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The Rare Earth Metals, Uranium, and Thorium: All Commonly Found Together; And All Desired By China

|Includes:AVL, LYSCF, Rhodia ADR (RHA)

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.
Stocks: RHA, LYSCF, AVL