Comments on: China’s Currency Valuation Change And The Rare Earth Mining Sector

By: Gareth Hatch

Gareth Hatch — Tue, 22 Jun 2010 20:25:18 +0000

Folks – I had a short discussion with Jack earlier today, on some of the points that he raised in this article. Our Q & A can be found at:

http://www.barnswood.com/tmr/wp/2010/06/will-changes-in-the-chinese-yuan-really-affect-the-rare-earths-industry/

Gareth

By: Jack Lifton

Jack Lifton — Tue, 22 Jun 2010 11:24:02 +0000

Ladies and Gentlemen,

I, of course, meant to say: This may not bode well at all for Western junior exploration and mining companies who want to believe that prices will rise enough now, to make their “speculative” income statements [not balance sheets] show profits at the mine face, where the product is ore concentrates.”

Mea culpa,

Jack

By: Tek

Tek — Mon, 21 Jun 2010 22:09:54 +0000

“This may not bode well at all for Western junior exploration and mining companies who want to believe that prices will rise enough now, to make their speculative balance sheets show profits at the mine face, where the product is ore concentrates.”

The recent article at Rare Metal Blog about Avalon’s Nachalacho deposit is an example. But the production is 5 years out and will take a billion dollars to develop. Nevertheless, the posturing has begun for investors.
Great Western Mining Group has about $150,000,000 worth of TREO piled on the surface, ready to be milled and concentrated now, and they have a mining permit for a 14% TREO, 3.00 per ton orebody, with a Feasibility Study underway. So why isn’t that stock rocketing?
There’s obviously a lot more afoot here than simple balance sheets. I don’t understand it all, but for now all the due diligence in the world seems to come back to the same dozen or so companies.

By: jack

jack — Sun, 20 Jun 2010 12:49:32 +0000

With all due respect the idea that Renmimbi revaluation would be a negative for commodity producers is absurd. While you no doubt have knowledge about the science of rare earths your disdain for stock promoters clearly clouds your view of how markets work. MANY of these marginal rare earth plays will skyrocket once prices for rare earths inevitably rise whether they ever produce or not simply because of speculation. And thats OK. That is how the market works. It is the investors job to get AHEAD of the speculative fury so that they are well positioned to profit when everyone rushes in. I for one am invested in over a dozen of these companies. Do I expect all of them to work? NO. I dont have a clue which ones will produce or just go up or down in price. Nor do I care. I risk x amount to make exponentially X amount when the sector goes. Thats the game and your readers would be better served with info that did not discourage them from playing that game. The facts are that Rare Earth prices are artificially low. That demand is skyrocketing and that a supply response will be neccesary and that that supply response will take many years to ramp up. And dont forget the geopolitical ramifications of it which will drive the prices even higher to ridiculous levels as all commodities get to when they go. ESPECIALLY the illiquid ones. In the meantime people will get rich speculating if they tune out the scare tactics derived from your anti-promoter bias.

By: Steve M

Steve M — Sun, 20 Jun 2010 10:28:58 +0000

Reganbaha,

Thanks for that. I was aware of the rejection of the Chinese bid, but for some reason I thought that the Chinese were major shareholders.

regards

By: John Petersen

John Petersen — Sun, 20 Jun 2010 09:36:39 +0000

The biggest problem with monopolists is they act like monopolists when they’re buying and when they’re selling. Until there is a reasonable bulk of rare earth mining, processing and finished goods manufacturing outside of China, competing miners will likely receive less than full and fair value for their ore concentrates and the price of finished goods from the Chinese processing and manufacturing supply chain will be determined in a manner that best suits Chinese interests. This makes for a very dangerous long-term market dynamic.

By: reganbaha

reganbaha — Sun, 20 Jun 2010 04:07:14 +0000

Steve M,

Chinese are not major shareholders of Lynas. They tried to offer a financing package for LYC, in exchange for 50+% of equity, however this was not allowed by Australia’s Foreign Investment Review Board (FIRB) and LYC subsequently, raised enough cash through a equity offering to Institutional and retail investors. This has provided them with enough cash to progress with stage 1 of their REE development, which will produce separated and refined RE oxides.

Both Lynas and Arafura, intend to produce separated and refined RE oxides, so this article doesn’t really apply to them, as it is discussing the production of much cheaper RE concentrates. ARU and LYC intend to capture much of the value-adding processes to produce separate RE oxides themselves by using their own dedicated facilities.

Choice

By: Steve M

Steve M — Sun, 20 Jun 2010 03:20:39 +0000

Jack,

I am wondering what that means for the Australian producers such as Lynas and Arafura. Lynas I understand has a medium to good supply of the heavy RE’s and as the Chinese are the major shareholders I am wondering if this move for the currency is a positive or negative for these producers?