The rare earth minerals sector surfaced into the mining and commodities news this week amid speculation that China could use its dominance in production to deal the killer blow in its trade war with Donald Trump.
It all stems from a visit by China’s top brass, President Xi and Vice Premier Liu He, to a rare earth minerals mine in Jiangxi province. The move was widely interpreted as a subtle hint that rare earths, which are vital for the manufacture of many high technology products from LEDs and microchips to wind turbines and electric car batteries, could be subject to export tariffs or even a ban.
China has considerable leverage in the sector, as it accounts for around 70% of global output. Myanmar, Australia, and the United States, plus a few other countries which mine only small amounts, account for the rest.
Jeb Handwerger was among the first to warn of the symbolism of the Chinese Premier’s mine visit, writing on The Market Oracle that the country had already caused rare earth minerals to spike once before, when it stockpiled supplies at the start of the decade. He pointed out that a restriction in supply could be a boon for canny investors but would be disastrous for tech giants like Apple and Tesla.
“Investors should be prepared for Chinese retaliation with rare earths which could send prices soaring like it did in the past,” he said. “Remember the rare earth ETF (REMX) that hit a high above $100 back during the last crisis in 2011? Now its trading under $15.”
Fears that rare earth minerals will be dragged into the trade war sharpened later in the week as Global Times editor Hu Xijin, regarded as an influential Communist Party bellwether, tweeted that China is "seriously considering restricting rare earths exports to the US."
That kind of market calamity-in-the-making would normally be expected to give gold prices a fillip but the yellow metal remained mellow - so much so that John LaForge, head of Real Asset Strategy at Wells Fargo, told Kitco news that he no longer regarded gold as a good defensive asset.
“Stocks have been hit - and you see the days when stocks really get hit - and what does gold do? Gold is up $3, it’s up $5, it’s up $7. I think where we are in this gold super cycle, this long cycle with commodity prices, and we’re kind of in the dull period,” he said. He expects gold to stay range-bound at $1,250 to $1,300 an ounce and sees better defensive prospects elsewhere.
Even junior mining legend Rick Rule seemed more inclined to talk up the potential of rare earth metals than common old gold in his latest interview, noting that the volatility of the former presented a potential opportunity. But he pointed out that studies made during the last rare-earth price spike had shown that they are in fact not rare at all, and it was only the low cost of Chinese production that precludes new mines opening elsewhere.
Rule added that “trade wars make everyone poorer” and that in general he saw little investor upside in any escalation. HIs own strategy does not appear to include rare earth minerals as he concentrates on the fallout of mining’s M&A spree and the need for new mines.
“The three things that I’m doing with my money are: mergers and acquisitions strategies; royalty and streaming companies; and generative exploration through prospect generators,” he said.
Among the latter, Kutcho Copper Corp. (TSXV: KC) raised C$2 million through a private placement this week in a financing backed by major shareholders including Wheaton Precious Metals and Capstone Mining.
The Vancouver-based junior miner will spend the proceeds on its Kutcho copper-zinc project in northern British Columbia: it consists of one mining lease and 46 mineral exploration claims covering an area of about 17,060 hectares. The Canadian junior miner’s stock received a boost on the news.
The rare earth minerals sector surfaced into the mining and commodities news this week amid speculation that China could use its dominance in production to deal the killer blow in its trade war with Donald Trump.
It all stems from a visit by China’s top brass, President Xi and Vice Premier Liu He, to a rare earth minerals mine in Jiangxi province. The move was widely interpreted as a subtle hint that rare earths, which are vital for the manufacture of many high technology products from LEDs and microchips to wind turbines and electric car batteries, could be subject to export tariffs or even a ban.
China has considerable leverage in the sector, as it accounts for around 70% of global output. Myanmar, Australia, and the United States, plus a few other countries which mine only small amounts, account for the rest.
Jeb Handwerger was among the first to warn of the symbolism of the Chinese Premier’s mine visit, writing on The Market Oracle that the country had already caused rare earth minerals to spike once before, when it stockpiled supplies at the start of the decade. He pointed out that a restriction in supply could be a boon for canny investors but would be disastrous for tech giants like Apple and Tesla.
“Investors should be prepared for Chinese retaliation with rare earths which could send prices soaring like it did in the past,” he said. “Remember the rare earth ETF (REMX) that hit a high above $100 back during the last crisis in 2011? Now its trading under $15.”
Fears that rare earth minerals will be dragged into the trade war sharpened later in the week as Global Times editor Hu Xijin, regarded as an influential Communist Party bellwether, tweeted that China is "seriously considering restricting rare earths exports to the US."
That kind of market calamity-in-the-making would normally be expected to give gold prices a fillip but the yellow metal remained mellow - so much so that John LaForge, head of Real Asset Strategy at Wells Fargo, told Kitco news that he no longer regarded gold as a good defensive asset.
“Stocks have been hit - and you see the days when stocks really get hit - and what does gold do? Gold is up $3, it’s up $5, it’s up $7. I think where we are in this gold super cycle, this long cycle with commodity prices, and we’re kind of in the dull period,” he said. He expects gold to stay range-bound at $1,250 to $1,300 an ounce and sees better defensive prospects elsewhere.
Even junior mining legend Rick Rule seemed more inclined to talk up the potential of rare earth metals than common old gold in his latest interview, noting that the volatility of the former presented a potential opportunity. But he pointed out that studies made during the last rare-earth price spike had shown that they are in fact not rare at all, and it was only the low cost of Chinese production that precludes new mines opening elsewhere.
Rule added that “trade wars make everyone poorer” and that in general he saw little investor upside in any escalation. HIs own strategy does not appear to include rare earth minerals as he concentrates on the fallout of mining’s M&A spree and the need for new mines.
“The three things that I’m doing with my money are: mergers and acquisitions strategies; royalty and streaming companies; and generative exploration through prospect generators,” he said.
Among the latter, Kutcho Copper Corp. (TSXV: KC) raised C$2 million through a private placement this week in a financing backed by major shareholders including Wheaton Precious Metals and Capstone Mining.
The Vancouver-based junior miner will spend the proceeds on its Kutcho copper-zinc project in northern British Columbia: it consists of one mining lease and 46 mineral exploration claims covering an area of about 17,060 hectares. The Canadian junior miner’s stock received a boost on the news.