A quick search of media stories from the
month of December, 2009 shows 24 clips including references to the 15
lanthanides and their related elements scandium and yttrium.
By contrast, one day in December, 2011 produced 56 stories on the same
resources. Even the tone of REE coverage has transformed over the years.
Two years ago, an analyst piece from veteran metals consultant Jack
Lifton titled “Underpriced Rare Earth Metals from China Have Created a
Supply Crisis ” was a common headline as the world discovered that cheap
supplies had left manufacturers vulnerable to a monopoly with an
agenda. That supply fear made REE the investment de jour and sent almost
all of the rare earth prices through the roof. In December of 2010, the
headlines in big outlets like The Motley Fool announced that the “Spot
Price of Rare Earth Elements Soar as much as 750% since Jan. 2010.”
Reality
soon set in as investors realized that this was not a simple supply and
demand industry. First, demand was still vague, subject to change and
very specific about the type and purity of the product being delivered.
Second, the ramp-up period for companies exploring, getting approval for
development, mining, processing efficiently and delivering to an
end-user was very, very long. Some became discouraged. That is why this
year, the consumer finance site, The Daily Markets ran an article with
the headline: “Why You Shouldn’t Give Up on the Rare Earth Element
Minerals” by Gold Stock Trades Newsletter Writer Jeb Handwerger.
Through
it all, Streetwise Reports has focused on cutting through the hype to
explain what is really driving demand, how the economy and geopolitics
shape supplies going forward and which few of the hundreds of companies
adding REE to their company descriptions actually had a chance of making
a profit.
Back in June of 2009, in
an interview titled “The Race to Rare Earths,” we ran an interview with
Kaiser Research Online Editor John Kaiser that concluded “China’s
export-based economy, once dependent on American greed, is now but a
fading memory. While the U.S. was busy printing and preening, the
Chinese were long-range planning. But America wasn’t the only country
caught off guard by China’s strategic, if surreptitious, supply
procurement.” Even while other analysts were panicking, Kaiser was
pointing out how investors could be part of the solution–and make a
profit in the process.
“For the
juniors, the opportunity right now is to source these projects. They get
title to them, and when these end users want to develop them, they’re
going to have to pay a premium to have these projects developed,” Kaiser
said. “So it will not be economic logic that results in these companies
getting bought out and having their deposits developed. It’ll be a
strategic logic linked to long-term security-of-supply and redundancy
concerns. And we’re seeing that sort of psychology at work in this
market. It’s a bit of a niche in this market. Not as big as gold, but it
is an interesting one because of the long-term real economy link
implications.”
After years of
covering the space by interviewing the growing chorus of analysts and
newsletter writers singing the praises of rare earth elements, in June
of 2011, we launched The Critical Metals Report to give exclusive
coverage to the entire space, including rare earth elements, strategic
metals and specialty metals. One of the first experts interviewed was
Emerging Trends Report Managing Editor Richard Karn in an article called
“50 Specialty Metals under Supply Threat.” He warned that investing in
the space is not as simple as some other mining operations. “The market
is just starting to become aware of the difficulty involved with
processing these metals, which, in many cases, more closely resemble
sophisticated industrial chemistry than traditional onsite brute
processing. Putting flow sheets together that process these metals and
elements economically is no mean feat.”
In
this early article, Karn busted the myth that manufacturers would find
substitutions, engineer out or use recycled supplies for hard-to-access
materials. “The advances we have seen especially in consumer electronics
over the last decade and a half have not been driven by lone inventors
or college kids tinkering in their parents’ garages, but rather by very
large, well-equipped and well-staffed research arms of powerful
corporations. The stakes are high and if a certain metal is critical in
an application, they will buy it regardless of the price,” he said.
Similarly,
a July 2011 article for The Critical Metals Report featured Energy and
Scarcity Editor Byron King sharing “The Real REE Demand Opportunity”
driven by the automobile industry and beyond. He was one of the first to
point out that not all rare earths are the same with Heavy Rare Earth
Elements demanding big premiums.
“Going
forward, the serious money will be in HREEs, which have a lot of uses
other than EVs,” King said. “For example, yttrium is used in
high-temperature refractory products. There’s no substitute for yttrium.
Without it, you can’t make the refractory molds needed to make
jet-engine turbine blades. If you can’t make jet-engine turbine blades,
you don’t have jet engines or power turbines. The price points for these
HREEs will reflect true scarcity and unalterable demand. People will
bite the bullet and pay what they have to in order to get the yttrium.”
House
Mountain Partners Founder Chris Berry also addressed the impact of
electric vehicle demand on vanadium, a popular steel alloy strengthener
now being used in lithium-ion batteries in the interview “Can Electric
Vehicles Drive Vanadium Demand? “
“The
use of vanadium in LIBs for EVs is not significant yet, but could
eventually become important as the transportation sector electrifies.
One of the real challenges surrounding LIBs is settling on the most
effective battery chemistry. In other words, what battery chemistry
allows for the greatest number of charge recycles, depletes its charge
the slowest and allows us to recharge the fastest? Today, based on my
research, lithium-vanadium-phosphate batteries appear to offer the
highest charge and the fastest recharge cycle. It seems that the
lithium-vanadium-phosphate battery holds a great deal of promise,
offering a blend of substantial power and reliability. I am watching for
advances in battery chemistry here with great interest,” Berry said.
In
September, Technology Metals Research Founding Principal Jack Lifton
shared his insights on why some junior REE companies are prospering
while others wither and die. In the article, “Profit from Really
Critical Rare Earth Elements,” he said: “Rare earth junior miners are
now being culled by their inability to raise enough capital to carry
their projects forward to a place where either the product produced
directly or the value to be gained from the company’s development to
that point by a buyer can be more profitable than a less risky
investment. The majority of the rare earth junior miners do not
understand the supply chain through which the critical rare earth metals
become industrial or consumer products. Additionally, they do not seem
to recognize the value chain issue, which can be stated as ‘How far
downstream in the supply chain do I need to take my rare earths in order
to be able to sell them at a profit?’”
Then
Lifton made this important point for Critical Metals Report readers.
“It is very important for the small investor to understand that the
share market does not directly benefit the listed company unless the
company either sells more of its ownership or pledges future production
for present, almost always sharply discounted, revenue.” As always,
Lifton encouraged investors to follow the money to a specific end rather
than the general market demand often envisioned by investors accustomed
to the more defined gold market.
In
October, JF Zhang Associates’ Principal Consultant and Chief China
Strategist J. Peter Zhang shared his insights on “U.S. Manganese Supply
as a Strategic Necessity.”
Manganese
is now largely used largely in the production of low quality stainless
steel, but is being incorporated into lithium-ion batteries. That
increased demand is focusing attention on the limited supply outside
China. “There really is no electrolytic manganese metals production in
the U.S. or anywhere outside China except for a small percentage from
South Africa. We don’t produce even a single ounce in North America.
Relying on other countries to supply essential commodities (like oil for
instance) is always a problem. If China suddenly decided to reduce
production, or in the likely event that its domestic demand increases,
the world would be out of options. Policymakers need to understand this
risk and Congress needs to take action to minimize the potential
impacts,” he said. “From the end of 2008 to 2009, China tied things up.
Since then, the price has doubled, tripled and quadrupled. That should
be a wakeup call. North America needs to either establish a strategic
reserve system for critical metals or build production capacity to
mitigate supply risk. I think there is some sense of urgency right now,
but a lot more needs to be done.”
Picking
the right junior is the trick. In the November article “Navigating the
Rare Earth Metals Landscape” Technology Metals Research Founding
Principal Gareth Hatch outlined the odds. “TMR is tracking well over 390
different rare earth projects at present; I can’t see more than 8-10
coming onstream in the next 5-7 years. Projects already well past
exploration and into the development and engineering stage, and beyond,
clearly have first-mover advantage.”
Just
this month, in an interview entitled, “The Age of Rare Earth Metals”
Jacob Securities Analyst Luisa Moreno compared the impact REEs will have
on our daily lives with the transformation in the Bronze Age.
“There
is an economic war over the rare earths, with China on one side and
other industrialized nations on the other—Japan, the United States and
the E.U. China is probably winning. It has decreased exports in the last
few years and increased protection. It has attracted a great deal of
the downstream business and it is positioning itself well. At this
point, it produces most of the world’s rare earths, and prices are at
record highs. Japan and the other countries have been left with few
options, and those options are more expensive, such as substitution,
recycling and adapting production lines to use less efficient
materials.” Moreno then pointed to the seven companies that could come
to the world’s rescue and usher in a miraculous new world of smaller,
stronger, more powerful gadgets based on a steady supply of REE
materials from reliable sources.
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