Without these rare earths, there wouldn’t be much of an alternative energy industry…since there wouldn’t be magnets for the next generation wind turbines in our wind farms needed to generate electricity or batteries for hybrid electric cars that would zip up. freeway.
Without these rare earths, we can say goodbye to space launches and satellites… as there would be no magnets for miniaturized guidance systems or titanium and ceramics for light rocket motors or nose cones. As such, there would be no weather satellites, and weather monitoring and forecasting would decline, and there would be no navigation systems in our cars because there would be no GPS (global positioning system).
Without these rare earths, our modern high-tech lifestyle will disappear, as there will be no television screens, iPods, cell phones, digital cameras, and ultra-scanners, as there will be no medical imaging devices.
The demand for these valuable and critical rare earth metals on the face of the planet is skyrocketing, but the supply is not. So why is demand increasing and supply not skyrocketing creating an imbalance and alternative investment opportunities?
Steve Forbes likes to say that “increased financial education and the resulting financial education and empowerment will open our eyes to alternative investment opportunities and will be the key to recovery from this financial crisis.”
In that spirit, I will use this article to briefly introduce rare earths, provide some examples of why they are key to energy technology and the 21st century economy, and highlight the unfolding drama offshore that is a future imbalance between the supply and demand with key players in Denver, Mt Weld, WA (Western Australia) and the Middle Kingdom.
Why the Middle Kingdom? China’s national leaders study these elements and know that without these elements much of the modern economy will simply shut down, so they are trying to control and limit supply (more on that in a minute).
Rare earths are 15 elements of the periodic table called lanthanides. As described in the opening paragraphs, we are as addicted to these rare earths as we are to our modern lifestyle and 21st century energy economy as we are to oil.
These elements are rare because, while they are found on the earth’s surface, deposits of significant size need to be found to account for the economics of mining, milling, and processing.
However, the only people studying these elements are MS/PhD level chemists, solid state physicists, and of course national leaders in places like China.
Deng Xiaoping, China’s ruler in the 1980s and 1990s, said that “while there is oil in the Middle East, there are rare earths in China.” In 1999, China’s leader was Jiang Zemin, and after a visit to the “rare earth” region of Mongolia, he declared it a national goal to achieve “economic superiority” by harnessing China’s vast rare earth resources. They are building industrial cities in Mongolia’s mineral district called the “mother lode” of rare earths with over 15,000 Ph.D. scientists and engineers dedicated to working on the world’s most modern rare earth facilities… The West has nothing not even remotely similar.
So as China develops its middle class, it consumes more, exports less, and tries to control the market with acquisitions and trade practices. For example, if you want access to these minerals from China, or to Chinese-owned mines in other parts of the planet, then you have to move your manufacturing facilities to China… which, of course, provides jobs for your middle class. emergent. Right now, China produces 95% of the world’s supply of rare earths.
Now, this is where the situation gets interesting.
The US has a mine containing the highest grade rare earth ore in the world located in Mountain Pass, CA, which is east of San Bernardino and Palm Springs…still in California but almost to the Nevada/Nevada border. Arizona. It is owned by Denver-based MolyCorp.
Previously, Molycorp was owned by Unocal (Union Oil of California) and in 2005, the Chinese tried to buy Unocal…while the Chinese said they wanted access to oil, many believe that reason was a red herring, as the The Chinese really wanted to gain access to the only US rare earth deposit located in California.
There are no processing facilities in the US, so all iron ore must be ground into powder and shipped overseas for final manufacturing into material for magnets, batteries, light steel, ceramics, etc.
Furthermore, these metals are highly toxic and environmentalists are on the prowl, threatening to shut down mining operations.
Now the third leg of this 3-legged stool.
In Australia there is a company called Lynas Corp, based in Sydney, which controls what is believed to be one of the largest rare earth deposits ever discovered on this planet, in Western Australia’s Mt Weld.
China recently made an offer to buy Lynas Corp. A few days ago, the Australian Foreign Investment Review Board, though late to the party, issued a ruling that would not allow majority ownership of Australian resource companies by companies. or governments outside of Australia, as these rare earth resources have been declared strategic assets. .
China’s monopolistic practices (lowering prices to effectively shut down startups), its attempts to buy and thus limit supply, and its lax rules on environmental safety are putting the Middle Kingdom in the driving seat for technology. 21st century energy. create another example of shifting wealth and power from west to east (see my recent article on one of the 5Es of the “5E Valuation Framework”) and set the stage for more drama on the high seas, so to speak.
I trust this article has introduced you to the importance of rare earths to energy technology and the economy of the 21st century. Over the past 200 years, the West has been able to industrialize and grow thanks to an abundance of energy and resources. As we enter an era of scarcity, we need to increase our education, improve our literacy, and monitor and pursue alternative wealth creation opportunities as a way out of this economic crisis.
In previous articles, I wrote that many of us are evaluating alternative wealth-building strategies outside of the US dollar…out of dollar-denominated assets…perhaps emerging markets…perhaps energy assets that are inherently useful as oil rigs, hydroelectric power, or methanol plants… maybe precious metals, water rights, oil, natural gas, potash mines, or gold mines… things that are hard to build, hard to replace, and expensive to replace. definitely not financial stocks, definitely not retail stocks, definitely not commercial property.
I hope this article provides a bit more insight into why emerging markets with a demand for things that are in short supply (such as oil, food, water, precious metals, rare earths, and potash mines) represent alternative wealth creation strategies.
Also, a good book to read would be “Global Paradox” by John Naisbitt, where he provides information and clues about the likely winners and losers in the global market as new rules emerge for the world economy that will determine the standards of politics and business. behavior from Tokyo to New York to Sydney to Shanghai.
I will continue to monitor developments in rare earths and the global resource market and report on alternative wealth building strategies in future articles and updates on my blog (link to my blog below).
