Friday, January 27, 2012

Cobalt, tantalum and rare earths among main topics at indaba’s commodities review

The increased global interest in minor metals will shape the Commodities Review and Outlook ferroalloys and minor metals’ presentation at the 2012 Investing in African Mining Indaba, says commodity research and consultancy company Core Consultants.

Feature speaker, Core Consultants MD Lara Smith, tells Mining Weekly the company will particularly highlight minor metals cobalt and tantalum, as well as rare earths, as these metals are increasingly used in everyday technology and are experiencing an increase in demand.

“Cobalt, for instance, is used in lithium batteries and, with the manufacturing of electronic devices booming, we are seeing greater demand for cobalt as most electronic devices, such as mobile phones, tablets and laptops, rely on this type of battery for power,” she explains.

Further, she notes that 50% of global cobalt reserves are along the Copperbelt in the Democratic Republic of Congo (DRC) and Zambia, with only 5% of copper refined in the DRC and the rest refined in China.

However, Smith highlights that, although cobalt represents an opportunity for Central Africa through global demand, supply will be a challenge.

“Mining licences have been granted in the DRC but logistics are still a major concern,” she says.
Nevertheless, Smith predicts the price of cobalt will increase if supply is disrupted.

Meanwhile, tantalum, which is used in the production of capacitors for automotive and electronic equipment, is also experiencing increased demand.

“Supply of tantalum was traditionally supplemented by secondary sources, including DLA inventory sales and recycling. However, in 2007, the DLA ceased selling tantalum.

“Recycling has become increasingly costly as, in many instances, the recovery costs outweigh the extraction of tantalum owing to the miniaturisation of electronic devices.”

Also experiencing high demand are rare earths, the bulk of which are concentrated and produced in China.

Smith says substantial funds have been raised by Japan and invested in the research and development of rare earths recycling methods, as more countries attempt to diversify away from reliance on Chinese rare- earth material.

She notes that the introduction of new rare earths producers in other countries will be costly, compared with China, where the orebodies are more favourable and amenable to extraction and capital, and labour and environment costs are lower.

Smith will also provide Core Consultants’ price projections for these metals to attendees of this year’s Mining Indaba.

By: Reggie Sikhakhane

Wednesday, January 25, 2012

CIGS market to double by 2015

While the solar photovoltaic market is tight and competitive, there is one arm researchers say is almost guaranteed to grow.

Copper indium gallium diselenide solar (CIGS) will double in installed capacity by 2015, according to a recently released research report from Lux Research. The market for CIGS is expected to be worth more than $2.3 billion by then.

“The big driver for us to look at this was all of the oversupply in the industry creating downward pressure,” said Lux analyst Pallavi Madakasiri. “For a new company to try to get in now is almost impossible.”

Traditional mono- and poly-crystalline solar photovoltaic modules have flooded the market causing dramatic price drops and lower profit margins for the companies building them.
In traditional thin-film technologies, First Solar completely dominates the market.

But CIGS have shown tremendous increases in conversion efficiency, reaching over 20 percent at the cell level, Madakasiri said.

Manufacturing and productions costs have also fallen off as processes have grown more efficient.
And most of the companies working in that market are still getting started.

“There has been a lot of interest and investment in CIGS,” Madakasiri said.

The technology is emerging with a lot of opportunity for growth, Madakasiri said, though it will face challenges, including a sharp fall in venture capital dollars.

Among those companies actively working in the market, some stand out.

“We used 12 different metrics to identify winners and losers,” Madakisiri said.

The criteria graded companies on their technical value, business execution, business maturity and capacity.

“Solar Frontier clearly leads the pack,” Madakasiri said.

That company has a solid position in the “dominant” quadrant of the Lux Research grid. Solar Frontier has already worked its way into emerging markets like India, where it is selling about 30 megawatts of CIGS cells a year.

“We also believe others have a very good chance of succeeding,” Madakasiri said.

Other contenders in the CIGS market are Global Solar, Avancis and Solibro. Madakasiri said she expects they could be very successful if they make good business decisions moving forward.

By: Amanda H. Miller

Gallium arsenide allows hot lasers to cool semiconductors

Researchers at the Niels Bohr Institute of the University of Copenhagen have succeeded in using the heating action of lasers to actively cool a semiconductor. The phenomenon is achieved using a special gallium arsenide (GaAs) semiconductor membrane paired with mirrors to create an optical resonance chamber. When laser light is shot at the membrane, most of it bounces off, is reflected back by the mirror, and then resonates between the mirror and the GaAs surface.

 Then the magic happens. Sometimes an atom in the membrane will absorb a photon of light, creating heat and a tiny bit of expansion. The movement of the membrane, the properties of the semiconductor, and the resonant frequencies then interact in a bizarre and wonderful way that cancels the molecular motion generated by heat, ultimately cooling the material to minus 269 degrees C. Although still in the experimental phase, this technique could be useful for cooling electrical components in super-sensitive sensors where thermal energy (as small as it is) creates more noise than the signal being detected. The results of the experiment are published in the January 2012 issue of Nature Physics.

By Joseph Parish

Tuesday, January 24, 2012

Conflict-Free Minerals Reform In The Congo: What You Can Do

The Democratic Republic of the Congo: a region marked by violent conflict since 1996 in which torture, mass rape, forced displacement, and mass murder have been going on for years without much relief. It is a region in which armed groups are able to propagate the violence through the sale of the Congo’s mineral resources.

According to the Enough Project’s Raise Hope for Congo Campaign,
“Armed groups earn hundreds of millions of dollars per year by trading four main minerals: the ores that produce tin, tantalum, tungsten, and gold. This money enables the militias to purchase large numbers of weapons and continue their campaign of brutal violence against civilians, with some of the worst abuses occurring in mining areas.”
Most of these “conflict minerals” are used in the production of electronic devices in a process involving supply chains marked by a disturbing lack of transparency, so that by the time products such as cell phones or laptops end up in the hands of consumers, there is no way to know whether the purchase of those products contributed to the income of armed groups in the Congo.

The goals of many concerned activists are to find a way to ensure transparency in companies’ supply chains and to pressure companies found to be using conflict minerals to discontinue purchasing those minerals. The market for conflict minerals then, ideally, would be limited in terms of profit, reducing resources available to the armed groups, and thus pushing the armed groups toward peaceful resolution of the conflict which could open the region to other reforms.

There have been arguments that the initial attempts toward conflict-free policies have actually been detrimental to the Congo, by driving companies to search for minerals elsewhere, therefore crippling the economy and reducing the income of the general population. However, the UN Group of Experts recently issued a report stating that a conflict-free resolution proves to be an “important catalyst for traceability and certification initiatives and due diligence implementation in the minerals sector regionally and internationally,” and serves to reduce “the level of conflict financing provided by these minerals” in regions that have begun to comply to the due diligence guidelines. So, it seems that passing and implementing conflict-free resolutions are the first steps toward true reform and peace in the Congo.

Why not focus the fight for conflict-free reform on college campuses, which house a “particularly coveted demographic of electronics companies,” namely, students?

The Enough Project’s Raise Hope for Congo Campaign and STAND, a Student Anti-Genocide Coalition, have created the Conflict-Free Campus Initiative, a “nation-wide campaign to build the consumer voice for conflict-free electronics, such as cell phones, laptops, and other devices that will not finance war in eastern Congo.” By focusing on college campuses, the initiative “draws on the power of student leadership and activism to encourage university officials and stakeholders, both of whom are large purchasers of electronics and powerful spokespersons, to commit to measures that pressure electronics companies to take responsibility for the minerals in their supply chains.”

Organizing the student voice at the university level not only expresses the collective desire of individuals to ensure that they and their university do not participate in the perpetuation of the conflict in the Congo, but it also sends a powerful message to both political and corporate entities that consumers care about policies of those entities that may support the conflict. The Conflict-Free Campus Initiative explains:
“Universities are also a large client for most electronics companies and represent a large section of the buyers’ market for consumer electronics. By raising our collective voice as consumers, we can actually bring about a shift in corporate and government policy and help bring peace to Congo.”
Eight universities have issued conflict-free resolutions, including Stanford University, the University of Pennsylvania, and Duke University; more than sixty other colleges and universities throughout the United States and Canada have begun campaigns to do the same (including Yale University, Harvard University, Dartmouth College, Brown University, UC Davis, UCLA, UCSB, UCSC, Notre Dame, and Georgetown University).

The activism geared toward passing these conflict-free initiatives on college campuses has been successful in inspiring activity at the government level. California passed a bill prohibiting “state agencies from signing contracts with companies that fail to comply with federal regulations aimed at deterring business with armed groups in eastern Congo,” the first state bill to be passed regarding conflict minerals. Massachusetts is now also considering a conflict-free bill. Two cities, Pittsburgh, PA and St. Petersburg, FL, have also passed conflict-free resolutions.

If enough colleges, universities, towns, cities and states take the initiative in decisively acting to prevent the perpetuation of the conflict in the Congo by taking steps toward becoming conflict-free, perhaps the income of the armed groups committing mass rape and murder will be decreased sufficiently to prompt the beginnings of an end to the conflict.

Once the fighting ends, addressing the root causes of the conflict – including ethnic tensions – can be addressed through effective institutional reforms. But the fighting has to end before that can happen, and the fighting cannot end unless the actors in the conflict cannot afford to fight.

Tuesday, January 17, 2012

Investing in Inefficient Markets and the Efficient Markets Hypothesis

There’s a nice little point being made here in the WSJ. We’ve all pretty much internalised the Efficent Markets Hypothesis: that markets are efficient at processing the information which might affect prices in a market. We’ve also all pretty much internalised the idea that as a result of this we’re not going to beat those markets. And nor are most fund managers most of the time.
To which, as the WSJ says, the come back is yes, but there are plenty of markets out there (weird foreign ones say, or small caps in certain industries) which are still inefficient because, well, there’s not enough players in them to make them efficient. And it’s certainly possibly true that this is so.
However, what the WSJ then points out is that if this were so then those funds investing in those inefficient markets should be beating the general market: and while certain funds do do so, no class of funds does so regularly.
All of which pretty much shoots down the contention that there are those inefficient markets in which excess returns can be gained. Or, perhaps, that the fund managers who claim to be following that strategy aren’t very good at following it.
There’s just one point I’d add to this. Something from personal business experience at the wierder end of the metals market. There are most certainly inefficient markets here. When the entire global market for lutetium (yes, I know, you’ve never heard of it) is three or four tonnes a year, worth maybe $1.5 million all told, yes, among 7 billion people we’d think that was a pretty inefficient market.
And it is a pretty inefficient market, truth be told. However, it doesn’t take much interest, much volume, for a market to become efficient in things like price discovery. Take, say, tantalum as an example. Global usage is of the order of 1,000 tonnes a year. Worth, well, depends upon which day you look at the price but in the $300 million to $500 million range perhaps? Yes, I know that looks like a lot of money but that’s the entire size of the whole global market: this is still a very small market indeed. But a pretty efficient one. Absent political problems you’ll not find prices varying by more than 2 or 3 % at any one time. The tantalum price in Hong Kong is roughly within transport costs of the price in Rotterdam, on the other side of the world.
Please note, I’m not saying that the tantalum market is “efficient” in the sense that the market for Apple stock is. Rather, just pointing out that a market doesn’t have to be very big before it’s much closer to that efficient end of the spectrum than the inefficient one at which you can make tonnes of money by exploiting the inefficiencies.
That is, inefficient markets are, almost by definition, small markets. Meaning that they’re just not open to profitable exploitation by any large number of people: for as soon as there’s a large number of people they’re not small markets and thus not inefficient.
By: Tim Worstall

India’s rich eye gold

he emergence of young, entrepreneurial high networth individuals in India is leading to a more diverse investment appetite, with gold linked debentures and gold ETFs high on the list.

The amount of wealth held by high networth individuals in India has reportedly increased faster than that held by rich people globally, according to a report, which notes that India’s elite are looking to invest their cash in gold.
With Indians holding more than 18,000 tonnes of the precious metal, the report by Indian wealth management firm Karvy Private Wealth has noted that the demand for gold has risen by 13% on average over the past 10 years, and is likely to increase by 30% this year.
The report found that while the fortunes of high networth individuals internationally grew by around 9.7% during 2011, money held by India’s rich increased by more than 18%. The growth made India one of the fastest growing high networth populations in the world, accounting for 1.6% of global wealth, according to the report.
Even as these rich Indians look for risk averse ways to invest their cash, the rising demand for gold from this class has not gone unnoticed. Though much of the growth in wealth was thanks to the increase in investment in fixed deposits, bonds and equities, the most popular alternative asset was structured products in the form of equity and gold-linked debentures, which constituted nearly 72% of the total wealth invested.
Individual wealth of Indians surged to $1,683 billion (Rs 86.5 lakh crore) in 2010-11 fiscal. Investment in alternative assets has increased significantly, boosted by investors’ rising confidence and interest in a relatively newer class of assets, the report states. According to Karvy, total assets under management (AUM) in equity-linked debentures was estimated to have grown 21% year on year.
According to R Parandekar, group head of the Wealth Management and Asset Management team at Karvy, “India’s individual wealth in alternative assets is 0.34% of her total wealth in comparison to 6.2% globally. We believe that alternative assets will be a major investment avenue in India over the next few years. Alternative assets including Gold ETFs, structured products, private equity and venture capital funds, etc. which are expected to grow at a rapid pace of 100% per annum.”
Gold exchange traded funds (ETFs) have also seen a steady increase in interest. The asset base of gold ETFs, as per data from the Association of Mutual Funds in India, has surged 167% between January and November 2011 to $1.8 billion (Rs 9658 crore). In the last two years, gold mutual fund assets have grown nearly 570%.
Analysts say the gold fund category is the only one that has generated significant returns for investors in 2011, ending the year generating over 30% returns. Gold funds gained 27% to 31% over the past one year, as compared to large cap equity funds, short term bond funds and income funds which on an average returned minus (-) 23%, 9.04% and 8.2% respectively during the same period, according to data from Value Research.
Between now and 2016, the wealth of India’s richest is also expected to treble. As per the Karvy report, with current annual household savings of about 34%, and expected to grow 8% on average, India is well poised to lead wealth creation in the global arena.

Critical Metals Vital to Our Lives in Tight Supply

We begin 2012 similar to how we started 2011 when it comes to rare earth, rare technical metals and rare industrial metals. China has over 90% of production and refining. The US and EU governments are scrambling to legislate, source, produce, open and reopen mines. The West has decided to continue down the road of the idea that the markets will take care of the supply and price of these metals. What is alarming is how easily the West was lulled to sleep by China´s ability to supply the world its metals cheaply and efficiently. The West concentrated on making money trading stocks and futures that dealt with these commodities. China concentrated on building the most extensive mining industry in the history of man. Here in 2012 the Department of Energy in the USA has approved a spending bill that includes $20 Million to focus on the supply issues of these metals.
The metals I am speaking about are so vital to our everyday lives. These metals are found in your mobile phones, computers, LCD and LED TV´s, hybrid cars, solar power, wind power, nuclear power, efficient lighting and medical technologies. Here is a list of metals that have been deemed critical.
  • Indium RIM (Solar, Mobile Phones, LCD)
  • Tellurium RIM (Solar, Computers, Semi-conductors)
  • Gallium RIM (Solar, Mobile Phones, LED´s, Fuel Cells)
  • Hafnium RIM (Processors, Nuclear, Lighting, Plasma Cutting Tools)
  • Tantalum RIM (Capacitors, Medical Implants, Mobile Phones, Nuclear)
  • Tungsten RIM (Nuclear, Armaments, Aviation)
  • Yttrium REE (Lighting, Medical Technology, Magnets in Hybrids)
  • Neodymium REE (Magnets in Wind power, Super Magnets, Hybrid Vehicles)
  • Dysprosium REE (Computers, Nuclear, Hybrid Vehicles)
  • Europium REE (Lighting, LED´s, Lasers
  • Lanthanum REE (Hybrid Vehicles, Magnets, Optics)
  • Cerium REE (LED´s, Catalytic Converters, Magnets)
RIM=Rare Industrial Metal REE=Rare Earth Element
The supplies of these metals could hold back the production of green technologies. According to the latest report by the Department of Energy, ¨Supply challenges for five rare earth metals may affect clean energy technology deployment in the years ahead¨. If Green technology is to become main stream, the costs of these technologies have to reach cost parity with traditional energy sources. As long as there are serious supply issues with these metals the costs can´t reach these levels. The other option is finding alternatives like Graphene and Nanotechnologies.
The US and EU need supply chains of the metals that include both mining and refining of these metals. Relying on sovereign states for critical metals such as these, leave a nation vulnerable to outside influence in both politics and economics. Environmentalists have succeeded in influencing politicians to close mines throughout the West. Politicians have legislated the mining industry into the position it is in today. The Western nations must start now to build its supply chain or continue to be at the mercy of the BRIC (Brazil, Russia, India and China) nations for its metal needs.
The best the West can do now is provide, enough metals to meet its own demands. China has reached a point where it can now demand that certain industries produce their products there. If a company decides to try to produce the product in another country China will make producing that item cost prohibitive outside of China by raising the prices of the metals.
The demand for the products these metals are used to produce, are showing few signs of slowing down even in a so-called recession. Governments are subsidizing Green technology, people are buying mobile phones across the planet and everybody wants a nice flat screen TV. Will 2012 pass without countries truly taking this opportunity to fix the problem or will they step up and make the hard decisions which can put the countries back in control over their own destiny?

Thursday, January 12, 2012

China, 14 Currency Swap Agreements and Counting

Since the financial crisis of 2008 China has been signing agreement after agreement with other sovereign nations for bilateral currency swaps. China and these other nations are trying to diversify their central bank foreign – exchange reserves out of U.S. Dollars. China would like its currency, the Renmimbi, to play more of an important role in the world financial system. Here is a list of the fourteen nations that have already signed bilateral currency swap agreements with China.
  • Pakistan
  • Argentina
  • South Korea
  • Indonesia
  • New Zealand
  • Malaysia
  • Belarus
  • Hong Kong
  • Japan
  • Uzbekistan
  • Thailand
  • Turkey
  • Singapore
  • Kazakhstan
After the collapse in 2008 Chinese exporters were finding it difficult to do international trade as they were unable to settle their deals with Yuan (Renmimbi) and were forced to settle in Dollars. The currency swap agreements will make it easier for now for international companies and traders to receive financing in Yuan during difficult economic periods. If they can settle their deals in Yuan (Renmimbi) it would reduce their risk. China and these nations would like to keep trade flowing even in the event of another financial crisis.
What is a Currency Swap? Essentially a currency swap is a transaction between two nations to exchange the interest and principal payments on loans issued by two different nations. The two countries gain access to foreign exchange reserves. This limits the nations exposure to exchange rate fluctuations because they can pay back the liability associated with its currency instead of in Dollars.
Why is China so concerned about the U.S. Dollar? China has grown suspicious of the US government unwillingness to curb its spending and printing of its currency. This runaway printing has and will continue to devalue it dollar-denominated assets. Recently we are hearing that the US Federal Reserve will quietly implement QE3 (Quantitative Easing 3).
China would like the world to look upon its currency as a store of value similar to Gold and the Dollar. This privilege has given the US the ability to expand and borrow. China would also like this ability. If nations hold reserves in Yuan (Renmimbi) it is extending credit to the Chinese government. These currency swaps are the first steps in Yuan (Renmimbi) transforming in to a global currency. How many more countries will sign agreements with China in 2012? How will the USA and the IMF react? I look forward to seeing the results of China spreading its influence.
Randy Hilarski – The Rare Metals Rare Earth and Rare Industrial Metals Specialist

Wednesday, January 11, 2012

China, Japan, South Korea, ASEAN Agree on Wider Currency Swap Arrangements

ISTANBUL, May 4 (AFP) – Finance ministers from China, Japan, South Korea and the Association of Southeast Asian Nations (ASEAN) agreed Wednesday to expand their system of bilateral currency swaps under the Chiang Mai Initiative to a more multilateral system. The ministers, meeting as the “ASEAN-plus-3″ on the sidelines of the Asian Development Bank (ADB) annual meeting in Istanbul, said this would make the Chiang Mai Initiative a “more effective and disciplined framework.” Under the currency swaps, an Asian country hit by a foreign exchange crisis like the one in 1997 could borrow borrow foreign currency — usually US dollars — from another country to bolster its reserves until the crisis had passed. An ADB analyst remarked that Wednesday’s accord was a step towards setting up an “Asian Monetary Fund,” although such an institution might never actually be created.

In a joint press conference, the 1O ASEAN and three East Asian financial ministers also called for a review of the quota of Asian countries in the International Monetary Fund (IMF) “to properly reflect the current realities and their relative positions in the world economy.” The 13 ministers said an economic surveillance system would be put into place along with the Chiang Mai Initiative framework, to detect irregularities early and apply swift remedies. They also said a collective decision-making mechanism would oversee the current system of bilateral swap arrangements “as a first step towards multilateralization.”

This would make it easier to activate the bilateral swap arrangements in case of an emergency, the ministers said in a joint statement read after their three-hour meeting. Crisis-hit countries would also be able to draw down as much as 20 percent of the money under the bilateral swap arrangements without having to go through the IMF. Under the current arrangements, countries that draw more than 10 percent under their swap arrangements must have an IMF-supported program in place. The decisions of the ASEAN-plus-3 group apparently followed recommendations made during a meeting of the Chinese, Japanese and South Korean ministers a day earlier. Previously, the initiative launched in Chiang Mai, Thailand, in May 2000 involved only bilateral swaps but the Chinese, Japanese and South Korean ministers said they would look towards expanding this into multilateral swaps involving three or four countries. Asian countries had earlier proposed the creation of an Asian Monetary Fund after the 1997 fiscal crisis but the United States and the IMF had strongly opposed this. Chinese minister Renqing Jin said his country had already agreed to “double the scale of its currency swap,” from its current level.

However, when asked if they were setting up an Asian Monetary Fund, Japanese minister Sadakazu Tanigaki replied, “only the Chiang Mai Initiative was discussed”. The ministers said the initiative had been very helpful in maintaining the financial stability of Asian countries even if there had been no repeat of the 1997 crisis. Masahiro Kawai, special adviser to the ADB president, who monitored the ASEAN-plus-3 meeting, said the ministers wanted to increase the effectiveness of the Chiang Mai Initiative which now covers 16 bilateral swap arrangements. He called it a “step towards multilateralization,” adding that a “de facto Asian Monetary Fund,” may eventually be created. He said the United States and the IMF had opposed such a fund in the past partly due to fears it would increase the risk of moral hazard. But Kawai said this was why the ministers wanted to increase the surveillance function of the Chiang Mai Initiative. He remarked that in the past, China had not joined the move to create an Asian Monetary Fund and that if it joined with the other Asian countries, they might be more successful. mm/wai

Supply Threats Persist For Thin-Film Solar Materials Due To Competition

One year ago, a report from the U.S. Department of Energy (DOE) on the global supply of essential PV module materials predicted possible disruptions for thin-film manufacturing.
The availability of indium, gallium and tellurium was examined in the context of current and future production needs, and the DOE found cause for concern. Indium and tellurium were pegged as especially vulnerable to supply tightness and price volatility, according to both the report and several market analysts at the time.
(See “New Government Report Identifies Supply Risks For Thin-Film PV Materials” in the February 2011 issue of Solar Industry.)
Now, the DOE has released the latest edition of its Critical Materials Strategy. Have the worries over thin-film PV materials supply eased? According to the DOE, the general supply-demand picture for indium, gallium and tellurium has “improved slightly,” but the situation is not entirely reassuring. The three metals are still highlighted (alongside neodymium and dysprosium) as clean-energy materials that face a “significant risk of supply chain bottlenecks in the next two decades.”
The report attributes the slight improvement primarily to decreased demand for the three thin-film materials: Although PV deployment is expected to grow, the requirements of the materials per module are expected to shrink.
For copper indium gallium diselenide (CIGS) modules, manufacturers are shifting to compositions with higher proportions of gallium and lower concentrations of indium, the DOE says. The result is a “partial trade-off in the potential for supply risk between the two elements.” At the same time, CIGS’ market share assumption has been reduced under the DOE’s new calculations, lowering projected demand for both indium and gallium.
Cadmium telluride (CdTe) thin-film modules currently account for approximately 10% of the PV market, according to the report. Declining silicon prices may threaten this slice of the market, but high tellurium costs and the increasing need for CdTe manufacturers to compete for supply with non-PV companies requiring tellurium continue to cause supply headaches.
“The cost of tellurium is a critical issue for CdTe solar cell makers, and the industry is working to lower material use and increasing recovery of new scrap to reduce reliance on primary tellurium,” the DOE says in the report.
Although short-term supply of tellurium appears adequate, future capacity increases may be insufficient to supply both CdTe manufacturing and the multitude of other manufacturing sectors that use tellurium. Under one scenario modeled in the report, tellurium supply would need to increase 50% more than its projected 2015 total in order to meet expected demand.
Indium and gallium have also experienced increased popularity in non-PV manufacturing uses, such as semiconductor applications, flat-panel displays, and coatings for smartphones and tablet computers. The DOE forecasts that as a result, supplies may run short by 2015 unless production of these materials is increased – or non-PV demand lessens.
Of the two metals, gallium poses more cause for concern, as the DOE has adjusted its assumptions of future gallium use under CIGS manufacturers’ expected manufacturing modifications.
“These higher estimates [of gallium requirements] are driven largely by the assumption that gallium will increasingly be substituted for indium in CIGS composition,” the DOE explains. This change points to the benefits of reducing material intensity in other aspects of PV manufacturing, such as reducing cell thickness and improving processing efficiency.
Overall, indium, gallium and tellurium all receive moderate scores (2 or 3 on a scale of 1 to 4) from the DOE with regard to both their importance to clean energy and short- and medium-term supply risk.
In order to help mitigate possible supply disruptions that could threaten the manufacturing and deployment of PV, as well as other types of clean energy, the agency has developed a three-pronged approach.
“First, diversified global supply chains are essential,” the DOE stresses in the report. “To manage supply risk, multiple sources of materials are required. This means taking steps to facilitate extraction, processing and manufacturing here in the United States, as well as encouraging other nations to expedite alternative supplies.”
The second strategy relies on developing alternatives to materials whose supply may be constrained. For PV, one DOE research program focuses on advancements in thin-film formulations such as copper-zinc-tin and sulfide-selenide. Another initiative funds research and development into PV inks based on earth-abundant materials such as zinc, sulfur and copper.
“Several projects also seek to use iron pyrite – also known as fool’s gold – to develop prototype solar cells,” the DOE notes in the report. “Pyrite is non-toxic, inexpensive, and is the most abundant sulfide mineral in the Earth’s crust.”
Finally, improving recycling and reuse mechanisms can reduce demand for new materials, the DOE says, adding that these strategies also can help improve the sustainability of manufacturing processes.

Photo: Enbridge Inc.’s 5 MW Tilbury solar project in Ontario uses First Solar’s cadmium telluride thin-film modules. Photo credit: Enbridge

Endangered Elements: Tungsten Among China’s Potential Embargo List

It didn’t take long for the panic to set in, last year, when the Chinese government flexed its muscle by threatening the world’s Rare Earth Element (REE) supply. With 95% of REE supplies coming from China, that scare was indeed legitimate. But REEs aren’t the only elements with which China has the potential to choke off. On American Elements’ 2011 Top 5 US Endangered Elements List, three elements (tungsten, indium and neodymium) have over 50% of world supply coming from Chinese mines.

To refresh the memory of those who followed the rare earth surge from last year, and the subsequent piquing of interest in rare earth companies, it began with Japan. As the summer of 2010 was coming to a close, reports of an embargo of shipments to Japan for REEs raised concern for manufacturers who depend upon the elements for production primarily in the tech industry. Within a month, that embargo spread to North America and Europe, and concern over Chinese monopolization rose, along with REE prices, and those of the companies devoted to them. When the embargo ended, relief came to the sector, while the pace of development outside of China received only a minor increase. The threat of supply shortages still lingers, especially with tungsten, indium and neodymium.

The example of tungsten is not to be ignored, as 85% of global production comes from China, which has already indicated it might end all exports altogether due to domestic demand increases. With the highest melting point and greatest tensile strength of all elements, tungsten’s importance is unquestionable. Used in all situations that call for high temperature thresholds or hardness and strength, tungsten is imperative to many modern living standards that depend upon it. From a US perspective, the element’s use in the aerospace program, electronics and military (including in bullets and armor) is critical. To the mining industry as a whole, tungsten is a savior with many uses within the assembly of mining equipment itself, including drills in need of durability. Strangely enough, the United States dismantled domestic production of tungsten ore in 1994 with the last tungsten mine, the Pine Creek Mine in Inoyo, California, going down as a historical footnote en route to Chinese dependence.

Today, tungsten production remains primarily within China, but awareness of a need to develop outside of the PRC is becoming clearer. Options in the western hemisphere are appearing, and may soon be getting the attention they need to aid this drive for domestic independence. Juniors such as North American Tungsten [NTC - TSX.V] and Playfair Mining [PLY - TSX.V] may provide answers that mitigate a possible future supply breakdown. For North American Tungsten, the title of being the western world’s leader in tungsten production doesn’t come lightly. Through developing its Cantung Mine, it provides tungsten concentrate production within the borders of Canada’s Northwest Territories, which from an international standpoint is a much more secure mining investment environment to work within. At a much earlier stage, Playfair Mining is not yet a producer, but is heavily leveraged to the price of tungsten, which today sits around $440/MTU (“metric tonne unit”) or over $20/lb. With a goal in mind to partner with an end user of tungsten metal in order to finance its Grey River deposit into production, Playfair is well aware of the potential impact a tungsten shortage would carry.

Due to its high level of use in the manufacturing sector, a significant number of Fortune 500 companies are dependant upon tungsten’s availability. General Electric and its Tungsten Products Division, along with others like Kennametal and ATI Firth Sterling are among those that would most likely benefit from securing a long term tungsten supply, and are among potential targets should Playfair seek a high-worth partner to put its nearest term tungsten property into production. The company has 4 high-grade deposits with two located in the Yukon, one in the Northwest Territories and another on the southern coast of Newfoundland. Each of the properties was acquired strategically during a period of massively deflated tungsten prices, prior to this latest surge over the $440/MTU mark. This increase represents a 70% rise from the recent low prices that graced Playfair’s entry period. While the commodity’s price has risen, the company’s stock has yet to follow suit.

While the current price of the stock seems to have languished, the team is making strides to be better prepared for when the bigger end-users in need of tungsten come knocking. The board includes experienced individuals who have taken deals into production before, as well as Director James Robertson who took the last big tungsten company outside of China to successful acquisition. In both combined 43-101 compliant and non-compliant resource categories, Playfair’s tungsten properties contain more than an estimated 5.5 million MTUs of WO3. It’s to be expected, though, that since Playfair is an exploration company, these resources have room for expansion. As economic uncertainty lingers in all global markets, crucial and endangered elements such as REEs, tungsten, indium and neodymium will be within the watchful eye of western manufacturers in need of these ingredients for their operations. Whether another anticipated panic is inflicted by possible impending embargo actions by China doesn’t change the dependence we have on endangered elements. And like last year’s REE crisis, a price surge on those companies were set to move prior complications is entirely a likely scenario. G. Joel

– Disclaimer: The author does not currently hold any shares of any of the companies mentioned in the article. However, some members of Cordova Media Inc., which owns the, may or may not have interests in one or more of the companies mentioned at the time of publication. Staff members from the Prospecting Journal reserve the right to acquire interests in any of the companies mentioned after 36 hours have elapsed upon initial publication of this article. Playfair Mining is a sponsor of

Global Tungsten Shortage Looming

Tungsten is an essential component in many industrial applications including drilling & cutting tools, electronics and specialist steels. The European Union categorises tungsten as a “critical raw material”. China currently produces 85% of the world’s tungsten but their factories are ravenous consumers and China is a net importer. USA, Europe and Japan consume 55% of world tungsten, but produce only ~5%. It should be no surprise that tungsten prices have surged in the last year, while many other commodities have experienced price decline. Image Link: Tungsten is currently selling for $20 a pound. New growth markets include nickel-tungsten alloys which can substitute for gold-nickel plating.

Playfair’s tungsten properties contain an estimated 100 million pounds of 43-101 compliant tungsten, and significant additional historical resources. These resources have potential for expansion.
Tungsten is a low profile commodity. There is no tungsten ETF, and few pure plays. Outside of China only two publicly traded companies currently produce tungsten: Malaga (MLG-TSX) and North American Tungsten (NTC-TSX). With four high-grade Tungsten deposits, Playfair Mining (PLY-TSX) is highly leveraged to rising prices and looming tungsten shortages. Image Link:

“We feel very fortunate to have 4 high grade tungsten deposits at a time when the price of tungsten has started to move sharply higher,” states Don Moore, Playfair CEO, “We acquired these projects when tungsten prices were depressed. China has an ironclad grip on the market. It’s not surprising that we are starting to see some serious interest from large tungsten end-users who need to get stable supply from outside of China.” Image Link: Tungsten is an essential industrial product but typically insignificant on a cost basis. Like the salt in a bag of potato chips – the price of salt could triple and the bag of chips would only increase a penny. But you can’t sell chips without salt. So with China slurping up most of the global supply – tungsten could see dramatic price increases with little demand destruction. Playfair’s veteran team of Donald G. Moore, Neil Briggs is augmented by Director James Robertson who was a principal in Primary Metals, a tungsten producer taken out by Japanese giant, Sojitz Inc.Judging from public statements by Playfair’s management, the strategy may well be to partner with a tungsten end user to help finance the project into production.

In addition to the compliant resources at Grey River (16.2m lbs) and Risby (89.4m lbs), Playfair has historical resources of 18.5m lbs at Lened and 5.3m lbs at Clea. Four high grade Canadian deposits: Grey River representing near term production potential, Risby offering massive size potential and all offering room for exploration upside.

Grey River, located on the south coast of Newfoundland, consists of nine mineral claims covering 1,750 hectares. The Grey River tungsten veins are typical fluorite-rich wolframite-quartz greisen vein deposits. A 1984 GSC Economic Geology Report lists the Grey River deposits as “one of the largest typical wolframite deposits in Canada” and states “It would be remarkable if there were not many more tungsten occurrences’ [on the property].” The Grey River deposit sits at tidewater in an ice free, deep water Atlantic port that offers year round shipping.

Risby is an advanced stage deposit in the Yukon accessible by a 25 km tractor road from an all-weather highway. The property is located approximately 55 kilometres west of Ross River and is comprised of 38 quartz mineral claims, all 100% owned by Playfair Mining.
The property was worked on from 1968 to 1982 by the Caltor Syndicate and Hudson Bay Exploration and Development Co. Ltd. Together their exploration efforts include 48 diamond drill holes (7,057 metres), geological mapping, trenching, stream sediment sampling and ground geophysics (magnetometer and EM surveys). Recent work by Playfair includes diamond drilling, resource expansion and a NI 43-101 compliant inferred resource calculation of 8,537,000 tonnes of 0.475% WO3 at a 0.2% cut-off.

Despite surging tungsten prices, Playfair has been hit hard by tax loss selling is currently trading close to all-time lows at $.07. It has a market cap of $5.4 million. The British Geological Survey (BGS) has tungsten #4 on its “Risk List” stating that it is critically vulnerable to supply disruption. With 122 million fully diluted shares and 100 million pounds of 43-101 compliant tungsten on the books – worth about $2 billion at current prices – Playfair is definitely worth a closer look.

Friday, January 6, 2012

Nation urged to increase holdings of gold

BEIJING – China should further diversify its foreign-exchange portfolio and make more gold purchases when the metal’s price dips but is still at a relatively high level, a senior central bank official said on Monday.
“The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation,” said Zhang Jianhua, director of the research bureau affiliated with the People’s Bank of China (PBOC).
He made the remarks in an article in the Beijing-based Financial News, a newspaper run by the PBOC.
The spot gold price declined 16 percent over the past three months to less than $1,600 an ounce last week. It touched a record of more than $1,900 in early September.
Zhang said bleak economic conditions, increasing international liquidity as countries turned to monetary easing and the resulting high inflation had dampened investors’ confidence. He said that gold had become the only “safe haven” for risk-averse investors. “No asset is safe now. The only choice to hedge risks is to hold hard currency – gold.”
Zhang didn’t specify what proportion of China’s $3.2 trillion foreign reserves should be held in gold.
China is the largest foreign holder of US Treasury securities, having invested about one-third of its foreign reserves in those bonds. About 20 percent has been invested in euro-denominated assets.
As of this month, China ranked sixth worldwide in gold holdings, with about 1,054 tons. The value accounted for about 1.8 percent of the country’s total foreign reserves, according to a report released by the World Gold Council (WGC).
The US topped the list by holding more than 8,133 tons of the metal, 76.6 percent of its foreign reserves by value, while Germany ranked second by holding 3,396 tons, 73.7 percent of its reserves.
In 2011, countries including Russia, Thailand, South Korea, Bolivia, Colombia, Kazakhstan and Venezuela purchased the metal to increase gold holdings of their central banks’ reserves.
China didn’t sell or buy gold from 2010 to 2011, according to WGC statistics.
“The PBOC may have realized that its euro-denominated assets are in greater danger than it expected and started to eye gold,” said Li Jie, director of the foreign-reserves research center at the Central University of Finance and Economics.
“But it’s impractical for China to put its foreign reserves into commodities, including gold, because all these markets are too small for such a big hoard.
“For example, China’s purchasing gold would push up the price of the metal and increase its own cost,” said Li.
Li added that there was no easy way for China to get as much gold as it wished because major economies such as the US hold the majority of gold and market supplies are very limited.
China produced 31.75 tons of gold in October, the Ministry of Industry and Information Technology said on Monday. Gold production gained 5 percent in the first 10 months of this year to 290.752 tons.
Driven by increasing demand from risk-averse investors, the international price of gold repeatedly reached new highs in 2011.
Central banks made their biggest gold purchases for a single year in 2011 since the Bretton Woods system dissolved in 1973 and major currencies began to float against each other without being pegged to gold. China has vowed to further diversify the nation’s foreign-reserve portfolio amid growing global financial uncertainty. In October, it cut holdings of US Treasury securities by $14.2 billion to $1.13 trillion, the lowest level this year.
Media reports have said that the PBOC plans to create a fund worth $300 billion to invest the country’s foreign reserves in the US and European markets. The fund will reportedly seek to invest in real assets and company shares, rather than government securities.

Wednesday, January 4, 2012

2012: The Recognition of The Age of Critical Technology Materials

The following essay was written over New Year’s weekend, 2011-12. My theme is that the rare earths supply frenzy has exposed an irreversible shift in the demand/supply picture for all technology materials, not just the metals, but also the energy minerals, and the minerals necessary for agriculture. The only mining ventures today that have the potential to be profitable on a stand-alone basis are those that can produce at the lowest cost in the global marketplace and the breakeven point of which is low enough to so they can maintain production at very low levels thus holding on to their customers.
America’s technology materials mining industry can prosper now only by vertically integrating to supply the domestic market first. Surplus production can be exported from several points of a total supply chain thus reinforcing capacity flexibility and dropping the breakeven point for the whole supply chain. This is smart globalization. Just as an aircraft flight attendant tells you to connect your oxygen first before trying to help anyone else I am telling you to build total supply chains for technology materials domestically to ensure that you can help yourself before you try to help others.
Note that by “American” I mean North American. The North American market for producing end use technology materials is 90% in the USA, but the production of those materials and at least half of the requisite supply chains can be constructed in Canada. There has never been a better opportunity to make NAFTA into the basis for a world class technology materials production economy.All that is really needed now is insightful finance and much better educated legislators driven by something other than re-election and greed. Call me a cynic, but Happy New Year.
The unprecedented and unexpected growth in total demand for technology materials for the production of fabricated goods, energy, and food since the beginning of the 21st century has changed the dynamic of the global materials market.
The response of American and European style capitalism to this sudden rush of demand has until now been to treat it as a problem to be resolved along traditional lines by raising the prices of the affected “commodities” until the “opportunity for profit” thus created resulted in additional supplies to relieve, or at least, to limit, the upward price pressure. “Demand will create supply” and “shortages will be ameliorated by surpluses” were among the responses I heard from American and European industrial procurement and planning managers. I was among those who then raised the “security of supply” issue only to be told that it was a non-issue due to the fact that the amounts of all materials in the earth’s crust made the potential supply infinite.
It was impossible at first, and it is not much easier now, to explain to industrialists and financiers that only resources the mineral deposits of which are concentrated enough to be recovered and purified by known and economical technologies can be called even potential supplies. The greed, short-sightedness, and poor general science education of our current politicians, industrialists, and financiers has let America and Europe sit back and not only observe but actually assist our economic competitors to gain such an advantage over us through focused acquisition and management of natural resources that the USA and Europe, in order to survive economically, must now restructure our financial as well as our remaining industrial assets in the hope of salvaging some competitive advantage through maintaining a lead in technological innovation.
Yet like the Mahdi’s soldiers who wore talismans to ward off bullets our financial, industrial, and political elites raise the banner of an outmoded form of independent operator capitalism to ward off the advances of a differently structured and focused Asian capitalism wedded directly to the finances and centralized direction of an immense nation able to drown the individual western capitalists in a tsunami of money not for the sole purpose of acquiring more money but mainly to acquire ownership and control of critical natural resources so as to make their home nation(s) self-sufficient in natural resources and energy.
The western capitalists serve the purpose of the eastern capitalists by choosing to concentrate on short term gains while the Chinese, for example, acquire resources for their use to create products and jobs not for speculation.
The problem of course arises from the fact that this growing demand for natural resources has not been created by the USA, Europe, or Japan, but almost solely, at this point, by a new player on the world trading stage, the Peoples Republic of China (PRC).
I believe that 2012 may finally see a recognition by western strategic investors that the long term outlook for the global demand for technology materials is one of continued high net growth and that the present rate of supply of these materials already is at the point where it cannot even now keep pace.
Junior miners, which are basically exploration companies, playing the same old game of appearing to be on the cusp of “rushes” are really just bit players in the new world of natural resource supply. The economic cycles and turmoil in the old capitalist societies of the west and of Japan have taken precedence in the news over the dramatic growth of overall demand for technology materials, but the focus on short term gain from trading junior mining shares in a casino atmosphere is no longer viable when looking at ensuring the security of supply of technology materials.
Ownership of ore bodies and other such natural resources are only of long term value when they are developed to the stage where they contribute directly to Increases in the rate of production of technology materials. This requires years of planning and continual development. This cannot be achieved just by issuing shares to raise capital. The share market for technology materials’ producers is rapidly becoming a sideshow. China seems today to be the only nation-state with both an existing industrial policy and the capital and command organization to carry it out. Like the Soviet Union before it the PRC plans its economy in five-year tranches. Also, like the Soviet Union before it the PRC sets higher production targets for goods and services with each successive five-year “plan.” But the PRC also measures the success of a five year plan by the increase in employment and improvement in the standard of living it brings about. The Soviet Union pretended that it was always at full employment. The planners of the PRC do not seem to follow this tradition.
The key to future wealth is the ownership and control of total supply chains for the production of technology materials. There are no short cuts.
In the western markets tumbling share prices and suspension of IPOs on news of temporary declines in demand or temporary oversupply are simply casino gambling, and if that is the best that the so-called free market can do then China will be the clear long term winner in the technology materials’ self-sufficiency stakes. In order to be a competitive economy it is necessary for a nation to have access to the natural resources it needs so that its economy can grow. The development of such resources can no longer be left to short term planning. It is necessary to commit both capital and intellectual capital to the long term development of adequate and sustainable production rates of natural resources. Base lines must be established for nations and the development of the resources necessary to maintain those baselines and allow for growth must be a priority of the nation’s markets.
This didn’t come about overnight. This situation has been building since the making of money for the sake of having more money eclipsed the making of money from increasing productive commerce
The economic cause of the transfer the world’s trading and manufacturing center from America to China has been American capitalism, which seeks the lowest cost for all resources, goods, and services in a system of as much global free trade as is compatible with minimizing national and international taxation, i.e. maximizing profit. American style free market capitalism does not believe in natural resource exhaustion except as a scare tactic to drive share or commodity prices. In fact it is the maximization of the rates of production of natural resources that is the problem from the point of view of the long term allocation of capital for most, non-energy, extractive industries.
Increasing the rate of production of extractive resources is capital intensive and time consuming, which means, of course, that it must be a low profit endeavor when ranked against speculation.
Twenty-five years ago when the transfer of labor intensive repetitive operations to low labor cost countries was begun in earnest the main driver for American industrialists was cost control as a method for the retention of market share in a very competitive market place then just beginning to feel downward price pressure from Asian, predominantly Japanese, imports. A second, no less important, driver at the time was the maintenance of the industrial company’s share price. This was in the era of blue-chip stocks, which were defined as those of the largest producers of raw materials, energy, or finished goods in an era when banks were service industries. Money was to be made through profit margins on goods and services. Banks were providers of the service of lending money to blue chips mainly for cash flow or working capital purposes. Investment “banks” took new ventures public and the partners in those banks had their own money at risk first of all.
The until now unnoticed political driver that allowed the transfer of low cost manufacturing to China, in particular, was the desire of the ruling communist party of the People’s Republic of China to use the situation (the desire of the capitalists for low cost labor) to literally force-start and then accelerate China’s development into a modern military-technological-industrial state. As Deng Xiaoping had put it succinctly the idea was to make China “strong and rich.” A version of capitalism was to be allowed albeit one with Chinese characteristics so that the nation could be put onto a path that would lead it to being able to provide its average citizen with the safety, health, and material well-being already achieved by the nations of the west of which the paragon is the USA. Of course this would come after or at the same time as China grew in strength to “resume” its natural place among nations.
On Friday, December 30, 2011 the Chinese government announced that China would put men on permanent duty in an orbital space station before 2020. Such an announcement in 2000 would have been considered “crackpot” at best. What a difference a decade of GDP growth at 10% per annum makes!
I have thought, and I have been trying to point out for many years now that apocalyptic theories of supply shortages and of subsequent rampant price inflation supposedly due to peak natural resources, i.e., the exhaustion of natural resources, are based on the type of reasoning that confuses the disease with the symptom. The disease is the financialization of capital, which means that the majority of investments made in the west today are completely detached from any relation to the production of commerce at all. Money is being used primarily for pure speculation. The purpose of such types of investments is solely to make more money. The confusion between wealth creation (jobs, goods, and services )for productive purposes and the simple making of money, for no other reason than to make more money, by the press, the politicians, and the ordinary citizen has masked this societally suicidal frenzy until it has now resulted in the downgrade of the American standard of living for the vast majority, and the placing on the path to extinction not only the contemporary middle-class but also the pathways to entering and remaining in that class.
The American governing classes have purposefully joined the financial elites and insulated themselves from this downgrade, which has now moved beyond their understanding. They have assigned the solution of the financialization crisis to those whose lack of interest in the well being of the nation is manifest, the bankers, who in fact brought on the American abandonment of wealth creation for productive purposes as a status game enshrined in the corrupted phrase, “Him who has the gold makes the rules.”
American industry literally taught the world how to build and equip workshops to economically mass produce consumer goods. The industry was financed by a capitalism, which counted success as the marketing of mass produced products made at the lowest cost that could be sold at a profit.
America’industrialists never worked under a national industrial policy, so that when the opportunity arose to lower costs simply by exchanging the American for a lower cost labor workforce there was no ethical barrier. The short term goal of maximizing profit was paramount. No one was concerned with the long term consequences of such a move to the workforce much less to the country as a whole.
Keep in mind that financiers backed the moving of millions of jobs to low cost labor countries while politicians never even gave a thought to the effect on the economy of the ensuing unemployed masses. As I recall we were told that “service” jobs here would replace those lost to low labor cost countries. It was never clear exactly what the economic pundits were defining as service jobs. We now realize that was because they didn’t know what they would be either.
So why should investors in natural resources care about the sad history of American corruption, greed, and sheer stupidity. It’s because one of the totally unforeseen long term consequences was the shift to Asia of the demand for not only the final assembly and the manufacturing of the parts necessary for such assembly, but ultimately of the TOTAL SUPPLY CHAIN BEGINNING WITH AND INCLUDING THE MINING AND REFINING OF THE MINERALS. This shift has meant the loss of not only the physical plant for total supply chains but the withering away by the attrition of non-use of the intellectual basis of such industrial processes.
The rare supply earth situation, which has been highlighted in the USA for the last few years, is just the tip of the iceberg the body of which is the loss or collapse of the capability to build or operate a total supply chain for a given critical material when the first steps of that supply chain have been moved off-shore.
Clueless and engineering-ignorant American environmentalists for whom mining and refining are simply evil incarnate have managed over the last generation to force re-election-only driven legislators to favor the closing of sites producing natural resources for energy and manufacturing and the imposing of regulations that make such production simply too time consuming as well as adding enormous costs .
The dwindling proportion of capital targeted to increasing productive capacity remaining in a system being squeezed dry of such capital by pure financial speculators seeking short term gain has now made it more productive to move entire supply chains off-shore to where the raw materials CAN being mined and refined rather than to waste capital on endless regulations and battles with the ignorant and suicidal (or ignorant and rich). The result has been at best to increase the cost of re-starting a supply chain and at worst to make it intellectually impossible if only domestic resources are to be utilized.
I note in passing that America’s most important remaining engine of wealth creation is its innovative high-tech industries. These industries, such as electronics and healthcare, have been responsible for more improvement in the standards of living and lifestyle of the peoples of the world than any other intellectual force in history. The American electronics, aerospace, and nuclear industries have held out off-shoring their research and development, but sadly they have only managed to do that by enticing the best of the Asian students to come and work in the USA.
For a generation this worked well, because such individuals for the most part preferred to stay in the USA to utilize their American honed and learned skills to enjoy a better life style than they could at “home.” And to have the opportunity to create their own businesses. Today that situation has changed as places like China and India have improved enough in opportunity-availability to entice their brightest and best to stay home or even to come home. The American mining and refining industry has also had its share of bringing skilled Asian workers and engineers to the USA from China and India and like the high tech manufacturing industries it has now seen the outflow of these same people with their American honed skills and technological improvements back to their “home” countries.” Asian engineers who specialize in mining and refining engineering are very unlikely to remain in an America that blocks them from opportunity at every step.
America’s greatest inherent advantage in the production of natural resources is based on
  1. The variety of items in which North America can be self-sufficient,
  2. The safety of American natural resource production, and
  3. The productivity of North American mining technology and personnel.
The hypocrisy and sheer stupidity of those who want to stop producing natural resources in North America, so that we can get them from places where civil liberties are frequently nonexistent, productivity is low, safety is poor, women are treated worse than domestic animals, and the standards of living are appalling is simply beyond understanding.
I think that January 1, 2012 is as good a date as any to focus on the fact that maintaining a steady flow of affordable raw materials for energy production, food production, and manufacturing all at prices we can afford, which will let our economy GROW without lowering our standard of living is now the imperative.
The problem is that while we are trying to maintain production levels and costs the BRICS are trying to increase the production of the same materials at a rate never before seen in history. It is unlikely that America can ever again be a major supplier of extractive resources to an export led domestic manufacturing industry. We have waited too long and have simply lost the will and the capability to restore that capacity.
We can however conserve capital and reduce debt by becoming self-sufficient in energy and by again being entirely self-sufficient in metals and minerals for our domestic needs. The demand for technology materials of all kinds is ultimately now and in the future to be driven by the BRICS as all of them struggle to build military-technology-industrial complexes. The USA cannot hope to supply the BRICS with structural metal ores or fabricated products, because we waited too long to get into the game. Our structural metal industries cannot now, and have been unable to, compete with those of China or India on price since at least the middle of the last decade. The move to financialization destroyed any hope of American financiers creating truly global metals and minerals giants such as Rio Tinto or BHP. However there is still time remaining for the USA to become a technology materials powerhouse for ourselves and for the world.
The USA and North America are rich in the extractive resources of the metals and minerals that are critical to mass producing high tech devices for all uses civilian and military. The USA and Canada combined currently also lead the world in mining and refining engineering as well as technological innovation. The USA, however, is entering upon the last decade during which it has a chance to return to self-sufficiency and innovative leadership in technology. Once these opportunities are gone the world will have passed us by, and the result will be the slow erosion of our standard of living and of any further opportunities for growth. Canada has been a patient partner, our largest supplier of natural resources, but Canada’s population cannot support the creation of enough capital to move North America into the position of the world’s premier and central supplier of technology materials.
Small investors need to take note that the first decade of the 21st century saw more change in both the movement and the composition of the world’s metals markets than any other comparable period in history. The changes are permanent and their cause is an irreversible and fundamental change in the geography of the global raw materials trade. The driving center of the trade is no longer in the west; it is today in east Asia.
I believe that you can safely relegate the bulk of twentieth century punditry and scholarship on the cycles of the production and prices of metals in peacetime to the scrap heap. There they join such ideas and common wisdom as “the end of history” and descriptions of China as a third-world or developing country. In 2011 as in the prior decade, China and the other “developing” countries of southeast Asia continued to grow their GDPs at a rate of at least 3, and as much as 4, times the pace of the US or Europe. And since their common target, not their target in common, is to develop technology-military-industrial economies with a per capita GDP at least equal to that of the pre-2008 USA the rapidly growing economies of the nations of south and east Asia, and soon, if not already, of Brazil are consuming, in an unprecedented accelerated timeframe, the same volumes of base metals, mainly for fixed infrastructure and for transportation, that the USA and Europe produced and consumed in the from the beginning of the age of steel, 1867, until now!
The strain this acceleration of and growth of demand has put on the world’s productive capacity for the ores of the base metals has now highlighted the differences among the base metals themselves by resolving them, by use, into the structural metals and the enabling structural metals. China alone today, in 2011, already uses 60% of all of the iron ore mined globally and 33% of the aluminum ore. Huge investments of capital in the ores of both of these base structural metals have been made outside of China solely for the purpose of supplying just China. Investors should note that unless the demand for base structural metals grows in the other BRICS-the resource rich and/or resource mega-demanding nations of Brazil, Russia, India, China and South Africa- China could create chaos in the world iron-ore market simply by increasing its domestic output to self-sufficiency, which is in fact possible, although not today economical. This game changing event, Chinese self-sufficiency in iron ore, which is actually predicted by Rio Tinto to take place by 2020, would, without a buildup in demand outside of China, throw global iron ore production into a vast oversupply status thus collapsing prices. By simply, albeit expensively, moving forward towards self-sufficiency China puts downward pressure on global iron ore prices. Strategic investors should now look for the most efficient low cost producers and fabricators of steel and aluminum outside of China, because the creation of a massive non-Chinese demand is absolutely necessary for the non-Chinese owned iron ore industry.
The ores of iron and aluminum are available in proven accessible deposits in great abundance. The proven resources of these ores are sufficient even at present global demand to sustain the global steel and aluminum industries for centuries. As long as energy is plentiful and relatively cheap the global production of steel and aluminum will continue, but continue to grow only through demand from the “developing” countries. Strategically I think that Russia is far from any meaningful development. I am looking at India and Brazil as demand drivers for iron and aluminum. Both are today self-sufficient in iron ore and both are world class exporters. Note well though that should either’s economy ever require the importing of iron or aluminum ore while at the same time Chinese demand were stable at today’s rate, or continued growing, there would then be a run-up in iron ore prices that would dwarf those of the last 10 years. In that case Australia would be the big winner. Australia’s demand for steel can never require more than a small fraction of its capacity to supply of iron ore. The unknown factor in all of this, in the long run, is China, which could become an exporter of iron ore in the 2020s.
Whatever commodity scenario one plots for the long term it is now always Asian demand that is critical. America’s future is tied to sophisticated supply chain developments for natural resources.
I personally do not believe that China will become an exporter anytime soon of iron ore, as a raw material, unless such action becomes necessary to maintain employment in the Chinese mining industry and then only after domestic demand is satisfied.
Additionally it should be noted by strategic investors that a China, self-sufficient, or in an ownership situation globally of resources to make itself self-sufficient, in iron ore, coking coal, limestone, bauxite, and cryolite could easily come to dominate the global supply of steel and aluminum.
It is ironic that monopoly capitalism with Chinese characteristics is the true threat to so-called free market capitalism, which considers monopoly capitalism to be counter-productive to the fair distribution of wealth because it concentrates wealth in too few hands and hands pricing power solely to the monopolist. Yet the Chinese have chosen state monopolized capitalism to ensure the distribution of the wealth created to the largest number of Chinese people. The Chinese system is as much a threat to western economic philosophy as it is a threat to western lifestyles and standards of living. The biggest problem is that even as production rate investments consume more and more western capital it is not at all clear that the prices for the materials so produced will be set by a free market. Thus such investments are high risk-in fact this is exactly the problem in the current rare earths production buildup. There has been almost no change in the geographic center of rare earth demand, China. This means that Chinese moves to regulate its environment, improve worker health, safety, and compensation, and to direct its economy away from being export led to being domestic consumer demand driven will be the drivers for rare earth pricing. When one takes into consideration Chinese moves into global finance are targeted so as to keep Chinese manufacturing competitive this means ultimately a convertible currency in which raw materials such as the rare earths are denominated.
So long as America is dominated by a Wall Street and Washington elite that believes that a man’s worth is measured by the capital he accumulates whether or not it is used productively to make products and create jobs there is no contest. China is winning

Tuesday, January 3, 2012

Buy Gold and Store Offshore

It is a new year and we can breathe a sigh of relief or can we? 2011 was a very rough year for the world as a whole. Governments are tightening the nooses on their citizens. People are feeling like their money is not buying them as much as it used to. Wages are stagnant for most of the working class. Many people who were once considered middle class who gave to help the poor are now in the position of asking for assistance.
What is happening to the world as we know it? The European Union is struggling to stay together. The USA is turning into a police state. The Middle East and North Africa is destabilized. Asia is struggling with natural disasters and a weakening China. Central and South America are emerging as commodity power houses. Russia seems to be reawakening. All this and we have more rumors of war. What can we do?

In times of uncertainty Gold has always been the money of choice. Gold offers you many benefits.

  • Retaining Purchasing Power when governments print their fiat currency. Gold always retains a value to protect the holder. For Americans Gold has proven to consistently protect against Dollar weakness. Governments will try to hide the devaluation of their currencies.
  • Diversification is key, have a portion of your portfolio in a hard asset such as Gold Bullion. I do not recommend all of your assets be tied to the US stock market. So this means if you buy Gold make sure to buy bullion, 100% allocated.
  • As a Safe Haven, Gold is the asset that is considered safe. In volatile and uncertain times do you want your money exposed to a volatile stock market?

 Alan Greenspan (Former Chairman of the Federal Reserve) once said,

“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense that gold and economic freedom are inseparable”.
Gold has risen for 11 years straight. Some speculate that Gold is in a bubble similar to the early 1980’s. One thing that I see that is much different today than 30 years ago is the size of the market today. In 1980 the Gold bubble was primarily a Western phenomena. Today we see people from all nations participating. The Chinese have Gold fever, as well as the Indians, Russians, Arabian nations etc. Everyone can sense that it is time to put their money in a hard asset until the storm clouds pass.
How do we store the Gold that we purchase? Most people who start out with Gold ownership buy a few coins and store them at home or in a safety deposit box. The only reservation I have concerning this is the uncertainty of government. In the USA there is already a precedent set that the government can ask its citizens to turn in their Gold. This happened under President Franklin Roosevelt in 1933. Confiscation of the peoples Gold recently happened in South Korea and Thailand during the Asian financial crisis of 1998.
The other option outside of paper assets is to buy physical Gold Bullion and have it stored offshore in a safe secure facility. What are some benefits to offshore storage?
  • Asset Protection
  • Privacy
  • Security
One program that can give a person of peace of mind is offered by Swiss Metal Assets. The benefits of partnering with Swiss Metal Assets include.
  1. Your Gold is stored safely and securely in the Zurcher Freilager in Switzerland.
  2. 100% insured by AXA Insurance.
  3. Your Gold will never be leased by bullion banks unlike many ETF’s
  4. The vaults are audited regularly by Swiss customs.
  5. Rapid liquidity of your metals
  6. Individual Retirement Account (IRA) eligible
This spring Swiss Metal Assets is opening another storage facility in Panama. This state of the art facility will be located in the Panama Pacifico Free Zone. This Free Zone is the old Howard Air Force base. This facility will have the benefits of an airfield to bring your holdings securely into the country.
Gold gives a person peace of mind like very few assets can. Let us hope that 2012 will be a safe and prosperous year for all of us.

By: Randy Hilarski – The Rare Metals Guy

Rare earth crisis: Innovate, or be crushed by China

Laptops, cars, smartphones, TVs, MRI scanners, LCD displays, light bulbs, optical networks, jet engines, cameras, headphones, nuclear reactors. It might seem like a random selection of high-tech gizmos, but every single object on that list has one very important thing in common: Their manufacture requires one or more rare earth metals.

Rare earths — a block of seventeen elements in the middle of the Periodic Table — aren’t actually all that rare, but they tend to be very hard to obtain commercially. Generally, rare earth elements are only found in minute quantities in mineral deposits of clay, sand, and rock (earths!), which must then be processed to extract the rare metals — an expensive process, and also costly for the environment as billions of tons of ore must be mined and refined to yield just a few tons of usable rare earths.

Many rare earths are also geochemically rare — they can only be mined in a handful of countries. This is simply down to Mother Nature being a tempestuous so-and-so: Some countries have deposits of rare earths, and some don’t. This results in massively skewed production (China famously produces 97% of the world’s rare earth metals), and, as you can imagine, a lot of national security and geopolitical troubles, too.

It doesn’t stop with rare earths, either: Many other important elements, such as platinum, are only available from one or two mines in the entire world. If South Africa sustained a huge earthquake — or was on the receiving end of a thermonuclear bomb, perhaps — the world’s supply of platinum would literally dry up over night. The continued existence of technologies that rely on platinum, like car exhaust catalytic converters and fuel cells, would be unlikely.

If geochemistry and politics weren’t enough, though, we even have to factor in ethical concerns: Just like blood/conflict diamonds — diamonds that originate from war-torn African nations, where forced labor is used and the proceeds go towards buying more weapons for the warlord — some rare metals could be considered “blood metals.” Tantalum, an element that’s used to make the capacitors found in almost every modern computer, is extracted from coltan — and the world’s second largest producer of coltan is the Democratic Republic of the Congo, the home of the bloodiest wars since World War II. Not only do the proceeds from coltan exports get spent on weapons, but the main focus of the wars were the stretches of land rich in diamonds and coltan.

Also along the same humanist vein, it’s important to note that extracting these rare elements is usually a very expensive and disruptive activity. Indium, probably the single most important element for the manufacture of LCDs and touchscreens, is recovered in minute quantities as a byproduct of zinc extraction. You can’t just set up an indium plant; you have to produce zinc in huge quantities, find buyers and arrange transport for that zinc, and then go to town on producing indium. In short, extracting rare elements is generally a very intensive task that is likely to disrupt or destroy existing settlements and businesses.

The rare earth apocalypse

The doomsday event that everyone is praying will never come to pass, but which every Western nation is currently planning for, is the eventual cut-off of Chinese rare earth exports. Last year, 97% of the world’s rare earth metals were produced in China — but over the last few years, the Chinese government has been shutting down mines, ostensibly to save what resources it has, and also reducing the amount of rare earth that can be exported. Last year, China produced some 130,000 tons of rare earths, but export restrictions meant that only 35,000 tons were sent to other countries. As a result, demand outside China now outstrips supply by some 40,000 tons per year, and — as expected — many countries are now stockpiling the reserves that they have.

Almost every Western country is now digging around in their backyard for rare earth-rich mud and sand, but it’ll probably be too little too late — and anyway, due to geochemistry, there’s no guarantee that explorers and assayers will find what they’re looking for. The price of rare earths are already going up, and so are the non-Chinese-made gadgets and gizmos that use them. Exacerbating the issue yet further, as technology grows more advanced, our reliance on the strange and magical properties of rare earths increases — and China, with the world’s largest workforce and a fire hose of rare earths, is perfectly poised to become the only real producer of solar power photovoltaic cells, computer chips, and more.

In short, China has the world by the short hairs, and when combined with a hotting-up cyber front, it’s not hard to see how this situation might devolve into World War III. The alternate, ecological point of view, is that we’re simply living beyond the planet’s means. Either way, strategic and logistic planning to make the most of scarce metals and minerals is now one of the most important tasks that face governments and corporations. Even if large rare earth deposits are found soon, or we start recycling our gadgets in a big way, the only real solution is to somehow lessen our reliance on a finite resource. Just like oil and energy, this will probably require drastic technological leaps. Instead of reducing the amount of tantalum used in capacitors, or indium in LCD displays, we will probably have to discover completely different ways of storing energy or displaying images. My money’s on graphene.