As we have addressed in previous notes, certain events and stock price weakness in the REE sector have created buying opportunities, in our view. Avalon could generate about 30% (~ $240mm) of its annual revenues from by-products by 2016. Niobium (Nb) and Zirconium (Zr) are expected to be the largest contributors, each generating over $110mm in revenues. We forecast that Tantalum (Ta) will contribute an additional $20mm per annum. In this note, we discuss the outlook for the Niobium (Nb) and Tantalum (Ta) industries. This includes a discussion on uses, demand growth drivers, supply and demand analysis and pricing outlook for Nb and Ta.

David Fuller's view I maintain that rare earths are a very interesting but highly speculative sector, not least due to the lack of revenue and profits as they are still in the developmental stage. Consequently the shares should only be purchased following setbacks and sold on strong rallies. Volatility is guaranteed.