The US Geological Survey recently updated its list of America's import reliance in terms of minerals.
There are 21 upon which the US is 100% reliant. Of those, China is a supplier of 10. They are arsenic, fluorspar, gallium, graphite, indium, mica, quartz crystals, and rare earths, with scandium and yttrium listed separately, and also in that category.
It is the rare earths that concern us today, with some commentators suggesting that - with the threat of a trade war - Beijing could take America's queen with one daring move: cut off America's access to rare earths. (The same could apply, in varying degrees, to others such as those listed above - and even, for example, antimony where the US is dependent in imports for 85% of its supply and China is the big banana.)
Two years ago the US Government Accountability Office warned, in its annual report to Congress, that the Department of Defence, although a major user of rare earths for a range of armaments and other equipment, had still not managed to get around to taking a comprehensive approach on classifying mineral supplies according to whether they were "strategic" or "critical". Indeed, the DoD had promised to do so in 2008 but had failed to follow through.
Cutting off rare earth supplies would be, one writer suggested, the "nuclear option" to stymie Donald Trump's standing up the China over issues such as the severe trade imbalance and thefts of technology.
But that would not really work. In 2010 we all thought China could pull the same trick on Japan. That was the year the two countries got into a tiff over some disputed islands. Japan was China's single biggest customer, and a range of industries was dependent on rare earths from China, so Beijing thought it could bring Tokyo to heel with an export ban.
Of course, it did have an impact - but only a limited one. On the one hand, Japanese companies looked to finding ways to either reduce the amounts of rare earths used in various applications or substitutes, as well as announcing plans for rare earth recycling (in Vietnam, for example); on the other hand, they were the main customers for the large amount (somewhere up to a third of world supplies) that were mined in China (sometimes illegally) and were then smuggled out of the country.
The same, to some extent, would apply to the US (and at least Lynas Corp is now providing a sizeable option to buying from China, although not with some of the key heavier rare earths). But America's position has been compromised by the shuttering of the Mountain Pass mine after Molycorp went under.
But here where that story gets complicated. Last year Mountain Pass was sold to a consortium, led by Shenghe Resource Holdings, a rare earth miner and processor based in Chengdu. The purchase price was US$20.5 million, but it has been reported that Shenghe has sunk $50 million into the consortium. That group does include US fund managers, but Shenghe is the one with the rare earth expertise and will presumably manage the revival of Mountain Pass.
Back in 2010, when Japan was under the gun, Tokyo (as well as encouraging the "replace, reduce and recycle" initiatives) also backed exploration of the country's EEZ for seabed resources. With the collapse of rare earth prices, though, that story dropped out of the headlines.
But this week the story is back. The Nikkei news service is reporting a discovery of more than 16m tonnes of rare earth mineralisation near the island of Minami-Torishima, located 1900km southeast of Tokyo.
The University of Tokyo team leader published the findings on a British scientific journal's website. According to Nikkei, they claim they have also "come up with the technology to allow the resources to be extracted commercially".
The research team collected samples from 25 locations, and the report says that the team is confident the deposit has enough dysprosium to supply Japan for 730 years and enough yttrium for 780 years.
But, if there is a junior out there looking for a new story, let me (a la "The Graduate") just say one word to them: Idaho.
The Idaho Geological Survey, based in Moscow - that's Moscow, Idaho, not the other one - says the state is an obvious target for exploration because it has several known rare earth deposits. In the 1950s the US Geological Survey concluded that the Lemhi Pass region had the largest thorium reserve in the country "and also hosted an equal amount of rare earths".
That's a story that might just be enough to get investors (especially in North America) to get out their chequebooks. Topics
PEK Price at posting:
4.0¢ Sentiment: Buy Disclosure: Held
(20min delay)