TGR: Let's move on to rare earths, which have been getting a lot of buzz at the various mining conferences. What's your viewpoint on them and the investment opportunities they represent?

VG: Rare earth elements and rare earth metals, in general, are going to be a huge phenomenon. It's like in '07 when we had a uranium boom and uranium went from $8 to $136.

What it comes down to is these rare earths are needed for so many things. For example, hybrid cars are really the driver for rare earths' increase in price. But not just hybrid cars. You've got tantalum and niobium being used in a lot of other things and these rare earths are going to be in huge demand.

I don't think we've gotten ahead of ourselves with the demand or with the price of these rare earths. We don't have enough to supply the markets fast enough. That's partially what's causing the price to move up. There's also supply constraint out of China. China controls 95% of the rare earths and says, okay, we'll just keep them for ourselves, thanks. You've got to fight for the rest of the 5% of them out there. So that's obviously causing major upswing in the price of rare earths. That has been the main driver. But that coupled with a shift in how we do things — we're going to see a ton more hybrid vehicles go on the road over the next couple of years and each one of them is going to require 50 pounds of rare earths. That's going to add up.

TGR: Jack Lifton, who speaks at conferences about the rare earths, asserts that it's really a rush to production. When the next two or three companies actually get to production, the amount they produce will probably satisfy demand for decades to come.

VG: Yes, it is a race to production. Like with uranium, for example, there's plenty of uranium out there for the market. It's just whoever does it first will obviously satisfy a lot of the market and I think that's quite the possibility for rare earths.

The best part for an investor is that it's not going to happen today or tomorrow or next year. We've got a little bit of time. We've got some idea as to which companies have been in the space for a long time and have had more lead time to develop a project and get to the stage where they're working the economics of it. Those are the companies I'm really interested in. Obviously, there's a lot of brand-new companies coming out of the gate who will represent an excellent investment opportunity because of the sizzle in the market, but I would have to hear something incredibly compelling from a very small junior to sway myself from some of the larger companies.

TGR: So who are you following, then, in the rare earths?

VG: Avalon Rare Metals (TSX:AVL) is kind of a darling because I bought it so cheap. I've been following that from around the 40 cent range. It had a very impressive run to over $4. The most important thing is not the tenfold run in price. It's also the increase in market valuation because a $4 market cap on a company with 80 million shares outstanding is a company that's worth a lot of money and is representative of what they've got.

They've got one of the largest deposits, they're working on feasibility, they're working on all the things it's going to take to put it in production. Based on its size, I don't think the fact that it's in the north is going to be a major hurdle. If anything, due to the relationship with the native communities up there, I think that's actually going to be a benefit. So Avalon I personally believe is going to be probably the first or second company to attain that status, and they're very well funded, working towards their end goal. They're considering actually using wind power to power their project because they are located in one of the windiest places up in the Northwest Territories. So I think that really attests to a legitimately green company. This company is the type that's just going to keep moving up and up and up because they're going to keep hitting the milestones without anything hindering it.

TGR: So they're one of the first one or two to get to production. Are there other ones that you are following that are in a similar situation?

VG: I think Rare Element Resources Ltd. (TSX.V:RES) is certainly in a similar situation. I have a personal bias towards Avalon just because I have so much more of Avalon stock, but that's not to say by any means that Rare Element Resources is not in a situation where they can really progress. They've had a similar run in their stock from give or take 40 cents to $4 as well. They have a tighter share structure, but they also have a bit of a small project. However, it's not in the remote situation; i.e., it's not in the Northwest Territories, so that's kind of nice. But I think both these companies are going to be real winners in this situation. It'll be like having a Goldcorp and a Barrick. It's not necessarily one or the other. I think it'll be really both.

TGR: On BNN you mentioned a company named Threegold Resources Inc. (THG:TSX.V) that seems to be in a similar space.
VG: Threegold is in the rare earth space. And, again, not a lot of the companies that are really in a low, low market cap (i.e., 15 cents and lower with not very many shares out) compel me in the rare earth space, but Threegold certainly did for multiple reasons. I've actually followed this company for quite a while, since inception actually, just haphazardly because somebody presented it to me.

When I saw them come out with these rare earth numbers, I was quite intrigued and I sat down with the president probably a couple of months ago. He told me in University his Masters was on rare earths. A lot of these rare earths companies, especially the ones just sprouting up now, have nice projects, have good consultants, but the people who actually work for the company don't always have the highest expertise in the area.

Well, this is a company who has a guy in charge that spent most of his academic career working on and researching the rare earth space and that, to me, makes a big difference.

I think it's around 17 cents today. Right now we're still waiting on news on their gold project which could end up being a new discovery. If it comes back positive, I think it'll be a game changer for the company. This could have major potential. That's my opinion.

TGR: And we appreciate your time, once again, Victor. This has been very interesting.

By arrangement with: www.theaureport.com

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