Rare Earth Elements are about to get a whole lot easier for the general investor to buy. One will no longer have to go to the artic, or other inhospitable place, where only extremeophiles live and use complex science to separate the likes of Dysprosium from Neodymium. One will no longer have to bet on the junior mining company theoretically seven to ten years away from production (if all goes according to plan). This is not to say that these seemingly impossible metals to name (and spell) reside only in bizarre places and that no company will be (and already are) producing these metals, but given the public’s full awareness of them, they may as well be.
However, on October 28, 2010, Van Eck Global will be launching the Market Vectors Rare Earth/Strategic Metals ETF (NYSE Arca:REMX). REMX is not similar to the Spider Gold ETF (NYSE Arca:GLD) insomuch as they will not retain physical metal in some undisclosed vault, but rather is slated to seek to replicate, as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Rare Earth/Strategic Metals Index.
The prospectus is available here.
For those who want a brief summation of the prospectus…REMX will have a total annual fund operating expense of .57%. Publicly traded companies whose focus is the exploration, development (of REE properties), production (refining) and recycling will make up the structure.
The fund is calculated and maintained by Structured Solutions AG on behalf of the Index Provider. The Index Provider is not affiliated with the Fund. Index values are calculated on weekdays and are disseminated every 15 seconds between the hours of 1:00 PM Central European Time (CET) – 11:30 PM CET, so 7 AM to 5:30 PM EST. Note: CET is UTC+1 – basically all of the countries in Europe to the left of Greece except Portugal, the United Kingdom, Ireland and Iceland. Finland is UTC+2.
To be included, the companies must have a market cap above $150M and cannot fall below $75M. Stocks must also have a three-month average daily trading volume value of at least $1M and must have traded at least 250,000 shares each month over the last six months.� Currently there are 24 securities in the fund. Which will officially be release at the opening bell tomorrow (or today by the time I finish this article.)
Well, three things come to mind.
1) The general public will have a much easier time purchasing these esoteric metals/elements. We will have instant diversification to a largely unfamiliar sector, even to mining analysts.
2) With the greater ease, speculators will have a much easier time running up and pushing down the price of these metals which are almost exclusively sold on contract. Copper companies see the upside of copper speculators running the price to $4.00 per lb, but once the price got too high, companies and nations began to go into their stockpiles. Copper, lead and silver have been known for eons. See: how the island or Sardinia got its name. However, twenty years ago, only a few people knew what Cerium was and even fewer to what applications it could be applied.
3) Following upon point two; with a new variable affecting these prices, China will certainly be even more of a wild card. Now, when China sneezes about REEs, the prices jump. To trade this ETF (vs. invest) one will have to look at China much more closely.
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