China

History is typically difficult to see up close, but it’s possible that resources are sparking a great geo-political reordering on par with the mass discoveries of oil that made the Middle East a rising economic power the mid-20th Century.  Witness the country of Mongolia, a geo-political pawn for much of the last hundred years, but now drawing increased interest for its potential resource riches.

A story I found on www.oilprice.com provides the context:

Mongolia’s mining sector has some of the world’s richest deposits of gold and copper, uranium, coal, fluorspar as well as (rare earth elements) REEs such as tantalum, niobium, thorium, yttrium and zircon. According to a 2009 estimation by the U.S. Geological Survey, Mongolia has 31million tons of rare earth reserves, or 16.77 percent of the world’s total, exceeded only by China.

Oh, and coal.

Erdenes, a state firm is overseeing the Tavan Tolgoi (“Five Hills”) massive coal deposit located in the east Tsankhi area of Mongolia’s Gobi desert, estimated to hold over 7.5 billion metric tons of coking coal, essential for making steel, and the currently world’s biggest untapped deposit.

Where’s it gonna go?

Potential suitors include Russian, Chinese, Japanese and South Korean firms, while representatives from 20 global investment banks jetted into sunny [Ulaanbaatar] to make their pitches.

While Mongolia’s economy was traditionally based on herding and agriculture, neighboring China’s rising demand for minerals has underpinned its current mining boom, and Beijing would undoubtedly happily buy virtually all of Tavan Tolgoi’s output.

In terms of geo-politics, resources offer Mongolia an opportunity to recast its uncomfortable relationship as a buffer-state between Russia (dating back to the old Soviet Union) and China, by ushering Japan and South Korea into the picture.

The fact that the U.S. is nowhere mentioned in this article (unless of course you count the resource estimates for Mongolia’s riches, prepared courtesy of the US Geological Survey) speaks volumes.

Interestingly, though, Vice President Joe Biden’s travel itinerary for this month includes a visit to Ulaanbaatar. Might this be an indication that policy makers are finally realizing that resource development will be key to the “Wealth of Nations” in the near future?

Another example of what happens when one country dominates supply of a resource, California-based phosphor maker Intematix, relying on rare earths to produce phosphors used for fluorescent light bulbs and white LEDs, has decided to move some of its manufacturing to China.  The news comes on the heels of Japanese metals fabricator Showa Denko announcing the relocation of its production site to China in an effort to mitigate steep cost increases resulting from Chinese REE export restrictions.

In the mid-to long run, the Chinese geopolitical rare earths power play will undoubtedly accelerate efforts to develop rare earths outside of China (see for example our recent posts about the Alaska priority permits or the promising REE prospecting site in Nebraska).  In the short term, however, we’ll likely see more manufacturers follow the rationale of “if the metals won’t come to you, you’ll have to go to the metals.”

U.S. policy makers should see Intemax’s decision for what it is – a bellwether move for other critical metals and minerals, many of which we could source at home but currently fail to develop, thus perpetuating our dependence on foreign resources. Once again, one need to look no further than page six of the USGS Mineral Commodities Summaries – it sure isn’t a pleasant story, but it should be required reading.

Making national headlines this week, the Elk Creek, Neb. rare earths and niobium prospecting site (we’ve talked about it here and here) may finally be getting the attention it deserves.  The Northwest Mining Association also recently covered this topic on their blog at TheMoreYouDig.com.  With all of this newfound attention, however, comes the larger issue [...]

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