Rare Earth Metals 2020
A new resource war has begun. But this time the war is not over oil... Or gold... Or clean water... Or any other material which has traditionally sparked resource wars. No, the new resource war will be over a lesser-known group of substances: rare-earth elements.
Rare-earth elements –– sometimes called rare-earth metals or rare-earth minerals –– are a vital component in most of the technology we use every single day.
There are between 15 to 17 rare earth elements, depending on who you ask. They are:
- Cerium (Ce).
- Dysprosium (Dy).
- Erbium (Er).
- Europium (Eu).
- Gadolinium (Gd).
- Holmium (Ho).
- Lanthanum (La).
- Lutetium (Lu).
- Neodymium (Nd).
- Praseodymium (Pr).
- Promethium (Pm).
- Samarium (Sm).
- Scandium (Sc).
- Terbium (Tb).
- Thulium (Tm).
- Ytterbium (Yb).
- Yttrium (Y).
Some sources don't classify scandium and yttrium as rare-earth elements.
They're used in the production of everything from smartphones, laptops, rechargeable batteries, GPS units, televisions, speakers, magnets, fluorescent lighting, and much more.
The glass industry alone uses tens of thousands of tons of rare-earth elements each year, for polishing and additives that provide color and special optical properties. Meanwhile, the automobile industry requires some of these minerals for the manufacturing of catalytic converters.
Despite their name, most rare-earth elements aren't exactly “rare.” In fact, cerium is as abundant as copper. What is rare are rare earth deposits or properties with high enough concentrations of rare earth elements which are economically feasible to mine.
Right now, approximately 90% of the global supply of rare earth elements comes from just one country: China. And that's a big problem for the U.S. right now considering Washington's ongoing trade war with the Asian nation.
The truth is, China has been drawing down exports of REEs, for years. Between 2005 and 2012, China cut rare earth exports by almost 50%.
Not only that, but this isn't a new tactic for China. In 2010, China completely cut off rare earth exports to Japan over a territorial dispute. This caused prices for all rare earth, particularly neodymium, to soar. The halt in supplies was globally challenged by several nations, resulting in a ruling against China's export quotas by the World Trade Organization.
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In response, the U.S. Department of Energy initiated Project REACT, short for "Rare Earth Alternatives in Critical Technologies," to specifically develop cost-effective alternatives to rare earths. Yet, to date, there have been no good substitutes discovered. In its 2020 Mineral Commodity Summary, for rare-earth elements, the USGS says, “Substitutes are available for many applications but generally are less effective.”
The demand for newer, faster, and better technologies will no doubt continue to rise in the future, as will demand for the raw rare earth materials needed to create them. That's part of the reason why, Senator Ted Cruz introduced new legislation aimed at reviving the U.S. rare earth industry this week.
Cruz's bill would allow mining companies to deduct construction costs of rare-earth mines, processing plants, and related mining equipment. It would also allow manufacturers of consumer electronics to deduct 200% of the cost of U.S. rare earth products, require the U.S. military to exclusively use U.S.-derived rare earth products in all weaponry, and provide $50 million in public funding for rare earth pilot projects, among other things.
Right now, there is only one rare-earth mine in America –– one! And it only produces a small about of material. AND it's now owned by a Chinese firm.
The Mountain Pass Mine in California was operated by Molycorp, Inc. But the company filed for bankruptcy in 2015, and the mine has since been purchased by the Chinese rare-earth consortium Shenghe Resources.
For investors like you and me, though, getting exposure to rare-earth minerals isn't easy. There are several large mining companies like, BHP and Freeport-McMoRan that mine small amounts of rare earth elements. But there is no major miner, with pure rare earth exposure.
There are several junior exploration companies seeking a big find. But no doubt many are simply trying to capitalize on the rare earth hype and have no assets of any real value. Most are flat out scams. That's why resource investor Keith Kohl, spent his entire quarantine time pouring over data, to find the best companies sitting in a prime position to develop rare earth deposits in the United States. Kohl says, “We’re already far behind in this game. But that’s about to change for us. Demand for rare earth metals is surging, but you don’t need to take my word for it, just take a look around you.”
Kohl will be releasing a report, of his findings exclusively for Energy and Capital sometime next week. So be on the lookout for that.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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