5 Rare Earth Stocks to Hedge Against Chinese Control

Investing in Rare Earth Stocks

Written by Brian Hicks
Posted April 29, 2010

Ever since I saw "Iron Eyes" Cody shed that single tear back in 1975, I've considered myself a pretty outspoken environmentalist.

And I make no apologies for this. It is incomprehensible to me how anyone could take in all the beauty that God has created and treat it like a sewer.

That being said, I am also a die-hard capitalist. I firmly believe that there is no greater system than an honest free market, where hardworking folks can thrive and succeed.

And as I've successfully argued countless times before, it is both the environmental and economic superiority of renewable energy in a real free market that hold the key to its long-term success.


Strip away every last oil subsidy (both direct and indirect), and it won't take long for most folks to demand their electric cars and high-speed rail.

Account for the liquidation of natural capital as it is related to the production and consumption of fossil fuel-based power generation, and it won't take long for those solar panels and wind turbines to look like absolute bargains.

Of course, this natural capital liquidation also holds true for renewables... Because no matter how strongly you want to wave that green flag, no form of power generation is 100 percent environmentally benign.

Sure, solar, wind, and geothermal are dramatically less environmentally destructive than oil and coal; but developing these renewable resources does require certain, not-so-sexy things that some environmentalists often choose to ignore. Like mining, for instance.

While there are certainly more environmentally-friendly options for mining these days — see Bioteq Environmental Technologies (TSX: BQE) — it is still a process that doesn't run on sunshine and rainbows. However, it is an absolute necessity if you want to build a cleaner, more sustainable energy economy.

Especially when it comes to rare earth metals or rare earth elements (REE).

Preparing for Chinese Control

REEs are basically the building blocks necessary for certain products that transmit, consume, produce, and store energy.

These include, but are not limited to:

  • Wind Turbines

  • Hybrid Vehicles

  • Electric Motors

  • LEDs

  • Thin-Film Solar

  • High-Performance Batteries (for electric vehicle and utility-scale storage applications)

Because 95% of the world's rare earth elements are produced in China, it is becoming increasingly urgent for developers to find REEs in other parts of the world.

This becomes more and more apparent every time I talk to high-performance battery manufacturers and companies that rely on rare earth magnets for things like wind turbines and energy efficient electric motors.

Bottom line: China needs those REE supplies for its own consumption.

And in the not-too-distant future, those supplies found outside the Middle Kingdom will be the only supplies we'll be able to get our hands on.

So here are a few companies that are operating in this sector, and are not based in China:

  • Avalon Rare Metals, Inc. (TSX: AVL) - Projects in Canada
  • Great Western Minerals Group (TSX-V: GWG) - Projects in Canada, South Africa, and the U.S.
  • Hudson Resources, Inc. (TSX-V: HUD) - Projects in Greenland
  • Rare Earth Metals (TSX- V:RA) - Projects in Canada
  • Commerce Resources Corp. (TSX- V:CCE) - Projects in Canada

And of course, there's Molycorp, which has just recently filed to go public. This company is looking to develop operations in Mountain Pass, California, just about 15 miles from the Nevada border.

Molycorp claims that its Mountain Pass mine holds more than two billion pounds of rare earth oxides.

We'll keep you posted as more develops.

And for Green Chip Stocks Premium members, we'll have a new report on REEs — with detailed coverage on our three favorite REE plays — next month.

To a new way of life, and a new generation of wealth...

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