Resource developers, especially in the rare earths space, are suffering from the market’s obsession with immediate results, says Byron King, writer and editor for Agora Financial’s Outstanding Investmentsand Energy & Scarcity Investor newsletters and contributor to the Daily Resource Hunter. Nonetheless, he argues, large-scale demand for high-tech metals remains. The question is, which developers can weather the storm?
COMPANIES MENTIONED: ENERGIZER RESOURCES INC. – FLINDERS RESOURCES LTD. – FOCUS GRAPHITE INC. – LYNAS CORP. – MATERION –MEDALLION RESOURCES LTD. – MOLYCORP INC. – NEO MATERIAL TECHNOLOGIES – NORTHERN GRAPHITE CORPORATION – STANS ENERGY CORP.– UCORE RARE METALS INC.
The Critical Metals Report: In the last nine months, poor stock performance has shaken investors’ confidence in the rare earth elements (REEs) sector. What will restore their risk appetites?
Byron King: We need to see successful efforts from developers. Molycorp Inc. (MCP:NYSE) is not the success story it should have been. Molycorp presented itself as an all-American, mine-to-magnets resource, but when it joined forces with Neo Material Technologies (NEM:TSX), its research and development went to Singapore and its manufacturing to China. Its share price is down from a where it was a few months ago, let alone a year ago.
Lynas Corp. (LYC:ASX) was another great hope, but it has had trouble getting its plant in Malaysia up and running. Just as it was nearing the end of construction, local communities raised concerns about radiation in the materials the company is processing and bringing in from Australia. You have to wonder about the source of those problems. Cynics would say, follow the money. What do key Chinese players think about a new, Western player in the sector?
Looking at the smaller developers, their efforts have been slower and more expensive than expected. They prove the rule that nothing is easy in the REE space. It is a hard, technical space to work in. Many management teams are feeling their way through the maze.
Everybody is getting slammed. At the same time, some of the really smart money sees this as the perfect opportunity to buy low.” –Byron King
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