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TALK TO AN EXPERT: Clint Cox Makes The Case For Rare Earths

Clint Cox founded The Anchor House, Inc. in 1995 to focus on special investing situations. The firm has been focused on researching the rare earth sector for over four years.
theanchorhouse.com.
Email c.cox@theanchorhouse.com

What are Rare Earth Elements?
Over the last several decades, rare earth elements (NYSEMKT:REE) have gone from being an obscure scientific novelty to becoming an essential ingredient in a significant portion of today’s high-tech hardware. According to Dudley Kingsnorth of IMCOA, the current rare earth market is worth about $1.25 to $1.5 billion. In Japan it is said that, “Oil is the blood of industry, steel is the bread of industry and rare earths are the vitamins of industry.”
REEs are used in iPods, cell phones, hybrid automobiles, wind turbines, energy-saving light bulbs, MRIs, laptop computers, fiber optics, SONAR, RADAR, flat-screen TVs, glass polishing, petroleum cracking, and much more. The list of applications is constantly expanding, and for many uses there is no current substitute for the REEs. Some of the highest growth areas for REE are magnets, high-tech alloys, and phosphors.

The rare earth elements are the lanthanide series from the periodic table and include:

Light Rare Earth Elements (LREE):

    * Lanthanum (La)
    * Cerium (Ce)
    * Praseodymium (Pr)
    * Neodymium (Nd)
    * Medium Rare Earth Elements (OTCQB:MREE):
    * Samarium (Sm)
    * Europium (Eu)
    * Gadolinium (Gd)
    * Heavy Rare Earth Elements (HREE)
    * Terbium (Tb)
    * Dysprosium (Dy)
    * Holmium (Ho)
    * Erbium (Er)
    * Thulium (Tm)
    * Ytterbium (Yb)
    * Lutetium (Lu)

Yttrium (NYSE:Y) is usually included with the HREEs. Promethium (Pr) is a rare earth but is seldom included because it is created in nuclear reactions and does not occur in nature.

Note that elements such as Gallium (Ga), Germanium (Ge), Indium (In), Niobium (Nb), Tantalum (Ta), Lithium (Li), Zirconium (Zr), and Hafnium (Hf), Tungsten (NYSE:W), and Rhenium (Re) may fit into the broad category of “rare metals”, but are not rare earth elements.

The REE sector’s requirement for praseodymium, neodymium, terbium, and dysprosium is currently driving the market.


Key Factors to Watch in 2010

The Economy

This may be the single greatest factor in the rare earths market.  Many believe that an economic recovery is underway, but if not, the rare earth industry may be negatively affected.  The cautious environment of 2009 brought a substantive drop in the size of the REE market, showing the direct affect that the overall economy has as a backdrop to the industry.

The flipside is also true—if there is a marked recovery in 2010, the rare earth market should benefit greatly.


Disclosure: No Positions