Friday, October 23, 2009

Money Show 2009 4

Yesterday, I said I would talk about the panels I went to at the Money Show. The first panel I went to was on Canadian Mining. On this panel were representatives of Arc Energy Trust, Avalon Rare Metals Inc and Mines Management.

I had reviewed Arc Energy Trust previously and it is into oil and gas. David Carey spoke for Arc Energy Trust. They are currently 50-50 into gas and oil, but will become gassier, as David said. He did not say what the new ratio of oil to gas would be. He said that there was more gas in supply than current demand, however, gas supplies tend to build up in the summer and tend to be drawn down in the winter. There is still an excess, but apparently, if this winter is 3ยบ colder than normal, then there will be no over supply. He also said that gas needs to be at $5 to $7 per MMBTU for companies to make a profit in natural gas.

David feels that there will be no radical changes at his company with the change to a corporation, sometime before 2011. He says (and also others said at this conference), that the distributions for his company will be influenced by the price of oil and gas and not by any company structural changes.

Obviously, Avalon is into Rare Earth Metals (and rare metals are a very interesting story in itself). William Mercer spoke for Avalon. I do not know if you have read about China and rare earth metals, but you should. Rare earth metals are in all new technologies and in some new version old ones technologies. Recently China has been supplying the world with rare metals and they dominated the market, as they would sell these cheaper than anyone else could. Now they have control of the market, they recently announced that they will restrict export of rare earth metals and maybe in the future stop export altogether. (China also said that the way around their restrictions was for companies to set up high tech plants in China.) Many think this is a play to have companies move high tech manufacturing to China, so they can have employment in high tech industries. China wants jobs for its people, they also want high tech jobs.

He thinks that China is a very sophisticated country and has played this well. China is not only the number 1 producer of rare earths, but is also the number 1 processor of them. However, he wonders if the West, in going green, will be happy to trading a dependency on OPEC for oil to a dependency on China for rare earths. (One use of rare earth metals is in wind mills.) There has been some problem in setting up rare earths mines in Canada because of aboriginal land claims, but he hopes the US will look upon us as a reliable supplier of rare earths.

Not all countries have rare earth metals, but Canada has them. (Note that China has also been buying up rare earth metal mines world wide.) In rare earth metal, the heavy rare earth metals are worth much more than the light rare earth metal. Avalon says its mine has 20% to 30% heavy rare earth metals compared to light rare earth metal. Most mines than have only 10% heavy rare earth metals compared to light rare earth metals. They expect their mine to start producing rare earths in 2013. It takes 6 years from the discovery of rare earths to production. They are, therefore, some 3 years along in this process.

Mines Management talked about their mine, which produces silver and copper. Douglas Dobbs spoke for this company. He thinks his company is interesting because of this mine. He thinks the price of all metals will rise because a lot of mines went on hold in 2007 and it will cost both time and money to bring them back online. Douglas feels that in 2 to 4 years, demand will be higher than supply and then prices will start to climb.

He thinks that silver is an interesting play because of its increase use in small electronics. Silver’s use in photography, a big past use, of course, has declined sharply of late because of the switch to digital photography. But, silver has also been rediscovered for its anti-bacteria properties. It is starting to be used to inhibit the growth on bacteria (in hospital and in bandages). Also, high tech is continuously finding new ways of using silver.

I will talk about the next panel I went to on Monday. This panel was on where to find safety and growth.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

No comments:

Post a Comment