Rare Earths

Rare Earths Update

Wall Street Journal has come up with a new article about Rare Earths which you can read here:

http://online.wsj.com/article/SB10001424052748704124504576117511251161274.html

Link as of February 7, 2011.

Some key extracts that may be of interest:

China has storage facilities expansion going on, new Inner Mongolia buildings can hold more than their exported metals of last year.

China controls more than 90% of current global supply of rare-earth metals—a group usually classified as 17 elements and sometimes are called "21st Century gold"

While China says its deposits of rare-earth minerals account for only about a third of the global total, the country mines most of the world's marketed supply, which has raised concerns that China could deplete the supply too quickly.

Jiangxi area of Ganzhou. The area is known for deposits of particularly rare, premium-priced "heavy" rare-earth metals, such as terbium, which is used in fuel cells.

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The eventual price rise may finally make Canadian and US mines viable enterprises.

I write this soon after China has cut world exports quota for Rare Earth by 35% right before the new year. Many people have scurried on this news. China currently control about 90% of the world supply, a supply that goes into the production of hybrid cars, guidance materials, ipads, iphones, blackberries and things like neodymium magnets that make their way into many of the high tech devices and structures. They form small but highly important parts of these technological devices.

According to Bloomberg

http://www.bloomberg.com/news/2010-12-28/china-cuts-first-round-rare-earth-export-quotas-by-11-correct-.html

The news has sent stocks of rare earth mining companies located outside of china flying.

  • Shares of Molycorp rose $2.85, or 5.8 percent, to $52.29 at 10:33 a.m. in New York Stock Exchange composite trading. Rare Element Resources Ltd., a Vancouver-based rare-earth miner, jumped $2.29, or 20 percent, to $14.02 in New York. General Moly Inc., which is developing a molybdenum mine in Nevada, climbed 42 cents, or 7.1 percent, to $6.32.
  • Output and export of rare earths from China have been reduced because some of the companies mining the minerals were causing “severe” environmental damage and had to be closed, Wang said.

    “Excessive mining in southern provinces is still severe and it severely damages the environment. That’s why China is controlling mining, and naturally output and export will be reduced,” Wang said.


Zero Hedge, a popular counter-mainstream economic information site, has called rare earths the new black (gold). An extract of the article as well as how to find it as follows:

http://www.zerohedge.com/article/2011-year-when-rare-earths-become-new-black

  • This year, I have relocated this exercise 2,300 feet underground inside an abandoned mine at a slag dump site in Monaca, Pa. I have appropriated thirty-seven Chinese nationals from a Scandium Mine in Longba Town, Zhuxi Country, China, that have secured and transported my gadolinite, promethium, cerium and yttrium and other rare earth minerals holdings. As many of you are aware, I recently acquired these minerals, as well as the laborers, on a recent site visit to a rare earth mining facility in the P.B.O.C. My rare earth mineral holdings represent precisely half of my net worth. -MOMO

The thing about rare earths however, is that they are a misnomer. Unlike silver or gold, rare earths are not actually 'rare' in that they are not commonly found. They are about a thousand times more common than gold, and historically about 60-70 times more so than silver.

Gold minerals do have much less industrial use as compared to rare earths however.

What makes them (rare earths) valuable and not produced in any significant quantity in the USA currently is that it is hard to extract the minerals. Complex refining involving capital intensive sorting (thus ruling out USA and other high minimum wage high currency strength countries, and also favoring the cheap labor capital that has drawn investors all over to flock to china) and environmental costs not only on the physical terrain around but also taking a toll on the human people involved in the process if costly safeguards are not implemented. (which is why China is doing a crackdown on the more poorly run mines)

If one was to be really critical, then there have been commentators who have argued that this is the new blood diamonds. The environmental cost on the chinese people operating the mines is what China is exporting in its Rare Earth operations.

As a result, green and ethical investors may decide to take a long hard look at operations such as in Canada which may now be economically viable with increasing prices of Rare Earths. More mines may be created.

This may even include SWF (Sovereign Wealth Funds) like that of the Netherlands which have an ethical component to their selections.


Comments at the very bottom (after the news)

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