“At Great Risk” – Rare Earths
Source: Agora Financial’s 5 min. Forecast, 2/2011
By: Addison Wiggin
“China’s dominance in the rare earths market will have profound implications for U.S. national security in the next couple of years” warns a new report from the American Security Project.
“As it is, some analysts already believe it is too late to avoid a global shortage of rare earth metals, placing the U.S. in great risk. The U.S. needs to take steps to remedy this situation.”
and
The significance isn’t what’s being said so much as who’s saying it.
The American Security Project is a lesser-known think tank in Washington, but it has some heavy hitters on its board — like Richard Armitage, who was Colin Powell’s No. 2 at the State Department; former Sen. Chuck Hagel (R-Neb.); and retired Adm. William Fallon, the first Navy officer to run U.S. Central Command.“Although the Pentagon claims that the U.S. only uses 5% of the world’s supply of rare earth metals for defense purposes,” the report says, “the fact is that the U.S. is completely reliant on China for the production of some of its most powerful weapons.”
The math behind the warning: China accounts for 97% of current world production. That leaves only 3% coming from everywhere else. If the Pentagon uses 5% of current production… well, you see the problem.
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The AmSec report concludes with several recommendations for the U.S. government…
- Build a rare earths stockpile, which Japan and South Korea have already done
- Develop new mines in the United States and Canada
- File a dispute with the World Trade Organization
- Develop new technologies that don’t rely on rare earths.
The problem with all these recommendations is that they require time — which the report acknowledges: “The U.S. is currently working on reopening the mine at Mountain Pass, Calif., and expects it to be fully operational by the end of 2012.”
The report is referring to the mine owned by Molycorp, one of several operators of non-Chinese rare earth mines that sold off hard earlier this month, after an epic run-up late last year. Molycorp is in the same boat as all the other familiar names in the sector. They won’t be in production for another 12-24 months, at least.
The race to become the first producing rare earth operator outside China is exactly why Byron has become so intrigued by one “dark horse” company that may get there first, against all odds. “To say I’m floored by this stock idea is a significant understatement,” Byron commented last week at our editorial meeting. This time around, people were listening.
