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Posts on this website are general "tips" and nothing more than that and should never be used to make an investment or trading decision. All information should be carefully cross-checked against official sources for accuracy. Sparty's posts nearly always relate to companies that he either holds, has held or intends to hold.

Main ForumRecent REO Share Price Falls

  • Hi Sparty, I have read that REO prices have softened of late but the drop in the share prices of ALK, LYC and ARU has been large. The market is dropping but not nearly as fast as these REO shares. Do you know how much the REO prices have fallen and why? I'm struggling to find the info.

    Alite

  • Hi All, An article in the Age may explain the share price drops: excerpts follow:

    “A greater focus on recycling and substitution, particularly by Japanese consumers, has resulted in the tightness of demand easing somewhat for the lighter rare earths,” Berridge said by phone.

    Prices for cerium and lanthanum, the most abundant rare- earth elements, will drop by 50 per cent in 12 months, Christopher Ecclestone, an analyst at Hallgarten & Co. in New York, has forecast. Neodymium and praseodymium, metals used in permanent rare-earth magnets, may fall as much as 15 per cent, he said.

    Some Toyota vehicles will be built with an induction motor, which doesn’t use rare-earth magnets, said John Hanson, a Toyota spokesman in Torrance, California. “Moving from a fixed-magnet motor to an induction motor is a huge savings with regard to rare-earth metals,” Hanson said by phone. (though the article went on to say that there will be a drop in efficiency with the induction motor)

    Rare earths have been pushed lower because of selling by speculators, Michael Gambardella, a New York-based analyst at JPMorgan Chase & Co., said in a report last week. Tsunami- related disruptions in Japan and dumping of unpermitted material in China have undercut prices, while industrial substitution has driven “demand destruction,” said Sam Berridge, a Sydney-based analyst at Royal Bank of Scotland Group Plc.

    To Read More: http://www.theage.com.au/business/markets/rare-earths-set-to-become-less-so-as-users-hunt-alternatives-20110929-1kz85.html#ixzz1ZRC9VcpU

    It seems reasonable to me that a substitution of technologies in the car industry could reduce the demand for REO magnets. But I'll bet that these substitutes are not as good as the REO based products that they are replacing and so the price of REO products will settle at a number that is good for both the market and the suppliers / shareholders. I also think that ALKANE is very much insulated from the reason for price falls as they have a relatively high % of the heavier REOs (the price of which continue to rise) as well as another income stream coming from their Zirconium.

    To my mind the price fall is a buying opportunity with ALK at the front of the list.

    Alite

    Note: I hold Alkane shares

  • Got to agree with your post. However there is quite a lot of info..... But my guess is that China is playing the market. Interesting that LYC is doing so very badly in terms of price. Social media is a potent force! Especially when it is heavily influenced/ funded by a third country. But I'm in Laos and they really need clean air and when I meet Chinese tourists they tell me it is far worse in China. I met an ex-ambassador who told me that massive investment is coming in clean energy. This puts ALK with their zirconium, and Heavy REE in a great long term position. But as I have said many times before GGG will likely become the game changer if they can successfully see of the same forces that are manipulating the Malays. I will be back in Australia in about a week......

  • You state with reference to LYC that , "it is heavily influenced / funded by a third country". Are you saying / guessing that China is providing funds to groups in Malaysia who are protesting against Lynas (to the benefit of China). If so, and if true, there are hundreds of journalists who would give their left pinky finger for such a scoop.

    GGG could be anything. Their resource is huge and getting bigger, has lighter REOs in excess but if they produce at high volumes then there will also be plenty of HREO. I'm not a fan of GGG as I dislike the uranium produced which is used in Uranium based Nuclear power plants. My position is that Nuclear power is OK as long as it cannot produce Plutonium and is a non-critical reactor (i.e it turns itself off when not stimulated).

  • Hi Sparty, The more I look at GGG the more I think that this company will become the worlds next major supplier of both REO and uranium for the next 20+ years. Only the lowest cost / highest grade HREO resources have a chance to find a niche. Your thoughts? It also beggers belief that GGG currently has a market capital of only 43mill. Yes they will need to raise 1.5 billion+ dollars but as I see it this is a tear 1 resource and should be highly in demand. BHP, RIO, and NFC (China Nonferrous Metal) should be champing at the bit to take them over. So why do you think their share price is so low?

  • In a nutshell political uncertainty re Uranium mining is the cause of GGG's low market cap. However I think that this could be pivotal: China gets about 2 per cent of its electricity from nuclear power and aims to raise the level to 6 per cent by 2020. The country is operating 30 plants with a capacity of 26.9GW and another 24 are under construction. They will add another 28.8GW when they come online. Read South China Morning Post's article

  • If you are interested in the heavy REE's particularly the "magnetic" ones have a look at ASX: HAS.

  • Also note that China has increased their production and exports (against China's policy but as they pay China's tax it is OK) has increased. REO prices have 1/2ed and more.

    It seems one should never poke the bear...

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