What is “The ‘Black Ops Resource’ – 51 Times More Valuable Than Gold?”

Friday File look at the latest Oxford Club teaser

By Travis Johnson, Stock Gumshoe, January 6, 2012

That’s the headline of the latest ad for the Oxford Club, which is teasing us with a special report on the “Black Ops Resource” and the huge wealth it will create for you and yours.

And no, you can’t be cynical yet — it’s only January 5th, for pete’s sake!

Let’s read the ad with an open mind, shall we?

Here’s how they reel us in …

“A Gov’t-fueled resource shortage could upset the global balance of power… making one strange, new commodity more valuable than gold, silver and platinum combined….

“If you missed out on the big bull market in gold… don’t worry.

“Our research indicates that an even bigger resource explosion will sweep the globe in 2012.

“Because another precious commodity – which most Americans know nothing about – is set to outpace gold over the next year.

“And it could prove safer, too.

“I’m not talking about crude oil, silver, uranium, platinum, or natural gas…

“This exotic commodity – a kind of magnetic substance – promises to revolutionize our nation’s technology industry, and our national security programs.”

We learn that this is more important than steel in the 20th century, or than uranium in the dawning of the nuclear age, or oil in the OPEC-dominated 1970s. And the Congressional research folks apparently believe that the gap between supply and demand for this critical whatever-it-is will quadruple over the next two years.

So what is this “Black Ops Resource?”

Well, the name of the person pitching it might sound familiar — the ad is for the Oxford Club, which apparently now has Steve McDonald on board. He ran a newsletter called the Bond Trader for a number of years that was much loved by some of my readers, so I thought I should check him out in his new endeavor — but it turns out that this is definitely not a “relatively low risk” bond investment like the ones he often teased us with in the past.

Nope, this is … wait for it … rare earths. Again.

So after the huge run-up that the rare earth miners and explorers saw in the second half of 2010, and the occasional spurts of interest in 2011, we’re seeing some teasing and touting of these companies again. Most of them had a relatively weak second half of 2011, and are down a bit over the last month or two, and most of the stocks in this sector, absent a big discovery or company-specific news, trade primarily on news releases about Chinese rare earth export quotas.

Which isn’t a surprise, because most rare earths names are “story” stocks in the truest sense of the word — explorers and searchers and drillers who haven’t ever really made or produced anything. Of course, most junior resource stocks are the same way — but rare earths are a strategic resource with a dominant monopoly supplier and an often inelastic demand (these are usually tiny components in large systems for the end users, shortages are a big deal but even if the price of a rare earth magnet, for example, goes up by 500% the impact on the final price of the iPad that uses several of those magnets will generally be minimal) … so the price can swing even more wildly than the more widely-followed commodities in part because higher prices don’t destroy demand (ie, doubling in a month — or more — at times last year).

So which rare earther is Steve McDonald pitching?

Well, he’s not going for a bond here, but he is moving to the top of the food chain — he tells us that he’s recommending not just a stock that has a rare earth property to explore, but one who can actually produce the stuff … and expand production dramatically to help meet demand and assuage the fears of Congressional and military leaders about strategic shortages from China (rare earth minerals are needed for all that whiz-bang military technology, too — in fact, McDonald relies heavily on military demand when he says this could be “the most lucrative investment opportunity in 30 years”).

And then we start to get hints about the specific company being pitched:

“The key to this opportunity is enormous amounts of pending government demand – for use in strategic weapons systems, high-tech fighters, communications, and countless other applications.

“And there are no options to secure commercialized rare earth metals from a friendly source outside of China, with one exception.

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“I’ll tell you about the one company that could save Uncle Sam…. “

He also goes on to elaborate on why this pick is a “real” company, not just a junior penny stock explorer:

“… you need access to raw rare earth metals.

“But you also need ores of rare earth metals of a certain quality.

“And most importantly, you need a way to process and refine the high-quality rare earth metals into a useful product for use in high-tech fighter planes or advanced night vision riflescopes.

“Without this refining and processing, raw rare earth ores are as useful as dirt.”

And yes, this company is actually producing stuff …

“And not only is this company already producing finished rare earth products, but it is only months of away from opening its new state-of-the-art facility… and doubling – even tripling – its production.

“It all starts with the new ‘super plant’. You see, this company has the technical capacity to start producing tons of finished rare-earth products right now.

“We’re not interested in this company because it just discovered a bunch of rare earths in some hill somewhere. This company does something no miner can – it produces finished, commercialized products made from rare earth elements.

“Rare earth oxides, alloys, metals and magnets…ready for use in the manufacturing of fighter jets and smart bombs….

“Not only does this company have operations based outside of China…it also makes its headquarters in the Western Hemisphere. So it’s entirely based in countries friendly to the U.S.

“This company is positioning itself to acquire a virtual monopoly selling the Black Ops Resource to the U.S. market. The company’s already producing this resource, today, with plans to ramp up production by 200% over the next 12 months.

“In fact, it’s about to double production of the Black Ops Resource… and start selling it by the TON. This company is nearly finished building a brand new state-of-the-art facility to produce the Black Ops Resource, the large