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Sexy metal: the missing element in the Korean puzzle
By Pepe Escobar
From Asia Times
This may not be about condos on North Korean beaches after all. Arguably, the heart of the matter in the Trump administration's embrace of Kim Jong-un has everything to do with one of the largest deposits of rare earth elements (REEs) in the world, located only 150 km northwest of Pyongyang and potentially worth billions of US dollars.
All the implements of 21st century technology-driven everyday life rely on the chemical and physical properties of 17 precious elements on the periodic chart also known as REEs.
Currently, China is believed to control over 95% of global production of rare earth metals, with an estimated 55 million tons in deposits. North Korea, for its part, holds at least 20 million tons.
Rare earth elements are not the only highly strategic minerals and metals in this power play. The same deposits are sources of tungsten, zirconium, titanium, hafnium, rhenium and molybdenum; all of these are absolutely critical not only for myriad military applications but also for nuclear power.
Rare earth metallurgy also happens to be essential for US, Russian and Chinese weapons systems. The THAAD system needs rare earth elements, and so do Russia's S-400 and S-500 missile defense systems.
It's not far-fetched to consider "The Art of the Deal" applied to rare earth elements. If the US does not attempt to make a serious play on the Democratic People's Republic of Korea's (DPRK's) allegedly vast rare earth resources, the winner, once again, may be Beijing. And Moscow as well -- considering the Russia-China strategic partnership, now explicitly recognized on the record.
The whole puzzle may revolve around who offers the best return on investment; not on real estate but sexy metal, with the Pyongyang leadership potentially able to collect an immense fortune.
Is Beijing capable of matching a possible American deal? This may well have been a key topic of discussion during the third meeting in only a few weeks between Kim Jong-un and President Xi Jinping, exactly when the entire geopolitical chessboard hangs in the balance.
So metals are not sexy?
Researcher Marc Sills, in a paper titled "Strategic Materials Crises and Great Power Conflicts," says: "Conflict over strategic minerals is inevitable. The dramas will likely unfold at or near the mines, or along the transportation lines the materials must travel, and especially at world's strategic choke points the US military is now generally tasked to control. Again, the power equation is written to include both control of possession and denial of possession by others."
This applies, for instance, to the Ukraine puzzle. Russia badly needs Ukraine's titanium, zirconium and hafnium for its industrial-military complex.
Earlier this year Japanese researchers discovered a deposit of 16 million tons of rare earth elements (less than the North Korean reserves) beneath the seabed in the Western Pacific. But that's unlikely to change China's -- and potentially the DPRK's -- prominence. The key in the whole rare earth element process is to devise a profitable production chain, as the Chinese have done. And that takes a long time.
Detailed papers such as "China's Rare Earth Elements Industry," by Cindy Hurst (2010), published by the Institute for the Analysis of Global Security (IAGS) or "Rare Earth in Selected US Defense Applications," by James Hedrick, presented at the 40th Forum on the Geology of Industrial Minerals in 2004, convincingly map all the connections. Sills stresses how minerals and metals, though, seem to attract attention only in mining trade publications: "And that would seem to explain in part why the REE contest in Korea has eluded attention. Metals just ain't that sexy. But weapons are."
Metals are certainly sexy for US Secretary of State Mike Pompeo. It's quite enlightening to remember how Pompeo, then CIA director, told a Senate Committee in May 2017 how foreign control of rare earth elements was "a very real concern."
Fast forward to one year later, when Pompeo, taking over at the State Department, emphasized a new "swagger" in US foreign policy.
And fast forward again to only a few weeks ago, with Pompeo's swagger applied to meetings with Kim Jong-un.
Way apart from a Netflix-style plot twist, a quite possible narrative is Pompeo impressing on Kim the beauty of a sweet, US-brokered rare earth elements deal. But China and Russia must be locked out. Or else. It's not hard to visualize Xi understanding the implications.
The DPRK -- this unique mix of Turkmenistan and post-USSR Romania -- may be on the cusp of being integrated to a vast supply chain via an Iron Silk Road, with the Russia-China strategic partnership simultaneously investing in railways, pipelines and ports in parallel to North-South Korean special economic zones (SEZs), Chinese-style, coming to fruition.
As Gazprom's Deputy CEO Vitaly Markelov has revealed: "The South Korean side has asked Gazprom... to restart a key project -- a gas pipeline across North Korea, an umbilical cord between South Korea and the Eurasian landmass
Since key discussions at the Far East Summit in Vladivostok in September 2017, the roadmap is set for South Korea, China and Russia to attach the DPRK to Eurasia integration, developing its agriculture, hydropower and -- crucially -- mineral wealth.
As much as the Trump administration may be late in the game, it's unthinkable Washington would abandon a piece of the (metal) action.
Mountain Pass sells for $20.5 million
The new owner of the Mountain Pass rare earths mine in California is MP Mine Operations LLC – a Chinese-led consortium including rare earths miner Shenghe Resources.
The mine, which was the only functioning rare earths mine in the US before it went bankrupt in 2015, went up for auction on Wednesday.
The eventual sale price was significantly higher than ERP's original "stalking horse" offer of $1.2 million back in April.
MP Mine Operations (MPMO) put in a winning bid of $20.5 million, half a million above the competing consortium made up of ERP Strategic Minerals LLP, Swiss private equity firm Pala Investments and Peak Resources (ASX:PEK), an Australian rare earths company. The losing consortium also includes two creditor groups from the bankruptcy of Molycorp, the mine's former owner.
The eventual sale price was significantly higher than ERP's original "stalking horse" offer of $1.2 million back in April. The deal still faces scrutiny from regulators, who may take issue with foreign ownership of a strategic asset. Rare earths are used in a number of important economic and strategic applications including magnets for green technologies like wind turbines and hybrid cars, aircraft engines and computer hard drives.
Mountain Pass was the only rare earths mine operating in the United States, before it went bankrupt in 2015 – a victim of low rare earth oxide prices. At the time Molycorp listed $1.7 billion in debt. Through bankruptcy proceedings Molycorp was restructured, allowing it to receive $130 million in debt financing.
Molycorp then moved Mountain Pass into care and maintenance, while continuing to serve customers through its production facilities in Estonia and China.
Mountain Pass was expected to be America’s flagship source of rare earths. In 2010 Molycorp sensed an opportunity to capitalize on reduced rare earth oxide exports from China – which supplies about 90 percent of the world's rare earth minerals – which had caused the prices of REOs to spike. When China subsequently relaxed export rules, however, prices fell, leaving Molycorp to pay the bill for a $1.25 billion state-of-the-art processing facility.
Hit by lower rare earth prices, Molycorp warned it might not have enough money to remain in business. Three months later, it filed for chapter 11 bankruptcy protection.
Rare Earth Elements
What are Rare Earths?
The Japanese call them “the seeds of technology.” The US Department of Energy calls them “technology metals.” They make possible the high tech world we live in today – everything from the miniaturization of electronics, to the enabling of green energy and medical technologies, to supporting a myriad of essential telecommunications and defense systems. They are the elements that have become irreplaceable to our world of technology owing to their unique magnetic, phosphorescent, and catalytic properties...
From Wikipedia, the free encyclopedia Mountain Pass rare earth mine
The Mountain Pass Rare Earth Mine is an open-pit mine of rare-earth elements (REEs) on the south flank of the Clark Mountain Range, just north of the unincorporated community of Mountain Pass, California, United States. The mine, owned by MP Materials, once supplied most of the world's rare-earth elements. MP Materials is re-emerging as a best-in-class, globally competitive Rare Earths producer...In 1998, chemical processing at the mine was stopped after a series of wastewater leaks. Hundreds of thousands of gallons of water carrying radioactive waste spilled into and around Ivanpah Dry Lake.
In the 1980s, the company began piping wastewater as far as 14 miles to evaporation ponds on or near Ivanpah Dry Lake, east of Interstate 15 near Nevada. This pipeline repeatedly ruptured during cleaning operations to remove mineral deposits called scale. The scale is radioactive because of the presence of thorium and radium, which occur naturally in the rare-earth ore. A federal investigation later found that some 60 spills—some unreported—occurred between 1984 and 1998, when the pipeline was shut down. In all, about 600,000 gallons of radioactive and other hazardous waste flowed onto the desert floor, according to federal authorities. By the end of the 1990s, Unocal was served with a cleanup order and a San Bernardino County district attorney's lawsuit. The company paid more than $1.4 million in fines and settlements. After preparing a cleanup plan and completing an extensive environmental study, Unocal in 2004 won approval of a county permit that allowed the mine to operate for another 30 years. The mine also passed a key county inspection in 2007.
This CEO Wants Trump to Nationalize the Only Rare-Earth Mine in America
Sally Bakewell and Steven Church
American Elements’ Silver says he met top Trump deputies
‘The staff understood the urgency of the matter,’ he says
The head of an advanced-materials manufacturer said he met with President Donald Trump’s chief strategist, Steve Bannon, on Monday to persuade him that the U.S. should nationalize the country’s only mine of rare earth minerals, which are used in military applications.
“The staff understood the urgency of the matter,” Michael Silver, chief executive officer of closely held American Elements Corp., said in a phone interview after his White House meeting, which he said was also attended by presidential deputy assistant Sebastian Gorka and White House Chief of Staff Reince Priebus.
The rare-earth mining operations in Mountain Pass, California, the last remaining assets of bankrupt Molycorp Inc., were bought in June by a group that drew objections from rival bidders, who said the winner has ties to the Chinese government.
The mine should be converted to a national laboratory “dedicated to rebuilding America’s rare-earth mining industry so the world knows it is safe to build high-tech manufacturing plants in the U.S.,” Silver said.
The production of rare-earth minerals -- used in applications from hybrid electric cars to iPhones and military hardware such as night-vision goggles and guided weapons -- is dominated by low-cost Chinese companies. Molycorp Minerals and its parent, Molycorp Inc., filed for bankruptcy in 2015 after prices for the minerals fell below the mine’s costs to produce them.
Silver said he was invited to brief the president on the issue on Tuesday. The White House didn’t respond to requests for comment.
Silver said he’s proposing the U.S. government apply the Takings Clause of the 5th Amendment and acquire Mountain Pass by eminent domain.
Any attempt to make the mine commercially viable would fail because no one can compete with China, which accounts for almost all the world’s rare-earth production, Silver said.
“The perception is the only place in the world you can go for reasonably priced rare earth materials for your product is in China,” he said. “You have to change that perception.”
Los Angeles-based American Elements manufactures metals and chemicals and has a catalog of more than 15,000 products, according to its website. Silver said his company did business with Molycorp before its Mountain Pass became idle. Silver was among the first Americans to set up a production and distribution supply chain from rare earth mines in Inner Mongolia and China to North America and Europe, according to documents on the company website.
The sale of Molycorp’s last remaining assets to one of two groups of creditors that had feuded over the facility was approved after complaints that the winning bidder, which is majority-owned by JHL Capital Group LLC and QVT Financial LP, had recruited an affiliate of Shenghe Resources Holding Co., which allegedly is tied to the Chinese government.
The Chinese mining company, Leshan Shenghe Rare Earth Co., owns nearly 10 percent of the business that took over the mine and mineral rights, MP Mine Operations LLC, according to court records. Leshan’s stake doesn’t give it voting rights, MP Mine said in the filing.
JHL Capital founder James Litinsky, who has been helping lead the effort to revive the mine, declined to comment.
Efforts to reopen Mountain Pass have been hampered by a two-year fight for control of the assets between a group of low-ranking noteholders, led by JHL, and distressed debt giant Oaktree Capital Management LP.
Molycorp went into bankruptcy while trying to perfect an advanced, experimental ore processing system that cost hundreds of millions of dollars. Oaktree provided the loans that funded that system and got ownership of it under a compromise in bankruptcy court that split up the company’s assets.
Oaktree owns the most advanced ore-processing equipment at the mine, while JHL and QVT control the most important mineral rights at the site.
— With assistance by Jennifer Epstein
Palm Springs and Coachella Valley Desert Sun
Trump administration opens millions of acres of California desert to mining
The California desert is the latest target of Interior Secretary Ryan Zinke's campaign to promote resource extraction on public lands across the West.
Zinke's Interior Department said this week it would allow mining on 1.3 million acres, or more than 2,000 square miles, across the California desert, reversing an Obama-era effort to protect those lands. Vast swaths of Utah's Bears Ears and Grand Staircase-Escalante national monuments were similarly opened to mining this month, following President Trump's decision to dramatically reduce the size of those monuments.
In California, the areas that will be open to mining include low desert lands bordering Joshua Tree National Park in Riverside County, high desert areas north of Pioneertown in San Bernardino County, lands flanking Death Valley National Park in Inyo County, and huge stretches of eastern Imperial County. Starting March 9, mining companies looking for rare-earth metals, gold, sand and other minerals can stake claim to those areas.
The opening of those places to mining follows the Trump administration's announcement last week that it would reconsider an Obama-era plan to protect millions of acres of public land in the California desert. The Interior Department said it hopes to allow more solar and wind farms, off-road vehicle driving, mining and grazing on those lands, which are home to desert tortoises, bighorn sheep, Joshua trees and other iconic species.
The California desert plan was the result of a decade-long effort by state and federal officials to strike the right balance between conservation, renewable energy projects and recreational activities like off-roading across 10 million acres of federal land, spanning seven counties. Conservationists see Zinke's decision to allow mining on some of those lands as a sign the Trump administration may unwind the entire desert plan, throwing the future of the region's treasured landscapes and fragile ecosystems into doubt.
Mariana Maguire, an associate director for conservation at the Conservation Lands Foundation, called Zinke's actions "a real slap in the face to the state of California, to local input and to a process that actually worked in achieving a balanced result.""This opening up is just a huge example of hypocrisy and a huge waste of time in taxpayer dollars," said Maguire, who lived in the town of Joshua Tree until late last year.
President Trump has made resource extraction on public lands a top priority, repeatedly promising to achieve American "energy dominance" by cutting regulations that block coal mining and oil and gas drilling. He also signed an executive order on mining and mineral production in December, calling for federal officials to develop "a strategy to reduce the nation's reliance on critical minerals" imported from other countries.
That order followed a report from the U.S. Geological Survey that found the U.S. doesn't produce many of the minerals its economy depends on. China, for instance, is the source of 90 percent of the world's rare-earth metals, which are used in industrial and military technologies. Most of the world's lithium, which powers batteries for cell phones and electric cars, comes from Chile and Australia. Russia and South Africa are the biggest suppliers of platinum-group elements, which are used by the chemicals industry.
"The United States must not remain reliant on foreign competitors like Russia and China for the critical minerals needed to keep our economy strong and our country safe," Trump said in a statement accompanying his executive order.
But as with Bears Ears and Grand Staircase in Utah, it's not clear how much mineral production will actually happen in the California desert lands newly opened to mining.
The Sonoran Institute, a conservation group, published a report in 2015 examining the mining economy in the California desert. The report shows that many areas with high mineral potential were not actually excluded from mining claims by the California desert plan, known as the Desert Renewable Energy Conservation Plan. Many of the best mineral deposits are on private lands, rather than the federal lands protected under that plan, according to the Sonoran Institute's senior director of programs, John Shepard.
"The notion that somehow the (desert plan) was significantly constraining mining, I think, is fiction," Shepard said.
Shepard is less concerned that the 1.3 million newly opened acres will actually be mined, and more concerned that federal land managers won't prioritize conservation in those areas. He said conservation, not mining, is "the highest and best economic use" of those lands, since outdoor recreation drives so much economic activity in the desert.
“It makes a lot more sense to protect lands than open them up to mineral development," Shepard said.
The 1.3 million acres being opened to mining are a subset of 4 million acres designated as National Conservation Lands under the California desert plan. Zinke's Interior Department says lands with that designation "offer the American people exceptional opportunities for hunting, solitude, wildlife viewing, fishing, history exploration, scientific research, and a wide range of traditional uses." (The agency described them differently under President Obama, saying National Conservation Lands "epitomize the remarkable values that public lands have to offer" and "represent the diversity of landscapes, cultures, and experiences that are the building blocks of the United States.")
In December 2016, Obama's Interior Department proposed banning new mining claims on one-third of the new National Conservation Lands in the California desert. Federal officials had identified those 1.3 million acres as worthy of further protection because of their "significant landscapes with outstanding cultural, biological, and scientific values." Interior said it would solicit public input and study the environmental impacts of its proposal, with new mining claims blocked for two years while that process played out.
A few weeks later, President Trump took office. The public comment process never happened, and neither did the environmental analysis. Despite that, Zinke's Bureau of Land Management "concluded that impacts of future mineral exploration and mining, subject to existing environmental regulations, do not pose a significant threat to the protection of cultural, biological, and scientific values," the agency said in a statement this week, announcing that the proposed mineral withdrawal had been canceled.
"Based on the likelihood that there would be little significant mining-related disturbance to these lands...withdrawal at such a large scale does not appear to be necessary to achieve the purpose for which the national conservation lands were designated,” Jerry Perez, California director of the Bureau of Land Management, said in a statement.
It's not clear how federal officials made that judgment after canceling the environmental analysis planned by the Obama administration. The Bureau of Land Management wouldn't make Perez available for an interview, and a spokesperson said the agency would have no comment beyond its press release and a Federal Register notice.
Phil Hanceford, conservation director for the Wilderness Society, pointed out that years of environmental analysis informed the California desert plan. He said the Trump administration should have done its own environmental study if it wanted to know whether the lands could be safely mined. But he's not surprised that didn't happen.
"We know the administration has really one focused priority when it comes to our public lands, and that is as far away from conservation and compromise and concern about climate change as you can get," Hanceford said.
"The threat is very real that these lands could be mined and essentially removed from conservation status," he added. "If you're looking at long-term conservation, you're never quire secure or safe from the potential for mining to always come back."