WSJ reports pros are shorting rare Earth (REEs) stocks

By BRENDAN CONWAY And TATYANA SHUMSKY, Wall Street Journal (27jun11)

The rare-earth minerals sector is drawing near-record short interest as bearish investors bet against its previously highflying stocks.

The industry, whose minerals are used to help power items as varied as vacuum cleaners and smartphones, had been a darling of the stock market over the past year. Investors snapped up shares of the North American trio of Molycorp Inc., Avalon Rare Metals Inc., and Rare Element Resources Ltd. as rare-earth minerals were viewed as short in supply, likely to be hit by Chinese export curbs and all but certain to enjoy steady future demand by a broad range of tech customers.

That all came to an end in recent months after a confluence of events sideswiped the industry, causing short sellers to swell. Investors who want to short shares borrow the stock and then sell it, betting that the price of the shares will fall and that they can buy them back at a lower price, for return to the lender.

Shares of rare-earth mineral companies have been punished amid doubts that the Chinese supply crunch—the country now accounts for 95% of world output—is as bad as surging prices imply. Last week's share sales by executives at North American industry leader Molycorp may also be weighing on sentiment.

"Short interest in the three quoted rare-earth miners outside of China has continued to build since April and stands just off record highs," said Will Duff Gordon, research director for Data Explorers. Despite a recent share-price correction in the three stocks, "it seems that short sellers still believe them to be overvalued."


Molycorp, Avalon and Rare Element Resources all targeted

These non-Chinese rare-mineral stocks have seen share prices fall between 33% and 42% from their highs in the early part of this year. The proportion of Molycorp shares on loan, a proxy for bearish short interest, hit a high of 11.5% on June 15 and has since hovered slightly below that mark, according to Data Explorers. Avalon and Rare Element have also seen more bearish-looking short activity in recent months.

"The peaks of all three of these stocks were a good 40% above where they are now, so some froth has been blown off the beer," said Christopher Ecclestone, mining strategist at Hallgarten & Co.

The "rare earth" name is something of a misnomer. The 17 metals are found in deposits all around the globe and aren't limited to China.

The range of uses is wide. Certain rare-earth elements, like yttrium, have been used to make specialty steel stronger and more durable over the years, but the industry blossomed with the rise of certain high-tech products over the past decade.

Companies like Dyson Appliances Ltd. rely on neodymium magnets to create the powerful suction vortex in their vacuum cleaners. Apple Inc. and Blackberry maker Research In Motion Ltd. use terbium to make their phones smaller, lighter and faster.

Other countries largely dismantled their mining operations as China undercut competitors and came to dominate processing over the years, according to market participants. The country is in the position of restricting supply to some degree, but recent price gains mean that extracting the metals elsewhere is once again profitable.

Outsiders are only now beginning to rebuild that capability. Mr. Ecclestone said the two companies besides Molycorp "don't have a ghost's chance of production in the next two years, maybe more."


Insider Sales also affecting downward pressure

Some of Molycorp's recent declines may be linked to large insider share sales conducted over the past month. Chief Executive Mark Smith reported a sale of nearly 175,000 shares last week, or about 16% of the executive's holdings as of May.

A Molycorp spokesman said that the short interest may not be driven by sentiment, and may instead be the result of complex arbitrage trades. He added that Mr. Smith's sales were "prudent personal financial planning" and said the "vast, vast majority of [Mr. Smith's] personal net worth is tied up in the single stock."

He added that the executive's interests "remain completely aligned with shareholders" and his financial success "still depends almost completely on the success of the company."

The bearish action comes as some Wall Street analysts have grown more positive on the stocks, largely to reflect the jump in prices. J.P. Morgan Chase & Co. stock analysts led by Michael F. Gambardella raised their Molycorp target price recently to $105 from $87, in part "to reflect the continued rise in rare-earth prices."

But even some bullish analysts are voicing doubts that the surge in prices will last. Dahlman Rose & Co. analysts Anthony Young and Anthony Rizzuto said this week that the underlying metals have already priced in tighter Chinese quotas, adding that they are "uncertain current levels are sustainable."

The analysts have a "buy" rating on the stock, though they reduced their price target, to $120 from $125.

— Chuin-Wei Yap also contributed to this article.

Rare Earth Metals Stocks Primer; Sources, Uses, Companies

Rare Earth Elements (REEs) are often used in key components of emerging clean energy technologies, so the Green Energy Stocks Investing Network will attempt to provide some basic information and links to rare earth metals mining stocks, rare earth elements research and applied technologies, and generally cover the sector from both a social and investment point of view.

If our goal is to transform this planet from a dinosaur-flesh fueled quagmire into a sustainable, infinite energy powered living machine, then the discovery, careful mining, and delicate processing of REEs must be developed in Canada, the USA, australia etc, as the existing 95-97% reliance on exports from China is neither healthy nor efficient. Rare Earth Elements will continue to be key components of new technology developed and marketed over the coming years and decades, so the sources and distributors need t become far more diversified.

Rare Earth Elements are referred to in a variety of ways that are abbreviated as follows:

RE = rare earth
REM = rare earth metals
REE = rare earth elements
REO = rare earth oxides
LREE = light rare earth elements (La-Sm)
HREE = heavy rare earth elements (Eu-Lu)

Rare Earth Element deposits tend to occur in two ways:

Light rare earth elements (‘LREE’), which include lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), and samarium (Sm)

Heavy rare earth elements (‘HREE’), which are less common and more value, include europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb) and lutetium (Lu)


Rare Earth Elements (REEs) are utilized in hybrid cars, renewable energy such as windpower, and in many types of modern electronics, such as cellphones. Examples of Rare Earth Elements in demand include:


Cerium - A major technological application for Cerium(III) oxide is a catalytic converter for the reduction of CO emissions in the exhaust gases from motor vehicles. In particular, cerium oxide is added into Diesel fuels. Another important use of the cerium oxide is a hydrocarbon catalyst in self cleaning ovens, incorporated into oven walls and as a petroleum cracking catalyst in petroleum refining. 

Cerium(IV) oxide is considered one of the most efficient agents for precision polishing of optical components. Cerium compounds are also used in the manufacture of glass, both as a component and as a decolorizer. For example, cerium(IV) oxide in combination with titanium(IV) oxide gives a golden yellow color to glass; it also allows for selective absorption of ultraviolet light in glass. Cerium oxide has high refractive index and is added to enamel to make it more opaque.

Cerium oxides, and other cerium compounds, go into catalytic converters and larger-scale equipment to reduce the sulfur oxide emissions. Cerium is a diesel fuel additive for micro-filtration of pollutants, and promotes more complete fuel combustion for more energy efficiency.


Dyprosium – The cost of this metal has risen from under $7 a pound in 2006 to over $130 per pound in 2011! Dysprosium is used, in conjunction with vanadium and other elements, in making laser materials. Because of dysprosium's high thermal neutron absorption cross-section, dysprosium oxide-nickel cermets are used in neutron-absorbing control rods in nuclear reactors. Dysprosium-cadmium chalcogenides are sources of infrared radiation which is useful for studying chemical reactions. Because dysprosium and its compounds are highly susceptible to magnetization, they are employed in various data storage applications, such as in hard disks.


Erbium - A silvery-white solid metal when artificially isolated, natural erbium is always found in chemical combination with other elements on Earth. As such, it is a rare earth element which is associated with several other rare elements in the mineral gadolinite from Ytterby in Sweden.

It is commonly used as a photographic filter, and because of its resilience it is useful as a metallurgical additive. Erbium-doped optical silica-glass fibers are the active element in erbium-doped fiber amplifiers (EDFAs), which are widely used in optical communications.[12] The same fibers can be used to create fiber lasers. 

Erbium is also used in a variety of medical applications including laser surgery.


Europium - Europium is not found in nature as a free element, and has no known biological role. It is a by-product of nuclear fission, and is used in television sets, lasers, fluorescent lamps and in medical tests for Down's Syndrome and other genetic illnesses.

Europium's use in fluorescent lighting is significant, as it can reduce power usage by 75% relative to traditional incandescent lighting. In the medical field, europium is used to tag complex biochemical agents, helping to trace these materials during tissue research.


Gadolinium - Used in Rare-earth magnets, high refractive index glass or garnets, lasers, x-ray tubes, computer memories, neutron capture, as MRI contrast agent, and as NMR relaxation agent.


Lanthanum - Generally found in the mineral bastnasite, it is extracted through a method known as solvent extraction. Lanthanum is a strategically important REE due to its activity in catalysts that are critical in petroleum refining. Lanthanum additives, called "cracking-agents", have been estimated to increase refinery yield by as much as 10%, while reducing overall refinery energy consumption.


Lutetium - Named for Lutetia, the ancient city which later became Paris, Lutetium is used in PET Scan detectors, and high refractive index glass.


Neodymium – Used for magnets in hybrid cars including Prius, Insight, LEAF, Focus, pretty much EVERY hybrid car model available. Also used in the Dyson Vacuum's magnets.

Neodymium is a critical component of strong permanent magnets. Cell phones, portable CD players, computers and most modern sound systems would not exist in their current form without using neodymium magnets. Neodymium-Iron- Boron (NdFeB) permanent magnets are essential for miniaturizing a variety of technologies. These magnets maximize the power/cost ratio, and are used in a large variety of motors and mechanical systems.


Praseodymium - This REE comprises only 4% of the lanthanide content of bastnasite, but is used as a common coloring pigment. Along with neodymium, praseodymium is used to filter certain wavelengths of light. So praseodymium finds specific uses in photographic filters, airport signal lenses, welder's glasses, as well as broad uses in ceramic tile and glass (usually yellow). When used in an alloy, praseodymium is a component of permanent magnet systems designed for small motors. Praseodymium also has applications in internal combustion engines, as a catalyst for pollution control.

Samarium - Though classified as a rare earth element, samarium is the 40th most abundant element in the Earth's crust and is more common than such metals as tin. Samarium occurs with concentration up to 2.8% in several minerals including cerite, gadolinite, samarskite, monazite and bastnäsite, the last two being the most common commercial sources of the element. These minerals are mostly found in China, the USA, Brazil, India, Sri Lanka and Australia; China is by far the world leader in samarium mining and production.

One of the most important applications of samarium is in samarium-cobalt magnets, which have a nominal composition of SmCo5 or Sm2Co17. They have high permanent magnetization, which is about 10,000 times that of iron and is second only to that of neodymium magnets. However, samarium-based magnets have higher resistance to demagnetization, as they are stable to temperatures above 700 °C (cf. 300–400 °C for neodymium magnets). These magnets are found in small motors, headphones, high-end magnetic pickups for guitars and related musical instruments.[8] For example, they are used in the motors of a solar-powered electric aircraft Solar Challenger and in the Samarium Cobalt Noiseless electric guitar and bass pickups.

Another important application of samarium and its compounds is as catalyst and chemical reagent. Samarium catalysts assist decomposition of plastics, dechlorination of pollutants such as polychlorinated biphenyls (PCBs), as well as the dehydration and dehydrogenation of ethanol.[9] Samarium(III) triflate (Sm(OTf)3, that is Sm(CF3SO3)3) is one of the most efficient Lewis acid catalysts for a halogen-promoted Friedel–Crafts reaction with alkenes.[66] Samarium(II) iodide is a very common reducing and coupling agent in organic synthesis, for example in the desulfonylation reactions; annulation; Danishefsky, Kuwajima, Mukaiyama and Holton Taxol total syntheses;strychnine total synthesis; Barbier reaction and other reductions with samarium(II) iodide.



Yttrium - Rare in bastnasite, it is usually recovered from even more obscure minerals and ores. Still, almost every vehicle on the road contains yttriumbased materials that improve the fuel efficiency of the engine. Another important use of yttrium is in microwave communication devices. Yttrium- Iron-Garnets (YIG) are used as resonators in frequency meters, magnetic field measurement devices, tunable transistors and Gunn oscillators. Yttrium goes into laser crystals specific to spectral characteristics for high-performance communication systems.

Yttrium (Y) is most commonly found in association with HREE deposits.




Mining company Lynas Corp. (ASX: LYC) is a producer of rare earth metals that has seen its stock triple over the past year.


Rare Earth Minerals stocks, investing in Rare Earth Elements


Here is a list of publicly-traded Rare Earth Elements stocks:

Alkane Resource Ltd. (ASX:ALK, PK:ALKEF)

Arafura Resources Ltd. (ASX:ARU, PK:ARAFF)

Avalon Rare Metals Inc.(TSX:AVL, AMEX:AVL)

Bolero Resources (TSXV: BRU)

Canadian International Minerals Inc (CVE:CIN)

Commerce Resources Corp. (TSXV:CCE)

Cricket Resources Inc. (TSXV:CKV)

Frontier Rare Earths Ltd. (TSX:FRO)

Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF)

Greenland Minerals and Energy Ltd. (ASX:GGG, PK:GDLNF)

Hudson Resources Ltd. (TSX.V:HUD, OTCQX:HUDRF)

IBC Advanced Alloys (TSXV:IB)

International Montorro Resources (TSXV: IMT)

Kirrin Resources Inc. (TSX VENTURE:KYM)

Lomiko Metals Inc. (TSX-V:LMR)

Lynas Corporation Limited (ASX:LYC)

Matamec Explorations Inc. (TSX.V:MAT, PK:MTCEF)

Medallion Resources Ltd (TSX-V: MDL)

Molycorp Inc (NYSE:MCP)

Navigator Resources Ltd. (ASX:NAV)

Pele Mountain Resources (TSX:GEM)

Quantum Rare Earth Developments (TSX.V:QRE)

Quest Minerals(QRM.V)

Rare Element Resources (TSX-V:RES)

Stans Energy Corp. (TSX: V.RUU)

Tasman Metals (TSX: TSM.V)



As of January 2011, here is a list of 17 Rare Earth Elements mining projects (TMR Advanced Rare-Earths Project Index), and the rare earth minerals mining companies that are behind these ventures (list courtesy of Resource Investor – News That Trades)

Bear Lodge (Bull Hill Zone) – Wyoming, USA : Rare Element Resources Ltd. (TSX.V:RES, AMEX:REE)

Cummins Range – Western Australia, Australia : Navigator Resources Ltd. (ASX:NAV)

Dubbo – New South Wales, Australia – Alkane Resource Ltd. (ASX:ALK, PK:ALKEF)

Hoidas Lake – Saskatchewan, Canada : Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF)

Kangankunde – Balaka, Malawi : Lynas Corporation Ltd. (ASX:LYC, PK:LYSCF)

Kutessay II – Chui, Kyrgyzstan : Stans Energy Corp. (TSX.V:RUU)

Kvanefjeld – Kujalleq, Greenland : Greenland Minerals and Energy Ltd. (ASX:GGG, PK:GDLNF)

Mount Weld – Western Australia, Australia : Lynas Corporation Ltd. (ASX:LYC. PK:LYSCF)

Mountain Pass – California, USA : Molycorp Inc. (NYSE:MCP)

Nechalacho (Thor Lake Basal Zone) – Northwest Territories, Canada : Avalon Rare Metals Inc.(TSX:AVL, AMEX:AVL)

Nolans Bore – Northern Territory, Australia : Arafura Resources Ltd. (ASX:ARU, PK:ARAFF)

Norra Karr – Småland, Sweden : Tasman Metals Ltd. (TSX.V:TSM, PK:TASXF, F:T61)

Sarfartoq (ST1 Zone) – Qaasuitsup, Greenland : Hudson Resources Ltd. (TSX.V:HUD, OTCQX:HUDRF)

Steenkampskraal – Western Cape, South Africa : Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF) & Rare Earth Extraction Co. Ltd.

Strange Lake (B Zone) – Quebec, Canada : Quest Rare Minerals Ltd. (TSX.V:QRM)

Zandkopsdrift – Northern Cape, South Africa : Frontier Rare Earths Ltd. (TSX:FRO)

Zeus (Kipawa) – Quebec, Canada : Matamec Explorations Inc. (TSX.V:MAT, PK:MTCEF)



Member companies of the Bloomberg Rare Earth Mineral Resources Index and their respective weightings:

Company Ticker Symbols Weighting (%)

Molycorp Inc. NYSE:MCP 16.4

Lynas Corporation Ltd. ASX:LYC, PK:LYSCF 15.0

Avalon Rare Metals Inc. TSX:AVL, AMEX:AVL 11.4

Rare Element Resources Ltd. TSX.V:RES, AMEX:REE 11.2

Arafura Resources Ltd. ASX:ARU, PK:ARAFF 10.0

Greenland Minerals and Energy Ltd. ASX:GGG, PK:GDLNF 6.7

Quest Rare Minerals Ltd. TSX.V:QRM, PK:QSURD 6.3

Frontier Rare Earths Ltd. TSX:FRO 5.9

Alkane Resources Ltd. ASX:ALK, PK:ALKEF 5.0

Tasman Metals Ltd. TSX.V:TSM, PK:TASXF, F:T61 4.6

Great Western Minerals Group Ltd. TSX.V:GWG, OTCBB:GWMGF 4.2

Navigator Resources Limited ASX:NAV 2.1

Matamec Explorations Inc. TSX.V:MAT, PK:MTCEF 1.2



Here is a Rare Earth Elements (REE) Map of United Sates:



Here are some US States that contain rare earth metals deposits:

The map shows locations in the United State of rare earth deposits. (source: USGS.gov) Most have had limited testing.

Note: Thorium, while not a rare earth element, often occurs together with rare earths.

A breakdown of the rare earth metals or possible rare earth metals by location is as follows:

Rare Earth Elements deposits in USA:

Alaska (Bokan Mountain) – Yttrium

Alaska (Salmon Bay) – Thorium

California (Mountain Pass) – Rare earth oxides

California (Music Valley Area) – Yttrium

Colorado (Iron Hill Carbonatite Complex) – Carbonatites, which may contain some rare earth elements.

Colorado (Wet Mountains Area) – Thorium Oxide

Idaho (Diamond Creek) – Ree Oxide and Thorium

Idaho (Hall Mountain) – Thorium

Idaho (Lemhi Pass District/Idaho-Montana) – Thorium (largest concentration in the United States)

Illinois (Hicks Dome) – Rare Earth metals include: Thorium, Yttrium, Cerium, Neodymium, and Dysprosium.

Missouri (Pea Ridge) – Rare earth elements oxides

New Mexico (Capitan Mountains, Red Hills, Gold Hill area & White Signal district, Lemitar & Chupadera mountains, Petaca district) – Thorium

New Mexico (El Porvenir District) – Samples of quartzite contain: Thorium, Lanthanum, & Yttrium.

New Mexico (Gallinas Mountains) – Rare earths oxides and Cerium oxide.

New Mexico (Laughlin Peak) – Yttrium (alongside Thorium) and Cerium.

New Mexico (Wind Mountain/Cornudas Mountains) – Lanthanum, Neodymium, and Yttrium.

New York (Mineville Iron District) – Rare earths oxides from Apatite content.

Wyoming (Bear Lodge Mountains) – REE oxides.

Some other general areas in the US with possible rare earth metals resources:

SE United States – Phosphorite deposits from North Carolina to Florida along the Atlantic Coastal Plain. There is no estimate as of yet for the potential rare earth elements in phosphate deposits. Some analysis has indicated Yttrium and Lanthanum are present.

Placer Deposits

Idaho (Monazite districts in Long Valley, Bear Valley, Boise Basin, Burgdorf-Warren area, & Elk City-Newsome area) – Analyses indicate 63% REE oxides from the Monazites here.

North & South Carolina (Piedmont region) – Rare earth oxides/Thorium

Florida & Georgia (Beach placer deposits) – Rare earth elements oxides/Thorium, hosted in Monazite.





Many Happy Returns in 2011!


(Note of Caution: Investing in individual equity securities is for high risk investors, and junior mining stocks have added speculative risk on top of that. Medium risk investors should seeking exposure to the industry may want to research and invest in resource funds with a significant Rare Earth Elements component, and even then as part of a widely diversified portfolio)



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Sources, wikipedia, dailyreckoning.com.au, windpowerstockstowatch.blogspot.com, Google Finance, Yahoo finance, Bloomberg, StcokWatch