TCMR: The share prices of North American-listed REE stocks have gone down so much. How should investors play the potential supply problems in and outside of China?
JH: The sector is really beaten down and forgotten, along with the entire resource market. Investors are losing hope that any of these companies are going to be developed in this sort of economic environment. The rare earth sector will break out of the downtrend soon.
There are very attractive HREE assets, some of which have recently published impressive economic studies and preliminary economic assessments (PEAs). Recently, Lynas Corp. (LYC:ASX) announced positive news from the Malaysian parliament, which recommended that a temporary operating license be granted for its advanced materials plant.
The last time Lynas made an announcement like this, it was a positive development throughout the sector. If Lynas begins producing REEs profitably, it will be a real boost to confidence in the sector.
TCMR: Is the market paying attention to Lynas in Malaysia and to the Molycorp-Neo Materials deal?
JH: Lynas went from about $0.90 to $1.10 and has pulled back since the Malaysian Parliament gave an affirmative recommendation on its LAMP Project.
It's really just beginning to hit the radar that Lynas and Molycorp may soon be producing a lot of LREEs. A lot of investors don't realize that there have been some major developments in the rare earth sector.
It may boost confidence in the sector once investors see that companies are producing LREEs profitably outside of China.
Molycorp Inc. (MCP:NYSE) recently acquired the REE processor Neo Material Technologies (NEM:TSX). Molycorp has mentioned that China's increasing demand for REE materials is predicted to drive production in other countries.
One of the benefits of the Molycorp and Neo Material deal is that they will be able to sell to the Chinese market. The world is still completely relying on China, especially for critical HREEs.
The Molycorp and Lynas deals don't answer the HREE problem. The HREEs are a piece of the puzzle that's still missing, and many investors are overlooking HREE assets, such as Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.A; TASXF:OTCPK; T61:FSE), Quest Rare Minerals Ltd. (QRM:TSX; QRM:NYSE.A), Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX), Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX), Pele Mountain Resources Inc. (GEM:TSX.V) and Matamec Explorations Inc. (MAT:TSX.V; MRHEF:OTCQX).
Look at Matamec. It signed a deal with Toyota Tsusho Group (TYHOF:OTCPK). It has an end user and Toyota coming in and showing confidence in the project, but it's being priced at the same level as it was before the Toyota deal. No credit. Nothing. Matamec has a lot of potential. It shouldn't be trading at the same levels as it was before that deal.
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