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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
  • Chinalco steps up drive for rare earths: Ominous News for Non Chinese Rare Earth Juniors, but Perhaps, Not for All of Them 5 comments
    Aug 5, 2010 6:43 AM
    An article in this evening's Beijing based "People's Daily" freely available on the Internet states that:

    "Chinalco has initiated discussions with the Guangxi State-owned Assets Supervision and Administration Commission (SASAC) to develop rare earth mines with local miners, and also participate in the processing projects, said the source on condition of anonymity."

    For the almost total number of non-Chinese rare earth wannabe miners who failed to bother to show up this week in Beijing for the 6th Annual International Conference on Rare Earth Development and Application & China Rare Earth Summit 2010 this will be devasting news to their business models.

    With the exception of the higher atomic numbered "heavy rare earths" China likely has more than enough rare earth reserves to satisfy even its growing domestic needs indefinitiely. What has been holding up the progress of China's rare earth mining sector is a combination of historical environmental mismanagement that has now led the government to curtail the activities of the exisitng mining operations pending a vast clean up and a need to consolidate to take advantage of economiees of scale and to eliminate illegal mining and smuggling.

    The People's Daily article also says that:

    "Industry sources said Inner Mongolia-based Baotou Steel Rare Earth High-Tech Co has led rare earth consolidation in northern China, while Jiangxi Copper Corp and Ganzhou Rare Earth Mineral Industry Co will take up the mantle in Sichuan and Jiangxi."

    So now China will have just three, or at most four, rare earth miners, and each one will be a subsidiary of a massive commodity metal producer/refiner with all of the mining and refining and fabricating skills that go along with that status to say nothing of management skills and access to capital.

    I think we need to look now only for non-Chinese junior miners, who have the heavy rare earths in commercially significant quantities, as long term investments. I believe that in the near term there will be a large and growing Chinese/Japanese/Korean market for lower atomic numbered rare earths such as neodymium and lanthanum for rare earth permanent magnets and nickel metal hydride batteries, but this market will be supplied ultimately from the massive Chinese resources now to be developed or expanded by the iron, copper, and aluminum enterprises within China.

    There is still going to be a growing demand for the heavy rare earths and these will be supplied by non-Chinese miners unless, that is, the Chinese investment community snaps them up too.

     

     



    Disclosure: I own Great Western Minerals Group stock
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Comments (5)
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  • Jesse Carlton
    , contributor
    Comments (3) | Send Message
     
    Hey Jack,

     

    Given that your interest is in HREEs, and given that the new Kyrgyzstan government just approved Stans Energy's 25 year mining licence, does this company now spark your interest? I've been doing my own research and the company seems solid, but few analysts speak about Kutessay II's potential. What is holding you back from giving an endorsement?
    5 Aug 2010, 05:10 PM Reply Like
  • Jack Lifton
    , contributor
    Comments (407) | Send Message
     
    Author’s reply » Jesse,

     

    I have not ever been to the Kutesay II mining site nor have I ever spoken to a technical operations manager working for STANS. I have met the CEO and I have heard his presentation, but I only draw conclusions from data I myself have gathered. I am very skeptical of the prospects of re-opening or refurbishing operations from the Soviet era during which economic considerations were not the driver for operations as much as politics and national security were.

     

    The instability of the Krygyz nation gives me pause as does the fact that Russia is dominanrt in every way in the region. This means dealing with the Russian hierarchy. This is not a game for amateurs.

     

    If I ever get to the mine site(s) and the refinery I'll let you know what I think after that.

     

    Jack
    6 Aug 2010, 04:15 AM Reply Like
  • JosephN
    , contributor
    Comments (49) | Send Message
     
    I'd love to hear your opinion about how this news will affect the newly IPOed MolyCorp (MCP).
    5 Aug 2010, 07:25 PM Reply Like
  • Jack Lifton
    , contributor
    Comments (407) | Send Message
     
    Author’s reply » Joseph,

     

    Molycorp says that its to-be-reopened operations are important for American national security. This, by definition, would not then be the operations in which to have Chinese technological and capital involvement.

     

    Molycorp would have been acquired by China National Offshore Oil Company (CNOOC) in 2004 as part of a takeover of its then parent company, Unocal, if the US Congress had allowed it. Instead Chevron was "persuaded" to act as a white knight.

     

    Chinese investors understand all about national security issues, so they won't try again for Molycorp, which is unfortunate in a way. China's companies capitalize civilian as well as miltary strategic value, so i think that they will invest in rare earth production around the world and will pay more than western investors would.

     

    I think that Molycorp is facing an uphill battle from Lynas and from the threat of increased Chinese production or increased export quotas. Molycorp did not raise all of the money its own business plan called for. Its challenge is to raise the additional money. I wish Molycorp luck.
    6 Aug 2010, 04:26 AM Reply Like
  • rolo15
    , contributor
    Comment (1) | Send Message
     
    I own the Great Wesern Minerals stock for about a year now. The hioghest price I pid per share was $0.11. I think that their strategy is two-fold:
    1. Be vertically inegratedf.
    2. Capture as many sources of Rae Earth Metals a s possible.

     

    Unfortunaely, they are less than fortcoming about their effort with the Deep Sands Utah project. I understand of course that they cannot do everything at once, but this one would have given them a commanding position in the world maket on rare eath metals and so would be woth pursuing on a priority basis.
    10 Aug 2010, 06:38 PM Reply Like
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