Mickey Fulp in Gold ReportDiscussion on REs and many references to Quest in The Gold Report. The following are some selected Quest references. Use this link for the full report.
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MF: The mining and concentrating of the rare earth elements isstraightforward. It's the separating and the processing into useableproducts that is difficult because it requires multi-stage chemicalplants. Because the REEs are so similar in their properties, they arevery difficult to separate into useable pure metals and chemicalcompounds. It's a complicated, iterative process requiring eithersolvent extraction and/or ion exchange to separate them into useableproducts. I recently visited the Silmet operation in Sillamae, Estonia,which was acquired by
Molycorp Inc. (NYSE:MCP)in April. The facility separates the LREEs lanthanum, cerium, neodymiumand praseodymium. It also has the capacity to separate samarium. But,they do not have the ability to separate europium from gadolinium or theHREEs. At this stage, Silmet would have to invest in an ion exchangecircuit to separate europium and gadolinium. But Molycorp's beenseparating and producing europium for 50 years, so there's some synergywith Silmet and they are expanding its capabilities.
Molycorp isthe 800-lb. gorilla on the block. The company owns two of the threeseparation plants outside of China for light rare earths. The third oneis in Kazakhstan and doesn't amount to much. I think an Americas-centriccartel of rare earth companies is forming to create an independentsupply chain outside of China. Junior exploration companies would bewell served to quickly get on board with the major and minor playersinvolved in this group to secure a place where their products can beseparated and processed into usable compounds and metals.
In my opinion this is important for companies like Avalon Rare Metals Inc. (TSX:AVL; NYSE.A:AVL; OTCQX:AVARF), Rare Element Resources Ltd. (TSX:RES; NYSE.A:REE), Quest Rare Minerals Ltd. (TSX.V:QRM; NYSE.A:QRM) and Tasman Metals Ltd. (TSX.V:TSM; OTCPK:TASXF; Fkft:T61),the four companies I consider to be the cream of the crop among juniorexplorers. In my opinion, each must form some kind of a businesscombination, strategic alliance, joint venture or offtake contract inorder to fund the capital expense (capex) to build a mine. Therefore,each needs to find a partner to succeed in the business.
TCMR: In April, you talked about Quest Rare Minerals gettinglisted on the AMEX. However, when it was listed, it didn't get the samestock price jump that Avalon and Rare Elements saw. Were you surprised?
MF:I was very surprised. We haven't seen the 10 times magnitude volume wesaw with Rare Element and Avalon getting an AMEX listing. If you look atthe chart of Quest in 20/20 hindsight, it appears that the marketfactored the listing in before it occurred. It had already happenedtwice. We thought it was going to have a similar run up. It has not. Infact, we've seen about a 30% drop in the entire sector, includingMolycorp.
But looking back to late May of last year we saw theexact same weakness in the high-flying REE stocks. Rare Element, Questand Avalon all traded at less than $2 on or about July 1. They had lost50% of their previous market cap highs during that period. And, thenlook what happened within three months. They were hitting all-time highsagain. There's a cyclicity to the sector. Overall market weakness isbeing exacerbated now by short attacks, massive short attacks on thesecompanies because they're very speculative, and it's especiallyprevalent on the ones with AMEX listings.
We've seen shortattacks over the last few months really knock the best REE companiesdown at times. It would not surprise me to see additional weakness inthe sector through the summer. But I like this group of companies. Ithink that the upside is still high. I personally am not buying them atpresent levels because my cost basis is less. Buying these stocks onweakness is a viable move if you don't currently have a position. Howsmart would you look if you had bought all three of the above plusTasman, which will be the next one to get its AMEX listing, on July 1last year? You would've been laughing all the way to the bank right nowbecause they're all still trading at double or triple or five times whatthey were last July.