Earlier today I got word that the US Department of Energy (DOE) has released an update to its Critical Materials Strategy, which was first published as a report in December 2011 2010. This document has helped to shape a fair amount of the debate on rare earths in particular, and critical & strategic materials in general, in the past 12 months.

You can download a copy of the report from here.

I’m still digesting the contents of the report; I can tell you that the DOE still considers the five rare earths dysprosium, neodymium, terbium, europium and yttrium to be critical in the short and medium term; indium is judged to now be near-critical in the near term, compared to being categorized as critical in the 2010 report.

New sections include one that covers the use of rare earths in fluid cracking catalysts, and how the petrochemical refining industry reacted to escalating prices of materials in 2011.

More to follow once we’ve had a chance to read through the report more thoroughly.

Update (01/17/12): the URLs for the report have been updated, since the original links no longer work.

A couple of weeks ago the US Department of Energy (DOE) announced a Request for Information (RFI) on rare-earth metals and other materials used in the energy sector. This follows on from a similar solicitation made last year, that culminated in the publication of the DOE’s Critical Materials Strategy in December 2010.

The DOE says that this second RFI will be used to update the Critical Materials Strategy, and will also cover areas not considered in the original document, such as fluid-cracking catalyst materials for the petroleum refining industry.

The DOE is soliciting information in eight categories:

1. Critical Material Content
2. Supply Chain and Market Projections
3. Financing and Purchasing Transactions
4. Research, Education and Training
5. Energy Technology Transitions and Emerging Technologies
6. Recycling Opportunities
7. Mine and Processing Plant Permitting
8. Additional Information

The deadline for RFI submissions is May 24, 2011 and submissions from the public are welcomed. You can get more information from the DOE Web site.

By Mike Ramsey – Wall Street journal – Published: January 14, 2011

Toyota Motor Corp. is striving to develop a new type of electric motor to escape a simmering trade conflict involving China’s grip on a rare mineral.

The Japanese auto maker believes it is near a breakthrough in developing electric motors for hybrid cars that eliminates the use of rare earth metals, whose prices have risen sharply in the past year as China restricted supply. The minerals are found in the magnets used in the motors.

All electric motors rely on magnets to make them work. The new motor Toyota is working on is based on the very common and inexpensive induction motor, found in such devices as kitchen mixers. Induction motors use electromagnets—magnets that only have their magnetic attraction when power is applied to them.

Most motors used in electric and hybrid cars today use a different type of motor that relies on permanent magnets. These magnets always have a magnetic field—akin to the magnets used to attach things to refrigerator doors.

But the permanent magnets found in electric-car motors, unlike those that hold up the school lunch menu, are made from neodymium, a rare-earth mineral that is almost entirely mined and refined in China.

As car companies race to improve electric and hybrid vehicles, their reliance on metals like neodymium and lithium—used in batteries found in electric and hybrid cars—is raising a host of new geopolitical issues over access to the minerals. The supply of many of these minerals is controlled by China.

Toyota has taken several steps to reduce its dependence on China for the materials, including investing in a lithium venture in Argentina and launching a joint venture in Vietnam to prospect for rare metals like neodymium.

The auto industry purchases 40% of the world’s supply of neodymium and Toyota buys more than any other company, said Jack Lifton, a rare earth materials expert and founder of Technology Metals Research in Carpentersville, Ill. There is about a kilogram (2.2 pounds) of neodymium in every Prius, he said. Toyota declined to comment on this figure.

“It would be a big change in demand for neodymium” if Toyota switched to an induction motor, said Mr. Lifton.

General Motors Co., which launched its Volt electric car last month, also is looking into alternative types of motors. “We have ongoing development in those areas and the induction motors do work,” said Pete Savagian, who leads GM’s hybrid powertrain engineering division.

Continental AG of Germany, one of the world’s largest auto parts makers, said it already has developed a rare-earth-free motor that will be used in an undisclosed electric car due out in Europe this year. This motor uses a variation of an electric motor often found in power plants.

Part of the rationale for developing this motor is to avoid rare earth metals, but it mostly is a move to lower costs, said Mike Crane, who runs Continental’s hybrid and electric vehicle programs.

“Even in the best scenario of supply, these [rare earth-based] magnets are very expensive,” Mr. Crane said.

China produces about 95% of the world’s supply of neodymium and last summer the country began restricting exports. In December, China announced a 67% increase in export tariffs on the metal and has declared new limits on exports this year.

Neodymium prices have quadrupled in the past year, according to Lynas Corp., an Australian company developing a giant mine and refinery for the material.

Rare earth minerals are a grouping of 17 chemically similar elements that are usually found together in ore and are refined and split apart. They are used in magnets and semiconductors and a host of other technologies. The U.S. and Australia have deposits of them but lack the expertise in extracting and refining the minerals.

For Toyota, getting around this barrier is crucial. The auto maker at this week’s Detroit car show announced the expansion of its hybrid-electric lineup by adding two new Prius variants and plans to spread the technology to all of its models in the next decade.

“The technology that would allow us not to use the magnets and yet to make a smaller size, high-performance motor will come soon,” said Takeshi Uchiyamada, Toyota’s global chief engineer.

“We currently have such a motor, but controlling the motor is rather difficult,” he said.

Mr. Uchiyamada wouldn’t say when the motor would be introduced.

Toyota spokesman John Hanson said the new motor could come in the “near term.” He added: “It looks like we could reduce cost, weight and mass and avoid the geopolitical issues with the rare earth metals.”

Elias Strangas, an electrical engineering professor at Michigan State University, said induction motors that serve as the basis of Toyota’s work “are cheap to make and as rugged as you can get, but they are not terribly efficient, and they are big.” Improving them “is kind of a holy grail in motors.”

Prof. Strangas said he had heard rumors of Toyota working on an advanced induction motor, but hasn’t seen a published study on the work. “I would like to see the numbers [on the motor's performance] to say they are convincing,” he said.

The permanent magnet motor took off only in the past decade as car makers tried to find more efficient and powerful motors for electric vehicles and hybrids.

“But then we discovered they are a bit expensive, and the rare-earth places where they are mined are not too many,” Prof. Strangas said. “We are now trying to revisit very old technology and remove the problems” in induction motors.

At the same time, Toyota affiliate Toyota Tsusho Corp., which imports metals, said in October it would begin working with Vietnamese companies to extract the rare earth metals from deposits there.

A year ago, the same company struck a deal with an Argentinean company to develop a lithium mine to secure a direct source for the key element in advanced electric batteries.

The vast majority of the world’s mined deposits of lithium are in China, Chile, Argentina and Bolivia.

There is pressure on the entire automotive industry to develop better supplies of these materials because of a slew of new and planned all-electric cars, including Nissan Motor Co.’s new Leaf.

Electric cars require much larger motors, with more rare earth metals, than hybrids such as the Prius.

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.