Jack Lifton: Safeguarding Our Future Supply of Rare Earths

“Price may not be as important as security of supply,” says Jack Lifton, an independent consultant with more than 45 years of experience in sourcing nonferrous strategic metals. In the U.S., our dependence on rare metals is undermined by the simple fact that we’re not producing any. Given that China now controls 95% of these ‘technology metals’ and the world is projected to eat 200,000 tons of rare earth metals near 2015, Jack tells The Gold Report we need to jumpstart our own domestic supply chain and, more importantly, build the refineries to process them—rather than sending them to China for refining, which is our only option currently.

The Gold Report: Jack, we hear you’re starting on a documentary, “On the Green Road.” Tell us a bit about it, and what you mean by “Green Road.”

Jack Lifton: I came up with that title because no matter what the attitude of the individual is towards being “green,” there really isn’t any other path for us now. My proposed documentary “On the Green Road” will follow the path that a rare earth metal takes from the mine to the market, so that the consumer can see the necessary steps required to make the technological devices upon which our quality of life depends. If the Green Road is the path to the future we need to get on it and stay on it right now.

Six hundred million people in the Western world are enjoying a life increasingly dominated by technology that we don’t understand. In particular, we don’t understand how it is made. What I see in America is a reluctance to admit that the green road starts in the black earth. We have to mine and refine the minerals and metals into forms which can then be fabricated into forms which can then be made into parts which can then be assembled into the technology devices we use to conserve energy. Everything starts at the mine or at the oil or gas well.

In the West, electronic devices using electricity produced by a huge network of generating devices control our transportation, communication, and our environment. We’ve got a grid that we talk about as if we understand it, but it’s an extremely complicated system. We ignore the fact that we produce and distribute oil and its by-products, metals and their compounds and alloys. Nobody pays attention to that. All we do is say we’ve got to stop doing this and stop doing that. We have to start educating everyone as to how a metal becomes a radio or how a metal becomes a battery, how a battery propels a car.

TGR: I heard you speak recently at the Hard Assets Conference about supply issues in terms of expanding wind and solar technologies. Can you explain some of those supply constraints?

JL: Yes. In the United States, Canada, and Western Europe we are consuming most of the supplies of the technology metals. Now we’re facing six billion people in the rest of the world whose standard of living is growing rapidly and we do not have ten times the amount of materials used to create the good life in the West to create the same standard of living for the entire world.

I don’t mean to be a doomsayer, but if the Chinese government wants its own people to have the standard of living that people in Los Angeles have today, it’s going to mean that China must use all of its own natural resources to improve its standard of living and its quality of life, which will mean that our standard of living will have to decline. Why? Because there are some materials—for example, the rare earths—that China controls 100% of the supply of today. And as China’s economy is growing, China is requiring more and more of these materials for its own domestic economy.

Ten years ago China exported 75% of its production of rare earth metals to the rest of the world. Today it exports less than 25%, even though the production in the last 10 years has more than doubled. So that should tell you what’s going on here. This is not a conflict. This is economic reality.

Now I’m using the rare earths as an example of something I think is very much misunderstood in the West. The rare earth metals were originally discovered in Europe and originally produced commercially en masse in California. The largest rare earth deposit in the world of its kind was discovered in California in 1947. It was put into production and by 1984 that site, Mountain Pass, California, near the Nevada border on M-15, was producing 35% of the world’s rare earth metals and 100% of the domestic needs of those metals here in the U.S. That was 25 years ago. Today that mine is producing nothing and approximately 95% of the rare earth metals are today produced in the People’s Republic of China. The United States imports all its rare earth metals from the People’s Republic of China.

Why? Because between 1984 and 2009, Chinese production of those metals ramped up to the point where the Chinese decided to lower the price so that they could sell more metals so they could mine more metal and employ more people. They basically were able to sell these metals into the market, including to the United States, at a price less than the cost of producing it in California. Well, if you believe in a global economy, then you say, that’s how capitalism works.

There are now other issues arising besides price, which is what shut down the Mountain Pass mines. Price may not be as important as security of supply. Do we really need rare earth metals to maintain our style of life? We cannot force the Chinese to sell them to us. The Chinese have an internal priority to develop their domestic economy. China’s issue is the need of the Chinese economy to grow and to improve the quality and style of life of the Chinese people. We have become so dependent on rare metals in general and rare earth metals in particular in our technological economy and at the same time we’ve simply ignored the fact that we are not producing them in the West.

TGR: Doesn’t the U.S. have plenty of metals? Why aren’t we supplying more of what we need?

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