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China's Electric Car Market

China in the spotlight at the Frankfurt Motor Show

Written by Brian Hicks
Posted September 16, 2009

Editor's Note: Rare Earth Metals (REEs) are nothing short of crucial to the way we live. In fact without them, some of our most important modern technologies could never exist: rechargeable batteries, electric motors, photo optics, and solar cells, just to name a few.

They are so pivotal to modern circuitry that industry insiders came up with a nickname for REEs: 'technology metals.' And on January 1st, Denmark will relinquish its sovereign hold over Greenland's mineral rights, making Greenland's $273 billion rare earth resources private property. To learn about the single company in control of all of it, read the following new report.

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As you read this, the future of transportation is taking place in a convention hall in Frankfurt, Germany.

It's called the Frankfurt Motor Show. . . and insider reports indicate electric cars are taking over the world like an army of robots, hell-bent on revenge against their flesh masters.

Every company represented at the show is featuring their version of an electric/hybrid automobile. Even high-end brands like Porsche and Ferrari are going electric.

But while SAAB, BMW, and Mercedes size-up each others' electric motor, the Chinese are the ones that are the talk of the show.

The bottom line: China's car market is the Holy Grail.

While the U.S. and European dealers have to create tempting incentive plans to get cars off their lots, Chinese dealerships literally have waiting lists of customers who want to buy cars and are willing to take a spot in the queue.

The potential numbers are mind-boggling.

In China, only 2.9% of the population owns cars. That's only about 38 million cars on the streets of China's cities and villages.

Compare that to the United States, where 238 million vehicles are on the road.

Catch my drift now?

The growth in China is going to be awesome.

According to a Wall Street Journal article on September 9:

China's auto industry continued to post strong growth, with sales of passenger vehicles rising 90% in August.

Passenger-vehicle sales in China rose to 858,300 units in August, up 90% from a year earlier, the China Association of Automobile Manufacturers said in a statement Tuesday. China's overall auto sales rose 82% in August to 1.14 million units.

Mr. Liu said he expects sales of small cars to continue to outperform the industry. . . "Customers right now are becoming younger," he said. They only need and can only afford smaller cars, he said.

As the breakneck pace in sales growth eases, it will help to spur consolidation in China's auto industry, which currently has more than a hundred vehicle manufacturers, Mr. Liu said.

You read that correctly. . . 100 different car manufacturers!

And this brings me now to draw readers' attention to the real opportunity from this electric car bull market: rare earth metals.

Rare earth metals are vital in the clean energy markets of electric batteries for cars, solar panels, wind turbines. . . even weapons!

Metals like neodymium, indium, lithium, dysprosium, and terbium are essential to green energy technologies.

Without these metals, there would be no Toyota Prius.

According to Jack Lifton, a commodities analyst and leading authority on rare metals, "The Prius automobile is the biggest user of rare earths of any object in the world."

How much are we talking?

Lifton says there is 1 kilogram (2.2 lb) of neodymium in the Prius hybrid's electric motor between 10 and 15 kg (22-33 lb) of lanthanum in the car's battery pack. Those figures would likely rise if the car were fitted with a larger battery pack and motor for higher fuel efficiency.

And guess what? China accounts for 97% of global production and about 60% of consumption of rare earth metals.

In a recent article titled "China's Plan to Dominate Rare Earth Metals," Sean Brodrick writes:

China plans to curb its exports of the metals. China has announced that export quotas for the first half of 2009 are being reduced by approximately 34% over the same period last year.

Not surprisingly, Toyota is said to be searching for additional suppliers of these materials outside China.

But it might not help. You see, the Chinese are on a buying binge for rare earth properties.

According to Brodrick. . .

Two Australian companies, Lynas Corp. and Arafura Resources, are planning to open mines in the next couple years that have combined production equal to a quarter of annual global production of rare earth metals.

But then the global financial markets collapsed last year. Both companies lost their financing. Guess who stepped in with new financing?

The Chinese, that's who!

Mining companies wholly owned by the Chinese government showed up with the cash needed to finish construction of both companies' mines and ore processing factories. In exchange, the Chinese companies received 51.7 percent of Lynas and 25 percent of Arafura.

And that's not all. . . Remember when Chinese oil company CNOOC tried to buy U.S.-based Unocal a few years ago? Unocal owns is the Mountain Pass mine, a potentially rich rare earth mine in California.

China's Unocal bid fell through, and Chevron bought the company instead. Who shows up at Chevron's doorstep but the Chinese, cash in hand, asking Chevron to sell them the Mountain Pass mine separately from Unocal.

Instead, Chevron sold the mine to Molycorp Minerals, a private American group, which plans to reopen the mine by 2012.

Rare earth stocks are rallying . . . and will continue to rally for years to come.

My research team will be releasing a report on the investment opportunities in this tight space.

But if you want to play rare earth metals now, you can play my favorite junior mining stock: Argentex (AGXM - OTCBB).

I recommended Argentex nine months ago. . . and the stock has done nothing but go up for my readers.

Argentex has a potentially significant indium resource. . . but this past Monday, the company released its silver estimate that blew away its original estimate.

wd_chart

Argentex's first-ever Pinguino mineral resource estimate yielded 180 million ounces of silver equivalent.

Argentex announced the completion of the first-ever mineral resource estimate for Pinguino, the company's 100%-owned polymetallic property in Argentina's Santa Cruz province.

The mineral resource estimate reports 180 million ounces of silver equivalent in the inferred and indicated categories. Specifically, the inferred resource of 35.4 million tonnes is estimated to contain 141,600,000 ounces of silver equivalent.  The indicated resource of 7.3 million tonnes is estimated to contain an additional 40,150,000 ounces of silver equivalent.

Mineralization at Pinguino remains open in all directions and only 15 of more than 47 veins mapped on the property have been tested by drilling.  There is excellent geological potential for the delineation of additional mineralization, which would be reported and modeled to increase and upgrade the resource estimate.

I had a chance to talk to Ken Hicks (no relation), CEO of Argentex, on Monday. His exact words to me were, "We've just scratched the surface. Less than 10% of our Pinguino property has been worked on. This is huge. . . we have a lot of work to do. . . "

Argentex is going to $2 a share by the start of 2010. Buy it on the dips.

Rock it out,

brian sig

Brian

P.S. Metals essential to green energy technologies are starting to taking off — but they're not the only members of the metal family that are set to skyrocket. Silver is moving to the investment forefront, as a buying frenzy of a little-known silver stock shifts into high gear. This stock could return an instant 33% — and in the next 18-24 months — over 450%! The likes of JPMorgan, Goldman Sachs, and Barclays are sinking millions into this particular silver stock. . . Click here to read more about the greatest silver rush Wall Street's ever seen.

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