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Jack Lifton
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Jack Lifton is an Independent consultant and commentator, focusing on the market fundamentals and future end use trends of the rare metals. He specializes in the sourcing of nonferrous strategic metals and on due diligence studies of businesses in that space. His work includes exploration,... More
My company:
Technology Metals Research
My blog:
The Jack Lifton Report
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  • Underpriced Rare Earth Metals From China Have Created A Supply Crisis
    Todays, Dec. 6, 2009,  Times of London (UK) has an interesting story about the environmental problems in the region of Inner Mongolia that accounts for essentally all of the production of "light" rare earths today in the world.

    China has a policy of predatory pricing, which has allowed it to gain monopoly control over some strategic natural resources such as the rare earth metals. The policy has now backfired as the low revenues to Chinese producers have deprived them of the investment funds they need to not only expand production but also to maintain the production they have.

    The result is a massive Chinese environmental problem, which threatens all by itself to cut  non Chinese end users off from their only supply.
     
    I wonder if our western institutional investors really understand the key driver for China's rush to "develop" its natural resources. Western investors see greed/profit as the main driver for any production of natural resources anywhere. I think that the Chinese government,which we must remember is the owner of, and licensor of any production of, all natural resources in China, is determined to catch up with western technological progress by whatever means necessary not to make profits but rather to level the cultural playing field. Chinese "entrepreneurs" are not risking their lives and endangering the lives of their fellow countrymen primarily to produce natural resources for export; they are driven by greed, surely enough, but their greed is satisfied by the managers of Chinese state enterprizes who cannot get sufficient raw materials to meet their quotas under the current five-year plan. These managers will pay more than the "contract" price for supplies, because in China failure to meet your goal is the same as failure to do your job, and simply to say that you could not get sufficient supply is merely making excuses, because the same five-year plan that you are not fulfilling says that the natural resource producers will produce enough material to fulfill their part of the plan, and their suppliers of equipment will also produce enough. Those failing to meet their quotas are clearly failing the people... I think we all understand how this type of pressure can lead to environmentally unsound decisions and even to official mines looking away from unscheduled and unsafe production.
    The idea that we in the west can compete with this type of thinking by simply looking at such metrics as "return on investment" is at best naive.
    I have said before and I will continue to say that the so-called prices set for rare earth metals by Chinese producers at all levels are arbitrary.
    When the crunch point comes, and it may come very soon, when there are no rare earth metals to be had in China for export the prices of the rare earth metals will skyrocket and institutional investors will squander billions to re-start the western supply and value chains for the rare earth metals. Western institutional investors simply don't know how to value rare metal resources; they are about to have an expensive lesson.
    Let me repeat: I believe that the rare earth metals are underpriced already at the present time, because they represent a Chinese pricing set for the main purpose of keeping the production of the rare earth metals and of their end use products in China to maximize the jobs created by this industry within the domestic Chinese economy.
    This situation cannot last much longer, because China itself is running short of rare earth metals due to inefficient production methods, environmental problems, and corruption.
    Any questions??


    Disclosure: I have no positions in the stocks of any rare earth mining companies
    Dec 06 9:32 AM | Link | 2 Comments
  • The Rare Earth Metals, Uranium, and Thorium: All Commonly Found Together; And All Desired By China
    I listened yesterday, November 14, 2009, and I think, if you have an interest in investing in the development of rare earth supply chain dynamics,  you should also listen to an audio clip that had first been broadcast the day before yesterday on the ABC, the Australian Broadcasting Company, and is now available on the Internet at  http://www.abc.net.au/rn/breakfast/stories/2009/2741501.htm

    I'm certain that the above clip was edited out from an almost full hour show that ran on the ABC yesterday, Saturday, November 14, 2009,  and was a good survey of the current issues in the market fundamentals (i.e., the current supply and demand situation) of the rare earth metals. The nearly hour long show is on the Internet at
    http://www.abc.net.au/rn/backgroundbriefing/stories/2009/2738774.htm

    The first clip cited above helped me to understand why the Chinese mining industry is interested in the Australian miner, ARAFURA, which I do not mention in my surveys, because, although it is one of the very few "listed" companies with a rare earths' deposit, known as the Nolan's Bore deposit, it is, to the best of my understanding not ready to go forward due to open issues with its "metallurgy." This is the term used in mining to describe the chemical engineering processes needed to economically extract the desired minerals from the mined ore concentrates and then to separate them into their constituent elements in a form in which they can be further processed to usable materials. The main issue is always economics.The metallurgy must finally result in products that will sell for more at that point than they cost to produce. It is very important to note that an environmental issue can have an economic impact on a project that makes the ultimate cost prohibitive even if the chemical processes involved do not on their own make the costs prohibitive.

    This comes out strongly in both of the clips above as the Lynas Chairman, Mr. Nick Curtis, alludes to the problems caused for ARAFURA by the fact that their Nolan's Bore ore body contains both of the naturally radioactive elements, uranium and thorium.

    An environmental commentator then uses inflammatory words such as "dirty" and "dangerous" to describe what he calls the historical mining of the rare earths (anywhere) through their extraction from formations known to geologists as monazite mineral sands, in which, as Mr. Curtis points out correctly, thorium is always found along with the rare earths.

    The commentator goes on to tell us that the citizenry of Darwin, Australia is "concerned" with a plan by ARAFURA to "dump" rare earth processing residues from Nolan's Bore containing "yellowcake ( a common name for the yellow uranium oxide U3O8 ore known as carnotite when found alone) on an island in Darwin harbor. He doesn't mention, or if he does, I didn't note it, the final destination of the thorium from the Nolan's Bore operations.

    I'd like to point out to my readers that I didn't know of the Darwin island scheme or that the radioactive residues were such an issue until I heard the ABC commentator and Mr. Curtis' comments during the last two days, but I must admit that I take a different view from theirs.

    Perspective is the key to objectivity. So, what is the Chinese perspective on all of this?

    China is very interested in uranium for current use and in thorium for future use in nuclear reactors to produce electricity for civilian use without the need to burn fossil fuels. In addition China seeks uranium for its military programs. China last year instructed its domestic rare earth processing plants to hold all thorium produced as a byproduct for government use. This has always been the requirement in China for any uranium produced anywhere.

    I'm certain that the current Chinese minority shareholder in ARAFURA would be willing to buy and export to China all of the uranium or thorium produced in Australia by ARAFURA (or anyone else) at market price.

    I am not confusing China and Chinese mining companies here; they are one and the same with regard to their primary focus on growing China's economy. I do not see any need to name individual Chinese entities at this point in the discussion.

    Mr. Curtis and well known Australian rare earth expert, Dudley Kingsnorth, who once worked for Lynas, both point out that Australian monazite deposits were the source of 25% of the world's rare earths in the 1970s and 1980s and that the thorium (and uranium?) contained in them caused their then refiner, France's Rhodia, SA, to ultimately transfer their processing where possible to China where it was said on the program that environmental controls were less stringent.

    What was not said was that until the LYNAS refinery being built in Malaysia is ready-in, perhaps 2-3 years-any ore concentrates produced in Australia by anyone will have to go to China also, even those produced by Lynas, should anyone want to refine them. Mr. Curtis indicated that LYNAS ore does not contain thorium. What he failed to note that even if it does contain thorium and uranium those elements will be recovered either in China or in Malaysia.

    What also was not said by anyone on the show was that neither of the Australian deposits has significant amounts of the higher atomic numbered rare earths, dysprosium, terbium, or europium. Interestingly enough the show mentioned those rare earth elements frequently, but failed to mention that they are not present in Australian deposits in any significant amount. The "heavies" come only from China today, but I think they will soon be coming from Canada, the U.S., and the Republic of South Africa.

    I'm going to discuss the topic of the relative importance and the relative value of rare earth deposits in a lengthy article to appear in "The Jack Lifton Report" next week after I discuss "who's going to win the race to be the first to produce the heavy rare earths outside of China?" next weekend, November 22 at the Hard Assets Conference in San Francisco at the downtown Marriott. Come by and talk to me at the expert round table there or, if you can't, be sure to read The Jack Lifton Report, www.jackliftonreport.com, next Monday, November 23.

    The linkage of the rare earths, thorium, and uranium needs to be taken into account by those who are looking to produce rare earths or invest in their production.
    Nov 15 2:37 PM | Link | 5 Comments
  • Strategic & Critical Metals in Washington, DC.
    I co-chaired a conference in Washington, DC, last week, Oct. 20-22, called "Supply Chain Management for Strategic & Critical Metals." It was an eye-opener for me with respect to both the current level of interest and of knowledge of this topic among private industry end users of strategic & critical metals, government(s), producers (mining companies), economists, mining analysts, and metal traders.

    The conference was organized and managed by Infocast, www.infocastinc.com, a Los Angeles based firm that produces some 60 conferences a year including many well attended ones on alternate energy (wind and solar, for example) and energy storage (batteries). I was asked several months ago by Infocast if I would work with them to create this conference and help plan its agenda and choose speakers. I agreed, because I wasn't then aware of any other conference themed on this topic, and I wanted to get this theme into the public's awareness. I believe that this was the first public conference open to non specialists on this specific topic.

    The list of attendees included a large delegation from Canada's Northwest Territories, a still mostly unexplored treasure house of natural resources (rare earths [Avalon Rare Metals(AVL.TO), North American Tungsten, and the largest diamond mines in the world}, which included representatives of the Territorial government. Additionally. The US Government was also very much in attendance. Over the conference's three days I met individuals from the Departments of Defense, Energy, and Interior.

    In addition to Avalon, Canada's Great Western Mining Group (GWG.V), Canada's Commerce Resources (tantalum) (CRZF.PK), America's Molycorp, and American located Canadian owned Rare Element Resources were present.

    General Electric (GE.NYSE), Denmark's Vestas (the world's largest maker of wind turbines), and Intel were there, among other global 1000 manufacturing corporations.

    Essentially all of America's designers and makers of permanent magnets, Thomas & Skinner, ElectronEnergy, Arnold Magnetics, and Dexter Magnetics were also present.

    Trade associations attending included REITA, the Rare Earth Industries Technology Association, the USMMA, the United States Magnet Materials Association, and the MMTA (www.mmta.co.uk), the Minor Metals Trade Association, a UK based international group.

    The speakers included officials from both the governments of the US and Canada, mining and metals experts and analysts, and procurement specialists.

    The CEO of Infocast told me that Infocast plans to repeat this conference in Asia and to expand its, Infocast's, footprint in the rare metals information space as it pertains to alternate energy and cleantech.

    I will be posting excerpts from the conference presentations and my commentaries on them here and on my new web site, "The Jack Lifton Report," www.jackliftonreport.com, in the near future.

    In the meantime, for your edification, I am going to list below the URLs for some videos I made during the conference. There are two summary commentaries by me, and two interviews by me of prominent people, Dave Trueman (rare metals geologist) and John Kaiser (mining analyst and publisher of the Kaiser Bottom Fish, www.kaiserbottomfish.com )who attended and/or spoke at the conference.  

    Jack Lifton in Washington Part 1 - http://www.youtube.com/watch?v=XKNpnWZkxl0

    Jack Lifton in Washington Part 2 - http://www.youtube.com/watch?v=5mlJbnxsXHk

     

    Jack Lifton with John Kaiser - http://www.youtube.com/watch?v=fCUZbt1CgnM

    Jack Lifton with Dr. Dave Truman - http://www.youtube.com/watch?v=pkVuYqLAoR4


     
    Tags: GE, CMRZF
    Oct 26 8:23 AM | Link | 6 Comments
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