January 2016

Without fanfare, and largely unnoticed at a time when all eyes in our nation’s political circles are on Iowa, the United States Geological Survey (USGS) has released a report that should be required reading for all our policy makers.

Analyzing data collected from 1954 through 2014 for more than 90 non-fuel mineral commodities from more than 180 countries, the study, entitled “Comparison of U.S. net import reliance for nonfuel mineral commodities—A 60-year retrospective,” confirms what ARPN readers know and underscores the findings of our 2012 report “Reviewing Risk: Critical Metals & National Security”: The United States’ reliance on foreign non-fuel minerals has significantly increased over the examined 60-year time frame, both in terms of number and type, as well as percentage of import reliance.  Along with the rise in import dependency came a drastic shift in provider countries.

The authors explain the relevance of their findings:

“Mineral commodities are the fundamental building blocks of civilization. Along with energy, they form an essential foundation upon which modern economies and living standards rest. The changing patterns in net import reliance of nonfuel mineral commodities over the past 60 years are a clear indication that the United States has become increasingly dependent on other countries to supply nonfuel mineral commodities that are important for its economic well-being and national security.

When determining mineral criticality, defining supply risk, and developing mitigation strategies, it is crucial to understand for which commodities a country is experiencing an increase in the [percentage of net import reliance] (NIR%) and to know the amount of the increase, as well as to be aware of shifts in commodity sources and supply chains.

Furthermore, it is important to understand and measure the types, sources, and quantities of commodities imported by the United States compared with what can be competitively produced domestically.” 

The data clearly shows that whereas the number of nonfuel mineral commodities for which the United States was greater than 50% net import-dependent was 28 in 1954, this number has increased to 47 in 2014.  And while the U.S. was 100% net import reliant for 8 of the non-fuel commodities analyzed in 1954, this total import reliance increased to 11 non-fuel minerals in 1984, and surged to 19 in 2014.

These numbers alone paint a troublesome picture, but adding the supplier countries into the mix adds fuel to the fire: Whereas in 1954 the U.S. sourced metals and minerals largely from our trading partners, our diversified supply sources today also include a number of countries that are ranked as “unfree” and “less free” on various indices, thus raising the specter of supply disruptions given the volatility of geopolitical realities.

Considering that much of our over-reliance on foreign minerals is largely self-inflicted, making the exploration and development of the vast mineral deposits we are fortunate to have beneath our own soil should be a key priority in Washington.  Hopefully, our policy makers and their staff can make time to take a break from politics to review USGS’s findings.

 

The new year typically is the time for people to reflect on the preceding twelve months and make resolutions for the new year.  In an exclusive to the Vancouver Sun, our very own Daniel McGroarty, who serves on the advisory board of mining company American Manganese, joins ARPN expert and CEO of American Manganese, in reviewing 2015 as what may well be one of the worst years for the Canadian financial market.

Having posted the world’s third-worst decline, the Canadian financial market now has the dubious honor of having one of the world’s worst investment markets, a distinction it shares with “Europe’s economic basket case” Greece.

Reaugh and McGroarty argue that pointing the finger at the challenging overall climate in global resource market, which undoubtedly impacts Canada’s resource extraction-driven economy, captures only part of the issue. The underlying problem for Canadian companies, they say, is the end of the “uptick trading” rule – a financial market rule with a proven track record of restoring sanity for struggling markets.

Explain Reaugh and McGroarty:

“For reasons never fully explained to the public, regulators reacted to the aftermath of the 2008-09 financial meltdown by scrapping the uptick rule.

The change ushered in a kind of wild-west trading that no Canadian under 80 years old has seen in his or her lifetime. Here’s how it works. Speculators now don’t have to own a share of stock to sell short — they’re free to hit the bids with non-existent shares until the price crumbles. Eventually long-term shareholders feel pressed to sell, allowing the traders to cover their short position — pocketing investor money that could have gone to financing the company. And the company goes on life support without any regard to market fundamentals, or global demand for the resource in question.

The damage to the Canadian economy is considerable. Approximately 100,000 jobs have been lost directly and indirectly from the demise of the Venture Exchange — and who knows how many from the TSX itself?”

Pointing to the United States’ recent positive experience with at least partially reinstating the previously-ditched uptick rule in 2010 – a move that has helped the DOW climb significantly by over 7,500 points – Reaugh and McGroarty call on Canadian regulators to reinstate the rule for Canada so that the resource sector, and other key industries can unleash their full growth potential.

They say “Out with the old, in with the new” - for the sake of restoring market discipline to the resource sector, now would be a good time for Canadian regulators to reverse course and make reinstating the uptick rule their new year’s resolution for 2016.

What could have been a great start of the year for Wyoming’s economy and the United States’ critical resource needs had the U.S. Forest Service (USFS) done its job, feels more like a hangover thanks to the agency. As Laura Skaer, executive director of the American Exploration & Mining Association, writes for the Casper Star Tribune, the [...]