"Tiny Australian Miner Breaks China’s Rare Earth Monopoly"

I’ve seen this ad in a few different variations, for a couple different related newsletters. The most detailed one was from Ann Sosnowski for the MicroCap HotSheet, which would like you to sign up for a subscription at around $1750 a year.

And of course, even if you want to pay that much, they want you to promise to keep a secret:
“You must be able to keep a secret. No blabbermouths. Sharing MicroCap HotSheet stock picks with people who are not within our private group is strictly prohibited.”

Thankfully, the Stock Gumshoe is not a subscriber … so I have no problem sleuthing out the company she’s talking about, and sharing it with my lovely readers.

The ad opens with many claims of past successes in microcap investing, including some that the author “would have” recommended to her other newsletter readers back when they were tiny, like Force Protection (a previous Gumshoe article sleuthing out FRPT is here, FYI), but couldn’t because of their size (thankfully, she doesn’t note any of the microcap flops and bankruptcies she would have recommended, too, or I would have fainted from the stench of honesty). And now, this new newsletter product means this advisor can finally tell you about all these hot microcaps.

The pitch for this one is thus:

China has a near-lock on “Rare Earth Elements”, which are a set of obscure fellas from the periodic table that are rare or difficult to find, but which are in significant demand for very particular products — like hybrid car batteries and lots of other electronic stuff.

If you’re like me, you’ve probably heard of “rare earth magnets” … but didn’t know much about all this other stuff.

So many things are dependent on rare earth minerals and elements that the author argues this is a national security issue — guided missiles and other defense technologies are particularly dependent on these elements.

And most of these elements are currently mined and produced in China, which strategically moved to slash prices and drive other producers out of the market in the past decade … and has taken steps to choke off export to the US. (again, according to the newsletter ad — there may be more to this story, I don’t know the politics)

Now, the ad says, there’s an Australian rare earth elements miner that’s just about to start digging — and the prices might shoot up incredibly fast.

The headline promises a move from .35 cents to five dollars … but later on, the sell gets sweeter:

“This tiny 35-cent company is hands down the single most lucrative investment I’ve seen in the last three years … I wouldn’t be surprised if it went all the way to $6.50 or even $7 per share.”

Here are the clues we get about this little Australian company:

They bought the mine site in 2001, and it is the only non-Chinese commercially viable rare earth element mine in the world.

“J.P. Morgan, Goldman Sachs and RAB have started building positions in the stock.”

She also supplied a chart, not sure if it’s in US or Aussie dollars, that shows the date she’s working from for the 35 cent price is December (I’ve seen more recent ads on this, too, but without specific prices it was harder to confirm from just those ads).

So … would you like to join the “exclusive” limited community of the MicroCap HotSheet? Or do you just want to know the name of the company so you can do your own research?

I thought so.

So your friendly Stock Gumshoe entered the researchitron chamber and came out with the knowledge that this particular Australian miner is …

Lynas Corp. (LYC on the Australian Exchange, LYSCF.PK on the US Pink Sheets)

Lynas was trading at just about 35 cents (US — closer to 45 cents AU) when this email was initially sent out. They have a mine in Australia called Mt. Weld, which they bought in 2001 from Anaconda Nickel. Their promotional materials claim that Mount Weld has “without a doubt the world’s richest Rare Earths ore body.”

They also have a processing plant for the ore in some stage of development in Malaysia (so that they won’t be subject to Chinese policies, as they would be if they sourced this work in China).

But I’m not trying to sell you on this one — or sell you anything, frankly. I’m just telling you that you don’t need to spend $1,750 for an “exclusive” newsletter to find out what this company is, not when your friendly Stock Gumshoe is around.

(Though if you want to make a donation to the Stock Gumshoe cause as some of your fellow readers have, they’re always welcome — just click the donate button in the right sidebar.)

As I’ve said many times before, I don’t have any idea whether this is a good investment or will get to $5 by the summer as the ad predicts … and I don’t know if the story about the rare earth elements monopoly in China and the general demand picture for these unique elements holds water, though my basic understanding of the situation is that it does.

I don’t know if Lynas will run into any hitches as they develop their mine at Mt. Weld, or with their plant in Malaysia — the digging is supposed to start soon, I think, but the processing plant won’t be commissioned until the middle of next year.

I also haven’t looked in detail at Lynas’ financials, except to confirm that there is some investment bank interest as was teased, including institutional placements in the US — and that one of the major holders, a hedge fund called Ospraie, has been selling a bunch of shares recently. I don’t know if they’re prescient or idiotic to be doing so (or if this is just one of those “unwinding carry trade” stories for them). You can read all the filings and announcements yourself at http://www.asx.com.au if you’re interested. And if you promise to come back to the Gumshoe when you’re done.

As always, the Stock Gumshoe can’t tell you what to buy … but he can tell you what company the newsletter ads are telling you to buy. Now you’re on your own — enjoy!
             ——————–
Is Your Bank Safe?
More than 130 banks will have failed by the end of 2009. What if your bank fails?
Did you know you could be left in the lurch for days, weeks, even months before you get your money back from the FDIC? What happens if the FDIC can’t cover your funds? How do you find a safe bank to protect your deposits right now? Find answers to these questions and more in the original “Safe Banks” report from one of our advertisers, Elliott Wave International.
Learn more and download your free 10-page “Safe Banks” report now.

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.

Related Articles:

"Surefire Agflation Play"

The Week of Our Discontent

Winners and Losers from the Gumshoe

Stock Gumshoe — Monthly Review

Stock Gumshoe Update — Winners and Losers

1. What are the Blue Gold companies our friend S Lieb is hyping?

   [Reply]

   Posted by Anonymous | April 1, 2007, 6:31 am

2. LYSCF has been good to me; up almost 18% last Friday alone (March 30).

   [Reply]

   Posted by BangkokMan | April 2, 2007, 1:16 am

3. Dynamic Market Alert has been sending e-mail to me on this stock showing graph taht it’s up 108% and last chance to det in under a $1. If you’d like I could forward teh e-mail to you. Why would anyone want to keep it a secret. If they own it wthey should want people to buy.

   [Reply]

   Posted by erhine | April 7, 2007, 2:18 pm

4. It’s not about getting the stock to go up or down — it’s about getting a paid subscriber for a newsletter, that’s where the money is for these guys. Sure, go ahead and forward it — I like reading all these emails.

   And about the “blue gold” companies (water stocks) that have been teased a lot lately — I’ve got a bunch of these emails but haven’t done the work yet. Hope to soon.

   Thanks for reading and commenting.

   [Reply]

   Posted by One Guy | April 7, 2007, 2:24 pm

5. One Guy don’t know how to forward to you though link in e-mail is:
   http://www.isecureonline.com/reports/DIM/EDIMH401/?o=1222296&u=16287624&l=819219
   I checked and the stock closed 73cents LYSCF April 4th 2007
   sorry about typos in last.

   [Reply]

   Posted by erhine | April 7, 2007, 2:32 pm

6. I have been following Lynas Corp back to 2001 and several other Rare Earth Deposits other than those in China. Lynas was to mine the deposit and ship the ore to China for process but that deal fell through and now Lynas is attempting to build a processing plant in Malayasis. China was instrumental in closing down the only North American producing mine of rare earth elements, Mountain Pass. I am a staunch follower of the rare earth developments, their application and uses. There is no substitution for REE’s. Another deposit under development is one in Northern Saskatchewan by Great Western Mineral Group trading on the Toronto Venture Exchange under the symbol V.GWG.

   Their website is http://www.gwmg.ca
   Lynas website is http://www.lynascorp.com/

   [Reply]

   Posted by wwwater | April 27, 2007, 3:16 pm

7. There’s another company Ian Wyatt is pushing called NEM.TO or NEMFF for us. Neo Materials Technology is a Canadian company that supposedly has strong market share in this “rare earth” magnet market, owning mines in China

   FYI

   [Reply]

   Posted by Anonymous | April 28, 2007, 2:24 pm

8. Even though Neo Materials Technologies is basded in Toronto, the two susidiaries, AMR and Magnequench are controlled by the Chinese. Other than having a head office in Canada they do not have any other interests in Canada

   [Reply]

   Posted by wwwater | April 28, 2007, 4:51 pm

9. Looks Like it’s typical Pump & Dump, hit 1$ now constantly going down, non-stop..
   Too may warrants too, about
   10 million. Just another balloon..

   [Reply]

   Posted by Anonymous | May 3, 2007, 5:49 pm

10. You could be right … Sosnowski’s in danger of losing her spot as the top performer in the Gumshoe spreadsheet. I don’t know what more she could do to push this one, there’s already been another campaign based on this teaser (with more focus on hybrid cars as the Rare Earth end market) that’s been filling my mailbox over the past two weeks. I guess we’ll find out in the coming months how it plays out, or whether there’s a viable investment hidden behind all those warrants … thanks for the comments.

    SG

    [Reply]

    Posted by One Guy | May 3, 2007, 6:06 pm

11. I bought at 72 cents in April and it closed today at 96 cents up 6 cents. According to what I’ve read this is the month they are to open a new mine. So far so good.

    [Reply]

    Posted by erhine | June 4, 2007, 11:51 pm

12. I must be the most gullible guy in the world. Sosnowski sounded like a great researcher.Am I glad that I discovered ‘Gumshoe’.

    [Reply]

    Posted by Gullible | December 4, 2007, 9:43 pm

13. I’m following LYNAS CORP over a year now. Prices seems to go up and down as a result of new (old) newsletters between 0.80 and 1.50 AU$. Productions and income increased in 2007 compared to 2006, prices tripled. Further increase is to be expected and effect on stockprices seems to come near a break-even somewhere in 2009. Time to get in on a 80/90 cents dip in the second half of 2008?

    [Reply]

    Posted by Hans van Toorn | April 1, 2008, 11:08 am

14. Thanks Hans for the update. Keep tracking it. I’ll set an alert for it and let everyone know the next time (if ever) it drops back to .85 or thereaboots…

    [Reply]

    Posted by clicclic | April 15, 2008, 7:24 am