by Leo Lewis – The Times – Published: August 27, 2010

The world will belong to the countries who control the resources, such as rare earth metals, which power the 21st century.

In the magnificent banqueting room of Seoul’s presidential Blue House, Evo Morales suspended his rabid socialism last night to enjoy South Korean capitalist hospitality at its most bountiful.

In the Bolivian President’s briefcase were two documents: a wildly generous memorandum of understanding from one of Asia’s foremost powers and an honorary doctorate from one of its best universities. Not a bad day’s work for a former llama shepherd who never finished school.

For 45 years, South Korea has ignored dirt-poor Bolivia, and certainly not entertained its leader at lavish expense. Mr Morales’s nation, however, has lots of lithium – and Seoul wants Samsung, Hyundai, LG and its other industrial giants to remain in business.

Not an ounce of the stuff has yet left Bolivia’s Salar de Uyuni, but the great salt lake holds enough lithium, according to some projections, to give whoever gains access to it future dominion over batteries for electric cars, laptops and mobile phones.

Mr Morales has also spotted sooner than most that the world has fundamentally changed: resource geopolitics has lurched far beyond oil. The impending clashes will concern almost-unknown minerals and the world’s consumer nations are realising this with some alarm. A series of recent reports warn that industries may no longer be viable even at the national level, forcing abrupt re-evaluations.

Countries like Japan, South Korea, Germany and other technology powerhouses may struggle to retain their positions. “We are at economic war,” Jack Lifton, an authority on rare minerals, told The Times.

“The world where you could get everything for a price is history. And the West has been sound asleep on this. The level of ignorance about the upstream of mineral supply … is just out of this world.”

Even in Asia, where growth is more visibly dependent on the minerals, the sense of dismay is recent. The South Korean government declared last week that it would draw cash from the national pension and sovereign funds to secure rare metals. It was coupled with a proposal that future aid should be focused on countries with rare metals.

The courting of Mr Morales is not an isolated incident: China, Japan, Russia and France have all tried similar ruses to win his heart. This is, however, just the start. Other land grabs in the “New Great Game”, warned a recent EU report, could erupt over the molybdenum used for cardiograms, cobalt for mobile phones, palladium for desalination plants, fluorspar, which is essential to chemical production, or the magnesium oxide vital to every oil refinery, cement factory and steel mill on Earth.

The EU lists 14 raw materials as “critical”.

The US Department of Defence will next month publish a report on how much its military relies on materials that, currently, can only be obtained from China.

In May, Britain’s Department for Transport and Department for Business received a report on rare earth resources which said it was likely that China would, by 2015, ban all exports of the metals – substances that underpin the digital revolution and without which most “green” technology cannot function.

Gal Luft, a director of the Washington-based Institute for the Analysis of Global Security, pointed to China’s 95 per cent control of global production of rare earth metals, predicting that foreign policies around the world would be shaped by the need for dysprosium, cobalt and platinum in the same way that oil defined geopolitics in the 20th century.

China’s ever-tightening restrictions on rare earth exports quotas will be slashed by 72 per cent by the end of this year – reflect a pattern that may soon be seen in other commodities. “When it comes to resources, there is no free market,” Mr Luft said. “The lesson for governments that want to stay in business is that you can’t source things you want from one place.”

Jaakko Kooroshy, a policy analyst at The Hague Centre for Strategic Studies, told The Times that the situation had exposed spectacular complacency among Western governments. “The West has woken up late to the idea that these metals have a strategic importance. In the supposed boom of the 1990s … mining was a non-issue and everyone wanted to diversify away from something seen as dirty and old. Suddenly it matters again.”

The mineral issues do not end with technology, with attention focused also on fundamental minerals. Control of world potash supply for crop fertiliser may become increasingly tormented by trade restrictions and politicised resource control.

Academics in the US and Australia have warned that phosphorus, the other mineral behind the 1960s “green revolution” in food, may be approaching physical limits, ushering in “the gravest natural resource shortage you’ve never heard of”.

Just as this resource vulnerability has not been lost on President Lee of South Korea, Japan’s leadership is at least unified on the need for panic. Supplies of lithium, tantalum, germanium, indium and the 17 rare earth metals are fundamental to things that Japan does best – consumer electronics, hybrid vehicles and precision technology.

The dominance of China in the supply of many of these has become a source of concern. Katsuya Okada, the Japanese Foreign Minister, has spent this year in a typhoon of trips. London, Paris, Berlin and even Beijing have not featured – instead it is South Africa, Vietnam, Tanzania, Mongolia, Kazakhstan and Australia that have featured.

The country is urgently talking to mineral-producing heads of state – before China and South Korea get their feet in the door.

“Until recently, the government took the attitude that this was something best left to market forces … but the world has changed dramatically and the Government cannot just sit back any more,” Mr Okada said.

There is a threshold of investor awareness and confidence that the rare earths have not yet passed; I don’t know if the rare earth sector will ever even achieve that threshold much less pass through it, but I do know why it hasn’t so far. There are indeed many critical uses for the rare earths and they, the rare earths as functional components, are pervasive in our technological culture. Understanding those uses  requires specialist education and/or technical skills. Explaining why, exactly, the rare earths are important to the general public, involves teaching skills far beyond that of the typical disgruntled or adventurous scientists and engineers, who have become analysts and publicists for the  financial firms servicing the high-tech sector of the stock markets.

The lithium battery sector has been better served by the educational and analyst establishment than the rare earth sector. I think this is because everyone with even a general higher education, thinks they understand at least the use of batteries. Thus the technical language of the battery sector of energy storage economics, seems to them to be at least familiar enough for them to be comfortable, that they understand it generally.

Between 2008 and 2009, the global production of lithium declined by 30%, entirely for economic reasons.  In fact, I created a definition for rare metals in 2009, in which I defined a rare metal in 2009 as one produced at a global rate of 25,000 metric tonnes per year or less. Lithium was my threshold rare metal in 2009 by this definition. In 2008 it was in fact produced at a rate of 25,000 t a year. When updating my rare metals chart earlier this year, to produce my list of the rare metals for 2009, I fully expected that lithium’s production would have increased to the point where it was no longer a rare metal by my definition. Instead, to my surprise, lithium tracked the recession. Its 2009 production was in fact 30% less than it had been in 2008; it was, in 2009, only 18,000 t for the year.

Like every other commodity metal besides gold, silver, or platinum, the production and price of lithium is dependent on the demand for the element in the global industrial marketplace and has no intrinsic value component at all. This demand in its turn is a direct function of the end use of lithium, in all of its chemical forms in mass produced devices, chemical catalysis, and pharmaceuticals. Therefore, instead of just being based on lithium metal production, a lithium ETF for a small investor is much better based on being indexed to not only actual production and demand but also to the probability of future demand and supply increases, due to technological breakthroughs. An indexed ETF that includes investments in technological breakthroughs that can drive future high demand, is the best bet for a small investor, providing that the companies indexed by the ETF are chosen for their ability to increase existing production of lithium, or to economically bring new production on line when called for, and/or for their ability to innovate uses for lithium and to commercialize those innovations profitably.

I don’t know who is choosing companies of both types, either lithium producers or present and future lithium users , for the new fund mentioned in the Wall Street Journal article noted below, but that individual or group of individuals will make all of the difference, among this new lithium ETF and any other lithium ETF that will be created now or ever. Before you invest in such a natural resource-based rare metal ETF, look carefully at its board of advisors and at its founders.

When I first encountered Euclidean geometry in junior high school 56 years ago, my understanding blossomed when the teacher ridiculed my answer to the question, ‘What is the reason that side A of the figure equals side A of the same figure? My answer was “it is obvious.” The very good teacher said “No, it is because they are congruent, and that is what is obvious, Mr. Lifton.” I realized at that moment, that nothing is obvious unless we all agree on the subject matter, the meaning of terms, and the rules of  logic.

Without further ado then, I give you the Magic World of rare metals-themed investing (drumroll, please and a cloud of non-toxic, non-irritating smoke – this type of smoke is called steam by the way; it is the visible output from nuclear reactors, for example, and is often mistaken for pollution…)

Yesterday’s Wall Street Journal had on the first page of its regular section called “Money & Investing”, a story I have been waiting for that I thought would come sooner, entitled “Lithium ETF Aims to Rev Obscure Part of the Market”.

Who benefits from an ETF based on rare metals such as lithium?

An ETF places in the hands of a group of experts, the role of advisor to small investors, on a sector that the majority of individuals find either too arcane or too technical to comprehend. There are, however, questions to ask these advisors – the answers for which are understandable by almost anyone without a specialized knowledge of the rare metal or metals (such as lithium) or its uses.

I am going to use lithium below in all of the questions and answers, but you can substitute any rare metal or metals generally ,and still need to answer the same questions:

Q: Is there today a shortage of lithium – is the current demand for it, greater than the current supply?

A: Unequivocally NO.

Q: Are there today sufficient existing producers of lithium, to meet foreseeable increases in near term demand (at least five years), by increasing output from existing proven resources?

A: Unequivocally YES.

Q: Is it possible for a new industry, such as, in the case of lithium, an automotive /transportation themed lithium battery industry, to use enough lithium to create a shortage if current production rates hold constant?

A: It is possible ,but highly unlikely until the second half of this decade at the earliest.

Q: Can current lithium battery chemistries (the principal end use) be mass produced economically enough for transportation uses, so that new producers of lithium would be required in the next decade?

A: NO and this is not due to the price of lithium, whose price in 2010 accounts for little more than 1% of the manufacturing cost of a storage battery for transportation use, in any of the chemistries being developed or tried in use.

Q: If there were to be a breakthrough in lithium battery chemistry, and in the manufacturing technology needed to mass produce it (two entirely different categories of problems and solutions), then which  manufacturing scheme for that technology, and which competent management to carry it through would be the best to invest in?

A: This is the reason that the makeup of an ETF’s board of advisors is the most critical aspect of the ETF. If such an ETF does not have people knowledgeable and experienced in real world mining, end use product development, and manufacturing management along with corporate finance, then the risk of the ETF’s failure to make proper choices is very high. This is my key objection to most of the schemes that have been proposed for rare metal themed ETFs; the advisors are all financial experts who know little or nothing of the real worlds of natural resource production, R&D management, manufacturing management, or end product marketing.

I find to my dismay that small investors think they are going to make money, while helping to fund the companies in the ETF’s index.

The purpose of an ETF is to first and foremost make money for its founders.

The function of the ETF (do not confuse purpose with function!) is to make it possible for small investors to reduce the risk inherent in betting on just one horse to win. It is a bet that if any one of them wins, you win i.e. a sure thing. The first problem is finding out if there is a race at all, and to find out which of the horses is likely to die of exhaustion, long before reaching the finish line.

The avowed function of the ETF is to allow ‘good’ companies, the ones chosen by the ETFs, to receive capital through the ETF’s purchase of their shares or of their metal. In practice this means that the ETF can participate in IPOs or private placements, or by choosing the stock for its portfolio, encourage institutional investors to buy into an IPO.

Note well that the only value a company gets from its issued shares trading in a market, is in the net worth of the company (its value) being maintained high enough to enable the company to get credit and financing for new projects as it needs them. I say this because it is not a trivial point for small investors, who somehow think that buying a share of stock in a company, after its IPO, is somehow money that goes directly to the company. I apologize to those who think, as I did, that this is an obvious error of judgment; but it is not.

For an ETF to make money for its investors, the net value of the ETF’s holdings must increase, so that new investors in the ETF will pay more for shares than those who bought them before.

The shares of the companies making up the ETF will only increase in value and maintain that value if those companies are doing well in their intended purpose. Whether or not that happens depends on the financial management, the manufacturing management, and the marketing management of the company as well as on the market fundamentals of the underlying rare metals, no matter which metals they are.

Judging the probability of the commercial success of a natural resource producer or end user, is a complex undertaking, requiring real world experience, and it is almost impossible for any single person or small group of persons to be successful at such judgment.

If you are a small investor in for the ‘action’ to make (or lose) a quick buck, who believes that the trend is your friend, and that a rising tide lifts all boats,. then invest in any rare metal ETF that comes along with a word in its name that you have heard a lot.

If you are a long term strategic investor, study the makeup of the fund’s personnel and then look at the choices they’ve made and then invest. The long term investors are the ones supporting our economy and letting it grow. That’s the trend to follow.

Set your stop (common sense) watches!

I’ll bet that there is an Afghan Minerals, Inc (or Ltd) or an Afghan Minerals Fund (or ‘Trust’) by the end of the week, if not sooner, listed on an American secondary exchange and surely in Toronto, Vancouver, Sydney, and Frankfurt…

The New York Times has today, June 14, 2010 (Flag Day here in the USA) delivered a pieces of first-class political theater.

We are supposed to believe that one of the most primitive societies in the world – the cash crop of which is opium, and the actual government of which is tribal, fragmented, religiously fundamentalist, and hostile to Western values in general – is going to suddenly realize that the very little value its people get by being at the bottom of both the supply and value chain for narcotics, is going to be now supplanted by the very little value they will get from being at the very bottom of the supply and value chains for minerals needed by every other culture but the Afghan. Even the warlords (read ‘local officials’) would get less from mining companies than they get today from illegal drug distributors, so they’ll sign on, of course.

The New York Times is either acting as the agent of the US Department of State or just as the agent of the absurd.

Afghanistan is not the Saudi Arabia of lithium; it is the Saudi Arabia of ladies’ fashion. Afghans know as much about the one as the Saudis know about the other.

The development of natural resources requires that there is in place:

1. Logistics, i.e., roads, vehicles, vehicle fueling and repair stations, railroads, railroad fueling, repair, and maintenance services, etc.;
2. Huge quantities of flowing or pumpable water and systems to clean it, before returning it to any other use or even to the aquifer, and
3. Enormous quantities of reliable electricity

Mining ventures in remote places usually fail, no matter how good their resource, due to the fact that they cannot afford to have the above necessary and critical resources put in place. In developed countries they can share the resources of logistics, water, and energy already in place, the costs for which are distributed among the population (i.e., government) and local industries of a similar type.

China’s national government recognizes this full well; the US Government, for one, does not.

China will ‘gift’ the Afghan people with roads, railroads (coincidentally just a part of a larger network for which China happens to be trying to get the right of way), power plants, and water resource development. Then, and only then, will a Chinese miner begin to develop an Afghan resource, the ore concentrates from which, dug most likely by contract workers from China, will go by Chinese-built trains to Chinese smelters in (you guessed it!) China.

The US Government wishes to slap Bolivia’s socialist ruler, Evo Morales, in the face, so just coincidentally there is a story in its current house organ, the New York Times, about the fact that some day no one will even need Bolivia for any lithium.

The US Government wishes its people to have a reason for losing American lives in Afghanistan other than protecting the poppy growers, so it invents Afghanistan as a mineral treasure trove (for the 22nd Century?).

North America probably has tens of trillions of dollars of undeveloped natural resources, and it has the world’s premier developed infrastructure, flowing water resources, and produces 25% of the world’s electricity. Environmentalists however will not allow the development of North American resources.

So, of course, these same environmentalists will simply roll over and pant for the destruction of the Afghan way of life so that their Blackberrys, lights, TVs and cars can keep running and keep coming off of the assembly lines on the backs of injured, disabled, and dead Afghans working in primitive conditions for low wages.

I wondered when the rare earth playlet of the current political theater was going to end. Now I know. It is now. The Times is onto natural resources, Act II, ‘The Quest for Lithium’, starring a heroic Hollywood hunk as either an evil American ‘developer’ of natural resources or, in makeup, as a noble Afghan warlord with a heart of lithium only wanting the best for his exploited people. This role seems made for Kevin Costner, doesn’t it?

By the way did you know that if a material is produced so that its supply exceeds its demand, then the price falls? So, if the minerals in Afghanistan were all in production now their net value would be in the low hundreds of millions at best, not a trillion or more.

Do any of the economic pundits at the New York Times (or in Washington) care that such development would cost a trillion dollars – but, of course they don’t, because they don’t know that or anything else about real world costs.

There is no present demand for lithium that cannot be met by present supply and then some, and no foreseeable demand that cannot be met by increasing the production of lithium from existing, already capitalized, sources such as those in Chile, the USA, China, and Argentina. Such increases would be the most economical way to deploy capital. That is how the free market will do it.

I’m already bored by this ‘play.’ Is Act III worth waiting for? I don’t know, but I’ll bet it’s going to be copper…

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.]

by Jeremy Hsu – TECHNEWSDAILY – Published: Feb 12, 2010

Rare earth elements with exotic names such as europium and tantalum are crucial for future technologies such as hybrid cars, but their scarcity could thwart innovation.

But more common metals used in the tech industry could fare better, even if their prices rise due to worldwide demand. For example, lithium-ion batteries for hybrid cars and smart phones won’t run out anytime soon because there is an overabundance of lithium, Jack Lifton, an independent consultant for U.S. rare earths, told the Gold Report during a December interview.

Other important elements tracked by the U.S. Geological Survey (USGS):

Iron and steel make up about 95 percent of all the metal produced in the United States and worldwide, and find uses in thousands of products. These are the least expensive of the world’s metals.

Aluminum is the second most abundant metallic element in the Earth’s crust, just behind silicon. Its light weight, durability, corrosion resistance and malleability make it the most widely used metal after iron.

Copper has one of the oldest lineages of any metal, and has served as the foundation for many ancient civilizations. It still represents the third most-used industrial metal because of its thermal and electrical conductivity – characteristics that make it highly useful in power transmission, telecommunication, and many electronic products.

Gold is still coveted for its monetary value and for jewelry, but it is also an excellent electrical conductor. As an industrial metal, its applications include computers, communications equipment, spacecraft and jet aircraft engines.

Silver has been used for thousands of years to make ornaments, utensils, and coins. Of all the metals, pure silver has the highest reflectivity, and the highest thermal and electrical conductivity. As a result, silver has many industrial applications including mirrors, electrical and electronic products, and photography.

Niobium and tantalum find uses in a variety of high-tech applications. Niobium (also known as columbium) shows up in jet engine components and rocket subassemblies, while tantalum is used to make parts for cell phones, pagers, personal computers and automotive electronics. The U.S. currently imports both resources from countries such as Brazil, Canada and Australia.

The Wall Street Journal yesterday, January 19, 2010, reported that:

“A key supplier of Toyota Motor Corp. (TM) moved to secure a long-term source of lithium in Argentina, in one of the first global natural-resource plays of the electric-car age.”

Today, January 20, 2010, it has been disclosed that the same Toyota “supplier” has also extended its discussions with Canada’s Great Western Minerals Group for the exploration and development of that company’s two heavy rare earth rich properties in northern Saskatchewan. The press release from the company begins:

“Great Western Minerals Group Ltd. announced today that, at the request of Toyota Tsusho Corporation (Tokyo Stock Exchange – “8015T”; Nagoya Stock Exchange – “8015NG”), it has extended the expiry date of the non-binding letter of intent (the “Letter of Intent”) between Great Western Minerals Group Ltd (“GWMG” or the “Company”) and Toyota Tsusho Corporation (“TTC”), originally announced in the Company’s news release of July 21, 2009.

If you now recall that last year this same Toyota “supplier” entered into an agreement with the government of Vietnam to explore and develop the rare earth elements deposits at Dong Pao in Vietnam you see a pattern. Toyota is moving aggressively to secure its long term supplies of the critical metals for the electrification of the private motor vehicle.

Toyota is both hedging its bets and securing its future ability to manufacture any of the currently used or proposed technologies for the power trains of electrified motor vehicles.

It is the only OEM automotive company in the world with such an actual degree of vertical integration. Toyota today designs and builds both its own nickel metal hydride batteries for its full hybrid Prius type power train, and the lithium-ion batteries it is testing as well. Its actions in securing supplies of the critical metals both for batteries and electric motors (rare earths and lithium) show that the company is clearly committed to continue manufacturing any and every viable technology for the electrification of motor vehicles. Toyota’s actions are also a vote for the steady development of electrified vehicles by an experienced and profitable mass manufacturer.

Clearly any resource company in which Toyota invests must go to the top of the list of such companies in the probability of commercial success category.

Clearly Toyota is the leading OEM automotive manufacturer in terms of long term strategic planning.

Disclosure: I do not own shares in any company mentioned in this article, nor am I employed by them in any capacity.

I’ve just completed the finishing touches to a new report that I’ve written for subscribers to The Jack Lifton Report.

In December 2009, I was invited to New York’s Essex House by CLSA, one of Asia’s leading independent brokerage and investment groups, to present a short seminar on “Rare Metals in the Age of Technology” to CLSA University, an ongoing executive education program that CLSA produces for its clients.

The seminar focused on discussion of the rare metals, and the issues and challenges facing their supply and production rates. I also presented a set of tables detailing production rates of a wide range of metals, to illustrate some key points on the subject.

The seminar answered three fundamental questions relating to the business of the technology metals:

1. How are metals produced, which is to say, where do the metals we can use actually come from?
2. What quantities of new metals are produced each year, and can the production rates of any or all of them now be increased beyond 2008 levels, or can or will the production rates for some of them actually decrease?
3. How does the location of the production sites for any and all metals factor into their availability, if at all?

A free 10 page PDF copy of the new report based on this seminar, is now available exclusively to subscribers of The Jack Lifton Report.  Just fill out the simple form in the upper right of this Web page and you’ll have the report in minutes.

A note to existing subscribers – if you took a look at the report prior to 6:15 PM EST today, then you’ll want to download a slightly updated version which was missing some minor data in the tables. It can accessed with the same URL and password that you received already.

by Karen Roche, Publisher – THE GOLD REPORT – Published: Dec 11, 2009

“Price may not be as important as security of supply,” says Jack Lifton, an independent consultant with more than 45 years of experience in sourcing nonferrous strategic metals. In the U.S., our dependence on rare metals is undermined by the simple fact that we’re not producing any. Given that China now controls 95% of these ‘technology metals’ and the world is projected to eat 200,000 tons of rare earth metals near 2015, Jack tells The Gold Report we need to jumpstart our own domestic supply chain and, more importantly, build the refineries to process them—rather than sending them to China for refining, which is our only option currently.

The Gold Report: Jack, we hear you’re starting on a documentary, “On the Green Road.” Tell us a bit about it, and what you mean by “Green Road.”

Jack Lifton: I came up with that title because no matter what the attitude of the individual is towards being “green,” there really isn’t any other path for us now. My proposed documentary “On the Green Road” will follow the path that a rare earth metal takes from the mine to the market, so that the consumer can see the necessary steps required to make the technological devices upon which our quality of life depends. If the Green Road is the path to the future we need to get on it and stay on it right now.

Six hundred million people in the Western world are enjoying a life increasingly dominated by technology that we don’t understand. In particular, we don’t understand how it is made. What I see in America is a reluctance to admit that the green road starts in the black earth. We have to mine and refine the minerals and metals into forms which can then be fabricated into forms which can then be made into parts which can then be assembled into the technology devices we use to conserve energy. Everything starts at the mine or at the oil or gas well.

In the West, electronic devices using electricity produced by a huge network of generating devices control our transportation, communication, and our environment. We’ve got a grid that we talk about as if we understand it, but it’s an extremely complicated system. We ignore the fact that we produce and distribute oil and its by-products, metals and their compounds and alloys. Nobody pays attention to that. All we do is say we’ve got to stop doing this and stop doing that. We have to start educating everyone as to how a metal becomes a radio or how a metal becomes a battery, how a battery propels a car.

TGR: I heard you speak recently at the Hard Assets Conference about supply issues in terms of expanding wind and solar technologies. Can you explain some of those supply constraints?

JL: Yes. In the United States, Canada, and Western Europe we are consuming most of the supplies of the technology metals. Now we’re facing six billion people in the rest of the world whose standard of living is growing rapidly and we do not have ten times the amount of materials used to create the good life in the West to create the same standard of living for the entire world.

I don’t mean to be a doomsayer, but if the Chinese government wants its own people to have the standard of living that people in Los Angeles have today, it’s going to mean that China must use all of its own natural resources to improve its standard of living and its quality of life, which will mean that our standard of living will have to decline. Why? Because there are some materials—for example, the rare earths—that China controls 100% of the supply of today. And as China’s economy is growing, China is requiring more and more of these materials for its own domestic economy.

Ten years ago China exported 75% of its production of rare earth metals to the rest of the world. Today it exports less than 25%, even though the production in the last 10 years has more than doubled. So that should tell you what’s going on here. This is not a conflict. This is economic reality.

Now I’m using the rare earths as an example of something I think is very much misunderstood in the West. The rare earth metals were originally discovered in Europe and originally produced commercially en masse in California. The largest rare earth deposit in the world of its kind was discovered in California in 1947. It was put into production and by 1984 that site, Mountain Pass, California, near the Nevada border on M-15, was producing 35% of the world’s rare earth metals and 100% of the domestic needs of those metals here in the U.S. That was 25 years ago. Today that mine is producing nothing and approximately 95% of the rare earth metals are today produced in the People’s Republic of China. The United States imports all its rare earth metals from the People’s Republic of China.

Why? Because between 1984 and 2009, Chinese production of those metals ramped up to the point where the Chinese decided to lower the price so that they could sell more metals so they could mine more metal and employ more people. They basically were able to sell these metals into the market, including to the United States, at a price less than the cost of producing it in California. Well, if you believe in a global economy, then you say, that’s how capitalism works.

There are now other issues arising besides price, which is what shut down the Mountain Pass mines. Price may not be as important as security of supply. Do we really need rare earth metals to maintain our style of life? We cannot force the Chinese to sell them to us. The Chinese have an internal priority to develop their domestic economy. China’s issue is the need of the Chinese economy to grow and to improve the quality and style of life of the Chinese people. We have become so dependent on rare metals in general and rare earth metals in particular in our technological economy and at the same time we’ve simply ignored the fact that we are not producing them in the West.

TGR: Doesn’t the U.S. have plenty of metals? Why aren’t we supplying more of what we need?

JL: The United States has the largest distribution of different metals and minerals of any country in the world. The National Mining Association, on their website, nma.org, shows that we have 76 minerals and metals in the United States in sufficient quantity to supply our needs. However, in the last 10 years we have lost our self-sufficiency in between 14 and 25 metals and minerals. Not that we don’t have them, but that we don’t produce them.

The reason for this is that we have been going global in our economic outlook. For example, Chile produces 25% of the world’s copper. Well, the United States was always self-sufficient in copper. Now we’re not. Now we’re beginning to import copper because it’s cheaper to buy Chilean copper than to keep mining more of it in Utah. The U.S. was always self-sufficient in iron. Today we import 30% of our iron ore to make steel here because it’s been, up till this moment, cheaper for us to do this than to produce it here. But now something new is happening. The demand in the rest of the world is increasing at such a rate that the United States must, for the first time in its history, compete.

We need to produce wealth here and not just consume it. One way we can produce wealth is by reactivating, for example, the rare earth mines we have and by starting new ones in the United States and North America. If we don’t start producing our own critical and strategic metals and minerals, we’re going to find that our industry, and anything we want that uses those materials, will be made in other places such as China. We’ll be at the mercy of those economies as to whether they have a surplus to ship us. China is a dynamic growing economy, which has four times as many people as we do and maybe 20% of our GDP. So, on average, they’re way behind us, but they’re growing and they are consuming their own production of energy, minerals, and metals and they do not believe that they must export those things to us, either as raw materials or finished goods if there’s a Chinese demand for them and they’re trying to increase Chinese demand.

TGR: So North America, the U.S. in particular, has a wealth of these minerals within their own borders. When does the price either get to the point that you get miners who now say, hey, I can make money by mining these rare earths here or the government comes in and decides they’re going to subsidize the exploration and the initial development of these mines?

JL: I don’t know. I’ll tell you what the real problem in the United States is. These industries are too small to return a profit in a short time. In other words, if you look at a rare earth mining opportunity in the U.S. like Molycorp, or a newly named company, U.S. Rare Earths (both privately owned), you have to think, well, it’ll cost how much to develop the mine and how much does the product sell for. If you want a return on your investment in one, two, or three years, mining isn’t the place for you. So, yes, in order to get mining going, the government has to subsidize it. That’s absolutely correct. Or you have to assemble something new in the United States, which is a vertically integrated company.

TGR: At the conference there were companies claiming to be either producing or almost ready to produce these rare earth metals. Will that solve the supply issue?

JL: The problem is it’ll solve the issue of the first step in the supply chain. We’ll have the mines in North America producing the concentrates we need. But those materials then need to be refined and purified into the pure metals. Then those metals need to be made into fabricated forms that people who make magnets, electronics, cars, and batteries can use. Then those devices have to be made from them and put into products that ultimately wind up in your driveway, in your drawer, in your purse, in your pocket. The problem is we have yawning gaps in that supply chain in the U.S. The fact is if we were producing rare earth metals in North America today, those ore concentrates would go to China for refining. We do not have any refining capability in the United States today. It’s all been shut down.

TGR: So these companies who are mining this will not be able to refine it?

JL: That’s right. Those companies, in the tradition of mining, have a plan to dig up the ore, remove everything but the mineral—that’s called concentrating—then in the case of rare earths, they’ll probably separate those minerals into the constituent forms of the individual metals, the oxides or whatever end form. And then they stop.

Now the next step is to take those individual metal concentrates and make them into metals. Let’s say we’re talking about neodymium. We take the neodymium. It will come from the mine in the form of an oxide. You make it into neodymium metal. That’s usually one company. And then another company will make special alloys of neodymium iron and boron, for example, to make magnets. What that company will do is they’ll supply it to a magnet maker. The magnet maker will do their work on it and make it into a magnet. The magnet will then go to a generator producer or a motor producer or a speaker producer or computer hard drive producer and they’ll use the magnet as a critical part of some end use product, which will then end up in the shop that you’ll buy it from. That includes a car, a computer hard drive, a laser, things like that. What we don’t have in America are any of the steps beyond concentrating the ore. That’s the problem.

TGR: So, at this point we aren’t concentrating the ore because we’re not currently producing rare earths?

JL: That is correct. We are not currently in North America producing any rare earth ore at all.

TGR: So having the capabilities to refine if there’s no production here is somewhat irrelevant.

JL: We have one refinery running at this point, which is Mountain Pass, California. It’s still working off concentrates last produced in 2002 and they restarted the refinery. Mountain Pass is producing two tons of neodymium praseodymium every day, which is a commercial form that needs further work and, also, four tons of lanthanum. Both of those products are produced as oxides and those materials go to their customers, one of which is in Japan and the other one they didn’t state. Let’s put it this way. Nobody in the United States today has the capability of taking those materials and making the pure metals from them. So that is today almost entirely done in China.

TGR: Would Mountain Pass have the ability to either scale up what they’re doing now?

JL: Yes, but it will take years and a lot of money. Mountain Pass—it’s Molycorp—has announced that they plan to produce the metals when they resume mining, but they need to build a rare earth metal refinery and get it going. So we’re talking about a lot of money and a lot of years because no one in the United States has made those metals for some time. We have people here with the skills, but there’s been no demand for it because China now dominates this.

This is why I’m saying you can view success as bringing ore out of the mine, concentrating it and separating it into its individual materials, and the next step is refining that material. One of the biggest problems I have with the mining industry is they don’t plan ahead. They don’t have a marketing plan.

When I look at a business model for a mining venture, especially in something like rare earths, I look for a mine-to-market venture such as Great Western Minerals Group (GWMG) has. Great Western owns a magnet alloy producer in Great Britain called Less Common Metals Ltd. of Birkenhead, U.K. When I say magnet alloy, they make neodymium iron boron, they make samarium cobalt. Those forms, those base alloys go to people who make magnets. Some of it goes back to China. Some of it goes to the U.S. Some of it goes to Europe. But they’re the only vertically integrated rare earth miner that I’m aware of outside of China. So when they start producing, they are planning to build a refinery next to the mine at the same time that they’re developing the mine. The goods from that operation will go to a metal producer, which will be theirs, probably in the U.K. Then their U.K. operation will produce magnet alloy, which then goes to magnet makers. Having control of just those steps in the supply chain gives Great Western on paper enough margin, enough profit from producing the metals to show an excellent return on investment. The bankers I’ve talked to and institutional investors are thrilled with this model.

I am not saying that Great Western can supply the world’s needs. I’m saying in my opinion, they’ll be the first rare earth producer outside of China to produce heavy rare earths economically. That means that because of what they can do, they hope to be able to produce total rare earth production of 2,500 tons, I think, in three or four years and then maybe 5,000 tons a year after that. In a world that is projected to eat 200,000 tons of rare earth metals by 2015, you can see that’s not a lot. But it’ll be disproportionally high in the heavy rare earths and they’ll be able to sell everything they’re mining. They can’t produce any more than that. That’s what they’ve got. Because they’re going to be the first past the post, they will get a lot of attention and they’ll probably get financing. But, more important than that, that’s going to make it easier for the other companies that can produce much more to get into the market.

I think the second producer will be Avalon Rare Metals (TSX:AVL), which by sheer volume in size, swamps Great Western. Keep in mind that Great Western’s product is not going to be rare earths. It’s going to be magnet alloy and Avalon can’t compete with that. Avalon is going to produce huge quantities of rare earths ultimately. They have one of the largest if not the largest rare earth ore body on earth in Canada. But they won’t be the first to produce. Once Great Western is producing and once the supply chain is reinvigorated in North America, that’s going to bring all of these other guys and you’re going to have in the next 10 years, in my opinion, four to six producers of rare earths in North America and no more than that. Maybe there’s 85 companies, but you’re going to have just four to six produce.

TGR: So you say there are four to six producers of rare earth in the next four to five years. You’ve mentioned Great Western, Avalon. Who else is teeing up to get into that production place?

JL: There’s Molycorp. There’s Lynas Corporation (LYSCF:US) . I would say there’s a good shot for the company U.S. Rare Earths (which I mentioned earlier) in Idaho, Colorado, and Montana. Please note I consult for U.S. Rare Earths. I’ve been looking at those deposits for several years. They’re very nice deposits. It’s a junior. It’s just now they’re trying to raise money to do a pre-feasibility study. So it’s very early on. U.S. Rare Earths is a player in the long term because of the accessibility and size of its deposits. But in our immediate time frame, it’s Great Western, Avalon, Molycorp, Lynas. That’s it. Quite frankly, Molycorp is really a restart. Molycorp’s mine holds the record. It was the world’s largest producer of rare earths, 20,000 tons a year in, I believe, 1984. No mine today existing or projected has ever approached that output. China’s production of 124,000 tons comes from 40 mines, the biggest of which I think is 10,000 tons. Molycorp is a huge deposit. It’s 9.5% ore, 30 to 50 million tons.

TGR: How much of that deposit remains after being extracted for so many years?

JL: About 99%. They have just touched the surface of that; it’s so huge. Molycorp’s distribution of rare earths maximizes cerium, lanthanum, neodymium, the so-called light rare earths. But in order to make modern technology devices that operate at high temperatures, we need the heavy rare earths, dysprosium, terbium, europium. The Canadian deposits are disproportionately rich in the heavy rare earths. I don’t mean that they’re running over with it; whereas, in Molycorp, basically, dysprosium and terbium are non-existent.

In Avalon and Great Western deposits in Canada you have as much as one or 2% of the total rare earths would be the heavy rare earths, which is very, very high. Great Western has one mine where the heavy rare earths make up 8% of the total. It must be the richest heavy rare earth mine in the world. It’s a small ore body, but it can be produced. The point is we need an American producer like a Molycorp or a U.S. Rare Earths and we need a Canadian producer or we need the Australian Lynas, which also is only in the light rare earths and a Canadian producer. We need these kinds of combinations.

I have been doing due diligence consulting for Canadian institutional investors, and I can tell you that they are only waiting for the production of the rare earths to begin at either Great Western or Avalon to support them substantially. I always say to a banker, would you guys please buy Avalon and Great Western and Molycorp and make one company and they say to me, yeah, we will as soon as somebody starts producing. And they’re not joking. It’s logic.

TGR: Jack, is the supply situation with lithium similar?

JL: It’s actually quite different. The world is in over-supply of lithium because the hype on lithium was much more than the demand. So there is no shortage of lithium. The problem is that the six largest producers of lithium today are telling us if we want more lithium, we have to pay. They will not use their capital to massively increase the output of lithium when there’s no demand. That’s foolish.

TGR: What about tantalum?

JL: The amount of tantalum sold in this world is tiny; there’s no market in tantalum. Here’s what I’m predicting is going to happen. Those end user companies for which the rare metals are critical are going to create a virtual hedge market. Today you can only hedge materials that are exchange traded with transparent prices, so you have to create a virtual hedge for the rare metals. But if Honeywell were to say to Commerce Resources Corp. (TSX.V:CCE) (PKSHEETS:CMRZF) we’ll buy $250 million worth of tantalum from you for delivery from 2015 to 2020 and here’s our guarantee of payment, Commerce then goes to Toronto Dominion and says, look, we’ve got this. Toronto Dominion says we could discount that for you right now. How about if we give you a facility of $225 million and you start building that mine?

I don’t know if it’s going to happen in the tantalum industry, but it’s going to happen in one of these industries sometime in the next 12 months. Some big company is going to say we’ve decided to take a risk. So if the U.S. government says, for example, we’ll cover you—in other words, the Defense Department is going to give you the order for the machines from 2014 to 2020 and it guarantees payment, then you issue your guarantee on the off- take, the bankers are willing to work with that and so is the Congress. I’ve been involved in these discussions already. We need to get this done. In other words, off-takes are a great way to get buy-ins kick started. It wouldn’t surprise me if something like that happened with Commerce Resources, or Molycorp, or Great Western.

TGR: Jack, this has been great. Any closing comments?

JL: We need to safeguard our future. I’m not saying take the future back, beat the Chinese. We can’t do that. We need to safeguard our standard of living, not our lifestyle; our standard of living. If we don’t stop the outflow of our wealth to overseas, we’re going to decline and we can see it already. We now have to adapt and understand the Chinese are doing it right; we’re doing it wrong. We have to do long-term thinking, secure our supplies of raw materials, maintain high productivity and efficiency. Otherwise, we’re just going to be stop on the world economic train.

Jack Lifton is an independent consultant, focusing on the sourcing of nonferrous strategic metals. (View videos featuring Lifton on strategic metals.) His work includes exploration and mining, and the recovery of metal values by the recycling of not only metals and their alloys but also of metal-based chemicals used as raw materials for component manufacturing. Mr. Lifton has more than 45 years of experience in the global OEM automotive, heavy equipment, electrical and electronic, mining, smelting and refining industries. His background includes the sourcing, manufacturing and sales of platinum group metal products, rare earth compounds and ceramic specialties used to make catalytic converters, oxygen sensors, batteries and fuel cells. He is knowledgeable in locating and analyzing new and recycled supplies of “minor metals,” including tellurium, selenium, indium, gallium, silicon, germanium, molybdenum, tungsten, manganese, chromium and the rare earth metals.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

DISCLOSURE:
1) Karen Roche, of The Gold Report, conducted this interview. She personally and/or her family own none of the companies mentioned in this interview.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Avalon Rare Metals Inc. (TSX:AVL, OTCQX:AVARF) and Commerce Resources Corp. (TSX.V:CCE) (PKSHEETS:CMRZF)
3) Jack Lifton: I personally and/or my family own none of the companies mentioned in this interview. I am a consultant to U.S. Rare Earths.

Copyright © 2009 Streetwise Inc.

Yesterday at the Seeking Alpha Web site, John Petersen published an excellent article on the new Electrification Coalition, titled “Rapid Transition to Grid Enabled Vehicles Not Possible or Desirable.” I suggest you read this article right now, if you haven’t done so already.

To paraphrase John Milton, “logical analysis is a dangerous thing, drink deep or drink naught of the logical spring.”

I want everyone to print the following paragraph by John in his article, and to read and to understand it:

“Batteries are commodities, as are all of the raw materials that are used to make the batteries, motors and other components required for a [Grid Enabled Vehicle]. The roadmap assumes away critical issues of raw materials availability by proving that the elements exist in nature and then ignoring fundamental natural resource development issues like location, economics, environmental impacts and the difference between known mineral resources and developed mineral reserves. It also assumes that recycling issues will resolve themselves despite the fact that the only class of ARRA battery manufacturing grants that went begging was battery recycling.”

As usual, John has zeroed in on the two key points of logical absurdity in this latest set of directions on how governments should spend taxpayer money for private interest:

1. This group does not understand the difference between “present in the earth’s crust” and “available for use by mankind,” and
2. There is no safe, economical, recycling method for recovering the lithium from lithium-ion batteries.

Unelected, poorly educated bureaucrats, throw money at nice presentations such as the outlined in John’s article. The money has been allocated to their use by elected, poorly educated, politicians whose advisors are agenda ridden interest groups. In government speak this process is called “investing in science and technology.”

We’re watching just another lobby being born. This will be the infrastructure spending for electrification lobby. It’s an interest group not an agenda.