Australian weekly: Bubble? What rare earth bubble?

Something unusual has just happened on the Australian stock market: a company made a bullish announcement about rare earths and its stock did not blast off. Of course, so many mining stocks in recent days have lost ground as metal prices hit the wall, with most mining company investors enduring a very bumpy patch, but normally even on down days a rare earth announcement can usually give a share price something of a jolt.

The other fact that must be added is that the company, newly floated Kidman Resources (ASX:KDR), made the announcement on its first day of market trading and there are always IPO investors who like to take what profits they can during those first trading hours. And Kidman does have prospects other than rare earths, and the fall may reflect the falling metal prices generally. The stock reached A24c on its first day of market trading last week, but closed on Tuesday (ahead of the Australia Day holiday) at 19.5c.

Nevertheless, it was quite a bullish announcement. At the Hale River project in the Northern Territory, the identified REO areas had been doubled from four to eight. Ten further rock chip samples had returned grades up to 0.86 per cent REO.

It was just one item in another fast-moving week in the Australian rare earth space.

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There was an interesting interview with Arafura Resources (ASX:ARU) chief executive Steve Ward published by the subscription website Ward said he wanted to burst the two "bubble" claims about the rare earth sector.

He said the first was the claim that the market is facing a blow-out in production from all the proposed new mines. Not so, he said, for all the reasons with which RareMetalBlog readers are familiar. One, a few samples do not a mining project make; even the successful projects can take 15 years from discovery to production, and production will continue to struggle to keep up with demand.

The other wrong-headed notion, in his view, is the belief that China could switch policy and export more rare earths, meaning prices would collapse. Rather, he believes, China could become a net rare earth importer within five years.

Meanwhile, it was pointed out (in response to my recent niobium post) that this metal is an important part of the Dubbo zirconia project owned by Alkane Resources (ASX:ALK), a fact that should have been included. When that comes into production in 2013, Alkane will be Australia’s first niobium producer. I must say that the high level of investor interest in this company is impressive.

Also on the niobium front, I should mention another company that could be added to watch lists. Globe Metals & Mining (ASX:GBE) plans to bring its Kanyika project in Malawi into production in 2013 at a rate of 3000 tonnes a year of niobium. In November the company took on board as a partner the East China Mineral Exploration & Development Bureau with a A$41 million investment from the Chinese company. Kanyika contains niobium, uranium, tantalum and zircon.

The company has two other projects of interest. There have been some encouraging returns of heavy rare earths (especially dysprosium) at its Machinga project in Malawi and, at Mount Muambe in Mozambique (which was acquired with fluorite in mind), there have also been some good indicators of HREEs, again dysprosium but also europium.

Also in Africa, Peak Resources (ASX:PEK) says it is very encouraged by results from the Ngualla project in southern Tanzania. Drilling there has identified REO (including yttrium) along with niobium-tantalum and phosphate.

But, from what one can tell, there are many investors here also waiting for some indicative results from a number of REE projects recently announced and which are located within Australia. Rare earths still have a buzz going for them Down Under.

In other words, never a dull moment on the Australian rare metals scene.


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Robin Bromby

About Robin Bromby

Robin Bromby is a journalist, author and sometime publisher who has had titles issued by mainstream publishers, including Doubleday, Simon & Schuster and Lothian Books. Robin began as a cadet journalist in 1962 with The Dominion, the morning paper in Wellington, New Zealand. He also worked for the NZ Broadcasting Corporation, TV1, the South China Morning Post, The Herald (Melbourne), the Sunday Times (Wellington), The National Times (Sydney) and, since 1988, he has been first a staff reporter and now columnist for The Australian and has been a Senior Editor for InvestorIntel since the onset.
  1. Robin – you have us adding companies so fast, suffering from whiplash. This was a great piece and never a dull blog from you – kudos. Tracy

  2. Anyone has a plausible explanation why the Aussies (Lynas, Alkane , Arafura, northern uranium etc. etc) loose momentum while the need for REE’s is increasing?
    Are the JP Morgan’s selling off or is it the inundation problem of the North-West? The AU$ is weakening against $ and €, but that has to be accounted for the problems in the N-W.
    Anyone of you guru’s?

  3. Aat
    Sorry for the delay in replying. No, not affected by either floods or cyclones, just the quarterly reporting season by mining and oil companies which means trying to keep track of something now near 900 companies.
    The quick answer to your question: like other falls, it’s mainly the general trend on anyone day on the Australian share market. And the market mood switches so quickly. Late in 2010, any REE announcement sent prices soaring. But the two most recent 100%-plus one-day gains were on copper results. The present REE company prices should be read in conjunction with the wider Australian market – and where the day traders decided to strike next.

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