Christopher Ecclestone of Hallgarten & Company has today published a new report called “Soup to Nuts: Vertical (or quasi-vertical) integration in the mining/industrial space“. The report covers the general specialty metals space, building on the content of the last report on this space. It includes commentary on tungsten, rare earths, lithium, tellurium, graphite and cobalt.
Mr. Ecclestone again makes the point that the Chinese have been warning of supply restrictions for a number of years, and that Western users should have heeded these warnings – but have not. Interestingly the report came out on the same day that the news hit regarding Chinese intention to fix rare earth prices while at the same time reducing the export of specific rare earths for the rest of the year.
The report re-visits the role of Wall Street in the “vertical disintegration” of the supply chains required to secure supplies of a wide range of specialty metals. For folks who have spent a lot of time watching the rare earths space, it might [or might not] come as a surprise that there are many similarities in the problems faced with other speciality metals, including those listed above. For example, China supplies over 90% of the global supply of tungsten. Re-iterating the reports of mantra of “secure thy upstream“, Hallgarten gives examples of companies beginning to do just that, in a number of sectors.
On rare earths, Mr Ecclestone notes that industrial end users have remained fairly quiet on the issues at hand, suggesting that the major players are in denial and are waiting for “someone else” to solve the problem. While this is slowly but surely changing [there are reports of a number of large, multi-national companies starting to look at the issues of rare metal supplies holistically], the point is well taken [though of course the irony is that it was these types of end users, by and large, that caused many of the present problems in the first place through their embracing the doctrine of globalization and off-shoring].
Still in the rare earths space, the report focuses not unpredictably on Neo Material Technologies, Great Western Minerals and Molycorp. It suggests that Neo should merge with Great Western or even Arafura Resources to “hasten vertical integration in the REE space“, perhaps overlooking the existing relationships that Neo has with Mineracao Taboca & Mitsubishi Corp to pursue access to non-Chinese heavy rare earths, and the recent Letter of Intent with Molycorp as a means of accessing non-Chinese light rare earths.
Mr. Ecclestone is particularly scathing in his comments concerning Great Western Minerals, essentially accusing the company of screwing up its chances of securing a joint venture with Toyota on the Benjamin River property, by not expanding that resource when the company had the chance. There are choice words, too, for Molycorp on some of its past activities.
On lithium, the report notes that
the three major producers of lithium are all chemical companies and not miners. Investors rushing into the space seem to forget this fact as they search for lithium miners and come up with juniors, when in fact the larger players are very large and entrenched.
There are plenty of observations on the other rare metals and materials mentioned above – you can download a copy of the report from here.
First published at RareMetalBlog.