American Resources followers know their Rare Earths from their rare metals, and that distinction is key to understanding a strategic investment that’s getting a lot of attention right now: Molymet of Chile’s $390 million investment in Molycorp, the U.S. Rare Earths miner. But while most analysts are looking for the commercial synergies in the deal, I’m intrigued by what it might tell us about the evolution of U.S. public policy on strategic metals.
What do I mean? Many metals analysts speak often of Molycorp’s mine-to-magnets vertical integration strategy; what I find interesting in the Molymet deal is the first hint of what might be a “horizontal” strategy, bringing into one company a basket of strategic metals, ranging from Molycorp’s Rare Earths to Molymet’s Rhenium and Molybdenum.
While Rare Earths, Rhenium and Molybdenum have not historically been a part of the U.S. National Defense Stockpile, all are on various DoD “study lists” of critical materials, and the establishment of a Rare Earths “inventory” is an element in Congressman Mike Coffman’s proposed bill. According to the new USGS Mineral Commodities Survey, the U.S. is 86% foreign-dependent for its Rhenium supply; Rhenium can be recovered during Molybdenum production. And as we know, even with the return of mining at Molycorp’s Mountain Pass Mine, the U.S. is still more than 99% dependent on China for its Rare Earths. (Interestingly, the Molymet investment brings Molycorp full circle, as it bought the Mountain Pass property in 1950 to mine for Molybdenum, light years before the mini-computer/Internet era tech boom would vault Rare Earths into high demand.)
Wheels are turning in the defense industrial sector on how to source critical metals. While public policy coalesces, the Molycorp-Molymet deal may offer a first hint from the private sector on how a multi-metal mining operation might position itself to meet strategic resource needs. American Resources will follow the policy debate for signs that awareness on the strategic resource issue is beginning to grow.
