Rare Earths In A Rarified Atmosphere
By Charles Kubach - Mine-Engineer.Com
Much has been written about the demise of the value of rare earths, China dumping production, numerous exploration companies looking for deposits, and doom and gloom for the industry. However, after viewing all of the facts concerning the Rare Earth Industry, all is not bad. In fact, they are not in as bad shape as all these financial "experts" would have us believe, especially those geniuses on Wall Street.
Below is a price history of rare earth metals and oxides from 1992 to 2013, with a few years missing, due to lack of reported data. The majority of the data is from the US Geological Service, and the 2013 data is from a Commodity Investment House. As one can see, the period 92 to 98 was good for US production and prices were quite good. However in 1999, China began to dump rare earth products onto the market and it depressed the price, since the supply was very high and the demand did not increase. Then, in 2008 the housing bust and global recession set in and prices remained fairly modest. However, upon checking the June price for these commodities, it appears that many have rebounded a bit while a few flounder. The robust prices represent a increase in demand, even with China exporting rare earth products internationally. While they are not averaging the boom year prices, they are still good and will sustain a well run operation that has good production costs and a high efficiency in recovering these difficult to extract metals.
As the Chinese economy limps along at a GDP increase that the rest of the world envies (7.4%), they have acquired the realization that these products are very valuable to their own economy and are not likely to dump them as they did in the late 1990's. In the US our economy is improving slightly at about 1.8%, and will get much better when a administration controls the government that understands the economy and business. Until then 2%-3% will be about as good as it gets. Europe and Asia have their problems also, but Asia is likely to pull out long before heavily indebted Europe does.
As for numerous exploration companies looking franticly for new deposits, it takes about 10 years to get a project permitted if one of commercial value is found, and another five years to get it into full production. So, if one were discovered today and were good enough, quality and quantity wise, to be commercial, it would be 15 years before it affected the supply-demand for rare earths. There is one element of the explorers that is interesting, and that is examining old gold mining tailings piles for rare earths. It appears that in some instances, rare earth and gold existed in the same deposit. However it would take quite a concentration of the rare earth elements to make one of these tailing piles economical to recover and sell on the market. So far, none have had any concentration of rare earth elements in the ball park to be considered a commercial development. So, it would appear that new deposits will not effect the rare earth market for at least 10 years, and probably longer than that.
As for the doom and gloom of Wall Streeters that can only understand a balance sheet, they really do not have a clue. The rare earth market actually appears to be in pretty good shape, much better than any other industry, and the outlook looks bright, as well. How much and how quickly it advances it's profitability depends upon how quickly the global economy will progress in it's recovery from the nagging recession. As for demand, unless one believes that consumers, the military, business and governments of the world are going to cease using all modern technology, the demand is going to increase exponentially in a very short period of time, and much of this technology is not possible without rare earth elements. Yes, everything from cell phones, to flat screen televisions, MRI's, lasers and high tech weapon systems all depend upon rare earth minerals to function, and there are no substitutes, currently. So, demand is not likely to decrease, unless, of course, the economy slips into a depression, fueled by liberal spending and taxation programs to feed a ever encroaching, inefficient and oppressive governmental entity, that will snuff out the life of free enterprise quicker than the speed of light.
I am bullish on rare earths, and I own shares of Molycorp, even though almost all Wallstreeters say it is a bad investment. I have never made any money following their advice, anyway. That should tell you what it is really worth. Although there are many challenges ahead for the industry and economies of the world, I believe that common sense will eventually prevail, and all will be well, and those that would destroy the Free Enterprise System and Freedom for the Citizens of the Free World will once be relegated to a non-influence roll and those that understand the economy and business will be restored to the power of decision making for government. Kind of like the old children's game, Whack A Mole. When these creatures pop up, someone must whack them back to the nether regions where they and their bad ideas dwell.
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