Finding experienced teams could be elusive in the rush to capitalize on growing demand for heavy rare earth elements. Energy and Scarcity and Outstanding Investments Editor Byron King unearths companies that can deliver the goods along with shareholder value in this exclusive interview with The Critical Metals Report.

Byron King: The Real REE Demand Opportunity

The Critical Metals Report: In late June, Takashi Yamanouchi, president of Mazda Motor Corp., said as much as 90% of the world’s car engines, including hybrids, will still be gas powered in 20 years. What does that prediction do to the investment thesis that electric vehicles (EVs) will drive the development of rare earth element (REE) deposits?

Byron King: The man from Mazda is giving a variation on the idea that anything that cracks the automotive market will experience soaring demand. Even if you just use a little bit of something in a lot of cars, that adds up to a lot of whatever you’re talking about. If you lighten a car by replacing steel with aluminum, that means a boom for aluminum makers. When you add more electronics, it’s a boom for electronics makers. So, there’s this idea out there that building more cars with batteries will be a great thing for the REE industry.

Now, the Mazda boss is saying ‘not necessarily.’ He’s spraying cold water on those warm expectations for the future of batteries in vehicles. Yamanouchi is making the point that there’s still a lot of technological development left in the good-old internal combustion engine and in redesigning cars to get better mileage. This is something that people everywhere ought to ponder—from politicians and policymakers to the single investor—which stocks are best for a short-term trade? Beware the thesis that EVs are driving REE developments. Not so fast. The thing is, though, we use rare earth elements for a lot of things in addition to cars that don’t yet exist in great number.

TCMR: But aren’t electric vehicle makers considered one of the biggest future uses of REEs? We’ve seen REE company share prices skyrocket over the last three years, based largely on this expected demand and on the lack of a supply chain outside of China. However, if EVs don’t become ubiquitous, one of the main demand drivers for REEs won’t exist. Wouldn’t that could be a major obstacle in developing these resources?

BK: Well, some companies have benefited from the expectation that they’ll sell into the car market, for batteries that haven’t been perfected in cars that haven’t been designed, and for assembly lines that don’t yet exist. That’s my way of saying that there’s a lot of open road between here and there. EVs are almost a niche industry today and will be a slightly larger niche industry in, say, five years.

But let’s get down to the basics of understanding what to look for when investing in REEs. The first thing to understand about REEs is that there are two distinct groups. The light rare earth elements (LREEs) include lanthanum and cerium. Examples of heavy rare earth elements (HREEs) include erbium, terbium and gadolinium. The light rare earths have traditionally sold in the US$5,000–US$10,000 price range. Right now, LREEs are selling for US$150K. For projects already in the pipeline, you could see those US$150K prices kick back down to US$5K or US$10K.

TCMR: Why would that be?

BK: Because lanthanum and cerium, the LREEs, are the most abundant of REEs and tend to dominate most of the production projects on drawing boards, if not in the pipeline. There won’t be a lot of big money in the light rare earths going forward. Right now, China is squeezing the world and raking monopoly profits out of what ought to be much lower-cost items. It is acting as a very sophisticated monopolist in that arena.

Going forward, the serious money will be in HREEs, which have a lot of uses other than EVs. For example, yttrium is used in high-temperature refractory products. There’s no substitute for yttrium. Without it, you can’t make the refractory molds needed to make jet-engine turbine blades. If you can’t make jet-engine turbine blades, you don’t have jet engines or power turbines. The price points for these HREEs will reflect true scarcity and unalterable demand. People will bite the bullet and pay what they have to in order to get the yttrium.

TCMR: Rare earth juniors comprised a roughly US$2 billion industry a couple of years ago. Today, it’s a US$10B industry. Can that growth continue?

BK: I believe that’s a fair reflection of the intrinsic value of the overall industry; US$10B might even be low. I think we’re going to see major reallocations of capital from company A to company B as people realize which projects are or aren’t going to work and which companies will and will not have cash flow.

TCMR: Does this mean investors will start taking their money from company A and putting it into company B, or will there be consolidation?

BK: Both. When people have asked me for my opinion, I’ve advised management teams to get it while they can, in terms of consolidation, roll ups, takeovers and takeouts. If you’re running a small-cap rare earth play, you need to build something that reflects the reality of the REE production chain. A lot of people think that the rare earth space is a mining industry. Actually, it’s only a mining industry at the very beginning of the process—when you dig a hole, blast the ore, pull it out of the ground and crush the ore to get a concentrate. That’s mining, too. Everything else after the concentration stage is ultra-advanced chemical technology. I used to say that it’s more Dow Chemical than it is Barrick Gold Corp. (TSX:ABX; NYSE:ABX). Really, with all respect to that fine company in Midland, Michigan, REEs are even more sophisticated than Dow Chemical.

When you get into chemical engineering and the complexities of turning these concentrates into products that people can sell, buy and use, you’re dealing with some of the most-complex chemical engineering in the world. The quality assurance for the end product involves inspecting representative samples under a scanning electron microscope. They look at the atomic structure and the crystallography of an oxide molecule to make sure that the electron bonds are at the correct angles.

Look at it another way: If I mine gold out of the ground, I can sell my gold concentrate to hundreds of thousands of buyers. It goes into the world’s commerce system, and it will wind up as a gold coin, gold bar, piece of jewelry or piece of electronics.

If I mine a rare earth deposit, I’m pulling minerals out of the ground that might have as many as 17 different exotic elements in them. I have to turn each one of those 17 elements into a highly engineered end product. My end customers will buy that product only if it meets what they call

“four or five nines”—99.99%–99.999% purity–in a particular crystallographic structure. That’s why you have to be very careful about thinking the REE space is just a mining play. You can’t just go with the company that has the biggest ore body and highest ore grade. It may not be the one with the right chemistry. The biggest ore body may not be the one that makes all the money.

TCMR: Does that mean the juniors will have a difficult time finding people with the expertise needed to develop these deposits?

BK: Perfect question. The answer is, absolutely yes. Developing rare earths the right way requires management teams with every imaginable skill. First, the team needs traditional promotional skills. After it promotes the company’s stock, it needs really good science and chemical people, as well as project management and development people. Rare earth miners need relationships all the way down the industrial food chain to the end-use customer.

Back to the gold-mining analogy. Gold miners don’t care which jewelry store buys the gold and turns it into a bracelet. When mining REEs, companies need a relationship with the light bulb company that will buy a particular set of rare earths for use as phosphors in their products. They need a relationship with the electronics company that will use its REE in an advanced computer chip or piece of circuitry. It takes a whole other set of managerial skills up and down the food chain, including teams of people from the face of the mine out to the sales reps that interact with the final end users.

TCMR: Most of the juniors operating in the REE sector have market capitalizations below US$1B. The cost of developing projects is often that much or more. Other than through massive dilution, how are these companies going to get the capital to develop these projects?

BK: I believe there will be massive dilution with some companies. Furthermore, it’s going to blow back over the whole industry.

The better idea is for companies to team up. The rare earth development companies need to team up with intermediate and end-use companies. That will bring infusions of capital and human skills—the chemists, scientists, engineers, project managers and developers. Companies need to bring in the people and outside money and give them an investment stake, whether it’s equity in the company, profit sharing or offtake agreements at different stages of refining and processing.

TCMR: Will we see lots of offtake agreements or juniors doing friendly mergers?

BK: I think we’ll see highly detailed offtake agreements. As I said earlier, companies may have 17 different elements in their ore. Not every end user needs every one of those. So, companies wind up having three or four different offtake agreements with various partners, each of whom wants some or all of a particular segment of those 17 elements. They’ll have competing interests. At the same time, they’ll probably have more lanthanum and cerium than they know what to do with. They might be stockpiling bags of it, hoping somebody else will come along and takes it off their hands.

TCMR: Which companies are ahead of the game, in terms of the specialized chemical-development and finance side of the equation?

BK: The biggest name is Molycorp Inc. (NYSE:MCP), which had an IPO a year ago, priced at around US$14. It’s been as high as US$79 and is something like US$53 right now. Molycorp is an established American company with a deposit in California. I think there’s still some regulatory risk in operating in California. There are interest groups that would be more than happy to file a lawsuit in the Federal District Court for the Southern District of California to protect some endangered snail or turtle. But, Molycorp, like every company, needs human skills. It hasn’t been in the production business in many years, so it needs to develop human skills and redevelop its industrial processes.

TCMR: Didn’t Molycorp just buy a processing plant in Estonia?

BK: Yes, a plant that specializes in light rare earths. For years, it processed niobium and tantalum. The Molycorp people will tell you that they bought this plant to get something up and running wherein the company can develop and maintain a production process, along with the human skills needed. So, it’s going to be something of a training ground for Molycorp.

Another company that is a household name is Australia-based Lynas Corporation (ASX:LYC) with an ore deposit in Mount Weld, Australia. It’s building a plant in Malaysia in an area already filled with oil refineries and chemical plants. Lynas spent a couple of years and something like US$600 million building the new plant, which should now be in a preoperational, punch-list testing mode. However, at the last minute, Lynas is having problems with the Malaysian government over importing ore from Australia, and there are some rumors that Chinese interests are behind that.

TCMR: You once called human capital the “secret sauce” of Stans Energy Corp. (TSX.V:HRE) success.

BK: The human capital angle with Stans Energy is its relationship with a division of the Russian atomic power agency, Rosatom State Nuclear Energy Corp. Stans has a super-strong relationship with a group called the Russian Leading Institute for Chemical Technology, or VNIIHT, once the Cyrillic transcription is done.

VNIIHT is an absolute gem of an institution filled with hundreds of people with PhDs in metallurgy and chemical engineering. Its specialty is coming up with useful applications for exotic elements. VNIIHT was founded in 1951 as Secret Laboratory Number 10 in the old days of the USSR. Today, VNIIHT brokers its skills and works as a consultant for international customers.

An institution like VNIIHT is a very strong part of those critical human skills needed in the REE space. Stans’ relationship with VNIIHT gives it a leg up on the competition, in terms of the chemistry, engineering and developmental process. Stans and its partner VNIIHT have an inside track in this horserace.

TCMR: Stans started the month of June at US$2 and ended the month at US$1.50. In the June 28 edition of Energy and Scarcity, you called the Stans’ selloff a strong buying opportunity and a “chance to capitalize on the mistakes of others.” What would those mistakes be?

BK: One big mistake has been to get the capital expenditures wrong. There are some bad numbers floating around the blogosphere that say the capital expenditure for Stans to reactivate and restart a basic REE production line in Kyrgyzstan would be US$500M and more. They’re off by about 80%. I think US$100M is a more appropriate estimate—a shockingly low number versus what you hear for Molycorp, Lynas or other players.

The cost difference comes from the fact that Stans controls a Soviet-era mine that has a very strong life ahead of it, as well as former Soviet facilities and equipment. I’ve seen the equipment up close, and I was immensely impressed. With this trove of equipment and its relationship with VNIIHT, Stans is shaving years and hundreds of millions of dollars off its development cycle.

TCMR: In the June 13 edition of Energy and Scarcity, you wrote about Medallion Resources Ltd. (TSX.V:MDL; OTCQX:MLLOF) plans to buy the monazite tailings from an ilmenite

producer, upgrade the monazite ore into an REE concentrate and sell that concentrate to an array of potential buyers. If it works out, that would propel the company’s value into the clouds. Please tell us more about Medallion and its plant.

BK: It’s hard for me to say more than that because of confidentiality. The point is that there are operations where monazite sands are considered a waste product. But the monazite sands actually have value.

I mentioned Medallion Resources to readers because I think when something like this monazite sand-play happens, it could be a game-changer for Medallion and for the entire industry. If the sands are brought up to a concentrated level, even if not to the high-end part of the value chain, monazite sands could find buyers in Japan, Korea or China. That’s how bad the world needs the basic product.

TCMR: China controls upwards of 95% of the global supply of rare earths. But there are roughly 150 REE projects being developed throughout the rest of the world. What are some of your favorites?

BK: Two that I’ve been following in the U.S. are Ucore Rare Metals Inc. (TSX.V:UCU; OTCQX:UURAF) and Rare Element Resources Ltd. (TSX:RES; NYSE.A:REE).

Ucore has the Bokan Mountain project in the panhandle of Alaska, near Ketchikan. This is an old, permitted uranium mine with roads and a certain amount of infrastructure. It’s very mineable in a small-scale way, but it’s rich in heavy rare earth elements. Being in Alaska, it’s a U.S.-jurisdiction project and it’s very doable. I would really like to see more development along those lines. I’d like to see the Bokan Mountain mine come into play.

Rare Element Resources has an intriguing REE play going on in the Black Hills uplift area of Bear Lodge, Wyoming. Rare Element is still drilling and doing basic chemistry. It would take a lot of development to turn Bear Lodge into a mine that produces concentrate for processing into a final product. But, again, it’s a U.S.-jurisdiction play with a lot of potential.

TCMR: Do you have some tips for investors looking to play the REE sector?

BK: My strongest recommendation for the near and medium term would be Stans Energy. No disrespect to any other companies, but I think Stans has the best prospects to move quickly and solidly in the near and medium term.

TCMR: Byron, thank you for your time and insights.

Byron King is the editor of Outstanding Investments and Energy & Scarcity Investor. These publications reach more than 60,000 paid subscribers. He is also a contributor to the Daily Resource Hunter. Byron is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deepwater oil fields in five oceans. This provides him with a unique perspective on myriad investment opportunities in energy and mineral exploration. Byron has been interviewed by dozens of major print and broadcast media outlets, including Financial Times, Guardian, Washington Post, MSN Money, MarketWatch, Fox Business News and PBS NewsHour.

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Mini-Crash Ahead Or Can We Hold Recent Gains? I Would Be Real Careful Here. In Cash or Short!

Commentary below from Mark Leibovit, TIMER DIGEST’s #1 Intermediate Market Timer for the 10-year period ending in 2007, the #2 Intermediate Market Timer for the 10-year period ending in 2009, AND currently the #1 Market Timer for the six-month period ending June 24, 2011. And, the #3 Gold Timer for the Ten Year Period ending 12/31/10
———————————————

TIMER DIGEST SIGNALS:

Stocks – NEUTRAL –

Today is a potential ‘Turnaround Tuesay’, but in overnight trading stocks are once again being taken to the woodshed. If I’m correct, about last week’s top being a bull trap (at last for the short-ter,), there is more pain ahead with risk of a more severe decline if the recent lows (1258-1262) in the SPX do not hold. It’s still ‘Sell May and Go Away’ – Stall until the Fall!

Gold – BULL –

I remain bullish on gold even though I know we could be entering another negative seasonality period sometime this summer. The case for gold gets stronger by the day and surprises could still be to the upside. If we can clear the record 1578 high, we’re probably off and running now versus later. The most recent signal is a Positive Leibovit Volume Reversal in gold on Friday, so that’s where I stand I believe if the troubled country or countries ultimate choose to secede from the EU, that could be a big, big positive, akin to cutting a cancer out from diseased patient. For now, strength in gold (and to much lesser degree silver) is very much related to the default of sovereign debt, much as we saw in Iceland a few years ago. Ultimately, bankruptcy is bankruptcy and it has to be recognized as the only solution – the only truth – instead of covering up and hiding a glaring reality.

Bonds – BEAR –

Money is seeking safety and bonds are rallying. It is as simple as that. If we clear recent highs in the bonds (127 01 in the 30-year bond), I am incorrect in my assessment (for now) that interest rates are upticking. With the likelihood that the rally in stocks into July was merely a short-term bull trap, bonds could very well breakout to the upside (lower interest rates).

The above is just a portion of Mark’sVRTrader. Much more analysis contained every day in Mark’sVRTrader Silver or Platinum Service

Mark Leibovit’s Special Trial Offer: Use this month to kick our tires. Pay 50% for the first 30 days (No refund) and sample our Silver or Platinum service and then decide what works best for you. If you aren’t 100% ready to move forward, simply email us to cancel one week before your 30 day 50% off trial subscription ends and it will be canceled and you will not be charged ANY FURTHER, no questions asked. Just send an email to mark.vrtrader@gmail.com or call 928-282-1275 to cancel. You will receive an emailed confirmation of your cancellation at that time.

Michael Campbell: You have made a lot of money in silver over the last two years but you are more interested, more excited and enthusiastic now. Why?

David Morgan: Yes I’m more bullish now actually than I was the previous 10 years. In the March 2010 issue of the Morgan Report I did a study that took me a while to do, on what would silver be as an investment starting in early 2010 and going out ten years. We already had a history of what it was like from 2000 to 2010 and most of my analysis at that time took in everything into account of course. But primarily it was the monetary phenomena of destroying the currency which of course it’s a global phenomena because as we all know the US dollar is the reserve currency of the world. So I took out a clean sheet of paper and said I am going to pretend I don’t know anything about the silver market and what I discovered was the increase in mining of silver has been significant over the last decade, and will continue over the next probably three years or so. Certainly there is a lot more silver coming to the surface from mining activity than there was a decade before and that only makes sense because of the commodities boom overall, in the metals, agriculturals you name it .

On top of that, you’ve got more investment demand and more industrial demand. So we broke them apart,  looked at them all and basically the industrial demand is getting bigger than ever and it continues to grow. The reasons for that is several fold but the three main ones are energy which is solar, food which is basically processing and packaging where they are using nano particles within containers and plastics because silver is a natural biocide. So something which could be on the shelf for four days can now be on there a lot longer because of the silver impregnation into the plastic, can or whatever. Then you’ve got water purification where silver plays a vital role as well.

If you discounted everything else, you really shouldn’t but if you did, in other words if you discounted all the electronics, all the electrical especially with China building up infrastructure even further, super conductivity, the RFID Tags, the clothing industry that is using more and more silver and on and on and on, if you discount that to zero you still come out where in about four years or so, you are at a deficit again in the silver market. Meaning that all mining and recycling does not meet the total demand from industry alone and that discounts no investment demand.

So Mike, I have to say as thorough as I can be that whenever you go out ten years there are going to be errors. I am not perfect it’s a projection, it’s a best case scenario and I am biased. I am really for honest money and an honest financial system that’s my mission statement. But, even if I am off in a lot of these areas I still can not build a case for the bear side of the silver market regardless of the worst deflationary depression in the history of mankind.

Michael: I think is so interesting, a lot of times we look at the precious metals and we are really just talking about the debasement of currency.  But there is this other side, silver being an industrial commodity, a side many people ignore. Is this demand side that’s coming out of the industrial use you’ve just chronicled, and that supply isn’t sufficient to meet that demand putting a bottom in prices?

David: Absolutely, and you’ve got to look at the investment demand and the investment demand of course has picked up substantially since April 2006 with the advent of the ETFs for silver. Then you’ve got to look back in history, look at the Central Fund of Canada for example. Do you think Stefan Spicer and his group are done buying silver?  I don’t think so. What about Bullion Management Group and Nick Barisheff, are they done buying silver? I don’t think so. What about Sprott Money or Sprott Asset Management with the PSLV physical silver trust. They are just getting  started do you think they are done buying silver?  What about the Zurich Cantonal Bank, Eric Mayer who I had the privilege of meeting in one of my last trips to Europe. They have roughly 79 million ounces of fine silver in Swiss Alps do you think they are done buying silver? These are just a few of the big players. Where are you going to go Michael with the system that we have now that is so corrupt and the debasement  on the currency so great while they are trying to solve the debt crisis by printing more money. Do you think people that are in the know that can really think through the problem are going to give up on it. So if you factor in a very modest amount of silver demand for the investment side, which I think is going to accelerate greatly in the future,  but being conservative, if you keep a steady state 100 million ounces a year which is a joke. I mean, there is going to be far more than that in my view. But if you use that conservative number to fill the investment demand on top of the industrial demand, it’s game over eventually.

Now, I want to be very clear on something here because I am biased but I try to be as objective as possible, I cite my sources whenever possible, I just gave you my opinion but there are going to be substantial increases in the silver supply over the next three years. We have some very substantial significant mines coming on stream. And I say coming on stream and I want to put that in quotations and the reason I say that is these are projections going forward, but let’s look at the other side of it.  It all comes to fruition, there are going to be some analyst’s out there saying look at the increase of silver, look at increase silver, look at the increase and I am saying I have looked at it and you’re right it’s going to increase I agree. But then we have the geopolitical side of the equation. Look at what happened to Peru, look at what happened to Bolivia, Mexico is getting shakier by the day, so just because these things are projected to happen doesn’t necessarily mean they will. I hope that they do, I am pro-mining. The problem is if things start to unravel more and more and more not only do people have a financial survival mentality but so do nation states and that’s what we’re starting to see with the Bolivia’s and the Peru’s and on and, on you know Venezuela has been that way for years. So this is something else that you need to factor in your thinking.

Michael: When we wrap it all up in a ball, could you could summarize where you think silver prices are headed, pick your time frame?

David: Okay but before I get to the why I think prices  are going higher, I want to digress  a moment and talk about a seminar that I gave in Los Angeles very recently, one of the most important lectures I gave really was on the economy not on silver per say. In that economic lecture I focused on how we are set up for a currency crisis, in all aspects that you want to name and I compared it to the 1923 Weimar republic. The last slide that I showed and it was the most important,  it’s called the M1 Multiplier. Basically it is the turn over of money. In other words, how much a dollar turns over in the economy and when that number is below one and it is, and the reason I am making this point, is it just hit a new low. What that means is that no matter how much is out there or printed or in credit or available, it really doesn’t matter at this point in time because what matters is how much is being circulated and right now it’s basically at a stand still, it’s below one. It’s below one which means that whatever is out there is being tightly held and so this is a highly deflationary at this point in time and nothing else can really be said about it. Now, that doesn’t mean that we don’t have inflationary pressures building at a phenomenal rate behind the scene or openly, but what it does mean is the psychology right now, especially I would say in United States, is I would rather hold on to a dollar and pay down my debt or save for a future that is uncertain than to spend that dollar in the circulation.

Now, that is looking primarily at the USA. Now, if we take that and put it to the side and look at the velocity of money on a global basis, the velocity there is not, and this is my best guessestimate, is not nearly as low as it in the US so we have to factor that in of course. I mean you could have basically everyone in the US holding on to their money because they are scared of the future and they are way over indebted and at the same time you could have people outside the US saying I don’t want these dollars, I want to spend them as fast as I possibly can. Now, I am not saying that’s happening but that’s sort of the trend. I think it’s a very important concept to understand.

Michael: What would our listeners google to find the M1 chart you reference?

David: Just google the M1 Money Multiplier.

Michael: You deal with in the Silver Investor with a variety of subjects from the big picture economy right down to what silver stocks you have been looking at. You look at all sides of silver stocks,  who is developing a mine, who is coming on stream who has got significant assets already producing, can you give us a couple to put on our radar screens?

David: You bet. We call them top tier companies but in reality in the last 10 years they were mid tier with high growth rates that had the best risk to reward profile. A lot of those companies have grown into billion dollar companies or greater and we still think those are fine for conservative investors. That would be like Pan American Silver Corp PAAS on the Nasdaq. I own Pan American. One that’s really not a silver stock that I hold a great deal of personally is Franco Nevada FNV on the TSX. I really like the royalty model they have there is so much upside and so little downside. Its basically a gold royalty company with some oil as well so it’s energy and gold,  I like that one on the top tier. In the mid tier you have First Majestic Silver Corp. FR.TO on the TSX and that one has really moved a great deal. We are very patient with this one, I knew the fundamentals and I knew I was right and not often do I have that kind of conviction. We had that stock at $4 and  it just seemed that it would stay there around the $4 level or lower forever. It took off, it’s moved a great deal, now it’s comes back. If you’re going to get that one at the right price or if I start buying in now and to plan to buy it over the next three months I think that is a very good stock. There are several that fit that model which is a producer with upside potential for more production, more efficiency and also more exploration.

On the junior side, we don’t want to give any of  those out but we have just found a brand a new royalty company run by some of the best people in the industry and this is going back to early days of the Morgan report when it was called the Silver Investor and in those days there was Chap Mercantile which is a little unknown penny stock that turned into Silver Wheaton.  We have had quite a few like that, we have had some of them hiccupped and done poorly and drop off the list I mean no one in this industry is perfect. With Juniors we teach not to buy one stock and don’t put too much into a speculative stock. Sometimes a speculative stock becomes and Silver Wheaton and when that happens on the way up I am not afraid to add more money to it because it’s a different company. If you bought Intel when they were just drawing up chips on the board and hadn’t produced one, that’s a whole different investment to when they become the world’s greatest producer. If you can get them when they’re at the growth curve and they starting to become recognized that’s a far safer investment than when it was in the drawing board stage if you catch my drift.

Michael: What do you look for when you’re trying to identify sort of up and comers?

David: Mostly it’s the people, that’s the number one. This goes back years that Dr. Bill Green who taught Geology at the University of Idaho, told me if you find the right people they will keep working till they find it or get it, and that’s a general statement but it is fairly true. Of course you’ve got to have capitalization, I mean you have the best people in the world if they don’t have any money behind them they are not going to be able to do anything. There are several factors but I say people is absolutely number one if they have done it before chances are they can do it again, not every case but it’s more likely so that’s key especially on the junior side because there is really no analytical model that you can use.

Michael: You’re right this is a sophisticated business and when you’re looking at, but your advice to look at the track record of people I think is very well taken. That’s where one should start and that’s the same way when you are looking for analysts. David Morgan has spent his sort of adult research life looking at the precious metals and the broader economic implications that impact the precious metals and specifically silver of course with the Morgan Report and you can find him at www.silver-investor.com. David your insights are much appreciated.

David: Michael it’s always a pleasure thank you.