Long on Sarissa
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I rely on Punxsutawney Phil. He says "to infinity and beyond".
There was also a younger chinese man from CIC, who described tech as his best investment last year.
They were the largest shareholders when tech went from about a 2.50 stock and then rose to about $60.
A company that I owned part of sold for $40M and the investment banker received about 2%. It was a large firm, so I think that is closer to what we would pay.
There are many different deals cut, but even 10% would be extreme.
Great post Ont. I agree.
Pdog,
I thought the reason that nothing was done with this property was that the demand and price for the minerals that we have was minimal at the time. As technology and prices increased the property then became more valuable.
My guess is that family is somewhat involved already.
I am glad to see that, but he must feel like the Maytag repairman.
Not much to audit.
Red,
I enjoyed your vulture picture. This has been my sentiment about SRSR for awhile now. I am a former MGGV holder also.
I think Scott has done a great job of conserving funds, but am starting to wonder if he isn't being unrealistic in his expectations from investors or JV partners.
There is no way to determine this with the limited info availabe to us, but this is just my suspicion.
Gotta wonder why anyone would dump shares now. Shorts would have to be crazy trying to shake any shares loose from the current holders.
Oh well, let em try.
No, I paid .03 per share for my first 25k. Then it started to drop and it went so low that I was going to sell at one point and I did not because I would not have even covered my commission. I think it was as low as .00012. Take a look at an old chart and you will see how high it was and how low it went.
I am sure there are old timers with great price averages, but I do not think there are too many. I am no better off than most people here. My average is about .05.
You're right, The old memory is'nt what it used to be
I have been here since this was Michigan Mining Ventures (MMM). My patinece is wearing a little thin, and my wife's disappeared two years ago, but I still believe.
Fortunately, this does not represent a majority of my investments. Which, by the way, are not doing so well either.
I keep telling my self, at least I can use the condo on Panama City Beach.
I do, and have been freeing up a little more cash from here and there just to build up my pile of shares as I can.
Thanks, I always respect your opinion.
Can't believe I am almost the only buyer today. 50k @.029.
What does everybody else know, that I do not?
This is why I do not care if Scott ever looks for rare earth elements
Comparative Value Metrics For 13 Advanced Rare-Earth Projects
by Gareth Hatch on November 11, 2010
As of the beginning of November 2010, there are 251 individual active rare-earth projects in the TMR database, being run by 165 companies in 24 different countries outside of China. It will be no surprise that these projects are in a wide variety of development stages, ranging from being prospective for rare earths on the basis of a grab sample or two, to full-blown mining operations.
When working with clients to analyze the sector from a strategic point of view, I generally filter this list of projects and focus much of my attention on what I call advanced rare-earth projects – those that meet one or both of the following criteria:
The deposit associated with the rare-earth project has been formally defined as a mineral resource or reserve under the guidelines of a relevant scheme such as NI 43-101 or the JORC code;
The deposit has been subject to past mining campaigns for rare earths, for which reliable historical data is available, even if the data is currently not compliant with a relevant scheme in terms of a resource of reserve definition.
Based on these criteria, at this time the TMR Advanced Rare-Earth Projects Index comprises 13 projects, being run by 12 companies in 6 different countries. These projects, in alphabetical order, are:
Bear Lodge (Bull Hill Zone) - Wyoming, USA : operated by Rare Element Resources Ltd. (TSX.V:RES, AMEX:REE);
Dubbo – New South Wales, Australia : operated by Alkane Resources Ltd. (ASX:ALK, PK:ALKEF);
Hoidas Lake – Saskatchewan, Canada : operated by Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF);
Kutessay II – Chui, Kyrgyzstan : operated by Stans Energy Corp. (TSX.V:RUU);
Kvanefjeld – Kujalleq, Greenland : operated by Greenland Minerals and Energy Ltd. (ASX:GGG, PK:GDLNF);
Mount Weld – Western Australia, Australia : operated by Lynas Corporation Ltd. (ASX:LYC, PK:LYSCF);
Mountain Pass – California, USA : operated by Molycorp Inc. (NYSE:MCP);
Nechalacho (Thor Lake Basal Zone) – Northwest Territories, Canada : operated by Avalon Rare Metals Inc. (TSX:AVL; OTCQX:AVARF);
Nolans Bore – Northern Territory, Australia : operated by Arafura Resources Ltd. (ASX:ARU, PK:ARAFF);
Steenkampskraal – Western Cape, South Africa : operated by Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF) in association with Rare Earth Extraction Company ;
Strange Lake (B Zone) – Quebec, Canada : operated by Quest Rare Minerals Ltd. (TSX.V:QRM);
Zandkopsdrift – Northern Cape, South Africa : operated by Frontier Rare Earths Ltd. (TSX:FRO from 11/17/10 onwards);
Zeus (Kipawa) – Quebec, Canada : operated by Matamec Explorations Inc.
Slummin in the pinks allowed many of us to create a nice pile of this stock. I, for one, am thankful for the opportunity.
I am also anxious as hell to get out of the pinks, now.
Nice move for a day with zero news.
I bit on 34k @.0269. It might seem high right now, but I think by hte end of the day, it will look like a good buy.
I could not get any takers except at the ask.
I am with you emergency. Those shares I picked up at .0195- .020 look real cheap now, and brought my average price down to about .05.
I wish I could have bought more, but why be greedy. This baby is going to make us all rich.
NO, It shot up because I ran out of money to buy more.
Thanks Net,
I just wish we were mentioned. Maybe they are waiting until our impending PR is released.
Well said, Downside.
Great post Ont. It is good to be reminded, especially when we see the price dumps.
Here are a few points to think about regarding REE's:
Jack Lifton, one the nations leading metals markets experts, has other concerns. "The serious problem for junior rare earth ventures outside of China," he said, "centers on the value of ore
concentrates, the end product of any rare earth mine. For many companies, there is likely insufficient value in the ore concentrates alone, to make stand-alone mining profitable at that stage.
Even going further up the supply chain in the case of the rare earths, for example, will add more cost than benefit until a stage is reached in the value chain where the product sells for more than its total accumulated cost of production." What might that stage be? "For the rare earths this is probably the ‘refined metals’ stage," said Mr. Lifton, "which is a good ways down the value chain from the mine face, and the production of which has never before been attempted by a non-Chinese mining operation in a
vertical integration. It is at this point that China will now report monthly prices, i.e., the producer prices." Mr. Lifton notes that price increases alone are not the only trigger required to kick start the production of rare earths in the West. "Settling on technologies to produce the metals, and then implementing them, is already under way in Japan," he said, "and has actually been accomplished there, although I do not know at what level of volume. Toyota, having seen the problem already, has invested in the development of a mine outside of China to feed an existing value chain it has in operation at some level
in Japan."
Problems associated with future pricing of rare earths will affect different parts of the supply chain differently. "The actual value of the contained rare earths in a finished consumer product is very small." said Mr. Lifton. "Therefore, even if rare earth prices doubled tomorrow, for one of the the largest enduser
segments, the makers of rare earth permanent magnets, I doubt whether any increase in the price, for example, of the magnet for the vibrator function of a 'silenced' Blackberry, would cause the seller to raise the final retail price of the finished consumer
device. Competition would intervene."
My guess is that Niobium will be what SRSR focuses on for our homerun.
It should not take long once they decide that it is worth spending a little money and time on. By time, I am referring to the time it will take away from whoever has kept the books over the past four years. They will need to present the documents and answer some questions from the auditors.
Sun,
I have had a number of audits done at companies where I was the CEO, and they are not a big deal. This would be especially true with the low number of transactions and employees at SRSR.
Sun,
That would be months and months of very, few transactions.
It does not matter anyway. Dahlman Rose is interested in what is in the ground, not what is in our bank accounts.
You are probably correct. I was just looking at the two pictures, it looks like much higher concentration of gold. I had no idea how big the wikipedia rock was.
Either way we have some significant deposits. You just do not find visible large concetrations very often.
If you click on the quartz rock picture in this file you can see the gold. It is one tenth as large an amount as in our pictures.
Downside, I have been saying the same thing for a year now. How complex could our fianncials be. We have two employees, no sales, no inventory, no marketing, no production. I am betting a four page financial summary would do it.
I think it could be audited over the weekend.
lucky,
I would also imagine our financials are very limited.
How many financial transactions could we have with two employees, no sales, no marketing, and very little inventory?
If these amounted to more than four pages per year, I would be surprised.
Ontareeo,
He might have. He has made so many calls, he might have actually stumbled on to one correct one.
The only thing he has done more often than make bad calls, is tells us he was taking a subatical from this board.
As usual, an awesome list verifying Nemogosenda's assets.
Thanks again, Web.
And thanks to the sellers out there for all the cheap shares. I cannot help it that I keep buying under these distressing times.
Thank you somebody. I got 50k at .0256.
The Billion-Dollar Rare-Earth-Mining Club
by Jack Lifton on October 1, 2010 · 4 comments
in News Analysis,Permanent Magnets,Rare Earths
Today’s announcement by Arafura Resources, the Australian-owned and Australia-based rare-earth mining venture that it is in funding talks to raise A$1 billion (US$964 million) to develop its rare-earth mine, served notice upon the world of natural resources’ supply that yet another non-Chinese rare-earth project would need a great deal of money to bring its product(s) to the market.
By my count, Arafura Resources is the fifth rare-earth mining venture to ring the ‘above US$500 million’ bell in just the last two years. The first such was Australia-based Greenland Minerals and Energy, which has said it will need US$2.3 billion. Next was Lynas Corp., another Australian venture, which has raised more than US$600 million so far on its way to production. The newest big spenders are America’s Molycorp, which recently raised US$400 million in its recent IPO, but said it would need more than US$500 million, and most recent of all, Canada’s Avalon Rare Metals, which filed required Canadian Securities Commission disclosures documentation, stating that it may need as much as C$900 million for its Northwest Territories project.
These ventures all have one thing in common, which is that most of the money required by all of them is admittedly required just to produce ore concentrates. The problem with this goal, is that, as for most mines in general, but for rare earth mines in particular, the ore concentrate stage is the lowest point in the value chain.
The Australian rare-earth expert commentator Dudley Kingsnorth, stated at the 6th Annual Chinese Society for Rare Earths Summit on August 3, 2010, that he estimated the total value of all of the rare-earth ore concentrates produced in the last calendar year to be south of US$1 billion. Let me point out here that it does not matter what the selling price of high-purity rare-earth metals may be, or may jump to, when you are valuing the ore concentrates from which they are produced. The value of the ore concentrates will rise much less than the price of the high-purity individual metals, because it is post ore concentration where most of the added costs arise.
If you believe, as I do, that the total demand for rare earths will no more than double in the next decade, then it is obvious that we are faced with a mining industry expansion which has probably too many new entrants competing to recover their cost of investment, from a relatively small total revenue pool. This means that there are already too many new entrants, and if all of them raise the necessary capital they believe they need, then some strategic investors will never see any profit.
Besides the problem of too many competitors chasing too small a pool of money, there is the problem that not all rare earths are as desirable as the others.
The most valuable rare earth in terms of total demand and total revenue, is the metal neodymium, the basis of 90% of the world’s rare-earth permanent magnets. Its price as a high-purity metal has been climbing lately, and almost all of the projected balance sheets and income statements of the rare-earth mining ventures are based on neodymium’s current high price. But common economic sense and the basic law of supply and demand tell us that if neodymium is overproduced, then its price at every point in the value chain will fall. If this happens, many of the business models of the members of the ‘billion-dollar cost club’ will fail to show a profit, no matter where in the value chain they are calculated.
The other economic curiosity among rare-earth mining ventures, is the belief by many of the miners that if they produce large quantities of the currently-highest-priced rare earths with commercial uses, the so-called heavy rare earths dysprosium and terbium, then the prices of those metals will stay high no matter what the excess of supply over demand might be. This is plain silly and misleading.
I have come to the conclusion that in rare-earth mining, outside of China, small is beautiful and the higher the proportion of heavy rare earths to total rare earths, the better for any venture.
There is no way that a non-Chinese rare-earth mine will be able to outproduce the Chinese mines in Inner Mongolia, in total production of eiher neodymium or lanthanum, the two most widely used of all of the rare-earth metals; but even the Chinese believe that they will not be able to meet the demand for dysprosium and terbium beyond this decade.
If the demand for dysprosium and terbium doubles, then there will be a major shortage of dysprosium and terbium beginning by 2015. I am betting that Chinese, Japanese and Korean investors will focus on neodymium and, perhaps, lanthanum only in the short term, but on dysprosium and terbium for the long term.
There are six rare earth mining projects being developed outside of China by Japanese companies, such as Toyota, Sumitomo, and Mitsui at the present time. I think that Japanese companies issuing letters of intent to rare-earth mining ventures in Australia and the USA are simply using the no-cost letters of intent as insurance policies, which they will allow to expire if and when their own mining ventures bear fruit. If the letters of intent are from Korean or Indian companies, then I would value them higher. I understand why the issuers of such letters want their identities kept secret – for competitive advantage – but I would feel that the letters were more valuable if I knew they were from Korean, Indian, or European stockpile agencies or industries.
Focus On The Japan vs China Rare Earths Saga Misses The Point
by Gareth Hatch on September 29, 2010 · 11 comments
in China,Japan,News Analysis,Rare Earths
It’s all so utterly predictable.
Every man, woman and canine following the rare earths space will be aware of the ongoing saga of China’s alleged unofficial ban on rare earth exports to Japan. We’ve been told that China got uppity with Japan over its arrest of a fishing trawler captain, and the next thing you know China was apparently telling rare earth exporters, to quietly yank on Japan’s chain, through the temporary cessation of exports [because of course doing it quietly in this way, would mean that no-one would put two and two together, right?].
The wider story broke in the New York Times last week, following the earlier publication of a single anecdote on the subject, by the Industrial Minerals web site. This is a Web site not to be confused by the way [as it was by at least two so-called "reputable" mainstream news publications], with Dudley Kingsnorth’s Industrial Minerals Company of Australia Pty Ltd [IMCOA]. Dudley and his company had nothing to do with the story as it emerged.
Protagonists from all sides of the various stories and sub-stories came rushing forward, claiming this, that and the other. Then came the inevitable denial from China, followed by the inevitable “they denied it so they MUST be guilty” routine, and before we knew it, ladies and gentlemen, we had ourselves a good ol’-fashioned tale of conspiracy, dark dealings and yet more ABSOLUTE evidence, by gosh, of the perfidious nature of the Chinese. And so it goes.
I almost hate to break it to you, folks, but the truth of the matter is that outside of a few dingy offices, several thousands of miles away from where you and I are probably sitting right now, no-one really knows what ACTUALLY happened last week, or continues to go on – or not, as the case may be. Anecdotal “evidence” continues to flow but frankly, it’s all rather irrelevant.
Ultimately it doesn’t actually matter if the alleged ban was or is real or not: diversifying our supplies of any important materials, makes as much plain common business sense now, as it did before last week’s storm in a teacup. Right? Whether it’s alleged threats to cut off supply, or an unfortunate but catastrophic earthquake or other natural disaster, placing all of one’s procurement eggs in one geographical basket is just daft if it can be avoided, particularly in the case of the rare earths where there are deposits geographically located all over the globe.
Perhaps if North Americans and Europeans spent as much energy on actually implementing and coordinating sound procurement strategies, underpinned by sound national policies and objectives, as they did on the pissing and moaning that has taken place these past few days, we might have been just a little closer to the creation of a robust, decent supply chain than we are now. The reaction to last week’s story feels like being stuck on a boat with half a dozen rowers all paddling in different directions, taking us nowhere except towards the ominous waterfall ahead. All mouth and no trousers, as they say back in my old neighborhood.
The story does actually get a little better in Japan; that country has been looking to develop non-Chinese sources for their technology metals for years. They have also been developing alternatives to rare earth elements – again, for years. Not that certain Japanese ministers and politicians appear to know this [or those who would quote them]; apparently there is nothing unique to the Americas or Europe, in politicians having no clue regarding the scientific work being done right under their noses, in their respective countries.
As a resource-poor nation, Japan has had no choice on this matter, for years. As just one example, Japanese researchers have been working to reduce the amount of dysprosium needed in high-performance neodymium-based permanent magnets since at least 2004, if not earlier. Long before the present rare earths bubble, or the one before that…
And yet, despite being just about the world’s leading location [certainly outside of China] for science and innovation in the rare earths and their applications, Japan was excluded as a possible partner, in work to be conducted by a new US rare earths research & development center, which was proposed in legislation making its way through the US House of Representatives this week. There is mention of cooperation with directorates of the European Union, to avoid “duplication of efforts”, in the bill, so I suppose we should be thankful for small mercies. Not linking up with Japan, however, and its formidable scientific and engineering talents, is just plain myopic, and brings into question the motivations of the bill in the first place.
We’ll see how the China vs Japan story unfolds [or doesn't] as time goes by. We’ll also see if the rare earths bill gets turned into legislation or if the upcoming campaign season and subsequent lame duck session in Congress will see the bill disappear into oblivion. In the meantime, let’s just hope that the powers that be, in the public and private sectors of the USA and Canada, can get their political and financial acts together in the face of potential supply chain disruption, from threats real or imagined.
EU approval should be fairly easy on a devise like this. It is nothing like getting approval for a drug.
Basically ISO approval already says it works as advertised. There is no downside such as side effects. IMHO.
As Lifton stated below:
HEAVY VERSUS LIGHT
But is vertical integration enough to ensure rare earth success? Independent commodities commentator and strategic metals expert Jack Lifton isn't so sure.
He puts more emphasis on mineral concentrations, favoring the heavy rare earths.
All rare earth deposits contain the 17 elements in varying concentration. The heavy rare earths are in far shorter supply, and as such, are more valuable.
"The Chinese have such enormous reserves of light rare earths that I find it very, very improbable that there could be a profitable light rare earth company developed outside of China," he said.
To get at the heavy elements, miners must also process the less valuable light ones. This could spell disaster for companies whose deposits are low in heavies, said Lifton.
"If I make 9,600 white Chevrolets, and 400 black ones, and only the black sell, please don't tell me that's good economics," he said. "Making something is not what counts, it's selling something that's important."
Avalon Rare Metals is one company that will have a lot of heavy rare earths to sell, if it can raise the money it needs to bring its Nechalacho mine into production.
The mine, located in northern Canada, has a low total concentration, but is rich in valuable dysprosium and terbium.
"That greater enrichment in heavy rare earths makes for a more valuable ore in the ground," said Avalon Chief Executive Don Bubar. "And much bigger potential profit margin on production."
Avalon's goal is to further increase profit margin by including a mill and a hydrometallurgical plant on site.
But because of the remote location and heavy infrastructure needs, the project will cost an estimated C$844 million ($792.6 million) to bring into production, which analysts see as a tough pill for investors to swallow.
"If Avalon came online it would solve the world's problems, but it wouldn't solve Avalon's problem," said Lifton. "Their problem is how do you raise that kind of money?"
Now, I believe Dahlman Rose would not be partnering with us if they did not already have some very strong indication that we have the right combination of metals.
I can feel this coming together like a fine Concerto.
The Maestro, Scott, has this under control. Everytime I think he should have done something, he has already done it.
A masterpiece is being produced, and we own a piece of it.
This sure confirms the pathway that Scott has set us upon.
We are in good hands!
Jack Lifton: US Has Been ‘Foolish’ On Rare Earth Metals
by Admin on September 4, 2010 ·
China,In The Media,Rare Earths
by Lara Crigger – Hard Asset Investor – Published: September 3, 2010
Is the rare earths metals hype overblown? Yes, says Jack Lifton, co-founder of Technology Metals Research, who adds that although the panic over Chinese “hoarding” is misplaced, the U.S.’ dissolution of its domestic rare earth metals production has been equally “foolish.”
Jack Lifton is one of the world’s foremost experts on rare earth metals, and is a highly sought-after author, consultant and lecturer in the industry. With over 48 years’ experience in the metals business, Lifton continues to advise institutional investors and high-tech OEM companies worldwide on the complexities of the natural resource sector.
At the recent 21st Rare Earth Permanent Magnet Workshop in Bled, Slovenia, Lifton presented a paper outlining the steps the U.S. would need to take to reestablish a presence in the rare earths industry.
Editor Lara Crigger caught up with Lifton right before he began a two-week rare earth investing “road show” that would take him to Beijing, Shanghai and beyond. He shared with HAI some thoughts on the rare earth metals industry, including why the current rare earth panic is overblown, how China has managed to dominate the market and what the U.S. needs to do to make an REE comeback.
Crigger: Is the panic over securing our rare earth metals supply overblown? Do we need to worry about China “hoarding” rare earth elements [REEs]?
Lifton: Yes. China doesn’t consider itself to be hoarding anything. They figure that they’re using their own materials for their own needs. They question why we insist on using words like “control” and “hoard,” because they ask, “If you needed the material, why shut your factories?”
So it’s as simple as that. We really are foolish in America. We’ve shut down an industry that’s strategic and critical, and all in the name of low cost. Now we’re surprised that the consequences that are obvious in doing this have now come back to bite us. I’m not surprised, and neither is anybody else in China.
Crigger: The materials are still there, though.
Lifton: The utilities are still there. But we haven’t been doing this for awhile, and people don’t just sit around waiting for work. You have to reconstruct the intellectual basis of the industry, as well as the physical basis, and that’s the problem.
Crigger: Are the people in this industry generally heading over to places like China, where the importance of REEs is better acknowledged?
Lifton: Well, they die. They get other jobs. If you’re a chemical engineer specializing in separating rare earths, where do you think you’re going to get employment in the U.S.? There’s nobody doing it here. So if you’re deciding what to do in grad school, you get a different specialty. Or if you were already doing this, you have to retrain yourself, or find something in the home cleaning or Slurpee-mixing fields, because what you were doing is gone.
I don’t know what possesses politicians to think that they can simply invent intellectual capital. You can’t. It takes time. And once you fall behind in your specialty, you are behind. You have to catch up. It’s not a matter of reading the latest papers; you also have to go back to what happened between the latest papers, and when you knew how to do it.
So I find the politicians and financial minds in America seem to have no knowledge whatsoever of manufacturing or mining. They just think that money solves all problems.
Crigger: So what do we need to do to keep those knowledgeable people around?
Lifton: The first step would be to go ahead and fund the RESTART Act [a bill to reestablish domestic rare earth minerals production in the U.S.]. I didn’t say enact it. That doesn’t mean anything. They need to actually put some money in it. And they need to get it done while we still have a core of people at the point in their working lives where we could get this done, because that is a diminishing resource. If this doesn’t get done in the next decade, it will never get done, because we’ll have lost any ability to do it.
Crigger: How else do we need to adapt the way that we think about rare earth metals in this country?
Lifton: We have to decide that rare earth metals are as important as, say, bridges with no intended anchor point. And the only ones who can do that are the people in Congress, who hold the purse strings. But Congresspeople have notoriously short attention spans. When you have a television camera there, they say, “Whatever it is you support, so do I,” and the moment the camera switches off, they walk away.
This is sort of beside the point, but I think America needs national goals. Let’s say that, for argument’s sake, we’d like to restore our standard of living to what it was in 2008. To do that, we better start creating wealth and creating high-tech items that we can not only use ourselves, but sell to the rest of the world. For example, if you mine rare earths in California, you could actually mine a lot more than the U.S. needs, and have the rest for export material to make a profit.
So perhaps someone in Washington should go back and study basic economics, because they don’t seem to understand anything about wealth creation. There’s an anti-resource bias in Washington that’s palpable. Do we really think that energy creates itself, or metals just drop out of the sky?
Crigger: At least on the financial side, we see investors say, “Well, we don’t know what REEs are, but hey, let’s learn.”
Lifton: Exactly, and if the politicians had that much interest, we wouldn’t have that problem. My personal business is that I do due diligence for institutional investors looking into metal opportunities, and I can tell you that I have seen more interest among bankers and fund managers than I’ve ever seen in Washington. They’re the ones asking, “What are rare earths? How do they fit into the economy?” And they’re honest: They admit, “We don’t know what you’re talking about, so just start at the beginning.” Of course, that can be a problem in other ways.
Crigger: How so?
Lifton: Well, the problem for junior miners – exploration companies, I mean, not production companies – is that the institutional investors have an unfortunate requirement: They need to make a profit. They do not make investments that don’t return something.
But there’s a huge distinction between stock market plays and actual company operation. When the institutional investors that I have as clients take a look at a mining operation, they say, “When will $1 become $1.50, and is that a faster rate than if we put our money in gold or some solid paper?” The answer at the present time is, “No.”
And it’s true. The concentrates mine is just not profitable. Really, don’t believe anything about rare earth prices rocketing up. They may be rocketing up in pure metals, but not for ore concentrates, because the value is added after that. So your mine needs to be on a combined balance sheet.
Two or three of the junior miners in rare earths have adopted this strategy, and they’re the ones that are getting the most attention. Because if you just admit that you don’t make money mining rare earths, that you make money in producing products from rare earths, well, then you can get somewhere.
Crigger: How does this compare to what China has done?
Lifton: Well, the problem is the mining companies are small. They’re not big enough to buy a mine and finance a refinery, so you need the real end-user – the car company, the jet engine company – to come in and help.
In the case of China, the Chinese have simply put all the rare earths under the control of their large base metal companies. Those companies are now responsible for delivering high-purity rare earth metals, after they’ve restructured the industry over the next five years.
A few weeks ago, China announced that Baosteel, Jiangxi Copper and Chalco have now been given the assignment of geographically restructuring the rare earth production in their geographic regions. Today, there’s 129 official recognized rare earth miners in China – and god knows how many flying under the radar – and 79 refiners. That’s 208 companies. By the end of 2015, you will see three companies: Baosteel, Jiangxi Copper and Chalco. As far as they’re concerned, bigger – and more consolidated – is better.
Crigger: It’s all part of that same machine, that same philosophy, that’s driven the staggering growth we’ve seen in China over the past two or three decades.
Lifton: Well, 20 years ago, China was producing less than 50 million tons of steel a year. Today, they’re producing 650 million tons of steel. That’s 6.5 times as much as the U.S., 5 times as much as Europe, and more than all the rest of the world put together.
China has done more growth in metals production in a generation than the entire world put together. Rare earths are the tip of the iceberg. Frankly, you shouldn’t bother looking at them as much as you should steel, iron, copper, aluminum, tungsten, antimony – these are all metals where China is both the dominant demand in the world, and the dominant producer.
Investors say, “We’re not going to invest in mining, because you know what happens: The $3 price of copper becomes $.70, and we lose our money.” Well, if China’s demand continues, we will never see a commodity bust again.
Crigger: Of course, eventually we wouldn’t be able to keep up.
Lifton: Right, their demand is so high that the world is already straining. You know, we used to laugh about the Soviets and their five-year plans. “We’re producing more steel than anybody else!” they said. Of course, that steel was stockpiled, and they weren’t using it, and it was killing their economy. People say China’s doing the same thing. It isn’t. The Chinese are using these materials, and they’re producing like crazy. At this point in time, China’s producing some 53-56 percent of all the metals of all kinds in the world, and yes, they export some, but everything they export is value-added in China. They are creating jobs, wealth, industries.
The rare earths are a real issue, because China doesn’t think it has enough. That is, they think they have enough reserves, but not production. And their demand is outpacing their production at the moment. So there’s a window here for Western mining to supply China with goods it needs.
But the danger is that what happened before will happen again: China will then ramp up its production and come roaring back, and kill everyone else in price. They did this in the ’90s, and they killed the non-Chinese rare earth industry—by 2002, it was shut down.
Crigger: So then is it even worth it for any non-Chinese company to jump into this fray again?
Lifton: Well in the short term at least, absolutely there’s value. And for the heavy rare earths, the ones China doesn’t believe it has enough reserves of. That’s a good business to be in.
But you can’t produce one type of rare earth without producing all of them. So the big issue is, who’s going to be the lowest-cost producer of terbium, europium and dysprosium? Because those are the three materials China thinks it needs outside sources of.
An astute businessman might say to China, “Look, I have a deposit in Alaska or South Africa of material, and it’s got heavy rare earths in it, but here’s the problem – we’re going to produce lanthanum, cerium, neodymium, and all sorts of things you already have enough of. So I can’t sell you the heavies unless you buy the lights. You have to buy the entire cow; I’m not selling the milk.” The Chinese used to say no, but now they say, “Let’s talk about it.”
The Chinese are realizing they have to change the dynamic. Instead of saying, “We must control it,” they’re saying, “Can we invest enough money to develop something and then we can buy the output?” Because in a capitalist society, the risk is that somebody will out bid you. That’s not a problem for the Chinese. They need the material, they will not be outbid.