Pundits with Pull
All the factors have to be in place to make a bull market in any commodity but it takes a pundit with pull to get them roaring.
John Kaiser of The Bottom Fishing Report was probably the earliest supporter of the Rare Earths market. But he's not a pundit with pull. I even wrote about a couple of them as early as 2007. I'm not a pundit with pull either and I was a couple of years early. Avalon, one of the best REE companies, was $2.10 then and was $.72 in late May of this year.
But Jim Dines is a pundit with pull and when he touted REE in May of this year, every junior with any claim to having REE shot up. Avalon tripled in a couple of months. (Back to where it was when I wrote it up. Sigh!)
Jim Dines is a market mover. Like Richard Russell, he's been around since Christ was a Corporal. He was the original Internet-Bug (sort-of) and his subscribers made millions; he was the original uranium bug (sort-of) and his subscribers made millions. Now he's the original REE-Bug (sort-of) and again his subscribers have made millions.
It takes a pundit with pull to jump-start an industry. I'm hesitant to use the term Guru; most of the self-elected Gurus I know are frauds. Remember back in 2001 when the WORLD'S LEADING SILVER GURU said that according to his figures, the world was going to completely run out of silver by November of 2001.
Well, he sort-of picked the lowest price for silver in 5000 years. I called the bottom within a week, he said silver should be $50-$100 an ounce. That's just before he said silver was going to rocket if we got into a war because it IS THE MOST CRITICAL WAR ELEMENT. Yawn!! We've got two wars going on and silver didn't go up as much as copper or zinc or lead or nickel or a dozen of other commodities. Face it; until we go back to a gold standard, silver is going to trade like a commodity.
Unlike uranium and internet stocks, even gold and silver shares, companies with a real presence in the Rare Elements or Rare Metals markets, can be named on about two hands. It's a tiny market and a recommendation by someone of Dines' stature is enough to get them roaring.
I visited such a company a couple of weeks ago with a compelling story. It's not a REE play; technically tantalum and niobium are not REE, but rare metals. The company is called Commerce Resources (CCE-V)
CCE's primary project is called the Blue River property located in eastern British Columbia. It's 1,000 square km. 100% owned by Commerce and is subject to no royalties of any kind.
Tantalum is a rare element that plays a large part in our lives. Without it we could have no electronics but few of us (including me) have any idea of what it does. Tantalum is used for capacitors; it has the highest capacitance known to science. That is the ability to hold and instantly release electrical charges.
Unlike the rest of the REE materials, tantalum is not controlled by China. The Wodgina mine in Western Australia owned by Resource Capital Funds of Denver claims to provide 30-52% of the tantalum produced today. It's a controlled market with little transparent pricing information.
2007 consumption of tantalum was 6 million pounds; experts predict a 5% compounded annual growth rate. 2008 prices were about $60 per pound in concentrate form and $140 per pound for tantalum oxide.
Where the market gets interesting is on the supply side. The US Defense Logistics Agency depleted its stockpile for tantalum after being the 2nd largest ore seller after Resource Capital from 2001-2007. There is tantalum coming from the DRC, Rwanda and Uganda that came under a scathing UN report saying the material (coltan) used as a source for tantalum was funding civil wars in central Africa. As a result the UN has forbidden trade in coltan under the Kimberly Process. China ignores the restriction and is able to buy tantalum for about $30 a pound.
In addition, Resource Capital is demanding a 100% increase in the price for tantalum concentrate before reopening Wodgina. In addition, the Cabot Corporation, a major supplier of the final material, has closed the Bernic Lake mine in Manitoba, and Noventa Ltd, a producer with a mine in Mozambique, has shut their mine and is seeking $60 million for development before reopening their facility.
It's a good time to have a tantalum resource and be close to production as Commerce is. But tantalum is not the only economic part to their carbonatite host rock. It also contains valuable niobium.
Niobium is more of a transparent market and current prices for niobium run about $18 per pound. Commerce will be releasing an updated 43-101 resource based on last year's 80-hole drill program shortly but already has a indicated resource of 14.6 million tonne of 190 g/t Ta2O5 with 1,300 g/t Nb2O5 and a 19.8 million tonne inferred resource of 188 g/t Ta2O5 with 1,612 g/t Nb2O5.
Niobium is used as an alloy with steel. Standard steel has a PSI capacity of 40,000. Adding 2% niobium increased the PSI to 120,000.
Commerce does have an early stage exploration program for REE, tantalum and niobium in Quebec at their Eldor project. They have released interesting drill results from their 2008 drill program. Quebec, of course, has an excellent program for supporting junior exploration companies and rebates them 50% of their exploration expenses.
Commerce is well cashed up, has dedicated and professional management and seems to be in the right place at the right time with near-term production capability for tantalum.
Commerce is an advertiser and as such we are biased. I would like to remind readers that they are responsible for their own business decisions and we encourage you to contact Commerce for more information.
Commerce Resources Corp