Canada and Critical Rare-Earth Metals
Something is critical if without it, a technology cannot be done, or cannot be done economically or efficiently. When such a definition is applied to the space of all metals, it narrows the list. It allows investors to focus on what’s necessary to the continuation and growth of our technological society, not just on what’s nice.
More important, such winnowing down exposes the fact that there are critical mines as well as critical materials.
For example, for the USA to be self-sufficient in critical rare-earth metals, it will be necessary for the Alaskan Bokan Mountain deposits of Ucore Rare Metals to be developed as quickly as possible, along with either Molycorp’s Mountain Pass mine and/or Rare Element Resources’ Bear Lodge property in Wyoming. Only in this way can the USA become self-sufficient in the critical rare earths in the near term.
Canada has little internal domestic demand for the rare earths, but it has or controls not only more deposits of rare earths than any other country, but also significant operational expertise in processing rare-earth ores to high-purity metals. Canada is now turning to the idea of becoming a supplier to the world of rare-earth metals. This would occur via supply-chain development and perhaps the vertical integration of some existing companies, already doing various aspects of the rare-earth supply chain, not necessarily in Canada but owned and/or operated by Canadian businesses.
Canadian companies furthest along, or already in operation in the rare-earth supply chain, include Avalon Rare Metals, Great Western Minerals Group (GWMG) and Neo Material Technologies. Companies that own rich deposits with good heavy REE values, include Matamec Explorations, Quest Rare Minerals and Stans Energy.
Markets trade on momentum and fads, as well as on fundamentals. Let the herd pass on over the cliff with regard to the general run of REE ventures out there. Stick with the above owners of the critical mines, because your lifestyle and quality of life depend on your doing so. China wants not a piece of the pie, but a whole new supply of baked goods. Natural resources take a long tome to discover and to bring into production. Demand for the REEs is increasing and may well be larger than supply shortly. At the Vancouver conference, a paper read on behalf of Dr. Zhanheng Chen, academic director of the Chinese Society for Rare Earths , noted that China may well be a net buyer of rare earths by 2015.
I apologize for not mentioning all of the companies also presenting at the Vancouver conference, but I wanted today to focus on critical mines for rare earths, because I think there isn’t enough awareness of this and there has to be. The REE supply chain has to be geographically diversified. If not, Chinese demand and Chinese control of the processing will simply send all of the newly produced material in North America and elsewhere to China, thus baptizing North America as a third-world raw-materials supplier. Wasn’t that how China started out, by the way?
Don’t send me any mail about Molycorp’s separation plant or Lynas’ processing facility to be built in Malaysia. Those are company-specific operations, and are a good start, but neither company has ever produced high-purity rare-earth metals in the type of commercial quantities required today, nor have they made battery or magnet alloys and compounds, nor made finished goods such as NiMH batteries and rare-earth permanent magnets before. The first consumer-product mass producer, to be vertically integrated in rare-earth-based end-use products, will in all likelihood be Toyota in 2013-14. I still believe that the first vertically integrated producer of rare-earth permanent-magnet alloys and forms, will be GWMG. Exactly like China, I think that GWMG will allocate its internal production of REEs to its own operations, so that it will be able to realize the highest value-added from the rare earths. If and when there’s a surplus, then GWMG will sell into the market. Note that if this happens for China, the “demand exceeds the supply” conspiracy theorists will say it’s a plan. GWMG’s plan is just good business, but, apparently, the same plan followed by China Inc. will be a plot to control the sector.
In any case some REEs are going to be in more critical short supply than others, if this is not already the case, so some mines will be more critical than others.
Don’t say I didn’t warn you.
Disclosure: At the time of writing, Jack Lifton holds long stock positions in Ucore Rare Metals Inc. (TSX.V:UCU) and Great Western Minerals Group Ltd. (TSX.V:GWG). Jack also does ongoing paid consulting for Ucore.
Jack Lifton is a leading authority on the sourcing and end use trends of rare and strategic metals. He is a founding principal of Technology Metals Research LLC and president of Jack Lifton LLC, consulting for institutional investors doing due diligence on metal-related opportunities.