Three rare earth companies for investors to watch
My grades in high school chemistry were less than stellar. The only thing I recall well is memorizing the periodic table. Had my science teacher informed me that the obscure rare earth elements would eventually set Wall Street on fire, I may have been more attentive.
Rare earth elements (REE), or rare earth metals, are a collection of seventeen chemical elements in the periodic table, namely scandium (#21), yttrium (#39), and the fifteen lanthanoids (#s 57 -71 on the periodical table). We can even include platinum (#78) and uranium (#92) as well.
REE elements are incorporated into many modern technological devices: you can't build a Prius, an accurate missile, or a wind turbine without them. They are also vital to new technologies such as iPhones and flat screen televisions, green energy technology such as solar and geothermal, and critical to the future of hybrid and electric cars. Easily obtainable sources of rare earth elements are also becoming less common.
At least on earth. Recently, astronomers used the Suzaku orbiting X-ray observatory, to discover the largest known cache of rare metals in the universe to date. Suzaku detected the elements chromium and manganese while observing the central region of the Perseus galaxy cluster, which lies 225 million light-years from Earth.
The portion of the cluster within Suzaku's field of view is some 1.4 million light-years across, or roughly one-fifth of the cluster's total width. It contains a staggering amount of metal atoms: The amount of chromium is 30 million times the sun's mass, or 10 trillion times earth's mass. The manganese reservoir weighs in at about 8 million solar masses.
Needless to say, if we could figure out how to become miners of intergalactic rare metals, we would. But, for the time being we cannot.
And thanks to the threat of an export boycott by China, which controls about 95% of the current global supply of rare earth elements, the stocks of the few non-Chinese companies with rare-earth mines are some of the most attractive penny stocks for speculative players.
Uranium and vanadium producer Denison Mines Corp (AMEX: DNN, Stock Forum) / (TSX: T.DML, Stock Forum) is a financially robust company with a strong exploration and development portfolio and international land positions. While the company recently announced that its McClean Lake uranium mill will be put in a care and maintenance mode in mid-2010, the company’s Wheeler River joint venture could, in time, drive Denison’s growth.
American Lithium Minerals, Inc. (OTC:BB: AMLM, Stock Forum) is an innovative development stage company that has strategically acquired interests in America's richest lithium reserves. In June, the company announced the closing of its acquisition of 16,000 acres in the lithium-rich Montezuma Valley, Nevada. On September 23, it announced it started work on the Montezuma Valley project. In November, AMLM announced it signed a Letter of Intent to acquire Premier Lithium Property in Utah.
The growing need for batteries used in hybrid and electric cars is expected to boost demand for lithium, the key ingredient in the next generation of batteries, from a projected 11,000 metric tons in 2012 to almost 90,000 metric tons in 2020.
The electric motor in a Toyota Prius uses about 2 pounds of neodymium in its permanent magnets. Each Prius battery also uses 20 to 30 pounds of another rare earth element, lanthanum.
Avalon Rare Metals Inc. (TSX: T.AVL, Stock Forum) is a mineral exploration and development company focused on the rare metal deposits in Canada. Its flagship project, the 100%-owned Nechalacho Deposit at Thor Lake, Northwest Territories, is emerging as one of the largest undeveloped rare earth elements resources in the world.
Avalon has returned very high-grade drill results and its Thor Lake deposit has high concentrations of heavy rare earth elements, nearly double the typical concentration. Avalon presently owns five rare metal and mineral projects in Canada, four of which are at advanced stages of development.
Why should penny stock investors be interested in North American rare earth metal plays? One reason – China.
China controls about 95% of the global production of REE. It also controls about 99% of the production for rare earth metals, such as dysprosium and terbium, and 95% of neodymium. Recently, China started to reduce the amount of rare earth metals that could be exported, and this year the plan is to reduce exports further.
Companies outside China face the very real possibility of not only paying higher prices, but of not being able to buy the raw materials they need at all.
ABOUT THE AUTHOR
John Whitefoot
John Whitefoot is the senior editor for Peter Leeds. He publishes www.PennyStocks.com, one of the most popular financial newsletters in North America, with over 10,000 subscribers. To get involved with Canadian and US penny stocks before they increase in price, take a free trial with us at pennystocks.com. |
