Later this week I’ll be flying out to Europe, ahead of the 21st International Workshop on Rare Earth Permanent Magnets and their Applications – also known as REPM’10 or simply “The Workshop” within the magnet industry.

This Workshop will be held on the shores of the picturesque Lake Bled in Slovenia, and is the latest in a long series of similar events stretching back to the 1970s. Karl Strnat, the co-discoverer of the first generation of permanent magnets based on rare earths, organized the first Workshop at the University of Dayton, Ohio in 1974. Dr. Strnat worked at the US Air Force Research Laboratory, part of the Wright-Patterson Air Force Base in Ohio, and it was there that he, Alden Ray and others undertook the research that led to the discovery the first RE-Cobalt magnetic compounds.

I’ve had the privilege and the pleasure of attending three prior Workshops, which are held every two years. I say without hesitation that the Workshop is the most important meeting for the permanent magnet community on the calendar. The attendees are a unique blend of folks from industry and academia, technical and non-technical, and drawn from all around the world. This year’s event is being hosted by the magnetics research group at the Josef Stefan Institute in Ljubljana, Slovenia’s capital, a group with a distinguished track record of research and development in magnetic materials.

As a slowly developing postgraduate research student in magnetic materials at the University of Birmingham, I had the somewhat dubious honor of working as part of the security detail at the Workshop held at that University in 1994. I was also part of a musical “ensemble” during that meeting that passed into Workshop legend too, but that’s about all I’ll say on that.

What I will mention though, is that it was my attendance and participation at that Workshop in Birmingham in 1994, that led to my being introduced to the leading players of the industrial and academic sectors of the rare earth magnets industry. I made contact with one particular individual at that meeting, who would eventually go on to introduce me to my first employer after graduating in 1997.

At the Workshop in Slovenia next week, I will present an invited paper titled ‘Recent Developments in the North American Permanent Magnet Industry and its Supply Chain‘. It was not without a considerable sense of satisfaction at being able to “close the circle”, that I discovered that the Chair of the session in which I’ll be presenting this paper, was none other than the gentleman I first met in 1994, who helped propel me into the commercial world of permanent magnets – Mr Reinhold Strnat, a distinguished member of the magnetics community in his own right, and a now long time friend and colleague.

The ability for young, wet-behind-the-ears postgraduate research students to present their work to crusty old professors and captains of industry alike, in a non-threatening, non-pretentious setting is a near-unique aspect of the Workshop series, and was certainly an essential part of my growth in the discipline. It is from meetings and interactions like these, that the future researchers, developers, engineers and scientists in the field of rare earths, permanent magnets and allied arts will be drawn. I am pleased to note that the attendance at the Workshop in Slovenia will be as high as ever – perhaps 150 attendees, representing all the research groups, companies and other organizations of importance to the rare earth permanent magnet industry.

Interestingly, this year will see a number of presentations from folks within the broader rare earths industry, including TMR’s very own Jack Lifton, Gary Billingsley of Great Western Minerals, and others. I’m hoping to snag some interviews and Q & As with the various leading rare earth magnet researchers while in Bled. I look forward to being able to share that info and perhaps a few photos, on my return.

Many of my readers have expressed surprise at my report of the non-appearance of practically all of the non-Chinese rare-earth junior-mining ventures, at the ’6th International Conference on Rare Earth Development and Application & China Rare Earth Summit 2010′, held in Beijing this week.

I personally decided to come to the English-language ‘China Rare Earth Summit 2010′ in the Spring of this year, when the Chinese Society of Rare Earths invited me to be a guest speaker during the plenary (general introduction and overview) session. I paid my own air fare, and the Society is covering my hotel room in Beijing. When I agreed to come, I did not know who else would be attending, but I assumed that the regular contingent of junior miners and sector analysts, who I see at all of the rare earth conferences I attend, would be there.

I admit that I now only attend conferences at which I am a speaker. Since my consultancy is focused on assisting institutional investors doing due diligence on rare metals related opportunities, I even narrowly select only those speaking opportunities where I believe I can improve my knowledge of a sector, such as rare earths.

I also admit that since late last year, I have been hearing that ‘conference fatigue’ is setting in among the attending classes of the rare-earth ‘space.’ It should be noted here, by the way, that institutional investors rarely attend the typical rare-earth conferences put on by information services and other professional conference organizers who cover the ‘sector.’ Institutional investors have their own gatherings which are for (high) paying clients only, such as private equity funds. I frequently speak at those and have meetings with the clients of my clients, who usually have specific questions about particular sectors and companies in which they are interested.

I give advice only on my assessment of the probability of commercial success of rare-metals-related opportunities. I do not presume to be a stock picker, because that requires knowledge of, and interest in, market psychology, which I possess only to a limited degree.

Having said that, I agree, however, that most industry conferences put on by information services and professional conference companies, are for stock promotion and networking among industry hopefuls and public relations companies.  They usually consist of endless ‘presentations’ by junior miners saying exactly the same thing over and over again. I am indeed fatigued by most of this myself.

The trouble for the serious junior miners, seems to be that they cannot distinguish between the forest and the trees. I agree wholeheartedly that there is and should be conference fatigue with regard to the financing of rare earth mining opportunities outside of China.  These conferences are pointless if your goal is to secure either long term strategic financing, or get access to technology to move your project forward. Neither the financiers, nor the providers of such technology, attend most of the stock-promoting conferences.

Serious junior miners need financing, supply-chain knowledge and technology, and marketing assistance. The ‘China Rare Earth Summit 2010′ was certainly a source of information on supply (and value) chain technology, as well as a source of knowledge of the largest rare-earth market in the world, Southeast Asia, primarily China. Even though Western institutional investors were not at this meeting, I did ask that successful Chinese miners, refiners and mining companies look at investing and opening operations in the USA, which would make the financing of smaller rare earth mining ventures in North America more economically feasible.

I will continue this dialog with the Chinese mining and mining finance community in November of this year, when I address the ‘China Mining 2010′ meeting – Asia’s, if not the world’s largest mining congress – on US contributions to the global rare-earth market. I will also chair a mining commodities forum there on lead and zinc.

What I want to say about the non-attendance of junior non-Chinese rare-earth miners at this week’s meeting in Beijing is that I think it indicates a lack of understanding of what is required to successfully bring a rare-earth (or any other metal or metals) producer to the marketplace. It underscores for me what seems to be only too common among junior miners: a lack of management skills, particularly obvious in the areas of long term finance planning and acquisition, business model development, supply-chain awareness, value-chain awareness, and marketing.

There were 300 attendees in Beijing this week. They represented, comprehensively, China’s rare-earth miners, refiners, metal-trading companies, academic and industrial research and development, related manufacturers, and government. The conference language was English. There were attendees from Mongolia, Kazakhstan, Bulgaria, Russia, France, the UK, Australia, Canada, and the USA, but the only non-Chinese junior miner, as I have previously said, was Great Western Minerals Group (GWMG), which was doing exactly what the others should have been doing; networking with Chinese companies that have the skills and technologies for sale or joint venture, which a company like GWMG needs to bring its project to a successful conclusion.

I marvel at the nonsensical braying of US promoters, about critical shortages and national security requiring massive public subsidies, for an industry that needs honed management skills in finance, supply chain interaction, technology, and marketing. A lot of what every rare-earth junior-mining company (US or otherwise) needs to be successful, was available in Beijing, but I guess they had ‘conference fatigue.’ Their general failures to understand their need for the skills in the Chinese rare-earth industry, do not bode well for the non-Chinese industry.

I’m tired of hearing about Chinese plans and conspiracies to control the rare-earth space. By the way, I was intrigued by the number of Chinese here who asked me why the USA is against Chinese investment in US mining. “Is there a conspiracy,” one gentleman asked me, “against the Chinese businessman?”

Also, by the way, the first response I got to my call for Chinese investment in the North American mining space was, “why would we want to create a competitor?” My answer? That refiners, metal and alloy producers should build facilities in North America, so that smaller mines can be put into operation with assured markets, and without the need to each finance a separation plant and refinery and metal production operation. This is the only way to make mining, on its own, profitable at the concentrate production stage. I suggest that Chinese supply-chain-operation providers support only those mines, which can produce a high proportion of heavy rare earths. Such mines in Canada or South Africa, would be producing into a no-demand local market and would be glad to sell to Chinese customers. Even in the USA, domestic demand is small and declining, so that materials produced in the USA would be mostly for export. Thus, I pointed out, Chinese investments in the USA would create US jobs and would produce both profits and valuable metals for the Chinese markets, as well as increased US exports.

The US military demand can be met through direct stockpiling and recycling, or by encouraging its own suppliers to do the same.

I cannot think of another way to make North American rare-earth mining profitable, within the core competency of the North American mining ventures I have studied.

GWMG, for one, is doing exactly the right thing. It has found a high-grade (though small) rare-earth deposit in a low-labor-cost country. The deposit in question is disproportionately rich in heavy rare earths, it was mined before by a major miner and there was therefore a developed metallurgy for the deposit in place. GWMG is seeking third-party assistance in refining and metal production to be carried out in South Africa. GWMG will produce magnet alloys itself, in the UK, in its existing facility there, now running using Chinese metals. They will sell into the market the more than 2/3 of its production that it does not consume internally, resulting in a production of 3,000 tonnes per annum of rare-earth permanent-magnet alloy worth, at today’s rates, approximately $150 million with a margin of more than 35%.

Even better, GWMG plans to use part of its proceeds from any financing, to explore the area of its South African claims, to try and find additional ore of the type it has already verified to be there, in relatively limited quantity.

These days I am only following five rare-earth companies in any great detail. Each of them has a heavy-rare-earth-rich deposit or one that has other valuable metals associated with the rare earth deposit. I am working with two of those companies as a paid consultant, to help them to find financing and to find what I call supply-chain-synergistic relationships.

My only connection with GWMG is that I am a small shareholder. Why wouldn’t I be?

Where is everyone’s business model for profitable operation??

In fact, where is everyone who isn’t Chinese?

I am in Beijing, where I am attending and have spoken at the 2010 China Rare Earth Summit, part of the 6th International Conference on Rare Earth Development and Application, run by the Chinese Society of Rare Earths. I was honored to be one of only three American guest speakers. The other two were America’s most well known academic experts on rare earths, Professor Karl Gschneidner of the Ames Laboratory at Iowa State University and Professor William J. Evans of the University of California – Irvine.

The conference has 300 attendees who are a comprehensive group, representing the academic, business, and governmental sectors of the Chinese rare earth research (academic and business), development, mining, refining, and end use manufacturing industries.

I was asked to speak about ‘The American Perspective of the Rare Earth Supply Issue.’ My presentation and commentary will be posted shortly here on the Technology Metals Research web site for review.

Although most of the nearly 100 speakers in the 6 technical tracks, and most of the 222 papers listed on the program were highly technical, interspersed among them were some that were purely descriptive of mines, processes, and important sectors dependent on the rare earth metals such as permanent magnets, batteries, phosphors, wind energy generation, and other clean-tech/green-tech applications.

My colleagues Dudley Kingsnorth of IMCOA and Judith Chegwidden of Roskill Information Services, were also both invited guest speakers and Ms. Chegwidden was the moderator of the introductory session at which I spoke. Their respective presentations might be available online in the near future.

I am here in China to find out what the Chinese rare earth industry is doing and where it is going. I have a scientific background, and was once a researcher myself. I also worked with rare earths in product development for phosphors and batteries, so I was interested in and able to understand most, if not all, of many of the technical papers I heard. THe biggest surprises though, came from the survey papers on clean-tech/green-tech applications of the rare earths.

It is obvious from the vantage of the rare earths’ sector in China, that China is simply racing ahead of the rest of the world in volume production, as well as development of state-of-the-art clean tech and green tech products.

For example, it was pointed out that China built and installed 13 gigawatts of wind turbine electricity generating capacity last year, using rare earth permanent magnets for efficiency and low maintenance. The astounding prediction was made that by 2020, China will install 330 gigawatts more wind power capacity, with each 1.5 megawatt generator require one metric ton of neodymium-iron-boron magnet alloys, which, if they contains 34 weight % neodymium, would mean that the Chinese wind power industry would need a further 70,000 t of neodymium, approximately 3 1/2 times the 2008 production of that metal – all as new added material – between now and 2018-19.

I plan to write much more on this topic during the next few weeks, but I believe that the trend is clear. China will be the driver for, and the home of, the most demand in the world for the rare earth metals from now on.

There wasn’t much talk about Molycorp in China, other than to hope that if it gets into production, Chinese customers will have an opportunity to buy its products. The only non-Chinese rare earth mining venture present was Great Western Minerals Group. Its chairman gave a talk on his ‘mine to market’ strategy, and he told me he was there both because he was invited, and in order to continue negotiations for a strategic alliance with a Chinese refiner, on an African project the goal of which is to supply Great Western’s UK alloy plant, Less Common Metals, with feedstock metals for its operations from GW’s South African venture at Steenkampskraal.

Japanese companies and academics were well represented and there were even French and Russian miners and refiners. I was disappointed that there were so few Americans, and as for the American media I saw only public radio’s Marketplace (who interviewed me) and the New York Times’ Asia correspondent.

If the rare earth supply issue is so important to America’s security, why then do so few Americans and almost no American media come to the world’s premier rare earth informational event? It is most likely because China is the center of the world rare earth industry, in all of its aspects.

The Chinese and Japanese magnet industries both need heavy rare earths. They may even need light, imported, non-Chinese, rare earths sometime before 2015, but I think it is clear that after 2015 they will both need heavy rare earths from outside of China. Japan may actually need both types of rare earths from the outside by 2015, if Chinese demand should exceed or meet its domestic supply capability by then, which is probable, so that China no longer is willing to export rare earths.

If all roads lead to Rome then certainly the home of all metals is now China.

Disclosure: I have a LONG position in Great Western Minerals Group stock.

I’m in Beijing, China, where I spoke yesterday at the Asian Metal “Rare Earths Summit 2010″. I sort of stumbled through my presentation, because I was absolutely distracted by the candor of the speakers from the Chinese rare earth mining, refining, and end-user industries. Considering the volume of nonsense being broadcast outside of China by stock promoters, the conference was an amazing breath of fresh air in a city not well known for its air quality (although I must say that Beijing weather and its air are first class right now).

Subscribers to The Jack Lifton Report can read the paper that I presented (if you’re not already a subscriber, joining is free and it’s as simple as filling out the short form in the upper right of this Web page). I warn you that it’s not for the complacent. You’re going to find out some facts about the Chinese metals industry, particularly about its size and growth rate, that will make you think very hard about the position that America’s foolish concentration on not producing natural resources, has put us into.

I heard fascinating talks by Dr. Zhu Baoliang, Chief Economist of the Economic Forecasting Department of the China State Information Center, and Professor Zhao Yumin, Director of the Chinese Academy of International Trade and Economic Cooperation. Both of these speakers emphasized that China welcomes non-Chinese production of the rare earths into the world market, because China’s domestic economic growth rate means that China needs more and more of its own domestic resources of all metals for its own use. Therefore, since China does not want to impede the growth of the world economy of which it considers itself a part, it must hope, both speakers said, that its best customer and biggest competitor, Japan, will be able to find resources of metals such as the rare earths from somewhere other than China.

After my talk Dr. Zhao asked me my opinion. I told him that I believe that China wants Australian, and/or American, and Canadian and/or South African rare earth mines to come into production so that, not only can China dedicate more of its own resources to its domestic economy, but also that China has the option to buy rare earth materials from non-Chinese suppliers, should the time come when Chinese demand outstrips Chinese domestic supply.

A key issue for the Chinese economy and the Chinese mining industry is a preoccupation with preventing commodity price inflation and preventing the Chinese currency from appreciating so fast, that Chinese exports become non-competitive. These pre-occupations are keeping the prices of all commodities produced in China from rising. In the opinion of the Chinese speakers, the low prices of the rare earth metals are a result of economic forces far beyond the industry’s ability to control.

An old China “hand” (as we used to call men like him) who was at the conference, told me that the Northern rare earth mines operate at best with a 20% gross margin and the Southern ones, the so-called ionic clays from which the higher atomic numbered rare earths, europium, dysprosium, and terbium are produced, can run so that they have a 30% gross margin. These margins are too low for the amount of environmental remediation necessary to meet WTO and new stringent Chinese domestic standards for safety and health. At the same time that the Chinese rare earth industry is facing environmental challenges, it must also restructure to improve efficiency and to eliminate so-called artisanal mining entirely.

The end result is that China’s mining industry as a whole and rare earth mining industry in particular, will be producing less material in the near term than was originally planned. Chinese high tech manufacturing industry, especially the alternate energy and other green industries, are swamped with business, and they don’t care about the problems of the mining industry – just as would happen anywhere in the world.

This in my opinion is a fantastic opportunity for those rare earth ventures outside of China that can be brought into production as soon as possible. There will be a sorting out later in the decade, when the Chinese light rare earth mining industry has remediated its environmental and productivity issues, but until then there will be strong markets in both Japan and China for rare earths.

I will report on my views of the future of the rare earth industry both inside and outside of China next week, when I return from China to attend the APS workshop on critical materials at MIT. I will have another chance there to speak with Dr. Karl Gschneidner, the dean of rare earth scientists, and Dr. Anthony Mariano, the world’s best known rare earth geologist. I want to get for you their opinions on what I heard in China.

Stay tuned and hold on to your money until we know a little more.

The 2010 Annual Meeting of the Society for Mining, Metallurgy & Exploration [SME] was held in Phoenix, Arizona at the beginning of last month. The SME has now made a number of the presentations available for download [a hat tip to Clint Cox for letting us know]:

• Critical and Strategic Failure of Rare Earth Resources by Jim Kennedy
• Rare Earths: Facing New Challenges in the New Decade by Dudley Kingsnorth [actually presented by Clint Cox]
• The Valuation of Rare Earth Deposits by Les Haymann
• Mineralogical Considerations in the Processing of Rare Earth Ores to Concentrates by Ed McNew & Anthony Mariano
• Rare Earth Permanent Magnets: Raw Materials, Magnets and Opportunities by Stan Trout
• Bokan Mountain U-REE Project Prince of Wales Island, Alaska by Harmen Keyser
• Economic Evaluation of REE and Y Mineral Deposits by Anthony Mariano, Clint Cox, and James Hedrick
• Targeting Rare Earth Elements & Gold at Bear Lodge, Wyoming by Don Ranta

The main rare earths session was also recorded as a combination of slides and audio – that is available from here.

[First published at RareMetalBlog.]

Yesterday I published my notes from the first day of the Technology and Rare Earth Metals for National Security and Clean Energy meeting [TREM'10] that took place in Washington D.C. Today in this article are my notes from the second day of the meeting.

The morning kicked off with a keynote address from US Representative Mike Coffman [R-CO], who the day previously had presented the RESTART Act to Congress as the first step in working to pass the proposed Bill into law. The Congressman went through some of the details of the Act.

Unfortunately I had to keep popping in and out of the morning sessions, and I do not have extensive notes from all of those presentations. I was able to hear the keynote address from Marcia McNutt, Director of the United States Geological Survey though. Some of the points that she made:

• The imports and export of raw minerals in the USA is fairly close to being in balance; it is in the area of processed minerals that there is at present a significant imbalance. This has to be kept in mind when deciding where to focus attention at the Federal level.

• The USGS is a part of the Department of the Interior [DoI]. During a recent DoI strategic planning session, a scientific approach when undertaking the endeavors of the DoI was explicitly mandated for the first time – “providing the scientific foundation for decision making“. As a scientific agency, this gives the USGS an important voice.

• The USGS is the only official non-fuel minerals data source for the Federal government.

• The USGS will be completing a commodity review of rare earths in Fiscal Year 2011.

The second part of the conference on Thursday was devoted to break out sessions, in which the attendees were split into two groups, and assigned moderators who switched with each other half way through the afternoon. The intend of the sessions was to generate an atmosphere for lively and candid further discussions on some of the topics presented for consideration at the conference, as well as the RESTART Act bill that was presented to the US Congress on the day before.  For the most part this approach actually worked, at least with the group in which I participated.

These sessions were conducted confidentially under the Chatham House Rule, which states that:

“[w]hen a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.”

For this reason, I am not at liberty to disclose who said what during these sessions, but I will summarize a few of the comments and points that emerged from the session in which I participated:

• The lack of substantial scientific or technical knowledge among members of the US Congress is a concern, though there are a handful of potential “go to” individuals who do have a scientific or technical background.

• When it comes to making progress with proposed legislation, a series of small steps is likely to be more effective than trying to do everything at once.

• There was general agreement that the intent of the RESTART Act might better be served by changing references to the “domestic” supply chain, instead to the “North American” supply chain. Others indicated that this should in fact refer to the global supply chain, and that this supply chain needed to be competitive, use state of the art technology, needed money to support necessary R & D, and needed access to reasonable instruments of credit, credit terms, loan guarantees or even loans directly.

• It wasn’t until the supply of oil was identified as a national security issue, that the issue of dependence on foreign oil was given a lot of attention.  It was suggested that the same might be said for the US dependence on foreign sources of technology and rare earth metals.

• An interesting question was posed: what might the availability of a special set of, say, 500 work visas to Chinese and other scientists with expertise in rare earths, do to kickstart the rare earths supply chain once again in the USA?

• Another interesting suggestion was to find the best technologies from around the world, and to introduce them into the USA, regardless of national origin.

The moderators summarized the discussions from the sessions, with a view to presenting a summary of the findings in the form of a white paper to the US Congress.

Overall, TREM’10 was an effective forum, with an unusually diverse range of opinions expressed on the topics at hand, even during sessions when the Chatham House Rule was not enacted. One observation: I tend to get far more value out of so-called panel discussions when the panelists keep any presentations to a minimum, allowing for lots of time for the panelists to actually *discuss* the topics, and to answer attendee questions. Some of the panels at TREM suffered from a lack of such discussion, which was unfortunate. For the most part though, this was not an issue.

That’s it for now!

[First published at RareMetalBlog.]

This week saw the Technology and Rare Earth Metals for National Security and Clean Energy meeting [TREM'10] take place in Washington D.C.. The meeting comprised two intense, packed days of presentations, panel discussions and candid round table sessions on a variety of themes and topics associated with rare earth elements and other technology metals [in particular lithium].

I tend to scribble notes furiously at such events, and ended up with 30 pages of semi-intelligible scrawl. I can’t simply regurgitate all these notes here today, or hope to cover every single speaker. I will instead share a few quotes, comments and observations made by some of the speakers on the first day, that were particular “personal take aways” for me, some of which may not have had much exposure elsewhere.

From Gal Luft, Executive Director of the Institute for the Analysis of Global Security [IAGS]:

• Energy and security polices must have concurrent materials policies, and the issue of dependence must be addressed. How does such dependence affect foreign policy? As a case in point, 50% of the world’s cobalt comes from the Democratic Republic of Congo, a country that has suffered a war that has lasted longer and claimed more lives than the Holocaust.

From Keith Delaney, Executive Director of the Rare Earth Industry and Technology Association [REITA]:

• China long ago recognized the value intellectual capital – the central government has long supported an advanced curriculum in rare earth sciences which has produced thousands of technical professions now employed in the rare earths industry.

• The growth of disposable income in China is driving internal demand for rare earths; China must also tackle the task of creating 300 million new jobs over the next 20 years as the population continues to grow.

From Clint Cox, President of The Anchor House:

• There have been as few as 5-6 specific rare earth minerals that have been successfully processed in the past. Many of the new deposits being developed at present, contain less well known minerals that do not, as yet, have established methods for processing.

From Dudley Kingsnorth, Executive Director of Industrial Minerals Company of Australia [IMCOA]:

• Constructing rare earth production facilities are capital intensive projects; a capital investment of over $40 is required for each 1 kg of annual production capacity [i.e. a facility capable of separating 10,000 metric tonnes of rare earths per year, would likely require over $400 million of capital investment].

• Heavy rare earths elements [HREEs] are particularly complex to separate; the production of terbium, for example, may require over 1,000 distinct stages to attain the desired purity, and such processing could take over 30 days from start to finish.

From Constantine Karayannopoulos, President & CEO of Neo Material Technologies:

• We are currently in a rare earths bubble, with most of the reported 200 projects or so having little to no chance of ever coming to fruition

• It is important to determine what is and what is NOT part of the so-called rare earth problem: it is the Chinese monopoly in the market that is a problem, not China itself. Capacity in China is also not a problem [at least for light rare earth elements [LREEs] such as lanthanum, cerium and neodymium].

• The so-called Baotou Strategic Reserves will not be drawn from existing final production; currently around 20% of the tailings from the iron ore plants in Baotou are used for the extraction of rare earths. The rest gets mixed with other tailings and stored in large tailing ponds. The new Reserve program gives the producers in Baotou permission to extract rare earths from 100% of the tailings going forward. Any so-called stockpile will actually be in concentrate format.

• Tax payers in the USA should not be paying for the construction of rare earth mines or processing plants; this is a job for the market. If Lynas was able to convince J P Morgan to raise hundreds of millions of dollars for new operations, it can obviously be done.

• In some of these discussions, an important question needs to be addressed: if a company does only a small percentage of its business with the defense supply chain, should the company’s responsibilities to its shareholders get overridden by a perceived responsibility to the country – should companies be forced to lose money, because of larger “national” interests?

From Irving Mintzer, Principal of MEG:

• Just opening new rare earth mines will not be enough to solve ongoing problems; companies will still be lured to China. The Federal government should lead the way by encouraging national laboratories to work on ways to reduce the amount of rare metals needed for particular applications; they also needed to re-energize recycling and recovery efforts.

From Jim Greenberger, Executive Director of the National Alliance for Advanced Technology Batteries [NAATBatt]:

• In order to advance the development of electric vehicles, the issue of battery ownership has to be addressed. One solution could be to get the utilities to see batteries as electrical devices [that are ultimately part of the electricity generation "ecosystem"].

From David Sandalow, Assistant Secretary of Energy for Policy and International Affairs at the US Department of Energy:

• Supply constraints are not static; strategies for addressing shortages of strategic resources are available, if we act wisely. We can invest in additional sources of supply, we can develop substitutes and we can re-use materials and find ways to use them more efficiently. We can consider the use of stockpiles and strategic reserves. Not every one of these strategies will work every time. But taken together, they offer a set of approaches we should pursue as appropriate whenever potential shortages of natural resources loom on the horizon.

• “The Department of Energy will develop its first-ever strategic plan for addressing the role of rare earth and other strategic materials in clean energy technologies. The plan will apply the approaches described above and draw on the strengths of the Department in technology innovation. We will build on work on these topics already underway, including in DOE’s national labs, and work closely with colleagues from other agencies throughout the U.S. government. We will solicit broad public input, including from the stakeholders and experts here in this room.” [ Assistant Secretary Sandalow's entire speech is available from here].

From Rick Lowden, Senior Materials Analyst with the Office of the Deputy Under Secretary of Defense for Industrial Policy:

• His office is doing their own study of the uses of rare earths in the defense supply chain, and has engaged the USGS to run the project. They plan to finish up the report by September 2010. The widespread use of “commercial off the shelf” components and sub-systems at all levels of the defense supply chain means that it may be impossible to known the true origin of every metal, material or comment.

• Foreign investments in US companies are not always a bad thing. One viewpoint is that it shouldn’t matter so much who owns a specific production facility, if the production takes place in the USA. If a foreign entity attempted to close down or to re-locate a critical production facility, the US government would have the option to step in.

From Paula Stead, Reconfiguration Program Manager with the Defense National Stockpile Center:

• As part of an attempt to determine the materials requirements of the defense supply chain,  the Center deconstructed 24 different weapon systems in order to determine just what was in there.

• The Defense National Stockpile is to be reconfigured into the Strategic Materials Security Program. The goal is no longer to simply massively stockpile critical materials, but to “insert” the Program into the supply chain, when the need arises.

From Chris Henderson, US Department of Defense’s Office of Net Assessment:

• The Department of Defense does not track the usage of technology metals at the elemental level. In the long term China is not going to be a problem, and in the near term, the market will sort the current challenges out.

• The USA as a democracy is not particularly good at implementing “top-down” policies, in the way that China’s central government appears enacts policy; we shouldn’t assume, however, that China does a particularly good job in implementation such an approach either, because of the lack of transparency.

That’s it for the first day of TREM’10. I’ll cover my “take aways” from the second day of the conference in my next article.

[First published at RareMetalBlog.]

I spoke in San Francisco two days ago on the market fundamentals of the “rare metals in the age of technology” at a conference for clients of the Hong Kong powerhouse brokerage, CLSA. The keynoter that day at the CLSA San Francisco Forum 2010 was Paul Volcker whose vigor and keen intellect at 83 put many men a generation younger than he to shame.

Paul Volcker didn’t mention the “rare earths” specifically so don’t hit your speed dial for your broker just yet. But he did speak about “green jobs,” and I was surprised at what he said on Wednesday although it anticipated the hubbub that has occurred since as several members of Congress seem to have noticed just where the green jobs are being created.

The former Federal Reserve Chairman said that although “green jobs” were desirable and perhaps necessary he wasn’t at all sure that they weren’t being created in such a way that they would benefit anyone seeking a manufacturing job in the USA. I understood him to be saying that current policies seem to insure that green manufacturing jobs will be in the low labor cost countries where the natural resources are available. He didn’t once utter the name, Obama, in his talk nor did he say anything about the current administration’s policy that I heard.

This morning (Friday, March 5) I note that some Missouri Congressman has started a fuss calling on the administration to drop out of NAFTA. Standing behind him in the photo in the paper were, of course, Nancy Pelosi and Harry Reid, the reverse Burns & Allen who now govern in America. I wonder if any of the people in that photo have ever asked Paul Volcker for advice. I doubt it.

Jobs have moved to Mexico because labor is cheaper there; Jobs have moved to Canada, because natural resources are abundant there and Canada is a nation not yet ready to give up its industrial base entirely just to create Wall Street (Bay Street) bonuses; and Canada is an immensely rich treasure house of natural resources.

If the USA wants to truly reverse the trend of offshoring and outsourcing it will have to enlarge, not diminish, its engineering education system and make it accessible to those qualified by merit alone. It will have to resume the mining of and the development of domestic resources of strategic and critical metals such as the rare earths, and it will have to support both of these agendas financially.

The Congress constantly treats the symptoms of our economic decline rather than the disease.

Can anyone in Washington hear what Paul Volcker is saying? Is their tone deafness on natural resources and technology a symptom of our disorder or is it the disease that is bringing us down?

by Jim Jones – TIMES LIVE – Published: Feb 7, 2010

Speakers at the Mining Indaba in Cape Town this week seemed as one in warning of a near-term supply-demand squeeze and some solid price increases for a swathe of metals.

They made the point that China and India will be central to minerals demand growth. And among the so-called rare-earth metals that are crucial to many of today’s high-tech products, China is the leading producer and is curbing exports unless they are already processed into manufactured products. As consultant Jack Lifton saw it, stronger demand has not (and cannot) lead to greater production.

Many of the metals that are needed for items such as solar panels, super-conductors and jet engines are produced as by-products of lead, zinc, copper, manganese or aluminium mining. There is no chance of increasing production of indium, gallium, germanium, rhenium, thorium and tellurium from primary mines.

It is not the same for copper, the metal showing the second-highest price increase over the past year – lead was first and zinc third. These are metals that better reflect the state of demand in the real economy.

Chinese demand is growing and, there are supply constraints. New mines cannot be brought on stream at the flick of a switch. Iron ore is in much the same boat. Price rises will be far more restrained than they were a year or two ago.

Copyright © 2009 AVUSA, Inc.

by Matthew Kennard – FT ALPHAVILLE – Published: Feb 2, 2010

He may have been robbed but that hasn’t stopped FT Alphaville’s man on the ground at the Indaba mining conference in Cape Town from filing his thoughts on the opening day of the industry’s annual South African jamboree.

By Matthew Kennard:

The conference started in fitting fashion with a World Bank special event on “sustainable mining”. It’s an obsession of the industry and has since become an obsession of miners solely because no-one seems to know what it is. Extraordinary amounts of time and effort is put into spreading the word about this mystical paradigm. One PR told me: “If an alien came to the convention center they would think that the big mining companies ran social services companies, it would be very hard to work out they were miners.”

Well, unfortunately I missed the first session because the administrative staff lost my press credentials and took the allotted hour to find them. But I did some investigating after. There was a mini protest outside the Indaba by a combination of 35 women’s groups. “Sustainable mining is a bad joke,” said one of the disgruntled. I asked a few chief executives what they thought of sustainable mining and waited for the best reply. “I wouldn’t actually know how to define it; it’s very ill-defined and got such a broad spectrum,” said Dr Bernard Olivier, executive director of TanzaniteOne, thereby winning his company the hallowed Featured Company Of The Day slot (more to come).

Anyway, sustainable mining aside, Monday was a serious metal fest. The conference organisers called it “commodity day” and got a host of experts to expatiate on a rich spectrum of metals, outlining their performance over the past year and the prospects for the future. A lot of wisdom was expelled over a lot of hours. I will give you a flavor below. To cut a long story short, I can sum it up in three words: China, China, China.

Rare Metals: Apocalyptic soothsayer Jack Lifton called the misunderstanding over the concept of rare metals “the biggest confusion in the world” which might be a slight overstatement. But his definition was any metal which produces 25,000 tonnes per annum or less, everything from lithium down basically. He struck his dystopian prognosis on the fact that rare earths are vital to technology and the demand can’t even be met now. “We’re living in the technological West, the rest of the world is still using steel.” But add in the rapidly modernising China and India and you have a demand crisis that can’t be met. “And I wouldn’t be surprised if levels of production stayed static,” he said.

Copper: Kevin Norrish, from BarCap, was optimistic about copper. “It’s had a strong recovery and we’re looking at further increases in prices,” he said. Copper was second only to lead as the second largest increase in commodity prices from Jan 2009 to Jan 2010. What did he put this down to? You guessed it. The not-so-sleepy giant in the East. Chinese demand was increasing, but he pointed to increased OECD demand too as a driver. He predicted that copper would move from surplus to deficit in the not-too-distance future.

Uranium: Dr Gene Clark, chief executive of TradeTech, lamented the lack of an open uranium exchange before casting a cautionary tone on the mineral. He pointed to a serious production problem, slightly remedied by resurgent Kazakh production which increased by 41 per cent last year. But the demand was there as nuclear energy was a growth industry, especially as, yes, the Chinese moved into it (it only comprises 2 per cent of their energy now). So Mr Clark predicted a looming supply tightness in 2014-17 with price staying between $40-60 for the next two years.

Iron Ore: “China is the key to understanding the future of iron ore,” said Magnus Eriksson, chairman of the Raw Materials Group, unsurprisingly. Chinese production of iron ore has been constant for the past two or three year, and the country cannot cope, he said. “It might lead to a shake out among producers there, merging mines, mechanisation,” he said. But as it stands Australia is leading and corporate concentration is “excessively high” especially with the prospective Rio-BHP joint venture in Western Australia. “That could be bad for those purchasing iron ore,” he concluded.

Platinum: This all comes down to Young Financially Independent Women In China, or YFIWIC (yes, I coined the acronym) according to Tony Kendall, of Mitsubishi. “There are 60 million of them in China and they are the target for platinum,” he said. The Chinese cultural shift towards buying two wedding rings was also a driver of growth in demand, with the possibility that it could rise to three. Apparently a platinum ring in China costs as little as 1,500 yuan ($220). He was bullish about prices predicting prices would reach the dizzy heights of $1,720 an ounce this year.

Gold: Three speakers were dispatched to talk about this one. China didn’t figure too much either. It was basically a debate about when the fourth gold cycle this century (which we’re at the top of now) would start to fall off. There were fears about the lack of new greenfield sites and the deteriorating grade of the deposits. David Davis, a mining investment analyst at Credit Suisse, predicted that the decline in production would be halted until 2013-14, but would resume after that. Paul Walker, chief executive of GFMS, said the kernel of the debate, or the elephant in the room, was the swelling of the investment share in gold purchasing. It now comprises 44 per cent, on parity with jewellery. “Is that a reason to be concerned?” he asked. “I think it is.” Hope that helps.

Back to the Featured Company Of The Day quickly: TanzaniteOne works in Tanzania on the only known deposit of this luxury sapphire-like stone, Tanzanite, and their story is a parabola for the Aim-listed miner over the past couple of years.

It listed in 2004 and paid out a dividend for the first three years, but the financial crisis devastated the market for luxury products (and their share price).

“We rebounded this year but it’s been a bumpy ride,” said Dr Olivier. “We have trimmed down costs by about half in 2009.”

Demand for Tanzanite, which I’d never heard of before, has apparently increased, but it’s hard to know how sustainable that is, as macroeconomic uncertainty still talks these plains.

At flotation in 2004 shares were 35p, they’re now down to 14p, which could be worse. There’s a mine life of 12 years and the company is producing 50-60 per cent of the deposit (the rest is artisanal miners).

Their hope for 2010 is a simple one: become profitable. “We’ve got to drive the price up,” said Dr Olivier.

Frank Timis Watch: As I mentioned, his PR said he wasn’t going to make it to Indaba this year. But hope isn’t dead: I got an email from someone in the know who is confident he took a private jet down here. I’ll follow that lead tomorrow. Is he planning a spectacular surprise?

Copyright © THE FINANCIAL TIMES LTD 2010.