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Posts tagged ‘japan’

The IZA Institute of Labor Economics attributes thousands of deaths to Japan’s post-Fukushima nuclear shutdown

November 27th, 2019

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Study attributes thousands of deaths to over-cautious post-Fukushima nuclear shutdown

October 29th, 2019

by Greg Klein | October 29, 2019

A misguided response to Japan’s Fukushima Daiichi meltdown brought many more deaths than the accident itself, according to a new report. Published by the Germany-based IZA Institute of Labor Economics, the study says the resulting nationwide nuclear shutdown pushed electricity prices high enough to discourage consumption, causing a sharp increase in cold weather fatalities.

Study attributes thousands of Fukushima-related deaths to unnecessary nuclear shutdown

A 2015 emergency response drill at Fukushima Daiichi.
(Photo: Tokyo Electric Power Company)

The 2011 earthquake and tsunami killed three workers. The Fukushima Daiichi plant withstood the earthquake but not the tsunami, which caused the plant failure. So far no deaths have been attributed to radiation, but the report cites a previous forecast that about 130 people will die from 2011 exposure.

Looking at data from Japan’s 21 largest cities, the report’s authors attribute 1,280 deaths (19% of all cold weather fatalities) between 2011 and 2014 to decreased electricity consumption caused by price increases as high as 38%. With that data representing just 28% of the country’s population, the report estimates over 4,500 such deaths nationwide during that period. Additional deaths will have occurred since then due to the persistence of higher electricity prices, the study maintains. “This suggests that ceasing nuclear energy production has contributed to more deaths than the accident itself.”

Meanwhile evacuating the Fukushima region caused another 1,232 deaths, according to a Tokyo Shimbun newspaper report cited by IZA. The World Nuclear Association, an industry group, attributes the evacuation deaths to “somatic effects and spiritual fatigue brought on by having to reside in shelters,” the effects of moving fragile individuals, and delays receiving medical aid in the disaster’s aftermath.

Therefore, the total welfare effects from ceasing nuclear production in Japan are likely to be even larger than what we estimate, and represent a fruitful line for future research.

Up to 2011, nuclear provided 30% of Japan’s electricity. During the four years under scrutiny by IZA, the country’s reliance on fossil fuel-generated electricity rose from 62% to 88%, partly by ramping up production from “old, often idle coal, gas and oil-fired power generators.”

American studies show nuclear shutdowns following the 1979 Three Mile Island accident “led to increased particle pollution and higher infant mortality,” the study adds. “Therefore, the total welfare effects from ceasing nuclear production in Japan are likely to be even larger than what we estimate, and represent a fruitful line for future research.”

Authors Matthew Neidell, Shinsuke Uchida and Marcella Veronesi say their study “is not the result of a for-pay consulting relationship. Our employers do not have a financial interest in the topic of the paper which might constitute a conflict of interest.”

IZA describes itself as an “independent economic research institute that conducts research in labour economics and offers evidence-based policy advice on labour market issues.”

Download Be Cautious with the Precautionary Principle: Evidence from Fukushima Daiichi Nuclear Accident.

Infographic: The world’s most powerful reserve currencies

October 8th, 2019

by Jeff Desjardins | posted with permission of Visual Capitalist | October 8, 2019

Visual Capitalist The world’s most powerful reserve currencies

 

When we think of network effects, we’re usually thinking of them in the context of technology and Metcalfe’s Law.

Metcalfe’s Law states that the more users a network has, the more valuable it is to those users. It’s a powerful idea that is exploited by companies like LinkedIn, Airbnb or Uber—all companies that provide a more beneficial service as their networks gain more nodes.

But network effects don’t apply just to technology and related fields.

In the financial sector, for example, stock exchanges grow in utility when they have more buyers, sellers and volume. Likewise, in international finance, a currency can become increasingly entrenched when it’s accepted, used and trusted all over the world.

What’s a reserve currency?

This visualization comes to us from HowMuch.net, and it breaks down foreign reserves held by countries—but what is a reserve currency, anyway?

In essence, reserve currencies (i.e. U.S. dollar, pound sterling, euro, etc.) are held by central banks for the following major reasons:

  • To maintain a stable exchange rate for the domestic currency

  • To ensure liquidity in the case of an economic or political crisis

  • To provide confidence to international buyers and foreign investors

  • To fulfill international obligations, such as paying down debt

  • To diversify central bank portfolios, reducing overall risk

Not surprisingly, central banks benefit the most from stockpiling widely held reserve currencies such as the U.S. dollar or the euro.

Because these currencies are accepted almost everywhere, they provide third parties with extra confidence and perceived liquidity. This is a network effect that snowballs from the growing use of a particular reserve currency over others.

Reserve currencies over time

Here is how the usage of reserve currencies has evolved over the last 15 years:

Currency composition of official foreign exchange reserves (2004-2019)
U.S. dollar Euro Japanese yen Pound sterling Other
2004 65.5% 24.7% 4.3% 3.5% 2.0%
2009 62.1% 27.7% 2.9% 4.3% 3.0%
2014 65.1% 21.2% 3.5% 3.7% 6.5%
2019 61.8% 20.2% 5.3% 4.5% 8.2%

Over this timeframe, there have been small ups and downs in most reserve currencies.

Today, the U.S. dollar is the world’s most powerful reserve currency, making up over 61% of foreign reserves. The dollar gets an extensive network effect from its use abroad, and this translates into several advantages for the multi-trillion-dollar U.S. economy.

The euro, yen and pound sterling are the other mainstay reserve currencies, adding up to roughly 30% of foreign reserves.

Finally, the most peculiar data series above is “Other,” which grew from 2% to 8.4% of worldwide foreign reserves over the last 15 years. This bucket includes the Canadian dollar, the Australian dollar, the Swiss franc and the Chinese renminbi.

Accepted everywhere?

There have been rumblings in the media for decades now about the rise of the Chinese renminbi as a potential new challenger on the reserve currency front.

While there are still big structural problems that will prevent this from happening as fast as some may expect, the currency is still on the rise internationally.

What will the composition of global foreign reserves look like in another 15 years?

Posted with permission of Visual Capitalist.

Uranium: A 2040 prognosis

September 5th, 2019

Growing energy needs, emissions reduction look positive for the other yellow metal

by Greg Klein

Oversupplied and under-priced for years, uranium’s forecast now looks good up to 2040, according to a new study. In its latest Nuclear Fuel Report, a study released at roughly two-year intervals, the World Nuclear Association has revised its projections upwards for the first time in eight years. Demand will come from a growing reliance on nuclear energy thanks mainly to China, India and other Asian countries, said the industry organization. Global warming concerns also play a role.

Growing energy needs, emissions reduction look positive for the other yellow metal

The report presents different data for each of three case studies, explained World Nuclear News, a WNA publication. The Reference scenario reflects official targets and plans announced by states and companies, and also considers how nuclear can help address climate change. The Upper scenario anticipates more favourable economics, greater public acceptance and increased dependency to offset climate change. The Lower scenario considers the possibility of negative public sentiment, a lack of political support and more challenging economics.

Even at the Lower scenario, the study foresees nuclear capacity remaining at its current level of 402 gigawatt electrical to 2040. The Reference scenario sees moderate growth to 569 GWe, while the Upper scenario predicts capacity almost doubling to 776 GWe.

The Upper and Reference scenarios show faster growth than at any time since 1990.

Even greater expansion would be required should countries adopt the WNA’s Harmony climate change strategy, which calls for nuclear to supply 25% of the world’s electricity by 2050.

The need for new primary uranium supply becomes even more pressing as a number of older mines are projected to be depleted in the second decade.—World Nuclear Association

The three scenarios “show that the capacity of all presently known mining projects (current and idled mines, projects under development, planned or prospective) should be at least doubled by the end of the forecast period, and the need for new primary uranium supply becomes even more pressing as a number of older mines are projected to be depleted in the second decade,” the WNA emphasized. 

“There are more than adequate uranium resources to meet future needs. However, oversupply and associated low uranium prices are preventing the investment needed to convert these resources into production. Uranium resources would be unlikely to be a limiting factor for the expansion of nuclear programs in order to meet the Harmony goal.”

As for uranium production, the report sees “fairly stable” volume until the late 2020s, but a sharp decrease from 2035 to 2040 “as a quarter of all mines listed in the model reach the end of their production lives,” the WNN stated. “Global output of 66,400 tonnes uranium in 2030 declines to 48,100 tU under the Reference scenario. For the Upper scenario the figures are 71,500 tU (2030) and 49,400 tU (2040). The partial return of currently idled mines to production is expected to begin in 2023 in the Reference case, 2022 in the Upper scenario and 2026 in the Lower scenario.”

In addition to Asia’s growing nuclear reliance, the report bases its positive forecasts on improved government sentiment in France, and in the U.S. at the federal and state level. Countries like Bangladesh, Egypt and Turkey will become significant producers of nuclear energy.

In our models, we don’t get excited on the demand side.—Kazatomprom CEO
Galymzhan Pirmatov,
as quoted by Bloomberg

The study crunched data from questionnaires sent to WNA members and non-members, publicly available info and “the judgement and experience of the members of the association’s working group.” Among the considerations were nuclear economics, government policies, public acceptance, climate change, electricity market structure and regulatory standards.

Co-chairing the working group was Riaz Rizvi, chief strategy and marketing officer for Kazatomprom, the world’s top uranium miner. But the positive forecasts seem to contradict his boss. Last June Bloomberg quoted CEO Galymzhan Pirmatovas saying, “In our models, we don’t get excited on the demand side.”

Using data from other sources, Cameco Corp TSX:CCO estimated an August 31 U3O8 spot price of $25.30 per pound and long-term price of $31.00, down from $26.30 spot and $31.25 long-term a year earlier. The company gives numbers of $60.50 spot and $70.00 long-term for March 1, 2011, 10 days before a tsunami hit Japan’s Fukushima Daiichi complex. As Japan shut down other reactors one by one, followed by a few other countries like Germany, the mining industry faced oversupply. Uranium prices fell steadily, sometimes dramatically.

Make no mistake, there is still a long way to go before we decide to restart McArthur River-Key Lake.—Cameco CEO Tim Gitzel

By January 2018 Cameco suspended its McArthur River mining and Key Lake milling operations, despite having put Cigar Lake into production less than four years earlier. Expressing cautious optimism last July, CEO Tim Gitzel added: “However, make no mistake, there is still a long way to go before we decide to restart McArthur River-Key Lake.”

But without them, Cameco has become more buyer than producer. To meet 2019 supply commitments, the company anticipates purchasing 21 million to 23 million pounds from other sources. That compares with an estimated nine million pounds expected from Cigar Lake this year.

Rate cuts, bubble-like stock valuations and possible QE with “new non-traditional” interventions look good for gold: WGC

July 11th, 2019

by Greg Klein | July 11, 2019

Some recent dips below $1,400 notwithstanding, yellow metal’s forecast looks positive for the next six to 12 months, according to the World Gold Council. While long-term performance depends on jewelry, technology and savings, shorter-term prices respond to other factors that the WGC considers positive for its favourite element.

Chief among them are interest rates, reflecting an about-face in global monetary policy. Less than a year ago the U.S. Federal Reserve and investors alike expected continued rate increases, the council stated. “Now, the market expects the Fed to cut rates two or three times before the end of the year. And while statements by board members, including Chairman Powell, are signaling a wait-and-see approach, the market has barely changed its forecast. The Fed may not do what the market asks, but it generally doesn’t like to surprise it either.”

The WGC expects Europe’s and Japan’s central banks to follow suit in a global environment of competing tariffs, U.S.-Iran conflict and the ever-looming Brexit. But, the WGC emphasizes, low rates have “the perverse effect of fueling a decade-long stock market rally with only temporary pullbacks. This has pushed stock valuations to levels not seen since the dot-com bubble.”

Should recession strike, central banks might respond with strategies almost guaranteed to bolster goldbugs’ hoarding instincts: “quantitative easing and, possibly, new non-traditional measures to reinvigorate the global economy.”

With over $13 trillion of global debt now offering nominal negative yields, “our analysis shows that 70% of all developed market debt is trading with negative real yields, with the remaining 30% close to or below 1%.”

As for central bank purchases, they came to about $10 billion during the year’s first five months, with continued buying expected. But a 10-year average shows central banks responsible for only 10% of gold demand. Jewelry commands the lead with 51%, followed by 27% for bars and coins, 9% for technology, and 3% for ETFs and similar products.

Positive economic performance, especially in China and India, would likely enhance the top category.

With a mandate to “stimulate and sustain demand for gold,” the WGC represents some of the world’s biggest gold miners.

Download the WGC’s Mid-Year Gold Outlook 2019.

U.S. critical minerals strategy includes Canada and other allies

June 5th, 2019

by Greg Klein | June 5, 2019

The country’s tariff tactics might present an image of Fortress America battling its adversaries, but a new critical minerals strategy advocates greater co-operation between the U.S. and its friends. The manifestation of Washington’s growing concern about securing resources and building supply chains, a federal report released June 4 announces six calls to action, 24 goals and 61 recommendations accompanied by timelines for accomplishment.

The U.S. includes Canada and other allies in its critical minerals strategy

Clearly, the Donald Trump administration recognizes the problem of relying on potentially unreliable sources, especially when they’re economic and geopolitical rivals: “If China or Russia were to stop exports to the United States and its allies for a prolonged period—similar to China’s rare earths embargo in 2010—an extended supply disruption could cause significant shocks throughout U.S. and foreign critical mineral supply chains.”

Rare earths provide an especially stark example of the problem, the report emphasizes. “The REE industry has experienced downsizing, business failure, and relocation in all phases of the supply chain, including mining, separation, metal reduction, alloying and downstream manufacturing of advanced technology products such as high performance rare earth permanent magnets.”

The report, A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals, follows a number of American initiatives including the formal classification of 35 critical minerals and a Secretary of Defense study released last September.

For 31 of the 35 critical minerals, the U.S. imports over 50% of its supply. For 14 of them, imports account for 100% of supply, creating “a strategic vulnerability for both our economy and our military with respect to adverse foreign government actions, natural disasters, and other events that could disrupt supply.”

If China or Russia were to stop exports to the United States and its allies for a prolonged period—similar to China’s rare earths embargo in 2010—an extended supply disruption could cause significant shocks throughout U.S. and foreign critical mineral supply chains.

Apart from finding new deposits, the report calls for specific measures to encourage R&D, new supply chains, additional and publicly available exploration data, land access and permitting, a workforce with appropriate skills and expertise, as well as international trade and co-operation.

On the latter topic, the report notes significant American reliance on Canada and Mexico for many essentials. “Working with them to develop their critical mineral deposits can help improve the security of U.S. supply.”

Washington’s agenda also calls for expanded collaboration with Canada, Australia, the EU, Japan and South Korea on a range of issues, from finding and developing resources to creating supply chains.

Although the U.S. began addressing the issue early in Trump’s administration, the report’s timing coincides with fears that another Chinese rare earths embargo could happen imminently. The U.S. relies on China directly for 80% of its imports, while much of the remainder comes from China indirectly. America’s sole REE mine, Mountain Pass in California, exports all its production to China.

That leaves Western Australian miner Lynas Corp as the only major producer outside China that is, as CEO/managing director Amanda Lacaze stated, “focused on rest-of-the-world markets, that is non-Chinese markets.” Although her company faces tremendous challenges meeting Malaysian government demands for its processing facility in that country, the government has made mildly conciliatory statements in advance of a June 28 meeting with Lynas.

Update: Following a June 20, 2019, meeting between Trump and Prime Minister Justin Trudeau, the two leaders “instructed officials to develop a joint action plan on critical minerals collaboration,” according to Reuters.

Turbulent times for Lynas

May 17th, 2019

Rare earths provide a cautionary tale about supply chain weaknesses

by Greg Klein | Updated May 21, 2019

Rare earths provide a cautionary tale about supply chain weaknesses

One of the world’s biggest supplies of magnet metals
undergoes separation at Lynas’ Malaysian facility. (Photo: Lynas Corp)

 

Update: On August 15 the Malaysian government granted Lynas a six-month licence extension. Read more.

 

How often does an investor presentation draw such keen interest from non-investors?

No doubt representatives from a number of governments and industries watched intensely on May 21 as Lynas CEO/managing director Amanda Lacaze accentuated her company’s “will to win.” Lynas has plans in place and funding en route to overcome what previously appeared to be an unattainable ultimatum. Far from becoming a takeover target, let alone a jurisdictional fatality, the miner expects to continue building a rare earths supply chain “focused on rest-of-the-world markets, that is non-Chinese markets.”

That was her message, and if stirring delivery could convince listeners, Lacaze made her case. But insufficient details cast a pall of uncertainty. Clearly the company can’t meet a September 2 deadline to remove over 450,000 tonnes of radioactive waste from Malaysia and thereby avert a processing plant shutdown in that country which would render useless the company’s Mount Weld mine in Western Australia.

Rare earths provide a cautionary tale about supply chain weaknesses

One of the world’s richest rare earths deposits, Mount Weld boasts reserves expected to give over 25 additional years of production at 22,000 tonnes of rare earth oxides annually. Included is an especially bountiful distribution of the magnet metals neodymium and praseodymium. Lynas concentrates ore in WA before shipping material to Malaysia for refining and separation. But while rare earths metallurgy has stymied some other non-Chinese operations, this facility has operated successfully since 2012.

At least it did so under Malaysia’s previous government. Its first electoral defeat since the country’s 1957 independence brought to office a party long opposed to Lynas’ operation in Kuantan. Concerns about waste containing thorium and uranium brought to mind a Malaysian RE refinery operated by Mitsubishi up to 1992. The plant closed down after an increase in leukemia and birth defects that critics attributed to the operation’s waste.

Following an environmental review of Lynas’ facility late last year, the new government delivered two formidable demands: Ensure that all material brought into the country has been rendered non-radioactive. And remove seven years of accumulated radioactive tailings from the country by September 2. Failure to do so will shut down the plant, the government warned.

An enormous logistical problem notwithstanding, Lacaze and her “dream team” told investors they have solutions backed by a AU$500-million “capital envelope” from senior lender Japan Australia Rare Earths (JARE) and the Japanese trading company Sojitz Corp.

“Of course we cannot do this on the smell of an oily rag, much as we might like to,” Lacaze acknowledged.

Rare earths provide a cautionary tale about supply chain weaknesses

Lynas managing director Dato’ Mashal Ahmad at the
podium, CEO Amanda Lacaze holding the microphone
at the company’s May 21 shareholder presentation.

A new cracking and leaching plant to be built in WA would “detox” Mount Weld material. Plans to pour money into Malaysia to upgrade the company’s Kuantan facility also sounded an optimistic note. But accumulated waste remains troublesome.

As managing director Dato’ Mashal Ahmad explained, the company will counter the ultimatum by asking the government to choose one of two options: Allow Lynas to treat the waste by producing a type of fertilizer, or allow Lynas to build another waste depository in Malaysia. The company already has four years of research backing Option 1. As for Option 2, “which Lynas is prepared to do anytime,” the company has already chosen three potential sites.

To those skeptical that Malaysia would accept the proposals, Ahmad said the environmental review, which hasn’t been officially translated, pronounced the Kuantan operation safe. Politicians, not the report’s authors, issued the ultimatum, he maintained. Discussions with the government continue and another decision will come from the entire government, not individual politicians, Lacaze added. Based on what she termed “relatively constructive” public comments from Prime Minister Mahathir Mohamad, she expressed “confidence in the outcome.”

An entirely different possibility for Lynas arose last March when Wesfarmers launched a AU$1.5-billion bid for the miner. One of Australia’s largest listed companies and a multi-billion-dollar conglomerate with interests including chemicals, energy, fertilizers and industrial products, Wesfarmers imposed a daunting condition: Kuantan must retain a valid permit for a “satisfactory period following completion of the transaction.” 

Lynas spurned the offer, provoking talk from Wesfarmers of going hostile. Undeterred, and the day before proclaiming its “will to win,” Lynas joined one of its customers, downstream rare earths processor Blue Line Corp, to announce a memorandum of understanding to build an RE separation plant in Texas. The proposed joint venture “would be the only large-scale producer of separated medium and heavy rare earth products in the world outside of China,” the companies stated.

Of course the Blue Line MOU lacks certainty, as does the strategy of presenting options in the face of a government ultimatum. $500 million isn’t all that much. To industry observers, the predicament once again emphasizes the need to create non-Chinese supply chains.

Rare earths provide a cautionary tale about supply chain weaknesses

A founding principal of Technology Metals
Research LLC and a senior fellow at the
Institute for Analysis of Global Security,
Jack Lifton has over 55 years’ experience
with technology metals.

Speaking with ResourceClips.com the week before Lynas’ May 20-21 announcements, Jack Lifton discussed the urgency of addressing critical minerals challenges.

A chemist specializing in metallurgy, a consultant, author and lecturer focusing on rare earths, lithium and other essentials that he labels “technology metals,” Lifton was one of four scientists hired by the previous Malaysian government to evaluate the Kuantan facility prior to its initial permit.

Wesfarmers “would have the money and the time” to solve Lynas’ problems, he said. “A $38-billion company can spend a year fixing problems and stay in business. If Lynas were shut down for a year, I think that would be the end of it.”

Earlier this month Wesfarmers offered AU$776 million for ASX-listed Kidman Resources, which shares a 50/50 JV with Sociedad Quimica y Minera de Chile SA (SQM) on the advanced-stage Mount Holland lithium project in Western Australia.

“Wesfarmers clearly knows all the problems with Lynas but they’re still interested in buying it,” Lifton pointed out.

The possibility of a Chinese buy-out, on the other hand, could meet opposition from either of two governments. Malaysia’s previous administration feared Chinese influence, Lifton says.

As for Australia, “I do not think that the government, as it will be constituted after this election, will allow the Chinese to buy what is basically the largest high-grade deposit of magnet rare earths on the planet,” he says. Even so, Chinese control could eliminate the Malaysian problem. “China has immense facilities and excess capacity for treating ore like that. They wouldn’t need the Malaysian plant, not at all.”

Control need not mean total ownership. Following Molycorp’s bankruptcy, California’s Mountain Pass mine quietly resumed production last year under MP Materials. With China’s Shenghe Rare Earth Company a minority shareholder, North America’s sole rare earths producer exports all its output to China.

Shenghe Resources comprises the world’s second-largest RE company by output. It holds a majority stake in ASX-listed Greenland Minerals, which describes its Kvanefjeld polymetallic deposit as having “potential to become the most significant Western world producer of rare earths.” Last August the companies signed an offtake MOU for the proposed mine’s total RE production.

Huatai Mining, a subsidiary of Chinese coal trader Shandong Taizhong Energy, holds 15.9% of ASX-listed Northern Minerals, which plans to become the “first significant dysprosium producer outside China” at the Browns Range project in Western Australia.

“Everything from Browns Range is now going to China for refining and use,” Lifton notes. “My understanding is that’s what’s going to happen in Greenland.”

Neither Greenland nor Northern can handle separation, he explains. “They can concentrate the ore, but where are the facilities to separate individual rare earths from the mixed concentrate? They are, today, overwhelmingly in China. The Chinese have an advantage in excess refining capacity.”

While Lifton thinks Malaysia would welcome Japanese ownership of Lynas, the Japanese no longer have processing abilities. They’re also burdened by Mitsubishi’s legacy.

“China does not, to the best of my knowledge, have ore as rich as Mount Weld. I don’t know of any other deposit on earth that’s so high-grade and well-distributed with magnet materials. So anyone who has processing would love to have that.”

If we don’t reconstitute a total American supply chain, if the Europeans don’t do the same, for the critical materials like rare earths, cobalt, lithium, we’re going to be out of luck.—Jack Lifton

Such a fate is now pure speculation but should Lynas face a Sino-scenario, it would only intensify a trend well underway, he adds. “They already have the largest RE industry on the planet and they’re buying RE, cobalt and other critical assets in Greenland, Africa, Australia, South America.

“If we don’t reconstitute a total American supply chain, if the Europeans don’t do the same, for the critical materials like rare earths, cobalt, lithium, we’re going to be out of luck. The Chinese in my opinion are already self-sufficient in rare earths, lithium and cobalt. They have mines all over the world that they own and operate, they have the bulk of chemical processing. They’re going to take care of their domestic needs first, and then if they want to export, they’ll control the price, the supply, and they do control the demand because at this time about 60% of all world metals goes to China.

“In America there’s a lot of talk now about critical minerals and some people are saying we need ‘a conversation’ on the subject. So while we think about it and have conversations, the Chinese are setting themselves up for the rest of this century.”

Got the minerals?

March 4th, 2019

A new book says self-imposed obstacles block U.S. self-sufficiency

by Greg Klein

“The Middle East has oil, China has rare earths.”

Deng Xiaoping’s 1992 implied threat became all too real eight years later in the Senkaku aftermath, when RE dependency put Japan and the West at China’s mercy. But just as the United States overcame the 1973 OPEC embargo to become the world’s leading oil producer, that country can overcome its growing reliance on dodgy sources of mineral production and processing. So say authors Ned Mamula and Ann Bridges in Groundbreaking! America’s New Quest for Mineral Independence.

Their country’s problem isn’t geology but policies, the book argues. Repeatedly pointing to Canada and Australia as role models, the authors say their own country’s mining potential can restore mining self-sufficiency, or at least minimize a crippling dependency.

A new book says self-imposed obstacles block U.S. self-sufficiency

Indeed, the mighty nation has a mighty problem with minerals: Imports supply many critical minerals and metals in their entirety, with heavy reliance on Russia and especially China, “countries we consider at best our competitors, and at worst our adversaries.”

Rare earths stand out as the “poster child for U.S. critical mineral vulnerability.” As the authors note, REs remain “essential for military and civilian use, for the production of high-performance permanent magnets, GPS guidance systems, satellite imaging and night vision equipment, cellphones, iPads, flat screens, MRIs and electric toothbrushes, sunglasses, and a myriad of other technology products. Since they offer that extra boost to so many new technologies, these rare earth metals rival energy in importance to our 21st century lifestyle.”

Industrial countries not only surrendered rare earths mining and processing to China, but gave up technological secrets too. That happened when China forced RE-dependent manufacturers to move their operations to China. After Apple transplanted some of its manufacturing to that country, China copied and reproduced the company’s products, at times outselling the iPhone with knock-offs.

A new book says self-imposed obstacles block U.S. self-sufficiency

Other intellectual property faces threats. “U.S. companies—Intematix, GE (Healthcare/MRI Division), Ford (Starter Motor Division), and Battery 1,2,3—have all added manufacturing capacity in China, and so has Japan’s Showa Denko, Santoku, and scores of other global electronics companies.”

RE dominance has also allowed China to lead the world in technology for electric vehicles, renewable energy and next-generation nuclear power. And America relies on its rival for defence: “Most of the U.S.’ advanced weapon systems procurement is 100% dependent on China for advanced metallurgical materials.”

Foreign dependency includes tantalum, “critical to the economy and national defense,” gallium, cobalt, uranium and the list goes on.

According to a just-published report from the U.S. Geological Survey, “in 2018, imports made up more than half of U.S apparent consumption for 48 non-fuel mineral commodities, and the U.S. was 100% net import-reliant for 18 of those.

“For 2018, critical minerals comprised 14 of the 18 mineral commodities with 100% net import reliance and 15 additional critical mineral commodities had a net import reliance greater than 50% of apparent consumption. The largest number of non-fuel mineral commodities were supplied to the U.S. from China, followed by Canada.”

The takeover of former TSX listing Uranium One by Russia’s state-owned Rosatom brings threats worse than most observers realized, the authors say. The acquisition granted the Russian government membership in trade organizations and therefore valuable intel formerly available only through espionage. Uranium One also gives Russia the ability to curtail future American uranium production and use its influence on Kazakhstan, the world’s top producer, to flood the U.S. with cheaper, subsidized supply. That could put both U.S. production and processing out of business in a tactic reminiscent of China’s RE machinations.

China’s communist government uses a ‘debt trap’ model of economic development and finance which proffers substantial financing to developing countries in exchange for an encumbrance on their minerals resources and access to markets. This predatory model has been particularly effective in countries characterized by weak rule of law and authoritarian regimes.—Ned Mamula
and Ann Bridges

The Chinese “are now masters at securing and controlling core natural resources globally, especially minerals.” The country uses long-term contracts, equity investments and joint ventures, as well as the “debt trap” that provides “substantial financing to developing countries in exchange for an encumbrance on their minerals resources and access to markets. This predatory model has been particularly effective in countries characterized by weak rule of law and authoritarian regimes.”

The U.S., meanwhile, suffers not only from naivete and short-term thinking, but from self-induced challenges. The authors devote an entire chapter to Alaska’s Pebble project, maybe the world’s largest undeveloped copper-gold-molybdenum deposit. After more than two decades and over $150 million in spending, “Pebble is still more about politics than geology, much less mining the minerals known to exist there.”

The story stands out as “the classic cautionary tale in U.S. history of how a powerful federal regulatory agency can go rogue and impose its will on an unsuspecting permit applicant.”

Suggestions to alleviate these ills include streamlining the permitting process, among other recommendations to open up domestic production and re-build supply chains. One of the authors’ more interesting ideas concerns teaming up with environmental activists to promote ethical green supply chains that would shut out conflict minerals.

The book’s marred by repetition, sloppy English and some bold-faced typographical shouting. It’s also cluttered with a few questionable information sources and excerpts from a novel that would have been better left unwritten. The portrayal of Canada as a role model, moreover, might induce bitter laughter from this side of the border. But Groundbreaking offers a vital message to general readers. In doing so, it could reinforce a growing awareness in the U.S. about the need to minimize foreign dependency.

Read more about U.S. efforts to secure critical minerals here and here.

Depending on the enemy

October 10th, 2018

The U.S. calls for new supply strategies to meet economic and defence risks

by Greg Klein

The goal might be summed up by a new slogan: Make America Self-Reliant Again. Or, with a tad less concision: Let’s Stop Relying on an Economic Rival that’s a Potential Military Threat for the Stuff We Need to Compete with an Economic Rival that’s a Potential Military Threat.

A newly released study from the U.S. Secretary of Defense illustrates that absurd dilemma. The dependency runs the gamut from sourcing raw materials to refining them, manufacturing key components, developing R&D, training workers, even setting prices. As the report says, “The central challenge to U.S. prosperity and security is the reemergence of long-term, strategic competition by what the National Security Strategy classifies as revisionist powers. It is increasingly clear that China and Russia want to shape a world consistent with their authoritarian model—gaining veto authority over other nations’ economic, diplomatic, and security decisions.”

The U.S. calls for new supply chain strategies to meet economic and defence risks

But Russia merits little mention in the 146-page document. China comes up again and again as the pre-eminent economic and military threat with a long-term hegemonic strategy.

That strategy’s been very successful, leaving the U.S. sorely unprepared for the resulting risks. Ordered by President Donald Trump in July 2017, the report urges a government-wide program to address the entire range of supply chain challenges.

The 2010 Senkaku incident, dramatic as it was, can be seen as a mere microcosm of a much bigger threat.

“China’s domination of the rare earth element market illustrates the potentially dangerous interaction between Chinese economic aggression guided by its strategic industrial policies and vulnerabilities and gaps in America’s manufacturing and defense industrial base,” the report warns. “China has strategically flooded the global market with rare earths at subsidized prices, driven out competitors, and deterred new market entrants. When China needs to flex its soft power muscles by embargoing rare earths, it does not hesitate, as Japan learned in a 2010 maritime dispute.”

It was a lesson learned by other countries too. The report describes rare earths as “critical elements used across many of the major weapons systems the U.S. relies on for national security, including lasers, radar, sonar, night vision systems, missile guidance, jet engines, and even alloys for armored vehicles.”

Rare earths figure prominently in the U.S. list of 35 critical minerals drafted last February and confirmed in May. American dependency was further highlighted when the country dropped rare earths from a revised list of tariffs on Chinese imports announced in September.

China’s soft power hardball has targeted other American allies as well, waging “aggressive economic warfare” against South Korea after the country installed an American air defence system. Other examples of “economic coercion” include “a ban on Philippine bananas over territorial disputes in the South China Sea; the aforementioned restriction of rare earth exports to Japan following the Senkaku Islands dispute in 2010; persistent economic intimidation against Taiwan; and the recent ceding of a Sri Lankan port.”

China can play nice too. But at a price. The country invests heavily in developing countries, often building infrastructure “in exchange for an encumbrance on their natural resources and access to their markets.”

As for Chinese electronics exports, they “lack the level of scrutiny placed on U.S. manufacturers, driving lower yields and higher rates of failures in downstream production, and raising the risk of ‘Trojan’ chips and viruses infiltrating U.S. defense systems.”

Technological expertise becomes a strategic weapon too. “As part of its industrial policy aggression, China has forced many American companies to offshore their R&D in exchange for access to the Chinese market.”

With an advanced-stage rare earths project in northern Quebec as well as advanced-stage tantalum-niobium in southern British Columbia, Commerce Resources TSXV:CCE president Chris Grove keeps tabs on Canada’s neighbour. “People in Washington tell me the anxiety level on these issues has never been higher,” he notes.

Here’s the world’s biggest military and they’re saying, ‘We need Chinese stuff to make it all work?’ That’s really for most Americans an absolutely untenable and unbelievable position of weakness.—Chris Grove,
president of Commerce Resources

“Apart from the trade imbalance between the U.S. and China, there’s the vulnerability of the U.S. military. Here’s the world’s biggest military and they’re saying, ‘We need Chinese stuff to make it all work?’ That’s really for most Americans an absolutely untenable and unbelievable position of weakness.”

Sources in Washington encouraged Grove to apply for a research grant from the U.S. Defense Logistics Agency. If successful, the application would bring up to $3 million to further metallurgical progress on his company’s Ashram rare earths project, advancing a potential source in a stable and allied country.

That would complement one of the report’s key recommendations, to “diversify away from complete dependency on sources of supply in politically unstable countries who may cut off U.S. access; diversification strategies may include re-engineering, expanded use of the National Defense Stockpile program, or qualification of new suppliers.”

Other recommendations include creating an industrial policy that supports national security, working with allies and partners on industrial development, expanding industrial investment, addressing manufacturing and industrial risk within the energy and nuclear sectors, encouraging home-grown scientific expertise and occupational skills, and exploring next generation technology for future threats.

In ordering the study, Trump stated the loss of key companies, over 60,000 American factories and almost five million manufacturing jobs since 2000 “threatens to undermine the capacity and capabilities of United States manufacturers to meet national defense requirements and raises concerns about the health of the manufacturing and defense industrial base.”

Can’t live without them

March 23rd, 2018

The U.S. Critical Materials Institute develops new technologies for crucial commodities

by Greg Klein

A rare earths supply chain outside China? It exists in the United States and Alex King has proof on his desk in the form of neodymium-iron-boron magnets, an all-American achievement from mine to finished product. But the Critical Materials Institute director says it’s up to manufacturers to take this pilot project to an industry-wide scale. Meanwhile the CMI looks back on its first five years of successful research while preparing future projects to help supply the stuff of modern life.

The U.S. Critical Materials Institute develops new technologies and strategies for crucial commodities

Alex King: “There’s a lot of steps in rebuilding that supply chain.
Our role as researchers is to demonstrate it can be done.
We’ve done that.” (Photo: Colorado School of Mines)

The CMI’s genesis came in the wake of crisis. China’s 2010 ban on rare earths exports to Japan abruptly destroyed non-Chinese supply chains. As other countries began developing their own deposits, China changed tactics to flood the market with relatively cheap output.

Since then the country has held the rest of the world dependent, producing upwards of 90% of global production for these metals considered essential to energy, defence and the overall economy.

That scenario prompted U.S. Congress to create the CMI in 2013, as one of four Department of Energy innovation hubs. Involving four national laboratories, seven universities, about a dozen corporations and roughly 350 researchers, the interdisciplinary group gets US$25 million a year and “a considerable amount of freedom” to pursue its mandate, King says.

The CMI channels all that into four areas. One is to develop technologies that help make new mines viable. The second, “in direct conflict with the first,” is to find alternative materials. Efficient use of commodities comprises the third focus, through improvements in manufacturing, recycling and re-use.

“Those three areas are supported by a fourth, which is a kind of cross-cutting research focus extending across a wide range of areas including quantum physics, chemistry, environmental impact studies and, last but certainly not least, economics—what’s the economic impact of the work we do, what’s its potential, where are the economically most impactful areas for our researchers to address,” King relates.

With 30 to 35 individual projects underway at any time, CMI successes include the Nd-Fe-B batteries. They began with ore from Mountain Pass, the California mine whose 2015 shutdown set back Western rare earths aspirations.

The U.S. Critical Materials Institute develops new technologies and strategies for crucial commodities

Nevertheless “that ore was separated into individual rare earth oxides in a pilot scale facility in Idaho National Lab,” explains King. “The separated rare earth oxides were reduced to master alloys at a company called Infinium in the Boston area. The master alloys were brought to the Ames Lab here at Iowa State University and fabricated into magnets. So all the skills are here in the U.S. We know how to do it. I have the magnets on my desk as proof.”

But, he asks, “can we do that on an industrial scale? That depends on companies picking up and taking ownership of some of these processes.”

In part, that would require the manufacturers who use the magnets to leave Asia. “Whether it’s an electric motor, a hard disk drive, the speakers in your phone or whatever, all that’s done in Asia,” King points out. “And that means it is most advantageous to make the magnets in Asia.”

America does have existing potential domestic demand, however. The U.S. remains a world leader in manufacturing loudspeakers and is a significant builder of industrial motors. Those two sectors might welcome a reliable rare earths supply chain.

“There’s a lot of steps in rebuilding that supply chain. Our role as researchers is to demonstrate it can be done. We’ve done that.”

Among other accomplishments over its first five years, the CMI found alternatives to both europium and terbium in efficient lighting, developed a number of improvements in the viability of rare earths mining and created much more efficient RE separation.

“We also developed a new use for cerium, which is an over-produced rare earth that is a burden on mining,” King says. “We have an aluminum-cerium alloy that is now in production and has actually entered the commercial marketplace and is being sold. Generating use for cerium should generate additional cash flow for some of the traditional forms of rare earths mining.”

Getting back to magnets, “we also invented a way of making them that is much more efficient, greatly reduces sensitive materials like neodymium and dysprosium, and makes electric devices like motors and generators much more efficient.”

All these materials have multiple uses. It’s not like they don’t have interest in the Pentagon and other places.—Alex King

Future projects will focus less on rare earths but more on lithium. The CMI will also tackle several others from the draft list of 35 critical minerals the U.S. released in February: cobalt, manganese, gallium, indium, tellurium, platinum group metals, vanadium and graphite. “These are the ones where we feel we can make the most impact.”

While the emphasis remains on energy minerals, “all these materials have multiple uses. It’s not like they don’t have interest in the Pentagon and other places.”

But the list is hardly permanent, while the challenges will continue. “We’ve learned a huge amount over the last five years about how the market responds when a material becomes critical,” he recalls. “And that knowledge is incredibly valuable because we anticipate there will be increasing incidences of materials going critical. Technology’s moving so fast and demand is shifting so fast that supply will have a hard time keeping up. That will cause short-term supply shortfalls or even excesses. What we need to do is capture the wisdom that has been won in the rare earths crisis and recovery, and be ready to apply that as other materials go critical in the future.”

Alex King speaks at Argus Specialty Metals Week, held in Henderson, Nevada, from April 16 to 18. For a 15% discount on registration, enter code RARE2018.