Rare earth elements (REEs) are a set of 17 different elements -- generally broken into two groups: the "heavies" and the "lights" -- that can be found together in rare earth deposits. They have many different uses in the high-tech, electronic, military and automotive industries, mainly in the form of powerful magnets.
Click to enlarge
The recent turmoil in rare earth markets has already been discussed in far more detail elsewhere, and for more information, this years' April issue of Resource World magazine has a great overview article titled "Rare Earths Review". In summary though, China slowed exports of rare earths in mid 2011, which caused a large jump in prices. Costly rare earth alternatives became viable overnight, and high prices caused a surge of exploration world wide. As substitutes have been announced, prices of rare earths have dropped. China is now being pressured by the Western World and the WTO to increase rare earth exports, and it is these competing forces that will shape the markets in the near future.
We try to cover the context of a commodity, in this case REEs, and we encourage investors to do their own due diligence on companies in this space. That said, we do have some recommendations on where to start your research.
As usual, we will start off with the safe, long term plays. Molycorp (MCP) is now producing rare earths in California, as is Lynas Corp from its (LYSCF.PK) Mount Weld Project in Australia. These companies stand to benefit from any global supply shortages as steady streams of REE's are hard to find outside of China.
Matamec Explorations (MTCEF.PK) have identified NI 43-101 compliant indicated and inferred resources at its Kipawa deposit, and have partnered with the automotive giant Toyota Corp. (TM), who has agreed to purchase all future production from Kipawa.
Great Western Minerals Group (GWMGF.PK) is an already an established processor of rare earths and is vertically integrating into production. It is currently developing its Steenkampskraal project in South Africa and is scheduled to begin producing in early 2013.
Dacha Strategic Metals (DCHAF.PK) is taking a wholly different route in the rare earths space. They are building the world's first corporate stockpile of REEs, which will be liquidated at a profit. Investors can therefore gain exposure to REEs while avoiding the pitfalls in the mining sector. As of May 18th 2012, the market value of their portfolio is $68.2 million dollars.
Thanks for reading, and good luck with your research!
Disclaimer: Visual Capitalist content is researched independently with the goal of educating investors on resource investing and management. Visual Capitalist does not receive direct compensation to produce this content, though it does provide other services and sponsorship opportunities from time-to-time to help cover costs.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.