Rare Earth Metals-Not Your Father's Mining Biz: Byron King

Byron King: The short answer is yes. In this market, anything is possible. In 2011 we saw highs toward the beginning of the year because there was a lot of enthusiasm for the technology metals space. We experienced lows towards the end of 2011 because there was a general market selloff. It didn't matter if you were stock-picking. The falling tide sucked everything down.

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Looking ahead into 2012, the good plays are going to see brand-new highs. But along with that good news for a select number of plays, we'll likely see a shakeout of companies that haven't put their business plans firmly on the rails.

TCMR: There was a time when you could plug in a rare earth land package into a shell company, change the name to something that included the words "rare earths," conduct an initial public offering and watch the share price climb. Those days seem to be over. It's about survival right now. Is this just the natural evolution of this subsector, or is it dying?

BK: The non-Chinese rare earth sector is not dying. In fact, the non-Chinese rare earth sector is established, and now it needs to survive. It needs to grow. It needs to prosper. The world cannot afford for the non-Chinese rare earth sector not to make it.

The rare earth space is at the point of separating out the stock promoters from the company builders and serious managers. The broad economy, and of course the stock market, needs company builders with strategic vision.

Rare earth miners are distinct from gold miners, who don't really care what ultimately happens to the gold they produce. That is, if you mine gold, it could wind up in a gold bar, a gold coin or a gold dental filling. But rare earth miners need to know where those rare earth atoms are going to wind up. Are they going to wind up as zeolite catalyst in an oil refinery, or as part of a battery pack of an electric car, if not a battery in a cell phone or a computer? The rare earth miner is putting the initial raw material into an entire, distinct production chain that needs to be understood from the refining and processing to the end user.

TCMR: If the rare earth element (REE) sector is to succeed, REEs will likely need to find their way into more everyday products. However, without a readily available and relatively inexpensive supply of REEs, that doesn't seem likely to happen.

BK: It's an unfortunate fact that the problematic supply situation and price spikes of the past two years or so caused an awful lot of research and development (R&D) for future applications to be defunded. Without assured supply, many companies don't want to do R&D for applications that can't get basic inputs.

At the same time, there's a lot of talk about substituting or engineering around rare earths. That is possible in some cases, but there are certain things for which the atomic properties of a given rare earth atom are utterly unique. People are not going to stop using rare earths in these kinds of apps.

When the user community sees a more assured supply coming downstream, they'll be more confident in using rare earths in larger quantities. I do think people are going to find more and more uses. There's a lot of development for rare earth applications left to be imagined. Even if we stopped dreaming up new ideas for rare earths, just the inertia of where we already are would take us quite a ways.