Tuesday 25th April 2017

Resource Clips


Posts tagged ‘u.s.’

Converging on batteries

April 23rd, 2017

Benchmark sees big investors wakening as three huge sectors chase three vital minerals

by Greg Klein

It’s “a sign of the times that big investors with big money are starting to look at this space in a serious way,” Simon Moores declared. “We’re seeing it with lithium, that’s just starting. And I think we’re going to see it with the other raw materials as well.” To that he attributes the automotive, high-tech and energy sectors for their “convergence of three multi-trillion-dollar industries on batteries.”

Addressing a Vancouver audience on the April 21st inaugural stop of the third annual Benchmark Mineral Intelligence World Tour, he pointed out that cobalt and graphite have yet to match lithium for investors’ attention. But not even lithium has drawn the financing needed to maintain supply over the long term.

Benchmark sees investment lagging as three huge sectors chase three vital minerals

While EVs still lead the battery-powered revolution, energy storage
will become more prominent after 2020, according to Simon Moores.

Back in 2006, batteries accounted for 22% of lithium demand. Ten years later the amount came to 42%. “We believe in 2020, 67% of lithium will be used for batteries.”

What’s now driving the battery market, almost literally, is electric vehicles. Energy storage will play a more prominent role from about 2020 onwards, he maintained.

He sees three cars in particular that should lead the trend: Tesla Model 3, Chevrolet Volt and Nissan Leaf. As consumers turn to pure electric vehicles with battery packs increasing capacity to the 60 to 70 kWh range and beyond, the industry will sell “hundreds of thousands of cars rather than tens of thousands… the era of the semi-mass market for EVs is beginning and it’s beginning now, this year.”

Last year’s lithium-ion market reached 70 GWh, Moores said. Forecasts for 2025 range from Bloomberg’s low of about 300 GWh to Goldman Sachs’ 440 GWh and a “pretty bullish” 530 GWh from Cairn Energy Research Advisors. As for Benchmark, “we’re at the lower end” with a base case of about 407 GWh.

“What does that mean for lithium demand? A lot of raw materials will be needed and the investment in that space is just starting.”

Lithium’s 2016 market came to about 80,000 tonnes. By 2020, demand will call for something like 180,000 to 190,000 tonnes. While battery-grade graphite demand amounted to about 100,000 tonnes last year, “by 2020, that will be just over 200,000 tonnes.” As for battery-grade cobalt, last year’s market came to just under 50,000 tonnes. “By 2020 it’s going to need to get to about 80,000 to 85,000.”

Benchmark sees investment lagging as three huge sectors chase three vital minerals

Moores: The industry needs both
spodumene- and brine-sourced lithium.

Investment so far favours lithium but for each of the three commodities, it’s “not enough, not for the long term,” he stressed.

Three years ago only two battery megafactories had been envisioned. Now in operation, under construction or being planned are 15, with the number expected to grow. “That’s going to be needed if we’re ever going to get anywhere near the forecast that everyone’s saying. Not just us, not just Bernstein or Goldman Sachs, everyone is saying significant growth is here but investment is needed.”

But although Tesla gets most of the headlines, “the new lithium-ion industry is a China-centric story.” The vast majority of megafactories are Chinese plants or joint ventures with Chinese entities operating in South Korea or Japan. “The majority of their product goes to China.”

At the end of last month lithium carbonate averaged $12,313 a tonne while lithium hydroxide averaged about $17,000. Spot deals in China, meanwhile, have surpassed $20,000.

That compares with prices between 2005 and 2008 of around $4,000 for lithium carbonate and $4,500 for lithium hydroxide. Only slightly higher were averages for 2010 to 2014. But prices spiked in 2015 and 2016. “Between now and 2020 we believe lithium carbonate will be in and around an average of $13,000 a tonne and lithium hydroxide will be closer to $18,000 a tonne.”

Those long-term averages “are important for people building mines and investing in this space.”

No other mineral out there has this kind of price profile.

Except for 2010, lithium prices have shown 11 years of increases, corresponding with battery demand. “No other mineral out there has this kind of price profile.”

Moores sees no oversupply or price crash for lithium in the next five years. Spodumene-sourced lithium “will fill the short-term supply deficit and brines will help fill the longer-term supply deficit post-2019 and 2020,” he said. “Both are needed to have a strong, balanced industry in the future.”

Turning to graphite, he noted that batteries had zero effect on the market in 2006. By 2016 they accounted for 16% of demand. By 2020, that number should jump to 35%.

While flake graphite comprises the feedstock for most anode material, “really, the price you should look at is spherical graphite.” That’s fallen lately to about $2,800 a tonne.

Moores foresees better margins for companies producing uncoated spherical graphite. “The people who make the coated will also make good margins, but not as good as in the past. For this reason, and because battery buyers are becoming more powerful and there’s more competition in the space, we believe the coated spherical graphite price will actually fall in the long term average, but will still be between $8,000 and $12,000 a tonne. So there’s very high value and significant demand for this material.”

He also sees natural graphite increasing its anode market share over synthetic graphite. “That’s a cost issue primarily, but there are green issues too.”

Silicon, he added, “will play a part in anodes but it will be an additive, not a replacement.”

Speaking with ResourceClips.com after the event, Moores said Benchmark World Tour attendees differ by city. The Vancouver audience reflected the resource sector, as well as fund managers attracted by BMO Capital Markets’ sponsorship. Tokyo and Seoul events draw battery industry reps. Silicon Valley pulls in high-tech boffins.

This year’s tour currently has 15 cities scheduled with two more under consideration, he noted. That compares with eight locations on the first tour in 2015. Moores attributed the success to Benchmark’s access to pricing and other sensitive info, as well as Benchmark’s site visits. “We go to China and other countries and visit the mines,” he said. “Our travel budget is through the roof. We’re not desktop analysts.”

U.S. Rep. Duncan Hunter calls on government to support domestic resources and supply lines for critical minerals

April 18th, 2017

…Read more

More critical than ever

April 13th, 2017

The USGS promotes awareness about essential resources and their supply chains

by Greg Klein

Let’s call it Critical Minerals Awareness Month. The U.S. Geological Survey hasn’t actually labelled April that way, but the agency does have a “big push” underway to inform American decision-makers and the general public about the country’s often tenuous hold on commodities vital to the economy and security of that country. Of course those concerns apply to its allies as well.

The USGS promotes public awareness about essential resources and their supply chains

“We decided to do a big push on critical minerals in April largely because we’ve got several big publications coming out on the subject,” USGS public affairs specialist Alex Demas tells ResourceClips.com.

“One of the things we’ve been focusing on is supply chain security, so with the sheer number of mineral commodities that are used in the United States, and the number of them deemed critical, we felt it was important to emphasize where a lot of those mineral resources are coming from and if there are any potential issues in the supply chain, getting them from the source to the United States.”

Computers provide an obvious example, increasing their use from “just 12 elements in the 1980s to as many as 60 by 2006,” points out one recent USGS news release. Smartphones offer another example. Looking back 30 years ago, “‘portable’ phones were the size of a shoebox and consisted of 25 to 30 elements,” states another USGS release. “Today they fit in your pocket or on your wrist and are made from about 75 different elements, almost three-quarters of the periodic table.”

Larry Meinert, USGS deputy associate director for energy and minerals, pointed out some of the sources. “For instance, the industrial sand used to make the quartz in smartphone screens may come from the United States or China, but the potassium added to enhance screen strength could come from Canada, Russia or Belarus. Australia, Chile and Argentina often produce the lithium used in battery cathodes, while the hard-to-come-by tantalum—used in smartphone circuitry—mostly comes from Congo, Rwanda and Brazil.”

That brings an ominous warning. “With minerals being sourced from all over the world, the possibility of supply disruption is more critical than ever.”

The campaign also reveals the agency’s methods for tracking this essential stuff. A USGS-designed early warning system described as “mathematically rigorous and elegant” helps the U.S. Defense Logistics Agency monitor a watch list of about 160 minerals. Not all have been labelled critical, but those so defined can change due to technological development and geopolitical conflict.

The USGS itself tracks something like 90 minerals important to the American economy or security but sourced from about 180 countries. For last year the agency identified 20 minerals on which the U.S. relied entirely on imports and 47 on which the country imported more than half its supply.

Not all the source countries are always best buddies with the West. China supplies most of America’s mined commodities, including 24 of the 47 minerals supplied 51% or more by imports. Among the critical items are rare earth elements, 100% imported, over 90% directly from China and much of the rest through supply chains originating there.

As a supplier, Canada came a distant second, the chief provider of 16 minerals, not all of them critical. Runners-up Mexico, Russia and South Africa were each chief suppliers for eight American mineral imports.

Among the research reports coming soon will be “a compendium of everything the USGS knows about 23 minerals critical to the United States,” Demas says. “It’s going to cover the industry side of things, the reserves, production, shipment, etc. It’s going to cover geology and sustainability. Each chapter on each mineral will have a section on how this can be mined sustainably so we can meet our needs not only today, but also in the future.”

In part the publications target “decision-makers in Congress, as well as the Defense Department and others who use mineral resources,” Demas adds. But he emphasizes the campaign wasn’t motivated by the proposed METALS Act (Materials Essential to American Leadership and Security). Currently before U.S. Congress, the bill calls on government to support domestic resources and supply chains of critical and strategic minerals. On introducing the bill, Rep. Duncan Hunter argued the risk of foreign dependence to national security “is too great and it urgently demands that we re-establish our depleted domestic industrial base.”

As Demas notes, “Since we are a non-regulatory, non-policy agency, we don’t directly influence policy. But we do want policy-makers to have our tools available so they can make the best science-informed decisions.”

And while this month will see special attention to critical minerals, Demas says the subject’s an ongoing concern for the USGS. Some of the reports coming out now will be updates of annual publications.

“We’re really trying to promote the idea that USGS has a lot of really useful information that we put out all the time,” he adds. “This information will hopefully be useful to people when they’re considering where their resources are coming from.”

Follow USGS news here.

Read about the West’s dependence on non-allied countries for critical minerals here and here.

USGS: Possibility of supply disruption more critical than ever

April 5th, 2017

by Greg Klein | April 5, 2017

USGS: Possibility of supply disruption more critical than ever

Many and various are the sources of smartphone minerals.
(Map: U.S. Geological Survey)

 

In another article warning of foreign dependency, the U.S. Geological Survey uses smartphones as a cautionary example. Looking back 30 years ago, “‘portable’ phones were the size of a shoebox and consisted of 25 to 30 elements,” pointed out Larry Meinert of the USGS. “Today they fit in your pocket or on your wrist and are made from about 75 different elements, almost three-quarters of the periodic table.”

USGS: Possibility of supply disruption more critical than ever

Smartphones now require nearly 75% of the periodic
table of the elements. (Graphic: Jason Burton, USGS)

The increasing sophistication of portable communications results from a “symphony of electronics and chemistry” that includes, for example, “household names like silicon, which is used for circuit boards, or graphite used in batteries. Then there are lesser known substances like bastnasite, monazite and xenotime. These brownish minerals contain neodymium, one of the rare earth elements used in the magnets that allow smartphone speakers to play music and the vibration motor that notifies you of new, funny cat videos on social media,” the USGS stated.

Almost as varied are the sources. “For instance, the industrial sand used to make the quartz in smartphone screens may come from the United States or China, but the potassium added to enhance screen strength could come from Canada, Russia or Belarus. Australia, Chile and Argentina often produce the lithium used in battery cathodes, while the hard-to-come-by tantalum—used in smartphone circuitry—mostly comes from Congo, Rwanda and Brazil.”

Rwanda and the Democratic Republic of Congo are also sources of conflict minerals.

“With minerals being sourced from all over the world, the possibility of supply disruption is more critical than ever,” Meinert emphasized.

The April 4 article follows a previous USGS report on an early warning system used by the U.S. Defense Logistics Agency to monitor supply threats. In January the USGS released a list of 20 minerals for which the country relies entirely on imports. Whether or not by design, the recent awareness campaign coincides with a bill before U.S. Congress calling on government to support the development of domestic deposits and supply chains for critical minerals.

See an illustrated USGS report: A World of Minerals in Your Mobile Device.

Read about the West’s dependence on non-allied countries for critical minerals here and here.

U.S. employs early warning system to identify critical minerals

April 3rd, 2017

by Greg Klein | April 3, 2017

A method of tracking critical minerals has grown from an American defence program to include commodities necessary to the country’s economy. Developed by the U.S. Geological Survey, the “early warning screening tool” guides the Defense Logistics Agency in monitoring supply threats, the USGS reported on April 3.

U.S. relies on early warning system to identify critical minerals

Minerals can be considered critical for consumer uses as well as
military applications such as this long-distance laser rangefinder.
(Photo: U.S. Department of Defense)

Described as “mathematically rigorous and elegant,” the system started with the DLA’s watch list of about 160 minerals crucial to national security. In 2015 the USGS expanded the tool to consider economic security as well.

“The system accounts for several variables in identifying critical minerals, including how vulnerable the supply chain is to disruption, how much production growth is expected for the material, and market dynamics,” the USGS stated. Further analysis allows the DLA “to define a cutoff point for analysing potentially critical materials for shortfalls.”

Different minerals can be labelled critical “as technology changes and geopolitical unrest shifts,” the USGS added.

In a report released last January, the USGS listed 20 minerals on which the U.S. imports its entire supply. Included were several critical commodities. A Congressional bill introduced in March calls on the federal government to encourage domestic sources and supply chains for rare minerals.

Read about the West’s dependence on non-allied countries for critical minerals here and here.

Elon Musk’s hidden agenda

April 1st, 2017

As he makes sci-fi reality, what on Earth motivates his mission to Mars?

by Greg Klein

He’s making sci-fi reality, but what on Earth motivates his mission to Mars?

A pioneer ponders her new planet, but the truth is down here. (Image: SpaceX)

 

Just two days ago—March 30—Elon Musk pulled off yet another stunning techno-coup by launching a pre-used rocket then landing it intact, ready for further re-use. Not only does that rate as a truly historic achievement, but it marks another milestone in his audacious plan to colonize Mars. Just what drives this guy?

His CV is phenomenal. Musk started with Zip2 and PayPal, went on to build the world’s most coveted electric cars, then supplemented them with a country-wide network of fast recharging stations and a growing empire of Gigafactories that he’ll likely merge with his unprecedented vertically integrated Solarcity green energy utility/storage battery company.

He’s making sci-fi reality, but what on Earth motivates his mission to Mars?

Whether with awe, apprehension or impatience, the first
Martians-to-be prepare to disembark at their new home.
(Image: SpaceX)

He’s actually booked tourists for a 2018 around-the-moon cruise. He’s pushing extraordinarily high-speed, long-distance pneumatic tube travel, musing about Internet access in outer space and working to wire people’s brains to computers.

Yes, he loses money on every Tesla he sells and a couple of his Falcon 9 rockets blew to smithereens. But Musk’s stunning success record would seem to make science fiction plausible. Has he finally strained credibility with the Mars colony? And, again, just what drives this guy?

As to the first question, a surprising number of experts consider the idea viable. Musk’s SpaceX, already in the business of transporting cargo and satellites into orbit, plans unmanned Mars trips in 2018 and 2020. The company has modelled craft that would initially ferry 100 people at a time on an 80-day voyage for about US$200,000 each. Later ships with greater capacity and a 30-day trip time would cut fares dramatically. Upwards of 10,000 return voyages within 40 to 100 years would give Mars an Earthling diaspora numbering one million people, enough to create a self-sustaining civilization, he claims. Necessities like air, water, food and radiation protection can all be realized, he insists.

The visionary CEO sees the first colonists arriving well within a decade.

But why does he strive for this, when he has his hands more than full with other soaring ambitions? And, with all the possible pitfalls, why risk capping a phenomenal career with monumental failure?

He’s making sci-fi reality, but what on Earth motivates his mission to Mars?

No symbolism is too obvious
for a little country.
(Image: SpaceX)

Musk speaks of our eventual extinction on Earth. But according to battery expert Raymond Tylerson, Musk’s real motivation lies in his need for resources. They’re not the extraterrestrial kind sought by those who would mine the heavens. They’re right here on Earth.

Almost completely overlooked in the mania about the battery minerals graphite, cobalt and lithium has been one essential ingredient, points out Tylerson. That’s lithium’s near-namesake, lithuanium.

“For every bushel of graphite, cobalt and lithium that goes into these suckers, you need only one demi-iota of lithuanium,” he explains. “That doesn’t sound like much until you realize it’s absolutely the most scarce commodity on the planet.”

Moreover, as its moniker memorializes, it’s found in only one place—the uniquely lithuanium-lush lithology of Lithuania. That gives the little country a lockhold on the most critical mineral of all.

Emma Rothstein recognizes the danger. A psychologist who specializes in nationwide borderline personality disorders, she says, “For its entire existence, Lithuania’s been pushed around by big country bullies. Now it’s fighting back. Make no mistake, this little country has big, big ambitions. It wants to achieve on an inter-galactic scale the domination it can’t possibly achieve on Earth. With their monopoly on lithuanium, Lithuanians have forced Musk into their service.”

Classified documents released by the Transparency Foundation confirm that Lithuania has guaranteed Musk exclusive rights to lithuanium provided he carries out the country’s expansionist agenda.

Not only might Musk be the one person most likely to succeed at interplanetary travel, but Lithuanians might be the one people most likely to succeed at interplanetary colonization.

“I mean, who the hell else would want to go?” asks Rothstein. “That 80-day trip would be worse than a group package vacation. It brings to mind the saying that hell is other people. By the time they’d arrive the colony would be screwed because they’d all hate each other’s guts. But not so with Lithuanians. They’ve always co-operated with each other despite the fact that they’ve always hated each other’s guts.”

But Musk faces formidable competition, she adds. “I recognized that as soon as NASA reported it was growing potatoes in a Mars-like environment. It was so obviously just another outcome of Little Country Syndrome.”

This little country is actually a province, tiny Prince Edward Island.

“Imagine what it’s been like, to start off as the birthplace of Canadian confederation only to find yourself by far the puniest province with the puniest population and an economy based almost entirely on potatoes. Puny PEI and its puny potato-pulling people carry an inter-galactic grudge matching that of Lilliputian Lithuania.

He’s making sci-fi reality, but what on Earth motivates his mission to Mars?

Musk: Could there be
something different about him?

“Don’t underestimate these pushy little people,” she warns. “They’ve already taken over NASA. Mars might be next.”

So who’s poised to win the burgeoning battle for the universe? “My money’s on anyone backed by Musk,” declares Kyle McCormick, a professor of sociological astronomy. “He doesn’t just talk about an interplanetary species. He comes from one himself. You don’t think he accomplished all that with Earthling expertise, do you? Listen to his speech, look at his eyes—he’s more alien than Mr. Spock.”

Then what’s he doing here?

“He just had to get away from his own planet,” McCormick responds. “Musk considers it a really tiresome, insufferably do-good crunchy granola save-the-endangered-whatever environmentally superior place. He’s sick to death of all that clean energy crap. Once he saves up enough trillions he intends to buy the entire U.S.A., pave it and compel everyone to drive around all day in huge dangerous noisy stinking gas-guzzling vehicles.

“He wants to turn America into one big monster truck extravaganza. And fossil fuels will be mandatory.”

 

Related news:
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Ontario Ring of Fire development begins.
Mining company inspires Canadian political reform.

Washington defence lobbyist Jeff Green watches rival Chinese and American assertion in the South China Sea with a sense of déjà vu

March 23rd, 2017

…Read more

Coal mine could produce green, renewable electricity

March 17th, 2017

by Greg Klein | March 17, 2017

Should all go to plan, the transformation from dirty to clean energy might come to be symbolized by this German coal producer. A longstanding idea to convert mine shafts to hydro chutes got further encouragement in a March 14 speech reported by Bloomberg. North-Rhine Westphalia state governor Hannelore Kraft has declared her support for a project that would convert the Prosper Haniel coal mine into a pumped storage facility.

Coal mine could produce green, renewable electricity

Dirty old Prosper Haniel could get a new, clean lease on life.

Referred to as a type of battery, it would use excess wind or solar energy to pump water from a reservoir at the depths of the mine to another reservoir above the shafts. When wind or solar fails to meet demand, the water would be released, plunging something like 1,300 metres to electricity-generating turbines.

A 2014 article on Grist.org said the mine could store up to about 990,000 cubic metres of H2O, “roughly the volume of the Empire State Building.” That could produce a 200 megawatt capacity, enough to power more than 400,000 homes, Bloomberg reported.

Prosper Haniel’s mining days are expected to end in 2018, when federal subsidies for the industry expire. Other mines could follow this reincarnation as the coal mining region of North-Rhine Westphalia intends to double its production of renewable energy to 30% by 2025, Bloomberg stated.

According to the National Energy Board, Canada’s only pumped storage facility is the 174 MW Sir Adam Beck station operated by Ontario Power Generation, which diverts water from the Niagara River to a 300-hectare reservoir. The transition from turbine to pumping sequence takes just minutes and occurs several times a day, the utility states.

The NEB attributes over 30 pumped storage facilities to the U.S., producing about 23,000 gigawatt hours a year but using about 29,000 GWh to do so. “Despite this net loss of energy, the grid reliability provided by PSH facilities and the ability to generate when demand is strong is highly beneficial and will become increasingly important as Canada and the U.S. integrate more renewable power into their grids.”

U.S. Congress to vote on support for domestic critical materials supply lines

March 9th, 2017

by Greg Klein | March 9, 2017

With an eye to national defence, American lawmakers will decide whether their government should help develop domestic supplies of rare minerals. A Congressional bill introduced March 7, Rep. Duncan Hunter’s proposed METALS Act (Materials Essential to American Leadership and Security) would offer a number of inducements to create supply lines for strategic and critical commodities.

U.S. Congress to vote on support for domestic critical materials supply lines

A “dangerous lapse in the supply chain for strategic and
critical materials” will be examined by the U.S. Congress.

“The U.S. must no longer be wholly dependent on foreign sources of strategic and critical materials,” said Hunter, a veteran of two combat tours in Iraq and one in Afghanistan. “The risk of this dependence on national security is too great and it urgently demands that we re-establish our depleted domestic industrial base.”

Pointing to China’s lockhold on over 90% of global rare earths supply, Hunter argued the U.S. has “ceded” its ability to produce REEs. Following the bankruptcy of the last U.S. rare earths miner, Molycorp “sold a portion of its assets to the Chinese,” said a statement from Hunter’s office. “The mine is now being considered for purchase by a firm with ties to a Russian billionaire.”

As reported by the Wall Street Journal last month, a group including Vladimir Iorich’s Pala Investments has offered US$40 million for Molycorp’s former Mountain Pass mine in California. The METALS Act would prohibit foreign acquisition of American rare earths deposits.

It would also provide five-year interest-free loans for new production or manufacturing techniques involving strategic or critical minerals. Additionally, Washington would reimburse defence programs for higher costs of domestic products. Funding would divert 1% of Department of Defense administration spending, Hunter said.

The act would also bar foreign interests from sourcing American supplies of ammonium perchlorate, a propellant for rockets and missiles. The bill further calls for a study on the viability of using thorium-fuelled nuclear reactors in naval vessels.

Besides encouraging supply chains essential to national security, the bill “supports the U.S. domestic industrial base by aiding domestic investment opportunities,” according to Hunter’s office.

Speaking with ResourceClips.com last month, David S. Abraham expressed skepticism about Hunter’s proposal. “Most bills on critical materials have not passed and his bills usually have the least chance of passing…” said the author of The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. “That’s not to say the U.S. hasn’t given money to metallurgy and mining before, but with the exception of some dabbling in beryllium in the ’90s, I can’t recall a time where the U.S. was really investing in mines from a defence perspective.”

But Washington defence lobbyist Jeff Green told ResourceClips.com of “a totally different dynamic” in circles of power that would be willing to “invest in America to protect our national security and grow our manufacturing base.”

A January report from the U.S. Geological Survey stated the country was wholly dependent on foreign sources for 20 minerals last year, some of them considered critical or strategic “because they are essential to the economy and their supply may be disrupted.”

As of press time Hunter’s office hadn’t responded to an interview request.

Not ready for another shock

March 1st, 2017

Unlike China, the West lacks a rare minerals strategy, warns David S. Abraham

by Greg Klein

Something of an epiphany came to him in 2010 as he watched the aftermath of a minor incident in internationally disputed waters. China’s shock-and-awe response turned its near-monopoly on rare earths into a mighty geopolitical weapon, exposing the perilous nature of our dependence on seemingly obscure commodities. That inspired David S. Abraham’s 2015 book The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. Now, as a similar confrontation threatens to flare up again, he sees the West still unprepared for further attacks on vital supply lines.

Asked whether people in power have at least gained greater awareness, his response is a firm No.

Unlike China, the West lacks a rare minerals strategy, says David S. Abraham

Speaking on the phone from Indonesia, Abraham took time to discuss the issue with ResourceClips.com. The 2010 event, of course, began with the China-Japan territorial dispute in the East China Sea. Late last year American warships entered the South China Sea, in another challenge to China’s claim to sovereignty. Yet compared with previous years, “I think we’re even more vulnerable to shock in our supply lines,” he says.

“If you look at rare earths, in 2010 there were opportunities for new supplies to come onstream quite quickly, and they’ve since failed. People look at that failure and say these places couldn’t compete, they couldn’t produce economically, so they failed.”

China, having pushed up prices exponentially by withholding rare earths, swung to the other extreme and flooded the market. That dashed the hopes of many potential non-Chinese producers yet encouraged complacency among end-users. “But the supply lines themselves really look no different than they did back then,” Abraham cautions.

Of course the problem’s hardly limited to rare earths. Just one example Abraham points to is cobalt and the Democratic Republic of Congo. Estimates of DRC supply range from 51% of the world total (2015 figures from the U.S. Geological Survey), to nearly 60% (Benchmark Mineral Intelligence), to 65% (Disruptive Discoveries Journal). That gives a disproportionate amount of supply not only to a single country, but one plagued with political instability and conflict mining.

Troubling too is the ownership.

Already a major player in the country, China stands to increase its DRC position should China Molybdenum and a Chinese private equity firm succeed in their $3.8-billion purchase of a majority interest in Tenke Fungurume, one of the world’s biggest copper-cobalt mines. With a 20% stake, the DRC state-owned company Gécamines has tried to block the sale but reportedly accepted a $100-million settlement.

What you see China doing is really consolidating up the supply line…. What they’re trying to do is build up their material capacity so other people producing batteries have to use material coming through China.—David S. Abraham

“What you see China doing is really consolidating up the supply line…. What they’re trying to do is build up their material capacity so other people producing batteries have to use material coming through China.”

The country fosters economic growth by “adding to the value chain that they can produce in their own country. It’s a strong economic argument. It’s not dissimilar to what Trump says, but he hasn’t really gone into the deep thinking that’s happening in China.”

Certainly, China’s strategic approach contrasts with the West. That’s suggested by the example of Tenke Fungurume’s would-be vendors, the American/Canadian team of Freeport-McMoRan NYSE:FCX and Lundin Mining TSX:LUN.

“For those companies, it’s about profits,” Abraham acknowledges. “The question is, what are the technology companies thinking about? Companies like Apple are trying to do a better job of understanding where their materials come from, but some of the others are less concerned.”

With the U.S. military in mind, Rep. Duncan Hunter is anticipated to propose a congressional bill that would help develop domestic supplies of rare minerals.

Abraham’s skeptical. “Most bills on critical materials have not passed and his bills usually have the least chance of passing…. That’s not to say the U.S. hasn’t given money to metallurgy and mining before, but with the exception of some dabbling in beryllium in the ’90s, I can’t recall a time where the U.S. was really investing in mines from a defence perspective.”

If decision-makers lack awareness, they’re not alone, he believes. Abraham sees little evidence that consumers understand the issues. “People talk about being concerned about where these materials come from but they really have to understand the challenging supply lines, and that’s what the book was trying to introduce people to,” he says. “It’s still a little too complex to fathom and I don’t think people think beyond ‘my phone causes conflict in Congo’ and get to the point that ‘my phone leads to geopolitical war.’”

If so, that makes The Elements of Power as timely now as it was in 2015. A paperback edition comes out in April.

In concluding the phone call, Abraham offers a maxim: “Nothing changes very fast. Then everything changes all of a sudden.”