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Gareth Hatch
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Gareth Hatch is a Founding Principal of Technology Metals Research, LLC. He is interested in helping people to understand the challenges associated with the growing demand for rare-earth elements [REEs] and other critical and strategic materials, and how those challenges affect market sectors... More
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Technology Metals Research, LLC
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  • Will China Become A Net Importer of Rare Earths By 2015?
    The buzz in the rare-earths industry over the past few weeks, sending the analysts scrambling to update their spreadsheets, has been the shocking news that China will become a net importer of rare earths by 2015, completely altering the supply and demand dynamics of the global rare-earth industry.

    At least, that is, if this news is accurate… is it?

    At the Critical Metals Investment Summit in Vancouver last month, a presentation was made on behalf of Dr. Zhanheng Chen, Director of the Academic Department of the Chinese Society of Rare Earths (NASDAQ:CSRE), titled “China’s Role in a Changing Global Rare Earths Market“. Dr. Chen was unfortunately not able to be there, and it is my understanding that Mr. Jay Roberge of Tehama Ventures gave the talk instead.

    In the presentation, Dr. Chen forecast a total supply in 2013 of 87,000 t from China, out of a total 134,000 t of global supply. He then forecast a total global supply target after 2015, of 278,000 t of rare earths, with the target for China’s production set at 100,000 t of rare earths. For China, this is not far off the current production levels, but is less than most analysts had been projecting for that time period. More important, this leaves a 178,000 t production target for the rest of the world (ROW), based on CSRE estimates, which is significantly higher than the total output of projects due to come on-stream in the next four years.

    Later in the presentation, Dr. Chen indicates that there are “early signs that China is moving from [the] sell side to [the] buy side”, noting that 10,381 t of rare-earth concentrates were imported by China, presumably last year. Nowhere in the presentation does Dr. Chen use the term “net importer” to describe China’s situation in 2015, as has been widely reported on the rare-earth-industry grapevine and beyond.

    To find out exactly what Dr. Chen meant, I dropped him a line to ask if he could clarify this notion that China will become a net importer by 2015. In his reply, he said that, “[it] is still too early to make an assertion than China will become a net importer by 2015“. He acknowledged that “[t]here is evidence that several China[-based] companies imported rare earth concentrate from CIS [Commonwealth of Independent States i.e. the former Soviet Union] last year”, as referenced in his Vancouver presentation. Dr. Chen went on to refer to heavy rare-earth elements, and indicated that “China might become a net importer soon” of these materials.

    So, is the buzz with which I opened this article, accurate? I would say that it was not. At the very least, Dr. Chen made it clear that it is not he who is making the assertion that has been ascribed to him (while acknowledging the possibility of this happening for a small subset of the total REEs sold). For me the real takeaway from Dr. Chen’s presentation are the CSRE projections for ROW supply requirements beyond 2015.

    Finally, for the record, I’m not accusing Mr. Roberge of mis-stating Dr. Chen’s position, or of putting words in his mouth :-) Clearly though, at least some folks in the audience got the wrong end of the stick last month, perhaps reading into the presentation, a sub-text that wasn’t there.

    Food for thought.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Feb 27 10:02 PM | Link | Comment!
  • The Curious Case Of The REE Companies That Aren't

    In the last few weeks a curious meme has been propagating throughout the rare-metals ecosystem, both online and off. It started on a few obscure blogs, but quickly reared its ugly head at outlets such as Benzinga, Seeking Alpha, TheStreet, Street Insider and even CNBC.

    I'm talking about the rare-earth companies that aren't.

    A handful of commentators have got it into their heads that companies such as China Shen Zhou Minerals and Resources (AMEX:SHZ),Qiao Xing Universal Resources (NASDAQGM:XING), General Moly (AMEX:GMO) and Thompson Creek Metals Company (NYSE:TC) are rare-earth companies. Those a little late to the game have simply been copying the garbage put out by the earlier hacks, and before you know it, a Potemkin village of new rare-earth companies has been born.

    We can partially thank the Van Eck Rare Earth / Strategic Metals ETF (NYSEARCA:REMX) for most of the confusion - or more specifically, the apparent inability of giddy investors and commentarati to actually read and comprehend the description of this fund, beyond the third and fourth words of its title. Perhaps that's a little too much to ask these days, I don't know. Two of the four companies above (General Moly and Thompson Creek) are featured in this fund. Again - for the record, they neither produce rare earths nor are they developing rare-earth projects.

    The same goes for the other two companies, but the reason for their emergence as faux rare-earth companies is less clear. Others who have spotted the issue  have suggested that something nefarious might be afoot. In the past month, China Shen Zhou Minerals and Resources has seen its stock more than double;  Qiao Xing Universal Resources almost doubled before settling at an increase of around 55% in the same period. these might be good stocks; they might even be good mining companies. They are not, however, rare-earth companies.

    I suppose this is yet another illustration of the need to Do Your Own Due Diligence, folks....

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: SHZ, XINGF, GMO, TC, rare earths
    Jan 14 7:41 PM | Link | 1 Comment
  • Introducing The TMR Advanced Rare-Earth Projects Index

    In the recent past I have published charts and graphs that were based on metrics associated with certain rare-earth deposits currently under development. I’m frequently asked why I include certain projects in such analyses, and not others. Despite mentioning them in a recent article, I thought I’d revisit the criteria that I use when selecting projects for attention, and to formally introduce the projects that form what we refer to as the TMR Advanced Rare-Earths Project Index.

    Note that I am first and foremost interested in the rare-earths sector from the strategic point of view. I am interested in the potential value that specific rare-earth deposits and their development could have, in the furtherance of the needs and demands of the overall technology supply chain. In theory, projects that are good for the supply chain in this way, should also be good investments, or more specifically, the companies that own and operate such projects (if they can do soprofitably). Obviously things don’t always quite mesh in this way, but you get the idea.

    To put things in context, as of the beginning of January 2011, I’m tracking 275 rare-earth projects that are being worked on by 180 individual companies in 30 different countries. This does not include projects in China, India or Russia, or projects that are not at least partially owned or operated by corporations or other non-state-run entities. It also does not include projects whose information is not in the public domain, and / or are simply not known to me at the present time.

    As you might imagine, the present status of these projects within the overall development cycle varies widely (and wildly!). Some are associated with properties for which there is only a minimum amount of rare-earth-related data available. Here we’re talking about grab samples, soil samples and perhaps the odd historical trench. Others have had some drilling work done on them, while others have been extensively drilled and explored, and have comprehensive datasets that can be used to model the deposit. In a few cases, properties have actually been mined in the past.

    In order to narrow things down a bit, I focus most of my charts and data on what I consider to be advanced rare-earth projects. As I define the term, advanced rare-earth projects are those that have been either:

    • formally defined as a mineral resource or reserve under the guidelines of a relevant scheme such as NI 43-101 or the JORC Code; or
    • subject to past mining campaigns, and for which reliable historical data is available, even if not formally compliant with a relevant scheme.

    The projects that meet the above criteria, form the TMR Advanced Rare-Earths Project Index. In the near future, we’ll be publishing a dedicated page on the TMR Web site, accessible from the navigation bar above, containing summary information about these projects. We’ll update the page on a regular basis. As companies publish 43-101- or JORC-compliant resource estimates, we’ll be adding those projects to the list too.

    As of January 6, 2011, the TMR Advanced Rare-Earths Project Index includes 17 advanced rare-earth projects, being worked on by 16 different companies and located in 8 different countries. Those projects are:

    Some of the projects above have only just recently been added to the Index. If the buzz in the rare-earths sector is correct, we can expect a couple of new additions to the list too, in the very near future. The absence of a project from the above list, is really just a reflection of the amount of public-domain information available for the project, not of any inherent “flaw” in the project itself. In time, we’ll see the Index continue to grow and to expand, and I’ll probably have to start to use tighter criteria to define what “advanced” actually means.

    On December 21, 2010, Bloomberg launched its Rare Earth Mineral Resources Index, which is a “modified market capitalization weighted index” that includes most of the companies listed above (or will include them once the companies with the most recent 43-101-compliant resource definitions have been added). TMR assisted the folks at Bloomberg in developing the Index; they decided to use only the first of the two criteria above, for a slightly more-stringent requirement for inclusion than I use for the TMR Index.

    I’ll be writing more on the TMR Index and its constituent projects in the near future, including some updates to previously published charts, as well as some new comparisons that will be of interest to some. We’ll also get into more detail on the Bloomberg Index as well.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 07 1:11 AM | Link | Comment!
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