Uranium and Rare Earths Stocks Leading the Rebound

As we predicted, our uranium and rare earth selections are amongst the leaders during this market rebound.  Their underlying fundamentals are strong enough on their own to propel this move.  In addition, the shorts may be running for cover here.  Lastly, the supply demand equation may be taking hold.

The month of January is a harbinger for what may happen in the year 2012.  This month we have seen both uranium stocks and rare earth stocks outperform the general market despite negative news.  This means the naysayers are having less of an impact as shorts are rapidly covering.

About a year ago we did a series of articles called the “Chinamese Twins”.  This related to a private candlelight dinner held in the White House between the industrial-military leaders of both nations.  The purported arrangements allowed for a strong yuan and a cheap dollar benefitting the interests of both parties at that time.

Fast forward to today, our kaleidoscope reveals a changing situation.  The world economy is affecting previously reached agreements.  The Chinese and the Americans have altered the requirements in the present economic picture.  The Chinese have tried to maintain a strong yuan while the Americans adhered to a cheap dollar.

This brings into focus the specter of the escalation of trade wars with China.  In the 1930’s, it was the Smoot-Hawley Act that exacerbated the Great Depression.  One must believe that the Chinese and the Americans will try to avoid this outcome.

We can only hope that both sides can reach a modus vivendi to avoid a return of the Smoot-Hawley protectionist nightmare which plunged the world into the Great Depression.  Associated with this burgeoning trade war  is the Chinese manipulation of the rare earth quota system of which they are in command.  We recently heard the ruling from the World Trade Organization against China’s export restrictions of critical raw materials.  This may only exacerbate the underlying issue.

Such a trade war goes far beyond economic aspects, but reaches into the very sinews of American national security and defense.  Our phlegmatic Congress should’ve acted long ago to green light and fast-track the development of a domestic source of these critical heavy elements.  Hopefully, they will awaken from their long torpor and rise to the challenges of the times.  Certainly, Alaska has awakened and included Ucore in its 2013 state budget. 

Another company which is witnessing support from European consumers is Tasman Metals (TAS or TSM.V) who controls Europe’s only 43-101 compliant heavy rare earth asset.  These companies are progressing rapidly to produce a preliminary economic assessment in the near future.