RARE EARTH METALS Investment opportunity

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RMB was established in response to the incredible ‘bull run’ that precious and rare earth metals are currently experiencing. RMB expects growth within the sector to continue over the next decade, providing potential returns to investors that outperform almost every other asset class.

Our management team members are all finance professionals from hedge fund, bro-kerage and investment banking backgrounds. During a global financial crisis and era of ‘paper investments’, the demand for investment grade metal as a hard, physical asset has grown exponentially. Whether you are a seasoned market professional looking for a portfolio hedge, or simply someone who has had enough of sluggish, fee heavy and lacklustre investments, RMB can help.

The 17 rare earth metals, including dysprosium and neodymium, are essential compo-nents in modern technology such as iPhones, wind turbines, halogen lights and even precision-guided missiles. China produces more than 95 per cent of these minerals and it has imposed a quota restriction on their export.”

“Prices of rare earth metals will continue to soar.”Daily Telegraph

“Investing in rare earths will make patient investors millionaires ina few years, like oil investments in 1970s benefited later, according

to the latest Absolute Wealth newsletter.” Money Morning

“Dyprosium oxide, used in lasers, has jumped 338 % since January.”Financial Times

“Rare earths such as Cerium oxide jumping 475 % in just five months.”Financial Times

WHO ARE THE RARE METAL

BROKERS?RMB are a full service, precious and rare earth metal broker that affords investors throughout Europe the ability to buy, sell and securely hold, a complete spectrum of investment grade metal.

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Since 1792 there have been five major commodity bull markets. These lasted 23 years, 21 years, 23 years, 18 years and 12 years. An average of 19.4 years. We are currently 10 years into this bull market, with metals having outperformed every other commodity class. The chart below refers specifically to exchange trad-ed precious metals but nevertheless gives a good idea on how the general metal sector is performing.

METAL BULL MARKET?

We are in the early stages of a massive bull market for commodities, inparticular, metals. Analysts suggest we have another decade of rising prices ahead and here is why.

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You’re probably using some right now. They’re key to the production of everyday devices, from tablet computers and TVs, to hybrid cars and wind tur-bines, so it may be encouraging to know that sever-al kinds are actually common. Cerium, for example, is the 25th most abundant element on Earth.

So why are they called “rare” earth metals? The name refers to their elusive nature, since the 17 el-ements rarely exist in pure form. Instead, they mix with other minerals underground, making them costly to extract.

This isn’t the only point affecting global supply lev-els. The mining and refining of rare earth metals has a huge environmental impact and as a result almost all developed nations have neglected domestic production and relied heavily on China instead.

Much of the appeal of rare earth metals lies in their ability to perform obscure, highly specific tasks. Many of them have no known substitutes.

Permanent magnets are a big role for rare earth met-als. Their light weight and high magnetic strength have made it possible to miniaturize a wide range of electronic parts, including many used in home appliances, audio/video equipment, computers, cars and military gear. Innovations like small, multi-gigabyte jump drives and DVD drives wouldn’t exist without rare earth magnets, which are often made from a combination of rare earth metals.

While producing rare earths can contribute to envi-ronmental problems, they have an eco-friendly side too. They’re vital to catalytic converters, hybrid cars and wind turbines, for example, as well as energy-efficient fluorescent lamps and magnetic-refrigera-tion systems.

WHAT ARE RARE EARTH

METALS? Rare earth metals are a group of 17 chemically similar elements, crucial to the manufacture of many hi-tech products. Despite their name, most are abundant in nature but are hazardous to extract and therefore are currently in limited supply.

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RARE EARTH METALS IN

DETAIL

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YTTRIUM LANTHANUM CERIUM PRASEODYMIUM NEODYMIUM PROMETHIUM

Produces colour in many plasma TV tubes. Also conducts microwaves and acoustic energy, simulates diamond gemstones, and strengthens ceramics, glass, aluminium and magnesium alloys, among other uses.

One of several rare earths used to make carbon arc lamps, which the film and TV industry use for studio and projector lights. Also found in batteries, cigarette-lighter flints and specialized types of glass, like camera lenses.

The most widespread of all rare earth metals. Used in catalytic converters and die-sel fuels to reduce vehicles’ CO2 emissions. Also used in carbon arc lights, lighter flints, glass polishers and selfcleaning ovens.

Primarily used as an alloying agent with magnesium to make high-strength metals for aircraft engines. Also may be used as a signal amplifier in fibre-optic cables,and to create the hard glass of welder’s goggles.

Mainly used to make power-ful neodymium magnets for computer hard disks, wind turbines, hybrid cars, in-ear headphones and micro-phones. Also used to colour glass and to make lighter flints and welder’s goggles.

Produces colour in many plasma TV tubes. Also conducts microwaves and acoustic energy, simulates diamond gemstones, and strengthens ceramics, glass, aluminium and magnesium alloys, among other uses.

SAMARIUM EUROPIUM GADOLINIUM TERBIUM DYSPROSIUM HOLMIUM

Mixed with cobalt to create a permanent magnet with the highest demagnetiza-tion resistance of any known material. Crucial for building “smart” missiles; also used in carbon arc lamps, lighter flints and sometypes of glass.

The most reactive of all rare earth metals. Used for decades as a red phosphor in TV sets and more recently in computer monitors, fluorescent lamps and some types of lasers but otherwise has few commer-cial applications.

Used in some control rods at nuclear power plants. Also used in medical applications such as magnetic resonance imaging (MRI), and industri-ally to improve the work-ability of iron, chromium and various other metals.

Used in some solid-state technology, from advanced sonar systems to smallelectronic sensors, as well as fuel cells designed to oper-ate at high temperatures.Also produces laser light and green phosphors in TV.

Used in some control rods at nuclear power plants. Also used in certain kinds of lasers, high-intensity light-ing, and to raise the strength of high-powered permanent magnets, such as those found in hybrid vehicles.

Has the highest magnetic strength of any known element, making it useful in industrial magnets as well as some nuclear control rods. Also used in solidstate lasers and to help colour cubic zirconia and certain types of glass.

ERBIUM THULIUM YTTERBIUM LUTETIUM SCANDIUM

Used as a photographic filter and as a signal amplifier in fibre-optic cables.Also used in some nuclear control rods, metallic alloys, and to colour specialized glass and porcelain in sun-glasses and cheap jewellery.

The rarest of all naturally oc-curring rare earth metals. Has few commercial applications, although it is used in some surgical lasers. After being exposed to radiation in nu-clear reactors, it’s also used in portable X-ray technology.

Used in some portable X-ray devices, but otherwise has limited commercial uses.Among its specialty appli-cations, it’s used in certain types of lasers, stress gauges for earthquakes, and as a doping agent in fibre-optic cables.

Mainly restricted to specialty uses, such as calculating the age of meteorites or per-forming positron emission tomography (PET) scans. Has also been used as a catalyst for the process of “cracking”petroleum products at oil refineries.

Added to mercury vapour lamps to make their light look more like sunlight. Also used in sports equipment for example, aluminium baseball bats, bicycle frames and lacrosse sticks – as well as fuel cells.

THE 17 RARE

EARTH METALS

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As a result, over the last two years, they have begun to exploit this position by signifi-cantly reducing supply. Comparisons can be drawn against the likes of OPEC (Organisa-tion of Petroleum Exporting Countries), who for years have suppressed oil supplies in order to support and steadily increase the price of oil. In a similar manner to the way China manipulate their currency, the Yuan, they are openly manipulating exports and as a result the prices of some of these elements have risen over 3000 %.

Although this figure seems far fetched, it goes some way to highlight the severity of the supply issues that the US and Japan, who are the biggest consumers of rare earth metals, are currently faced with. In September 2009 China announced its intenlons to taper supply from 2010–2015, to put a stranglehold on the market in the interests of its domeslc industry. It was also announced in late 2011 that this quota would be reduced by a further 35 %, fuelling the increase in the wholesale prices across the globe. China has made its economic intenlons very clear. It expects to be the world’s largest economy somelme during 2014, therefore China views stockpiling rare earth metals as a taclcal and strategic necessity.

CHINA AND RARE EARTH

METALS

China supply 97 % of the world’s rare earth metals, which means they dominate the supply side of the market.

China

Rest of the world

97 %

3 %

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The US and Japan, the two biggest consumers of rare earth metals, have openly voiced their deep concern regarding dwindling supplies and skyrocketing prices. In 2011 the prices of some rare earth metals doubled over a two week timeframe with some rising over 3000 %. Domestic manufacturers are fighting to compete in a global environ-ment that grows more competitive by the day.

They can succeed, but only if the game is not rigged against them. China is playing hardball by first monopolizing, then price-gouging on resources manufacturers need to make many tech products. Technology-intensive companies now face a decision – move their factories to China where these minerals are relatively cheap and ac-cessible, or continue struggling with costs and supply.

Several aspects of the current rare earth metal market combine to create a near perfect storm of supply versus demand instability. Exponential expansion of demand for the materials, in order to main-tain critical applications, combined with uncommon ore bodies, slow and difficult production, and an almost completely unprepared mar-ketplace, make for a set of challenges that will require immediate and well considered actions if they are to be overcome.

SUPPLY AND DEMANDAs with any market, the basic fundamental principles of supply and demand are what dictate current prices. With our ever increasing dependency on modern technology, which as outlined above relies heavily on rare earth metals, it is widely accepted that demand can only continue to increase.

SUPPLY AND DEMAND FORECAST 2013

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RARE EARTH METALS SUPPLY

In 2004 China introduced maximum yearly export quotes of rare earth products and since 2010 it has been cut by 40 % thus supply has significantly tightened.

As we know China produces 97 % of worldwide supply, however, it is important to note that supplies are near their peak. Just as the last few years have seen “peak oil” and oil prices are at a high, then the same sup-ply and price fundamentals can be interpreted with a commodity such as rare earth metals.

The United States is completely reliant on imports of rare earth metals and is highly dependent on many other minerals that support its economy, including manganese, bauxite, platinum and uranium. The fact that China is the dominant supplier of rare earth met-als is a cause for concern that provides an opportu-nity for our clients to hold these rare earth metals.

In the meantime, Japan’s private sector has stock-piled “between six months to a year” of supplies, according to Dai Yoshikawa, general manager of Mit-subishi Corporation Unimetals, a subsidiary of Japan’s biggest trading house. We believe that other private sectors around the world will follow suit resulting in a shortage of supply. Japanese trading companies such as Sumitomo and Sojitz have also stepped up invest-ments in rare earth exploration and mining project in order to secure future supply.

However locating concentrations, setting up min-ing projects and bringing these online will still take a number of years which therefore presents an ex-citing opportunity. In summary, overall worldwide supply is limited and has the possibility to decrease even further due to the Chinese Government’s measures to put a cap on export. Although the sup-ply base of rare earth metals has demonstrated an impressive ability to expand over recent years, the mining industry will struggle to keep up with the pace of growth in demand.

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METAL DEMAND (t) SUPPLY (t) BALANCE (t) COMMENTS

Lanthanum 53,800 40,000 -13,800 FCC outside China

Cerium 52,800 66,300 +13,500 Mainly inside China

Praseodymium 14,400 8,300 -6,100 Short everywhere

Neodymium 40,900 27,900 -13,000 Short everywhere

Samarium 1,100 2,900 +1,800 Short outside China

Europium 540 375 -165 Short inside China

Gadolinium 1,200 1,700 +500 Oversupply

Terbium 600 250 -350 Short everywhere

Dysprosium 2,500 1,100 -1,400 Thrifting may help

Yttrium 9,300 6,000 -3,300 Available stockpiles

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RARE EARTH METALS DEMAND The demand for rare earth metals is derived from the production of their

end use products, such as flat panel displays, cars, catalysts etc. As a result, the demand for rare earth metals (as with other minerals) depends on the strength of the demand for the final products for which they are inputs.

Global rare earth demand is forecasted to rise by 8-11 % a year from 2011 to 2014 which is cited to be largely driven by the rate of growth of the two low carbon technology markets involving renewable energy and electric vehicles. At present, 4 % of new offshore wind turbines use a magnetic drive system containing rare earths – used to improve reliability and efficiency. This figure is expected to increase to 15 %-25 % by 2015.

If wind turbines and electric vehicles are going to fulfil the role environmental planners have allocated them in reducing worldwide emissions of carbon dioxide using current technologies, then this would require an increase in the supply of Neodymium and Dysprosium of more than 700 % and 2,600 % respec-tively during the next 25 years.

Significant breakthroughs in magnet technology (for example, the discovery of a room temperature superconductor) are unlikely and there are no cur-rent known substitutes for rare earth metals. Miner-als supplier Rare Earths Global is the latest company to seek AIM listings to raise capital to fund extraction expansion and at the same time meet potential man-ufacturers’ demand for creating consumer goods.

In conclusion, overall worldwide demand has been in-creasing for many years. Just as oil is linked to the Mid-dle East, rare earths metals is linked to China. For com-modities that are characterized by derived demand, the demand conditions for the final consumer goods to which they contribute are key factors. A growing worldwide population with an expanding middle class represents an income growth in disposable income meaning a large proportion can afford such goods.

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BASKET OPTIONS

Depending on your chosen profile we will source a basket with a range of metals to comply with your request.All baskets include:• Shipping costs from China to London• Insurance, underwritten by Lloyds of London• Brokerage fees• Three years storage in a HMRC bonded warehouse of your choosing

Storage or delivery?The most practical and secure method of storing your physical metal is in an HMRC approved bonded warehouse. Metal held in bond is not liable for VAT, meaning the current rate of 20 % does not act as an additional hurdle to making a return on your investment. You can change your mind at any time and take delivery, however VAT will always be payable even if you choose to return metals to storage at a later date. Our wholesalers take care of the whole process for you and provide you with all the supporting ownership documents so you are 100 % in control of your investment.

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Rare Metal Brokers Neutorgasse 13 / Mezzanin A-1010 Vienna Tel: +43 (1) 23 63 41 41-0 Fax: +43 (1) 23 63 41 41-70 contact@raremetalbrokers.com www.raremetalbrokers.com

Important Risk Disclosure Rare Metal Brokers acts only as an introducer (for investment products that are currently not authorised by the Financial Services Authority) in respect of regulated activities and/or products and therefore seeks to rely on introducer exemptions in Article 33 and 33A of the Financial Services and Markets act 2000/01.

Rare Metal Brokers does not operate any form of collective investment scheme, nor can Rare Metal Brokers offer any form of investment advice whatsoever. Rare Metal Brokers is not regulated by the Financial Services Authority. The purchasing of metals for physical delivery on a spot basis is an unregulated activity and should only be considered by those who are comfortable making their own investment decisions.

Purchasers should seek to rely solely upon their own research and due diligence when purchasing. Past performance is not a guide to the future. The future returns and opinions expressed are based upon Rare Metal Brokers’s own forecast and should not be relied upon as indicating any guarantee of return for any investment. The source of all information is generally from Rare Metal Brokers unless specified otherwise.