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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
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Technology Metals Research
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The Jack Lifton Report
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  • The Number of Nearest-in-Time Potential American Critical Heavy Rare Earths Producers is Increased by One: The Coming Rare Earth Junior Mining Cull, Crystal Balls and Brass Balls
    Rare Element Resources Ltd (REE.AMEX) today issued a press release that makes very good reading for the American civilian and military industrial manufacturing sector. REE now joins Ucore as having a high potential for producing the critical rare earths, dysprosium, terbium, europium, and neodymium in commercial quantities. Additionally REE could produce samarium, gadolinium, and yttrium in notable and certainly commercial quantities thus joining Ucore (UURAF,PK) in that capacity.

    So now there are two potential domestic American  HREE producers that I think are viable and have high probabilities of commercial success.

    The sole free market criterion for measuring the value of a company
     is profitability. For "junior" mining companies, all of which are mineral exploration ventures organized to explore for and verify valuable deposits of minerals that can be either developed by the junior or sold by it to a mining company for development as a profitable venture, Profitability in the junior mining space almost always means the difefrence between the sale price for the deposit and the cost of getting to a saleable point..

    Thus junior miners are speculative ventures, which, in a fair and balanced world, would be rated as much by their management experience and marketing skills as by the economic value of their deposits.

    Unfortunately this is not the case.The measue of success (metric) used in the junior mining world is the previous experience of the particular promoters involved in successful past promotions especially in gold, the forever fad and, most recently, uranium.

    Human nature is to create fads and measure the worth of individuals by their adherence to the particular "narrative" of the latest fad. For the last three years the promotional aspect of the stock markets based in Vancouver, Toronto, Sydney, Perth, Frankfort, London and New York have been suucessfully promoting a rare earth boomlet. Various pundits and money managers have spun stories of the importance of the rare earth metals beyond any recognizable common sense logic in order to lower the bar for entry to the rare earth junior mining corral.

    Some rare earth metals are indeed very important for the maintenance of the mass production of the miniaturized electronic devices that the younger among us believe have always existed and have always been available cheaply and abundantly.

    The total conversion of our technological society's electric motors and generators to smaller and more powerful types using rare earth permanent magnets is nearing completion. Rare earth permanent magnets, particularly of the neodymium-iron-boron metallurgy dominate the market for permanent magnets for all uses.

    Interestingly enough, of the very small percentage of neodymium-iron-boron magnet powder and solid alloy imported into the USA for the production of rare earth permanent magnets most is used by high tech civilian industry such as that for medical imaging devices. Only a smaller amount of the total is used for significant military devices. For example, just a tiny amount of the rare earth metal, samarium, is imported into the USA for direct conversion here into samarium cobalt alloy for rare earth permanent magnets exclusively for the US military,

    I doubt that more than 500 tons in total of magnet alloy as raw materials are imported into the USA each year for magnet fabrication, and of that amount I seriously doubt that more than 100 tons is used exclusively for military production.

    At least 90% of the world's rare earth permanent magnets are made in China (60% and Japan, 30%). The alloys from which they are made are produced almost entirely (95%) in China from rare earth metals produced domestically there.

    Anyone in the USA who is planning to manufacture rare earth permanent magnets from domestically (USA) produced rare earth metals is facing the situation that:

    1. No rare earth ores have been mined in North America in the 21st century,

    2. No American company using American developed technology has produced rare earth metals in the USA in the 21st century,

    3. No American company has made neodymium-iron-boron magnets from the individual rare earth metals in the USA since, at least 2004. Electron Energy Inc in Lancaster, Pa. has however made smaraium-cobalt rare earth permanent magnet alloys and magnets. The company, I believe,  has entered into an off-take with Great Westernn Minerals Group (OTCQX:GWMGF) for rare earth metals to be produced by that company's Less Common Metals subsidiary from its, GW's, mining and refining operations in South Africa.

    4. Only a small overall tonnage of rare earth permanent magnets are currently produced in the USA from a rare earth metal base, and, critically,

    5. All of the dysprosium used to modify the heat cycle sensitivity of rare earth permanent magnets, which is critical in their largest end-use, "under the hood" applications in the OEM automotive industry, as well as in their military use, is and always has been produced in China.

    Just two of the US junior mining ventures currently in development, principally Ucore (UURAF.OTCF) in Alaska and Rare Element Resources (REE.ASE)  in Wyoming could produce dysprosium in commercial quantities in time for the American military and industrial complexes to free themselves of Chinese monopolizing of the rare earth space in general and of the heavy rare earths in particular, before the liklihood of the discontinuing of the export of dysprosium by China either in or before 2015.

    America needs between 5,000 and 10,000 metric tons a year of lanthanum (90%) and cerium.(10%) in order for the fluid cracking catalyst manufacturing industry toremain based mainly in the USA. America also needs 4,000 tons, at most, of neodymium to manufacture all of the rare earth permanent magnets used in every application in the USA today rather than import most of them from China and Japan-this estimate may be too high-and America needs between a minimum of 400 and a maximum of  1200 tons of dysprosium to modify those magnets so that they can be repeatedly exposed to heating and cooling cycles (such as "under the hood") and retain their original properties. Also if America has 100 tons a year of domestically produced terbium it could dominate the world of non incandescent lighting if it so desired.

    Some of the above high tonnage production is simply not possible in the USA. Particularly amounts of dysprosium of more than 300 tons per year and of less than 60 tons of terbium, at most.

    For critical applications investors should look first to those who can in fact produce dysprosium and terbium and, of course lanthanum and neodymium.

    All of the emphasis so far has been on lanthanum, cerium, and neodymium, but only one of those, neodymium, is really a critical metal that I believe is even now in short supply.

    The important critical rare earth metals are now dysprosium and terbium because they are not produced in the USA but are necessary for the high tech devices of which America is the largest per capita consumer..

    The smart play is clearly to support those who can produce the most critical of the rare earths by also buying all of the lanthanum, cerium, and neodymium that they can produce. Rare Element Resources and Ucore should be the choice for end users of magnet materials and of lighting materials and of fluid cracking catalyst materials, because by buying out the production of these two companies in total American companies can be assured of independence from Chinese decisions on allocation
    .

    I also urge American civilian and military industry to support vertical integration the rare earth permanent magnet industry and the phosphor industry. America has all of the technology to transform rare earth ore conentrates, the first item in the rare earth end use product supply chain into finsihed magnets and CFLs. Yet we have simply abandoined these industrial steps, all of them, actually, for momentary cheaper prices.

    Since neither Ucore nor RER could provide individually or even together enough lanthanum and neodymium for the American fcc industry or a revived domestic magnet manufactruing industry the smart play for end-user procurement is to form a buying group and to enter into off-take agreements for the entire outputs of RER and Ucore and to divide up the critical materials among themselves
     
    Additional lanthanum, cerium, and neodymium needed by American industry can be purchased from Molycorp which can then dedicate the balance of its enormous production of light rare earths to rich overseas markets such as Japan, Korea, India and China itself. 

    I urge the management of RER and Ucore to determine their actual cost of production of all of the rare earth metals individually and then offer them to a procurement operation at a known level of profit and a predictable cost for the buyer.

    The two mining companies will be very profitable and the end users will continue to be able to utilize rare earths in their products and thus compete with Chinese industries that will continue to have easy access to raw materials the prices of which are now climbing within China along with labor, regulatory, health, and safety costs.

    It is obvious that if Molycorp's projections are accurate then it will be producing at lower costs than the Chinese. At that point Molycorp can sell its output to the world's largest consumer of its products, China, as well as to Japan, which today sources from China
    exclusively.

    If American self-sufficiency to insure that our civilian and military manufacturing industries retain their market share and can grow is important then those sectors of our economy must strike bargains with and  buy from Rare Element Resources and Ucore to ensure their own prosperity as well as that of you and me.

    I urge industry, both civilian and military, to grow a pair, work together, and get the ball(s) rolling beofre America becomes an industrial backwater.







     
     
     
     
     



    Disclosure: I am long OTCQX:GWMGF.
    Aug 04 4:51 PM | Link | 2 Comments
  • Rare Earths, Reality, and High Finance
     

    Mitsubishi(OTCPK:MSBHY) and Lynas(OTCPK:LYSCF), A Love Affair or a Divorce from the dollar?

     

    This morning my Google filter caught the following story abstract from Industrial Minerals, which can be found at http://www.indmin.com/Article/2871816/Channel/19557/Mitsubishi-takes-stake-in-rare-earths-group-Lynas.html. I am not a subscriber to IM, so I have only the above abstract, but I am intrigued by what I believe it really implies, and I am really intrigued by the fact that the story abstract does not mention some very real implications here. It seems to me that:

    1.       Mitsubishi would right now rather have a bundle of securities, 25% of which is in Lynas shares, than a claim on US Dollars, and

    2.       Morgan Stanley (MS) would rather let go of a substantial stake in Lynas than give up cash

    What I see here as a logical consequence of my view of these actions is that Morgan Stanley believes it can get no further added value from its Lynas sate, and that Mitsubishi would rather have securities than a right to a fixed amount of American currency.

    Either the author of the IM article or I may be guilty of the logical fallacy called post hoc propter hoc, which is Latin for “After this, (therefore) on account of this.” It means that you cannot assume that an event that follows another event in time is necessarily caused by that prior event.

    I think it just as likely that Mitsubishi and Morgan Stanley have the views I expressed above as it is that this transaction was driven by a desire for Mitsubishi to acquire shares in Lynas.

    No matter what however I’d like to know why Morgan Stanley did what they did. Mitsubishi, it seems to me, got the best of the deal, unless Morgan Stanley knows something we don’t.

    Please, if anyone has read the IM article fully tell me if I am off track here.

    Tags: , MS, LYSCF, rare earths, dollar
    Jul 26 12:58 PM | Link | 10 Comments
  • Down Under Down Under: A Visit to Arafura Resources Nolan's Bore Rare Earth's Project in Australia's Northern Territories
    Sydney, Australia, June 25, 2011: My business partner, Dr. Gareth Hatch and I are in Sydney where we have just wrapped up a busy week.

    We were first both invited speakers at a Rare Earth & Strategic Metals Conference here, and then we both conducted a well-attended workshop on understanding and participating in the rare earth supply chain for junior miners, refiners, and end-users. The workshop attendees/participants included public companies such as Matamec(TSX Venture: MAT) as well as closely held ventures from Russia and Europe. The Australian government was represented as were Australian universities and a well regarded`Australian national laboratory that studies, develops, and validates metallurgies for miners and prospective miners.

    On Thursday we flew to Alice Springs in the Northern Territory, and then drove for an hour and a half to the Aileron Roadhouse, which is just a few KM from Nolan's Bore, a water well originally dug to provide water for cattle grazing and now the center of the rare earth ore bodies being brought into production by Arafura Resources (ASX: ARU). In fact the company's mining will begin literally at Nolan's Bore, which Mr Nolan seems to have drilled many decades ago right through the center of a rich mineralization of rare earths.

    Gareth and I visited`the drilling camp on the mining site where Arafura has already begun an impressive program to verify the extent of its deposits. 

    Gareth will provide the technical details of what we observed and learned when he reports on the Arafura visit on TMR, techmetalsresearch.com, our web site.

    Just for now I want to tell you the initial results of my observations of the operations and the managers and workers of Arafura Resources:

    Arafura Resources has a first class operational management (I have never yet met its administrative managers), a skilled and dedicated workforce, and a first class operation. Arafura's business model is excellent. It's exactly what it should be and it is running smoothly.

    I decided to draft this note this evening while I am still in Australia, because earlier this week before I ever met any of Arafura's staff I saw a story that Arafura had decided to postpone the completion of its bankability/feasibility study by 6 months to a year in order to assure that it wasn't prematurely rushed into operation.

    This "slow down" is a very good idea. It seems to me that to closely study a complex undertaking, before committing to specific expensive undertakings, that are difficult once underway to modify is the soul of professional and well thought out business models and an indicia of good management.

    Siting an extraction and S/X plant capable of producing 10-20 KT/year of separated rare earth oxides is not to be rushed or done except after studying the needs of such a facility thoroughly, with care for details, and the best possible estimate of the future of variable costs. 

    Yet I see stories that "something is wrong" or that "there`are problems with the company" and other such punditry based on the fact that the pundits involved do not know how a good business should be run and have not looked at the hard data and plans of the company.

    The rare earths' sector is rapidly separating itself into wannabes (want to be in operation) and gonnabes (going to be in operation).

    The gonnabes are going to be because they have a good deposit, a metallurgy that works, a marketing plan, and management that efficiently manage both the mining and the financing operations.

    The cold cruel world of capitalism also requires that the gonnabes are among the first to produce and, at the same time, can sell profitably at the lowest price and highest quality among their competitors.

    I'm placing Arafura Resources in my list of the top 10 global rare earth projects I have seen.

    My list will appear next month, July, on TMR's web site along with the overall reasons that I have decided to create it, and the reasons for my choices.

    Be aware all ye pundits that I consider this week's announcement by Arafura Resources to be very positive, and that I am curious why anyone would come to any other conclusion.

    I'm going from here to Singapore for further work on the rare earth's sector, and I'll be home on July 3. 

    Please make wise choices in your investments and don't make investment decisions based on the analyses by those who don't understand how a profitable business must be built and operated.






     
    Jun 25 5:28 AM | Link | 16 Comments
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