TNR Gold and Rodinia Lithium - two of our Top Picks in Lithium space are covered now in recently released research report from RCR.
"We have another hint into the recent M&A activity in Lithium space. Talison deal with Salares Lithium confirms real Chinese appetite for Lithium. Now it is time for Lithium Supply - China already controls 97% of Rare Earths market. Lithium output will be increased fivefold in Chinese Lithium province, but the real news is below from Reuters - it is only half of previously expected output and now Chinese companies are on the shopping spree among lithium developers. Who will be at the boardroom table next - only a few lithium brines plays are left without J/V partners and we are following here two of them: International Lithium and Rodinia Lithium. We expect M&A activity in lithium space to be continued during this summer months."
SOURCE: Resource Capital Research
Sep 13, 2010
Junior and Mid Tier Rare and Minor Metals Companies
DENVER, CO--(Marketwire - September 13, 2010) -
Key Points
Demand for the rare and minor metals (RMM) should increase in the next 4-5 years, which could benefit current and near-term producers, or exploration and development companies with projects that can be fast-tracked.
Strong market and price growth for the RMMs over this period should be driven by increasing intensity of use, for high-tech and energy efficient applications.
Share prices of rare and minor metal companies have increased 42% year on year, outperforming the ASX S&P200 (3%).
Resource Capital Research ("RCR"), an equity research company which focuses on small and mid size resource companies, today published its quarterly research report covering rare and minor metals exploration, development and production companies.
The report covers TSX/V listed companies: Avalon Rare Metals Inc, Rodinia Lithium Inc, TNR Gold Corp; and ASX listed companies: Alkane Exploration Limited, Arafura Resources Limited, Globe Metals & Mining Limited, Greenland Minerals & Energy Limited, Gippsland Limited, Gunson Resources Limited, Galaxy Resources Limited, Icon Resources Limited, King Island Scheelite Limited.
The report includes rare and minor metals price fundamentals covering: lithium, niobium, tantalum, tungsten, rare earth elements, and zircon/zirconium.
RCR also publishes quarterly reviews of the Iron Ore, Uranium, Gold and Copper (out soon) sectors. To access the free summary of the Rare and Minor Metals Report or to purchase the 54 page Subscribers report, go to www.rcresearch.com.au/reports.
The outlook for rare and minor metals
Rising rare and minor metal (RMM) demand and prices over the coming 4-5 years should be met with increased supply from new and existing mineral projects. RMM deposits can take 5+ years to develop as mines, sometimes due to their geochemical complexity, and the challenge of financing projects that are considered to be outside the resources mainstream. This provides an opportunity for companies with relatively low-risk projects, and which are advanced or can be fast-tracked, to gain RMM market share and potentially substantial returns on investment.
Some examples of commodities with a stable to strong outlook for the next several years:
• Lithium: Increasing intensity of use is expected to require additional supply beyond 2014.
• Niobium: Industry forecasts are for FeNb consumption growth of ~15% per annum to 2014.
• Rare earth elements (REE): Forecasts are for 20-30% compound annual growth in prices to 2014. Reported prices up 355% year-on-year.
• Tantalum: A supply shortfall is expected to hand a competitive advantage to companies that provide a long-term supply of ethically produced tantalum.
• Tungsten: Supply shortages are indicated from 2013.
• Zircon/zirconium: A lack of greenfields projects could create supply shortages and boost prices problems in the near to medium term (1-3 yrs).
These forecasts are based on expectations of increasing intensity of use in new or high-tech applications across all manufacturing sectors, and on related concerns about security of supply for manufacturers in view of China's dominance of some metal markets (e.g. ~97% of REE) and its policy of mining restrictions and tariffs (e.g. 20% tariff on ferrotungsten).
Equity performances
Share price performances of 358 exchange-listed companies with one or more RMM projects (in lithium, REE, tungsten, zirconium, niobium and tantalum) have been tabulated. The unweighted average performance of these stocks over 1 month (to September 7) was +13%, compared to 0% for Australia's ASX S&P200 (ASX: XJO). Three-month performance was +19% (XJO 6%) and 12-month was +42% (XJO 3%).
Globally, RMM stocks have on average outperformed the ASX by a significant margin in the past 12 months. Despite this, the average share price is 42% below its 12-month high -- but also 114% above a 12-month low. The best performing stocks in the past one month are those with tantalum projects (+14%), which have benefitted from international efforts to stop illegal tantalite supplies from the Congo (DRC). REE stocks have also lifted (+12%) due to tightening of Chinese export quotas, especially on the light REE. All six groups have outperformed over the quarter; the flattest was Li (3%), for which the price has been comparatively stable.
Analyst's Comment
"The past year has seen a strong recovery in prices for rare and minor metals, which has flowed through to equity markets, especially in recent weeks," says RCR analyst Trent Allen.
"This has been driven by the broader post GFC recovery, and some sector specific factors: for example, China decreasing the export quota for light rare earth elements in 2H10, and US lawmakers passing a Bill to crack down on use of 'blood' tantalum and tungsten supplied from the Congo (DROC).
"The combination of anticipated shortfalls in supply, and increasing demand over the next 4-5 years, has pushed up the price of RMMs and of shares of resources companies that can, or plan to, supply them. Again, the REE are a good example, with reported oxide prices up an average 355% year on year, and 235% in the past 3 months -- leading to an average 16% gain in share prices for companies with one or more REE projects.
All the commodities we've looked at (REE, niobium, tantalum, lithium tungsten and zirconium) have performed strongly in the past year, and demand and supply appear stable, although China dominates and has a strong influence over markets, so some short-term price volatility is expected, especially for the individual rare earth elements."
About Resource Capital Research
Resource Capital Research ("RCR") (www.rcresearch.com.au) was founded in 2004 and is based in Sydney. RCR provides investors with in-depth reports on current investment opportunities in the mining sector both in Australia and globally. The focus is on small and mid cap resource companies, across a variety of sectors including iron ore, uranium, gold, rare and minor metals, and copper. Companies covered range from exploration stage, through development and production. John Wilson the principal of the firm has over ten years' experience analysing mining companies in Sydney and on Wall Street including for major investment banks. Dr Trent Allen, Rare and Minor Metals Analyst, joined RCR in 2006. Trent has extensive experience as a mine geologist, academic and journalist.
The report is available at http://www.rcresearch.net./ The next Rare and Minor Metals Company Review will be of the December Quarter, 2010.
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