After China recently cut exports by 72%, the Middle Kingdom is now hoarding the very rare earth materials we need for high-tech and government products.
China's State Council just issued a national guideline for rare earths — the first of its kind in 11 years — that lifts rare earths to the level of national strategic reserves for the first time in history.
And when the prices of our cell phones, computers, flat-screen TVs, and iPads go through the roof in the very near future, we'll be well aware of just what this means...
Products that depend on these materials would see prices skyrocket, possibly bankrupting the very companies that depend on these sales.
Electronics could start disappearing from shelves. Green technologies would suffer. Strategic and defense weaponry (guided missiles, for example) wouldn't be produced as quickly.
China isn't just stockpiling rare earths out of strengthening dominance this time; they're doing it out of weakness.
I had the opportunity to speak with Elissa Resource President and CEO Paul McKenzie recently in an exclusive interview. He shared his insight on the rare earth situation in China, as well as what it means for the United States — and for the companies that mine this precious family of elements in the near future.
According to McKenzie, China's “supply of the metals is going down. Their mines are not producing as much, so there’s a real shortage here.”
He went on to tell me:
[China was, far and away] the world's biggest supplier of coal. And they were the largest exporter of coal. Now they’re a net importer of coal. And I think the same thing is going to happen with rare earths. Far and away, they’re the biggest rare earth supplier and in a matter of years, they’re going to need to start importing rare earths.
Elissa Resources (ELI.V)
Rare earth and gold company Elissa is rapidly advancing its 100%-owned Thor light and heavy rare earth property in Nevada.
Compared to Molycorp's $5.4 billion market cap, Elissa operates as a $7 million company. But before you pan this off as a waste of time, consider that the company's Thor project, located just 16 miles from Molycorp's chief asset, may have something Molycorp desperately needs: heavy rare earth.
And, we're told, the easy money has not yet been made here.
“I don’t think too many people have been made aware of it yet,” says McKenzie. “We’re differentiated from that very important mine because our project has heavy rare earths associated with it.”
What the CEO told me could send shares of this 40-cent stock to the moon...
The Molycorp mine is strictly a light rare earths mine. We have anywhere from 4% to 10% heavy rare earth associated with our discovery. And that is substantial. That’s significant. There’s no sole heavy rare earth mine in the world; they’re either straight-up light rare earth, or they’re a combination of light and heavy. The value here for investors is to discover heavy rare earth deposits. They’re more valuable than the light.
And that could be the main driver for this up-and-coming stock...
“There’s a lot of interest in companies like Elissa because our project is in the United States. And rare earths are becoming increasingly a vital commodity to our country’s economic stability, as oil is,” McKenzie explains.
“I think the U.S. will bring some production back online but, again, they’re going to need a combination of heavy and light. Molycorp’s mine is going to be online within the next year or two, but again they’re only producing the lights, which is going to leave a gap for heavy rare earth...”
A gap that Elissa may be able to fill.
What Uncle Sam Needs to Do
For years we've been moving backward, allowing China to become to rare earth elements what the Middle East is to oil.
The United States used to be home to one of the top miners of rare earth. But now, due to regulations, the future of our military intelligence, technology, economy, and everyday lifestyle could be compromised if we don't secure a rare earth resource or stock pile.
The government can talk about starting up domestic mining programs again, but that means nothing right now. The U.S. was dumb enough to put itself in a position of dependence on China. But we don't have time to play the blame game...
We need supply — and fast, as the U.S. and China's rare earth trade wars become worse by the day.
Bills going through Congress seek to stockpile rare earths. We need these Bills passed as quickly as possible. As McKenzie points out:
It's becoming more and more strategic element to economic stability. And the U.S. is notorious for planning for worst case scenarios, and they’ve already done this with oil supplies. It would very much so make strategic sense for them to stockpile rare earth metals.
And it's not as if processing rare earths will be a problem for domestic companies.
Molycorp, for example, has “spent hundreds of millions of dollars to refurbish and re-establish a processing facility on their site and they’re 16 miles away from us, which is perfect fit for us. If we have even modest discovery success — or world-class discovery success — we’re a billion dollars ahead of the curve...”
Other Catalysts to Buy Now
Colorado Congressman Mike Coffman recently introduced the Rare Earth Supply-China Technology and Resource Transformation (RESTART) Act of 2011, which would establish “a loan guarantee program for the industry and attempts to speed up the permitting process”, according to reports. You can read more on that bill right here.
And, after popping the $100,000-per-ton mark, rare earth prices are about to explode higher as Chinese producers try to meet stricter environmental regulations by August 1 (or be denied environmental assessment approval for new projects, output expansion, and IPOs, according to the Ministry of Environmental Protection).
Why You Should Own Elissa Resources Today
On May 12, Pure Asset Trader readers received the buy alert on Elissa at 22 cents.
Today, as it trades at 45 cents, readers are up more than 100% in just weeks... And there's no telling how high the stock could run. Buy it. Hold it. And forget about it.
Elissa isn't the only hot stock to keep an eye on...
We're even looking at a rare earth company in Greenland, where Denmark recently relinquished its sovereign hold over Greenland's mineral rights. This report reveals how you can get in on the ground floor of the next big rare earth stock.
Stay Ahead of the Curve,
Ian L. Cooper
Editor, Wealth Daily