The Organic Chart of Rare Metal Opportunities for Investors
I am inaugurating Jack Lifton's Corner by publishing the chart below for the first time today. I call it an "Organic Chart of Rare Metal Opportunities for Investors," because I intend to add to it on a regular basis until it lists all of the rare metals and groups of rare metals, organized by their current and projected future uses. It is my plan, and hope, that the chart will be complete sometime before the end of summer, 2009. The purpose of the chart is to tell you what is happening in the utilitarian space occupied by the end-uses of the metals and how I think those happenings, when combined with the market fundamentals for the metals, pertain to the metals as investments in both the near term and the long term.
I have been working with rare metals as a research and development metallurgist, OEM automotive supply manufacturing executive, rare metals trader, and, now, a consultant, writer, and lecturer on rare metals market fundamentals and end-uses for nearly 50 years. You can contact me through my home page at www.JackLifton.com.
Jack Lifton's Organic Chart of Rare Metal Opportunities for Investors
|Lifton Metal Recommendation||USA|
|Note: all items in red link to a relevant article or source material.|
The highlighted cells on the chart, those with yellow backgrounds and a red colored letter, are linked either to specific, current, descriptive information such as the Commodity Mineral Survey Charts issued yearly by the U.S.G.S., the United States Geological Survey, the data gathering arm of the Bureau of land Management of the U.S. Department of the Interior, or to articles, in the case of an X, B(uy), S(ell), or H(old) recommendation , by me or chosen by me to illustrate a particular use, or related group of uses, of the metal being described as a reason that I have recommended that you buy, sell, or hold investments in the metal in the time frame noted by the column in which the B, S, or H is noted.
I have placed the B(uy), S(ell), and H(old) recommendations in columns indicating my opinion of what you should do currently, at the end of December 2010, December 2015, and December 2020. The future dates correspond roughly with the publication of China's Five Year Economic Plans, which list their goals for China's economic growth during the five year period then to come.
I will link also in those places to my analysis of producing sites for the metals only when I have visited those sites myself and/or spoken at length with executive and technical personnel of the companies. My company analyses will be my opinions of their feasibility as producers of the metals.
This first list of metals includes the base metal, manganese, it is not rare, but neither is it produced today at all in the USA. It is one of 11 metals chosen by the U.S. National Academies in 2007 as critical for the future health of both civilian and military production for the U.S. in the twenty-first century. The rest of the metals noted in today's chart are also on the USNA critical materials listing; the remaining ones will be added and links to articles about their technological and utilitarian end-uses will also be added.
There is a column on the right side listing the import reliance of the United States for each metal in percentage terms. This should open your eyes if you consider how many critical metals are no longer produced, or were never produced in the USA, even though the USA has more variety of metals and minerals than any other nation.
The "production" levels section of the chart, which is on the far right, is intended to make you aware of just exactly how much of a metal is produced globally each year. Note, for example, that although I refer to 2008 as the greatest production volume level year in the history of metals production it was for some metals a lower production year than 2007 or 2006. I will discuss these "trends" only if I think they are important to the investment value of the metal.
The detailed article by me which follows the chart is the introduction to the issues that caused me to create the chart. The table of contents is to help you navigate. There is a lot to learn about rare metals before you invest your hard earned money in them, but I have no doubt that the precious metals of the past are now being replaced permanently by rare metals that have high utilitarian value. Thanks for reading, and I hope you'll stay the course.
Table of Contents
- Base Metals, Precious Metals, Minor Metals, Rare Metals, and now Technology Metals, What Metals belong in Which Categories, and Why?
- Global Metal Production in all time record year
- The Age of the Technology Metals
- Electronic Metals
- Structural Metals
- Power Metals
- Performance Metals
- Byproduct Minor Metals for Thin Film Photovoltaic Solar Cell (PVSC) Manufacturing
- Byproduct Minor Metals for Electronic and Nuclear Uses
- Byproduct Minor Metals for Specialty Steel Alloys
- Byproduct Metals for Environmental Uses
- Some concluding remarks on the future direction of the Organic Chart
I believe that the probability of near-term protracted interruptions in the supply chain of some of the rare metals, which are critical for the continued operation of both the civilian and military sectors of the domestic American manufacturing industry, is a near certainty. The sole reason for the coming interruptions is that the United States is 100% reliant, and unnecessarily so, on imports for its supplies of these rare metals. It will not be possible to determine at this time, May 25, 2009, for just how long the supplies of imported rare metals will be interrupted, yet although it is now impossible to prevent some or all of the interruptions it is still possible to limit their duration. There are three ways to do this: 1.) A national stockpile of critical rare metals can be built up immediately to insure the continuity of supply of the affected critical rare metals for the military and for essential civilian production, 2.) American owned and operated companies can be encouraged and supported financially, through loans and subsidies, to buy and operate production sources of critical rare metals all over the world, and 3.) American domestic production of critical rare metals can be encouraged and, if necessary, subsidized by the Federal Government through programs administered and directed by the Department of Commerce, the Department of Defense, and the U.S. Treasury.
No matter which one or which combination of the above 3 methods of addressing the supply interruption of critical rare metals is, or are, adopted, or even more so if none of them is adopted, rare metal prices will rise due to global demand growth. I will do my best in my organic table, the first version of which follows this introductory article, to keep you abreast of what rare metals in which to invest. I will also do my best to design for you a metric by which to measure individual companies in the rare metal space as specific investment opportunities.
Although it is daily becoming more intrusive in the private sector the American Federal Government's version of free market capitalism cannot seem to find a way to hedge the risk of supply interruption, which I am trying to bring to your attention, because it requires goal-oriented intervention by the American Federal Government, which would need to intervene to create a stockpile based on maintaining a supply of critical materials in quantities sufficient to insure the continued operation first of the manufacturing of military supplies and second to insure the continued operation of the parts of the civilian manufacturing sector, which are critically dependent on the metals to be stockpiled. Unfortunately for Americans this decision making process by the Federal Government would require not only choices but also recognition that many rare metals which are abundant in America are not produced simply for political reasons that are not grounded in fact, common sense, or the future well being and security of the United States.
The irony of the age of technology in which we now live is that the actualization and mass production of the new energy, communication, and transportation technologies that have already changed our society irrevocably are themselves dependent on rare metals, their alloys, and compounds most of which were not even known to exist prior to the Second World War. Most of these materials were unknown because they were rare and hardly produced beyond what was needed to identify them and do academic studies of their properties.
Our civilization has now entered a phase in which most of the rare metals have become strategic and in many cases critical to our structural technologies for producing energy, maintaining communication, and transporting ourselves great distances. Yet the investment community still has little or no understanding of the availability of these metals and takes for granted that price will drive access to supplies of them and that increasing demand will automatically result in an increase in supply. Both of these fundamental western B-school concepts are incorrect when applied to rare metals and the evolution of global capitalism as modified by economic nationalism in those countries, principally in Southeast Asia, now rapidly trying to catch up with the west economically.
The worst misunderstanding of all by the investment community is the misguided notion that the percentage of a metal in the earth's crust is the ultimate measure of the availability of that metal to our civilization. This is nonsense and has led to a monumentally wrong and destructive reliance on a fantasy global free market as the supplier of all natural resources
The only metals available to us are those the ores of which have been concentrated by natural processes into grades high enough for our current mining technology to extract economically and then to refine. The locations of these ore concentrations was set by processes that began and concluded from billions of years ago to millions of years ago and that had nothing whatsoever to do with twenty-first century national boundaries!
A general misunderstanding pervades our culture, even our scientific culture, that engineering progress can be bought with money rather than with time and directed human resources. The sciences behind the exploration for and the development of natural resources occurred more rapidly in the European dominated west, so that the cleanest and safest production of any and all natural resources occurs in the greatest of the western mineral treasure houses, North America and Australia. Yet in the one nation with the single largest diversity of natural resources, the USA, the exploration and development of those resources has been demonized and our self-sufficiency in many rare metals and minerals has been destroyed by activist organizations which bring about, through ignorance, the very ends they say they fear.
I have been involved in the study of the market fundamentals and the development of end-uses for rare metals for nearly fifty years. I did research on the electronic properties and the mass production of devices based on those properties and was a member of the team that originally proved, in the 1960s, that phase changes in certain amorphous materials could be made reversible and repeatable and controlled and so could be used to make electronic switches and memory devices. This led, among other things, to the development of the modern recordable DVD and to the latest types of flash memories. Some of this work took nearly fifty years to produce economically marketable devices.
I am not suggesting that you make investments in the production or use of rare metals with a fifty year horizon. I am suggesting that you look at my recommendations and the reasoning behind them to help you make decisions on investments in the future value of rare metals producers and end-users. I am going to limit my horizons to investments to make now, a year from now, five years from now, and 10 years from now. I am going to suggest that you buy, sell, or hold such investments at each of these points in time, and I am going to explicate why you should do so.
I have above introduced my "Organic Chart of Rare Metal Opportunities," which will begin today by listing some metals, 5 elemental ones and 1 large related group of them, which are critical to America's military for the twenty-first century. I have chosen to begin with these metals, because they are vital to our nation's future, and so both their production and our access to that production are very important. I will link each metal to one or more articles I have written about them in the past three years. Beginning on June 1, I will update the Organic Chart (Thus it will be "organic" or "living") to reflect two types of ongoing process: 1) If I change my mind on whether a particular metal is a good investment at any time I will either change the symbol, B(uy), S(ell), or H(old), at which point the background of the cell containing the symbol will change from yellow to red; it will revert to the original yellow background color a week later, and will be linked to an article or an explanation of my change of mind, or 2) I will add a new metal and its investment potential during my chosen time horizon to the chart. I plan to introduce new metals, and my information on them and my suggestions for investing in them to the chart, once a week. Even so it will take me at least three months to get through the rare metals that are the technology drivers of our civilization.
The Organic Chart will be displayed in adjustable segments each of which shows at least five metals. This is to make it readable, and to allow me to group metals by their main uses such as for electronics or nuclear power. Again I have arbitrarily chosen to begin with the metals chosen by the United States National Academies as critical to American civilian and military industrial production. The very recent book length publications detailing the reasons that the National Academies chose these metals are listed and linked below-they can be read free on the Internet by those who paid for their creation.
There is an urgent need for the government of the United States to adopt the prioritization, in time, of the supply of critical metals and minerals both for private industry and for the 21st century military as identified by the National Academies and published in two separate studies: 1) Minerals, Critical Minerals, and the U.S. Economy (2008) and 2) Managing Materials for a Twenty-first Century Military (2008), which publications catalog the metals and their uses that are likely to bring about economic or security crises if their supply is interrupted and which publications include charts showing that the most likely metals and minerals to be interrupted are always those for which the United States relies all or in the most part upon imports from politically unstable or unfriendly foreign nations and further show that such import reliance on politically unstable or unfriendly nations for critical metals and minerals is increasing dramatically.
I want to now explain how I determine to which category or categories in the chart a metal belongs. This is so you can understand that rare opportunities occur now not only among rare metals but also among base, precious, minor, and technology metals some of which belong to more than one category but all of which are strategic or critical:
2. Base Metals, Precious Metals, Minor Metals, Rare Metals, and now Technology Metals, What Metals belong in Which Categories, and Why?
In the interest of disclosure I may well have coined the usage of the term, "technology metals" as a category to include those, so-called, minor metals, which are critical to the operation and manufacturing of precision and miniature tooling, electronics, electromagnetics, electro-optics, extreme strength alloys, nuclear reactors and the generation of electricity by the conversion of solar radiation, wind, geothermal, and tidal forces. I was scheduled to speak at the Hard Assets Conference in Las Vegas, Nevada in September, 2007, and I was looking for a term to collectively describe the metals, discovered in the last 250 years, and the recent explosion of uses for them, which have now so differentiated the last century from all previous ones that the previous descriptive categories have become obsolete.
Up until the end of the Second World War the average person, and even the average scientist and engineer, would have recognized, if they thought about it at all, only the three broad categories of base metals, precious metals, and minor metals. Minor metals were usually at that time considered loosely to be just those metals for which there were few or no known uses. The term "minor metal" was by no means a description of rarity.
A good example is the metal nickel, which until the discovery of stainless steel was, along with chromium, a minor metal, even though both are far more abundantly accessible to us in mineable deposits, and were known long ago to be so, than many other minor metals.
Look at the chart below of the global production figures of some industrially used metals for 2008. In particular I want you to look at the relative production of iron, the iconic "base metal" and the other base metals known in antiquity, namely copper, lead, tin, and mercury. Note well that even though copper was surely the first "base metal" discovered it was originally a "precious" metal along with gold, because these two metals alone were found native, or elemental, in amounts that could be accumulated and worked. Today the production of both of these metals is dwarfed by that of iron, which, by the way, is believed to have been originally found as native iron, the residue of meteor strikes. Literally stainless steel ornaments and blades have been found, the manufacture of which predates any refining of iron from ore, and these objects were clearly treated by their owners as made from "precious" metal. We know that in the 14th century BCE, for example, in a recorded transaction in the middle-east, 40 weights of silver, already then a "precious" metal, were traded for one weight of (meteoric) iron.
The point is that the definitions of metals as base or precious has been flexible with time and has traditionally been based on the availability of the native metal. It is only since the 19th century that there has been an understanding of the actual processes involved at the atomic and molecular levels of extracting and purifying metals.
Beginning in 1800 it was becoming increasingly obvious that there would need to be an additional category for metals as their numbers increased rapidly from less than 10 in 1700 to as many as 50 in 1900. The term "minor metals" began to be widely used in the nineteenth century to describe metals, which no matter how abundant they might be, had few, if any, or only "minor" uses. This situation continued until after World War II when the development and study of the new science of solid-state electronics made it obvious that some technologies were critically dependent on formerly minor metals. The new technologies could not be actualized without the use of the properties of specific minor metals, alloys, compounds, and forms. The atomic age, itself, was completely dependent on the natural minor metals uranium and thorium as well as the new man-made metal plutonium. Uranium and thorium had been minor metals in 1939 with thorium having more uses but still not enough to be classified as anything but a minor metal.
3. Global Metal Production in all time record year
Look now at the production figures in the chart below. I am going now to define a rare metal as one the annual production of which is equal to or less than that of lithium in 2008 (27,400 metric tons)as reported by the USGS in its 2009 Commodity Mineral Survey for Lithium.
One missing rare metal is tellurium the production figure for which in 2008 is unknown but was certainly less than 800 metric tons and that only as a byproduct mostly from copper mining. I will discuss tellurium later on in the summer (2009) when I add tellurium to my chart as a rare and critical technology metal address technology metals for solar use.
The dawn of the twenty-first century requires a nomenclature change, because not all minor metals are rare metals, while all of the rare metals are technology metals. Some of the technology metals are not "critical" technology metals, because their uses can be substituted by other metals even some in other categories. Copper and silver, for example, can be substituted for gold and palladium in almost all of their industrial uses as a very good conductor of electricity. Let's now turn to:
4. The Age of the Technology Metals
Everyone is talking about minor metals but no one seems to know exactly which ones they are.
It is clearly not enough to define the minor metals as what's left over after you subtract the major metals. If you define a minor metal, as I do, as a metal the uses for which are minor, then you can see immediately that you must also add to that definition. Specifically you must cite the precise historical period of which you are speaking, because the question of which metals are "minor" depends on "when" you are speaking of as well as upon "which" metal you are discussing. The migration from minor metal to rare metal has also been flexible. Aluminum was a rare and minor metal from its discovery at the beginning of the nineteenth century until the Hall-Heroult process and the dynamo made aluminum into a base metal.
A common contemporary definition for all metals, in general, is "a chemical element which at room temperature and pressure conducts electricity."
Beginning in the ancient world, and up until the mid-19th century, this definition would have been meaningless, if for no better reason than the fact that up until then electricity had not yet been "discovered."
Therefore, the ancient and early modern worlds used a definition of metal that is even today still in popular use. By using the word "metal" an ordinary person is describing a durable material that can be "worked" into shapes by heating and hammering or by melting and pouring into a mould. Additionally, it is assumed that a metal will be heavy and can be polished to be shiny. Historically, metals were usually materials that could hold an edge. Their use to support structures was unknown in the ancient world. Stone and wood were the principal building materials of human civilization until the third quarter of the 19th century.
Archaeologists have by tradition named the developmental stages of our civilization by the most common materials used at a given time to make tools and weapons, not shelter. There was first the Stone Age, then the Bronze Age, and then the Iron Age. The Iron Age ended, in my opinion, in 1865 when Henry (later Sir Henry) Bessemer built the first of his "converters." We now call this device a blast furnace and it was the first method of mass-producing the alloy of iron and carbon called steel in a consistent reproducible way. By the end of the nineteenth century, ships, buildings, tools, and weapons of all sizes were principally made from steel and the Iron Age had ended.
Just to put into perspective how rapidly the age of steel was being displaced even as it grew in breadth; it is instructive to note that the second of the great structural metals, which was completely unknown to the ancients, was aluminum. As I mentioned above it was a rare and precious metal in 1865, a minor metal from then until 1885, when the process was discovered to produce it in mass and cheaply. It became a base and major structural metal from 1900, when the fruits of 15 years of technical innovation and development in aluminum alloys began to bear fruit
In order to know that a metal existed it had, of course, to be first discovered. Then an accessible ore body containing it had to be found. And then techniques had to be developed so that the metal could be refined, purified, and studied both scientifically and practically.
In recent times, the 20th century in particular, the impetus for such study has been overwhelmingly the manufacturing of the implements of war. Some examples are repeating firearms, aircraft, and submersible ships of war, high performance internal combustion engines, jet engines, rocket motors, radio, radar, and nuclear weapons.
Note' the above uses are cumulative. Once discovered, all of these have continued to be used, and so the demand for the once minor metals grows.
It is clear that, in fact, there are few or no permanently minor metals, only metals the uses for which go from minor to major and thus increase in value the critical metal components. Therefore one way to understand this asset class is by reviewing some principal, but certainly not all inclusive, categories of uses of metals.
- Electronic metals such as silicon, germanium, gallium, indium, rare earths, hafnium, tellurium, and selenium
- Power metals used to construct aspects of coal, oil, nuclear solar, and wind electric generators such as molybdenum, zirconium, hafnium, silicon, gallium, indium, neodymium, praseodymium, dysprosium, terbium, selenium, tellurium, uranium, and thorium
- Structural metals used to make high performance alloys such as chromium, vanadium, tungsten, molybdenum, manganese, nickel and cobalt, silicon and aluminum, and
- Performance metals used in situations requiring extremes of operation such as titanium, rhenium, nickel, scandium, and yttrium.
Investing in metals by usage category requires knowledge of the synergies of metal production, mining in particular.
For example there are the byproduct metals; i.e., those which are not produced in primary mines but are found overwhelmingly only as traces in the ores of primary metal mines. In fact the majority of all of the metals are produced in this manner.
5. Byproduct Minor Metals for Thin Film Photovoltaic Solar Cell (PVSC) Manufacturing
Metal - Source Metal
- Germanium, Indium - Zinc Cadmium
- Selenium, Tellurium - Copper, Lead
6. Byproduct Minor Metals for Electronic and Nuclear Uses:
Metal - Source Metal
- Gallium - Aluminum
- Hafnium - Titanium, Tin
- Zirconium - Titanium, Tin
- Thorium - Rare Earths
7. Byproduct Minor Metals for Specialty Steel Alloys:
Metal - Source Metal
- Molybdenum - Copper
- Rhenium - Molybdenum
8. Byproduct metals for environmental uses:
Metal - Source Metal
- Rhodium - Platinum
- Lithium - Brines (High salt "sludges")
9. Concluding remarks on the future direction of the organic chart
The most important thing to remember about byproduct minor metals is that the tail doesn't wag the dog. Unless the primary metal is produced in large volume there is no production of the byproduct. So, for gallium, for example, which is only found as a trace (5 parts per million on average) in bauxite, the primary ore of aluminum, its production is limited to around 200 tonnes a year at this point, simply, because that is the amount that can be recovered from 39 million tonnes of aluminum, last year's production (2008).
I was asked last year "What's the play in gallium?" My answer is aluminum. All of the Gallium is produced from bauxite and no large end user is dominant.
But if I am asked "What's the play in lanthanum?" I would answer "Either it is one of the few publicly traded light rare earth mining ventures -the only possible sources of lanthanum- or a well managed profitable manufacturer of nickel metal hydride batteries for the construction of which lanthanum is critical - you can't make the battery without it. One choice in this latter category would be Toyota-the world's largest consumer of Lanthanum for the production of the nickel metal hydride batteries for its best-selling Prius hybrid.
This type of answer is what you should get from your mining analyst or broker offering you opportunities in "minor metals."
If an investment you are asked to look at involves a technology based on a "minor meta", which today may be simply a metal of which you have never heard, you must ask if the production volume of the products of the technology is limited by the availability of the minor metal.
If so, such as the limitation of the total number of thin film photovoltaic solar cells that can be built with the unknown, but limited, small amount of the copper/lead byproduct, tellurium that is produced annually, then you must ask yourself whether your investment is just following a current "trend' or if it can have increasing value in the future if and only if new sources of tellurium are found.
Unfortunately I continue to hear that resources of all minor metals are "earth fundamental", e.g., that the rare earth metal, neodymium, is more common than lead in the earth's crust, so that there is no need to worry about the ultimate supply.
This type of statement is misleading and is usually intended to be so!
Only metal ore deposits that are economically feasible, i.e., concentrated in place in large quantities; accessible logistically; and recoverable by known technology with a cost less than their selling price can be considered as a source of a metal!
There are no economical primary mines for Gallium, Indium, Germanium, Selenium, Tellurium, Cadmium, or any individual Rare Earth Metal, for example.
Let me say in conclusion that today the minor metals are really defined by the technologies they have brought into existence, and that I expect to shortly see "metal technology funds" come into existence so that the information an investor would need to calculate and manage his risk can be packaged in a fashion that will illuminate and quantify the natural resource limitations inherent in the expansion of any modern technology from the laboratory to the consumer.
I believe that the Age of Steel (and the structural metals, aluminum and magnesium) has ended, and we have now entered the Age of The Technology Metals, formerly the minor metals. The challenge is to find the technologies for which the metals are or can become available. Investing in those searches is the best play in minor/technology metals.
The chart above, which I am calling The Organic Chart of Rare Metal Opportunities for Investors, will be published weekly as a perpetually updated series. While I am creating the complete series, which will be around 8 charts following five metals or groups of metals each, I will be simultaneously reviewing each metal weekly and updating existing charts as I deem necessary.