“The Saudi Arabia of the Arctic” — Huge profits from Greenland’s Rare Earth Minerals?

By Travis Johnson, Stock Gumshoe, November 5, 2009

We’ve looked at rare earth elements before (also called rare earth metals or minerals, and some of them are rare earth magnets), they’re a dozen different rare elements from the periodic table that have specific uses in lots of high tech gear, from batteries to missile guidance systems. China is widely credited with strategically undercutting all the other global producers of rare earth minerals over the last couple decades by slashing prices, but has more recently been cutting export quotas because they need these resources for their own industries — so the feared result is that China continues to have essentially all of the global capacity for producing and refining rare earth minerals tied up, and if other countries and industries lose access to them there will be hell to pay.

Which is why we see teasers for “non-China” rare earths pretty frequently. Rare earth minerals are actually fairly common in the earth’s crust, but it’s fairly rare to find them in decent concentrations that can be profitably mined and refined, particularly in relatively high-cost countries like Canada and Australia, and every mine produces different kinds or rare earth ore with different concentrations, which apparently requires complex and tailored refining.

The first company I looked at in this area as a strategic play to build rare earth capacity outside of China was Lynas, and I owned shares of this one up to a couple months ago. To further complicate things, for a while it looked as though Lynas would effectively be taken over by, you guessed it, a Chinese company — but that takeover was essentially nixed by the Aussie government, so Lynas is still an independent company that owns one of the world’s largest unmined rare earth minerals resources and they can still promote themselves as the strategic alternative to Chinese hegemony. They are also moving ahead now, securing new financing now that the world hasn’t fallen apart and restarting the construction of their processing plant in Malaysia, and preparing the concentrator plant in Australia that will prepare the rare earth ore for shipment to the Malaysian refinery. I have no idea when they might become profitable, but it appears that the economy has recovered enough that they might not need the rescue funds that the big Chinese investment represented (they were in a dispute with bondholders before that, and essentially had to stop all operations to preserve cash).

So that’s one that we’ve seen teased several times, and that gets covered by bloggers and the financial punditocracy with some frequency. But today we’re not looking at an Australian rare earths project, or even a Canadian one … today we’re looking at Greenland.

The tease is from Brian Hicks, published in a Wealth Daily article, and it doesn’t specifically tease this stock as a secret that will be revealed only after subscribing to one of their paid newsletters, but perhaps that will come in the future — they just say that “In the next few weeks, we’ll be publishing specific approaches to squeezing the most mileage out of this historic stock.” So maybe they’ll reveal the name of their favorite Greenland rare earths investment for free someday … but really, why wait? Let’s look over the clues and see if we can identify it ourselves.

We get some more enthusiasm from Hicks first:

“This single site boasts deposits valued at an estimated $1.3 trillion. . . and yet, REEs are worth more than just money.

“Which is why the world’s leading manufacturers of hybrid cars, wind turbines, batteries, and yes — even the guidance systems to our most sophisticated air and ground defense missiles systems, are watching the events in Greenland unfold with baited breath.

“The elements that fall into the category of Rare Earths include:

“Lanthanum – essential in the production of electric car batteries;
“Terbium – without this element, high-strength magnets would not exist;
“Erbium – makes possible a wide range of light-weight, high-strength metal alloys;
“Thulium – makes high-frequency lasers a reality.
“And once Greenland takes control of its mineral wealth, this land — totaling barely 800 square miles — is projected to supply 25% of the world’s entire REE market. . . for half a century.”

OK, so that’s a lot of rare earth minerals. And they go on to reiterate some of the same arguments about Chinese hegemony that we’ve been hearing for quite some time (not to say they’re not real arguments — China has certainly focused on controlling this market, whether for economic, political or military reasons we’ll have to guess).

“According to Wired Magazine, “China’s Ministry of Industry is weighing a total ban on exports of terbium, dysprosium, yttrium, thulium, and lutetium — and may restrict foreign sales of other rare earth metals.”

“This news is a potential death knell for hybrid manufacturers that have forecast 500% growth in the next 6 years alone. . . alongside a wide spectrum of other cleantech companies whose products depend on magnets, motors, and batteries to create and store energy.

“Not to mention a political and economic nightmare for our Department of Defense. . .

“However, as Greenland prepares to open its resources to the open market, this Chinese monopoly has finally met a foe it cannot easily topple.

“Come January, a single company will control this massive deposit, turning it into the world’s second biggest single producer of REEs.

“With a stock price just under 60 cents today, this company has already gained close to 30% since the start of September. . .

“But the big spike is still just around the corner, with a vast majority of the gains still in the future.”

This one, by all accounts, must be Hudson Resources (HUD on the venture exchange in Canada, HUDRF on the pink sheets, tiny volume and minuscule market cap, shares are likely to jump like crazy today thanks to Hicks and yours truly, so be very careful — gravity usually hits these little guys pretty soon after a morning like this).

Hudson resources is focused on rare earth exploration in Greenland, and they are the best match for those clues — the shares are right around 60 cents at the moment (going up quickly today, probably thanks to Hicks’ email, and were at 40 cents at the beginning of September, so the 30% gain is a match (it’s also a match, though a more strenuous one, for Greenland Minerals and Energy, which I’ll go into a bit below). And the other specific clue we get, the fact that the land totals “barely 800 square miles”, is sort of a match. I’m assuming that Brian Hicks or his copywriter forgot that the calculation for converting square kilometers to square miles is different than that for converting km to mi — Hudson does have concessions totaling about 1,300 square kilometers (1,300 kilometers would be 807 miles, but 1,300 square kilometers would be more like 500 square miles). That’s a common mistake, so I feel comfortable counting this as a match.

They gave a presentation at a Canaccord Adams conference last week (it provides a good overview of this tiny company, worth a look — click here for the pdf file), and they’ve been raising money actively and are soon going to be releasing drill results, so this is probably the rare earths play that has the most “news” floating around it lately, but it’s also still in the very early stages of development. They don’t have the uranium risk of the other Greenland rare earths play that I often hear about, Greenland Minerals, but they are also far, far behind Lynas in developing an actual mine — they are really just this year beginning to actively explore their potential rare earth deposits, after years of focusing primarily on diamonds (they’re still looking for diamonds, too, but the diamonds aren’t as lucrative as rare earth elements right now — nor, the cynic states, as much of an attraction for investors).

And yes, the company is incredibly tiny — a market cap of something like C$30 million unless the share price is going up even faster since the moment I typed those words (the kind of interest generated by big distribution newsletters like Wealth Daily, or even Stock Gumshoe can easily double a share price for a tiny firm like this, albeit for only a few brief moments). Personally, I find these little rare earth plays interesting but if I were to actually invest in one I might choose to focus back on Lynas again, given the fact that they are so far ahead of all the other small potential non-Chinese rare earths miners, and thus might actually have some revenue in the foreseeable future … but still, the temptation to find lightning in a bottle with a teensy weensy stock like Hudson is certainly always there. It will be many, many years and many, many fundraisings before they do any mining, but perhaps it’s still worth a daydream. And since these nonproducing rare earths miners trade largely based on Chinese behavior and pricing, and on strategic posturing over availability of these metals, a sneeze from Hu Jintao or a move from a big mining company to sniff around for some little rare earths deposits could easily move the shares far more than the upcoming drilling results.

So not to overstate this, but if you do decide you’d like to speculate in these shares, be very careful of the price — and watch the Canadian price, that’s where most of the volume is. There’s no reason for the shares to jump today other than the attention from Hicks and this article you’re reading, which means, unless those drilling results are released tomorrow, the shares could easily fall right back down again (or Hicks could write about it again and they could shoot up, I have no idea).

The same warning applies to the other significant rare earths explorer in Greenland, by the way — that one is an Australian firm, Greenland Minerals and Energy (GGG on the Australian Exchange, GDLNF on the pink sheets). Be careful if you’re a pink sheets trader in this one, most of the volume is on the Australian exchange and the occasional US interest in these shares can spike the stock painfully up (and sometimes back down). There have been a few times when the shares were in the news and it traded up to a million shares or so, but most of the time far fewer than 100,000 shares are traded on the pink sheets on any given day, which means that at about 38 cents a share right now there’s often less than $50,000 changing hands in these shares. If you decide you’re interested in this one and want to be careful, use the Australian price as your guide and place limit orders. GGG closed in Australia at just under .39, which at the current currency rate would be US .35, but the shares are already spiking on the pink sheets as I type this and are now changing hands for more like .38. You may decide it’s worth that price, of course, but be careful.

Who is Greenland Minerals? This is an Australian company that has exploration concessions in Greenland, with the critical ones for our purposes being at the site where the Danish government identified significant uranium resources decades ago. Greenland Minerals noticed that the Danish survey was done without chemical analysis of the drill cores, so they went back and did that and found that in addition to the uranium that has long been known to be present, the site also contains high concentrations of many valuable rare earth minerals. Yippee!

Except, bah humbug, Greenland’s law specifically forbids uranium mining — I assume that’s a political sentiment influenced by the controlling Danish government, but it might be an environmental or safety one as well. So the big question for Greenland Minerals is whether that law will change — the hope seems to be that the country’s move to greater independence from Denmark will also lead them to be more interested in economic development, and for Greenland, which currently relies almost exclusively on fishing and Danish support, probably the most immediately lucrative “new” industry would be mining … it is, being huge and lightly populated, already a good target for natural resources extraction, and the government has apparently been largely friendly to most mining operations, and several large mining companies are looking for resources of various types — the geology reportedly has quite a bit in common with the Kola Peninsula in Russia, which is a large mining center. Greenland also floated a partially state-owned company on the Copenhagen exchange a couple years ago, mostly to raise money for gold exploration — that company is also available for investment and has some potential for rare earth mineral exploration, it’s called NunaMinerals and it has a large portfolio of potential projects, but I don’t think it’s available to trade outside the Copenhagen market.

Greenland’s autonomy in natural resources began in June of this year, though Denmark remains in charge of their finances, defense, and foreign affairs. Greenland is in the process of being identified as an independent nation, slowly weaning itself from Danish rule and welfare — and a big part of that independence is going to rely on natural resources. Licensing rounds are expected for offshore oil in the years to come, and the government is currently debating a big potential aluminum smelter to take advantage of hydroelectric power. If I had to guess I’d say they probably will move forward with the rare earths mining, with uranium as a critical secondary resource that helps to pay for the mining of the rest of it (the way GGG presents it on their website, uranium represents a tiny fraction of the physical ore (maybe 5-10%) but would account for almost 25% of the value of the resource, so with current economics they probably have to produce the uranium to make the rare earth mining feasible. But my guess that they’ll be allowed to move forward is just that, a wild guess — the resource looks very large and strategically and economically interesting, based on what I’ve read, but it’s also probably true that even if the government proves to be mining friendly and uranium-friendly, this is still just a hilly plateau near the ocean with a few drill holes in it, it will be many, many years before they produce anything and, as with all mining operations, a huge number of changes can occur in that time. After all, the Mt. Weld deposit owned by Lynas in Australia was discovered as a rare earths deposit in 1988, Lynas didn’t start really focusing on it until 2001, and, while they have begun mining eight years later, they haven’t actually produced any concentrated ore, let alone any refined rare earth minerals.

So there you have it — rare earths are a “story” that investors come back to with some frequency, though this is the first time I’ve looked at the Greenland potential. There are also rare earths deposits in Canada (Avalon’s Thor Lake and Great Western’s Hoidas Lake), and others in Australia (Alkane, Arafura) that are being developed, but all are also at very early stages as far as I can tell, and there are at least a half dozen more that are in the extremely early stages of exploration, well behind the ones I’ve named here. I expect we’ll continue to see many of these firms teased now and then, as rare earths bounce in and out of the headlines.

So what do you think? Like Hudson, or Greenland Minerals (or Lynas, or Great Western for that matter?) If you’ve a favorite rare earths investment, or if you think they’re all crazy, feel free to let us know with a comment below. And we’ll be keeping our eyes out to see if Hicks goes further with his “I’ll tell you more later” bit about Greenland rare earths.

Full disclosure: as mentioned above I previously owned Lynas shares, but do not currently own stock in any other firm noted in this article, and will not trade in any of those stocks for at least three d


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33 Comments on "“The Saudi Arabia of the Arctic” — Huge profits from Greenland’s Rare Earth Minerals?"

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elissa stein
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elissa stein
November 5, 2009 11:53 am

I purchased a few thousand shares of Great Western several months ago. I like their integration. They can go from mining to separating the minerals and packaging and selling them, too. I believe they are the only ones with this capacity (outside of China).
It is a fiendishly expensive industry, and so do your dd,these companies are not profitable.

edski
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edski
November 5, 2009 12:09 pm

To me, Mr.Hicks article read closer to a re-write from Greenland Minerals and Energy.

These days, it doesn’t matter if the investment rewards are in the forseeable future, or years away.

So is it GGG.ax? It certainly is, although it is possible it may not be, which is not to say that it isn’t, but in all probability…
definately may be!

Just my thoughts.

JT
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JT
November 5, 2009 12:36 pm

Just picked up 2500 shares of Lynas at .43

Seems like a good speculation. In Sept it was trading over $1.00 and has pull back to strong support around the .40 area.

Makes more sense to me to go with the company that’s close to production and costs less too. Plus if the China interest is rekindled, I can “imagine” a quick double…

Cheers!

Chandra
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November 5, 2009 12:43 pm

I have been hearing a lot about AMNP and AMLM. Can anyone throw some light on these two Gold and Lithium stocks please?

Tom
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Tom
November 5, 2009 12:43 pm

Lynas just completed financing to complete the project from shareholders. I am one. We can complete the project without any China backing and maintain a truly Western source of REE. Stansbury ( I think) touted Sierra Gold -SGCP about 3 years ago and I bought a lot. SGCP has been stinking up the portfolio since ’07 but just turned active. If you want to buy a million shares for $500 here is a chance. 100,000,000 shares traded today just on E*trade.

SageNot
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SageNot
November 5, 2009 1:19 pm

Have either of you two Lynas investors read their Yahoo boardroom comments. It reads as if the Aussies don’t give a darn about non-Aussie investors, not just the Chinese investors. Since when has Australia stuck their heads in the sand, if either of you know?

Garry
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Garry
November 5, 2009 2:08 pm

Have owned Lynas for a couple of years and it is fairly stable but has a real future rather than just speculative.

Gumshoe, has anybody asked about “foreclosure slips.’ have battered my head against a brick wall on this one.

gerry
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gerry
November 5, 2009 3:03 pm

own lyscf, ucu very interesting because U.S policy change, CCE, GWG and looking at
RES and AVL, all on TSX except LYSCF

Andrew
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November 5, 2009 3:39 pm

I like Avalon for their Thor Lake project and Great Western for their planned mine to market strategy. Great Western is already producing rare earth products through its subsidiary companies and they are furthest, according to Jack Lifton – independent consultant, the furthest ahead, outside of China, as to mine development. These two should get together to form a larger company.

turbomut
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turbomut
November 5, 2009 6:24 pm

Cons.Abaddon ( abn.vn ) ia another company with a lithium project going on at Lake Raleigh in Ontario Canada….Also a rare earth property at Selwyn Lake with news to be out in a few week.
2 million in the treasury and 44.3 mil. shares…..Yes i am a share holder and still on the bid…. closed at 09 cents.

Gipsy King
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Gipsy King
November 5, 2009 6:48 pm

The climate in Greenland will not be in any miners’ favor.
I stick to Lynas.

mr xxx
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mr xxx
November 5, 2009 7:07 pm

Best REE stock IMO is Ucore (UCU.V), UCU is in Alaska and REEs are nat. security issue- mil. applications.

UCU.V is my fav. REE. It is cheap and in USA- REEs have mil. applications ie. nat. security!Good luck to all!

Herach
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Herach
November 6, 2009 7:33 am
Chandra, re your inquiry on AMNP. bought 1k at .75 based on recs and research. Watched it climb to 145. Bought another k. As soon as it started down, I got out at 1.35. Now it’s at 1.08. I bought a speculative stock. When it rose on merit or being “pumped” I bought more. When the air was let out, I sold. Never catch a falling knife, but do not be afraid to increase winners. I broke even , but had a chance to make some real money. AMNP may eventually be OK, but I am chary of the volatility.… Read more »
richard stanley
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richard stanley
November 6, 2009 2:09 pm
I’m so glad I found you. You’re research is wonderful. And you are absolutely correct on how these guys playing up a penny makes their prices go kooky. Which makes me wonder, if you’re subscribed to them, do you get the picks the day before? Because everytime i look, there is no way to get in on the buy price. The stock is already up before opening. What i have done on a few is buy and set tight stop losses and limit sells at like 50% above purchase price. Also I have waited for price to fall back down… Read more »
Buddhahead
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Buddhahead
November 7, 2009 8:27 pm

Just a point of error, Hudson suffers from the same political problem as Greenland Minerals. It’s REE Ore has Uranium. From the latest Hudson update: “Hudson processed two surface samples in 2008 to help confirm
earlier published results. They contained highly anomalous
average values of niobium (38.0% Nb2O5), uranium (1.01% U3O8),
tantalum (0.72% Ta2O5) and REEs (0.67%)”

Gary A. Imburg
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Gary A. Imburg
November 8, 2009 8:52 pm

I too have fallen into the REE craze.I own Lynas and Great Western.They have real long term value, but stock prices today are based upon potential rather than earnings.
I believe the first companies to get to market will have the best economic advantage because they can tie up contracts for delievry first.
As exhibited by Lynas, going into production is a costly adventure and the other players will have to jump a lot of financial hoops to achieve production. GI

tomt
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tomt
November 9, 2009 12:56 am

I imagine Greenlanders will not turn this economic gift down.

I also suspect upcoming market volatility will result in much better prices, but only if I can remain patient. So if only for the probable “fall back” in this stock (and others) near term, as Travis points out, being patient is good advice. Back to point one- I think HUD really could work out as a speculation, and in a long term way as well- but it all depends on if and when their law against Uranium changes.

Derek
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Derek
November 10, 2009 6:23 am

Another good rare earth opportunity is Sarrissa Resources (SRSR). They recently confirmed $11b of Niobium at their Nemegosenda property and that’s only in one area. They are in the process of confirming gold deposits at their Shining Tree property. They trade on the pinks though, which can be a drawback. The stock ran to 0.20 after their NI 43-101 report but has since pulled back to 0.04 and could be a great entry point. I wish i had waited instead of chasing it…lesson learnt. IHUB has a good forum for the stock for further info.

kb
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kb
November 11, 2009 5:49 am

COULD SUPPLY 25% OF WORLD DEMAND
New rare earth metals firm to list in London next year, would be second only to China in scale

Greenland Minerals and Energy says it has access to what are probably the world’s largest rare earth metal deposits.
Author: Pratima Desai (Reuters)
Posted: Tuesday , 10 Nov 2009

Steve
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Steve
November 14, 2009 6:54 am

I am into GGG, but i am concerned about some of the legal issues that seem to be in the background.
Do the major shareholders have a shady reputation?
see the below story and also ther ongoing legal action to determine ownership in the UK courts
http://www.theage.com.au/business/unravelling-the-greenland-minerals-web-20091008-gp0w.html

kumanari
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kumanari
November 23, 2009 6:10 pm

REE’s promise to be the next super bull market according to Jim Dines.I sold 1k shares RES last Jan only to see them blast 9x by May, QUC 83x,
AVL 13x, LYC 8x, ARU 4x. Just bought GWG this morning. Intend to purchase all the rest before years end. You will regret not staying with these co.s. GWG has one of the best positions as they also process which is verrry difficult. the others will have to process thru someone…..China???

chuck
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chuck
November 24, 2009 2:10 pm

Is GWG’s stock symbol GWGI? What else do you know about it?

Gravity Switch
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November 24, 2009 3:01 pm

I can’t speak for kumanari, but I expect this is Great Western Minerals, which trades at GWG in Canada (pink sheets GWMGF). Their main resource site is in Saskatchewan, and they are pursuing the “mine to market” strategy, their end-product “less common metals” subsidiaries are actually more advanced than their mining projects, from what little I know.

billl
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billl
January 9, 2010 9:02 am

if i recall symbol TM got some skin in GWG

Troy
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Troy
January 9, 2010 10:46 am
Obamanomics owning GM is the catalyst. It’s not about Hicks or anyone else promoting pump and dumps. That’s absurd. Look at GM’s website. They’re standing around the first produced battery for the Volt. It plainly states Lithium and REEs are the elements needed. In order for GM to turn a profit and the gov. to ease out of thier ownership, electric cars will have to be sold. When Wall Street gets the green light to hype it, whatever stock in this sector will explode. Greenland needs revenue, they are now weaned off of Denmark’s udder. Hudson will piggyback of off… Read more »
James H Farley
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James H Farley
January 11, 2010 7:28 am

I bought Northern Dynasty Minerals (NAK)at 8.38 on 12/29/09. It is now 9.39. The Pebble Project is 50% owned by NAK, 50% by Anglo American. Known mineral resources are 5.1 billion tonnes of measured and indicated resources grading 0.77% CuEQ, containing 48 billion lb copper, 57 million oz gold, and 2.9 billion lb of molybdenum; plus
4.0 billion tonnes of inferred resources grading 0.55% CuEQ, containing 24 billion lb copper, 37 million oz gold and 1.9 billion lb molybdenum. As I understand it, the REEs are abundant in the Moly.

btharvey1
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btharvey1
October 17, 2010 1:29 pm

i believe it is GGG.AX, as I just read a teaser from Chris Mayer, Stansberry & Associates, mentioning Greenland opening mining of uranium after a 20 year moratorium, and it stated that the company is probably going to get permits due to having ties to a former prime minister.

Gravity Switch
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November 5, 2009 12:15 pm
It’s certainly possible. And I like that your hedging is just as smushy as mine — the elements that made me conclude that Hudson was more likely were the two specific clues, the 800 square mile area and the 60 cent share price, both of which I thought matched Hudson better than Greenland MInerals, but aside from the uranium question they have a lot of similarities. Greenland Minerals’ main project, Kvanefjeld, covers 82 square km, which was the only specific measured land area I saw noted in their holdings, though their concessions may be far larger for all I know.
Mitesh
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Mitesh
December 4, 2009 2:14 am

Yes… I think you are right it is GGG.AX

matt
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matt
November 8, 2009 5:14 pm
i dont know about amlm but as far as amnp goes i think its a good bet there are alot of promoters around throwing there name out which isnt always good. but theyve recently got some attention from independent wall street research firms and have been upgraded to a buy. however they do not currently have an active mine and have no employees which is scary. but they use contractors bc it would take longer to hire train and orginize a work force, and they want to get they gold out withing 12-18 mo not 36. so its speculative but… Read more »
Cherrie Simison
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Cherrie Simison
November 21, 2009 10:39 am

Do you have any more information to share? The name of this company would be helpful. Thank You,
Cherrie Simison

Gipsy King
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Gipsy King
November 23, 2009 11:17 pm

Last time I checked (1 hour ago) they were at 0.61.
Halfway to the double for you.
Waiting for Jack Lifton’s report.
Not that he is going to be able to change my mind about Lynas. Just curious.

chuck
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chuck
November 24, 2009 2:21 pm

Is the GWG’s stock symbol GWGI? And what else do you know about GWG?

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