Rare earths have been back in the news lately with prices starting to firm up as China does a better job of stopping illegal exports of their rare earth materials and Japan files a complaint for relief with the World Trade Organization to stop illegal exports from China. The sector as a whole has been badly beaten up in terms of stock prices over the last few years, but that is far from a good indicator of the demand for critical rare earths. Critical rare earths are found in all types of products including cell phones, wind turbines, electric cars, magnets, and batteries. Use of these products is only going to grow over the next decade and does not include any of the military applications that rely on these same materials.
One US based rare earth development company recently had very positive news to report on one of their properties. On August 20th US Rare Earths (OTCQB:UREE) reported "US Rare Earths Inc. Confirms It Has the Most Accessible Critical Rare Earth Deposit in North America". This is a pretty interesting statement given that Molycorp (NYSE:MCP) based in California is currently producing 15,000 metric tons per year of rare-earth-oxide equivalence. However, it appears that the market is now considering the intricacies of the composition of the rare earth element deposits held by the companies when placing a value on the company.
Recent extensive research conducted by the U.S. Department of Energy, U.S. Department of Defense, JP Morgan market analysis, and research by Russian scientist V.V. Seredin have defined a suite of critical rare earth metal oxides (neodymium, europium, terbium, dysprosium, erbium, and yttrium) that best reflects the economic potential of a deposit with respect to U.S. and global demand, something that the Molycorp deposit does not have.
The forecast consensus is that demand for neodymium, terbium, dysprosium, and yttrium will exceed their output and as europium and erbium are critical metals also likely to be under-supplied while cerium output is both non-critical and overproduced. Lanthanum, praseodymium, samarium, and gadolinium will have a strong demand and supply should match demand by current output and new output related to the production of the critical rare earths. The four heavy rare earths holmium, thulium, ytterbium, and lutetium are likely to be in oversupply in the forecasted demand market.
Thus the Critical Rare Earth "basket" represents both the most critical and likely undersupplied rare earth metals where deposits with high percentages of these metals will be in a position for most favorable development.
This suite of critical rare earth metal oxides (neodymium, terbium, dysprosium, yttrium, europium, and erbium) found in the Lemhi Pass properties held by the company best reflects the economic potential of a deposit with respect to U.S. and global demand and is based on extensive research mentioned above.
The reported drilling and surface sampling efforts are on the "Last Chance" vein located in the Lemhi Pass area of Montana. Company geologists have defined a critical rare earth mineralized vein, open to exploration on both ends and at depth, with a surface length (strike) of at least 2200 feet (670m) and down-hole vein intersections of 3-29 ft (1-9m) at depths between 200-460 feet. The diamond core drilling efforts, totaling 1500 feet (455 m) with nine separate qualified surface channel samples totaling 202 feet (61.5 m), are being utilized to define critical rare earth mineralization along the "Last Chance" vein now initially defined both at surface and depth.
U.S. Rare Earths holds nearly all of the historically known rare earth element mineralization occurrences in the Lemhi Pass District of East-Central Idaho and South-Western Montana, the Lemhi Pass area is ranked by Russian Academy of Sciences' Researcher, V. V. Seredin, as holding the richest critical rare earths in the continental U.S. The well known rare earth mineralized Lemhi Pass area covers approximately 120 Square Miles of terrain along the Idaho-Montana Border. The Company holds 97 mining lode claims in Montana and Idaho covering 1680 acres (680 hectares).
CEO - Kevin Cassidy Said -"Based on the success of the Phase I season drilling I have approved the request by our lead geologist, Mr. Dunn, to initiate additional drilling in the Last Chance area. The USRE board is also pleased with the progress being made in other areas in the Lemhi Pass and North Fork Phase I field work which will continue through the summer."
Lemhi Pass was first investigated in the early 1950's for uranium and thorium for the US developing market. Continued investigation, during the late 1960's and through the 1970's, by the U.S. Defense Minerals Exploration Administration (DMEA) and Atomic Energy Commission (NYSE:AEC) - now the U.S. Department of Energy (DOE) -identified that rare earth metals were associated with the trace amounts of thorium.
In addition to the drilling reported on August 20th at the company's Last Chance Vein, it is in the midst of an extensive exploration and mapping program at its other properties in the Lemhi Pass Region of both Idaho and Montana, including channel sampling at a number of properties.
Along with any asset, having a management team in place that has the experience, passion and resources to maximize its value is key. In the case of U.S. Rare Earths, the key players are all highly accomplished.
Here are a few of the accomplishments of Texas businessman Victor Lattimore and the recent additions to the company's Board of Directors:
John Victor Lattimore, Jr.
Mr. Lattimore was appointed Chairman of the Board of Directors on June 27, 2011. Since 1996, Mr. Lattimore has served as President and Chairman of the Board of Lattimore Properties, Inc. of Plano, Texas. From 1986 to 2011, he was President of Lattimore Materials Company, LP, whose operations included seven aggregate mines, 26 ready mix concrete plants, four rail terminals and over 400 mixer and haul trucks.
Mr. Kerrey was appointed as a director on July 1, 2013. Mr. Kerrey served as Governor of Nebraska from 1983 to 1987, and was later elected to two terms as U.S. Senator from Nebraska, retiring in 2000. While serving in the Senate, he sat on the Senate Select Intelligence Committee, which exercises oversight authority over all U.S. intelligence agencies including the military intelligence program. A former member of the elite Navy SEAL Team, Governor Kerrey is a highly decorated Vietnam veteran who was awarded the Congressional Medal of Honor -- America's highest military honor.
Mr. Crandall was appointed as a director on June 27, 2013. Mr. Crandall co-founded Morgan Stanley's energy business in the early 1980s. In 1993 he became a founding partner in Trafigura, an energy trading company, which grew to $30 billion in sales and 1,000 employees in 58 offices worldwide.
General Tommy Franks
General Tommy Franks, former Commander-in-Chief, United States Central Command was appointed to the company's Board of Directors on August 28, 2013. General Franks is a retired four-star General. He was promoted to Commander-in-Chief, United States Central Command in June, 2000. The world knows General Franks best following the culmination of an almost four-decade military career that saw him lead American and Coalition troops in two strategically unprecedented campaigns in two years as Commander of Operation Enduring Freedom in Afghanistan and Operation Iraqi Freedom in Iraq.
The company is clearly building an experienced team to lead its emergence as a player in the rare earths supply chain industry, uniquely possessing valuable relationships capable of assisting them in working through the geo-political issues facing the US and its allies with regard to self sufficiency.
As with any development stage mining companies there are inherent risks. Having a mining asset that is high quality, easy to access, in a mining friendly area and which can mined in a cost effective manner, is a key factor for potential future success. The ability to attract financing to continue to prove up reserves is also vital.
In the case of US Rare Earths the management team only seems to be getting better every day. The deposit has already been recognized by the US Department of Energy to have shown Rare Earths that are considered at "Critical Risk". Investors may be well served to keep a close watch on the company. Ironically those of you who do may just be tracking their progress on an electronic device which more likely than not, utilizes a rare earth itself.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.