Over the last few months we have heard and read constantly about China controlling the world’s Rare Earth supply chain and rightly so. It’s about time that someone spoke up before it becomes a critical issue. It is also just as important that we pay close attention to the reality that there are also two other metals very critical and strategic to the N American industrial base as well as the Defense industry. Two metals of which China holds huge world dominance over in terms of production and/or export of, and those key metals are Manganese (Electrolytic Manganese Metal; EMM) and Magnesium.
Some Interesting Facts For Consideration:
*China now controls 97% of world’s Electrolytic Manganese Market Production & Exports.
*Since 1998 China’s output of Magnesium has been a world leader (630,000 T in 2008) (*T= tonnes)
China now controls 89% of world’s Magnesium Production & Exports. (China was a net importer in 1993)
*China uses an inefficient and outdated Magnesium process not used in the west but due to a cheap labor force they have always been able to operate at marginal costs. China now faces electrical shortages due to rapid expansion of their economy and coal shortages/costs so those cost increases will be passed on to the consumer.
*China imports Manganese from the four corners of the world, processes it into various products and sells it back to the western world after imposing a 20% export tax. (US adds another 14% import tax) Then the buyer pays trans-oceanic shipping and handling costs as well.
*Ever growing internal domestic demands for Magnesium and Manganese from within China itself are and will continue to set limits on exports over years ahead. (With the potential for further increases to Chinese export taxes in future)
*The US Dept of Defense Strategic Metals stockpiles of Manganese are virtually gone. Sold off!
*Manganese is listed as a key “Strategic Metal” for military hardware according to the US DOD.
*The US is 100% dependent on Manganese imports for the steel industry and its many other applications and you do not make steel without Manganese. US Electrolytic Manganese (EMM) Import Statistics are currently @ 35,000 Tonnes per year.
*Total world production of Electrolytic Manganese in 2008 was 1,190,000 T’s, of that China produced 1,138,000 T’s and domestically consumed 833,000 T’s of that total.
*Manganese is 4th largest traded metal commodity worldwide @ approximately 30 B pounds p/y worldwide.
*Electrolytic Manganese production (EMM) is currently at 2.6 B pounds p/y worldwide, up from 660 M pounds in 2002.
*Worldwide Manganese demand is growing @ 8% p/y, with EMM (Electrolytic Manganese) growing @ 26% p/y for the last five consecutive years.
*There are no substitutions for Manganese in its major applications.
*When Magnesium can be used as a replacement material in Aluminum use the weight drops by one third and when replacing steel the weight drops by three quarters.
The western world, primarily the USA needs to wake up to, and act upon the above facts (many more could be listed) in order to keep their technology, industries and military on an even playing field with the Chinese. Research will show that the US is 100% dependent on imports of 18 different key metals and 90% dependent on 4 others as well.
There is only one current producer of Magnesium in the USA (US Magnesium LLC) whereby the Magnesium is produced from lake water brine which has its facilities located on the shores of the Great Salt Lake in Utah. There are no other Magnesium mines currently in the US. Based on USGC info on known mineral deposits within the US and with at least one active exploration project currently underway it is quite evident there could easily be at least one or more Magnesium mines on the horizon that could supply any and all the domestic needs as well as possibly being an exporter.
As smelters close operations in various parts of the world China is rapidly expanding its own production facilities and import/export capacity of Magnesium. It seems quite timely that one junior miner currently active in the US and presently establishing a project in the US for Magnesium which is located in Nevada, is stating it holds approximately 50 B pounds of open pit-able Magnesium, (“Indicated and Inferred”) grading 10% (average). This one new player is just now on the threshold of its discovery and it appears to be potentially very large in scale. Based on the work of this one lone junior miner’s work so far it is quite likely that there is a very strong potential for a new Magnesium mine in the US, of that I have no doubt, and one that could have a significant impact for employment and economic benefit to the US. In any event it a good sign of things to come.
At the present time there are no Manganese mines in the US and the same potential applies for at least one or more domestic mines of this strategic metal. For any new domestic production in Manganese there is also one current junior miners project in which it is readily apparent from their company data and findings that they could potentially supply all N American Electrolytic Manganese Metal & Manganese Dioxide (EMM & EMD) requirements as well as feeding excess exports to the world. The potential is definitely there as the US has at least this one proven low grade Manganese “Oxide” deposit that was worked fifty years ago and has been known of for many years prior. The deposit in question being at Artillery Peak Arizona and quoted by the USGS as the largest low grade Manganese deposit in the western US. The company in question has ascertained thru extensive testing that it can produce EMM at about half the cost of China and the “Indicated and Inferred” deposit currently stands at approximately 10 B pounds of Manganese with ore body expansion exploration in progress. Again this early stage Manganese project could prove quite timely for the US.
Don’t be confused when it comes to the higher Manganese grades you read about from mines in S Africa, Russia, Australia or Gabon & Brazil. China imports raw ore from among these nations and is currently tripling its imports from Gabon this year alone. These are “Carbonate” Manganese deposits which require costly multiple milling, grinding and processing stages as well as a roasting process (not environmentally friendly) and additives like Selenium (banned in US). Apparently this Artillery Peak ore only needs simple crushing and as it is an “Oxide” Manganese ore it lends itself to low cost recovery. It is also known that this “Oxide” type of ore does not use the Selenium additive nor Sulfuric Acid in the leaching process. Sulfurous water is used and there is a big difference between the two when it comes to environmental concerns and the ore uses no roasting process. Added to the benefits of this type of Manganese Oxide ore and the process used is the fact it uses about one half the amount of electricity that China uses for its process and with no Co2 emissions.
So we know the US has at least one extremely large proven domestic source of “Oxide” Manganese Ore which lends itself to very low cost production of Electrolytic Manganese Metal (EMM) and this large known low grade “Manganese Oxide” deposit in Arizona alone could potentially supply all the needs of the US, Canada and then some.
Here we have “in country” one extremely large Magnesium deposit in mine friendly Nevada and an extremely large Manganese deposit in Arizona (also mine friendly). Isn’t it about time the Government and the investment capitalists awakened and reacted to these facts? Creating jobs, increasing domestic productivity and national security is supposed to be the most important focus of government is it not? Speaking of job creation (better yet jobs lost) I would highly recommend you read the following report on US Protectionism of Magnesium.
*US imposed Anti-dumping tariffs on Magnesium imports in 2005.
*US Die Casting Industry pays 50% above world spot price for its Magnesium imports.
*1675 die casting jobs lost to protect a single US Magnesium producer with about 400 employees.
*Japans Nissan Co says “Unless the US drops the anti-dumping duty that Magnesium is not a viable choice for them in their US market”.
Protectionism Boomerangs (http://www.stltoday.com:80/stltoday/business/columnists.nsf/davidnicklaus/story/C5551B0743FC786E86257701000A6C32?OpenDocument)
As the old saying goes “If it can’t be grown it must be mined” and keeping uppermost in mind that these aforementioned minerals as with other metal resources are finite in our world so don’t expect China or any other nation to be complacent or generous when push comes to shove over time.
If one needed any more reassurance of the prospects for Manganese you need look no further than this report from 2007 and it should be required reading for anyone interested in this metal. “Steel and Manganese Prospects to 2012”(http://www.laplaceconseil.fr/LaplaceConseil/htdocs/admin/upload/File/Steel%20&%20Mn%20prospects%20to%202012.pdf)
Due to a constant flow of new discoveries and technologies, the field of uses for Manganese and Magnesium are in constant flux today. For Manganese it’s new applications in steel, fuel cells, batteries, alloys, electronics, to name a few and for Magnesium it’s not only the lightweight capabilities for the automotive, aeronautical and space programs as well as 100’s of uses in the new fields of injection molding, die casting & alloys, it’s now a key component in a new discovery just announced by MIT for an electrical grid storage battery. This MIT project is truly exciting and will be a boon to Magnesium demand. If utilized, in effect it could be a cost effective grid storage system for electricity in wind farms and solar arrays and other applications. The MIT small version Prototype stores as much as 20 x the energy of a similar Lithium-Ion battery
In a world of constant flux, political tensions, trade disputes, new technologies, new discoveries and finite mineral resources it does a disservice to our nations to let China or any other country dominate or control the world production and supply chain of critical metals. When any supply disruption occurs (and they will) for any multitude of potential reasons, it could and would have an unfathomable impact not only on productivity, employment & military capabilities but also in our vast financial sector. Our Governments & Venture Capital groups should heed the numerous wake-up calls we now receive from various quarters regarding all of the above but are they listening?
There are some concerns like this report from 2007: US Defense Stockpile Is “Ineffective” (http://www.sciencedaily.com:80/releases/2007/10/071005121908.htm)
And more recently from a US Congressman in 2009 on the National Defense Stockpile: (Video)
We all know China is on the move like no other nation in history and others are following close behind so do we wait for them to catch up to the western world and leave us in the dust? The obvious answer is no, we need to become pro-active and get back to finding and building mines for critical and strategic metals for the 21st century, thus expanding employment and rebuilding our economy as well as decreasing our dependence on potentially fragile and uncertain foreign supply lines.
Many of the business world talking heads like to cast doubt on the long term base metals bull market and some speak of their concerns over China having a hard landing but the only hard landing I see is right here at home if we don’t start reinvesting in our own future metals supply. In my own personal estimation and one shared by many others this is a finite metals bull market that is not going away for many years to come if ever.
Perhaps the time has come to contact your Congressman and help get those in government who can do something to change the above outlined scenario become better informed. Self serving high paid anti-mining lobbyists are not the only ones with a voice out there. That is unless there is no outcry from you the public. Time is an issue before it gets worse.
As Always: Thanks for reading.
Ken J. Reser
Research & Investor Relations Consultant
Office Ph: 403-844-2914
Disclaimer: Mr. Reser is an independent Mining Research and Investor Relations Consultant currently contracted to Molycor Gold Corp as well as Rocher Deboule Minerals. No fees were paid for the writing of this personal view commentary and as such it is not a recommendation to own or buys shares. He may own shares a/o options in said companies from time to time. He is not an accredited investment adviser and the opinions expressed are his own.