Interview: Luisa Moreno on the state of the rare earth market and her ‘Super Seven’
February 28, 2014 — Tracy Weslosky, Editor-in-Chief and Publisher for InvestorIntel interviews Luisa Moreno, PhD, MEng, Sr. Metals and Mining Analyst for Euro Pacific Canada on the state of the rare earth market and what investors should consider when investing in rare earth companies. Tracy starts by pointing out that the rare earth industry fell 58% in 2013 and what Luisa anticipated in 2014. She starts with: “Hopefully, we will see a turnaround.”
Then continues with: “Demand for these elements is still real. They are used in many of the modern technologies. It all depends on the performance of the general or the global economy. Since 2011, when we saw the peak in rare earths, prices have come down significantly and so have the stocks.” Luisa suggests that this happened because, in response to the market uncertainty, and especially the risk of unavailability, stemming from tougher Chinese export restrictions, many end-users started to stockpiling rare earths. This means that rather than buying new supply, end users have been tapping into their stockpiles. Nevertheless, given that this process started three years ago, “…in 2014, we will see end users coming back to the market and we will see increased demand.”
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Luisa, who has been following the rare earths sectors for many years starts by identifying the rare earth companies she follows when Tracy asks about the issue of sustainability. Luisa starts by addressed the Standing Committee on Natural Resources at Canada’s House of Commons (Canada’s parliament) in mid-February on the need to ensure a steady supply of critical materials. Confirming that the Government of Canada appears to want to learn more about rare earths and “…not only for the Canadian economy but also for their allies such as the United States, Europe and Japan along with other industrialized nations.” Adding some insight into the hearings, she noted that the MP’s were very keen to find out was whether “rare earths really have a potential economic benefit for Canada.”
Tracy stresses this point and Moreno suggests that “we will….but it’s important to understand well the costs of developing these companies and projects and I think some of the companies have reached a level in their feasibility studies that allow us to understand the complexity and the cost of developing them.” Nevertheless, Moreno suggests that if rare earth prices should fall back to 2005 levels, for instance, when China was not enforcing any environmental regulations on rare earth producers such that prices were very low, “I think – that it will be very difficult for us to develop rare earth projects with lanthanum at two dollars or one dollar, and with neodymium and praseodymium at below 40 dollars.”
She goes on to state: “This means that operating and capital costs (OPEX and CAPEX) are key parameters to consider when investing in rare earths.” Some of Moreno’s favorites, (the ‘Super Seven’) are Matamec Explorations, Ucore Rare Metals, and Tasman Metals because they “happen to have a high percentage of the less common elements — the so-called ‘heavies’. Luisa states that this tends to increase their estimated basket price tends to be higher, and added that these three also have completed studies that show that their CAPEX is relatively lower compared to some of their peers. Listing the other four companies in her ‘super seven’ list, she expands on her position on Avalon Rare Metals, Rare Element Resources, Frontier Rare Earths and Montero Mining and Exploration.
An accomplished entrepreneur and corporate finance professional, Tracy Weslosky is the CEO for InvestorIntel Corp. and the VP of Business Development for Bellotti Capital Partners ... <Read more about Tracy Weslosky>