has an excllent interview with independent mining consultant Jack Lifton on the subject of rare earth metals.
TGR: I heard you speak recently at the Hard Assets Conference about supply issues in terms of expanding wind and solar technologies. Can you explain some of those supply constraints?
JL: Yes. In the United States, Canada, and Western Europe we are consuming most of the supplies of the technology metals. Now we’re facing six billion people in the rest of the world whose standard of living is growing rapidly and we do not have 10 times the amount of materials used to create the good life in the West to create the same standard of living for the entire world.
I don’t mean to be a doomsayer, but if the Chinese government wants its own people to have the standard of living that people in Los Angeles have today, it’s going to mean that China must use all of its own natural resources to improve its standard of living and its quality of life, which will mean that our standard of living will have to decline. Why? Because there are some materials-for example, the rare earths-that China controls 100% of the supply of today. And as China’s economy is growing, China is requiring more and more of these materials for its own domestic economy.
10 years ago China exported 75% of its production of rare earth metals to the rest of the world. Today it exports less than 25%, even though the production in the last 10 years has more than doubled. So that should tell you what’s going on here. This is not a conflict. This is economic reality.
Now I’m using the rare earths as an example of something I think is very much misunderstood in the West. The rare earth metals were originally discovered in Europe and originally produced commercially en masse in California. The largest rare earth deposit in the world of its kind was discovered in California in 1947. It was put into production and by 1984 that site, Mountain Pass, California, near the Nevada border on M-15, was producing 35% of the world’s rare earth metals and 100% of the domestic needs of those metals here in the U.S. That was 25 years ago. Today that mine is producing nothing and approximately 95% of the rare earth metals are today produced in the People’s Republic of China. The United States imports all its rare earth metals from the People’s Republic of China.
Why? Because between 1984 and 2009, Chinese production of those metals ramped up to the point where the Chinese decided to lower the price so that they could sell more metals so they could mine more metal and employ more people. They basically were able to sell these metals into the market, including to the United States, at a price less than the cost of producing it in California. Well, if you believe in a global economy, then you say, that’s how capitalism works.
There are now other issues arising besides price, which is what shut down the Mountain Pass mines. Price may not be as important as security of supply. Do we really need rare earth metals to maintain our style of life? We cannot force the Chinese to sell them to us. The Chinese have an internal priority to develop their domestic economy. China’s issue is the need of the Chinese economy to grow and to improve the quality and style of life of the Chinese people. We have become so dependent on rare metals in general and rare earth metals in particular in our technological economy and at the same time we’ve simply ignored the fact that we are not producing them in the West.
TGR: Doesn’t the U.S. have plenty of metals? Why aren’t we supplying more of what we need?
JL: The United States has the largest distribution of different metals and minerals of any country in the world. The National Mining Association, on their website, nma.org, shows that we have 76 minerals and metals in the United States in sufficient quantity to supply our needs. However, in the last 10 years we have lost our self-sufficiency in between 14 and 25 metals and minerals. Not that we don’t have them, but that we don’t produce them.
The reason for this is that we have been going global in our economic outlook. For example, Chile produces 25% of the world’s copper. Well, the United States was always self-sufficient in copper. Now we’re not. Now we’re beginning to import copper because it’s cheaper to buy Chilean copper than to keep mining more of it in Utah. The U.S. was always self-sufficient in iron. Today we import 30% of our iron ore to make steel here because it’s been, up till this moment, cheaper for us to do this than to produce it here. But now something new is happening. The demand in the rest of the world is increasing at such a rate that the United States must, for the first time in its history, compete.
We need to produce wealth here and not just consume it. One way we can produce wealth is by reactivating, for example, the rare earth mines we have and by starting new ones in the United States and North America. If we don’t start producing our own critical and strategic metals and minerals, we’re going to find that our industry, and anything we want that uses those materials, will be made in other places such as China. We’ll be at the mercy of those economies as to whether they have a surplus to ship us. China is a dynamic growing economy, which has four times as many people as we do and maybe 20% of our GDP. So, on average, they’re way behind us, but they’re growing and they are consuming their own production of energy, minerals, and metals and they do not believe that they must export those things to us, either as raw materials or finished goods if there’s a Chinese demand for them and they’re trying to increase Chinese demand.