Kaiser Update: "hold"Editor John Kaisernotes some interesting developments in the rare-earth sector. Duringthe past couple of weeks several Japanese companies have developedrelationships with Canadian rare-earth-focused companies, signallingthat the concern about long-term supply of the so-called "rare metals"is reaching critical mass where it counts.
Mr.Kaiser sees this development as significant because it may "neutralizethe hammer that has been hovering over rare-earth deposits outside ofChina during the past two decades, namely the ability of China to usepredatory pricing to undermine standalone rare-earth mines outside ofChina."
If theend-users become upstream funding partners, then the concern aboutlong-term project economics based on short-term prices diminishes,enabling "strategic logic" to trump "economic logic."
One winner may be companies like Avalon Rare Metals Inc. (TSX-AVL,$2.15). Mr. Kaiser confirms his hold recommendation and adds that hisoriginal value buy recommendation made at $1.77 in Nov. 2007 is finallyin the money again.
Avalonis a junior mineral exploration and development company with a focus onthe rare metals and minerals that are in increasing demand for hightechnology and environmentally-beneficial applications. These includelithium, tantalum, indium, gallium and other rare-earth elements.
Lastmonth Avalon reported that preliminary metallurgical tests indicate 80per cent of the rare-earth-bearing minerals from a samplerepresentative of the Basal Zone at Thor Lake can be recovered throughflotation methods into a concentrate which can be hydrometallurgically"cracked" to get the rare-earth elements into solution.
Avalonfavors the sulphuric acid processing route because it is cheaper thanhydrochloric acid and Thor Lake is close to northern Alberta wheresulphur is an abundant byproduct from oil and gas production.