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Rare Earth Metals Bears and Bulls: Anthony Alfidi
Source: Zig Lambo of The Critical Metals Report (12/20/11)
http://www.theaureport.com/pub/na/12052
Shrinking Chinese export quotas and market sentiment have made for unpredictable prices for rare earth elements, but the real opportunity lies with mining stocks. In this exclusive interview with The Critical Metals Report, Anthony Alfidi gives a rundown of his due diligence checklist and shares some junior companies poised for success in this exciting, yet challenging sector.
The Critical Metals Report: In your Alfidi Capital investment research blog, you talked about the wild ride rare earth element (REE) prices had in 2010, as well their the general drop this year. What are you predicting for 2012?
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Anthony Alfidi: I believe rare earth elements prices will continue to fall. They had a run-up until this summer, primarily based on Chinese export restrictions and the enthusiasm that some speculators had for the sector. But those conditions are both absent now. I believe that economic fundamentals are weakening around the world and the resulting credit crunch will hurt trade, finance and manufacturing. Demand for rare earth elements is derived from demand for finished goods. Therefore, it's very much dependent on the overall health of the manufacturing sector. I expect prices for rare earth elements to fall further in 2012.
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TCMR: China is both enforcing export quotas and moving to transition from REE producer to REE importer. How will this affect the market, and how much credence to you give to China's policy goals in this sector?
AA: I believe China will not be able to enforce additional export quotas to support rare earth prices. The coming global market slowdown will tie China's hands policy-wise. The country needs to keep exports up because it still has a primarily export-driven growth policy. Many analysts were predicting stronger economic growth up until late this summer, when China announced its most recent export quota targets.
TCMR: So you expect the sector to be based on free-market, supply-and-demand principles?
AA: Yes, absolutely. And, my outlook reflects weakness in the global economy, which is beyond Chinese influence.
TCMR: Some rare earths are much rarer and have significant market demand. Do you expect better performance in 2012 for these metals, and which REEs are at the top of your list?
AA: If I had to pick one, it would be dysprosium, one of the heavy rare earth elements. Demand for dysprosium will remain fairly healthy as long as the market for wind turbines remains healthy and is supported by government subsidies and stimulus spending.
TCMR: How is dysprosium used in wind turbines?
AA: It's used in the generator magnets and, when combined with neodymium, it helps neodymium retain its magnetism at high temperatures.
TCMR: You spoke at the Hard Assets Rare Earth Investment Summit in San Francisco on November 29th along with John Thomas, Jeb Handwerger and Mickey Fulp. Was there a consensus opinion for industry prospects?
