Dacha Strategic Metals (DSV.V) has somewhat been our "portfolio saviour" in a very difficult 2011, gaining ground when the overall markets have been tough. Dacha is an investment and trading company in individual REE metals. They have no mine but are licensed to buy and trade REE’s in China as well as exporting them. Dacha holds most of its inventory in LME approved warehouses in South Korea.

The company invests in the REE metals believed to have the best outlook from a demand-supply picture. The portfolio today consists mainly of heavy REE’s such as Dysprosium, Terbium, Yttrium, Neodymium, Lutetium and Gadolinium.

Our impression is that it is important for investors to understand that the metals that are currently rising fast in price are doing so because of rapid growth in demand plus current lack of supply. So starting from a market in deficit we want to identify the metals that are used in items where demand growth is fast and outstripping supply growth, or in the case of most heavy REE’s even supply shrinkage going forward.

Dacha Strategic Metals April 20, 2011

Since bringing Dacha to our subscribers attention, we have had a great run with gains >200%. Lately the shares have dropped down quite a bit, making the discount to NAV/share bigger than ever. We see great fundamentals for Dacha's metals going forward in 2012 and beyond, and there is really no reason why DSM should be trading with such a large discount.