House Mountain Partners

Rare Earth Metals

2014 Q2 Economic and Energy Metals Review & Second Half Outlook – Part I

Chris Berry

By Chris Berry

  • During the second quarter of 2014, many share prices of energy metals companies struggled for direction after the dust settled from the Tesla (TSLA: NYSE) Gigafactory announcement.                                                     

  • Our theme of viewing the supply and demand dynamics of each energy metal individually continues to be the best course of action as the trajectories of each metal may differ. For example, lithium carbonate prices remained healthy while uranium prices fell by 8% in Q2 and are down 21% YTD.                                   

  • The recent precious metals price spike did not transfer over into the industrial or base metals sector.

  • Though economic data continues to improve selectively, there are still too many economic headwinds in place. Therefore only those resource investments that demonstrate the ability to produce at lowest-cost quartile costs or those that have a disruptive competitive advantage should be considered at this time.          

  • Despite nascent inflationary pressures, we are still inclined to believe that deflation (or disinflation) is the predominant threat to growth. The recent US Q1 GDP print of a 2.9% decline has many concerned that this was due to more than “the weather”.                   

  • We think that the second half of 2014 will be just as challenging as the first half for reasons we outline below.


Different Quarter, Different Catalysts

When Elon Musk announced plans to build a Gigafactory in the Western US (and has since discussed building multiple facilities), this sent select energy metals share prices into the stratosphere. Many believed this was the “turn.” The dust has since settled.....

Q1 2014 Economic and Energy Metals Review

Chris Berry

In accordance with the roll out of our new journal offering next week, and our goal of increasing your “value added,” we will begin publishing a quarterly review of the Discovery space.  Specifically, today we will analyze the overall macroeconomic picture and how it has affected select Energy Metals.  We'll highlight the key themes which have driven many of the companies involved in exploration, development, and production to double digit returns YTD.


As the West Sputters Along…..

In mid 2013, it appeared as if the US and Euro Zone economies were picking up steam based on accelerating PMI readings and falling unemployment.

Recent Strength in Rare Earths – A Head Fake or Back to the Good ‘ol Days?

Shelley Chen
  • Seemingly out of nowhere, legitimate rare earth plays exploded higher late last week 
  • Like the prices of many other commodities, rare earth prices have firmed (both inside and outside China), but a convincing move upwards is still lacking 
  • This raises two questions: Why did many of the stocks move higher last week and is this a sign of a turn or just end of year positioning to benefit from the January Effect? 

Finally Some Good News 

One of the most interesting things about the rare earth element (REE) sector is that the narrative that put REEs on investor radar in the first place is still firmly intact. However, nobody seems to care anymore. Shown below is the 1 year price performance of an equally weighted basket of REE exploration and production companies versus the Dow Jones Industrial Average, S&P 500, and Nasdaq.