Dacha Strategic Metals Inc.

Dacha Strategic Metals Inc.

July 14, 2011 13:38 ET

Dacha Comments on China Rare Earth Quotas for Second Half of 2011

TORONTO, ONTARIO--(Marketwire - July 14, 2011) - Dacha Strategic Metals Inc. ("Dacha" or the "Company") (TSX VENTURE:DSM)(OTCQX:DCHAF) The Ministry of Commerce People's Republic of China (MOFCOM) announced today that Rare Earth export quotas for the second half of 2011 will be 15,738 tonnes, which represents an increase of 8.9% over the first half of 2011. This increase is contrary to expectations from the international market which was previously forecasting a 5-10% cut in quotas in line with the ongoing Chinese domestic policy balance between domestic demand and international demand. Domestic producers were likewise expecting a substantial reduction in quotas for the second half of 2011. The recent negative World Trade Organization ruling (July 5, 2011) on Chinese quotas of Coke and Bauxite may have played a part in this unexpected increase over the first half quota number.

It is only in the last year that Rare Earth export quotas come to have an actual monetary value and this has contributed to substantial increases in the international pricing of light rare earth elements such as Lanthanum and Cerium since last July. Surcharges for export quotas are currently approximately US$100 per kg regardless of the specific element being exported. An example of the impact of the quota surcharge can be seen in Lanthanum oxide where the domestic price is approximately US$23 per kg while international pricing is US$150 per kg. In addition, all rare earth oxides and alloys are subject to a 25% export tariff.

In the heavy rare earth elements such as Dysprosium and Terbium, the quota surcharge has very limited effect on pricing. Terbium pricing domestically is now quoted at approximately US$3230 per kg which would equate to approximately US$4040 per kg once the 25% tariff charge is applied. In the case of these elements a quota surcharge of $100 per kilogram is less than 2% of the value of the material.

Dacha's inventory value of US$132.1 million as at July 11th is currently weighted at 90% between Terbium and Dysprosium, or a total of US$118.7.

The recently mandated consolidation of producers and other supply constraints continue in Southern China, which is the largest supplier of Heavy Rare Earth Oxides and supplier offers in the Domestic market continue to increase. According to Metal Pages (July 11, 2011), an independent news source for the industry, some suppliers are quoting Terbium at prices as high as RMB32,000 per kg, which would imply an international price of approximately US$6,100 per kg prior to the value which would be attached for the quota surcharge.

Despite an increase in quotas for Rare Earth Elements, Dacha expects further price increases for heavy rare earth elements to continue for the rest of 2011 based on the continued supply constraints in southern China and a robust market in the fall, which has historically been the strongest demand quarter for Rare Earth Oxides. However, there may be some difficulty in exporters maintaining the quota surcharge at its current level and there may be pullback in the international prices for light rare earths such as Cerium and Lanthanum – two elements which are not included in Dacha's portfolio of physical Rare Earth Elements.

About Dacha

Dacha Strategic Metals Inc. is an investment company focused on the acquisition, storage and trading of strategic metals with a primary focus on Rare Earth Elements. Dacha is in the unique position of holding a commercial stockpile of Physical Rare Earth Elements. Its shares are listed on the TSX Venture Exchange under the symbol "DSM" and on the OTCQX exchange under the symbol "DCHAF".

Except for statements of historical fact relating to the Company, certain information contained herein constitutes "forward-looking information" under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to expectations as to future prices of rare earth elements, expected future quotas on rare earth elements, the Company's ability trade in rare earth elements, the realization value of Dacha's physical inventory portfolio, proposed investment strategy of the Company, and general investment and market trends. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Dacha to be materially different from those expressed or implied by such forward-looking information. Although management of Dacha has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Dacha does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

The market value of the Company's physical inventory is estimated using price quotes published by two of the largest independent news sources for the metals industry, namely, Asian Metal (www.asianmetal.com) and Metal-Pages (www.metal-pages.com). In cases where these websites do not provide a price quote on the type or quality of metal held in the Company's physical inventory, the Company relies on a price quote provided by independent third-party industry participants.


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