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.

DUSSELDORF, Germany — August 25, 2010 — Tantalus Rare Earths AG of Düsseldorf, Germany, with its 300 km² Rare Earth project in Northern Madagascar, announces today the appointment three new members to its supervisory board, namely Mr. Jack Lifton, Mr. Benoit M. Violette and Mr. Ben Paton. The new members will join the existing board members and will add comprehensive experience in their respective fields to the company.

Mr. Jack Lifton is one of the leading experts on technology metals, including rare earths, lithium and rare metals in general. Mr. Lifton is a renowned consultant, lecturer and author of many leading articles in this field. With his background as a physical chemist, specializing in high temperature metallurgy, he started out as researcher before moving to marketing and manufacturing executive positions. Mr. Lifton has been involved in the industry for over 48 years and is now utilizing his experience by consulting to global OEMs and institutional investors. He also frequently appears as an invited guest speaker at leading industry conferences worldwide.

Mr. Benoit M. Violette will join the board in his capacity as a professional geologist with extensive experience in generating, financing and managing exploration projects for a wide range of mineral commodities worldwide, including projects in Africa and Canada. Mr. Violette is a member of the Ordre des Géologues du Québec and holds a BSc. honours degree in Geology from the University of Ottawa.

Mr. Ben Paton is a fund manager specializing in European and Emerging Market Smaller companies. He was the lead fund manager for Fidelity’s International Small Cap Fund which grew to total funds under management of approximately USD $3bn in 2008. Mr Paton brings broad experience of investing in the resources sector and early stage projects. He is a London Business School MBA graduate and a qualified Chartered Accountant. His financial background as a successful fund manager and his experience in deal structuring and coordinating financings will be of great value to the company in the future.

“The company is excited to have attracted such excellent talent to its supervisory board. The board with its extensive experience will provide immeasurable guidance to our management and direction of the company”, states Stephen Forman, CEO of Tantalus Rare Earths AG.

In other developments, the company’s 40,000 m diamond core drilling program has started in July. The present drill rate is approximately 200 m per week; two more drill rigs are presently awaiting customs clearance. They are expected on site by mid- September. The first phase of the drilling program concentrates on the main vein hosted rare earth mineralization along the coast plus its southern and north-western extensions. The initial drill grid is 100 m by 400 m, in its final phase the mineralization will be drilled on 50 m centers.

The first line of 10 drill holes is nearing its completion, with vertical holes ranging from 60 to 80 m depth and inclined holes (-45°) ranging from 60 to 120 m in length. The drill cores have confirmed our geological model: Multiple, late stage, rare earth, tantalum, niobium and zirconium bearing sills and dikes of Tertiary alkaline granites have intruded into flat lying Jurassic sediments and caused skarnification along the contact zones. These skarns are also mineralized.

With encountered drilled widths of up to 5 m, the mineralized veins seem to be wider than originally anticipated by earlier explorers, such as the Soviet Geological Mission of the late 1980s. So far, five drill holes have returned multiple intersections which are presumably mineralized with rare earths, tantalum, niobium and zirconium. On this drill line, the zone in which mineralized veins may occur is apparently more than 250m wide. The Soviets were speaking of a maximum width of 200m.

The drill core samples are currently being crushed and homogenized at the company’s sample preparation facility in Ambanja. A first batch of samples will be submitted to ALS Chemex Johannesburg and Vancouver in the coming week for lithium borate fusion followed by ICP-MS (ALS code: ME-MS81). The first results are expected in 4 to 6 weeks from sample submission.

“We are most pleased with the progress of our drilling program. The zone in which mineralized veins occur seems to be wider than anticipated and the encountered widths of mineralized veins are also wider than expected” states Wolfgang Hampel, COO of Tantalus Rare Earth AG.

About Tantalus Rare Earths AG

The mission of Tantalus Rare Earths AG is the identification and development of rare earth exploration and mining projects outside from China, mainly focusing on Africa. Administratively, Tantalus Rare Earths AG is located in Düsseldorf, Germany. Currently, the investment portfolio consists of 100 % of the Tantalus Rare Earths Project in Madagascar.

by Brian Sylvester & Karen Roche – The Gold Report – Published: June 21, 2010

Everybody’s talking about rare earth elements (REEs), but does anyone truly understand them? With nearly 50 years in the industry, independent metals consultant Jack Lifton sure does. The educational powerhouse in this burgeoning space returns to The Gold Report with a look toward future trends and a plan to emancipate North America from China’s REE monopoly.

The Gold Report: Jack, since our first interview over a year ago, the rare earth space has received a lot of ink. You were one of the first to talk about these minor metals and their strategic importance to manufacturing and electronics. Could you give our readers a little refresher about some of these metals and their uses?

Jack Lifton: I define a rare metal by its production rate, because it doesn’t matter how much of a metal there is in the earth’s crust—or even how much of it is concentrated enough in accessible ore deposits to be, theoretically, recoverable. The only thing that matters is the amount of metal that is produced each year, because that’s all we have available to us use now, period. That production rate depends, of course, on a combination of economics and technology.

The cost of producing the metal from any particular source must be less than its selling price, and the technology must exist before the extraction project (mining) to produce the metal from that particular ore deposit.

The following chart singles out the rare earth metals in red (the lanthanides, plus scandium and yttrium) from all other metals and rare metals by their 2009 production rate. It also identifies the 2010 rare metals as those beginning with, and including, silver, as well as all of those produced at a rate less than that of silver in 2009.

As of today, June 16, 2010, I think the future-use trends for those rare metals critical for mass-produced, consumer-use technology must be differentiated from future-use trends for the rare metals critical for military technology. These future-use trends may be qualitatively alike. For example, they may require small, powerful, permanent magnets; but their quantitative requirements for each category—civilian and military—–are different by orders of magnitude.

Forging technologies for the military, which began in World War II, created a supply chain for the rarest metals critical for military applications. But, once military demand was understood—and, thus, limited—there came into existence a surplus of metals that had never before been available to civilian scientists and engineers. This resulted in a revolution in the creation and miniaturization of technologies for mass-produced civilian (i.e., consumer, markets, etc.).

Today, the quantitative demand for rare metals by the military and civilian sectors of the economy has inverted. The civilian sector dominates the demand for rare metals critical for use in technologies; I call this subset of rare metals technology metals. For now, I’ll concentrate on just those selected metals because increasing production from existing mines—or developing new ones—is so extremely capital-intensive and time-consuming, the probability of doing that declines rapidly as costs and expensive-to-fix technological issues mount. In fact, the stock market pundits like to gloss over technological impediments to increasing the supply of technology metals. And the stock market is woefully ignorant of the economic obstacles—from lack of mine profitability to increasing the production of almost any metal other than iron.

You may note from the previous chart that no tantalum was produced in 2009 even though tantalum is a critical technology metal for all electronics. This was an issue of economics and politics largely ignored by the world’s stock markets.

The world’s largest producer, Australia’s Talison Tantalum (private company), shut down production in late 2008 because the selling price for its mine concentrates was below its costs. Unethical trading companies covered the shortfalls—demand in excess of inventory—by procuring tantalum ore concentrates from places like the Democratic Republic of the Congo where illegal mining using child, and even slave, labor is rampant. Such ores were ‘baptized’ as being of ethical origin or disguised as previous inventory to circumvent UN, U.S., European and Chinese laws against the use of materials of such heinous origin.

The total volume of the tantalum trade worldwide is tiny compared to any base metal, such as iron, aluminum, copper, zinc or lead; so markets have generally ignored this issue, but I think it is a major issue. There is a good opportunity here for investing in North American domestic junior tantalum opportunities, such as Commerce Resources Corp. (TSX.V:CCE; Fkft:D7H; PK SHEETS:CMRZF), because the American government is realizing that the only way to ensure the survival of its high-tech industry is to ensure there is a domestic natural-resources supply chain that begins in every instance at the mine. I use tantalum as an example to emphasize that rare earths aren’t the only technology metals for which self-sufficiency is important.

Alternate energies for a green future are impossible to build and operate without rare metals. These include cadmium, tellurium, selenium, indium, gallium and germanium for solar; rare earths for wind power and electric cars; and uranium and thorium for nuclear generation of electricity.

Looking at the chart, you can see the total amounts of most of these critical technology metals are small, and some are even so small they’re unknown. We need to listen carefully to those miners who tell us they can produce any or all of the technology metals for us domestically (or under the control of friendly nations). Otherwise, the age of technology will stall or go into decline—and the green world will not come about.

TGR: Could you explain to our readers the difference between heavy and light rare earth elements (REEs)?

JL: The rare earth elements, known chemically as the lanthanides, are defined simply as those chemical elements beginning at number 57, lanthanum, on the periodic table, and running consecutively through, and including, number 71, lutetium. The atomic numbers 57–71 are the measurement by which true chemical elements are differentiated from each other. Technically, these numbers represent the quantity of electric charge of the nucleus of each atom; and this number dictates the chemical properties the atom will have.

The rare earths are called “rare” for the historical reason that their chemical properties are so similar, they could not be completely separated and identified individually until the 20th century’s rapid growth of chemical separation and identification technology. The commercial separation of the rare earths into individual, high-purity metals is still an expensive, and not always successful, undertaking. In fact, this separation and purification on a commercial basis is the great impediment to increasing rare earth production even today.

Such chemical operations are very expensive and time-consuming, so they restrict new entrants into the field to the well-financed, highly skilled. . .and those lucky enough to have an ore body (always a mixture of ores each with its own problems of concentration and extraction) that can be processed successfully on an economic basis.

All rare earth ores contain all of the rare earths, but in varying proportions. If the contained rare earths are primarily those with an atomic number at or below that of samarium, number 62, the ores are traditionally said to be those of the “light rare earths.”

The rare earths known traditionally as the “heavy rare earths” begin with europium, number 63, so anything at or above 63 is considered a heavy REE. Although the “heavies” are found in some proportion in all rare earth deposits, those ores with a significant proportion of the heavies, which are still very small numbers, are known as “heavy rare earth deposits.” This confusing terminology has now become fixed in stock-market talk.

Why is this important? Because the most important of all the rare earths are the magnet metals—the big four: neodymium and praseodymium (light REEs) and dysprosium and terbium (heavy REEs). These four metals, in varying proportions, make up the critical materials in 90% of rare earth permanent magnets made and used today. And these will continue to be critical to manufacture the rapidly increasing number of permanent magnets required by today’s and tomorrow’s technologies.

There is one other magnet metal of somewhat lesser importance—samarium; but, today it is used mostly in military applications or those requiring magnets capable of operating under extreme environmental conditions of radiation or temperature.

Lanthanum is critical for nickel metal hydride-storage batteries, which is the type of storage battery used universally for hybrid vehicle power trains. Lanthanum is also critical for the oil industry, as a component of fluid-cracking catalysts for modifying heavy crude into usable fractions. Some add lanthanum to their list of important rare earth metals to create a list of the rare earth “big five.” I reserve judgment on whether lanthanum should be in the same category of importance as neodymium.

TGR: You mentioned earlier that most of the world’s supply of these minor metals now comes from unreliable jurisdictions. Besides Commerce Resources, are there other producers or explorers in more politically safe locations?

JL: At this time, all of the rare earth metals are mined, refined and purified in Asia or Eastern Europe. More than 95% of this is done within the People’s Republic of China, with the balance is done in India, Malaysia, Russia and Estonia. None of these areas is politically reliable in terms putting the needs of the U.S. or the global community on an even par with their own domestic needs.

My view is that narrow-minded politicians in the West have sacrificed our economic and military security on the altar of their own short-term needs—to be re-elected. The U.S. was self-sufficient in REEs and had a complete supply chain for them as recently as 2002. At that time, global economics made Chinese ores cheaper than those produced in the U.S.

After Molycorp Minerals, a private company in California, shut down operations for economic reasons (i.e., inability to compete with low-priced Chinese supply), the rest of the supply chain—purification, metal and alloy production and magnet and battery production—simply moved to China for access to supplies of the rare earths.

Besides the huge deposit of high-grade light rare earth ore (with some europium) at Mountain Pass, North America also has significant REE deposits in Alaska, Idaho, Wyoming and Canada’s Northwest Territories, Saskatchewan and Quebec. The Canadian deposits and those in Alaska contain very significant quantities of the heavy REEs.

North America could be completely independent of China—and could, in fact, be a supplier to China—if just a few of North America’s deposits were developed.

TGR: A number of companies appear to be popping up that suddenly have REE deposits. Can you share with our readers some of your favorite REE names with real mineable assets?

JL: I’d be glad to list those companies with mineable deposits in North America, so long as you understand that a mineable deposit is just one of the requirements for a successful REE-mining business. It is a necessary, but insufficient, requirement.

The mineable deposits of rare earths in North America are owned by:

• Molycorp Minerals (private company in Mountain Pass, California)
• Avalon Rare Metals Inc. (TSX:AVL;OTCQX:AVARF) (NW Territories, Canada)
• Rare Element Resources Ltd. (TSX.V:RES) (Wyoming)
• U.S. Rare Earths (a private company in Idaho)
• Quest Rare Minerals Ltd. (TSX.V:QRM) (Quebec, Canada)
• Great Western Minerals Group Ltd. (TSX.V:GWG) (Saskatchewan, Nova Scotia)
• Ucore Uranium (TSX.V:UCU) (Alaska)

All of the above are North American resources. There are also significant, undeveloped resources of REEs in Australia, South Africa and Greenland.

In order for the U.S. to be self-sufficient and become a net exporter of REEs, some of the above-listed companies must be developed now. Other countries, domestically, and China and Japan, globally, are racing to acquire and develop REE resources outside of North America. It is a global competition, and the other entrants are already well under way.

TGR: Do you see demand for these REEs expanding dramatically in the future?

JL: Demand for rare earths, and particularly for the big-four magnet metals, is growing at a rate that is unsustainable unless new heavy REE production is brought online in the next five years at the most. Due to the nature of REE deposits, this requires that the production of light REEs increase significantly also. Therefore, I believe there is now a window of opportunity for one or two light REE producers and several heavy REE producers to enter the market over the next five years. Anyone whose timeline is beyond that will not likely be successful in this run up of rare earth demand.

TGR: This has been a real education, Jack. Thanks so much for your time today.

Copyright © 2010 Streetwise Reports LLC.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TGR: What about tantalum?

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

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

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

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

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

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

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