Jack Lifton, a consultant, author and public speaker with more than 45 years of experience in sourcing and recycling minor metals (including the rare earths), shares his views on the current balancing act between technologies production and available natural resources. Mr. Lifton identifies these dwindling resources and the mining companies in which to invest, as he warns of the devastating effect production cuts will have on our everyday lives in "the age of technology metals."
The Gold Report: Jack, you've been speaking a lot at conferences about technology metals and rare earth metals. Can you give us some insights into your theories?
Jack Lifton: I’ve been at about seven or eight conferences around the world this year talking about my theme, which is that (notwithstanding the quality of a technology) all production of technologies is strictly regulated by the amount of the particular natural resources available. And we have very quietly, but obviously, transformed our civilization into the age of technology metals.
We’re not dependent on just technology metals, however. Without rare earth metals, we can no longer make a powerful small motor, a nickel metal hydride battery, a Prius automobile or even lasers. We can’t make cutting tools, military armor, or ammunition without tungsten. We can’t make high-efficiency cooling systems for our power plants no matter what their fuel source—oil, gas, coal, wind, solar or nuclear—without molybdenum. Either we’re running out of oil or we’re running out of rare earth. We’re always running out of something, and that is not the issue. The issue is how much can human civilization produce of something in a given year.
TGR: What’s the difference between a minor metal and a rare earth metal?
JL: Rare earths are a particular group of metals that are from Atomic #57 to 71 and, with the addition of the metals scandium and yttrium, there’s a total of 17 metals designated rare earth. Minor metals were, until recently, considered to have only minor uses. I don’t call them minor; I refer to them as the technology metals.
TGR: So if we look at what’s happening with the economy, knowing that we’re in a recession, which are the minor metals that will still be required going forward?
JL: That’s a good question and I break them down into two groups—by-product metals and primary minor metals. Some of the most important of the so-called minor metals are only found as by-products of base metals. For example, the base metal zinc is our only source in the world of germanium, cadmium and indium metals. The base metal copper is a source of 75% of the world’s molybdenum and rhenium. Copper is also the source of 95% of the world’s tellurium and selenium; and the base metal aluminum is the only source of the metal gallium.
And when they reduce the production of base metals, they also reduce the production of molybdenum, rhenium, selenium, and tellurium. So what? Well, you can’t make a jet engine or a rocket engine without rhenium. First Solar Corporation in Ohio makes cadmium telluride thin film photovoltaic cells; the cadmium comes from zinc, and the tellurium comes from copper. Therefore, the reduction in base metals production has also reduced the production of the key minor technology metals used for solar—and there is no substitute. So right this minute we’re in the situation of running on inventory, which is not large, and recycling is almost non-existent for these materials because their uses are dissipated.
TGR: If we’re running on inventory right now and there’s no possibility of substitute or recycling, why haven’t the prices skyrocketed already?
JL: They’re actually holding pretty well. None of these metals is exchange traded. You can’t get prices for them by looking in the Wall Street Journal. So you need to take a look at the current pricing of tellurium, selenium, gallium and germanium and watch those prices. The reporting on those prices is spotty. So what I’m saying is don’t watch the actual daily pricing reports. Watch the trends. In a period when base metal production is going down, it means minor metal production is also going down, by-product metal, and we’re headed for a crisis here because there isn’t very much and the materials we make from them tend to be ordered on a much longer term.
TGR: As an investor then, the play here is to invest in equity companies that are producing base metals. Would that be correct?
JL: Correct. That’s correct.
TGR: Are there certain of these by-product minor metals that are more critical?
JL: I predicted at a recent conference that copper would hit perhaps as much as $10 a pound by 2011. Everybody said, oh, you’re crazy. But I’ll tell you who didn’t tell me I was crazy—all the men who were on those panels. One of them said to me, you know what’s wrong with your prediction? I said what? He said you’re way low—we know that there are critical technologies that are now based on derivatives of copper.
And these industries are going to get a lot of publicity in the next few years because they’re making cooling systems for power plants or batteries or photo cells, and they won’t be able to get material. I mentioned the Prius a minute ago. Are you aware that every Prius has 64 pounds of copper on board? There are a million of them on the road. That’s 32,000 tons of copper just in the Prius. Do you think you can make a car without copper? Our government has decided to continue the production of cars in Detroit. Every one of them eats more than a ton of steel, almost 100 pounds of copper, magnesium, aluminum. And if that comes from existing inventories, how long will those inventories last?
TGR: Can’t you get the copper from recycling?
JL: Yes, but if you’re going to get it from recycling instead of new production, you’d have to open some smelters. We don’t have that kind of capacity.
TGR: If we’re recycling copper, then we still don’t have these by-product minor metals.
JL: That is correct because they’ve been extracted when they were produced the first time. No new copper smelter or lead smelter has been approved in the United States for years, maybe decades. It takes three years to do the paperwork for a copper smelter, and most copper companies with existing smelters are quite satisfied; they’re not even starting the idea of a recycle. We have in America a dozen smelters for recycling battery lead that produce more than 20,000 tons a year each, more than 20,000. Anyway, the total recycled lead in America each year is over a million tons. Now you don’t hear about that, do you?
TGR: No.
JL: The Prius uses a nickel metal hydride battery based on the rare earth metal lanthanum. The world’s production of lanthanum is almost 100% in the People’s Republic of China. In America, we have at least two mines, that I’m aware of, that can produce lanthanum. Toyota’s been stockpiling lanthanum for some time, it’s been quietly investing; and last week it announced that it had bought a Japanese trading company that specialized in rare earth metals. Through that company, Toyota is now making an investment in a Vietnamese rare earth mine.
TGR: I read that.
JL: Toyota’s research center for North America is right near me. So I see these guys in the drug store and meetings and ask why they are investing in Vietnam. They say the Vietnam government has assured them it wants this kind of mining to happen, and they need the material. They also said they’re very, very concerned about the Chinese cutting off the world from rare earths, which they’ve said they’re going to do. They’re raising the export tax, they’re reducing allocation, and there’s a prediction that Chinese domestic demand for rare earths will equal Chinese production in 2013, which means no more export.
Toyota knows it needs a safe, reliable source of rare earth metal. Now why don’t they come to the U.S., which in 1994 was the world’s largest producer of rare earths? Because it feels the regulatory environment here and the political environment is so anti-mining that there’s no point to it. In the U.S., we have a company called Molycorp, which was owned by Chevron until two months ago when it was sold to a group consisting of Resource Capital of Denver and Goldman Sachs, the financier, in New York.
In 1994, Molycorp’s mine in Mountain Pass, California, was producing 100% of the United States’ needs of rare earths and 34% of the world’s. It was shut down in ’94 because the Chinese came roaring into the market with low prices and put them out of business. Beyond that, there’s only one other rare earth source in North America—a private company called Thorium Energy, which has deposits of rare earths and the metal thorium in Lemhi Pass, Idaho. Thorium is looking to finance it or sell it to a developer. That’s it for North American rare earth sourcing.
Toyota has been so aggressive in sourcing the rare earth metals (lanthanum, in particular), no other car company in the world outside of Japan has an opportunity to go with the nickel metal hydride battery for use in a hybrid car. It’s not about how much there is—it’s about how much is produced. And the amount produced is now insufficient to satisfy the Chinese domestic market and Toyota alone. Japan’s demand for rare earths this year in the summer was projected to be 40,000 tons of total rare earths; however, China has allocated only 38,000 tons for the entire world this year.
As for Ford, I thought it was committed to the lithium battery. I was very, very surprised to find that it’s committed to the nickel metal hydride battery and that the lithium battery is something in the distant future. Now lithium is found as a primary material but it’s found in the mineral spodumine, which is used primarily in the glass industry. It’s very expensive to extract lithium from this mineral for use in batteries. Since 1994, brine mines have been the largest source of lithium for batteries. The largest group of brine mines in the world is in South America.
Stay tuned for Part II of this article.
Jack Lifton is an independent consultant, focusing on the sourcing of nonferrous strategic metals. His work includes exploration and mining, and the recovery of metal values by the recycling of not only metals and their alloys but also of metal-based chemicals used as raw materials for component manufacturing. Mr. Lifton has more than 45 years of experience in the global OEM automotive, heavy equipment, electrical and electronic, mining, smelting and refining industries. His background includes the sourcing, manufacturing and sales of platinum group metal products, rare earth compounds and ceramic specialties used to make catalytic converters, oxygen sensors, batteries and fuel cells. He is knowledgeable in locating and analyzing new and recycled supplies of "minor metals," including tellurium, selenium, indium, gallium, silicon, germanium, molybdenum, tungsten, manganese, chromium and the rare earth metals.
