State of the Rare Earth Metal Industry

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Global Trade, Green, Minor Metals

MetalMiner had a chance to catch up with Ed Cowle, President and CEO of US Rare Earths Inc earlier this week. His company owns the mineral rights to one of the United States’ largest resources and reserves of rare earth metals including: lanthanum, neodymium, dysprosium, terbium, and europium. According to their website, “The USGS now recognizes U.S. Rare Earths Inc’s deposits in Idaho, Colorado and Montana as one of only five proven, substantial deposits of REE’s in the world outside of mainland China or Chinese control.

The economics as well as the political landscape involving rare earth mining and production have shifted a bit since the last time we spoke with Ed back in September of last year.

Yesterday, we wondered why US industry hasn’t been more vocal about shoring up raw material supply, particularly with the development of a new rare earth ETF (REE Fund), taking investments in rare earth mining, processing and manufacturing companies and this recent announcement about Dacha Capital Admitted to Minor Metals Trade Association Dacha Capital having joined the Minor Metals Trade Association as a member for its role in “acquiring a physical inventory of strategic metals including Rare Earth Elements. We will actually go on record with a provocative “we fully support the role of ETF’s in this industry (but we’ll come back to that in a follow-up post). Ed believes US industry has started to scramble for strategic supply and he personally has received numerous phone calls and interest in equity investments in his properties at Lehmi Pass and Diamond Creek. The principals of US Rare Earths have a 15-year history with the properties.

Though not everyone in the world agrees that rare earth metals will fall into short supply, nobody disputes the fact that China is the world leader in rare earth production and processing (with 97% world market share). From a strategic sourcing perspective, having more than one supply source IS ALWAYS preferable to having only one (especially one that has tinkered with rare earth metal export policies and even threatened to stop exporting 5 rare earths altogether see this NY Times story for more information).

Molycorp’s announcement of its impending IPO has galvanized the industry and brought the story of rare earth metals to the front pages. In addition, the GAO recently released a key report which as one of its objectives, summarized the US defense system’s dependency on rare earth metals from China. Several articles have appeared including this one highlighting US military concerns regarding raw material stockpiles.

Companies like US Rare Earth stand to benefit from these developments.  According to Ed, “We are trying to be smart and cautious. We spent most of our money on geology consultants, on advocacy as part of the US Magnet and Material Association’s lobbying efforts in Washington, public relations, accountants etc. These efforts have proved successful with the GAO report and several new pieces of legislation including a bill introduced by Rep. Mike Coffman, R-CO calling for a national security stockpile as well as government backed loan guarantees for companies who can mine and process these metals in the US. According to the NY Times, similar legislation will get introduced in the Senate.

In a follow-up post tomorrow, we’ll make our case supporting the role of ETF’s in the rare earth metals industry.

–Lisa Reisman

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