'Rare earth metals are going to be a phenomenon'

Equities and Economics Report writer Victor Gon
TER: Let’s move on to rare earths, which have been getting a lot of buzz at the various mining conferences. What’s your viewpoint on them and the investment opportunities they represent?

VG: Rare earth elements and rare earth metals, in general, are going to be a huge phenomenon. It’s like in ‘07 when we had a uranium boom and uranium went from $8 to $136.

What it comes down to is these rare earths are needed for so many things. For example, hybrid cars are really the driver for rare earths’ increase in price. But not just hybrid cars. You’ve got tantalum and niobium being used in a lot of other things and these rare earths are going to be in huge demand.

I don’t think we’ve gotten ahead of ourselves with the demand or with the price of these rare earths. We don’t have enough to supply the markets fast enough. That’s partially what’s causing the price to move up. There’s also supply constraint out of China. China controls 95% of the rare earths and says, okay, we’ll just keep them for ourselves, thanks.

You’ve got to fight for the rest of the 5% of them out there. So that’s obviously causing major upswing in the price of rare earths. That has been the main driver. But that coupled with a shift in how we do things — we’re going to see a ton more hybrid vehicles go on the road over the next couple of years and each one of them is going to require 50 pounds of rare earths. That’s going to add up.

TER: Jack Lifton, who speaks at conferences about the rare earths, asserts that it’s really a rush to production. When the next two or three companies actually get to production, the amount they produce will probably satisfy demand for decades to come.

VG: Yes, it is a race to production. Like with uranium, for example, there’s plenty of uranium out there for the market. It’s just whoever does it first will obviously satisfy a lot of the market and I think that’s quite the possibility for rare earths.

The best part for an investor is that it’s not going to happen today or tomorrow or next year. We’ve got a little bit of time. We’ve got some idea as to which companies have been in the space for a long time and have had more lead time to develop a project and get to the stage where they’re working the economics of it.

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