70% all companies in the field of rare earths deal with the insolvency

11.03.2013 Institute for Rare earth and metals – Until the middle of last century, the interest in rare earths relatively low. The increasing technologization this changed dramatically in recent decades. Today, the rare-earth elements (SEE) almost all areas of the high-tech industry needs. Even green technologies, such as electric vehicles, Wind power and photovoltaics, rely on rare earths.

Beginning of the 1990s, the U.S. held the largest market share of funding and rare earth metals. Due to rising production volumes at much lower production costs and low environmental- and safety standards and consequently low sales prices, however, soon became China to market leader in the SEE sector. The production from existing mines and the costly development of previously unused resources outside China environment was increasingly unprofitable. China was able to support his- and market share in the sector at present LAKE 96% develop. This puts the Middle Kingdom is a quasi-monopoly on rare earths.

China's political leadership was aware of its strategic market positioning has long been aware of, what the former President Deng Xiaoping already 1992 with his statement, "The Middle East has oil, China has rare earths "for expressing.

The situation in the market of rare earth

Als China in 2010 announcing a serious restriction of the export quota on rare earth elements for the following year, responded the consuming countries outrage. The industry feared existential shortages. Als China in 2011 all protest against its restrictive export policy prevailed, and also export duties on rare earths rose, accumulated in this country, the reports of a real shortage of rare earths in the industry.

The restriction of the export ratio resulted in 2011 to an enormous rise in prices of rare earths. This in turn improved the situation first international producers. The prospect of higher sales revenues supported by the media coverage, attracted investors and let the stock prices worldwide promoter rare earth metals rise significantly.

To participate in the booming market, were new corporations (AGs) founded, where it was also offshoots of companies, 've been successful in mining. IPOs over the capital was generated, to finance the costly development of new mines can.

But the optimistic initial situation was quickly stopped by not einkalkulierte costs and delays, because unlike other commodities, is the reduction of rare earth is many times difficult. Rare earths are not true, as the name suggests, really rare, However, they are often found in relatively low concentrations. Even the Separierungsprozess - ie the separation of the rare earths from rock, other metals, and ultimately the achievement of a high degree of purity of the SEE - proved to be expensive and complex than initially calculated. Other costs relate to the acquisition of necessary licenses and the implementation of new environmental standards in the mining sector. Many mining companies also lack the necessary know-how, that China has acquired in recent decades.

Ultimately not einkalkulierte costs and delays lead to raise additional capital. In times of a generally difficult market conditions due to the financial- and economic crisis had many AGs increase its capital through new issues. Due to the additional issue of shares recorded this a significant loss of value, which extends from the middle 2011 falling sharply in price development applies to play on penny stock level.

China is trying its hand forced by the market to bring the supply shortage in the form of Prod.stopps some mines to regain control and to stabilize prices for rare earths. But given the illegal exports from China, the 1,2 times as high as the legal exports are, This strategy proved to be not very successful.

And future opportunities in the rare earths

Should not stabilize the prices of rare earths and the share prices of the producers in the near future, Some companies might threaten insolvency. For although always speedy production starts are forecast, so are to 2014/2015 expected from ongoing projects shooting no gains.

The development projects are financed almost entirely by borrowing also, extremely vulnerable and dependent on what makes. Relatively well placed, however, companies, previously submitted to the IPO has sufficient capital possessed and achieve apart from the mining of rare earths other income. Diversification is the buzzword. To be prepared in the race for market-dominant positions in the rare earth sector, should be planned for a long time between exploration and production. On average, this lean period seven to ten years.

In our view, are different companies well positioned, both the "ordinary" metals such as iron, Chrome, Lives, Manganese etc. Remove and Rare Earths. By revenues on the one hand, expensive exploration on the other side are cushioned. Furthermore, investors should invest in investing in junior mining companies prefer to go before an IPO and the time until the IPO, with the company as a quick profit by listed companies in hopes to go, who are often forced to selling shares to cover the running costs. The massive sale of treasury shares diluted usually their own course, which eventually leads to a falling rate.

More information at: www.institut-rare-serden.org

This entry was posted in Rare earths General and tagged , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply