Sunday, February 27, 2011

While The World Continues To Sleep....

originally posted 2-21-11

Rare Earth Element prices continue to rise with no clear ceiling in site.  The world used approximately 100,000 tons last year and China has cut it’s export quotas down to the well under the 30,000 ton range.
Expert bubble spotters seem to be everywhere these days and while their portfolios are filled with “safe” municipal bonds they have clearly figured this REE move out and determined they will not be fooled here.
How about the suggestions that replacement elements will be found?  That is a great idea, hopefully you like using a cell phone like Zach Morris on Saved By The Bell because that is what your iphone will turn back into without these critical elements.

I have seen some recent analysts reports on my favorite REE companies and am shocked at the per/kg pricing they are assuming.  One in particular used assumptions of $19/kg when current actual pricing is between $80-100/kg depending on the blend of elements.
Here is an update from one future producer, courtesy of Perth Now, with a market cap equal to 33% of projected revenue:

Rare earth prices to deliver Arafura $1.7bn

  • From:AAP 
  • February 21, 2011 4:23PM

ARAFURA Resources says annual sales revenue from its Nolans Bore rare earths project in the NT will be $US1.7 billion ($A1.68 billion) if current high prices continue.
Arafura said higher prices for the commodity had increased the value of one kilogram of rare earths from its Nolans Bore project in the Northern Territory to $US86.26.
“This represents a 10 per cent increase since January 2011 and is 2.5 times the 2010 average,” Arafura said in a statement on Monday.
In an update provided in October, Arafura modelled its Nolans Bore project with a maximum rare earths price of $US51/kg.
Rare earths prices have risen since China announced reductions in export quotas for the first half of 2011, the company said.
“We are entering a new era for the rare earths industry as a very small number of suppliers from outside of China emerge in the short to medium term,” Arafura chief executive Steve Ward said.

“Arafura will be one of these suppliers from its wholly owned Nolans Bore rare earths deposit and we are making excellent progress towards our plan for first production in 2013.”
Shares in Arafura were down two cents, or 1.59 per cent, at $1.24.
end article
The price of these elements is NOT going down anytime soon.  When you require something to carry on modern life and it is just not available because you have not secured a supply, there is nothing you can do about it other than pay whatever price necessary to get the product.

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