Greenland is a treasure trove of rare earth metals.
For millennia nearly all of this massive island was buried more than a mile deep in glacial ice, making its rich mineral resources almost impossible to extract.
But in recent years, Greenland's ice has started to retreat, with summer melts becoming more extensive each year.
That has made Greenland's rare earth metals (as well as a variety of more conventional elements, such as iron, nickel and gold) much more accessible — and mining for them far more economically feasible, particularly in its southern tip.
"This is huge; we could be mining this for the next 100 years," Eric Sondergaard, a geologist with the Australian-owned company Greenland Minerals and Energy, told The New York Times. Greenland Minerals and Energy (OTC: GDLNF) controls the vast Kvanefjeld project, estimated to hold 10.5 million tons of rare earth ore.
Greenland's rare earth metals are plentiful enough, geologists say, to eventually satisfy 25% of world demand.
Greenland's sudden importance to the world became more obvious earlier this year when both the industry commissioner of the European Union and the president of China visited the island.
Now companies from Canada, Europe, Australia, and China have all taken steps toward reaping Greenland's bounty of mineral wealth.
As a result, the number of active licenses for mineral exploration issued by Greenland's Bureau of Minerals and Petroleum has jumped from 20 to 150 over the past decade.
Why Rare Earth Metals Matter
Rare earth metals are vital to the world economy because they are used in the manufacturing of so many things, including catalytic converters, alloys, solar panels, petroleum refining and the rechargeable batteries used in everything from hybrid cars and mobile computing devices.
While not actually rare, the 17 elements classified as rare earths are hard to find in amounts concentrated enough to be commercially viable.
Rare earth metals became a story in 2010 when China, which produces over 90% of the world's rare earths, tightened its export quotas as domestic use increased. That put a squeeze on world supplies, causing rare earth prices to soar.
In response, industries dependent on rare earths began to seek substitutes, and mining companies outside of China re-opened old mines and ramped up rare earth production.
Rare earth prices then plummeted, though lately have leveled off. But with so much technology dependent on rare earths, demand will keep rising, which eventually will start nudging prices up again.
Greenland: The New Home of Rare Earth Profits
One reason Greenland's ore is so valuable is that it is high in "heavy" rare earths compared to "light" rare earths.
In general, the heavy rare earths are both less commonplace and in higher demand. Analysts expect prices of heavy rare earths such as dysprosium and terbium to outpace those of the light rare earths.
Greenland's rare earth deposits also have an unusually high percentage of neodymium, a light rare earth that also happens to be on the U.S. Department of Energy's list of critical rare earth metals (as are dysprosium and terbium).
What's more, Greenland also has an abundance of deposits of more conventional metals, such as gold, iron, zinc, lead, platinum, and nickel.
And despite its glaciers and Arctic location, Greenland offers mining companies some surprising advantages.
Its southern ports, which sit just below the Arctic Circle, remain ice-free year-round.
Its tiny population of just under 57,000 means it's easier to get mining licenses – there's virtually no bureaucracy.
And Greenland needs the cash infusion from mining to help cement its economic independence from Denmark in the wake of achieving autonomous rule in 2009. Greenland still depends on a $500 million annual subsidy from Denmark that will decrease as time goes on.
Greenland is also eager to accept offers from mining companies, particularly those from China and Europe, to help improve its transportation infrastructure, particularly its seaports and airports.
Playing Greenland With Penny Stocks
American investors who'd like to participate in Greenland's rare earth gold rush have limited options, but opportunities do exist for those willing to be patient and take on more risk.
The significant players in Greenland are mostly foreign-based small cap junior miners — penny stocks.
While investing in penny stocks — particularly those based outside the U.S. – may be pushing the envelope, several of Greenland's rare earth miners do have strong prospects.
That's because Greenland's junior miners are likely to benefit from a common occurrence in the mining sector – acquisition by major mining companies compelled by the need to grow their resources. And acquisitions usually mean handsome payoffs to the shareholders of the purchased company.
With that in mind, here are the two best prospects among Greenland's rare earth miners:
Hudson Resources Inc. (OTC: HUDRF): Canada-based Hudson Resources was a diamond exploration company that shifted to rare earths in 2008 after hard times hit the diamond market. Hudson owns the Sarfartoq Carbonatite Project in Greenland, which holds high amounts of several in-demand rare earths, particularly neodymium and tantalum. Hudson has about $10 million in cash and no debt. Its market cap is just over $25 million and the stock trades at about $0.315 a share.
Greenland Minerals and Energy Limited (OTC: GDLNF): Australia-based Greenland Minerals recently secured complete ownership of its Kvanefjeld Multi Element Project. Test drilling has shown Kvanefjeld has high amounts of neodymium, dysprosium, terbium and yttrium and smaller amounts of several heavy rare earths. Production is expected to begin by 2016. GMEL has about $5 million in cash and no debt. Its market cap is $135 million and the stock trades at about $0.345.
And a one bonus rare earth penny stock:
North American Nickel Inc. (OTC: WSCRF): Canadian-based North American Nickel owns the vast 1,900-square mile Maniitsoq project, which is blessed with large deposits of nickel and copper thanks to the impact of a meteor there 3 billion years ago. The company has $3.42 million in cash and no debt. Its market cap is about $13 million and it trades at $0.17 a share.
With the rare earths market poised to make a comeback, one major mining company in particular is ideally positioned to make the best of it. For more details, check out one of Money Morning's specialized services for investors, Private Briefing.
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