Rare Earth Elements – the new rockstar?

Welcome to the July edition of the Highgrade Review. This month’s issue is completely dedicated to rare earth elements and the companies listed on the TSX and TSX-V Exchanges that hope to profit from their recent and dramatic price increases. Prices skyrocketed when China began to limit exports of the enigmatic metals last year. But does this mark a genuine shift in the supply demand curve? Some think so. John Meyer, head of resources at Fairfax investment bank states, “There are very real risks of a shortage.” And just last month, rare earth elements were a key component of the newly legislated Critical Minerals Policy Act in the United States… (cont’d)

Are rare earth elements the new rockstar of the mining sector?

Rare earth elements (or rare earth metals) are a set of seventeen chemical elements in the periodic table, namely the fifteen lanthanides plus scandium and yttrium. Scandium and yttrium are considered rare earth elements since they tend to occur in the same ore deposits as the lanthanides and have similar chemical properties.

Despite their name, rare earth elements (with the exception of the radioactive promethium) are relatively plentiful in the Earth’s crust, with cerium being the 25th most abundant element at 68 parts per million. However, because of their geochemical properties, rare earth elements are typically dispersed and not often found in concentrated and economically exploitable forms. The few economically exploitable deposits are known as rare earth minerals. It was the very scarcity of these mineral bodies (previously called “earths”) that led to the term “rare earth”.

Prices of rare earth elements skyrocketed when China began to limit exports of the enigmatic metals in 2009. But does this mark a genuine shift in the supply demand curve? Some think so. John Meyer, head of resources at Fairfax investment bank states, “There are very real risks of a shortage.” And just last month, rare earth elements were a key component of the newly legislated Critical Minerals Policy Act in the United States.

While others think that the price of rare earths, some having gained more than ten times their value over the past few years, is about to change. Goldman Sachs analyst Malcolm Southwood says the supply deficit of rare earth metals will peak at 13.2%, or just over 141 thousand tonnes this year, but will actually reach a surplus of 3.2% as soon as 2013.

Having made a significant move to the upside, are rare earth elements the new rockstar of the mining sector or is this another classic speculative bubble? We’re not touching that question with a ten foot guitar.

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