Strategic Metals - Introduction

A friend of mine, who happens to be an Economics professor at the local college, and I were discussing what has happened to the American Mining Industry in the past few decades. He was lamenting the high commodity prices of the past couple of years. A mutual friend's business was closing because he could not pass along the increasing cost of raw materials to his customers, most of whom were major manufacturing firms. He was astounded the "the American Mining Industry could let this happen". He began chastising the Mining Industry for "price gouging" and taking advantage of the American Customer.

I reminded him that it was Investment Advisors and Economists like him that constantly warned against investing in the mining industry because of its long-term low return on investment. That it was Environmentalists like him that blocked almost every attempt to open new mines, driving up their costs to a point where the low return on investment had become institutionalized. I was tempted to softly strike him between the eyes with my sample hammer to try to jar him back to reality.

I told him that I thought things would get a lot worse for the US and the Western economies, especially in industries that were related to or dependant on "strategic metals". I got the "eyes" that reminded me of a fish that had been in the refrigerated display cabinet of my local supermarket "a bit too long".

We then discussed what a "Strategic Metal" was. Basically we agreed that it is a metal that we need for the long-term development of a beneficial technology. The old definition of "it is a metal that you need and someone else has" also holds true. This was pointed out recently in Congress by US Representative Jim Gibbons of Nevada. He is, to my knowledge the only geologist in Congress. He commented that the US relies on foreign sources for 100% of 17 important metals and 80% or more of many others. In this 80% category falls titanium (used in aerospace and defense), the platinum group metals (used in catalytic converters and fuel cells) and tantalum (a key electronic metal). This is causing concern in Congress (finally) that we are vulnerable to the cut-off or curtailment of important metals required for our defense and economic future.

This seemed to take my friend by surprise, so we started talking about specific metals. He was very proud of his Environmental Activist days in college when he campaigned against the "bad" internal combustion engine and the "acid-rain-producing smelters". The conditions caused by this "activism" drive many of the raw material concerns of today.

A lot of the impact is hidden, unless you understand the industry. Many these metals occur as by-products and not the primary product. For example, take a look at molybdenum. Less than two years ago molybdenum was priced around $3.50 to $4.00 per pound and much of the technology involving it was developed in the US. The US had ample, in fact plentiful supplies, as it was a by-product of pyrometallurgical copper production (smelting). The Western US was full of copper mining and refining and the US produced almost half of the world's molybdenum. Today it is $35.00 to $40.00 per pound and we are lamenting the reduced imports from China as a main reason for driving up the costs. Why? Because our production is about half of what it used to be. Why? Because the smelters were forced to close by people like my Economist Friend, and production was moved overseas. The alternative to pyrometallurgy is hydrometallurgy (like the Solvent Exchange Electrowon process, or SX-EW for short), which has been adopted in the American West, which does not recover the by-products. So we are now dependant on someone else in the world for our molybdenum.

His next question was why should I care? I don't even know how to spell molybdenum; how could it effect me? Well it is used in a lot of applications. It is used (at about 1%) as an alloy in high-temperature-resistant, thin-walled, iron castings, like automotive exhaust manifolds. It allows cars to be made lighter and more durable, reducing the amount of gasoline they require (remember those horrible gas-guzzlers you campaigned against?). It is a key alloy element in metals that have high resistance to halogen attack, especially chlorine and fluorine; not many other things are. You may know the Hastaloy series, which are high molybdenum, nickel and chrome. These alloys have the ability to "live" in a Halogen, especially fluorine, environment. Resistance to fluorine is pretty obtuse, but anytime you use Teflon in an aggressive environment where it breaks down, it liberates fluorine. Welcome to the world of high-tech engines, chemical processing and fuel cells. Are we ready to give up our future in these areas? Specialty steel producers recently released major prices increases tied to the rise in molybdenum prices in 2004 and 2005. Comments by them and service center managers basically said, "yes we are raising prices but we don't expect to lose any customers since molybdenum alloy steels have the best corrosion resistance and end-users can't substitute one grade for another".

Furthermore, is it a real stretch of the imagination that a country that controls a mineral or metal might want a specific technology and the jobs associated with it. If they have not been successful attracting the user industry or industries, what would happen if they just stopped or slowed down exports, on the basis the "material is needed for the home market". Sort of a "bring your technology, production and jobs here and we can supply you with your critical raw material(s) campaign" approach. Seems like it could be a lot cheaper way of attracting economic development than the tax breaks. How many more jobs would likely leave the United States. Jim Gibbons may really have a point.

Over the next few columns I would like to look at a number of metals and associated minerals that may be critical to our future. We will take a look at the specific mineral; where it is used today and possible future uses; where it comes from today; where it used to come from and where it may be possible to still find it today. I will try to group things together in a logical format; especially where the critical metal is found as a by-product of something else. I will also try to identify "non-typical" ore bodies or sources of minerals that may offer opportunity in the future.

Since we have already started Molybdenum (above) I will begin with that one and go on to the following:

Antimony

Bismuth

Chromium

Cobalt

Gallium

Germanium

Graphite

Indium

Lithium

Manganese

Niobium (Columbium)

Platinum Group Metals (Platinum, Palladium, Rhodium, Ruthenium and Iridium)

Rare Earths - Lights (Lanthanum through Samarium)

Rare Earths - Heavies (Europium through Lutetium)

Rhenium

Scandium

Selenium

Tantalum

Tungsten

Vanadium

Yttrium

Zinc

I am not sure what the 17 were that Jim Gibbons cited, but these are the major ones that I have concerns over, and will explain why in my next group of columns.

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