The Missing B-52 and Greenland’s Uranium and Rare Earths Future (and some other Rare Earths Ideas)

Revealing a rare earths pick from Chris Mayer

By Travis Johnson, Stock Gumshoe, October 20, 2010

This is a note about a teaser that you can probably solve yourself — and many of you doubtless have. And it’s also about a company I’ve written about before, about a year ago … but the questions are piling up and the enthusiasm behind this stock over the last week is a little ridiculous as a result, so I thought I should take a look and focus on a few of the key points for you.

The tease in question is from Chris Mayer for his Mayer’s Special Situations newsletter — one of those “trade up” newsletters that convinces current subscribers to the $99 letter to try the $995 version, the one that has the more exciting ideas about small cap stocks, or stocks on foreign exchanges, or something else exotic about its countenance that means but a few hardy souls are welcome aboard (otherwise, of course, there would be too many investors “in the know” and the price of the chosen picks would be driven too high … forgetting, for the moment, that teasing the idea with transparent clues like this to a few million of your closest friends is also going to drive the price ballistic, but of course by then many of the paid subscribers are already aboard and Mr. Mayer’s pick looks even more prescient).

And the tease, of course, came in the form of one of those insufferable videos — and yes, I sat through the whole thing just because I love you.

If you haven’t yet availed yourself of this special ten minutes of promo-speak, I’ll give you the gist from my notes (this time around the video didn’t have a text equivalent, unfortunately, so I can’t do much direct quoting because, well, I’m too lazy to transcribe).

The B-52 bit is tied in a bit with the present day politics in Greenland, so there is at least some honesty in that story (though it is, of course, not as linear as the ad might imply) — there was an accident as a crippled B-52 tried to do an emergency landing at Thule in Greenland in 1968, and the plane happened to be on armed patrol at the time with a complement of atomic bombs. The plane crashed a few miles from the air base in a huge fireball, and while the nuclear bombs didn’t explode the fire spread radiation and caused some fallout. I have no idea how much or what the long-term impact was (there was a good article on this in the LA Times many years ago, you can see it here if you want more of the story).

But one impact, at least to some degree, was a prolonged reluctance on the part of Greenland, until very recently a Danish territory, to have any part of nuclear facilities or uranium mining, despite the fact that it’s been known for some time that there are uranium deposits on the island. This is also very likely a more generically political and ideological stance, as the ban on uranium dates back to the 1980s and the global nuclear freeze movements. Mayer’s argument — and we’ve heard this from multiple folks, too — is that Greenland’s recent moves to independence will open up their territory not only to mining and resource extraction in general, since they’ll need to build an economy to replace Danish support eventually, but to uranium mining specifically.

And this is indeed happening, at least to some very limited degree (and investors like nothing more than to take a crack in a dam and extrapolate a future flood). He cites the recent decision by the government to relax this restriction slightly as a key development, and he appears to believe that actual uranium mining is just about inevitable.

The actual revisions and relaxing of the zero-tolerance uranium policy do appear to be aimed pretty much squarely at the company being teased in this ad, which is clearly Greenland Minerals and Energy (listed in Australia at GGG, or GGGO for the options, and at GDLNF on the pink sheets).

And yes, the stock has shot up since the most recent announcement in mid-September, and even more so in the weeks following as word has spread through the rare earths investing community thanks to several different newsletter touts and, of course, to Chris Mayer, who appears to have written some about this topic back in June and updated his subscribers within the last week or ten days on the topic — and, of course, to have facilitated the dispersal of the idea even more with this compelling teaser ad that couldn’t possibly refer to any other company.

The relaxation of the zero-tolerance policy in the Greenland mining code essentially means that they can continue to explore and develop the resource of their main deposit, which is indeed, according to their exploration so far, a large rare earths deposit in Southern Greenland. It does NOT mean that they can mine uranium, or even that they have the go-ahead to mine rare earths, just that they can include the uranium in their resource estimates, and that the zero-tolerance policy is likely to change in practice to allow for extraction of rare earths with some minor uranium byproduct (.01% was the last number I saw, though I don’t know if that’s in the law).

And yes, it probably helps that they’ve signed on the former Prime Minister of Greenland, Lars Emil Johansen to head their Greenland subsidiary.

Greenland is going to probably see some hiccups as their new resource economy emerges (if indeed it does), and this project could potentially be a major one — though certainly Greenland’s potential as an oil producer gets more attention in the mainstream press, at least. As to whether this nascent project that has gone from a political impossibility to a potential mine is worth a dollar, a dime, or ten dollars … well, that’s all based on calculations that seem pretty impossible to make with any certainty … like how long it would take, how expensive it would be to build a mine in Greenland far from any mining infrastructure, how they would process these ores, whether indeed the uranium content resurfaces as a problem, whether the current rare earth strategic crisis emerges as an international and investor priority or goes back underground for a while … well, you get the idea.

And there is another rare earth explorer in Greenland that I’ve written about too, Hudson Resources (HUD in Canada, HUDRF on the pinks) — that was a Brian Hicks tease about a year ago when he called Greenland the “Saudi Arabia of the Arctic”, it hasn’t had anywhere near the traction of Greenland Minerals and Energy but has certainly gone up nicely with the improvement of the regulatory climate in Greenland recently. And there are a few other mining companies getting excited there — London Mining (LOND in London, LIIGF pink sheets) wants to mine iron ore, Ram Resources (RMR in Australia, RAMJF on the pink sheets — not the same as the geothermal company Ram Power, by the way) just bought a private company with a Greenland expl