Categories: Base Metals / Energy
Topics: General Base Metals / General Energy

Rare Earth Element Cos Could See Next Bull Market Run

 VANCOUVER -(Dow Jones)- Two TSX Venture-listed rare earth companies are enjoying strong gains Monday - an otherwise quiet day on the Toronto Stock Exchange as U.S. markets are closed for Memorial Day. 
Commerce Resources Corp. (CCE.V) and Rare Element Resources Ltd. (RES.V) are up 32% and 37% respectively, in part because two well-regarded market watchers are talking up a niche resource sector that's largely unknown to the everyday investor. 
Investment-letter writers James Dines, who writes the Dines Letter, and John Kaiser, who writes the Bottom-Fish Online report, say rare earth elements are increasingly important to global markets. 
Dines, who has declared himself a big-time "investor bug" of various nascent markets in the past, said last Friday that rare earth elements could be the next major surprise bull market. 
Why? Rare earth elements, which go by names such as thulium and lanthanum, are used in numerous electronic applications as well as superconductors, super-magnets, refining catalysts and hybrid-car components. 
The two other rare metals one needs to know about are tantalum and niobium. Tantalum is widely used in the electronics industry. Niobium is used in steels and superalloys. 
The actual amount of these elements that go into producing, say, hybrid cars is small but necessary. Supply is therefore vital to producers that need these rare elements in their products. 
Kaiser agrees, saying the value of rare earth element miners will be increasingly strategic as demand for product outstrips global supply. 
Enter Commerce Resources, a late-stage tantalum and niobium explorer, and Rare Element Resources, which has a key rare earth project in Wyoming. 
As Kaiser says, the strategic worth of what they're sitting on in the ground is becoming as valuable as the elements themselves. 
He used a recent example: state-owned China Nonferrous Metal Mining Group (CNMC) took a majority stake in Lynas Corp. (LYC.AU) this month, giving the Australian rare earth miner US$366 million in funding. While Lynas has offtake agreements to Japanese, European and U.S. clients lasting for the next five years, its rare earth supply could last some 30 years. CNMC has now secured and therefore controls the future supply from one of the richest rare earth deposits in the world, Kaiser said. 
That includes tantalum and niobium. 
This is all the more important because the U.S. Defence Logistics Agency stopped selling into the tantalum market in 2008. Australia's Talisman, the world's leading supplier of tantalum, has ceased production indefinitely, citing the adverse effect of the black market supply as well as intense pricing pressure. 
Black-market production in war-torn Democratic Republic of Congo is, by some estimates, supplying the world with some 30% of its required supply. 
As both Commerce Resources and Rare Element Resources move toward production, their leverage on global producers increases, observers say.
"Commerce Resources is in a fascinating global position; the window for tantalum has opened wide," said David Hodge, president of Commerce Resources. "We are becoming part of the supply solution on a global basis; no matter what the studies say in terms of the price of extraction, the industry will say yes." 
Commerce Resources is hoping to start open-pit production in 2010. 
In Toronto, Commerce Resources is up 10 Canadian cents to 40 Canadian cents on 621,000 shares. Rare Element Resources is up 35 Canadian cents to C$1.30 on 633,000 shares. 
Web Sites: http://www.commerceresources.com; http://www.rareelementresources.com