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Jack Lifton: North America Doesn't Need China's Rare Earths

-- Posted Monday, 21 June 2010 | Digg This Article | Share this article | Source: GoldSeek.com

Everybody'stalking about rare earth elements (REEs), but does anyone trulyunderstand them? With nearly 50 years in the industry, independentMetals Consultant Jack Lifton sure does. The educational powerhouse inthis burgeoning space returns to The Gold Report with a look toward future trends and a plan to emancipate North America from 's REE monopoly.

The Gold Report: Jack,since our first interview over a year ago, the rare earth space hasreceived a lot of ink. You were one of the first to talk about theseminor metals and their strategic importance to manufacturing andelectronics. Could you give our readers a little refresher about someof these metals and their uses?

Jack Lifton: I define arare metal by its production rate, because it doesn't matter how muchof a metal there is in the earth's crust—or even how much of it isconcentrated enough in accessible ore deposits to be, theoretically,recoverable. The only thing that matters is the amount of metal that isproduced each year, because that's all we have available to us use now,period. That production rate depends, of course, on a combination ofeconomics and technology.

The cost of producing the metal fromany particular source must be less than its selling price, and thetechnology must exist before the extraction project (mining) to producethe metal from that particular ore deposit.

The following chartsingles out the rare earth metals in red (the lanthanides, plusscandium and yttrium) from all other metals and rare metals by their2009 production rate. It also identifies the 2010 rare metals as thosebeginning with, and including, silver, as well as all of those producedat a rate less than that of silver in 2009.



Asof today, June 16, 2010, I think the future-use trends for those raremetals critical for mass-produced, consumer-use technology must bedifferentiated from future-use trends for the rare metals critical formilitary technology. These future-use trends may be qualitativelyalike. For example, they may require small, powerful, permanentmagnets; but their quantitative requirements for each category—civilianand military—–are different by orders of magnitude.

Forgingtechnologies for the military, which began in World War II, created asupply chain for the rarest metals critical for military applications.But, once military demand was understood—and, thus, limited—there cameinto existence a surplus of metals that had never before been availableto civilian scientists and engineers. This resulted in a revolution inthe creation and miniaturization of technologies for mass-producedcivilian (i.e., consumer, markets, etc.).

Today, thequantitative demand for rare metals by the military and civiliansectors of the economy has inverted. The civilian sector dominates thedemand for rare metals critical for use in technologies; I call thissubset of rare metals technology metals. For now, I'llconcentrate on just those selected metals because increasing productionfrom existing mines—or developing new ones—is so extremelycapital-intensive and time-consuming, the probability of doing thatdeclines rapidly as costs and expensive-to-fix technological issuesmount. In fact, the stock market pundits like to gloss overtechnological impediments to increasing the supply of technologymetals. And the stock market is woefully ignorant of the economicobstacles—from lack of mine profitability to increasing the productionof almost any metal other than iron.

You may note from theprevious chart that no tantalum was produced in 2009 even thoughtantalum is a critical technology metal for all electronics. This wasan issue of economics and politics largely ignored by the world's stockmarkets.

The total volume of the tantalum trade worldwide istiny compared to any base metal, such as iron, aluminum, copper, zincor lead; so markets have generally ignored this issue, but I think itis a major issue. There is a good opportunity here for investing inNorth American domestic junior tantalum opportunities, because theAmerican government is realizing that the only way to ensure thesurvival of its high-tech industry is to ensure there is a domesticnatural-resources supply chain that begins in every instance at themine. I use tantalum as an example to emphasize that rare earths aren'tthe only technology metals for which self-sufficiency is important.

Alternateenergies for a green future are impossible to build and operate withoutrare metals. These include cadmium, tellurium, selenium, indium,gallium and germanium for solar; rare earths for wind power andelectric cars; and uranium and thorium for nuclear generation ofelectricity.

Looking at the chart, you can see the total amountsof most of these critical technology metals are small, and some areeven so small they're unknown. We need to listen carefully to thoseminers who tell us they can produce any or all of the technology metalsfor us domestically (or under the control of friendly nations).Otherwise, the age of technology will stall or go into decline—and thegreen world will not come about.

TGR: Could you explain to our readers the difference between heavy and light rare earth elements (REEs)?

JL:The rare earth elements, known chemically as the lanthanides, aredefined simply as those chemical elements beginning at number 57,lanthanum, on the periodic table, and running consecutively through,and including, number 71, lutetium. The atomic numbers 57–71 are themeasurement by which true chemical elements are differentiated fromeach other. Technically, these numbers represent the quantity ofelectric charge of the nucleus of each atom; and this number dictatesthe chemical properties the atom will have.

The rare earths arecalled "rare" for the historical reason that their chemical propertiesare so similar, they could not be completely separated and identifiedindividually until the 20th century's rapid growth of chemicalseparation and identification technology. The commercial separation ofthe rare earths into individual, high-purity metals is still anexpensive, and not always successful, undertaking. In fact, thisseparation and purification on a commercial basis is the greatimpediment to increasing rare earth production even today.

Suchchemical operations are very expensive and time-consuming, so theyrestrict new entrants into the field to the well-financed, highlyskilled. . .and those lucky enough to have an ore body (always amixture of ores each with its own problems of concentration andextraction) that can be processed successfully on an economic basis.

Allrare earth ores contain all of the rare earths, but in varyingproportions. If the contained rare earths are primarily those with anatomic number at or below that of samarium, number 62, the ores aretraditionally said to be those of the "light rare earths."

Therare earths known traditionally as the "heavy rare earths" begin witheuropium, number 63, so anything at or above 63 is considered a heavyREE. Although the "heavies" are found in some proportion in all rareearth deposits, those ores with a significant proportion of theheavies, which are still very small numbers, are known as "heavy rareearth deposits." This confusing terminology has now become fixed instock-market talk.

Why is this important? Because the mostimportant of all the rare earths are the magnet metals—the big four:neodymium and praseodymium (light REEs) and dysprosium and terbium(heavy REEs). These four metals, in varying proportions, make up thecritical materials in 90% of rare earth permanent magnets made and usedtoday. And these will continue to be critical to manufacture therapidly increasing number of permanent magnets required by today's andtomorrow's technologies.

There is one other magnet metal ofsomewhat lesser importance—samarium; but, today it is used mostly inmilitary applications or those requiring magnets capable of operatingunder extreme environmental conditions of radiation or temperature.

Lanthanumis critical for nickel metal hydride-storage batteries, which is thetype of storage battery used universally for hybrid vehicle powertrains. Lanthanum is also critical for the oil industry, as a componentof fluid-cracking catalysts for modifying heavy crude into usablefractions. Some add lanthanum to their list of important rare earthmetals to create a list of the rare earth "big five." I reservejudgment on whether lanthanum should be in the same category ofimportance as neodymium.

TGR: You mentioned earlier thatmost of the world's supply of these minor metals now comes fromunreliable jurisdictions. Are there other producers or explorers inmore politically safe locations?

JL: At this time, all of the rare earth metals are mined, refined and purified in Asia or . More than 95% of this is done within the People's Republic of , with the balance is done in , , and . None of these areas is politically reliable in terms putting the needs of the or the global community on an even par with their own domestic needs.

Myview is that narrow-minded politicians in the West have sacrificed oureconomic and military security on the altar of their own short-termneeds—to be re-elected. The was self-sufficient in REEs and had a complete supply chain for them asrecently as 2002. At that time, global economics made Chinese orescheaper than those produced in the The supply chain—purification, metal and alloy production and magnet and battery production—simply moved to for access to supplies of the rare earths.

Besides the huge deposit of high-grade light rare earth ore (with some europium) at , North America also has significant REE deposits in , , and 's , and . The Canadian deposits and those in contain very significant quantities of the heavy REEs.

North America could be completely independent of —and could, in fact, be a supplier to —if just a few of 's deposits were developed.

In order for the to be self-sufficient and become a net exporter of REEs, some of theabove-listed companies must be developed now. Other countries,domestically, and and , globally, are racing to acquire and develop REE resources outside of . It is a global competition, and the other entrants are already well under way.

TGR: Do you see demand for these REEs expanding dramatically in the future?

JL:Demand for rare earths, and particularly for the big-four magnetmetals, is growing at a rate that is unsustainable unless new heavy REEproduction is brought online in the next five years at the most. Due tothe nature of REE deposits, this requires that the production of lightREEs increase significantly also. Therefore, I believe there is now awindow of opportunity for one or two light REE producers and severalheavy REE producers to enter the market over the next five years.Anyone whose timeline is beyond that will not likely be successful inthis run up of rare earth demand.

TGR: This has been a real education, Jack. Thanks so much for your time today.

JackLifton is an independent consultant and commentator, focusing on marketfundamentals and future end-use trends of the rare metals. Hespecializes in sourcing nonferrous strategic metals and due diligencestudies of businesses in that space. Jack's work includes explorationand mining, and the recovery of metal values by the recycling of notonly metals and their alloys but also metal-based chemicals used as rawmaterials for component manufacturing.

Jack has more than 47years of experience in the global OEM automotive, heavy equipment,electrical and electronic, mining, smelting and refining industries.His background includes sourcing, manufacturing and sales of platinumgroup metal products, rare earth compounds and ceramic specialties usedto make catalytic converters, oxygen sensors, batteries and fuel cells.Jack is knowledgeable in locating and analyzing new and recycledsupplies of 'minor metals,' including tellurium, selenium, indium,gallium, silicon, germanium, molybdenum, tungsten, manganese, chromiumand the rare earth metals.