clean energy

Rare Earths Supply at Risk Due to Growing Shift to Green Energy

Any global effort to save and prolong the life of Mother Earth, such as investing into and inventing technologies that use clean fuel and green energy are most welcome. But with the world still yet to determine a suitable, dependable and reliable source of rare earths outside of China, these efforts could prove detrimental to the rare earths supply chain.

Production of two rare earths metals, dysprosium and neodymium, critical components used to aid technologies in manufacturing wind turbines to generate electricity and make electric vehicles, have been found to have increased by only a few percentage points per year, according to Versus projected global demand seen to grow by 700 per cent for neodymium and 2,600 per cent for dysprosium over the next 25 years, it is believed the supply of the precious metal could not keep up given that the two metals are most especially available almost exclusively in China.

Citing a publication in the ACS journal Environmental Science & Technology authored by Dr Randolph E. Kirchain, inventions of green technologies would definitely carry out a proposed stabilisation in atmospheric levels of carbon dioxide, the main greenhouse gas, at 450 parts per million.

However, to meet the objectives of these green technologies would mean a parallel growth in the supply of rare earths.

“To meet that need, production of dysprosium would have to grow each year at nearly twice the historic growth rate for rare earth supplies,” Mr Kirchain said.

“Although the rare earths supply base has demonstrated an impressive ability to expand over recent history, even the rare earths industry may struggle to keep up with that pace of demand growth,” the author said.

In order to keep up, shortfalls in future supply could be mitigated “through materials substitution, improved efficiency, and the increased reuse, recycling, and use of scrap.”

Rare earth metals are essential for clean energy technologies, such as PVs; hybrid and electric vehicles; high-efficiency wind turbines; smart grid technologies; compact fluorescent lights; fiber optics; lasers and hard disk drives, defense guidance and control systems; global positioning systems; and advanced industrial, military and outdoor recreation water treatment technology.

Rare earth metals are not really rare. It is the mining procedure and operations that make them rare. Unfortunately, majority of the world’s rare earth metals, about 97 per cent, are mined in China, which have considerably slashed export quotas in 2010 and 2011 for domestic consumption and manufacturing purposes.

These “economically important metals are at risk of supply disruption due to human factors such as geopolitics, resource nationalism, along with events such as strikes and accidents,” said, citing a report by the British Geological Survey.

In December 2011, the U.S. Department of Energy (DOE), in its 2011 Critical Materials Strategy, said “many clean energy technologies depend on raw materials with potential supply risks” as it assessed the 16 elements considered most critical.

Dysprosium, neodymium, terbium, europium and yttrium were included in the short-term critical supply list. On the medium term were lithium and tellurium.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

By: Esther Tanquintic-Misa

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?

By: Randy Hilarski - The Rare Metals Guy

Electric cars to be hit by supply disruptions

The advancement of electric cars in the short-term could be affected by supply disruptions.

That’s the verdict of a new report from the US Department of Energy entitled 2011 Critical Materials Strategy, which looks at supply challenges for five rare earth metals – dysprosium, neodymium, europium, terbium and yttrium. These metals are used in magnets for wind turbines and electric vehicles or phosphors in energy efficient lighting. Meanwhile, other elements, including indium, lanthanum, cerium and tellurium, were found to be near critical.

According to the report, demand for almost all of the materials has grown more rapidly than demand for commodity metals such as steel – this has come from consumer products including mobile phones, computers and flat panel televisions, as well as clean energy technologies.

However, the report concludes that manufacturers of wind power and electric vehicle technologies are already looking into strategies to respond to potential shortages. It states that manufacturers are currently making decisions on future system designs, trading off performance benefits of elements such as neodymium and dysprosium against potential supply shortages.

As an example, wind turbine manufacturers are looking at gear-driven, hybrid and direct drive systems with varying levels of rare earth metal content while some electric vehicle manufacturers are pursuing rare earth free induction motors or using switched reluctance motors as an alternative to PM motors.

By: Paul Lucas

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

DOE report finds 5 clean-energy related REEs at risk in short-term

The substantial capex required for the development of a rare earths mine, compounded by major miners’ lack of interest in mining rare earths, may spell trouble in meeting future demand.

A report issued Thursday by the U.S. Department of Energy has determined supplies of five rare earths metals-dysprosium, terbium, europium, neodymium and yttrium-are at risk in the short term, potentially impacting clean energy technology deployment in the years ahead.

The 2011 Critical Minerals Strategy examined 16 elements for criticality in wind turbines, electric vehicles, photovoltaic cells and fluorescent lighting. Of those 16 elements, eight are rare earth metals valued for their unique magnetic, optical and catalytic properties.

Five rare earth elements used in magnets for wind turbines and electric vehicles or phosphors for energy-efficient lighting were found to be critical in the short term (present-2015).

Between the short term and the medium term (2015-2025), the importance to clean energy and supply risk shift for some materials.

Other elements-cerium, indium, lanthanum and tellurium-were found to be near-critical.

DOE’s strategy to address critical materials challenges rests on three pillars. 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 report said. “In all cases, extraction, separation and processing should be done in an environmentally sound manner.

“Second, substitutes must be developed,” the report cautioned. “Research leading to material and technology substitutes will improve flexibility and help meet the materials needs of the clean energy economy.”

“Third, recycling, reuse and more efficient use could significantly lower world demand for newly extracted materials,” the DOE advised. “Research into recycling processes coupled with well-designed policies will help make recycling economically viable over time.”

The report also contains three in-depth technology analyses with the following conclusions:

· “Rare earth elements play an important role in petroleum refining, but the sector’s vulnerability to rare earth supply disruptions is limited.”

· “Manufacturers of wind power and electric vehicle technologies are pursuing strategies to respond to possible rare earth shortages. Permanent magnets containing neodymium and dysprosium are used in wind turbine generators and electric vehicle motors. Manufacturers of both technologies are current making decisions on future system design, trading off the performance benefits of neodymium and dysprosium against vulnerability to potential supply shortages.”

 · “As lighting energy efficiency standards are implemented globally, heavy rare earths used in lightning phosphors may be in short supply. In the United States, two sets of lighting energy efficiency standards coming into effect in 2012 will likely lead to an increase in demand for fluorescent lamps containing phosphors made with europium, terbium and yttrium.”

In their analysis, DOE found R&D plays a central role in developing substitutes for rare earth elements. In the past year, the agency has increased its investment in magnet, motor and generator substitutes.

“The demand for key materials has also been driven largely by government regulation and policy,” the report observed.

“Issues surrounding critical materials touch on the missions of many federal agencies,” said the DOE. Since March 2010, an interagency working group on critical materials and their supply chains convened by the White House Office of Science and Technology Policy has been examining market risks, critical materials in emerging high-growth industries and opportunities for long term-benefit through innovation.

The report also found that, in general, mining and metal processing expertise “has gradually declined in countries of the Organization for Economic Co-operation and Development, although the need to develop and retain such expertise has received increasing attention in recent years.”

While the number of REO-producing firms located outside of China is small, the proliferation of new rare earth companies “could help ease market concentrations in the years ahead,” the DOE observed. However, “one of the most significant requirements in the rare earth supply chain is the amount of capital needed to commence mining and refining operations…”

“The extraction and, in particular, the processing of rare earth ore is extremely capital intensive, ranging from $100 million to $1 billion of capital expenditure depending on the location and production capacity,” the report noted. “Bringing a greenfield mine to production likely costs in excess of $1 billion.”

“The estimated financial investment needed just to prove the resource (e.g., exploration and drilling) can be up to $50 million,” said the DOE. “The up-front cost of production capacity can range from $15,000 to $40,000 per tonne of annual capacity.’

“Unlike other commodities, rare earth mining generally does not appeal to the major global mining firms because it is a relatively small market (about $3 billion in 2010) and is often less predictable and less transparent than other commodity markets,” the report said.

“Additionally, the processing of rare earth elements into high-purity REOs is fundamentally a chemical process that is often highly specialized to meet the needs of particular customers,” the study noted. “It requires unique mineral processing know-how that is not transferrable to other mining operations. These factors reduce the appeal of rare earths production to the major mining companies, leaving the field mostly to junior miners.”

The report observed that smaller mining companies face a number of challenges, including being less well-capitalized than the majors and may find it difficult to raise money from traditional market. Certain macroeconomic conditions, particularly tight credit and volatile equity markets, can contribute to these difficulties.

“Successful public flotations require fairly advanced operations with proven resources, a bankable feasibility study and often customer contracts or off-take agreements in place that ensure some level of revenue,” the agency said. The DOE noted that Molycorp and Lynas Corporation have the largest capitalizations, “reflecting in part their expansion of large established mines.”

By: Dorothy Kosich

Why Molybdenum is a Good Investment Right Now

What is Molybdenum?

The first important question when considering an investment in anything is what exactly is it that I am buying? In this case, molybdenum (or moly for short) is a metal that is added to steel to make it more corrosion resistant and able to withstand extreme temperatures (up to over 2600 degrees C.). There are many uses for moly (such as possible applications in nanotechnology circuitry, its use in dry lubricants, as a catalyst to help remove sulfur in coal burning furnaces, as well as many others) but to keep things simple its most common uses are in steel and stainless steel. For this reason you can think of moly as strongly tied to the steel industry. In general, if steel demand is going up it is highly likely that moly will follow. Now that we have a rough idea of what moly does, let’s dive into the industries it is used in. This is where things start to get exciting.

What Industries Require Molybdenum or Molybdenum Containing Steels?

There are many, but again the purpose of this article is to cover the broader view and to keep things simple. One of the primary industries that requires vast amounts of moly is energy production. Almost every means of energy production requires molybdenum. Let’s run through this by type:

Coal: Molybdenum is used in the blast furnaces of any new coal-burning power plants (because of the high temperatures reached in these furnaces). As was previously mentioned, it is also being used as a catalyst to remove sulphur that would be released from the plants, thus lowering greenhouse gases.

Oil and natural gas: If you’re drilling for oil or natural gas the drill bits you are using have moly in them. They need moly again because of the temperatures the drill bits reach, and to prevent cracking or deformation. It also helps increase the life of the drill bits. Keep in mind that these are a little different than the drill bits you used in wood working; they are often over a kilometer in length and have a much wider diameter. Even more important that the drill bits though, is moly’s use in pipelines. Every new pipeline built today will have a significant amount of molybdenum in the steel (sometimes up to 5%-8%). As the US is learning from their 1000’s of kilometers of corroding pipeline, increased corrosion resistance and longevity of lifespan of your infrastructure will help reduce your future costs. The size of the pipeline systems being proposed and currently under construction from Europe, across the Middle East, and into East Asia and China, are on scales the world has never seen. Every kilometer of pipeline will contain substantial amounts of molybdenum. This is also just one example of many.

Clean Energy: Molybdenum is found in some parts of solar photovoltaic cells, in the turbines of wind farms (especially those near coastlines or out in the ocean because of the need to prevent corrosion from the salt water), and in great abundance in nuclear power plants. This last sector is of great significance. After a few mishaps (Chernobyl being the catalyst) the nuclear power industry was essentially dormant for 20-30 years. But right now China is being the first to promote a nuclear renaissance with many countries following suit. Even the US is looking into constructing more reactors as a means to move to cleaner energy.</p>

Again, this is an overview. There are many other uses for moly in energy exploration, production, and transportation. Beyond energy though, another industry that has started to become a major consumer of molybdenum is the auto industry. Moly has been used minimally in the car industry for some time (I’m sure you can imagine how hot some parts of your car get and the need for steel in those areas that can withstand such temperatures). But, only recently has car operating efficiency (essentially gas mileage) become a huge selling feature that car companies are competing with each other to improve upon. One of the best ways to increase the gas mileage of your car is to lower the overall weight of the car, but this has to be done in a way that doesn’t lower the safety of the vehicle, in fact in many cases car manufacturers are trying to find ways to increase mileage and increase safety. How are they doing this? Well, by replacing the lower quality steel in the panels and frame of the car with smaller amounts of stronger steel. And, yes, you guessed it; this is done by adding moly to the steels. It’s a small addition percentage wise, (the new light-weight, stronger steels contain about 0.5% molybdenum) but when you consider the number of cars being produced to meet the growing demand of industrializing nations it is extremely significant. But I’m getting ahead of myself. We’re still talking about industries that require moly.

The next one is desalination plants. For anyone who lives somewhere that has a lot of free-flowing water (like myself in Vancouver, Canada) the concept of not having water running down rivers from the nearby mountains might seem foreign to you. But, I kid you not, there are many regions across the globe that due to increasing populations, unfavourable geographies, and lifestyles that consume vast amounts of water, simply do not have enough fresh water. In these cases, governments are often forced into investing huge sums of money to build desalination plants which take salt water, remove the salt, and produce clear, clean drinking water. Some regions heavily dependent on this technology are coastal regions in the Middle East, Australia, Cyprus, and even California. But of interest to you is that molybdenum is absolutely essential in the pipes, storage tanks, and pretty well entire desalination process of these plants. So now we know what moly is, and we understand some of the industries it is found in, but really why should someone invest their money in molybdenum?

Why Should I Risk my Money Investing in Molybdenum?

First, it really is essential to understand what a good investment is before you can even ask the question “Is ____ a good investment?” I’m sure most of you think you understand what a good investment is (and many of you are most likely even correct in what you believe to be a good investment) but for anyone who would like to be sure, to clarify their view, or just to understand what makes a good investment in my opinion you really should take a look at my post on What is a Good Investment?

If I’m about to consider molybdenum as an investment prospect I need to figure out one thing. Is the price of moly going to go up or down? At the most basic level this is the only question that matters. With commodities (in this case a metal) this question comes down to supply and demand. This is one of the reasons I invest almost exclusively in commodities, and even more specifically almost always in metals, because coming to understand the supply and demand of a commodity is really not that hard. Supply comes from miners in the case of metals, and demand comes from the world growth or contraction of the industries that consume the commodity. That’s it. Let’s talk about supply first.

Molybdenum Supply

There are several mines that supply molybdenum to the world market. Many of them are based in China, but a great deal of moly also comes as a byproduct of copper mining out of Chile, and some comes from the US, Canada, and other countries. The chart below gives a good idea of the molybdenum supply situation.

CPM Group has since put out a more recent chart showing that the actual supply of moly for 2009 and 2010 did fall in-line with what the chart above projected. Sadly, I couldn’t find it before posting this article. Anyway, what is important to take away from this chart is that there were a number of project expansions and new planned construction projects that would have brought new supply online in 2009 and 2010 which were paused or cancelled due to the US economic recession. It is also important to understand the general timelines of mining projects. It’s not a simple process building a mine; it doesn’t happen overnight. There are many stages, such as staking a claim to land, receiving drilling permits, performing drilling, assessing drill results and putting together a feasibility study, receiving construction permits and mining permits, getting financing, going into construction, and finally beginning to mine. This is important because this can sometimes take a decade to go through all of these steps. Even if the project is ready to go and the only thing paused for the recession was the construction, this stage alone can take 1-3 years depending on the size of the project. So, the lag that the recession had on molybdenum supply is a dramatic factor in whether or not molybdenum is a good investment. I believe it is safe to say that molybdenum supply is (as a worst case) a little above the 2007-2008 levels. The data suggests this is reasonable, and there are other factors such as diminishing grades at major mines that suggest this is a reasonable assumption as well. The next part of the equation is what is the demand picture for molybdenum?

Molybdenum Demand

We already went into some of the industries molybdenum is used in, so the obvious question here is do we expect these industries to be growing over the period of our investment or diminishing? Much of this ties into why I believe that molybdenum is a good investment now, because the world is in a state right now where the need for energy and infrastructure is paramount. But more so than the need, is the fact that it is actually happening. Perhaps the biggest example of this is the fact that China overtook the US as the largest energy consuming country in the world last year. This is huge. Combined with China’s immense GDP growth (according to some it has been around 10% for close to three decades, and expected to be 7-8% in 2011 which is still exceptional), the growing need for electricity, construction materials and equipment, safe drinking water, cars, rapid transit projects, etc. will require molybdenum. And it will be significantly more molybdenum than they have needed in the past. And this is just China. India is also growing at an astonishing rate with nothing in the foreseeable future slowing it down, and its needs for infrastructure and power are growing along with it. Even Africa is starting to see significant growth in some areas which will increase their need for molybdenum. In the US and other developed nations demand for molybdenum did significantly drop off during the recession, but Obama has on several occasions noted the need for the US to remain competitive on the world stage which means keeping their pipelines operational, keeping their cost of electricity down, lowering their dependence on imported energy (oil and otherwise), and creating jobs which means investment in infrastructure projects. Recently he stated that 50 Billion would be allocated to infrastructure projects. What this all amounts to, is that the world went through a major shift during the recession. Wealthier nations toppled over from a foundation of bad debt, and developing nations filled (and are still filling) in the gap. But what developing nations are doing with their new-found opportunity is of primary significance; they are doing exactly what the US did 80 years ago. They’re investing in themselves and their people. Building infrastructure, energy production, transportation routes, and entire cities on a scale that has never happened in the entire history of the world. All of this requires molybdenum.

If you’ve read my article on the Goals of you will know that I do not claim to be able to provide the absolute best investment advice out there, nor am I guaranteeing you some ridiculous % gain with a flashy banner ad. My goal is very simply to provide good advice, for free, to everyone and anyone who reads my articles. I say this because, will the supply and demand relationship with molybdenum over the next two to three years be the most out of sync of all the commodities and thus provide the best opportunity to investors? It is possible, but probably not. But is moly a good investment based on expected future supply and demand and thus presents an opportunity to investors with a fairly low risk profile and reasonable to high expected return? I believe that is exactly what moly provides and that is exactly why I am writing this article. I bring this up because it is the core of what I am trying to offer to my readers. This is why I don’t emphasize going into too much detail. Make some reasonable assumptions, do some good research, and you will be well ahead of most. But once again, I’m getting off track; back to moly.

The following chart shows moly demand over the past 50 years and gives a good idea of the long-term trend.

Given that moly is required in such a fundamental way to a growing world, and is finding new applications in clean energy, as well as possible future uses in nanotechnology circuitry, and others, there is no doubt in my mind that it will continue to be needed in the future.

The only other thing you have to consider when assessing a possible investment in a metal or other commodity is, can this material be replaced by something else? For example when copper becomes too expensive some wire makers turn to aluminum. This does take place to a small degree with molybdenum. In some cases there are cheaper alternatives for corrosion resistance. But for the most part the advantages that molybdenum adds are substantial, and the amounts of moly that need to be added to generate these benefits are small and cost relatively little. Also, generally replacements happen when a material is historically very highly priced. This is because manufacturers get used to certain prices and cost their end products appropriately with this in mind, but if one input material suddenly jumps in price they either have to pass on the cost to their less-than-impressed customers, or they have to find an alternative input material. The current price of moly is actually historically quite low, so if replacements were to occur it would be expected that they would not happen until moly was back in the $30-$40 rage at least.

Molybdenum Price

As was just mentioned, molybdenum is currently priced in the $16-$18 range, which is historically quite low. The chart below only shows data up to June 30 2010, but it does give some idea of the price trend.

Price is primarily useful when thought of in the context of supply and demand. On its own price really means very little unless you are in a business where you are buying or selling the specific commodity. So, if one agrees that world supply for moly is at worst a little higher than in 2007-2008 and demand is at worst still currently low, but should return to pre-recession levels in the not too distant future, then given that price is still historically low, molybdenum is likely a good investment right now. The next question is how do you want to invest in moly?

Ok, I Like Moly. How Should I invest?

This is really up to you, but it’s up to me to present you with some of your options.

First of all you can invest in the actual commodity molybdenum. This can be done by buying futures in the commodity. This very basically means you own a certain amount of molybdenum at a date in the future that you are paying for today at a certain price. As that future point in time approaches, if the price of moly is increasing you can sell your contract back to the market at a profit or you can roll-over your contract to a date further in the future if you expect moly to continue to increase. This is an extremely basic explanation; anyone interested in this should do more research on futures contracts, some great resources can be found on my Investment Resources page. One advantage of investing in the actual raw material is you don’t have to consider many of the risks that go along with owning shares in a company, such as political risk, management risk, currency risk, etc.

The second option is to buy shares in a company that mines molybdenum. Here you have to learn at least the basics about company financials, as well as how to assess a management team, which nations are politically stable, and how to value a company. A good starting point to learn how to do this for yourself, is in my article on How to Determine a Company Valuation

Buying shares in a company is in some ways a simpler and more accessible option for the average investor, so many individuals do go this route. It does increase your required level of knowledge on the investment though, because now before you can make a good investment you must consider all of the risks that were previously mentioned and understand how they apply to the company you are considering. For example if I’m considering a copper producer in the Congo, I must understand the political situation in the Congo, how it relates to mining companies, how stable it is, when the government is likely to change, etc. Any investment in this company without thorough knowledge of this takes on unnecessary and substantial risk and moves towards gambling and away from investing.

If you’ve come this far and are hoping I will provide you with a way to invest in moly beyond you learning about buying futures contracts, there are a couple companies that I believe are low risk (to understand risk you should see my article on Understanding Risk in Investing) and will benefit from any increase in molybdenum price. Two companies that meet my criteria for being good investments in molybdenum are Mercator Minerals (Ticker ML on the TSX)and Moly Mines (Ticker MOL on the TSX and ASX). Mercator Minerals operates a mine in Nevada, it has a management team that has constructed, optimized, and made profitable their first mine through the recession, they have a world-class copper project coming online in 2-3 years that will be built from cash flow, and they trade at a very reasonable level currently. Moly mines is an Australia-based company with a world-class molybdenum deposit that is permitted and ready to go as soon as financing is received. They have over $100 million in lead equipment already received, and their majority shareholder (Hanlong of China) is actively seeking financing for them of $500 million (half of this is already guaranteed in a commitment letter). Their management team is experienced and has an excellent track-record. They also have an in-production iron ore mining operation that should generate close to $100 million this year, and will provide cash for their moly project.

Why Invest in Moly Right Now?

Timing an investment is a challenging endeavor. But there is only ever one reason to make any investment right now. That reason is that the expected trend line of the underlying investment is positive; you don’t expect to see a lower price in the near future. In the context of molybdenum this means that I believe that current and near-future supply and demand are going to pull prices up and very little if anything could pull prices down. When you come across a situation like this buying right now (or waiting a very short while in the anticipation of a slight price drop enabling you to get a better entry point) is really all you can do.

You absolutely should do more research before making any investment decision. I’m merely presenting what I believe to be a good starting point, and a reasonable assessment of the state of the world in regards to molybdenum. Please feel free to contact me with any question on molybdenum, or anything related to this article.

Disclaimer: At the time of publishing this article I owned shares in Moly Mines.

By: Aaron Straker

China’s Rare Earths Monopoly - Peril or Opportunity?

September 30, 2011 (Source: Market Oracle) — The prosperity of China’s “authoritarian capitalism” is increasingly rewriting the ground-rules worldwide on the capitalist principles that have dominated the West’s economy for nearly two centuries.

Nowhere is this shadow war more between the two systems more pronounced than in the global arena of production of rare earths elements (REEs), where China currently holds a de facto monopoly, raising concerns from Washington through London to Tokyo about what China might do with its hand across the throat of high-end western technology.

In the capitalist West, as so convincingly dissected by Karl Marx, such a commanding position is a supreme and unique opportunity to squeeze the markets to maximize profits.

Except China apparently has a different agenda, poking yet another hole in Marx’s ironclad dictums about capitalism and monopolies, further refined by Lenin’s screeds after his Bolsheviks inadvertently acceded to power in 1917 in the debacle of Russia’s disastrous involvement in World War One. Far from squeezing its degenerate capitalist customers for maximum profit (and it’s relevant here to call Lenin’s dictum that if you want to hang a capitalist, he’ll sell you the rope to do it), Beijing has apparently adopted a “soft landing” approach on rare earths production, gradually constricting supplies whilst inveigling Western (and particularly Japanese) high tech companies to relocate production lines to China to ensure continued access to the essential commodities.

REEs are found in everyday products, from laptops to iPods to flat screen televisions and hybrid cars, which use more than 20 pounds of REEs per car. Other RRE uses include phosphors in television displays, PDAs, lasers, green engine technology, fiber optics, magnets, catalytic converters, fluorescent lamps, rechargeable batteries, magnetic refrigeration, wind turbines, and, of most interest to the Pentagon, strategic military weaponry, including cruise missiles.

Technology transfer is the essential overlooked component in China’s economic rise, and Beijing played Western greed on the subject like a Stradivarius, promising future access to China’s massive market in return, an opium dream that rarely occurred for most companies. You want unimpeded access to Chinese RREs? Fine – relocate a portion on your production lines here, or…

Which brings us back to today’s topic.

Rare earths and investment – where to go?

China is riding a profitable wave, which depending on what figures you read, produces 95-97 percent of current global supply, and unprocessed raw earth earths ores are currently going for more than $100,000 a ton, or $50 a pound, which some of the exotica fetching far more (niobium prices has increase an astounding 1,000 percent over the last year). Rare earth elements like dysprosium, terbium and europium come mainly from southern China.

According to a United States Energy Department report, dysprosium, crucial for clean energy products rose to $132 a pound in 2010 from $6.50 a pound in 2003.

The soaring prices however have also invigorated many countries and producers to begin looking in their own back yards, for both new deposits and former mining sites that were shuttered when production cost made them uneconomic before prices went through the ceiling.

However, a number of unknown factors play into developing alternative sources to current Chinese RRE production. These include first prospecting possible sites, secondly, their purity and third, initial production costs, where modest Chinese labor costs are a clear factor.

The 17 RRE elements on the Periodic Table are actually not rare, with the two least abundant of the group 200 times more abundant than gold. They are, however, hard to find in large enough concentrations to support costs of extraction, and are frequently found in conjunction with radioactive thorium, leading to significant waste problems.

At hearings last week before U.S. House of Representatives Committee on Foreign Affairs Subcommittee on Asia and the Pacific, Molycorp, Inc. President and Chief Executive Officer Mark A. Smith stated that his company was positioned to fulfill American rare earth needs, currently estimated at 15,000-18,000 tons per year, by the end of 2012 if it can ramp up production at its Mountain Pass, California facility.

Which brings us back to foreign producers. A year ago Molycorp announced that it was reopening its former RRE mine in Mountain Pass, Calif., which years ago used to be the world’s main mine for rare earth elements, filing with the SEC for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine. Low prices caused by Chinese competition caused the Mountain Pass mine to be shuttered in 2002.

Mountain Pass was discovered in 1949 by uranium prospectors who noticed radioactivity and its output dominated rare earth element production through the 1980s; Mountain Pass Europium made the world’s first color televisions possible.

Molycorp plans to increase its capacity to mine and refine neodymium for rare earth magnets, which are extremely lightweight and are used in many high-tech applications and intends to resume production of lower-value rare earth elements like cerium, used in industrial processes like polishing glass and water filtration.

In one of those historic economic ironies, China was able to increase its RRE production in the 1980s by initially hiring American advisers who formerly worked at Mountain Pass.

The record-high REE prices are also underwriting exploration activities worldwide by more than six dozen other companies in the United States, Canada, South Africa, Malaysia and Central Asia to open new RRE mines, but with each start-up typically raising $10 million to $30 million, not all will succeed. That said, the future is bright, as almost two-thirds of the world’s supply of REEs exists outside of China and accordingly, China’s current monopoly of REE production will not last.

So where do investors look to cash in on the RRE boom?

First, do your homework.

Exhibit A is Moylcorp, which would seem to be in unassailable position as regards U.S. production, but which nevertheless on 20 September after JPMorgan Chase & Co. lowered its rating of the company, citing declines in rare-earth prices, causing its stock to plummet 22 percent in New York Stock Exchange composite trading, despite being the best-performing U.S. IPO in 2010 after beginning trading in July, more than tripling after rare-earth prices soared as China cut export quotas.

Is there money to be made in RREs?

Undoubtedly – but the homework for the canny investor needs to extend beyond spreadsheets to geopolitics, mining lore, chemistry and Wall Street puffery. That said, it seems likely that whatever U.S.-based company can cover the Pentagon’s RRE requirements is likely to see more than a minor boost in its bottom line.

Gentlemen, place your bets – but do your homework first.

U.S. at risk of rare earths supply disruptions

The United States risks major supply disruptions of rare earth metals used in clean energy products unless it diversifies its sources of the minerals, the Energy Department warns in a report due to be released later on Wednesday.

The United States and other countries are worried that China, which controls 97 percent of the world trade in rare earth metals, will use those supplies as a political weapon and cut back their export when it is in a dispute with another country or to grow China’s clean energy technology sector.

“The availability of a number of these materials is at risk due to their location, vulnerability to supply disruptions and lack of suitable substitutes,” U.S. Energy Secretary Steven Chu said in a report, due to be unveiled on Wednesday at a rare earth metals conference at the Center for Strategic and International Studies.

The release of the report coincides with trade talks in Washington between the United States and China. U.S. officials are expected to push Chinese officials to loosen export restraints on rare earth elements.

China, which said on Tuesday it planned to raise export taxes on some rare earth metals beginning next month, holds 37 percent of known rare metal reserves, the United States has 13 percent and the rest is in other countries.

The 17 rare earth metals, with exotic names like lanthanum and europium, form unusually strong lightweight materials and are used in a wide range of applications including high-tech and defense products, car engines and clean energy.


By Tom Doggett
WASHINGTON | Wed Dec 15, 2010 6:23am EST

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