PEA) report on the project, released last February, reported that Zandkopsdrift is estimated to contain roughly 950,000 tonnes of total rare earth oxide (TREO), applying a one per cent TREO cut-off, and gave a whopping net present value of $3.65 billion, after tax and royalties, at an 11 per cent discount rate.

Internal rate of return for the project was seen at 52.5 per cent, after tax and royalties, with a two year payback from start of production.

Average production was pegged at 20,000 tonnes of separated rare earth oxides per year over a 20-year mine life, with production due to start in the second half of 2015.

Under the deal with Kores, the Korean company is also to arrange project financing for the entire development and must committ to provide its pro rata share of funding for the portion of  costs not covered by the project financing.

Rare Earth Manufacturer & Supplier: Chinatungsten Online - http://www.chinatungsten.com
Tel.: 86 592 5129696; Fax: 86 592 5129797
Email: sales@chinatungsten.com
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Its reported that Lynas expects to return to  commercial rare earth product production within a few weeks at its Malaysian plant, which has been emeshed in ongoing environmental and safety disputes with area residents.

The process has achieved recovery rates of more than 90 percent of contained rare earth oxides through the cracking units, which are now ready for production of individual rare earth products, the company said.

Rare Earth Manufacturer & Supplier: Chinatungsten Online - http://www.chinatungsten.com
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How many times have we heard the saying "Bet on the jockey not the horse"? This can be easier said than done with the requirement to do extensive due diligence on the jockey and still face execution risk. Yet with factual data at our finger tips, many times distractions draw our attention away from one of the easiest measures of a potentially undervalued situation. What do the officers and directors of that company think of their equity investment opportunity and are they willing to do anything about it? How much equity do insiders own? Has management been purchasing shares?

A long time ago a mentor of mine told me, investors sell stock for many reasons, but only buy stock for one, to make money. And we have to assume if insiders are buying, they not only want to make money but feel especially strongly about the future of their company.

Below are three companies in the heavy rare earth metal and mining space that recently have enjoyed insider buying and I believe are worth investors consideration for a buying opportunity.

Gold Resource Corporation (GORO) is a mining company that pursues and produces gold and silver projects in Mexico. For the most recent third quarter, GORO generated $36.5 million in revenue, $23.8 million in gross profit and net income of $7.3 million. As of September 30, 2012 the company had approximately $36.2 million in cash and cash equivalents or $0.69/share. The stock has seen its share of volatility recently which is well documented in a separate Seeking Alpha piece which you can find here.

Mr. William Reid, Chairman and CEO, purchased 6,188 shares on November 21, 2012 and currently owns 2,745,669 shares or 5.1% of the company. Mr. Reid previously co-founded and served as CEO of US Gold Corp. (USGL) from 1977 to 2005 where he helped build six producing mines.

Texas Rare Earth Resources is a mining company engaged in the acquisition, exploration and development of mineral properties primarily from their 950 acre Round Top lease located in Hudspeth County, Texas. An initial independent assessment detailed an estimated over 1 billion metric tonnes of measured, indicated and inferred resources containing 531 grams per tonne or over 1 billion pounds of rare earth metals including uranium contained at this location.

The company recently issued a detailed release highlighting that the company and insiders have recently purchased over 1.5 million shares or over 4% of the common shares outstanding. The company along with three directors recently purchased 1,000,000 shares, and separately directors earlier purchased another 559,025 shares at an average price of $0.384/share. Chairman, John Tumazos, is the beneficial owner of approximately 2.3 million shares consisting of 1.8 million common shares, 149,000 warrants and 369,446 options or 6.2% of the company.

The company's current game plan is to work towards monetizing their assets starting this year. In a recent announcement, the next phase in the monetization process was initiated with the air quality baseline study so that permitting can move forward on the property which could make it more attractive for strategic alternatives. The company has sufficient capital to move forward with this strategy through 2014.

Revett Minerals' (RVM) principal assets consist of a 100% interest in a Troy silver and copper mine in northwest Montana and a 100% interest in the undeveloped Rock Creek silver copper development project also located in northwest Montana. Recently, the company issued a release providing shareholders with an update on the monitoring activities at its Troy Mine. Data collected over the past two weeks suggests that conditions at Troy have stabilized and management believes that it will be back to production quickly after conducting all safety measures.

Rare Earth Manufacturer & Supplier: Chinatungsten Online - http://www.chinatungsten.com
Tel.: 86 592 5129696; Fax: 86 592 5129797
Email: sales@chinatungsten.com
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