Wednesday, April 20, 2011

Rare Earth Elements Update

Another week leads to another price increase in rare earth oxides.  This bull market continues to go unnoticed by the mainstream press.  Our last report on 4-4-11 showed a sample mix of oxides from one early producer with a blended market price of $150.20/kg.  This same mix now has a market value of $160.32/kg having experienced another 6.7% price increase in only 2 weeks.

Prices as of 4/4/11

Rare Earth Oxide
Distribution
2007
2008
2009
Q3 2010
 Q4 2010
04/04/11
Lanthanum Oxide
25.50%
3.44
8.71
4.88
23.67
52.49
123.10
Cerium Oxide
46.74%
3.04
4.56
3.88
23.05
52.62
120.60
Neodymium Oxide
18.50%
30.24
31.90
19.12
55.81
81.38
220.00
Praseodymium Oxide
5.32%
29.05
29.48
18.03
54.37
78.62
215.00
Samarium Oxide
2.27%
3.60
5.20
3.40
14.40
36.58
120.60
Dysprosium Oxide
0.124%
89.10
118.49
115.67
281.54
287.85
646.00
Europium Oxide
0.443%
323.90
481.92
492.92
585.31
611.54
1000.00
Terbium Oxide
0.068%
590.40
720.77
361.67
593.38
620.38 
1085.00
Av. Composition

11.59
14.87
10.32
16.02
62.18
150.20

Prices as of 4/18/11


Rare Earth OxideDistribution200720082009Q3 2010
 Q4 2010
18/04/11
Lanthanum Oxide25.50%3.448.714.8823.6752.49133.10
Cerium Oxide46.74%3.044.563.8823.0552.62130.60
Neodymium Oxide18.50%30.2431.9019.1255.8181.38230.00
Praseodymium Oxide5.32%29.0529.4818.0354.3778.62215.50
Samarium Oxide2.27%3.605.203.4014.4036.58120.60
Dysprosium Oxide0.124%89.10118.49115.67281.54287.85700.00
Europium Oxide0.443%323.90481.92492.92585.31611.541180.00
Terbium Oxide0.068%590.40720.77361.67593.38620.38 1200.00
Av. Composition 11.5914.8710.3216.0262.18160.32
Composition 11.5914.8710.3216.0262.18160.32
How long will it take markets to wake up to this new reality?  Once they do there is still time to make investments because even large firms do not have the slightest idea what they are doing in this space.  We recently studied a 35 page report on one of our favorite stock picks in the sector.  The report used 2007-2009 rare earth oxide prices in their valuation model.  See above that prices are up over 1,500% in that time period.  This position has returned over 135% in the past year and remains undiscovered by the market.  A rapidly approaching US exchange listing will increase the companies exposure.

We are ahead of the herd in this space and our recommended stock mix has performed better than we could have ever expected.  An example investment of $10,000 made one year ago in the stocks we cover has grown to $42,088.07.  That is a return of over 320% in a year.  This market still flies under the radar and the stocks have not performed in line with the oxides that they are mining.  As you can see in the chart above the average blend of oxide prices has risen nearly 1,000% more than tripling the stocks performance!  Some of our smaller miners have very valuable deposits that will be likely acquisition targets for key western government supported consolidation vehicles.

Speak with your broker about placing capital in this sector.  In the event that he has no useful advice for you we offer a 7 page report that includes the following:

  • Industry primer
  • History of the elements
  • Explanation of the manufacturing markets that rely on these critical elements
  • Analysis of world demand and the current supply shock driving it
  • Projection of when new supply will meet that growing demand
  • A recommendation of which 9 companies to own in the space with a focus on the most valuable deposits controlled by firms with proper share structures, focused management teams and a true shot at early development in an effort to benefit from the consolidation phase
Please sign up to follow this blog and contact the editor KSIR Capital for more information.


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