Well, a week’s hiatus for your friendly neighborhood Stock Gumshoe and the world remains in more or less the same mostly-negative feedback loop — more bank worries, more Euro panic, gold prices back above $1,900 again, more iPhone 5 hints and speculation … I guess part of me is relieved that the financial world is much as I left it, though my portfolio certainly had its share of gyrations.
Also remaining the same, of course, are our hunting grounds — the land of the big-horned teasers. The latest one that’s been making the rounds from Taipan has clearly caught the attention of Gumshoe Nation, if my email inbox is a fair indication, and that means it’s our best candidate for kicking off the week.
The pitch is from Michael Robinson, for his American Wealth Underground newsletter — his claim to fame lately, at least in these quarters, has been a well-timed pick of a handful of rare earths stocks last Summer, before many of those stocks took their remarkable run (he says in this new teaser that he’s still calling those four stocks buys right now, quite a bit has changed in the last year but you can see my older article identifying them here if you’re interested).
So perhaps we shouldn’t be surprised that he’s going back to the natural resources well again — this time, a company with a Swedish connection. Which also helped to catch my attention, since I know my way around a smorgasbord and a Santa Lucia bun thanks to some Swedish forebears… but there’s no reason for you to care about my ancestry, what’s the company Robinson is teasing this time around?
Well for that, we’ll need some clues … here’s how he introduces his tease:
“They came from nearly 10,000 miles away to a remote farm hidden deep in the forests of southern Sweden.
“Acting on a tip, these two foreign geologists were searching for a rare, and extremely valuable, material…
“There isn’t another known, viable source of the stuff in all of Europe. Even a small amount could be worth millions of dollars.
“They staked out the land and did some basic tests…
“The property was crawling with this substance — about 60,000,000 tons. At current market prices, their hidden treasure was worth $30 billion.
“Keep in mind, the price of this scarce material doubled in three weeks earlier this summer.
“That means this discovery could be worth as much as $60 billion by next year.”
Sounds compelling, no? There’s a reason they so often introduce a stock idea in the natural resources space with a hint of intrigue — all of us who select individual stocks fancy ourselves as intrepid explorers, folks who are finding diamonds where others see only rock … and an Indiana Jones story serves to remind us of how very special we are to be picking such cool companies. A little ego boost never hurt when trying to get someone to open their wallet, after all.
And yes, in case it pains you to hear yet another story about these elements, I should tell you now that Robinson is indeed teasing yet another rare earths company here — as he eventually does say after another long-winded pitch about the critical nature of rare earth elements and the Chinese near-monopoly.
I’ll spare you that full story — you’ve almost certainly heard it before, the shorthand is that rare earth elements are hard to find in economic concentrations and hard and dirty to refine, and the Chinese used their natural resources and willingness to cut environmental corners to corner the market on rare earths by undercutting all other producers about 20 years ago, which led to them controlling the market for a long time and, now, to a near-stranglehold on a market that has grow far more important.
And it’s important because of the high-tech nature of so many consumer and defense products — so you’ll see mentioned over and over again that cutting edge military technology depends on rare earths, but also that computers, iPods, lasers, and alternative energy technology all depend on various rare earth elements/metals as well.
That’s as briefly as I can put it and keep us all on the same page here, so suffice to say that there’s a race on both to get new rare earth mines up and running and develop new refining capacity outside of China, and to get investor attention for junior rare earths companies who are staking new claims, reopening old mines, or just plain looking for rare earths — we’ve seen plenty of these companies appear out of nowhere, and plenty or uranium explorers rebrand themselves as rare earths companies, and while it’s almost certain that most of these companies will never open a mine, there will probably be some that turn into real companies and producers in the next ten years.
So which one is it that Robinson is pitching? Well, we know it’s in Sweden, and that it’s focused on the “heavy” rare earths — here’s how he puts it:
“Rare earths are divided into two types, lights and heavies. Heavy rare earths are scarcer, more useful and therefore worth far more than light rare earths.
“The mine in Sweden is loaded with heavies. More than half of the rare earths found there — over 30,000,000 tons — are heavy rare earths.
“It’s these ‘heavies’ that the Chinese have been trying to hoard. And it’s the price of many of those heavy rare earths that recently doubled over a two-week span in June….
“Outside of military action, the only choice is to find more rare earths in friendly countries outside of China.Are you getting our free Daily Update
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“That’s what makes this discovery in Sweden so special. It’s the first full-fledged rare-earth mine of its kind in Europe.
“It’s enough to help make up for some of the supply lost to China’s export wars.
“But, it’s not enough to lower the price of heavy rare earths.
“If you were to invest in this mine right now, you could continue to reap the benefits of high rare-earth prices. And as this story reaches the mainstream, you could lock in quick gains on the commodities mania.”
Some more clues about the rare earth Swedes?
“You see, the two gentlemen who discovered the farm in Sweden started a company. As the only producing rare-earth mine in Europe, their stock is already valuable.
“But now they’ve begun snatching up property all over Scandinavia. They have at least two other properties on the verge of being productive rare-earth mines. And they’re continuing to explore for more….
“The recent discovery on the farm in southern Sweden is nothing new either. The mine’s been around since 1906.
“It was explored during and after World War II. But, the mine was before its time. Scientists hadn’t even discovered the elements inside, let alone found a use for them.
“When scientists finally did assay for rare earths, they didn’t even look for six of the nine heavy rare earths that are so valuable today.
“The rocks were put in an old cardboard box as a clue to the next generation. And now, those rocks could make you thousands of dollars.”
This company has apparently staked claims across Sweden and Finland, and has four new mines “on the verge of production.” We’re also told that development and permitting is easy in Sweden …
“… there’s no trouble from the government. Swedish officials even designated the mine near Lake Vattern as a place of “strategic national importance.”
“That green light is why production is about to kick into full gear…
“When it does, this tiny company will be the darling of Wall Street. Get in before then and you could make a fortune.”
And of course, the story about this little stock is in a “special report,” called How Sweden’s Rare Earth Treasure Could Make You Rich.
And the answer to our tease? Must be … Tasman Metals (TSM in Toronto, TASXF on the pink sheets)
Tasman does indeed own several potential rare earth production sites in Scandinavia — their flagship project is Norra Karr, which is the one teased here by Robinson, and it is indeed right near Lake Vattern in southern Sweden, in pretty close proximity to some other mining and timber towns and plenty of infrastructure. And Norra Karr does indeed hold about 60 million tonnes of heavy rare earth oxides per their estimates, though that total is inferred (not indicated or measured, and not reserves).
Despite Robinson’s declaration that this is a “mine” that’s been around since 1906, it’s not really a mine just yet — they have known since 1906 that a lot of valuable and rare elements are in this spot, and it’s true that Sweden is the place of discovery of many of the rare earths, but despite a few studies over the yearsm and a couple strategic effortsm development never got very far in this particular spot.
Tasman is not yet (and won’t soon be) producing ore at this site, but they are actively drilling to continue their exploration program — they’re in what they call Phase 3 drilling right now, aiming to move some of their resource over from the inferred to the indicated categories, and the site was designated as a strategic “national interest” project by the government a few months ago and it’s relatively low in radioactive elements (Thorium and Uranium), so perhaps their path to development will be easier than for some rare earth-ers.
But as yet, they have no reserves and haven’t reached even the “pre-feasibility” report stage (if you’re new to mining stocks, “reserves” means the stuff is there and you have a can reasonably and profitably dig it up, bring feasibility and economics into the picture — “resources” means they’re pretty sure the stuff is there, but no promises on getting it out profitably, a fuller explanation of these is here if you’re interested, but obviously “reserves” are more valuable and imply that you’re further along in development than either “indicated” or “inferred” resources).
And the company does have other sites throughout Scandinavia, including some iron ore exploration projects in Northern Sweden and their second-most-advanced rare earths project, Korsnas, in Finland. But I’d say that the promise that they have four projects “on the verge” of production is a bit of an exaggeration … depending on your definition of “verge,” I guess.
Tasman compares Norra Karr to some other rare earths projects with similar geologies, like Strange Lake (Quest Rare Metals) and Thor Lake/Nechalacho (Avalon Rare Metals), which helps to up the perceived value of Norra Karr — in part because it validates their prospects, and in part because of the relatively high percentage of heavy rare earths (sometimes referred to as HREOs, heavy rare earth oxides). Norra Karr comes in with world-beating percentages of HREOs at about 53% in their estimates, you can see the overview of their projects here and the latest company presentation here, and that does help to make them stand out in the crowd.
Tasman is clearly still an exploration stage company, but they do have a speculative project timeline that puts them at pre-feasibility in mid-2012, mine construction in 2014 and production beginning in 2016 — as with all such estimates, you’d have to assume that it’s extremely optimistic, though perhaps they’ll be the one who does make it through without big delays or pitfalls. They are planning to get an AMEX listing in NY sometime soon, they said last month that they would apply in the near future but I haven’t seen more detail after that, and certainly a NY listing has the chance to spur the share price as it has for some of the other rare earth stocks. There might also be an impact on the shares from the next release of drilling results, but from what I can see any near-term catalyst for the shares is likely to be either from a NY listing or from Chinese quota changes or pricing updates that impact all the rare earth explorers.
They do get at least some credit and investor attention for having among the most valuable “basket” prices for their prospective ore, thanks to high concentration of those HREO’s — you can see the chart of those basket prices and the size of mining projects for the advanced rare earth prospects here from Jack Lifton’s Technology Metals Research site, which is required reading for rare earth investors.
My very brief look at their timeline and prospects tells me that this mine probably won’t be one of the first five rare earths producers to be selling oxides outside of China, but it might be in the first ten — it’s obviously very early days, they only claimed and started to drill this (long known) site a couple years ago, and they’re still drilling and will have to raise buckets of money in the years to come, and the market is extremely volatile for all rare earth explorers, but I know folks always like to dream about rare earth riches … so dream away!
Got a fave in rare earth land? Think the “heavies” at Kutessay II (Stans Energy) are more valuable, or are the “lights” that are already being produced at Mt. Weld (Lynas) or Mountain Pass (Molycorp) a safer bet, or do you think Tasman or one of the other little explorers in Greenland or Canada has the best upside? Let us know with a comment below.
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