This article was originally sent to TickerTrax subscribers on Jan 6, 2011.
TRADING ACTIVITY the first two weeks of January is important for Canada’s small-cap and micro-cap stocks. (Australia, London, Hong Kong and Germany-listed shares, too.) If the stocks do well, it often means we have a relatively safe environment for speculating until early May.
The last few trading days of December were strong but this first week of January is definitely not what we want to see. Hopefully next week is better. It started out with the huge $40 sell-off in gold on Tuesday (January 4th) and was followed by heavy pressure on oil, copper and many other commodities. The drop in gold in particular caught most off guard. Prices had moved up in the last couple weeks of December on low volume so likely this was a primary contributor but it was enough to rattle nerves at a time when we need to see strength.
Right now I am hoping this doesn’t set the tone for Q1. Fundamentals for commodities still look very good and the economic outlook for 2011 is decent. U.S. corporations are sitting on $1 trillion in cash, earnings outlooks are strong, and many expect we’ll see a movement of capital from bonds to equities as investors finally realize the economic world is not crumbling around us. Growth in South America, China and India will continue to fuel demand for commodities.
RARE EARTHS
Last week it was announced that China cut rare earth exports again; the move heightened global concerns that China’s near-monopoly on production would only get worse. The China commerce ministry set a quota of 14,446 tonnes for the first half of 2011, which is much lower than the figure issued for the first half of 2010 which was 22,282 tonnes.
The lower quota tightens an already tight market for rare earths that contain a group of 17 elements crucial for products ranging from iPhones to missiles and hybrid vehicles. China, which produces 97 per cent of rare earths, has reduced exports repeatedly over several years, sending prices higher and prompting a rush of investment in mines outside China.
These quota levels are part of a unified effort to govern the sector that includes better environmental regulations and better mining regulations,” said Niu Jingkao, deputy secretary-general of the Chinese Society for Rare Earths, in one report. He expects prices to rise for 2011 until they hit a level with which China is comfortable.
This news should add some fuel to the junior rare earth sector in 2011. In this space, we already follow Bolero (TSX: V.BRU, Stock Forum $0.47), which will drill a B.C. based rare earth property in January and February.
On December 2nd we did an initial Ticker Trax report on Bolero at $0.49. We will follow this company until both rare earth and gold properties have been drilled. The outcome of those programs will determine coverage in Q2.
www.boleroresources.ca
Bolero has very large land positions next to proven discoveries. The gold properties are in northern B.C. neighbouring an important discovery by Imperial Metals; the REE properties are also in British Colombia.
Rare Earth Metals (TSX: V.RA,Stock Forum $0.40)
www.rareearthmetals.ca
I am not a big fan of the share structure but RA is also worth looking at near $0.40. The company has done extensive drilling this past year and they are more advanced than many other juniors. Capital gains will be dependent upon further positive drill results. If the sector heats up this year, it will generate interest across the board.
The corporate presentation available on the company website: www.rareearthmetals.ca/upload/documents/ra_dec-10.pdf.
These are only two of many REE junior stocks available on the TSX and TSX.V in Canada … plus Thom follows a few of his own. Long story short: the sector provides added diversification and should do well in 2011 as China continues to control supply forcing companies across Europe, Asia, and the United States to seek alternatives.
I own 25,000 shares of BRU and 10,000 RA. – Danny Deadlock
Thom Calandra: Thanks Danny. Finding fairly priced rare earth element prospectors these days is difficult at best. I’m attracted right now to industrial and specialty metals prospectors: tantalum, tellurium, scandium, molybdenum … and copper, iron ore, cobalt, tungsten. My stakes in several such companies are listed in my holdings, available to Stockhouse members for free (belowis link). Leave it said that all of these prospectors are insane investments that depend on many risk factors resolving themselves. The one I follow as a researcher and own, as you know, is Avanti Mining (TSX: V.AVT, Stock Forum), the moly producer at Kitsault in British Columbia.
I said Wednesday in Ticker Trax that I was going to highlight a couple of the ventures that Dr. Quinton Hennigh of Colorado is pursuing: Please see report. The doctor-geologist is, as reported, advising a number of ventures on several continents and can take credit – but rarely does – for two recent successes: Evolving Gold (TSX: T.EVG, Stock Forum) in Wyoming and Nevada and Gold Canyon Resources (TSX: V.GCU, Stock Forum) in Ontario with its seemingly monstrous alkaline intrusion of a property. In the report, I mentioned the Interra transaction that will turn the Rwanda prospector into Simba Gold (TSX: V.ITA.P, Stock Forum). I did not mention Bulgarian and Croatian gold prospected Euromax Resources (TSX: V.EOX, Stock Forum), whose shares I own and which I will not be following as a researcher; and Galliard Resources (CNQ: C.GRS, Stock Forum), a Western Australia gold prospector. I leave it there … for now. – Thom Calandra
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Ticker Trax™ is published by Stockhouse Publishing Ltd. Ticker Trax is an information service for subscribers and neither Stockhouse nor Thom Calandra nor Danny Deadlock is a broker or an investment advisor. None of the information contained therein constitutes a recommendation by Mr. Calandra or Mr. Deadlock or Stockhouse that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Ticker Trax does not purport to tell or suggest the investment securities subscribers or readers should buy or sell for themselves. Subscribers and readers of Ticker Trax should conduct their own research and due diligence and obtain professional advice before making any investment decisions. Ticker Trax will not be liable for any loss or damage caused by a reader’s reliance on information obtained in the reports. Subscribers and readers are solely responsible for their own investment decisions. Opinions expressed in Ticker Trax are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in Ticker Trax should be independently verified. The editor and publisher are not responsible for errors or omissions or responsible for keeping information up to date or for correcting any past information. Ticker Trax and Thom Calandra and Danny Deadlock do not receive from any companies that may be mentioned in Ticker Trax. Some of those companies are advertisers or clients of Stockhouse, the publisher. Xtra-Gold Resources was at one time a preferred client of Stockhouse for investment relations, marketing and other commercial but not editorial services, which are never guaranteed. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed in Ticker Trax. PLEASE DO NOT EMAIL SEEKING PERSONALIZED INVESTMENT ADVICE. Copyright 2010 all rights reserved.