Rare Earth Metals – A Short Primer

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Rare Earth Metals (REE) are elements, typically metal, that are required for high tech development and manufacture of electronics, aerospace, military and similar products.

Some examples include:

Molybdenum
Ruthenium
Lanthanum
Neobium
Tantalum
Cesium
Lithium
Cerium
Vanadium

Different analysts include varying example in their REE basket. For instance some would include Uranium while others would not.

Since REE are required for military applications, the mineral stocks are strategic store – a very competitive market exists for the rarest REE.

Extraction of these rare earths are similar to precious metal mining with a few notable differences.

1. <LI class=MsoNormal>Whereas precious metal ores have been sought out for a few thousand years, the REE have only come into demand in the last 70 years (some of these elements were only ‘discovered 100 years ago). This means that the mining infrastructure (power, roads, water, and human resources) do not exist where the ore bodies exist.
2. The mineralogy may require different engineering and technology than have usually been utilized on precious metals mines.

Some of these extraction scenarios produce many more tons of overburden (waste rock) than precious metal mining. This is a social and environmental aspect that demands significant personnel resources and goodwill capital.

Here are a couple blogs to read about REE.
http://www.raremetalblog.com/
www.raremetalstock.com

NOTE: These sites may receive financial subsidies by manufacturers/miners for product placement and write-ups.

How to Invest In REE

Option One – Speculative: Stock Picking.
This option requires the most amount of due diligence and time and will typically only pay off for the savvy. You will need to focus on a sector within the industry. For example, if you look at the Uranium slice of the REE pie, you might find choose to stick with the larger producers such as Denison, Cameco (CCJ), etc.

Or, perhaps you want to allocate some very speculative wagers into micro firms that may be on to the next bid ore body and determine that Ucore or Fronteer, Uranerz (NYSE:URX) or Paladin have promise:

When you become familiar with current producers, and learn their ore bodies, at that point you can begin to extrapolate from that ore body and predict which explorers in nearby areas have higher likelihood of production. For example, Uranium City in Saskatchewan might provide a more likely source of future uranium deposit discovery than Chicago, right?

Option Two: The Funds

Pinetree Capital, PNPFF, has multiple uranium stocks and is one of the very few funds with exposure to the rare earths; the fund also holds potash and precious metal portfolio.
Pinetree Capital

Option Three: ETF
The Rare Earth Metal Fund (REMX) just started trading.

DISCLAIMER: YOU MAY NOT KNOW WHAT YOU ARE DOING AND WILL PROBABLY LOSE YOUR a$$, SO DON’T BUY ANYTHING. PROVIDED AS INFORMATION ONLY. I COULD BE LONG OR SHORT ANY OF THESE STOCKS OR FUNDS AND NOT EVEN CARE TO LOOK IT UP.

 

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5.12.11
Howdy,

Time for a Rare Earth Metal update.

This sector has HAD A NICE RUN since I introduced the topic on November 1st.

What has happened since then?

Well, the sector had a major rager run!

OPTION ONE: Speculative Stocks
Denison (DNN)
Nov1:Closed at $, Ran to $, broke down to current $

Cameco: CCJ: TEXTBOOK 5 wave Move
Nov1:Closed at $2.11. This was the end of the correcton (Wave 2) that followed the first leg up (Wave 1 from $1.12 in June). Starting Nov 1, CCJ began Wave 3 to the upside, topping out at $4.45 – the top of Wave 5 of PRIMARY I.

Since then, CCJ has now made, what looks like a running ABC correction. Important to note, CURRENTLY NOW SITTING ($2.14) at THE breakout point ($2.11). See how these pivot points set themselves up? Previous trend supports now serve as a magnet/resistance.

The Uranium stocks have been a completely different animal.
Technically, many of them had the same chart structure, breaking out of the correction which ended Nov 1 and made new highs.

But THEN – the NEWS DRIVEN FUNDAMENTALS TRUMPED THE CHARTS. That is, the reactor meltdowns in Japan tanked the uranium stocks. Look at the massive breakdown (gap down) in their chart structure.

The NEWS can begin a new primary wave, either along with or against with the previous trend. Great example! Short term, today URZ breaking out (against the market) from support on the 200 day moving average; should run higher for another 10% into resistance at the 50 Day EMA.

UCORE has acted in a somewhat similar vein, but has BEEN MUCH STRONGER. Still way up since the corrective low and had not recently penetrated it’s 200 D EMA like URZ did.

OPTION TWO – THE FUND
PNPFF has performed MUCH STRONGER than some of the speculative stocks. The small micro cap stocks are for the hot money/nimble traders. The fund is for the investment houses. Note how PNPFF also broke out to the upside since November and has not yet broken through the 200 day EMA, though it did break down through the 50:


OPTION THREE – THE Exchange Traded Fund

The ETF has outperformed the underlying companies and the fund. Since the introduction of ETFs, they have absorbed much of the investment money that previously would find its way into the company stock. This fundamental change in money allocation MUST NOT BE IGNORED.

NOW: Although previously strong, currently REMX looks like it is making a distribution top, I will sell if/when it breaks the support near $26.

HOPE YOU ALL MADE SOME MONEY WHEN MOST OF THE MENTIONS IN THIS FIRST POST DOUBLED OR TRIPLED SINCE THAT POST!