“Greenland’s Giant-Killer” (Ian Cooper)

By Travis Johnson, Stock Gumshoe, October 22, 2010

I wrote quite a bit about one of the Greenland rare earths stocks earlier in the week, but I just wanted to clarify the situation in teaser-land a little bit today.

There are two Greenland rare earth explorers that are being actively teased by big newsletter publishers right now — the one that uses the B-52 story and talks about uranium is Greenland Minerals and Energy (GDLNF on the pinks, GGG in Australia), teased by Chris Mayer, that’s the one I covered in more detail earlier in the week.

And the second one, teased by Ian Cooper for his Pure Asset Trader, must be Hudson Resources (HUD in Canada, HUDRF on the pink sheets), which I first wrote about a year or so ago (for a teaser from the same publisher) but is being very actively promoted again. They’re using essentially the same arguments, about the Chinese hegemony in this space and the potential for a tiny miner to supply a large part of the global rare earths market, but instead of using the hook of a company that’s got the former Prime Minister of Greenland on board with the P.S. about also mining uranium someday (that’s Greenland Minerals and Energy), they’re using the pitch that this 80 cent company that recently rose to $1.50 owns 500 square miles of the most valuable land on earth… and that 500 square mile bit is clearly Hudson Resources (their main parcel is 1,300 square kilometers, which is about 502 square miles).

I won’t get into the details about production or resources on these two stocks, because it will probably be years before that matters — both are going to trade on rare earths hype, neither is anywhere near actual permitting or mining or, even beyond that, refining or producing the valuable end product (all are difficult and specialized tasks for these ores and oxides).

There’s a reason that the teasers about these stocks talk about vast future potential and about China, and put the limited info about drill results at the end of the ad — there are a few rare earths companies that are close (as in, a year or two) to adding new production to the market like Lynas (LYC in Australia, LYSCF on the pinks) and Molycorp (MCP), with a whole lot more that are not quite as far along but are certainly far more advanced than the Greenland guys … and there will be many more companies teased and touted after this incredible run up in all the rare earths stocks, but the fundamentals behind these picks are all very big picture and long-term, a continued run-up in the stocks depends on China and on investor enthusiasm on what have to be wild guesses about what the prices of these materials will be in five or ten years. That’s not to say that these stocks can’t quadruple from here or that they’re not worth investing in — or even that there’s anything wrong with the thesis that Chinese hegemony will probably lead to far higher prices in the next decade for these “technology metals” … but these stocks can also easily be cut in half (or more) after doubling in the past week or two, enjoy the trading if that’s your cuppa tea.

The movement in all these stocks has gotten the attention of the press, to be sure, and that continues to fuel the speculation — try any search on rare earths in any of the big news aggregators (Google News, etc.) and you’ll be quickly overwhelmed. Greenland is the flavor of the week, thanks to these newsletters and the recent revisions to the newly-semi-independent nation’s regulatory structure that might make it legal to mine rare earths there, but the next excitement could be about rare earths in South Africa, Central Asia or Vietnam, to name just a few of the other places that are getting attention at the moment.

As for me, I don’t own any of these and am not a nimble enough trader to get in and out in this kind of hype very often, so I’d personally probably stick with the near-production names that I can envision actually having a business someday and maybe think of as an investment instead of a speculative trade … they seem very expensive too, but at least they might make money and produce something valuable in the next few years. Enjoy!

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