DETROIT () -- I think that I can fairly describe or, at least, ascribe one general theme to all of the articles I have written for Resource Investor. It is that natural resources are not infinite nor are they infinitely renewable. My purpose is to try to get investors into a permanent mindset in which they always, and always first of all, question the implications and consequences for existing uses of any "new use" for a natural resource or the "discovery" of an additional "new source" of a natural resource for which there are already many uses.
The above statements may seem trivial to some and tautological to others, but in reviewing the comments I have received on my last 75 articles spanning the last year and a half, I have come to the realization that there is great confusion among investors with regard to the limitations on technological innovation that are due simply to the limited accessibility we have today, with current technology, to many metals and minerals regardless of their percentage abundance in the composition of the earth's crust, which number is often cited by my critics to "disprove" my conclusions or dispute my facts.
I came to this conclusion finally two weeks ago when I read a comment I received criticizing my conclusion that there was no point to considering any technology requiring a substantial amount of the metal gallium because the total global production of new gallium is less than 100 tonnes per year.
The writer of the comment reported that he had communicated with the Purdue professor who had discaovered that gallium, when melted together with aluminum in a certain proportion, produces an alloy that has the ability to split off hydrogen from ordinary water at room temperature.
Thus, a simple device which allows, but carefully controls the amount of, water to mix with the (granulated or powdered) alloy and which carries off the "waste products," probably hydrated oxides of gallium and aluminum, to a storage vessel can be built as a hydrogen generator, which can easily be turned on and off. This obviously could be an on board hydrogen-on-demand generator to fuel a vehicle. Further, the "waste" hydrated oxides could be reprocessed (not on board the vehicle but in a facility purposely built for the job) to restore the "alloy" to its original hydrogen-producing state.
The writer and the professor, from whose reply to him he quoted, were eager to point out that although "only" 80 tonnes or so of (new) gallium is produced each year, the amount that could be produced is huge, because gallium is present in the earth's crust in a proportion greater than that of the "common" metal lead.
I need to point out to these critics that not only is gallium's abundance in the earth's crust greater than (or at least equal to) that of lead, but gallium is also more abundant in the earth's crust than cobalt, germanium, arsenic, selenium, yttrium, niobium, molybdenum, palladium, cadmium, tin, antimony, tungsten, gold, mercury, bismuth, thorium and uranium.
Why then, dear readers, was gallium unknown to man until the late nineteenth century when several of the much less common metals were known at least since late antiquity (e.g., lead, mercury, and gold)? The answer is mostly due to lack of accessibility, not abundance. One gram of the earth's crust contains 160,000 parts per million of aluminum oxide, but the same gram contains only 18 ppm of gallium oxide. Not only that, but in order to separate and refine gallium, you must have a chemical paradigm (theory) of the elements. The development of the modern paradigm wasn't even begun until the nineteenth century and the theory of the chemical "elements" didn't emerge until the late nineteenth century.
Modern mining also begins in the late nineteenth century and techniques for extracting "minor metals" either directly or as byproducts are still in their scientific infancy in many cases, such as that of gallium. Interestingly enough, some of the current techniques of gold "mining" would be fully recognizable to an ancient Egyptian, much less a more recent Roman miner.
The technology for the analytical chemistry of the elements is much farther along in its development than the extractive and refining chemistry of many of them now so easily identified in tiny amounts. We know they are there, but we have yet no way to detect concentrations more than a little way beneath the surface, much less ways to extract them from any great depth or from beneath the oceans where 70% of the earth's surface lies mostly inaccessible and unexplored for minerals.
Has engineering and academic specialization brought us to this point where the most basic knowledge in a discipline such as mining engineering, which should be part of everyone's education, at least in engineering and the sciences, is considered irrelevant or too specialized? Could this be the reason that so much money is wasted in speculation? I think it is.
As I have said before in these, pages the engineering technology and skills of the human race give us today (potential) access to, not exact knowledge about the location of, those minerals buried less than 5 kilometres below the surface of the earth. Even at that depth, which represents around 1/8 (12 1/2 %) of the thickness of the earth's "solid" crust the heat and pressure are unbearable to human life. In order for miners to work at such depths in southern Africa to extract the ores of the platinum group metals and some gold it is necessary to set up beforehand expensive triply parallel systems to provide "cooled" air and water for them. Even so, they can only work for short periods.
The only reason men are sent in to such environments is that no economically priced computer controlled machine can yet look at a rock, determine that it is the sought after ore, extract it, and move it to the surface. In any case, if there were any easier way to get at the platinum group metals, then that easier way would surely be chosen by the mining companies.
This is a good place to point out that the greatest fear today of the platinum mining companies in southern Africa is that a substitute for platinum for use in fuel cells will be found, thus making fuel cells practical for mobile vehicle power sources. This reduction in demand would make the production of the platinum byproduct, rhodium, extremely expensive, because it would mean that platinum would be mined there primarily for its rhodium content.
The price of rhodium could only then be sustained until the new non-platinum fuel cells came into widespread use, because fuel cell-powered vehicles will not need rhodium, since they won't produce nitrogen oxides to be treated - the sole function of nearly 90% of the rhodium used on this planet today.
The typical short-sighted analyst will tell you when you mention these facts to him/her that jewelry demand for platinum and rhodium will maintain their prices even if automotive emission control and/or fuel cell use should vanish. This is nonsense.
Now let's take a brief look at lithium in the earth's crust. It is slightly more abundant in the crust than gallium, 20 ppm versus 18 ppm. Yet 21,000 metric tonnes of new lithium were produced globally in 2006. Why? Because concentrations of lithium (ores and brines) are 250 times more abundant than those of gallium, and these concentrations (of brines) are accessible. I base the above multiple only on the simple ratio of gallium produced each year to lithium produced each year.
I want to also mention silicon, the most abundant element in the earth's crust. Fully two thirds of the earth's crust is made up of silicon oxide (the definition of sand) mostly in the form of silicate rocks. Quartz is one of those natural materials, by the way, that is made up almost entirely of silicon dioxide. Why then did the US import 34% of the "silicon" it used on 1993? Because silicon is used industrially in the form of silicon "metal" and ferrosilicon (iron silicon alloy) as an addition in the steel making process, and to produce either silicon "metal" or ferrosilicon from pure silica sand requires a large amount of electric energy. These industrial forms of silicon used to be produced in the U. S. at many places where power was "relatively" cheap, such as Niagara Falls, New York.
Today all of the silicon additives for steel still made in the U.S. are produced in West Virginia where electric power from coal is the cheapest in the U.S. Once again, let's recite together: It's not abundance in the earth's crust that makes a metal or mineral available; it's the overall accessibility of the metal or mineral and the economics of the process used to extract and refine it.
Finally, I want to say that many commenters mistakenly emphasize a latest use of a metal or mineral to the exclusion of all of its previous and current uses. For example, 97% of all of the gallium imported into the U.S. is used to make modern high-speed electronic and optoelectronic devices. This use will expand, not contract, so that any new use of gallium must be for only new material.
It is a similar situation with lithium. The average financial analyst is unaware of the broad use of lithium organic chemicals in the manufacture of plastics. So any new use or expansion of an existing use of lithium must start from the current global demand of 20,000 metric tonnes per annum. When is this new production coming on line, and where is it coming from? Ask your analyst those questions.
Nickel is already in short supply today, so where will new nickel supplies come from that will be dedicated to producing batteries. This situation is not so bad, because the main use for nickel, stainless steels production, can be moderated by substitution or political decisions on allocation. There is also a substantial amount of new nickel being brought into production along with substantial recycling, a portion of which could be dedicated to a closed loop battery production industry. The same thing, by the way, might be done for lithium. A portion of production could be dedicated to a closed loop battery production industry.
I could go on, and I will in the future, but for now let me say that the abundance of an element in the earth's crust is the worst measure of its availability. The best way to measure availability is to match accessibility with ease of extraction and refining technology and then to look at recyclability of the most important industrial high use products. Then, and only then, can you make a long term investment in a metal.