Conference Fatigue And The Management Skills Of Junior Miners

by Jack Lifton on August 5, 2010 · 11 comments

in China, Event Reviews, Permanent Magnets, Rare Earths

Bookmark and Share Print

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bookmark and Share Print
1 Tek August 5, 2010 at 10:11 pm

Thank you Jack.

2 robit August 5, 2010 at 10:26 pm

Jack
Thanks for more information. I don’t suppose you would reveal “I am only following five rare-earth companies”? No harm in asking although I could probably guess the names.

I know you are probably not wanting to get into any strenuous exercise program, but you might consider bouboling to the centerin bouzal while I tweak my ree holdings toward 50%.
Kindest regards
robit

3 Volkhart August 6, 2010 at 2:22 am

Jack
You mentioned a conference on lead and zinc to be held later in the year. There is a Canadian JV with a big Chinese producer to develop the Howards Pass deposit. Any comments on that?

4 DM August 6, 2010 at 5:35 am

I agree 100%

GWG winning is going to be so rewarding.
GWG and third party what the hell.

Cheers

5 fran August 6, 2010 at 9:36 am

MR. LIFTON, TWO QUERRIES —

the n. american[canadian] mining industry certainly possesses the technical, process, and financial skills to be a success[junior and otherwise] in most other commodity types. what is the uniqueness of rare earths that has the industry in such quandry?

the japanese are finding their way to krygestan[spelling ?], africa and viet nam in search of REE sources. they opted out of relations with GWMG. what is your thinking here?

6 prescient11 August 15, 2010 at 10:12 pm

Jack,

Any update from your trip to Bear Lodge? thanks

7 Gareth Hatch August 16, 2010 at 2:34 am

Prescient11: I am not Jack, nor do I play him on TV – but I can tell you that Jack’s posting on his visit to Bear Lodge should be coming up in the next 24 hours.

8 prescient11 August 16, 2010 at 10:36 pm

Thanks Gareth. Btw, I responded to your question about the missing REEs in QRM’s metallurgical report on RMB. Best.

9 GC August 18, 2010 at 10:42 am

I think the five are: Great western, avalon, Molycorp, Lynas certainly, the fifth could be several
also the ones to watch in my opinion

10 steve August 18, 2010 at 5:26 pm

Jack – Do you really think what the US needs is MORE Chinese investment in our mining infastructure? The Chinese investment in US mining would look more like Chinese buying US minesites, otherwise what would there investment be? I am surprised at your apparent ambivilence on this issue. Why would the US desire having the Chinese owning mineral rights in the US – that does not seem to me as a good situation.

11 Jack Lifton August 20, 2010 at 10:15 pm

Steve,

Let’s be clear on what I’m saying. I believe and hold that so long as we Americans cannot own natural resources in China, there is no reason to allow Chinese ownership of American natural resources. However I think we should welcome Chinese job-creating, tax-paying profitable investments in the USA. If the Chinese want to build metal refineries or even to invest in mining here, why should we be against that, so long as the products or services offered here in the USA, are offered in accordance with our laws and regulations on pricing and fair and open competition, and the business’s operations are transparent. Believing otherwise would mean that British, French, German, Korean, Indian, and Japanese companies not only wouldn’t, but couldn’t locate here.? In the case where a mine is considered strategic by our federal government for our national defense, then no foreign company, Chinese or otherwise, would be allowed to invest. I would love to see some mine sites or mines declared to be in that category, because that would drive private enterprise to invest in such a venture. Alas, our political class hasn’t even got the sense to do that, because, I think, they’re afraid to let the voters know how screwed up we are by our clueless anti-mining, anti-natural resource ‘activists.’

Thanks for reading,

Jack

Comments on this entry are closed.

Previous post:

Next post: