The London REE Report: Which Companies?

In Monday’s comments Prescient11 was good enough to list his favourite rare metals stocks and invite me to comment. Never one to miss a chance to embarrass myself in the cause of entertaining others I am only to pleased to oblige. Pres. wrote: My tops are: QRM, RES, AVL, TSM. My secondary’s are: GWG, UCU, DAC, LYC, ALK I would love to know your thoughts on the various projects and who you thought stood a snowball's chance in hell in making this work. But first I better put up a couple of qualifications.

No one can see the future, even though many on Wall Street and in the City of London charge big fees pretending that they do. I have no crystal ball, just years of trading and following markets, good times and bad. During my 40+ years following markets, technology changed, and our world globalised as never before. We went through boom, bust, boom, bust, and stand today at the start of a historic transfer of economic power from west to east. While I think I have a legitimate experience level to draw upon to give informed comment, in no way should anyone rely on my writing and comments as the basis of making an investment decision in rare metals stocks. No one has more at risk in an investment, than you do yourself once you commit to an investment and it is critical to conduct in depth due diligence before risking hard earned cash.

There is rarely if ever a need to rush into making and investment decision. Marry in haste repent at leisure still works for stocks, if not any longer elsewhere. One other caveat. I do not get paid by any of the firms listed nor do I (yet) hold a position in any. Though that could change at any time.

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Prescient listed Quest Rare Minerals, Rare Element Resources, Avalon Rare Metals, Tasman Metals, with secondary’s, Great Western Minerals, Ucore Rare Metals, Dacha Capital Inc., Lynas Corporation Ltd, and Alkane Resources. So let me put them in placement order to how I see things from London. My order of preference:

GWG, LYC, TSM, UCU, QRM, AVL, RES, ALK. Not rated by me, Dacha Capital Inc., but only because I’m not sold on the wisdom of investing in the private stockpiling of physical rare metals. I would prefer a sector mutual fund of companies engaged in the rare metals exploration and production.

Don’t get me wrong, all or any of the companies listed could succeed or fail. If the management really messed up, or if substitution ruined their best laid plans of mice and men, it’s all too easy to fail. If they can finance their plans easily and carry them through on something close to the current timetables they succeed. Tomorrow, I’ll start explaining my logic behind my ranking. Up first, GWG, LYC, TSM, and UCU.

Graeme Irvine. London.

  1. I’m happy your on our side(GWG).
    You have joined the ranks of Jack Lifton and Jon Hykawy congrats on that. Now tell me what this means “subsidiary of Rareco”? Who owns this company Rareco? I think that GWG does and they ain’t talkin yet. but why? Did they buy it with the LCM name or what?
    June 2010: The Department of Mineral Resources of South Africa granted a New Order Mining Right to a subsidiary of Rareco with respect to the Steenkampskraal Monazite Mine.

  2. Hi Mari.
    I have no idea who owns Rareco, but GMG might have needed local help. The Republic of South Africa badly needs the potential jobs and wealtha successful Steenkampfkraal mine will bring, but they also encourage native participation. If I had to pick only 1 stock in the sector, not something I recommend even in sectors less rareified than rare metals, GWG would be my choice. Having already got paying clients in North America and Europe through their processing subsidiaries, gives then quite an edge to my eyes. The game is theres to lose, since they are already winning, so to speak.

  3. What concerns me as a stock holder is their recent consideration for a reverse stock split. Never a good sign. Also a name change?
    I personally think the management needs to get it together. Before I consider buying more shares, they will definitely have to prove themselves.
    In my humble opinion, LYC should be #1

  4. Hi Jim.
    GWGfor me rated over Lynas in that their subsidiaries already have theclients. LYC still has to build the plant in Malaysia and to get the skilled expertise. Looking at both purely from a strategic takeover perspective, I think a defence industry firm would prefer its refining expertise in America and the UK to Malaysia. I think they would rather take existing expertise to possible expertise tomorrow, plus Less Common Metals is doubling it capability by 2012. If any defence contractor-end user manufacturers are contemplating securing supply companies the top 4 are right up there, but GWG would be my pick as they are much further along and probably could be pressed to move forwards even faster.

  5. From what I have gathered, metallurgy is a make-it-or-break-it issue for the companies, and each company faces unique metallurgical processes, so the processes can’t be directly compared from one company to another.
    Any thoughts on those?

  6. Bob.
    You are quite correct, all the firms must find what they believe to be there and then get it processed in a commercial quantity and at a price that allows them to make a profit. Because the mix of elements present and the content percentage is always different, direct comparisons are never going to occur, we are always going to be comparing apples to oranges, plus on some, comparing the future crop of apples to future oranges. In many respects though, that is the nature of investing in mining companies, agricultural companies, and their like. Technology and bio-tech can be like that too. It’s what allows the paid professional advisor an escape, whenever they get something wrong, and another bite at the apple with another fee paying client later.

  7. Thanks Graeme, I think this is just the conversation that needs to be had. Everyone will learn so much about the entire process just by having these types of debates and hopefully come to understand the REE sector in greater depth. Look forward to your analysis and really appreciate your work.

  8. But nobody has an opinion on MolyCorp? Is that due to the semi-failure of the IPO? I really expected the US DOD to invest (indirectly maybe, I don’t know the restrictions by law in the USA) in Moly. In the recent interview of Mark Smith of Moly the interviewer haunted him again with respect to the pollution which was caused by a broken pipeline, so I think Moly has a long road ahead to overcome all the restrictions layed upon them now and in the future.
    GWG was left by Toyota, that is no winner in my opinion, my nr 1 still remains Lynas. Your thoughts on Moly please?

  9. Can you get the stuff out of thre rock?
    That is the question.
    Keep an eye on the player in the Red Wine.
    GWG , SEARCH MINERALS , Rare Earth Metals-”RA”, and Me .
    We all hold great properties in the new/1960′s discovered belt of rock.
    Check out RA’s Press today.
    The grade is there and Tonnage will be proven.
    But what I feel is most important is, you can retrieve the REE’s.
    A little wine for you meal.

  10. Aat
    sorry for the delayed reply. I had commented on Moly just before the IPO saying I would pass. To my way of thinking, there was no urgency to get in on an IPO that wasn’t covering all their financial needs, nor with another two years of work to go, there would be plenty of other opportunities to get in later, most likely at a more favourable price. I think that they will build a first class workable resource, but being an early owner via the IPO wasn’t for me. Post BP, operating risky technology businesses in the USA, will likely be slower to achieve and at higher cost, so on Moly I’d rather wait to seewhat the next few months bring.

  11. Hi Donna
    Sorry for the delayed reply. RA has an interesting property at Letitia Lake, but its very early days. Getting in this early is a bit of a gamble on what is actually there, rather than what they think is there. Even assuming that they are correct, they are further behind in the race to mine than many other companies. It’s a speculation trade at this point, rather than an investment trade.

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