I recently received a copy of a letter from Dr Anthony Mariano to one of his mining clients. That client and Dr Mariano have graciously allowed me to reproduce the letter, and I would like all of you to read it before I discuss its contents and make some comments on its conclusions.
Dr Mariano is certainly the most senior and experienced rare earth geologist still practicing in the USA. He continues to travel the world exploring (prospecting) for deposits of rare metal ore bodies as if he were in his 40’s, not at all acting as if he has just turned 80. I personally have shared many a stage with Dr Mariano, and I think there is no one today with a more encyclopedic knowledge of the world’s rare earth deposits. I know very few men who have visited so broad a range of Chinese deposits. “Tony” actually did so most recently of anyone I know. This gives great weight, for me, to his graph above comparing China’s rare earth deposits to those of Molycorp and Ucore. I completely agree with him that the best possible move for the USA would be the simultaneous development of both a LREE deposit such as Molycorp’s at Mountain Pass, California, and the HREE deposits at Bokan Mountain, near Ketchikan, Alaska. Such combined development would make the USA self-suffcient in the critical rarw materials for the industrially most important of the rare earth permanent magnets, the dysprosium modified neodymium iron boron types, and it would make our military demand for samarium-cobalt magnets, satisfiable from American resources of samarium (and either Canadian cobalt or cobalt produced in Idaho or Michigan).
Its difficult to talk about the economics of rare earth mines as free standing businesses, because, due to their high start-up costs, they are not likley to be economical as sellers of ore concentrates. Rare earth mining ventures to be successful must add value to their rare earth ore concentrates by doing one or more of the following value adding processes:
- extracting the undifferentiated metals from the ores,
- separating the individual rare earth metals from each other,
- purifying the resulting separated chemical compiunds,
- producing high purity metals,
- forming alloys,
- fabricating forms from those alloys,
- producing magnets and battery components from the alloys,
- and assembling the active components so produced into finished goods such as motors, generatorss, batteries amd the like.
Many, if not all, of the above value adding steps are not normally done by mining operations, so learning how to do them is usually more expensive than having others who are already experienced do them.
However if a stand-alone rare earth mining venture is to be profitable and competitive (i.e., be a low cost prodcuer) it must add value to its ore concentrates until it acheives enough value added to have a profit margin.
In the near term in the USA this can be achieved only thru government subsidies of both capital and research or though vertical integration of the mining operation into an existing supply chain or into an industrial company that can develop or acquire the missing componnets for adding enough value to achieve profitability.
All supply chains begin at the mine. America’s choices for self suffciency domestically are very narrow at that point, the beginning, in the supply chain. It’s either Molycorp and Ucore or Rare Elelment Resources and Ucore. The choices must be made now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.