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Mike Holt is a Senior VP, Wealth Management Strategist with The MDE Group, an innovative Wealth Management Firm located in Morristown, NJ that manages over $1 billion for corporate executives and other high net worth individuals located across the US. Mike's diverse background includes auditing... More
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  • Epilogue to TREM '11 -- Developing a Domestic Rare Earth Mining Industry 22 comments
    Sep 9, 2011 8:27 PM
    The purpose of this article is to research and compile information related to the topic of public/private sector initiatives that must be taken in order to establish a rare earth mining industry and related downstream industries in the United States.
     It was inspired by the memory of Thomas Jefferson’s reason and imagination, and by the main reading room of the Library of Congress, pictured below.
     LOC Main Reading Room
    The LOC Main Reading Room is encircled by bronze portrait statues paying tribute to great thinkers on various topics. Let’s call them the smartest guys in the room, who were very influential in their fields. This article is intended to serve as a virtual reading room that likewise seeks inspiration from great thinkers, but rather than relying upon statues with plaques known as pendentives, this virtual reading room will draw upon the knowledge of credible experts in fields related to the topic of this article.
    Comments posted to this article should therefore include links or references to primary sources of information, and the comments themselves should consist only of brief descriptions of the source material or its author accompanied by a key quote or passage capturing the essence of the main point(s) deemed to be of greatest interest or importance. If it is believed that personal knowledge or interpretations might be helpful, they should be clearly identified as being your own thoughts or opinions, so that the integrity of information compiled in this virtual reading room is preserved to the greatest extent possible.
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  • Mike Holt
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    Author’s reply » A market is said to be in equilibrium when the quantity supplied is equal to the quantity demanded. Theoretically, there is just one price at which this is possible, and this equilibrium price is the price that will result in a perfectly competitive market that is not subject to government intervention.

     

    As such, for the sake of clarity, I am going to divide comments under this article into these two broad categories:

     

    Sources of Demand

     

    Sources of Supply
    11 Sep 2011, 06:07 PM Reply Like
  • Mike Holt
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    Author’s reply » Sources of Demand
    11 Sep 2011, 06:08 PM Reply Like
  • Mike Holt
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    Author’s reply » Sources of Supply
    11 Sep 2011, 06:08 PM Reply Like
  • Mike Holt
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    Author’s reply » For the sake of clarity, I am going to further divide comments regarding sources of supply into the following categories:

     

    Land
    Labor
    Capital
    Technology
    Competition

     

    These may be further categorized according to the role that private and public sector interests may play in addressing challenges within each of these areas. In some cases, this may overlap with the topics of other articles under the banner "Epilogue to TREM '11, in which case I will do my best to direct readers to those other articles will for more in-depth discussions of those topics.
    11 Sep 2011, 06:19 PM Reply Like
  • Mike Holt
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    Author’s reply » Land
    11 Sep 2011, 06:20 PM Reply Like
  • Mike Holt
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    Author’s reply » Labor
    11 Sep 2011, 06:21 PM Reply Like
  • Mike Holt
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    Author’s reply » Capital
    11 Sep 2011, 06:21 PM Reply Like
  • Mike Holt
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    Author’s reply » Technology
    11 Sep 2011, 06:22 PM Reply Like
  • Mike Holt
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    Author’s reply » Competition
    11 Sep 2011, 06:22 PM Reply Like
  • Mike Holt
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    Author’s reply » Labor is a catch-all term that applies to what I will call Workers, Managers/Administrators, and Members of Government. Much has been said about the importance of certain characteristics associated with various rare earths deposits, about the importance of the availability of capital and its effective allocation, about the importance of rare earths to downstream technologies (with little said so far about the importance of applications of technology within rare earths based industries), about the impact of unfair sources of competition and the resulting need for corrective actions, but as I have indicated in prior articles, ultimately "it's all about the people."
    11 Sep 2011, 06:28 PM Reply Like
  • Mike Holt
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    Author’s reply » Because of the complexity associated with the mining and manufacturing processes for rare earth elements and their technological applications, the quantity and quality of workers in this industry is closely related to the quantity and quality of educational institutions with a focus on this field of knowledge.

     

    In "China's Rare Earth Elements Industry: What Can The West Learn?" published by the Institute for the Analysis of Global Security [IAGS], Cindy Hurst, an analyst for the US Army's Foreign Military Studies Office in Fort Leavenworth, KS reports:

     

    "One could argue that the study of rare earth elements has mirrored the industry. Until the 1970's the Mountain Pass rare earth mine in California was once the largest rare earth supplier in the world. During that time, American students and professors were greatly interested in learning about the properties of these unique materials. Their efforts led to ground breaking uses for rare earth elements both commercially and militarily. Then, as China began to gain a foothold in the industry, U.S. interest seems to have waned.

     

    ...In China things are vastly different. There is a great amount of interest in both the industry and the academics of rare earth elements. In fact, nearly 50% of the graduate students who come to study at the U.S. department of Energy's Ames National Laboratory are from China....

     

    Rare earth elements are an important strategic resource in which China has a considerable advantage due to the massive reserves in the country. therefore, a great deal of money has gone toward researching rare earths.

     

    ...China credits [Professor] Xu [Guangxian] with paving the way for the country to become the world's primary exporter of rare earth elements. Xu attended Columbia University, in the US, from 1946 to 1951, where he received a Ph.D. In chemistry.

     

    ...In the early 1990's, Xu who chaired the chemistry sector of the National Natural Science Foundation of China, launched several research programs in rare earths.

     

    ...There are two state key laboratories in China, both established by Xu, that focus on rare earths [The State Key Laboratory of Rare Earth Materials Chemistry and Applications in Changchun, ...[where] there are approximately 29 faculty members in the lab, including three CAS members, 13 professors, three senior engineers and ...currently there are 55 Ph.D. Graduate students, four masters graduate students, and 17 postdoctoral research fellows working in the lab, and the CAS [Chinese Academy of Science] Key Laboratory of Rare Earth Chemistry and Physics]. ...[where] There are currently 40 faculty members in the lab, including two CAS academicians and 20 professors.

     

    There are two other laboratories in China dedicated to rare earth elements. The Baotou Research Institute of Rare Earths was established in 1963. This organization has become the largest rare earth research and development institution in the world [and according to Karl Gschneidner has been for the past 30 years].

     

    The General Research Institute for Nonferrous Metals [GRINM] was established in 1952. ...The institute does not focus exclusively on rare earths, but also on many of the metals of the periodic table, other than iron.

     

    The full report can be found at:

     

    fmso.leavenworth.army....
    11 Sep 2011, 09:57 PM Reply Like
  • Mike Holt
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    Author’s reply » According to "THE RARE EARTH CRISIS – THE LACK OF AN INTELLECTUAL INFRASTRUCTURE" prepared by Karl A. Gschneidner, Jr. of the Ames Laboratory on 12/9/2010,

     

    "...today there is a serious lack of technically trained personnel with the appropriate expertise and experience to bring the entire rare earth industry from mining to original equipment manufacturers (seekingalpha.com/symbo...) up to full speed in the next few years. Accompanying this disappearance of technical expertise, innovation and new products utilizing rare earth elements has slowed dramatically, and it may take a decade or more to recapture America’s leading role in technological advancements of rare earth containing products. Before the disruption of the US rare earth industry, about 25,000 persons were employed in all aspects of the industry from mining to OEM, degreed and non-degreed. Today, only about 1500 persons are employed. The ratio of non-technically trained persons to those with college degrees in the sciences or engineering varies from about 8 to 1 to about 4 to 1 depending on particular area of the industry. Assuming an average of 6 to 1 the number of college degree scientists and engineers decreased from about 4000 to 250 employed today.

     

    The paucity of scientists and engineers with experience and/or training on the various aspects of production and commercialization of the rare earths is a serious limitation to the ability of the United States to satisfy its own needs for materials and technologies, (1) to maintain our military strength and posture, (2) or to assume leadership in critical energy technologies, or (3) to bring new consumer products to the marketplace. The lack of experts is of even greater national importance than the halting in the 1990s and the recent restart of the mining/benification/se... effort in the USA; and governmental intervention and support for at least five to ten years is required to ameliorate this situation. To respond quickly, training programs should be established in conjunction (a) with research center(s) at (an) educational institution(s) with a long tradition in multiple areas of rare earth and other critical element research and technology, as well as close affiliations with other universities, governmental laboratories, and non-profit research organizations having complementary strengths. In addition, single investigators or small teams of rare earthers at other universities should be 2
    supported by the standard grants from NSF, DOD, and DOE. These investigators may or may not be affiliated with the Center.

     

    The full report can be found at:

     

    www.reitaglobal.org/st...
    11 Sep 2011, 10:33 PM Reply Like
  • Mike Holt
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    Author’s reply » Karl Gschneidner goes on to report that,

     

    "Initially a total of about 170 trained persons having Ph.D., Masters and B.S. degrees are required per year for the first four years to quickly catch up to fill in the present void of technically trained and skilled personnel over the whole spectrum of rare earth commerce from the mine(s) to OEMs. After this, about 50 students per year with a solid background in the fundamentals of chemistry, materials science, and various engineering disciplines, and some knowledge in the rare earth science and technology are needed to maintain the normal growth of the field. The number of graduating students required at the beginning of the value added chain (i.e. geology, mining, benefication) to satisfy the industry requirements is small because currently there is only one operating mine in the USA, but several more will become operational in the USA and Canada in about five years. As one moves up the chain, significantly more students are needed. In the separation and the processing fields (the latter includes metal preparation, magnet scrap recovery, recycling and ceramics) about two to three times more students will be in demand. In the next higher step up the ladder of the value chain another increase of about twice as many highly educated persons are needed. These include physical, inorganic, and organic chemists; chemical and metallurgical engineers; physical metallurgists; condensed matter physicists; and electrical, mechanical and industrial engineers. These persons would be involved with magnetic and electronic materials, phosphors, lighting, optical displays, catalysis, batteries, oxidation and corrosion, and recycling. As the rare earth related industries expand in the United States significant job creation in supporting areas such as logistics, manufacturing technology, and business administration is to be expected. In addition, blue collar jobs, such as production workers, tradesmen, technicians, support and administrative staff, will result from this expansion of the rare earth intellectual infrastructure."
    11 Sep 2011, 10:46 PM Reply Like
  • Mike Holt
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    Author’s reply » According to Mickey Fulp M.Sc., C.P.G. "The Importance of Mentors" 9/14/2009,

     

    "There is an entire generation missing from the profession of "economic geologist" with few practitioners between the ages of the mid-late '20's to the mid-late 40's. There were no exploration or mining jobs for graduating students for most of the past 15-20 years, and university geology departments routinely eliminated positions for Economic Geologist. Now there are not enough qualified geologists to fill new demand created by the current commodities boom. I view this as a secular bull market in commodities that will last until after my generation is gone."

     

    Mickey has 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia. Mickey has worked for junior explorers, major mining companies, private companies and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation, and business development.

     

    The full copy of his article can be found at:

     

    www.goldgeologist.com/...

     

    In "Every Good Geologist Knows That Grade is King," dated 8/29/2011' Mickey goes on to say that, "The scarcity of economic geologists is nowhere more apparent than in the rare earth element space."

     

    goldgeologist.com/merc...
    11 Sep 2011, 11:08 PM Reply Like
  • Mike Holt
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    Author’s reply » In an article titled, "Obama sending jobs bill to Congress Monday," the Associated Press reported today (September 12, 2011) that "President Barack Obama is seeking to build public support for his $447 billion [almost half a trillion] jobs plan before formally sending the bill to Congress Monday [evening]."

     

    I will provide a link to a recap of this bill when it becomes available.
    12 Sep 2011, 10:58 AM Reply Like
  • Mike Holt
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    Author’s reply » It's not often that a newspaper article refers to the "history behind the headlines" rather than serving merely as a headline, but an article written by Louis Uchitelle titled "Is Manufacturing Falling Off the U.S. Radar Screen?" which appeared in the New York Times Business section on Sunday, September 11, 2011 is one such article. The manufacturing and mining industries are closely intertwined, and their fates have been similarly affected by global market trends as well as domestic and foreign government policies, so the discussion in this article primarily of the manufacturing industry is also of great relevance to both the rare earths mining industry and related downstream industries.

     

    Some highlights:

     

    "As President Obama urges Congress to enact a package of tax cuts and new government spending intended to revive growth and create jobs, one crucial corner of the American economy -- manufacturing -- has largely fallen off Washington's radar screen."

     

    "Manufacturing is not simply a market activity, especially not in the 21st century: manufacturers rely increasingly on governments, here and abroad, to prosper and expand."

     

    "'The United States today is alone among industrial powers in not having a strategy or even a procedure for thinking through what must be done when it comes to manufacturing,' says Thomas A. Kochan, an industrial economist at the Massachusetts Institute of Technology."

     

    "Manufacturing's contribution to [U.S.] gross domestic product -- roughly equivalent to national income -- has declined to just 11.7% last year from as much as 28% in the 1950s, according to the Bureau of Economic Analysis. ...output continues to rise, reaching $1.95 trillion last year. But other sectors of the economy have grown faster in recent decades, and that dynamic has reduced manufacturing's share. In particular, the finance, insurance and real esate sectors -- driven especially by investment banking and home sales -- rose from less than 12% of GDP in the mid-1950s to more than 20% before the onset of the financial crisis, and even now remain nearly that high. In China, in sharp contrast, manufacturing's share of national output is more than 25%. While the United States has a far larger economy -- $14 trillion in GDP versus China's $6 trillion -- it has less factory production.

     

    "What's more, each new manufacturing job generates five others in the economy. Shrinking the relative size of manufacturing has undermined that multiplier effect."

     

    "Forty percent of the nation's engineers work in manufacturing, for example, and that profession's numbers have been declining. That is a particular problem because innovation often originates in manufacturing, frequently in research centers near factories, which aid in the creation of products and the tweaking of them on assembly lines. As multinationals place factories abroad, they are putting research centers near them, with as-yet-undetermined consequences."

     

    "'Overseas,' Mr. [Andrew] Liveris [the chairman and chief executive of Dow Chemical] said, 'I get tax incentives, and I get incentives to go to certain locations where they offer us utilities, infrastructure and land. I get access to human capital. I get all sorts of support to help train that human capital."

     

    "He [Andrew Liveris] says vigorous government support, ... might eventually halt manufacturing's slide. But he adds that his company and others will not embark on a reverse migration, a significant "in-shoring" of what has already moved abroad. Too many consumers are concentrated today in Asia and Europe. 'We put things overseas,' Mr. Liveris says, 'because markets were growing there and we wanted to be close to them, and that will never change.'"

     

    "In each region of the world, multinationals produce much of what they sell locally."

     

    "'Battery production went overseas when electronics did, and we are only now bringing it back,' says David Pankratz, the Dow vice president of operations for the joint venture [Dow is manufacturing them in Midland in a joint venture with other companies, licensing the technology from the Kkoam Company in South Korea], adding that the government pushed for this to happen. That sally into industrial policy, some economists say, is like closing the barn door after the horse has escaped -- the horse in this case being America's possession of the world's biggest mass market. That ended in the late 20th century with the rise of millions of consumers in Asia and Europe with ample disposable income or access to credit. The upshot is that governments in these markets pile on subsidies to gain or keep as much production as possible."

     

    "When companies engaged in this kind of strategy in the 1980s [e.g., moving manufacturing operations to southeastern China, with help from local subsidies], there was often much more criticism than today. 'The reason you no longer get much of an outcry over this exodus has to do mainly with jobs,' says Heather Boushey, a senior economist at the Center for American Progress. 'Less than 12% of the American work force is in manufacturing today, down from 30% in the 1970s. So there isn't the same level of public concern."
    12 Sep 2011, 11:45 AM Reply Like
  • Mike Holt
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    Author’s reply » Here is the full transcript of the American Jobs Act of 2011 that President Obama submitted to Congress today.

     

    politisite.com/2011/09.../
    12 Sep 2011, 06:35 PM Reply Like
  • Mike Holt
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    Author’s reply » According to Karl Gschneidner Jr., senior metallurgist at the DOE's Ames Laboratory and winner of the Frank Spedding Award, the top honor for researchers in the field of rare-earth science,

     

    "Ames Laboratory has several scientists involved in rare-earth research. In fact, due to its large theoretical and experimental research base, the Lab probably does as much research on materials science and engineering, including rare-earths, as the rest of the United States put together.

     

    So why would there be any concern about the future of rare-earth research and education at the Lab, or in the United States, for that matter? The answer has to do with longevity.

     

    When you look at the Lab's leading rare-earth researchers right now, their average age is approximately 67 years old."

     

    The full text of this 11/1/2010 "Inquiry Article" publication on the Ames Laboratory website titled "The Future of Rare-earth Education Looks Bright," can be accessed via the following link:

     

    www.ameslab.gov/news/i...
    12 Sep 2011, 07:52 PM Reply Like
  • Mike Holt
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    Author’s reply » Let's stop for a moment to take stock of our library. So far we have several scientists specializing in rare earths at the DOE's Ames Laboratory in Iowa, and a jobs bill aiming to jump start our economy. But, there are no rare earth mining companies in Iowa, so who will transform these ingredients into the commercial activities that we are seeking, and what other factors may foster or impede this effort? It's as if we need Isaac Newton (in Science) to pass a note across the balustrade of the LOC Main Reading Room to Robert Fulton (in Commerce). This is whimsical to be sure, but I can't help being reminded of the 1921 play written by Luigi Pirandello titled "Six Characters in Search of an Author," in which A group of actors preparing for a play are interrupted by six characters who explain that the author who created them did not finish their story, and that they are therefore unrealized characters who have not been fully brought to life.

     

    Let's see what we can do for these characters, but in the meantime, I hear a crashing sound in the reading room titled "...Global Macro Risks to Investors in Rare Earth Mining Companies" so I had better go there now to take a look.
    13 Sep 2011, 08:11 AM Reply Like
  • Mike Holt
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    Author’s reply » This discussion of the American Jobs Act prepared by tax experts at Deloitte, in their September 13, 2011 newsletter "Tax News & Views," may also be helpful in deciphering (if that's the right word) President Obama's "jobs bill."

     

    newsletters.usdbriefs....
    14 Sep 2011, 03:39 PM Reply Like
  • Mike Holt
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    Author’s reply » One of my top twelve predictions for 2012 has already come true, but so far, it is for a different reason: my expectation was that the cost of hard disk drives would soar in 2012 due to restricted access to the rare earth based magnets used in computer hard drives. Inventories of hard disk drives have already plummeted in recent weeks, but the shortfall has been caused by severe flooding in Thailand. Western Digital, the largest volume manufacturer of hard disk drives, was one of the hardest hit by the flooding. 60% of its production is located in Thailand, according to IHA-iSuppli. Toshiba also manufacturers some of its hard drives in Thailand.

     

    Although the shortage of hard disk drives is due to flooding in Thailand at this time, I still expect prices for hard disks to rise in 2012 due to higher prices for the rare earths needed for their manufacture.

     

    To illustrate the inelasticity of demand for products using rare earths that allows higher rare earth prices to be sustained, the reaction to the recent hard drive shortage has been a surge in demand, rather than a decline in demand as prices have skyrocketed over the past month, in some cases as much as 100%. For example, on http://bit.ly/uCULXw, the price of a Seagate Barracude 1TB 7,200-rpm drive has climbed from an average of $140 in late October to $192 today -- hardly enough to reduce consumer demand for this critical component of many computers. However, Apple, which recently announced that they will shift more production to China, may benefit from the higher prices for hard drives, since they use flash drives in their iphones, iPads, and in many of their computers.
    12 Dec 2011, 09:54 AM Reply Like
  • Mike Holt
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    Author’s reply » This message that I just received from the National Mining Association helps to put the importance for a domestic mining industry into perspective:

     

    As we end one year and begin another, the many opportunities spurred by U.S. minerals mining in 2011 should not go unrecognized. One of few sectors to have consistently added jobs this past year, U.S. mining today supports 1.1 million American jobs nationwide and has enabled modern products such as aircrafts, medical equipment and state-of-the-art electronics to come to fruition.

     

    However, if we are to foster American ingenuity, build a stable economy and create jobs in 2012 and beyond, the U.S. portfolio for growth must include a secure, domestic minerals supply.

     

    Some of the fastest growing industries in the United States—including high tech, automotive manufacturing and renewable energy—rely on minerals to operate. In a December 2011 PricewaterhouseCoopers study,

     

    http://bit.ly/sWpmOP

     

    67 percent of respondents—senior executives in these industries worldwide—revealed that they expect their companies to be affected by minerals and metals supply scarcity in the next five years.

     

    We must not allow our nation’s minerals needs to go unmet, especially when these very resources help put Americans back to work and drive our economy.
    21 Dec 2011, 11:26 AM Reply Like
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