Down Under Down Under: A Visit to Arafura Resources Nolan's Bore Rare Earth's Project in Australia's Northern Territories [View instapost]
Chihawk,
The driver for all these fantasies, the best of which is that an agreement to take all or a part of its needs from your product line, at a market price if it is delivered on time and to specification, which is called a LOI, letter of intent, has collateral value at the bank, is the stock market. These silly statements trying to confuse corporate procurement policy and individual decision making have "announcement value only" for those pumping a share price.
I was just in Singapore, and I was interviewed two weeks ago by Malaysian Public Radio. I was in Australia before I went to Singapore, and I asked Lynas if I could visit Mt Weld. I was refused with the comment that we are not allowing visitors at this time. I did go to see Arafura's drill camp, and my colleague went to review Alkane's metallurgy at its provider of metallurgical process design.
I think that the Malaysian public feels that it has been left out of the permitting process, and I think the best case for Lynas is a one year and more delay.
I think Siemens needs neodymium and dysprosium or it will be squeezed out of the wind turbine market to say nothing of the (much much bigger) OEM automotive market. Siemens is interviewing every rare earth junior that has any credibility as are all of the others in its industries that have any common sense.
What is abundantly clear to me in this fog of BS is that the world's non-Chinese end-users of REEs have no way to judge who might deliver REEs outside of China, to their individual specifications, on time, and at a price the end-user can live with. Companies like Lynas are desperately selling the company to the investing public. End-users need the product, which none of them is yet selling from new production.
Down Under Down Under: A Visit to Arafura Resources Nolan's Bore Rare Earth's Project in Australia's Northern Territories [View instapost]
Chihawk,
The engineering required to contain radionuclides and remove them from a process stream and contain them is one that must be addressed with extreme attention to detail among every other consideration. I was surprised by the New York Times account of the failures in the plant's construction. Using mild steels to handle corrosive materials and having cracks in concrete vessels that were bad enough so that the sealant vendor was holding off do not give me confidence that just the drafting of procedures to handle and dispose of materials at decommissioning is going to solve the regulator's concerns. Radioactive material management is a skill learned from experience and at huge costs in time and money. Governments and specialized miners have these skills after having spent the time and money.
You're right that every REE miner is going to face these challenges. In particular those working with monazite to extract the HREEs. I urge my clients in this situation to be ready to address this issue first and foremost when they are out seeking finance. I have written that this issue, radioactive materials, is the 800 lb gorilla in the REE room.
For Lynas this means delays and costs that are today unknown. Certainly this will put them a year behind schedule.
Note well that the Chinese ionic absorption clays, which are very very low grade, are nonetheless essentially thorium free. This Chinese advantage will be hard to overcome and expensive. If deposits similar to the Chinese are found outside of China those deposits will be very much more attractive than monazite for that reason, little or no thorium/uranium, alone.
I am no longer surprised at the simplistic reasoning in the REE production sector. I simply write off those who ignore problems as having already failed.
Down Under Down Under: A Visit to Arafura Resources Nolan's Bore Rare Earth's Project in Australia's Northern Territories [View instapost]
I just read Keith Bradsher's article on the Lynas-Malaysia problems, and he does a very good job of deconstructing the story down to its basics. There are very serious engineering and materials problems that have to be corrected, This will be a large added cost and a costly time delay even if everything can be fixed. This is NORMAL in large construction projects, especially if such have not ever before been done. However this makes the costs per kg and the timelines simply wrong and such numbers as "margins" must now be recalculated.
The public has been following this story as a "its been done before therefore it must be easy to do" adventure. It is anything but that as this latest saga shows.
Hydrocarbons, Industrial Metals and the Alternative Energy Fallacy [View article]
It has been said that 80% of the world's economic growth over the next 40 years will come from Asia. Asia has utilized up until 2000 the least metal per capita outside of Africa. China is now, however, fully committed to building an industrial metals based economy; India, Indonesia, and the rest of Asia 2 billion people outside of China have just begun mass industrialization. China has already even entered the age of mass technology. India and the rest of Asia will do so within a generation.
These events will add 3 billion people, at a minimum, to the consumers of all metals. This will quadruple today's demand for all metals! The massive investment in the exploration for, the extraction of, the refining of, and the fabricating of all metals is underway and it is coming more and more from Asia. As production rate limitations are reached a zero sum game will ensue. Only the rich may have enough metal for the good life, or ,perhaps only the richest nations.
We in America must conserve, recycle, and stop using processes and product cycles that are dissipative of the metals the production of which we are losing ownership and control over daily.
It may have just begun in China and not yet begun in the rest of mainland Asia and Indonesia, but the age of senseless consumerism, of endless "product cycles" based on minor "improvements" is over in the west.
Market Conditions Quickly Move Molycorp to Price Share Offering and Convertible [View article]
This person says "The USA will need to stockpile rare earth material like it does to oil."
In fact that would seem at first be a good idea. The USA has a billion barrel "repository" that whatever its original purpose is useful in emergencies mostly for the military for which price is not a driver. However the US military needs relatively very little rare earths. What it needs is to have access to the skill set to turn rare earth ore concentrates into useful end user products. Those particular skills are in very short supply in the USA and all of the huffing and puffing of Molycorp will and can to little to alleviate that problem.
I am now getting sick of fantasy demand driving fantasy prices.
The USA needs a relatively small amount of rare earths to be domestically self-sufficient. But not all rare earths are equal in utilitarian value. The market has got its supply demand "estimates" both confused and mostly upside-down. No wonder investors are acting as if all of their blood has rushed to their heads, They're sitting on their brains.
Imagine if China were dependent on Molycorp for its own needs for its green future. Wow would Molycorp be a good investment in that case, right? But wait short term thinking on the part of previous owner/operators of both Molycorp and America destroyed this opportunity, because it was giving instant gratification.
If Molycorp fails it will strengthen China's paramount position in the rare earth production sector for all time. If Molycorp succeeds it will only be if China and Japan buy most of its output at the high prices that prevail today.
It looks like the Chinese high tech and green tech industries win in any case. Its sad.
Molycorp Share Offering and Financing Announcements Create an Overhang [View article]
wwwater can you clarify the following:
"The cash would go towards the phase-one and phase-two expansions at its Mountain Pass rare earths processing facility in California, where it aims to produce 19 050 tons of rare-earth oxides once phase one is completed by the end of next year, doubling this in phase two by the end of 2013."
Would this production be of mixed oxides, separated oxides, and, if separated, then "purified" oxides, and if "purified" then to what degree? Further it is my understanding that the "profits" to be generated from Molycorp operations will come from many tons of rare earth permanent magnets being produced AND SOLD. So I ask then about these magnets, what types, and pre-sold to whom are in the works for fiscal 2012,13,14, and beyond?
What are the precise benchmarks by which we can measure the success of Molycorp? I am tired of "going to" and "plan to." I want to see "will deliver by a fixed date to...."
Let's just use the flow chart in the MCP SEC filing. Where `exactly is the company on that flow chart? How does the purchase of SilMet and of Santoku's US operations fit into or modify that chart exactly? Why is it so hard for investors to ask these questions of analysts much less of the company?
Are MCP's management and board to be measured by the share price or by the company's ability to follow a business pan and bring it in on budget and on time? By smoke and mirrors or delivery receipts to end-use customers.?
Remember that you're betting on management not on "pounds in the ground!!!"
Phosphate: As Critical as Rare Earths [View article]
Mobile guru,
Thank you for your kind comments. I originally submitted the article you cite to SA, but it was rejected because they said it involved companies with too small market caps, This is not the first time that SA has rejected an article by me, but it will be the last. I will now post on Resource Investor and on my web site, techmetalsresearch.com. I will also be writing a weekly note for The Gold Report on "critical materials."
On Axion Power's Shelf Registration: An Elephant Hunter Explains Market Dynamics [View article]
John,
Automotive companies' production plans are driven by (excuse the pun) manufacturing engineers who have the final say after the designers and marketing staffs get their marching orders from the operational executives.
Manufacturing engineers decide whether or not something can be mass produced at a cost below the selling price. This aspect of the real world, whether or not something can be produced economically and whether or not such production can be significant enough in quantity and demand to justify the gamble of introducing the product to the marketplace is called rational economic behavior.
Such behavior requires the discipline and cost of accepting years of testing and investigation by the customer of the capabilities and capacities of the suppliers for the product.
Axion International seems like a dream factory only to those who don't understand the acceptance process, based on real time testing, of the OEM automotive industry. From what you've written over the last few years I can only conclude that Axion's PbC technology has passed the test: It has solved a problem (cycle life) that has been holding back the introduction of a technology (micro-hybrid) that will significantly reduce fuel consumption. It is past the first multi-year PPAP (production part approval process) requirement by a world class OEM auto maker (or two or three of them!) and is well on its way to being a mass production supplier.
You compare pissing away investor funds to carefully utilizing them as an overlay to understand "cash burn." I suggest another additional metric. The dream factory versus the wet dream factory. Axion is one and A123 is another.
I have read that in the late 1990s there was an accident at the Mountain Pass operation. An 8 inch pipeline used for drainage was being cleaned mechanically, and apparently no one knew that there was a 6" section. The auger broke the pipe and some water leaked out into the desert. The water was said to contain thorium. An environmental interest group called "The Friends of the Mojave" sued, and Unocal had to clean up the spill. I don't know if this matter was settled, but I suspect that it helped to bring about the decision by Molycorp to shut down Mountain Pass. I believe that the filing about the sale by Chevron to their original buyers led by Resource Capital stipulated that Chevron was retaining liability for this issue. I don't know anything more about it, but I wish someone would ask and get a clear statement about it to close the issue.
As to Lynas I am watching the situation in Malaysia with great interest. If Malaysia withholds or withdraws the operating permit for Gebang then Lynas will not be able to do much more in Australia either. The company's announcements are glib; this is a serious issue not only fort Lynas but for the entire REE mining industry.
Book Review: 'Red Alert - How China's Growing Prosperity Threatens the American Way of Life' [View article]
in 2004-5 Unocal was "in play" as the Wall Street gamers like to say. Unocal had a shut-down mining subsidiary called Molycorp, which had once operated molybdenum mining operations in New Mexico and a rare earths mining operation at Mountain Pass, California, 9 miles west of Henderson, Nevada on M!5.
When the China National Overseas Oil Company (CNOOC) came after Unocal, because, many people think, it, CNOOC, wanted Unocal's deep-sea drilling expertise and an entre into the US market, Washington, DC, panicked and sought out a "white knight" to rescue UNOCAL from the wiles of CNOOC.
I'm sure that Chevron, the white knight, as it turned out, was given something as an incentive in return for agreeing to "rescue" Unocal, but if the Mountain Pass mine was so important why didn't Chevron keep it?. In fact, why didn't Chevron do more than cover 2 million dollars a year in care and maintenance until it sold off the operation?
The fact is that in 2007 when Chevron selected one of the six bids it had gotten unsolicited for Molycorp it accepted a low bid from a AAA buyer, 80 million dollars, and rejected higher bids from entities it did not rate as AAA. There were Japanese bidders for Molycorp in 2007 but no Chinese bidders that I know of.
If Chevron had been interested in getting the mine up and running it would have sold it to a Japanese or Canadian bidder who would have brought it into production. Chevron, it seems, just wanted to get rid of it.
Do you think that Chevron's judgment was flawed by the fact that Chevron subsidiaries must make a profit on their investment in them in a reasonable time?
Great Western with a capital partner who is an end user of rare earth permanent magnets was a bidder for Molycorp in 2007. Two years later Mark Smith made a bid to acquire Great Western. At that point in time Smith was planning to sell separated rare earth oxides as an end product. At the same time GW had adopted a marketing plan called mine to market that called for the sale of magnet alloys produced at its UK subsidiary, Less Common Metals, and using in the future rare earths mined and refined by GW. At the time of the negotiations with Smith GW was buying rare earth metals from China and producing magnet alloys in the UK.
Mark Smith and GW's board made a deal, but Molycorp's board refused to abide by the terms, so at the last minute when no compromise could be reached GW pulled out.
It was after that time of the failed deal that Mark Smith came up with "mine to magnet" as a business model; he realized that Gary Billingsley, the executive chairman of GW who originally came up with the mine to market business model was correct and had designed the only p[possible way to profitably enter the rare earth sector and make a profit.
GW today already produces samarium-cobalt and neodymium-iron-boron powders for the , manufacture of sintered rare earth permanent magnets. I believe that within 18 months GW will no longer need to depend on Chinese suppliies of RE metals as they will be produced in house from company produced rare earth oxides.
The race to be the first REEs producer to be vertically integrated ends on the day that GW delivers high purity separated rare earth oxides produced at Steenkampskraal.to Less common Metals for conversion into magnet alloy
I made this comment. because in a meeting last week with a colleague who just returned from Bayan Obo he made the comment that there is a separation plant running LREEs there that was stated to him to have an annual throughput capacity of 10,000 metric tonnes (measured as TREOs); the Chinese manager told him that this was the largest solvent exchange separation plant for REEs in existence. I am trying to reach my colleague this morning to get the name and affiliation of this plant, because I am planning a visit to China to discuss processing technologies, and I want to put this plant on my agenda. I'll let you know when I get the name and exact details.
I repeat that I believe that MCP's board is making an error of judgment by pursuing the US Treasury "loan guarantee" program rather than seeking private debt finance. My direct experience with regard to the importance of rare earths with cabinet level departments is that this issue is considered more one of "should the USA have a peacetime industrial policy (e.g., classify some metals as strategic and/or critical and stockpile them or financially "subsidize" aspects of their production) and, if so, what aspects of such policy must be codified into law and what aspects of such policy can be accomplished by existing administrative structures and programs?
Does the above look like a "quick-fix" to anyone. DoE is continuing to put significant and impressive resources of person-power into its critical materials' study program. The second publication of the results of this program is scheduled for this fall even though the first was only last February. This is lightning speed for government. DoD needs to know, which, and if, certain metals and minerals will be classified as critical or strategic before it puts programs to stockpile them into place. These classifications are most likely ultimately to come officially from the Department under which the USGS operates, the Department of Interior.
Government at best is a slow process. Wall Street, by contrast, likes the action to be at casino speed with long term judgement hopefully ignored. Wall Street says "Let us alone. We don't need regulation. Why, we're great guys (and gals[?]), and we give a pittance to charity , and the US, which we dearly love, has no right to call on us to create wealth for others in America. Why, that's unAmerican?"
Then, of course, when short term planning by the likes of Goldman-Sachs blows up. The consequences were "unforeseeable."
I have come to the conclusion that in the case of industrially and militarily important metals and minerals government has recognized that a problem exists and it is moving to address the problem for the long term. This is what government should do. Not simply throw money at the flavor of the moment.
I repeat that I think that Molycorp's management and board are operating under the impression that success in Washington requires smoke and mirrors.
I congratulate Molycorp's publicists and lobbyists for bringing the issue of critical and strategic materials to the attention of the federal government. I hope they spent as much time and money bringing it to the attention of the California government from which they need action and support. Finally, someone here has said that it must be rather straight-forward to bring a previously producing mine back into operation. This is an incredible statement. In the case of Molycorp we have not been told: 1. When did mining and concentrating cease? 2. Why were those operations discontinued? a. Was it the price of the commercial product? b. If so, had competitive prices dropped, or were costs of maintenance rising, or both? 3. What was the capacity of the separation plant at shut-down? 4. If it was less than production capacity was ore concentrate being sent to China for processing? 5. Did Molycorp buy separated material from China for re-sale at any point in the last 15 years? 6.Does Molycorp buy significant amounts of REE material; today either for process studies or for re-sale? I am NOT disparaging Molycorp I simply want to analyze the business model, and I need answers to my questions, not press releases and "analyst calls," to do so. America should be self-sufficient in rare earths. If Wall Street were concerned about America's future as a great nation it would provide debt financing to Molycorp as easily as it takes profits from trading MCP shares.
The total investment in Molycorp by the original four large investors, Resource Capital, Pegasus, Traxys, and Goldman-Sachs was $122 million dollars; 80 million to Chevron and, after that, $42 million dollars more to begin to restore operating capability and capacity.
I believe that the filings show that insiders have now taken out between 10 and 20 times that amount.
Its difficult to imagine that the original insiders have much if any interest at this point in the company's future.
In Junior Mining Circles this is called "mining the street."
Why is Molycorp asking for a $200 million dollar loan guarantee from the government (us, you and me) instead of asking former insiders to loan it 10% of the money they just made? Why doesn't Molycorp ask a former insider to guarantee a loan???? Now that would be a vote of confidence that no one could deny.
The whole recent fuss about the rare earth metals mining sector seems to ignore common sense. Without subsidies the low-cost producer will always have the market, in a free market, because it will be able to charge the lowest prices and still make a profit.
The problem in the global marketplace for rare earths is Chinese politics and Chinese economic actions based on their politics.
China has control of both the supply and the demand of the rare earths market today, because it is the low cost producer, and its domestic demand for rare earths is globally dominant and growing.
I have said to Mark Smith, the CEO, of MCP that if he can produce any of the critical rare earth elements such as neodymium in commercially usable form at a selling price less than that of any large scale Chinese company then MCP will return to the market dominance in light rare earths (60%) that it last enjoyed in 1984.
MCP says it can do just this by vertically integrating so that its actual sale product is the rare earth permanent magnets made both from neodymium and samarium.
Announcements about joint ventures and acquisitions do not and should not trump announcements that previously stated milestones have been reached.
The only announcement that matters is that a company has begun to produce and sell its end-use product at a profit level that will enable it to cease raising money by the sale of equity, repay its current debt, and retain earnings or pay dividends.
All the rest is just normal puffing and promotion to raise the money by selling equity, or by pre-selling product (in mining this is called off-take)to be able to do what needs to be done to achieve the goal of making the announcement above.
Down Under Down Under: A Visit to Arafura Resources Nolan's Bore Rare Earth's Project in Australia's Northern Territories [View instapost]
The driver for all these fantasies, the best of which is that an agreement to take all or a part of its needs from your product line, at a market price if it is delivered on time and to specification, which is called a LOI, letter of intent, has collateral value at the bank, is the stock market. These silly statements trying to confuse corporate procurement policy and individual decision making have "announcement value only" for those pumping a share price.
I was just in Singapore, and I was interviewed two weeks ago by Malaysian Public Radio. I was in Australia before I went to Singapore, and I asked Lynas if I could visit Mt Weld. I was refused with the comment that we are not allowing visitors at this time. I did go to see Arafura's drill camp, and my colleague went to review Alkane's metallurgy at its provider of metallurgical process design.
I think that the Malaysian public feels that it has been left out of the permitting process, and I think the best case for Lynas is a one year and more delay.
I think Siemens needs neodymium and dysprosium or it will be squeezed out of the wind turbine market to say nothing of the (much much bigger) OEM automotive market. Siemens is interviewing every rare earth junior that has any credibility as are all of the others in its industries that have any common sense.
What is abundantly clear to me in this fog of BS is that the world's non-Chinese end-users of REEs have no way to judge who might deliver REEs outside of China, to their individual specifications, on time, and at a price the end-user can live with. Companies like Lynas are desperately selling the company to the investing public. End-users need the product, which none of them is yet selling from new production.
Down Under Down Under: A Visit to Arafura Resources Nolan's Bore Rare Earth's Project in Australia's Northern Territories [View instapost]
The engineering required to contain radionuclides and remove them from a process stream and contain them is one that must be addressed with extreme attention to detail among every other consideration. I was surprised by the New York Times account of the failures in the plant's construction. Using mild steels to handle corrosive materials and having cracks in concrete vessels that were bad enough so that the sealant vendor was holding off do not give me confidence that just the drafting of procedures to handle and dispose of materials at decommissioning is going to solve the regulator's concerns.
Radioactive material management is a skill learned from experience and at huge costs in time and money. Governments and specialized miners have these skills after having spent the time and money.
You're right that every REE miner is going to face these challenges. In particular those working with monazite to extract the HREEs. I urge my clients in this situation to be ready to address this issue first and foremost when they are out seeking finance. I have written that this issue, radioactive materials, is the 800 lb gorilla in the REE room.
For Lynas this means delays and costs that are today unknown. Certainly this will put them a year behind schedule.
Note well that the Chinese ionic absorption clays, which are very very low grade, are nonetheless essentially thorium free. This Chinese advantage will be hard to overcome and expensive. If deposits similar to the Chinese are found outside of China those deposits will be very much more attractive than monazite for that reason, little or no thorium/uranium, alone.
I am no longer surprised at the simplistic reasoning in the REE production sector. I simply write off those who ignore problems as having already failed.
Down Under Down Under: A Visit to Arafura Resources Nolan's Bore Rare Earth's Project in Australia's Northern Territories [View instapost]
The public has been following this story as a "its been done before therefore it must be easy to do" adventure. It is anything but that as this latest saga shows.
Hydrocarbons, Industrial Metals and the Alternative Energy Fallacy [View article]
These events will add 3 billion people, at a minimum, to the consumers of all metals. This will quadruple today's demand for all metals! The massive investment in the exploration for, the extraction of, the refining of, and the fabricating of all metals is underway and it is coming more and more from Asia. As production rate limitations are reached a zero sum game will ensue. Only the rich may have enough metal for the good life, or ,perhaps only the richest nations.
We in America must conserve, recycle, and stop using processes and product cycles that are dissipative of the metals the production of which we are losing ownership and control over daily.
It may have just begun in China and not yet begun in the rest of mainland Asia and Indonesia, but the age of senseless consumerism, of endless "product cycles" based on minor "improvements" is over in the west.
Market Conditions Quickly Move Molycorp to Price Share Offering and Convertible [View article]
In fact that would seem at first be a good idea. The USA has a billion barrel "repository" that whatever its original purpose is useful in emergencies mostly for the military for which price is not a driver. However the US military needs relatively very little rare earths. What it needs is to have access to the skill set to turn rare earth ore concentrates into useful end user products. Those particular skills are in very short supply in the USA and all of the huffing and puffing of Molycorp will and can to little to alleviate that problem.
I am now getting sick of fantasy demand driving fantasy prices.
The USA needs a relatively small amount of rare earths to be domestically self-sufficient. But not all rare earths are equal in utilitarian value. The market has got its supply demand "estimates" both confused and mostly upside-down. No wonder investors are acting as if all of their blood has rushed to their heads, They're sitting on their brains.
Imagine if China were dependent on Molycorp for its own needs for its green future. Wow would Molycorp be a good investment in that case, right? But wait short term thinking on the part of previous owner/operators of both Molycorp and America destroyed this opportunity, because it was giving instant gratification.
If Molycorp fails it will strengthen China's paramount position in the rare earth production sector for all time. If Molycorp succeeds it will only be if China and Japan buy most of its output at the high prices that prevail today.
It looks like the Chinese high tech and green tech industries win in any case. Its sad.
Molycorp Share Offering and Financing Announcements Create an Overhang [View article]
"The cash would go towards the phase-one and phase-two expansions at its Mountain Pass rare earths processing facility in California, where it aims to produce 19 050 tons of rare-earth oxides once phase one is completed by the end of next year, doubling this in phase two by the end of 2013."
Would this production be of mixed oxides, separated oxides, and, if separated, then "purified" oxides, and if "purified" then to what degree? Further it is my understanding that the "profits" to be generated from Molycorp operations will come from many tons of rare earth permanent magnets being produced AND SOLD. So I ask then about these magnets, what types, and pre-sold to whom are in the works for fiscal 2012,13,14, and beyond?
What are the precise benchmarks by which we can measure the success of Molycorp? I am tired of "going to" and "plan to." I want to see "will deliver by a fixed date to...."
Let's just use the flow chart in the MCP SEC filing. Where `exactly is the company on that flow chart? How does the purchase of SilMet and of Santoku's US operations fit into or modify that chart exactly? Why is it so hard for investors to ask these questions of analysts much less of the company?
Are MCP's management and board to be measured by the share price or by the company's ability to follow a business pan and bring it in on budget and on time? By smoke and mirrors or delivery receipts to end-use customers.?
Remember that you're betting on management not on "pounds in the ground!!!"
Phosphate: As Critical as Rare Earths [View article]
Thank you for your kind comments. I originally submitted the article you cite to SA, but it was rejected because they said it involved companies with too small market caps, This is not the first time that SA has rejected an article by me, but it will be the last. I will now post on Resource Investor and on my web site, techmetalsresearch.com. I will also be writing a weekly note for The Gold Report on "critical materials."
Thanks again,
Jack Lifton
On Axion Power's Shelf Registration: An Elephant Hunter Explains Market Dynamics [View article]
Automotive companies' production plans are driven by (excuse the pun) manufacturing engineers who have the final say after the designers and marketing staffs get their marching orders from the operational executives.
Manufacturing engineers decide whether or not something can be mass produced at a cost below the selling price. This aspect of the real world, whether or not something can be produced economically and whether or not such production can be significant enough in quantity and demand to justify the gamble of introducing the product to the marketplace is called rational economic behavior.
Such behavior requires the discipline and cost of accepting years of testing and investigation by the customer of the capabilities and capacities of the suppliers for the product.
Axion International seems like a dream factory only to those who don't understand the acceptance process, based on real time testing, of the OEM automotive industry. From what you've written over the last few years I can only conclude that Axion's PbC technology has passed the test: It has solved a problem (cycle life) that has been holding back the introduction of a technology (micro-hybrid) that will significantly reduce fuel consumption. It is past the first multi-year PPAP (production part approval process) requirement by a world class OEM auto maker (or two or three of them!) and is well on its way to being a mass production supplier.
You compare pissing away investor funds to carefully utilizing them as an overlay to understand "cash burn." I suggest another additional metric. The dream factory versus the wet dream factory. Axion is one and A123 is another.
Keep up the good work of predicting the future.
Jack
Molycorp Looks Too Good to Pass Up [View article]
I have read that in the late 1990s there was an accident at the Mountain Pass operation. An 8 inch pipeline used for drainage was being cleaned mechanically, and apparently no one knew that there was a 6" section. The auger broke the pipe and some water leaked out into the desert. The water was said to contain thorium. An environmental interest group called "The Friends of the Mojave" sued, and Unocal had to clean up the spill. I don't know if this matter was settled, but I suspect that it helped to bring about the decision by Molycorp to shut down Mountain Pass. I believe that the filing about the sale by Chevron to their original buyers led by Resource Capital stipulated that Chevron was retaining liability for this issue. I don't know anything more about it, but I wish someone would ask and get a clear statement about it to close the issue.
As to Lynas I am watching the situation in Malaysia with great interest. If Malaysia withholds or withdraws the operating permit for Gebang then Lynas will not be able to do much more in Australia either. The company's announcements are glib; this is a serious issue not only fort Lynas but for the entire REE mining industry.
Jack
Book Review: 'Red Alert - How China's Growing Prosperity Threatens the American Way of Life' [View article]
When the China National Overseas Oil Company (CNOOC) came after Unocal, because, many people think, it, CNOOC, wanted Unocal's deep-sea drilling expertise and an entre into the US market, Washington, DC, panicked and sought out a "white knight" to rescue UNOCAL from the wiles of CNOOC.
I'm sure that Chevron, the white knight, as it turned out, was given something as an incentive in return for agreeing to "rescue" Unocal, but if the Mountain Pass mine was so important why didn't Chevron keep it?. In fact, why didn't Chevron do more than cover 2 million dollars a year in care and maintenance until it sold off the operation?
The fact is that in 2007 when Chevron selected one of the six bids it had gotten unsolicited for Molycorp it accepted a low bid from a AAA buyer, 80 million dollars, and rejected higher bids from entities it did not rate as AAA. There were Japanese bidders for Molycorp in 2007 but no Chinese bidders that I know of.
If Chevron had been interested in getting the mine up and running it would have sold it to a Japanese or Canadian bidder who would have brought it into production. Chevron, it seems, just wanted to get rid of it.
Do you think that Chevron's judgment was flawed by the fact that Chevron subsidiaries must make a profit on their investment in them in a reasonable time?
Molycorp Looks Too Good to Pass Up [View article]
Great Western with a capital partner who is an end user of rare earth permanent magnets was a bidder for Molycorp in 2007. Two years later Mark Smith made a bid to acquire Great Western. At that point in time Smith was planning to sell separated rare earth oxides as an end product. At the same time GW had adopted a marketing plan called mine to market that called for the sale of magnet alloys produced at its UK subsidiary, Less Common Metals, and using in the future rare earths mined and refined by GW. At the time of the negotiations with Smith GW was buying rare earth metals from China and producing magnet alloys in the UK.
Mark Smith and GW's board made a deal, but Molycorp's board refused to abide by the terms, so at the last minute when no compromise could be reached GW pulled out.
It was after that time of the failed deal that Mark Smith came up with "mine to magnet" as a business model; he realized that Gary Billingsley, the executive chairman of GW who originally came up with the mine to market business model was correct and had designed the only p[possible way to profitably enter the rare earth sector and make a profit.
GW today already produces samarium-cobalt and neodymium-iron-boron powders for the , manufacture of sintered rare earth permanent magnets. I believe that within 18 months GW will no longer need to depend on Chinese suppliies of RE metals as they will be produced in house from company produced rare earth oxides.
The race to be the first REEs producer to be vertically integrated ends on the day that GW delivers high purity separated rare earth oxides produced at Steenkampskraal.to Less common Metals for conversion into magnet alloy
Molycorp Looks Too Good to Pass Up [View article]
Molycorp Looks Too Good to Pass Up [View article]
I repeat that I believe that MCP's board is making an error of judgment by pursuing the US Treasury "loan guarantee" program rather than seeking private debt finance. My direct experience with regard to the importance of rare earths with cabinet level departments is that this issue is considered more one of "should the USA have a peacetime industrial policy (e.g., classify some metals as strategic and/or critical and stockpile them or financially "subsidize" aspects of their production) and, if so, what aspects of such policy must be codified into law and what aspects of such policy can be accomplished by existing administrative structures and programs?
Does the above look like a "quick-fix" to anyone. DoE is continuing to put significant and impressive resources of person-power into its critical materials' study program. The second publication of the results of this program is scheduled for this fall even though the first was only last February. This is lightning speed for government. DoD needs to know, which, and if, certain metals and minerals will be classified as critical or strategic before it puts programs to stockpile them into place. These classifications are most likely ultimately to come officially from the Department under which the USGS operates, the Department of Interior.
Government at best is a slow process. Wall Street, by contrast, likes the action to be at casino speed with long term judgement hopefully ignored.
Wall Street says "Let us alone. We don't need regulation. Why, we're great guys (and gals[?]), and we give a pittance to charity , and the US, which we dearly love, has no right to call on us to create wealth for others in America. Why, that's unAmerican?"
Then, of course, when short term planning by the likes of Goldman-Sachs blows up. The consequences were "unforeseeable."
I have come to the conclusion that in the case of industrially and militarily important metals and minerals government has recognized that a problem exists and it is moving to address the problem for the long term. This is what government should do. Not simply throw money at the flavor of the moment.
I repeat that I think that Molycorp's management and board are operating under the impression that success in Washington requires smoke and mirrors.
I congratulate Molycorp's publicists and lobbyists for bringing the issue of critical and strategic materials to the attention of the federal government. I hope they spent as much time and money bringing it to the attention of the California government from which they need action and support.
Finally, someone here has said that it must be rather straight-forward to bring a previously producing mine back into operation. This is an incredible statement. In the case of Molycorp we have not been told:
1. When did mining and concentrating cease?
2. Why were those operations discontinued? a. Was it the price of the commercial product? b. If so, had competitive prices dropped, or were costs of maintenance rising, or both?
3. What was the capacity of the separation plant at shut-down?
4. If it was less than production capacity was ore concentrate being sent to China for processing?
5. Did Molycorp buy separated material from China for re-sale at any point in the last 15 years?
6.Does Molycorp buy significant amounts of REE material; today either for process studies or for re-sale?
I am NOT disparaging Molycorp I simply want to analyze the business model, and I need answers to my questions, not press releases and "analyst calls," to do so.
America should be self-sufficient in rare earths. If Wall Street were concerned about America's future as a great nation it would provide debt financing to Molycorp as easily as it takes profits from trading MCP shares.
Molycorp Looks Too Good to Pass Up [View article]
I don't think you're being realistic.
The total investment in Molycorp by the original four large investors, Resource Capital, Pegasus, Traxys, and Goldman-Sachs was $122 million dollars; 80 million to Chevron and, after that, $42 million dollars more to begin to restore operating capability and capacity.
I believe that the filings show that insiders have now taken out between 10 and 20 times that amount.
Its difficult to imagine that the original insiders have much if any interest at this point in the company's future.
In Junior Mining Circles this is called "mining the street."
Why is Molycorp asking for a $200 million dollar loan guarantee from the government (us, you and me) instead of asking former insiders to loan it 10% of the money they just made? Why doesn't Molycorp ask a former insider to guarantee a loan???? Now that would be a vote of confidence that no one could deny.
Molycorp Looks Too Good to Pass Up [View article]
The problem in the global marketplace for rare earths is Chinese politics and Chinese economic actions based on their politics.
China has control of both the supply and the demand of the rare earths market today, because it is the low cost producer, and its domestic demand for rare earths is globally dominant and growing.
I have said to Mark Smith, the CEO, of MCP that if he can produce any of the critical rare earth elements such as neodymium in commercially usable form at a selling price less than that of any large scale Chinese company then MCP will return to the market dominance in light rare earths (60%) that it last enjoyed in 1984.
MCP says it can do just this by vertically integrating so that its actual sale product is the rare earth permanent magnets made both from neodymium and samarium.
Announcements about joint ventures and acquisitions do not and should not trump announcements that previously stated milestones have been reached.
The only announcement that matters is that a company has begun to produce and sell its end-use product at a profit level that will enable it to cease raising money by the sale of equity, repay its current debt, and retain earnings or pay dividends.
All the rest is just normal puffing and promotion to raise the money by selling equity, or by pre-selling product (in mining this is called off-take)to be able to do what needs to be done to achieve the goal of making the announcement above.