The search for possible long-term winners may be a lonely road in the short term, but that is precisely the path I find attractive. Better to get in at ground level rather than to buy at the fiftieth floor when much of the profit is already reflected.
Today’s markets offer us a prime example of the validity of the statement "boldly go where no one has gone before."
For example: At one point my firm occupied the loneliest of perches. Hourly, the media blasted barrages of negative doom-and-gloom stories regarding the demise of nuclear power and the shortcomings of rare earth development. We sensed that much of this news was contrived to sell advertising.
Today, an important arm of China -- The Hanlong Bank -- announces that it is casting a covetous eye on a seemingly obscure nuclear miner, Bannerman Resources, domiciled in Australia and owning two huge uranium deposits in Namibia.
Read between the lines: The main property is located next door to Rio Tinto’s (RIO) Rossing Mine, one of the largest uranium deposits in the world. Bannerman’s Management is resisting the Chinese offer of $.61 a share, claiming China is taking advantage of its low share price due to the negative publicity that befell the global uranium market post-Fukushima. [It is important at this point to highlight the very same Hanlong Bank just signed an enhanced agreement with one of my firm's favorite and long followed equities, General Moly (GMO).]
Might it be that China is prescient?
As I write, the following story is coming over the wires: “China Set On Nuclear Path." The Chairman of China’s main energy agency states unequivocally, “Nuclear Power is a choice of must...we stay firm on our nuclear plans.” Exactly what is China’s (FXI) strategy? It is actively building 28 nuclear plants to reach 40 gigawatts by 2015. The Chairman felt that shutting nuclear facilities was ill-advised and precipitous. He claimed that the few nations that are abandoning nuclear are succumbing to fear and irrationality. It is as if humanity should stop eating because someone choked on a bite of food. He emphasized that China has no choice but to continue proceeding full speed ahead on its nuclear highway.
Similarly, there has been a significant development in another sector that my firm has been following for some time: the rare earths.
Avalon (AVL) just announced agreements with three major unidentified Asian companies in a memorandum of understanding (or MOU). These companies are agreeing to provide capital and technical know-how in exchange for future first call on production.
It is not a mere coincidence that this announcement surfaces at the same time that Avalon updates a very positive pre-feasibility study and begins the bankable feasiblity. It can only add additional spice to the wooing.
Today, there is an abundance of important developments. For one, major industrial producers concerned about having ready availability of critical rare earths are making alliances with miners.
Siemens (SI), Europe’s largest engineering firm, has entered into an important deal with Lynas. We are witnessing end users partnering with miners to secure future supplies in assuring availability for uninterrupted production. This burgeoning trend will continue with more and more strategic relationships between industrial giants and rare earth miners. Molycorp (MCP) just announced that it will partner with Hitachi (HIT) to produce permanent magnets.