DETROIT () -- Yesterday afternoon, at regular yearly session in San Francisco, manufacturing sourcing expert, Ivan Herring, retired just this year from General Motors after 37 years in finance and purchasing, gave a presentation on the special topic of "Rare Earth Minerals." Mr. Herring pointed out that of the five most critical minerals for the U.S. defence industry identified by the U.S. National Academies (of Science and Engineering) in two studies, one focused on civilian needs and the other on the needs of the U.S. military, published last month (and each discussed separately in an article on Resource Investor), four of the five were the rare earth metals, neodymium, samarium, yttrium and scandium. The lone non-rare earth metal classified as critical for defence was rhenium, which has also been the subject of a recent Resource Investor .
The rare earth elements were defined by Mr. Herring as a collection of 16 chemical elements in the periodic table; namely 14 of the 15 following and including lanthanum plus scandium and yttrium. Promethium, which is in the lanthanum row of the periodic table, is excluded, because it is a radioactive element the half-life of which insures that it is no longer present on the earth, naturally. Scandium and yttrium tend to occur in the same ore bodies as the lanthanum group.
I would add that thorium, in particular, and uranium, often, are often found associated with rare earth elements for reasons of chemical property similarities.
Rare earth metals are not necessarily rare. Some of them are, in fact, more common in the earth's crust than much better known metals, but the term rare has come down to us historically to emphasize the fact that they were rarely produced, and almost never found, individually. Also, the term 'rare' is descriptive of the fact that rare earth ore bodies that are accessible and economically feasible are, indeed, rare. The rare earth metals are typically found together in ore body admixtures that contain many, and sometimes even all, of them. Until the advent of modern chemical separating and processing techniques it was very expensive, because it was enormously time consuming and required amounts of reagents all out of proportion to the quantity of product obtained, to produce the individual metals.
Indeed, probably, the most common use of rare earth metals up until the end of World War II was for cigarette lighter 'flints', which in fact were made from mischmetall, German for 'mixed metal.' Mischmetal was, and is, a varying mixture of crudely processed, and individually un-separated, rare earth salts that have been reduced to the metallic state usually by reduction with an active metal such as magnesium. Mischmetal particles produced by grinding against a wheel of a harder material are pyrophoric; this means they quickly oxidize in air. This property gives rise to the sparks that seem to issue from the cigarette lighter 'wheel' when it is rotated against the 'flint' providing the ignition for the fuel vapours evaporating from the surface of the lighter's wick.
The metal research revolution that occurred with the advent of the age of solid state electronics and the need for alloys that could withstand extremes of heat, cold and corrosion was in the beginning unspecific; there was no paradigm for determining ahead of time which metals would have what properties if purified, ultra-purified, or alloyed with each other. It was largely hit and miss at first, but in order to determine that one was studying the actual properties of the pure metal it became necessary to learn how to separate and purify metals to levels never before attempted.
As an example I always tell the story of how Professor Karl Lark-Horowitz, a German refugee working at Purdue in 1944 had an idea that he could make a solid state electronic switch by starting with an ultra-pure semi-metallic insulating material and adding to it tiny amounts of ultra-pure metals (as ions) which would allow him to control the electronic conductivity. He probably, due to wartime restrictions, did not know that at the Electrical Engineering Laboratories of the Massachusetts Institute of Technology, at the same time, the engineers there had managed to purify the element silicon so that they had the purest silicon, indeed the purest element, ever produced up to that time. They carefully doped their now insulating silicon crystals and found that they would rectify tiny amounts of radio signals to produce tiny bursts of direct current, which they could measure. The idea was to use such a 'rectifier' to make a radar receiving set that was sturdy and didn't need complex fragile vacuum tubes to amplify the miniscule return signals. Such vacuum tubes did not function long when hit or rattled by German or Japanese machine gun and canon projectiles.
After the war the purifying technologies were quickly applied to the very rare (minor) semi-metal germanium, made then as now by processing tonnes of coal ash from power plants to get ounces of germanium, and one day in 1947 at the Bell Telephone Laboratories in Princeton, New Jersey, three American scientists attached a metal whisker to a doped germanium crystal and found that they could switch a current through their 'device' with a relatively small voltage; the transistor had been invented and the race was on to purify every metal and semi-metal and try it as an electronic device component material.
In the 1960s when I first obtained samples of separated rare earth metals they came from the St. Louis Chemical Company in St. Louis, Michigan. If you drove to Chicago from Detroit in those days you would see somewhere along I-94 a series of what appeared to be silos near the highway, which were in fact ion exchange columns being used to separate the rare earths from one another. I was thrilled to get 99.9% pure cerium in those days, and I used it to make rare earth chalcogenide glasses to see of they could be used to produce amorphous semiconducting switches and (the ancestors of flash) memories. They could.
I followed the progress of what we called then ultra purification as a specialty in the 1960s, and I was impressed by the rapid progress in metal purification for scientific purposes both in the U.S. and in eastern as well as Western Europe. The Russians did not have the sophisticated laboratory equipment we took for granted but more often than not it was their theory-they had pencils and paper and brains in ample supply-we followed in determining which path was the best for purification. I still remember marvelling at the tungsten rods I was receiving from Wah-Chang (An American company) at the end of the 1960s when I compared their smooth uniformly dense metal with the grainy and brittle rods I had first received in the early 1960s.
Ivan Herring pointed out that today, even though rare earth metals are critical to the U.S. for manufacturing small high performance electric motors, nickel metal hydride batteries, high powered lasers, and specialty alloys for aircraft use, the Peoples Republic of China produces 97.6% of the rare earth ores mined annually. The compounds and first-purification-level metallic forms of the separated elements are 76% produced in the PRC and 9% produced, from Chinese ore concentrates, in France. All the rest of the world produces, from Chinese ore concentrates, the balance of the 15% remaining.
This is a sad situation, Mr. Herring pointed out, considering that all of the rare earth elements were discovered in Europe and almost all of the current technology for separating and purifying the rare earth elements was discovered and perfected in North America and western Europe.
In order to get rare earth metals the western developers of the mining, refining and purifying processes have simply given these billions of dollars of research results to, basically, one Chinese company, Bao Tou Steel [SSE:600111], an iron mine of which in Mongolia is today the world's principal producing site for rare earth minerals.
North America has several large deposits of rare earth minerals. The last operational American production site, the Mountain Pass property in Inyo County, California currently owned by Chevron [NYSE:CVX] has been shut down for a decade due to the fact that its tailings contain radioactive materials, principally naturally radioactive thorium, which is often found with rare earth minerals. The Mountain Pass material already above ground when environmental activism shut down the mine has been sold off to Chinese customers who ship it, of course, to China for processing.
Mr. Herring closed his discussion by pointing out that the total amount of rare earth metals openly admitted to being used globally in 2005 was 99,000 tonnes. With new uses and expanded uses already under way he predicted that total usage in 2010 would be 162,000 tonnes. China, today the world's sole producer, mined 123,000 metric tonnes in 2006. In addition as we have noted here on RI, China is restricting the export of and even the allocation to non-Chinese companies of more and more 'minor metals' each day.
It is unlikely that China could meet this increased demand even if it wanted to do so. Progress in the expanded use of rare earth metals and in new uses in and for the U.S. will simply come to a halt unless the North American rare earth industry is revived.
There are several rare earth mining ventures already under way in North America. They differ from each other, from the point of view of the small investor, in the degree of risk involved and in the size of the ore bodies involved. They also differ in the technological capability of the promoters; I think this is important because it is critical that we not just mine rare earths in North America to send them to China or France for processing into the specialties required by civilian and military industry.
The rare earths are here in North America in sufficient quantity to meet our needs for a long time. We also have the technology domestically to refine and purify them and then process them into end products. We did invent or perfect all of the technologies after all. Industry and government need to get together to insure that as Ivan Herring predicts, "the future is bright for the rare earth industry."
As a note to investors let me say that, obviously, Chevron is today the highest quality existing American rare earth play, but first Chevron needs to return to rare earth minerals production by reopening Mountain Pass, and to do that it needs to do battle with environmental nihilists. Chevron has the money; I don't know if it has the will. Somewhere in the higher risk category is still Great Western Minerals Group [TSX-V:GWG]. It is not yet producing, but it has gone ahead and vertically integrated; its Great Western Technologies, Inc. is equipped to process and purify rare earth metals as well as produce alloys and compounds of them even if it must begin by utilizing other company's ore concentrates. This is a truly twenty-first century approach.
I'm watching other companies for you also. Thorium Energy, which I'm assured is moving towards an IPO, for example, has large reserves of rare earth minerals in its Lemhi Pass, Idaho, thorium mineralization. This is normal. Mountain Pass is a similar ore body although not as rich in thorium, but if Thorium Energy can bring its thorium mine into production it will be only a short step forward to also produce rare earth minerals.
There's even a rumour in the air of a major company in the U.K. pushing for rare earth futures contracts to be designed and implemented. This would bring about a sure way to finance rare earth mines everywhere, through off-takes at market guaranteed and insured prices.
I have to agree with Ivan Herring the future for rare earths is looking brighter than it ever has.
