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Good Morning Readers.
For months I have been writing about the
acute shortage of Rare Earth Elements (REE’s). I highlighted in one of
my posts a meeting that took place on
January 28, 2011 with Colorado Representative Mike Coffman and 28 Republican
and Democratic Representatives, Alaska Senators Lisa Murkowski and Mark
Begich and Governor of Alaska Sean Parnell. At
this meeting they drafted a letter to Secretary of Defense, Robert Gates. The
letter requests that the U.S. Department of Defense act on the increasing
need to document the use of strategic rare earth elements in U.S. weapons and
advanced technology systems. The letter asserts that the Defense Department
needs to document the growing dependence of the U.S. military on these
critical metals, and catalogue current domestic sources, with a view to
stockpile REE’s as China threatens to impose export quotas and tariffs.
A copy of the complete letter is available at
the following link:
http://www.politico.com/static/PPM110_110131_rare_earth.html
At the time of my post I reported that China
currently produces approximately 97 percent of the Rare Earth Elements
(REE’S) used by countries around the world. I reported that U.S.
policymaker’s fear that China’s near term cutbacks to the export
of heavy rare earth elements such as Dysprosium and Terbium will compromise
vital U.S. defense systems, as well as domestic competitiveness in
increasingly important high-technology applications.
At this meeting Representative Coffman stated
“Our modern technological economy, from hybrid cars to direct drive
windmills to consumer electronics, requires rare earth dependent components
and will impact product availability. Fully understanding the aggregate
demand for rare earth materials and necessity of the demand will be essential
to understanding the supply limits, the future market and formulating U.S.
policy on these materials.”
Yesterday, as MolyCorp (MCP), Avalon (AVL),
Lynas (LYSCF) spiked higher the media discovered this “breaking
news.” The media reported that they had just discovered that China has
cornered the market on Rare Earth Elements. OK, “A day late and a
dollar short” as the saying goes. They finally got the message that
these REE’s which are used to produce the flat screen TV’s,
Ipads, IPods are also used as Representative Coffman stated in "Secret
U.S. weapon and defense systems" and will be in short supply due to
China’s cut in exports and the tariff that will be applied to these
exports. The good news for my readers is that we will be positioned to profit
from this news.
On
Friday March 25th, Avalon (AVL), a stock that I have been
writing about, broke over the 50 day moving average @ $6.89 and traded
sideways putting in a level of support. Yesterday, AVL spiked 14% to close @
$8.15 on a volume of 9.27 million shares. A look at the chart confirmed that
this move was exactly what happened on December 6th as it broke the 50 day moving average after a
fakeout below the 50 day moving average in November and moved higher. This
can be verified by a crossover of the MACD line over the 9
day exponential average. I expect that there will be a healthy
amount of profit taking before it continues an upward move to the level of
$11.00. Many of the “major’s” are showing strong interest
in this asset as it has key heavy rare earths, which even China is believed to
be showing an interest in. As my readers know, what makes this all the more
important is that China has decided to curtail its exports of REE’s by
50% and to add insult to injury beginning on April 1stChina
will impose a tax on all Rare Earth exports.
Another of my recommendations, Lynas Corp.
(LYSCF) broke out and closed @ $2.28 with 1.8 million shares traded. This
company which is located in Australia, should be in production within a month
and its proximity to Japan, which will need all of the REE’s it can get
its hands on to rebuild, will be very bullish sign for this holding. While
this stock has lagged and continues to trade under the 50 day moving average,
I see a tremendous upside potential due to its geographical proximity to
Japan and China. Yesterday I doubled my position @ $2.15 and I look for this
stock to move quickly to my target of $3.00 before getting acquired by a
major or a Chinese company.
Another of my holdings that broke out
yesterday was General Moly (GMO). It closed up 7% @ $5.38. I can only assume
that the move was due to the fact that the mining stocks moved in
“lockstep”. If you have the stomach to wait, by the end of this
year GMO will be a big winner but at the moment they have had permitting
problems which are sure to be resolved. At this price, GMO is a buy. My
Dollar cost average on this stock is $4.98 and I would wait for the
inevitable retracement and buy it near the $5.00 level. Having said this you
will need to have the patience to wait because this tree will not bear fruit
until 2012. When it does you will be glad you bought it at this discount
price.
Of all, my favorite holding is Ucore (UURAF).
It closed @ $.99 yesterday. My
dollar cost average is $.84 and I would wait for a pullback to buy this.
Please read my post on March 8th to
get an overview of this stock. It’s location, management and the fact
that it is the 100% owner of the Bokan Mountain makes this stock a sure fire
winner. Having said that, I spoke to the CFO of the company and it will not
be in production until 2015 but I expect it to be acquired long before that.
Keeps this holding on your radar and if it pulls back to the $.80 range I
will be a buyer of more.
Finally, I listened to an interview of Jim
Rogers and he, as am I, is 100% bullish on Gold (GLD) and Silver (SLV). When
the interviewer asked him why he was so bullish on gold and silver he said
because of the devaluation of currencies and inflation. As I have already
said a study of the charts show that for the last 4 years gold and silver
pull back every six months or so. I bought GLD in January @ $128.00 and SLV @
$26.00. I would suggest my readers wait for what I think will be a pullback
in July and buy then. If you want to open a small position now I would not
try and talk you out of it because I see gold going to $1600.00 and silver
going to $45.00. I don’t think opening a position here will hurt you
but I think with some patience you will be able to buy lower.
I remain long AVL, LYSCF, UURAF, GMO, UXG,
GLD and SLV.
Stay Tuned!
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