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Why do Newsletter Writer's Think Great Western Minerals Group is Chopped Liver?

|Includes:Lynas Corp. Ltd. (LYSCF)

Two newsletter writers who write extensively on the rare earth junior mining sector have in the last couple of days each reacted to news of Chinese rare earth producer price increases. One of the two is a very savvy gentlemen who analyzes corporate balance sheets, announcements, business models, and management skills with a scalpel's precision, and the other is better known but seems to me to use a meat axe rather than a scalpel in his analyses.

I count one of the above two gentlemen as a friend, and I generally agree with him.

That having been said I want to make a point about the overlooking of the demand driver which can be described as the critical need for higher atomic numbered rare earths for the most important segment of the rare earth end-using industry, the manufacturing of rare earth permanent magnets.

Yesterday I bought the first shares of a publicly listed company that I have bought in 41 years-yes, you heard me correctly, 41 years. I bought 25,000 shares of Canada's Great Western Minerals Group at (USD$) 0.175. Why did I do that?

Two reasons:

1. I still think, as I did last November at the Hard Assets Conference in San Francisco, where i first said this, that Great Western will be the first non-Chinese producer of significant commercial quantities of the heavy rare earths, dysprosium and terbium. I also think that this will make GW a target for acquisition by Molycorp, Lynas, and all of the others trying to put together a balanced output of rare earth elements. GW is still the ONLY REE junior that has any more than one of the multiple of supply chain requirements to be a mine to magnet alloy (market) supplier. In fact it is the adoption of this same strategy by Molycorp that gives me hope that Molycorp will be successful in restoring America's self sufficiency in the REE "Business." Last year Molycorp tried very hard to buy GW's Less Common Metals, Ltd, wholly owned subsidiary, so that it, Molycorp, could progress on a mine to magnet strategy now detailed in its SEC filing. The mistake that Molycorp made was in not going after the whole of the GW "Business" including its, GW's, ore bodies in Canada and South Africa (and the USA for that matter). I doubt that a well financed Molycorp will repeat that error, and I suspect it will be back at the front lines of such an acquisition shortly after obtaining the proceeds of the IPO>

2. A rising tide lifts all boats. China has begun rationalizing its rare earth industry and has ordered a remediation program to resolve that industry's environmental problems. Both tasks will require huge amounts of capital. China therefore must force REE prices to rise to increase the REE mining industry's revenues. This will be first accomplished by shutting down rogue operations within China that have traditionally kept prices low by fierce internal competition. Then, or now, inventories will be built up to maintain a buffer for China's domestic and preferred foreign customers for this material. One man's "hoarding" is another man's "inventory building," but at the moment increased prices and the need for revenues are trumping all other business factors. This is perfect timing for the Molycorp IPO which one of the newsletter writers above has called for July 28.

You don't have to agree with me, but please, if you don't, and you want to comment please make your criticism constructive. I will respond to all constructive criticism of anything I write about anything. Like all of you I am trying to learn about the factors that drive the market not create them.

On August 2 I will address the Chinese Society for Rare Earths 6th annual general meeting on "The American Perspective on the Rare Earths Supply Issue." I'll publish my presentation on SA and on my own web site,, right after it is delivered.

Disclosure: I now own directly 25,000 shares of GWG.V

Stocks: LYSCF