What’s the “Pure Carbon” teased by Resource Stock Digest Premium?

Gerardo Del Real says "You could earn 826% in the weeks ahead by supplying the one" thing all U.S. modern tech desperately needs

By Travis Johnson, Stock Gumshoe, January 26, 2017

This “Pure Carbon” pitch from the Angel Investing folks has driven quite a few questions our way, so it’s time for some answers — let’s pull the Thinkolator out of the garage and see what it can find.

The as is for Gerardo Del Real’s Resource Stock Digest Premium, and the spiel is mostly about how there’s a rare material with “0% production” in the US, and with huge demand — and that a “brand-new source is about to open for business.”

And, of course, the key claim:

“If you act now, one flip of the switch could make you wealthy.”

Which is the main problem, of course — how on earth are you supposed to rationally consider an investment once you’ve got that “make you wealthy” idea planted in your brain?

So first, let’s all just clear our heads. Get rid of the “make you wealthy” bit.

Ready?

OK, so what’s this “one of the rarest materials in the entire world” thing about? Let’s pull a few clues from the ad for our edutainment:

“You’ve probably already heard on the news about global shortages of uranium, lithium, and precious metals.

“And it’s true… those resources are in high demand… investors who buy stock in the right resource companies can make millions.

“There are thousands of success stories of investors who have earned returns like 75%… 125%… even 291% and higher.”

And…

“I want to show you how to make money by supplying the one rare element that the U.S. military, Apple, and Tesla MUST HAVE for almost every technological device they build.

“I’m not talking about silicone or copper — this resource is even more rare and essential.

“You see, this resource is the primary ingredient in the lithium-ion batteries that power your cell phone and laptop…

“These lithium-ion batteries power electric cars, fork lifts, trains, submarines, battleships… even entire power grids.

“As the Washington Post reports, ‘the demand keeps on increasing…'”

And he makes the point that yes, there’s a lot more of “other ingredients” in a lithium-ion battery than there is lithium… and he says that 80% of what goes into these in-demand batteries is “Pure Carbon.”

So what the heck is that? Are we going to run out? As with all battery pitches, the focus is on Tesla’s Gigafactory…

“When it comes fully online, Tesla’s Gigafactory will produce more batteries in a year than were produced in the entire world just five years earlier.

“These batteries already power the 1,235,000 electric cars on the road today…

“And they’ll power the millions more vehicles expected to be on the road by 2020.

“Currently there are only 85,000 tonnes of Pure Carbon produced in a year — and the Gigafactory is expected to consume 115,000 tons a year all by itself.”

OK, so that conjures up some enticing notions about resource scarcity and higher prices… what exactly is this stuff?

It is, broadly speaking, graphite. Graphite is a crystalline form of carbon, and it is both mined directly in fairly high-purity flake form and created synthetically from other forms of carbon (like coal). And it is used in most lithium-ion batteries as an anode material.

The larger user for graphite is still steelmaking — graphite is used in refractories and as a carbon-raiser for molten steel, in addition to other industrial demand for lubricants, brake linings and, yes, pencils. And yes, like with some other strategic metals, China is the major producer and refiner of graphite — partly for strategic reasons, partly because steelmaking is concentrated in China, and partly because no one much wants to have a graphite processing plant in their backyard.

And, apparently, there’s an exciting new graphite project just starting up in Sweden…

“The UK, Europe, Japan, and South Korea are all in the same boat.

“The entire world is forced to buy from China.

“That is, until now.

One Flip of the Switch Is About to Change It All…

“Up in the forests of rural Sweden, a brand-new mining operation is about to open for business.

“Mining bulldozers are already moving the earth away to reveal one of the highest-quality lodes of Pure Carbon on the planet.

“And it’s about time…

“Up until two years ago, there hadn’t been a new non-Chinese mine since the 1980s!”

And it’s not enough to make up a name (“pure carbon”) for this highly refined graphite, we also have to make up a name for the little company who owns the mine…

“This mine is owned by a small raw materials company I sometimes call ‘Rare Inc.,’ because it specializes in supplying the world’s rarest and most valuable raw materials that are absolutely essential to today’s technologies.

“These raw materials are literally what make all modern technology possible.

“Rare Inc. opened this mine in 2014 and it’s spent the last few years streamlining its production.”

Most of the rest of the spiel is an argument that the billions being poured into lithium-ion batteries and electric vehicles will bring a windfall for graphite… and, as these ads so often do, he quotes some reputable sources:

“‘Now the rise of the electric-car industry promises a huge surge in the [Pure Carbon] business. Making batteries big enough to power cars will cause a daunting leap in demand.’ —The Washington Post

That’s from an article about the environmental impact of China’s graphite factories, in case you’re curious.

And he implies that Buffett is investing in this big growth story, too…

“All of this demand has attracted even the most conservative investors…

“Including Warren Buffett.

“His current investment includes heavy ownership in lithium-ion batteries, electric buses, and industrial equipment.

“Buffett has reviewed the same numbers that I have, and that’s why he’s comfortable making big bets in strategic companies.

“But here’s the unfortunate part: you don’t have access to the same opportunities that Buffett does.

“Even if you wanted in on his electric battery business, you’re completely shut out as an individual investor.

“That’s what makes this mine in Sweden such a rare opportunity.”

That’s not really true. Buffett’s Berkshire Hathaway does have a substantial (though still fairly irrelevant in the vast scheme of things for Berkshire) investment in BYD, which is a lithium-ion battery maker that has gradually turned itself into an electric car and bus company over the past decade. And you could buy shares if you wanted to, they’re listed in Hong Kong with ticker 1211 but also trade with some liquidity OTC in the US at BYDDF and BYDDY. Not that it’s really a play on this “pure carbon” or even on pricing of other battery raw materials, since the price of lithium or carbon or cobalt is not a major component of the cost of a new electric car or bus.

But anyway, back to this “Rare, Inc.” pitch — how about some more info about the company being teased?

“I got the CEO of this mine in Sweden on the phone to discuss the breathtaking potential of this mining property.

“He confirmed that demand has been growing by leaps and bounds, and that its Pure Carbon refinement facility has never been more needed than right now.

“‘We’re in a unique position with our facility in Sweden, which is fully permitted and operational ready… we’re able to supply this growing demand.’ —CEO of Rare Inc.”

And apparently this mining company is also planning to produce some other valuable minerals:

“Rare Inc. knows that once Apple, Tesla, and the U.S. military have locked in contracts, it will be easy to sell them hard-to-find commodities with even fatter margins.

“That’s why Rare Inc. has secured mines and sources for lithium and tungsten.

“But best of all is its unique plan to sell rare earth elements (REE)…

“It has another mine in Sweden, just a few hours away from its Pure Carbon mine.

“It’s the most significant rare earths source in all of Europe, and it contains some of the most valuable of all the rare earths.”

Rare earth minerals have created a couple stock market bubbles in the recent past, also partly because of the strategic importance of building supply outside of China, though it hasn’t worked out very well for any of the actual mine-builders over the longer term just yet (Avalon Advanced Materials was one of the huge stories in rare earth stocks and is down from a $7 high to about 20 cents in six years… Molycorp was the hope for the industry with its strategic US mine but fell into bankruptcy because of declining prices, etc.).

So yes, we get it — there’s a graphite mine and processing facility in Sweden. Gerardo Del Real thinks it’s going to be hugely valuable. What is it?

Thinkolator sez: Leading Edge Materials (LEM on the Venture Exchange in Canada, LEMIF OTC in the US)

Leading Edge used to be called Flinders Resources, and was teased and pitched a few times in the six or so years since they bought the past-producing Woxna mine in Sweden — most aggressively by Frank Curzio back in 2012 and 2014 when he was putting out the Phase 1 letter for Stansberry, but it was also teased right as the company was getting private placement money and changing its name by Michael Robinson, right on the tail end of the rare earth metals bull market when everyone was hoping to drive those old rare earths investors into graphene speculation.

And yes, the earlier pitches for Leading Edge/Flinders were mostly selling the “graphene” story, not graphite — graphene is the high-tech single-atom-thick engineered material that is widely expected to make miracles possible, but is not yet really commercially available (or viable)… its expected that graphene will be made using high-quality graphite as a raw material, but it’s going to be quite a while before that’s a meaningful business and there’s a good chance that the price of the raw material will be somewhat irrelevant. After all, graphite is priced by the tonne, and graphene is, literally, a single atom in thickness, which means that having more expensive or synthetic raw materials probably wouldn’t make much difference to eventual graphene prices.

But yes, graphite is also a key part of batteries, and I’ve seen plenty of estimates that lithium-ion batteries will be a larger part of the graphite end market than steelmaking by 2020 or so… so even if steel production doesn’t grow again, the demand for graphite will probably grow.

What will that mean for Leading Edge Materials? They are thinking about growth with exploration projects for lithium and rare earth elements in Sweden (they changed their name just last Summer, when they merged with Tasman, which had been working on exploring and defining the Norra Carr rare earth deposit in the south of Sweden for seven years), but the meaningful operations for the company right now are all focused on the Woxna mine, which for a while was also called Kringel.

Woxna has generated some news with the testing of their purified graphite being qualified for battery use, which has helped the shares to get some traction in recent months, though things have apparently not gone as was originally planned. Back when Flinders was first teased, they were saying that they aimed to be in production by 2014 and to take 10-20% of the European market for graphite, but production never started — I don’t know if that’s because pricing wasn’t good enough, or they wanted more capital, or what, I haven’t looked at the details.

If you want to be a worrier, which is always a good idea for investors in early-stage resources companies, here’s part of the risk assessment from one of Leading Edge’s press releases from last Fall:

“The Woxna project has never defined a mineral reserve and the previous preliminary economic assessment on Woxna dated October 29, 2013, has been superseded by the Company’s current technical report dated May 11, 2015. As the Woxna facility is not in production but remains on a production ready status, any future decision to recommence mining at Woxna will not be based on a preliminary economic assessment demonstrating the potential viability of mineral resources or feasibility study of mineral reserves demonstrating economic and technical viability. Under these circumstances, there is increased risk of technical and economic failure for the Woxna project, and the Company discloses additional risk factors relating thereto. The Company advises that it has not based its production decision on a feasibility study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any particular level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that production will begin as anticipated or at all or that anticipated production costs will be achieved. Failure to commence production would have a material adverse impact on the Company’s ability to generate revenue and cash flow to fund operations. Failure to achieve any anticipated production costs would have a material adverse impact on the Company’s cash flow and future profitability. Mineral resources that are not mineral reserves do not have demonstrated economic viability.”

The company also consistently refers to the Woxna project as “100% permitted,” but more recent press releases also refer to their commitment to “re-permitting” the site to allow for increased production and high-purity processing, and I don’t think they’ve talked about the timeline or costs of the re-permitting or the expansion potential beyond that 2015 technical report.

So if this is something you’re interested in, there’s certainly some potential that it will either turn itself into a more valuable company (it’s currently got a market cap of about C$70 million) or go on a crazy stock market run if people get excited about graphite or rare earth metals again… but as a financial operating business, it’s awfully hard to make any guesses based on a mine that has been fully permitted for two years but has never produced any revenue… presumably that means they need something else to make the restart of the mine economically viable. There are plenty of graphite projects that have been worthy of a sales pitch but haven’t actually ever been built or generated any revenue, and maybe all of those high-purity graphite projects (Lac Knife, Lac Gueret Albany and Bissett Creek in Canada, Graphite Creek in Alaska, Coosa in Alabama to name just a few) were just “early” or overpromised or got ahead of themselves during the years of falling graphite prices… or maybe they won’t ever be built, I have no idea.

Some are being built, like Syrah’s Balama in Mozambique, and there are stories about increasing Russian production as well… I don’t know how to get a handle on the whole market with any precision, other than to note that prices fell for graphite for many years because of the drop in demand from the steel industry, so probably crossing your fingers for a big increase in steel demand would be as effective as betting on increased battery demand (demand for graphite from the battery market is certainly growing much faster, but steel demand is a much larger part of the business and is expected to remain so for at least a few more years. And a surge in steel demand combined with a surge in electric vehicles would be the ideal result for graphite producers… but, given the potential for synthetic graphite, this isn’t a case where natural flake graphite is a “has to have” material at any price, there will be price constraints from that competition.

And I wouldn’t put much stake in the lithium project in Sweden, for sure — it’s almost unimaginable that a hard rock lithium project in an expensive country will be able to compete with the lithium brine producers on cost, and there’s no shortage of economically viable lithium reserves elsewhere. It’s also hard, frankly, to see them actually building the Norra Karr mine for rare earths in Sweden, though it is a large deposit and it’s certainly possible eventually — you’d need a lot of money and a lot of high-tech processing of rare earth ores, which is complex and difficult and expensive… though the fact that this particular deposit is not particularly radioactive compared to others is probably a positive for eventual permitting prospects.

So I find myself not terribly tempted by this one, but that does not mean it won’t go up — it just means I don’t have any visibility on the potential economics of the Woxna mine restart so it’s hard to know whether a $50 million valuation is reasonable for the company or it should be half that or ten times that… there are plenty of sources that predict a spike in demand for graphite, like the Benchmark report that Del Real cites in the ad, but I also keep reading that synthetic graphite, manufactured using petroleum coke, is perhaps only twice as expensive as natural flake graphite… which would keep a natural ceiling on prices.

I haven’t gotten comfortable enough with my understanding of the industry, the pricing, or the real demand to jump aboard any graphite producers — probably because I’m hobbled with the knowledge that there are lots of logical “supply crunch” stories from the past that never really played out because the story is always far more complex than we imagine (just refer to uranium from 2014-2016, for example, when the price “obviously” had to rise but still, in the end, fell by more than 50%… though it is coming back up again a little bit lately). If you do decide to trade this one, keep an eye on that Woxna mine and don’t get too excited about the other stuff… and pay attention to what the actual economics of that mine might be as it goes through “re-permitting”.

Or, of course, you might get lucky and see another bubble for graphite or rare earths stocks… in which case, you could just hold on to the hype machine with both hands and hope for the best.

Regardless, it’s your money — so it’s your call, and I’d be curious to know what you think. Interested in speculating on graphite, or rare earths, or lithium? Have a fondness for Leading Edge Materials or for others in the space? I often think my role is to give you some fodder for skepticism in the wake of the hype machines that fly by at high speed and threaten to swamp our little kayaks… but that doesn’t mean the hyped-up little stocks will necessarily go down, we’re just trying to look at them as seriously as we can and counter the daydreams of wealth with another (sometimes grumpier) perspective. Let us know what you think with a comment below.


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68 Comments on "What’s the “Pure Carbon” teased by Resource Stock Digest Premium?"

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Terrance
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0

They had a reverse split not too long ago and I got my ass handed to me. This thing will have to go up 1000% in order for me to break even. My advice is stay clear of this stock

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alanh
Member
4085

I never think of the subscription cost to SG (espec as its free) I measure its value by what its saved me from wasted subs elswhere and losses by investing in these dogs. Im up $10’s of thousands.
Go Travis.

stevelparr
Member
0

I looked at this and thought it was Australian mining company Talga Resources….

Jim McLeod
Guest
0

I agree. I think this is Talga Resourses. , which I bought 2 weeks ago. It is up double digits so far

takeprofits
Guest
0

Congratulations on your speculation. Doubles and triples on these juniors not covered by regular analysts flying under the radar of Wall St. can double much faster than bigger more established mature companies that may take years to double and require far more up front investment. I rarely buy a stock over $10 and doubled the value of my portfolio in the first 6 months of 2016.

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hector
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1

Greetings Travis, Your analysis of LEM.V is brilliant.
hector

qhue
Member
0

Most likely to be awarded the contract to coat the anodes for Tesla and Panasonic (Panasonic currently is the exclusive supplier to Tesla of batteries for ALL its cars right now) is Saint Jean Carbon Inc. (SJL.V) , the value of these plays are not in the commodity but rather in the technology : READ http://technologymarketwatch.com/sjl.htm they have been contracted to build the first next gen mill for Tesla imo it will pop when they announce more

takeprofits
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0

Thanks for that, had not run across that one yet in spite of looking at hundreds every month in my daily research for good junior prospects, but for the record I do hold Nemaska Lithium which I would rate as my top pick in the Lithium sector currently.

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b, gould
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Saint John Carbon, TSX- SJL (Canada). They have graphite properties as well as lithium property in Quebec (close to Nemaska-NMX). Currently perfecting a method to re-use components from used lithium batteries. Their News Releases are current and informative–worth a read. Just FYI.

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takeprofits
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Another Micro-Cap I bought @ .03 is American Manganese AMY-V that has patented processes for recycling lithium ion batteries including cobalt as well as graphite and lithium, so it might be worth comparing the 2 companies.
Always good to get in early on new technology and as electric car sales ramp up recycling the batteries can turn into a profitable new business. Being ahead of the curve BEFORE the mass market catches on is a sound strategy if you do your homework. Larry Reigh has weekly updates on the company’s progress weekly on the Howe Street radio broadcast out of Vancouver.

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wilksey
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Great info myron, see you’ve been doing your homework

takeprofits
Member
416
THANKS: I always do my homework, very little goes on in the junior mining space I don’t know about, I just don’t write about many of the stocks I buy until they mature because of the antipathy many investors have towards start-ups. For those interested I am thinking of starting a service dedicated to stocks under a dollar, but it would have to be limited to a few hundred people that are comfortable with penny stocks. I probably have at least 100 profitable stocks in my portfolio that I have never written about because they are to small to disclose… Read more »
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cash1
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1

Sure i would be interested.

TerriJ
Guest
0

I would be interested too.

mhardin54
Irregular
26

Have been a lurker, never posted in the past. However, have made money by following you & HN. Would be very interested in being considered a member for you new service.

mpburris
Member
0

I would be interested in learning from you mpburris@ msn.com

williamstown
Irregular
229

I too would be interested if you do proceed

weball
Member
0

I would certainly be interested should you proceed.

Doc B
Guest
0

I am an irregular follower of Travis, and just stopped by today. Was intrigued by your knowledge of penny miners, and would consider a subscription if this publication comes to pass.

mikeandbernie
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0

Interested in learning more

leskellum
Irregular
7

Myron I would be very interested in joining your penny stock service. How would I sign up. Les

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mmdwacjm
Member
121

Myron Count me in as well, Mark

pieter132
Member
67

hi Myron, I do the same basicly as you it is really hard work but it can pay of. If you have the service running let me know. I will as well share my info. pieterscheffers@hotmail.com

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takeprofits
Member
416
Thank you for your response, you are exactly the type of person I am looking for as my initial 200 “beta testers” people who appreciate the hard work involved in doing thorough and in depth research to find the gems among all the hyped rubbish put out by so many newsletter promoters, and are willing to share their own expertise and contribute to a collective effort. What I envision is a co-operative effort of like minded people that will level the playing field for the average small time investor with less than a $50,000. portfolio, most of whom can not… Read more »
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radius
Member
1

Hi Myron – I am interested to participate and have sent you an email. Happy to share any research publications that i currently subscribe to.

bechira
Guest
0

interested, please keep me posted. Thanks.

Brendan
Guest
0

I would be interested Myron

JESSIE DUONG
Guest
0

I am Jessie D. I would like to joint your service too my e-mail is DUONGQT@GMAIL.COM please help me to be part of your service.

leslie7
Irregular
669

I’m very interested!

keen1991
Irregular
172

Would also love to participate! Email cava@hotmail.co.uk

Thanks

J.W. Leslie
Guest
0

Got room for one more MM

scottu
Member
17

I’m interested too Myron, thank you for considering this service!

Adrian wright
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0

I would be interested, live in the uk and trying to find broker to buy in Canada etc

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coolhandluke
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0

Speaking of Michael Robinson by Travis, do any here have any opinions on Robinson’s advice or newsletters?

Regards,

CH

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Robin Steel
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0

Robinson is just another paid shill, He Hyped HPTO several years ago, rode the pop that resulted from his subscribers buying, and sold his shares, just like all of the penny stock floggers that cut deals for shares, and sell them to the suckers that believe the pitch….

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takeprofits
Guest
0
This deserves a comment. No doubt some analysts DO accept shares or payments for hyping a stock, its called :pump and dump: but for the record I have never stooped to that despicable practice. I only write about stocks where I have given the stock and management history thorough analysis and believe enough in the company’s prospects to invest my own money. My usual initial buy is in the $500. to $1000. range and then I add to my holdings as I see the companies progress in development of their project. These are not the kind of stocks you throw… Read more »
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speedymac
Member
0

Travis,
I was able to figure this one out–my first one!
Bought some shares and watched LEMIF rise and fall back
a couple of days before cashing out at .677 for a quick 25%.
I initially bought in thinking a double but exited when my doubts got the best of my greed!
I am just reading your post which confirms my decision was the right one for me.
Good luck to others still in and I will cheer their success.
Thanks Travis for what you do–it’s a real service!
Maurice, an irregular guy.

takeprofits
Member
416
You can never go wrong taking a decent profit, but you do limit your upside if you always cash out at any market dip. When you have the courage of your convictions based on thorough analysis of previous management history, the quality and potential of resources discovered to date, then you need to give a company and management some space to meet their objectives. I have held on to stocks that dipped 50% knowing that market sentiment is often fickle and still had them turn into 10 bagger’s which I have averaged at least one per year in the market,… Read more »
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Lynx
Guest
0

Thank you Travis

chrishughes
Irregular
0
Thanks Travis. As usual your analysis is well explained and highlights the risks with these start ups. I have lost money on a ASX listed graphite miner, and have held a position in Tasman for some years, which thankfully is now above water. My particular interest now is in the rare earth market. You have explained the difficulties of the rare earth business in your article, and they are all very true. Barriers to entry are very high. There is however one company out of China that is now successfully operating at better than cash break even. This is Lynas… Read more »
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MCGILTON98846
Member
-6

TSX Venture Exchange “Graphne Lighting PLC.”(OVP.H)Orlana Resources Corp. (NEX:OVPH)Oriana Resources Corp.Shure would like to no when it goes public so I can buy some . Groundhog

Matthew Handley
Guest
0

You’re right on the money – a high-cost mine in Sweden with plenty of resources elsewhere is not a good proposition. Thanks for the thinkolator article.

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takeprofits
Member
416

Not necessarily so, Europe needs rare earths just as badly as other advanced economies and a local source could certainly have preference over depending on China.

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