15 Rare and Valuable Metals

You’ve heard the good old story starting, “A guy walks into a bar,” right? OK, here’s my version of it:

This guy walks into a supply house and goes up to the clerk behind the counter. He says, “Excuse me, but could I buy some lanthanum?”

The clerk is busy smoking a cigarette. He looks the guy up and down and says, “We ain’t got no lanthanum.”

So the guy says, “What? You don’t have any lanthanum? OK, then how about some cerium? Or perhaps you could spare some yttrium? Do you have some cerium or yttrium that I can use?”

The clerk looks at him and shakes his head. “Sorry, pal. Not in stock.”

The guy begins to look a bit desperate. He says, “No? Well then, do you have any europium? Or is there any neodymium? While you are at it, can you please check for praseodymium or samarium? I don’t mean to trouble you, but do you have some gadolinium or dysprosium? And I need some terbium, holmium, erbium, thulium, ytterbium and lutetium.”

The clerk looks at him, shrugs and holds his cigarette out to flick some ash on the floor. “We’re fresh out,” says the clerk.

“Listen,” says the guy. “I hate to be a pest. But I can’t take no for an answer. I have to have these products. Without them, my whole economy shuts down. I’ll be ruined.”

The clerk looks at him and says, “Well, too bad for your economy. I guess you are just plain up the old creek, huh? Better grab a paddle.”

No Funny Punch Line to This Story

Well, dear reader, are you waiting for the funny punch line? Sorry, but there is no funny punch line on this one. This is no joke. I said at the beginning that I would tell you a good old story, not a funny story. And the investment recommendation makes for a good story, or maybe even a great one.

What were those strange-sounding things that the guy was requesting from the clerk? They are called “rare earths,” and for good reason. They are some of the most valuable, critical metals on the face of this planet or any other. Demand is soaring, and supply is…well, supply is not.

Meet the Lanthanides

In this issue of Whiskey I’m looking at an investment opportunity in 15 elements from the periodic table. In formal scientific nomenclature, they are called the lanthanides. More commonly, they are called rare earths.

None of these elements are famous like gold or sliver. None get shipped in giant ore freighters, like iron, aluminum or copper. You sure don’t learn much about these 15 elements in high-school chemistry class, unless maybe it’s the school that feeds lots of kids into MIT or Caltech.

In fact, the only people who really study these elements are master’s- and Ph.D.-level chemists and solid-state physicists. Oh, and national leaders in places like China. But without these elements, much of the modern economy will just plain shut down.

“Just plain shut down? C’mon,” you might say.

But yes, these elements are critical to the modern economy, and that is not hyperbole. We are addicted to rare earths as much as we are addicted to oil, except most people don’t know about the rare earth addiction. But I am going to explain it to.

Say Goodbye To TV Screens, Computer Hard Drives, GPS, and More…

These 15 elements are strategic. These elements play a critical role in petrochemicals, environmental protection, “clean” technology, electronics, automotive applications, optics, telecommunications, computing and defense. They are indispensable to a myriad of intermediate and end uses.

Really, without these 15 elements, you can say goodbye to much of modernity. There will be no more television screens and computer hard drives, fiber-optic cables, digital cameras and most medical imaging devices.

You can say farewell to space launches and the satellites that do everything from show you the weather to offer global positioning down to a few inches. And the world’s system for refining petroleum will break down, too. That’s pretty serious.

If you are curious about the details, I will discuss each of the 15 rare earth elements in greater detail at the end of this article. But this is not a technical paper on chemistry, no matter how interesting the subject might be from that angle.

What Are These 15 Elements?

These 15 elements are all metals, although usually one sees them in powdered form as oxides. They are called rare earths. But how rare are they? Well, they are scattered here and there in the Earth’s crust. But you won’t exactly trip over them as you stroll along the beach.

It is quite rare to find these elements in deposits that are economic to mine. So that is the investment lure.

Rare earths are usually found in rock bodies called carbonatites — for the most part non-geologists have never heard of them. And for our purposes today all we need to really know is that carbonatites are rare.

Once you find a deposit of rare earth elements in a carbonatite, it is still very difficult to mine and mill the rocks and minerals. The processing chain is long and complex. So we are dealing with rare earths in rare rock bodies that are difficult to mine, mill, and process.

Right now, almost all of the world’s supply of rare earths comes from China, which is why our investment opportunity is so appropriate. Unfortunately, I cannot let you know the specific investment opportunity I’m talking about. That simply wouldn’t be fair to the readers of my Energy and Scarcity newsletter. But now you at least know where to look.

Until we meet again…
Byron W. King
April 2, 2008