We are proud to announce that we will be releasing an extensive report on rare earth investing. The goal is to provide investors with a detailed analysis of the REE market, criteria for assessing companies, and analyses of many of the publicly traded REE companies. We will release parts of the report publicly, but the meat of the report, along with the most promising investment ideas will be exclusive to miningWEALTH premium subscribers.
Here is a preview of the opening section.
Be forewarned, rare earth investing is not for dilettantes, sissies, or those looking for a quick trade. There are enormous difficulties starting a rare earth business that must be overcome:
- No deposit works as a stand-alone REE mining project in today's market environment. All project economics estimates that we see in the public domain have been carried out at higher-than-market REE prices, including those put out recently.
- REE mineral chemistry is difficult enough on the theoretical level, but effectively utilizing it on a commercial scale is tortuous. Except for Lynas, which is presently cash-flow negative, the new Western REE industry (i.e. considering the past 3 decades or so) has only demonstrated operational success at the pilot plant level.
- There is very little capital available to REE companies today due to a lack of investor interest.
- Most REEs, particularly the heavies, are used in very small quantities and are not easy to market. Marketing of several REE products requires an understanding of market specifics that is possessed by very few people in the West.
Those who are reminded of Warren Buffett's statement about preferring one-foot hurdles might balk, but we believe the industry is absolutely essential to numerous facets of today's modern industry. Despite this essentiality there is almost no REE industry outside of China. Those companies that manage to enter the value-chain will become part of a very exclusive oligopoly. The potential gain is substantial for those who invest in companies destined to join this elite group, although we must be quick to point out that the bulk of the REE hopefuls will never make it.
The goal of this report will be three-fold. The first agenda is to illustrate just how essential the industry is and why it is so essential for the Western world to develop a value-chain independent of the Chinese. If a company becomes successful it will provide critical inputs for multiple products in the communications, defense, and health care industries, to name just a few. Current low prices don't reflect this essentiality. However, the low price environment has brought most pre-production stage projects to a near stand-still and it threatens Lynas' viability. Those companies that can progress viable businesses in this environment, and those that can present viable business models to the market will be at a tremendous advantage when prices turn.
The second is to provide investment criteria for the REE-space. There is no single right way to invest in REEs, but there are certain approaches or philosophies that make more sense than others, and there are companies that have done a lot more legwork than others. If we take these factors into consideration we can invest in those companies that are run by people who understand the aforementioned hurdles and have addressed them proactively. This will greatly enhance the probability that we will invest in a winner.
The third is to describe the various publicly traded REE companies. Most of them aren't worthwhile, and there are usually a couple reasons for this. First they are developing large, expensive projects far away from infrastructure. Projects that are far from infrastructure and civilization need to achieve sufficient economics of scale so that they can cover the cost of housing a small population, developing roads, building extensive power stations, reagent production/storage, maintaining airstrips, providing medical attention…etc. Second, they are ill-prepared for the metallurgical and marketing hurdles that come with producing and selling REEs. The extent of the difficulty of the latter is typically overlooked by investors, who believe that they can just equate a certain chemical product to a price tag and a quantity multiplier in order to forecast revenues. The various products-from un-separated REE compounds to high purity individual rare earth oxides-must meet certain client specifications, which can be achieved only through the mastery of large-scale complex chemical reactions. Knowledge of this chemistry and access to these clients is critical.
We were not paid a single cent by any REE company or related institution to compile this report. We're not afraid to let you know if we believe a company's management team is misleading, misguided, in over their heads, or overly promotional. We point out the most common risks faced by the industry, as well as less common risks that fly under most people's radars.
Our goal isn't to spoon-feed you stock picks, although we do make them. Rather the intent is to give you the tools necessary to make an informed decision as to the best ways to generate profits in the REE industry. Thus the report will have useful information for both investors and REE company executives.
Please go to miningWEALTH.com for more infomation. We're happy to answer any questions you might have.