Rare Earth Monopoly

Jeff Siegel

Written By Jeff Siegel

Posted February 6, 2012

China sometimes reminds me of a schoolyard bully that no one has the stones to confront.

He’ll take your lunch money, make you do his homework and run your pants up a flag pole during a particularly cold and rainy day.

Or in this case – hoard the world’s supply of rare earth metals.

Sure, the global community has been up in arms about it. And last week, the WTO ruled against China’s stockpiling. Apparently, if China doesn’t abide by the ruling, the Middle Kingdom can be sanctioned.

Of course, by the time they get around to doing that (it could take up to a year-and-a-half), all those WTO hearings and sanction threats won’t even matter anymore.

Because by then, true seekers of wealth will have already turned the tables on China’s rare earth bullying – and made billions as a result.

Sidestepping China

As you know, rare earths are found in everything from magnets and smart phones to radar equipment and hybrid vehicles.

But don’t think for a second that manufacturers of all these products are waiting around for some kind of WTO ruling to save their businesses from ruin.

Take Toyota (NYSE: TM) for instance. The Japanese automaker recently announced it has developed a way to make hybrid and electric vehicles without rare earths. Although Toyota has also invested in non-Chinese rare earth producers as a hedge, including a Vietnamese mining company that signed off on one such deal just a few months ago.

The fact is, any company that relies on rare earths today is either actively developing new technologies that rely less and less on rare earths, or they’re simply getting in on a wave of new non-Chinese rare earth producers.

A Rare Earth Bonanza

Back in April, 2010, I published an article entitled Rare Earth Stocks to Hedge Against Chinese Control.

In that article, I wrote. . .

Because 95% of the world’s rare earth elements are produced in China, it is becoming increasingly urgent for developers to find REEs in other parts of the world.

This becomes more and more apparent every time I talk to high-performance battery manufacturers and companies that rely on rare earth magnets for things like wind turbines and energy efficient electric motors.

Bottom line: China needs those REE supplies for its own consumption.

And in the not-too-distant future, those supplies found outside the Middle Kingdom will be the only supplies we’ll be able to get our hands on.

So here are a few companies that are operating in this sector, and are not based in China:

  • Avalon Rare Metals, Inc. (TSX: AVL) projects in Canada
  • Great Western Minerals Group (TSX-V: GWG) projects in Canada, South Africa, and the U.S.
  • Hudson Resources, Inc. (TSX-V: HUD) projects in Greenland
  • Rare Earth Metals (TSX- V:RA) projects in Canada
  • Commerce Resources Corp. (TSX- V:CCE) projects in Canada

And of course, there’s Molycorp (NYSE: MCP), which has just recently filed to go public. This company is looking to develop operations in Mountain Pass, California, just about 15 miles from the Nevada border.

By the end of the year (just eight months after I wrote that article), all six of those stocks delivered massive gains. Take a look:

  • Avalon Rare Metals: +158%

  • Great Western Minerals: +221%

  • Hudson Resources: +118%

  • Rare Earth Metals: +78%

  • Commerce Resources: +135%

  • Molycorp: +293%

Here’s What’s Next. . .

I won’t deny it. While my expertise is in modern, alternative energy, I made a fortune with those rare earth plays that year. Truth is, those were some of my best (and fastest) profits ever.

Well, until now, anyway.

You see, it wasn’t long ago when my colleague Nick Hodge sent me this text message:


He wasn’t kidding.

Nick was scouting a remote Alberta mining property that a geologist friend gave him a tip on.

What he found was more than 612 million pounds of metal wealth (including rare earths) spread over 700,000 acres. Or enough to supply the entire world for the next 100 years.

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

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