All the stuff we have is cool.
I like my iPod, smartphone, HD TV, and Xbox. I love my laptop, truck electronics, fiber optic crossbow scope, and wireless Internet router.
Electric cars, wind turbines, solar panels, and smart thermostats are cool, too — though I only own one of them so far.
Stuff like this makes life fun and interesting. It makes life easier. It makes life more efficient.
And some of it promises to alter the way we produce energy forever.
But these things have one more thing in common: To be produced, they all rely on a group of rare chemical elements that “are not presently mined, refined, or traded in large quantities, and, as a result, their availability might be constrained by many complex factors.”
I stole that bit from a recent joint report from the American Physical Society and Materials Research Society about “Energy Critical Elements” and how to overcome their scarcity.
Companies that can secure these metals are making a mint in the market, so I thought we should explore this topic further.
Energy Critical Metals and Uses
According to the report:
Energy-related systems are typically materials intensive. As new technologies are widely deployed, significant quantities of the elements required to manufacture them will be needed. A shortage of these “energy-critical elements” (ECEs) could significantly inhibit the adoption of otherwise game-changing energy technologies.
This, in turn, would limit the competitiveness of U.S. industries and the domestic scientific enterprise and, eventually, diminish the quality of life in the United States.
The U.S. already relies on other countries for more than 90% of these elements. Some simply aren’t abundant in the earth’s crust; others aren’t adequately concentrated.
A few are located in only a couple countries (like China), which makes their production and availability susceptible to manipulation.
Rhenium, for example, is rarer than gold by a factor of five. We need it for jet engines and industrial gas turbines.
Tellurium is quite rare, too. And without it, First Solar (NASDAQ: FSLR) couldn’t make its famous thin film solar panels.
It’s the high demand for these critical elements that has led to their high prices — and therefore the big market returns they’ve produced so far. Many more big winners are on the way from this situation.
That said, here’s a list of energy critical elements and their uses as described by the report:
Gallium, germanium, indium, selenium, silver, and tellurium, all employed in advanced photovoltaic solar cells, especially thin-film photovoltaics
Dysprosium, neodymium, praseodymium, samarium (all REEs), and cobalt, used in high-strength permanent magnets for many energy-related applications, such as wind turbines and hybrid automobiles
Most REEs, valued for their unusual magnetic and/or optical properties: examples include gadolinium for its unusual paramagnetic qualities and europium and terbium for their role in managing the color of fluorescent lighting; yttrium, another REE, is an important ingredient in energy-efficient solid-state lighting
Lithium and lanthanum, used in high-performance batteries
Helium, required in cryogenics, energy research, advanced nuclear reactor designs, and manufacturing in the energy sector
Platinum, palladium, and other PGEs, used as catalysts in fuel cells that may find wide applications in transportation; cerium, a REE, is also used as an auto-emissions catalyst
Rhenium, used in high performance alloys for advanced turbines
It’s because of these elements’ scarcity and high demand that I flew to Alberta a few weeks ago.
There’s a multi-billion ton supply of many of these elements there that could both satiate high-tech demand and make investors a fortune.
I’ll be sharing more details about that trip and company’s operations in coming weeks.
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Rare Metal Production and Companies
Before we look at some rare element investment success stories, let’s first drill down on how exactly these materials are produced.
To the report one last time:
Many potential ECEs are not found in concentrations high enough to warrant extraction as a primary product, given today’s prices. Instead, these ECEs are obtained primarily as by-products during the refining process of other primary ores, especially copper, zinc, and lead. Joint production complicates attempts to ramp up output by a large factor.
Because they are relatively scarce, many ECEs are available only in low-grade ores, which necessitates the processing of tons of rock for each gram of element recovered, sometimes in ways that do unacceptable environmental damage.
So not only are they rare, but they’re exceedingly difficult to extract.
Companies having mining success — or even very near mining success — have already generated big enough gains to send a few investors to early retirement.
Take a look at the chart and I’ll list the companies for you below…
From highest return to lowest, those companies are:
Quest Rare Minerals (AMEX: QRM)
Molycorp (NYSE: MCP)
Avalon Rare Metals (AMEX: AVL)
China Shen Zhou Mining & Resources (AMEX: SHZ)
Both Quest and Avalon stock went up thousands of percent as the rare earth bull market took hold.
Rare metal finding is the new oil wildcatting…
We’ll continue to bring you the opportunities as we see them.
Call it like you see it,
Editor, Energy and Capital