Thursday, March 22, 2012

Preliminary Economic Assessment (PEA) of the Norra Karr released by Tasman Metals

Tasman Metals Ltd (TSX.V : TSM; Frankfurt : T61; NYSE-AMEX: TAS) is a Canadian mineral exploration and development company focused on Strategic Metals in the European region. Today they released results of Preliminary Economic Assessment (PEA) of the Norra Karr heavy rare earth element (HREE) and zirconium (Zr) project in southern Sweden.


  • New "In Pit" mineral resource estimate of 41.6 Mt at 0.57% TREO with 51% HREO/TREO% and 1.70% Zr2O (Indicated), and 16.5 Mt at 0.64 % TREO with 49% HREO/TREO% and 1.70% Zr2O (Inferred);
  • $1,464 million before-tax value (NPV at 10% discount rate) based on conservative basket price of US$51 per kg versus current China FOB basket price of US$184.85
  • $5.3 Billion in revenue over the first 20 years
  • 40 year mine life
  • Initial capital expenditures of $290 million
  • Before-tax payback period of 2.6 years
  • Low start-up capital costs due to the excellent existing infrastructure at Norra Karr
  • Proximal to operating ports with rapid access to the European market

70% of the projected economic value of the project (86% of TREO revenue) is expected to be derived from the production of Norra Karr's four rare earth elements: dysprosium, terbium, neodymium and yttrium.  Here is a summary of the most critical rare earths based on my earlier article "Critical Materials For Clean Energy Economy":

As you can see this project has potential to supply the most critical of the rare earth elements. If you are interested to read more about this company I recommend reading analysis what was done before the release of PEA, but still capture the essentials of the project risks and reward potential:

The author of this arcticle was long Tasman Metals at the time of writing. Tasman Metals should be considered as high risk investment. As with all this type of investments, one must prepare for potential loss of entire capital invested.

Friday, March 16, 2012

Hard-to-believe news from GB

Two headlines from Great Britain caught my eye this week:
It was quite hard to believe that either one is true, but both seem to be seriously planned by authorities in GB. The 100-year bond is of course a very nice way for the government to finance itself and maintain deficits for a long time. But what kind of morons would buy them at very low rates? Unless we are going to have very low inflation or even deflation for the next 100 years those papers will be worth a tiny fraction of their value when they are due. And meanwhile you are lucky if you are even compensated for the inflation itself.

The "NewBuy" scheme on the other hand shows that nothing has been learned from the subprime crisis. It's not exactly "NINJA" scheme ("No Income No Job or Asset" -  and you still get a mortgage), but it's certainly creating risks to the system. If you only have to put down 5% and government is going to guarantee the rest you may loose interest in servicing the debt if the housing market collapses 10%, which is not a big correction. Like in U.S. people may walk away and let the banks (or in this case the goverment) handle the remaining mess.

The scheme seems to be based on expectation that the house prices go only to one direction: up. This assumption combined with granting loans too loosely caused the subprime crisis in U.S. Combine a house market price correction with economic downturn (job losses) and you get a disaster.

Thursday, March 1, 2012

Analysis Of Consumer Gold Demand

The year 2011 was yet another positive year for gold. It ended the year 9% higher in terms of U.S. dollars despite of increased price volatility. However, gold demand grew only 0,4% in the year 2011 compared tothe year before. On the other hand, consumer demand for jewellery, bars and coins grew 7,2%. These demand categories accounted for 84,8% of total demand in 2011.
To determine where this demand growth comes from I analyzed consumer demand for gold in selected countries and regions based on data recently released by World Gold Council (WGC).

India and Greater China (China, Hong Kong, Taiwan) accounted for over 50% of total demand for gold jewellery, coins and bars. Europe and VIST (Vietnam, Indonesia, South Korea and Thailand) are the next biggest hoarders of golden items.

Comparison of consumer demand for the precious metal in 2011 to the year before reveals a mixed picture. Consumer demand decreased in India, Middle East and USA while dramatically growing elsewhere in the world.

Changes in consumer demand have a big impact on the price of the yellow metal given the importance of consumer demand in the overall demand picture for physical gold.

Disclosure: Long physical gold via various instruments.