Germany working with Kazakhstan on rare earth deals

German companies are working with its government to develop rare earth projects in Kazakhstan, the Bloomberg cited the Handelsblatt newspaper as saying.

The report said BDI, or Federation of German Industries, had began enlisting companies since late 2010. These companies might take direct stakes in rare-earth development projects abroad, it said. 

The cooperation between Kazakhstan and Germany is similar with that of Mongolia and Japan. In both cases, the poor country is eager to develop its natural resources in exchange for development help and technology know-how. The rich country needs raw materials outside China. 

Here is the Bloomberg story: Germany, Kazakhstan Forging Rare-Earth Pact, Handelsblatt Says

Top hedge fund manager attributes success to rare earth stocks

Canada’s best performing hedge fund manager of the past year won big by positioning on rare earth stocks, according to a story on the Global and Mail.

Steven Palmer, president of Toronto-based AlphaNorth Asset Management Inc, said his company positioned with their biggest weighting in a couple of rare earth stocks such as Stans Energy Corp and Ucore Rare Metals Inc, and they were the star performers.

“The rare-earth stocks were among the winners that helped his fund become the top-performing Canadian hedge fund last year, ” the story said, citing data compiled by Globe Investor.

Palmer prediced that resoruces would have a pullback this year. “By the end of this year, resource stocks will be flat to modestly higher, but returns won’t be as good as we experienced in 2010,” he was quoted as saying. 

Here is the story: 

 Top hedge fund manager turns to tech micro-caps

China’s rare earth strategy criticized at home

        The West might see China’s handling of rare earth as too aggressive. At home, however, the policy is been criticized as being too introvert and passive. 

        An article on the website of the Ministry of Land and Resources started by a dialogue:

        A: Do you know that the Japanese has started to explore rare earth resources in Mongolia, Vietnam and Australia?
        B: That is good. So that they will not over develop the rear earth mines at home. Anyway we have enough for ourselves.
        A: You did not get what I mean. Being the largest producer and consumer of rare earth in the world, with mature geological exploration resources, why don’t we explore rare earth mines around the world, so that we can control it the way the Brazilians and Australians control the global iron ores?

        The article then said China did not try to control global rare earth resources. Instead, the country is used to take the defensive position, even in terms of rare earth, for which it actually has a dominant position.

        The thesis, the article said, is that in the global capital market, the control of resources does not lie on the control of materials or trading channels, it is the capital control of end supply and demand market.

       China’s performance in rare earth resources, according to the piece,  did not break through the status quo of being a resource supplier from the third world. It says that even China controls 70 percent of the world’s rare earth resources, it will not be able to monopolize the market as countries with transnational companies do, such as Brazil (Vale), Australia (Rio Tinto and BHP Billiton)

      The United States, it says, take an opposite strategy: “The US let its own oil sleep on the land of America, and reach its capital all over the world.”

      It ends by concluding that the resource strategy is still too introvert. It does not has the strategy of “managing the earth,” the author cited Mao as saying.

      Here is the article:"We are lacking capital and right thinking"

rare earth smuggling

This info from New York Times is interesting: "Many companies in the West indirectly depend on illegal mining and smuggling. Industry experts estimate that illegal production accounts for about a seventh of the supply of light rare earths in the world and as much as half of heavy rare earths.

Also, I am not sure whether yesterday's story on the ministry's control mean this : "That step removes administrative oversight of mining from provincial and municipal control. "

Anyway, here is the link of the NYT story: "http://www.nytimes.com/2011/01/21/business/global/21rare.html?_r=1&emc=tnt&tntemail1=y

China's national rare earth mining plan

The Ministry of Land and Resources identified 11 rare earth mines as the "national rare earth mining plan." It did not say what does that mean. But given the context, this might be part of the national strategy of integrating the industry, closing small mines and moving up the value chain.

I labelled the 11 mines on this map:


在較大的地圖上查看China National Rare Earth Mining Plan

Here is the link of the ministry's statement: http://www.mlr.gov.cn/zwgk/zytz/201101/t20110117_812188.htm

China’s rare earth export up in 2010

China’s rare earth export actually went up in 2010, despite all the talk about tensions and impact of quota decrease.

China exported 35,000 tons of rare earth from January to November in 2010, up 14.5 percent year-on-year, according to the website of China’s Ministry of Commerce.

Japan, EU, and US are the main export market, taking 86 percent of the overall export, the ministry said.


“China will keep supplying the world market with rare earth, and manage the export quota based on WTO rules,” said Yao Jian, spokesman for the Ministry of Commerce.
Yao said international cooperation will help the rare earth supply. “US, Australia, and some countries in the middle Asia have expanded rare earth production. I think this will help to ease the tension in rare earth supply,” he said at the press conference.

China takes 36 percent of the world’s rare earth reserve and 90 percent of the global supply. In 2010, the export quota decreased by 30 percent than 2009.

“We will further complete the rare earth regulation system in global cooperation, including rare earth export and production policies,” said Yao.

Here is the link for the transcription of the press conference: http://www.mofcom.gov.cn/xwfbh/20110118.shtml

Europe’s rare metal strategy

Europe should focus on mining and recycling of critical metals, instead of stockpiling, as US does, according to a FT report.

The suggestions includes set up a EU policy to protect the bloc’s investment in raw materials abroad. The report also cited Antonio Tajani, EU industry commissioner, as saying that he was eager to deepen co-operation with Africa to improve Europe’s access to raw materials.

I find this line interesting: “The report's recommendations include policies to improve access to primary resources by promoting exploration and ensuring that this is viewed as research activity.”

The report was prepared by an expert group “chaired by the European Commission and set up as part of Brussels’ effort to secure sustainable supplies for the bloc,” the newspaper said.

Here is the FT report: http://www.ft.com/cms/s/0/6522b2b6-78dd-11df-a312-00144feabdc0.html#axzz1BNUk9xhD

I haven’t found the exact report. But here is a EU report on metals:
ec.europa.eu/enterprise/sectors/metals-minerals/.../sec_2741_en.pdf

the rare earth ties between China, Japan and Korea

Three models as summed by Dr. Jung-Chan Bae (P127)

Resource-based China: world’s largest production, regulation of export

Import-based Korea: lack of resource, huge commercial industry, weak supporting industry.

Technology-based Japan: world’s 1st materialization. Closed recycling system.

According to Dr. Jung-Chan Bae, Korea Institute of Industrial Technology (KITECH):
Rare metals are imported from China by Japan. After materialization in Japan, Korea imports these highly refined materials, manufactures finished products, and either exports or consumes them. After use, the waste is either lost or goes back to China and/or Japan. Japan recycles the materials and exports them again to Korea. One of the principal goals of Korea’s rare metals strategy is to design policies that will make Korea self-sufficient by recycling rare metals. (P45)


Source: MIT Critical Elements Report

China’s national rare earth stockpile plan

China is pondering on a national rare earth stockpile plan, which might came out in February, the China Business reported, citing a report by an investment institution.

The story quoted officials and sources in the industry as saying that although the exact time of the plan is uncertain, stockpiling is for sure the right policy direction.

Xu Guangxian, a rare earth scientist, has suggested to spent 1 billion yuan a year on building a reserve system of rare earth that is similar with the oil reserve of OPEC.

The national plan might be based on the current system, when firms make their stockpile plan, largely at its own cost.

In the beginning of 2010, the Inner Mongolia Autonomous Region put into practice a stockpile plan within the region. The Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co Ltd is the main party that will put the plan into practice. It is expected to take care of the main cost, too. The local government and its parent company will support.

The national plan, in addition to the reduced quota since December, might bring up rare earth price further. The article quoted businessmen as saying that they expect the price will rise after the Chinese spring festival.

Here is the story on China Business:
http://news.hexun.com/2011-01-15/126810500.html

A Xinhua story on the plan of Baotou is here:
http://news.xinhuanet.com/fortune/2010-03/01/content_13073803.htm

In addition to Toyota…

It is like a war at various fronts: Toyota is developing motors without using rare earth magnets. At the same time it is also searching for rare earth mines outside China.

In addition to Toyota, smaller companies are working on related technologies, such as developing magnets for more efficient hydrid motors.

Electron Energy Corporation is the last remaining US producer of sintered rare earth magnets, according to an article on the Energy Department’s website. The US Department of Energy gave a $750,000 Small Business Technology Transfer (STTR) to the family-owned business in September 2008 to support it, the article said.

Peter Dent, a vice president of the company, said more than 6,000 Americans worked in the permanent magnet industry in the 1990s, but foreign competition took most of these job overseas, especially in China, according to the report.

The grant is part of American government’s effort to support its competition in the global market and increase manufacturing jobs.

The company has been trying to develop a process that “allows manufacturers to maximize the electrical resistivity of Neodymium Iron Boron and Samarium Cobalt sintered rare earth magnets without reducing their magnetic strength,” the report said. The market of sintered rare earth magnets is estimated at $4 billion worldwide, according to the report.

Here is the link of the Energy Department report: http://blog.energy.gov/blog/2010/08/06/grant-helps-make-us-rare-earth-magnets-more-common

And the company’s website is here:
http://www.electronenergy.com/

US rare earth miner compete for government support

Rare earth producers in the United States are lobbying for help as the US government seeks to revive its rare earth industry, the Bloomberg reported.

Morlycorp wants federal loan guarantees to convert the elements into metals, alloys and magnets, Bloomberg cited Jim Sims, Molycorp’s vice president for public affairs, as saying.

The report said Morlycorp hired Jonathan Etherton, a former Senate Armed Services Committee staff aide, in December to assit the lobby. McBee Strategic Consulting, based in Washington, also helps.

Wings Enterprises Inc. of St. Louis is developing a mine in Pea Ridge, Missouri. It is lobbying Congress to help create an industry-backed cooperative to act as a repository for thorium. It will produce heavy rare earth, the report said.

The report is here:
http://www.bloomberg.com/news/2011-01-14/rare-earths-producer-molycorp-rivals-seek-u-s-aid-as-china-chops-exports.html

Toyota to develop electric cars without rare earth

Toyota is close to breakthrough in developing a motor for hybrid cars without using rare earth minerals, the Wall Street Journal reported.

All electric motors rely on magnets to work. The new motor Toyota is working on is based on inexpensive induction motor, the report said.

Permanent magnets are made from neodymium, a rare earth mineral. The new induction motor will mean the company will break its reliance on the mineral.

The report is here: http://online.wsj.com/article/SB10001424052748703583404576080213245888864.html

Here is the Bloomberg story:
http://www.bloomberg.com/news/2011-01-14/toyota-readying-electric-motors-that-don-t-use-rare-earths.html

US Defense Department ‘s rare earth defense impact study

Something to expect: A Defense Department spokeswoman said the department has completed the study but not released yet.

Rare earth substitutes?

Both US and China see developing substitutes for rare earth elements as one of the three options of solving this problem, in addition to opening more mines and recycling.

It looks like some companies have already found substitutes. I got the hint from a trader’s diary on the FT website. The trader here recommends Carclo, a producer of precision plastic products, because the company owns “game changing technologies.”

One of the strengths of the company is that it requires no rare earths in “printed electronics” (I need to do further research to know what that is), while its competitors do. The technology will be a game-changer, the report cited experts as saying.

So traders are long on rare earth companies, or companies that do not use rare earth.

The FT story is here:
http://www.ft.com/cms/s/2/f58d2870-1a88-11e0-b100-00144feab49a.html#axzz1AeVzsgWQ

And here, investors keep long, long, and long on rare earth stocks: http://seekingalpha.com/article/245657-general-moly-s-volatility-is-your-friend

Rare earth issue raised during vice premier's European visit

The rare earth issue was brought up during China's vice premier Li Keqiang's visit in Europe, especially in Germany.

China's position is clear:
1. Its export will be continue to be regulated for environment concerns.
2. It welcomes international cooperation in the development of rare earth minerals.

Media focus has been on the first point. But China's willingness to stabilize the market, to cooperate with other countries to develop rare earth elsewhere, as well as the developing substitutes, has been almost ignored.

The original report is here:
http://english.peopledaily.com.cn/90001/90776/90883/7254539.html

My summary on the rare earth story, with comments from Jim Rogers

The following remarks of Jim Rogers summed up my research on rare earth so far.

The demand surpasses supply now, so prices are up. People are using this opportunity to make money. The frenzy on these elements now is overdone, but not done.

This is the core information in the rare earth story. Others are bubbles, or man-created myths.

Here is what he said:

"Well, China does produce 97% of rare earth. Uranium is not a rare earth, but they do produce a lot of uranium as well. The future of rare earth is great. What is happening is the prices are going through the roof because the Chinese do control the supply, but it is pure simple capitalistic economics now. A lot of other people are opening mines because they can make a lot of money and governments are behind the companies opening new mines. So it’s all going to bring a new supply and eventually the price of rare earth will come down again. But in the mean time until the new mines can come on stream, somebody is going to make a lot of money"

The source is here: http://www.gurufocus.com/news.php?id=118927

Rare earth hits US gasoline producers?

The high cost of rare earth metals is pushing up the cost of gasoline production in the US, according to the Wall Street Journal.
The cost in producing gasoline could be up by a penny a gallon due to the price increase of rare earth metals, the newspaper reported.
Rare earth elements accounts for 4 percent of catalysts used in gasoline making, and the recent price increase of them has added an extra 25 percent to catalyst costs, the paper cited the National Petrochemical and Refiners Association as saying.
Lanthanum and cerium are the elements used in this sector, know as gasoline-making fluid catalytic cracking units, or FCCUs, the report said, citing Lynas Corp Ltd, the Australian rare-earth supplier.

The original story is here:
http://online.wsj.com/article/SB10001424052748704055204576068270214808518.html?mod=googlenews_wsj

Japan and Mongolia in talk with EPA

Japan’s National Strategy Minister Koichiro Genba visited Mongolia this week to talk with economic partnership between the two countries, the Xinhua News Agency quoted the Mongolian Foreign Ministry as saying.

“Mongolia is interested in cooperating with Japan in mining, especially uranium, rare earth elements and technological fields,” the report cited Tsakhia Elbegdorj, Mongolian President, as saying.

The two nations may start the Economic Partnership Agreement (EPA) negotiation in April. This is going to be the first EPA negotiation for Mongolia, the energy rich Asian country.

The tie between the two nations will bring Japan more access to natural resources. In return, Japan will help Mongolia with its economic development.

The Xinhua report is here:
http://www.mongolianviews.com/2011/01/japans-national-strategy-minister.html
Also bookmark an article on Japan Mongolia love affair:
http://www.atimes.com/atimes/Japan/IB28Dh01.html

the myth: has the Chinese embargo to Japan ever happened?

A wall street journal piece point out Japan's imports of rare earth from China actually increased in 2010. This is an interesting point, confusing too --- all the media frenzy is based upon the embargo by China amid some territorial disputes. If that did not happen, what is this all about?

The article is here:

http://blogs.wsj.com/chinarealtime/2011/01/06/japan-sustains-chinese-rare-earth-imports/

China is to regulate its rare earth industry with new environmental rules

A regulation on pollutants of rare earth industry is under examination now and may take effect this year, the Shanghai-based Dongfang Daily reported, citing a former industry official.

The new regulation might double the cost on environment protection for rare earth manufacturer in China, the newspaper cited Wang Guozhen, a former vice director of China Nonferrous Engineering and Research Institute, as saying.

New plants will have to work according to the regulation. The existing facilities can spend a year or two before adjusting to the new standards, Wang was quoted as saying.

The Ministry of Environmental Protection passed the regluation on December 31st 2010, according to the ministry’s website.

Source:
1. Dongfang Daily http://www.dfdaily.com/html/113/2011/1/6/555449.shtml
2. Ministry of Environmental Protection: http://www.zhb.gov.cn/zhxx/hjyw/201012/t20101231_199336.htm

Short on Molycorp

Share price of Molycorp might be overvalued. The author estimates that the company value $2 billion, instead of $4 billion. The key is long term supply may meet, or even surpass, demand. Possibilities include future subsititution for rare earth, supply from China or elsewhere.
The analysis is here: http://seekingalpha.com/article/244880-is-molycorp-really-worth-4-7b

South Korea

South Korea:
South Korea will develop rare earths in Vietnam, Australia, Kyrgyzstan and South Africa this year, while cooperating with Japan for overseas development of the minerals, Reuters reported, citing a government report.

The report also mentioned the Asia’s fourth-largest economy is trying to increase its self sufficiency rate of demand for rare earth and other minerals.

Molycorp to double production; share rose

Molycorp Inc, owner of the world’s largest rare-earth deposit outside China, may double its planned production next year, the Bloomberg reported, citing its Chief Executive Officer Mark Smith.

The company’s board asked its management to raise its 2012 output to 40,000 tons from 20,000 tons. The production this year will be 3,000 to 5,000 tons, the report said.
The world excluding China will around 60,000 tons of the mineral this year, of which China will export around 24,000 tons, Smith was quoted as saying.

Shares of Molycorp rose 11.22 percent in New York. The stock has gained more than fourfold since an IPO in July, in which it rasied $394 million.

Latest move by Japan to secure rare earth supply

Japan:
Japan is to step up its search for undersea mineral reserves in the Pacific, the AFP quoted the Nikkei business daily as saying.
The report said the Japanese government plans to begin fully fledged surveys near Minamitorishima during the 12 months from April.
The Japan Oil, Gas and Metals National Corp. has been conducting basic surveys in waters but the government has decided to take direct control of the project, the report said. The overall budged amounts to 6.8 billion yen (US$84 million).
Moves by other Japanese companies:
- Sojitz set up a partnership with Australian mining firm Lynas Corp in November 2010.
- Hitachi Metals and US-based Molycorp agreed to set up a joint venture in December 2010.

rare earth 101: light and heavy

Light rare earths: cerium(铈), lanthanum (镧), praseodymium (镨), neodymium (钕), samarium (钐)
Heavy elements: dysprosium (镝), terbium(铽), europium (铕)
Light rare earths are used in lower-technology applications like oil refining and glass manufacturing.
Heavy rare earth elements are vital to high-tech products, such as iPhones, flat-panel TV, hybrid cars and wind-power turbines.
Source: Keith Bradsher, China Plans to Reduce its Exports of Minerals, New York Times. http://www.nytimes.com/2010/10/19/business/global/19mineral.html

Lynas, the promisting Australian rare earth producer, is based in Mt Weld. “Mt Weld, with its very high grade contains light Rare Earths and is also high in Europium, a heavy Rare Earth.” Source: Lynas Corporation website

Year of the RARE EARTH MINERAL?

A wall Street trader spent half of his wealth aquire raring earth minerals. Here is his letter to investors.

FW: 2011: Year of the RARE EARTH MINERAL

Friends,

The object of a New Year is not that we should have a new year. It is that we should have a new soul.
— G.K. Chesterton

New Year’s Day is just an arbitrary starting point, but it can have a great positive psychological impact if we spend a little time reflecting on changes we want to make. First and foremost it is mental adjustment that we need to focus on. Everything else will flow from there. The way we act, the actions we take and the way we approach the market will all flow from our mind-set.

The most important mind-set for investors to cultivate as we enter 2011 is one of flexibility. We probably all have at least some vague feelings about how the year will play out. Some folks go far beyond that and have very strong beliefs one way or the other about our prospects.

I try very hard to avoid the prediction game. The only thing I know for sure about 2011 is that there are going to be some very good rallies and some very ugly disappointment. My goal is to simply navigate it the best I can, provide some helpful insights and make some money. It would be easier if we just had a slow, steady bull market that lasts for most of the year, but I’m fairly certain that is not going to happen quickly or easily.

So let’s start off the new year with the right mind-set. Let others be hopefully optimistic bulls or doom-and-gloom bears — we will just be open-minded and see how it goes.

Welcome to 2011. Good luck and go get ‘em.

As many of you are aware, at the end of every year I move completely to cash and lock myself in a bank vault for a couple days with all of my money and all of my annual trading records. I carefully review all of my trades and try to learn what mistakes were made and what worked. I physically handle my cash; it helps me appreciate that trading is not simply an intellectual exercise involving numbers, but one which involves real money with real wealth creation and destruction.

This year, I have relocated this exercise 2,300 feet underground inside an abandoned mine at a slag dump site in Monaca, Pa. I have appropriated thirty-seven Chinese nationals from a Scandium Mine in Longba Town, Zhuxi Country, China, that have secured and transported my gadolinite, promethium, cerium and yttrium and other rare earth minerals holdings. As many of you are aware, I recently acquired these minerals, as well as the laborers, on a recent site visit to a rare earth mining facility in the P.B.O.C. My rare earth mineral holdings represent precisely half of my net worth.

Periodically going completely to cash (or, in my case, rare earth mineral deposits) is a great way to refresh your thinking and to regain your objectivity. Day in and day out, we carry the baggage of existing positions, and it’s tough to really look at the market in an unbiased fashion when you have something at stake. It’s only when you are completely on the sidelines that you can gain real clarity, and it also provides a good opportunity to evaluate what you have done right and wrong in the past.

Such is the market and so goes life.

Best of luck in 2011. Yaazzzzz!

Source: New York Times website:
http://dealbook.nytimes.com/2010/12/30/year-end-investor-letter-a-wall-street-parody/