Take control of these rare earths and you control the energy technology and economy of the 21st century.

Without these rare earths, there would not be much of an alternative energy industry … as there would be no magnets for the next generation wind turbines in our wind farms needed to generate electricity or batteries for hybrid electric cars that would blast freeway.

Without these rare earths, we can say goodbye to space launches and satellites … as there would be no magnets for miniaturized guidance systems or titanium and ceramic for lightweight rocket motors or nose cones. As such, there would be no weather satellites, and weather monitoring and forecasting would decrease, and there would be no navigation systems in our cars because there would be no GPS (global positioning system).

Without these rare earths, our modern high-tech lifestyle will disappear, as there will be no television screens, no iPods, no cell phones, no digital cameras, and no ultra-scanning, as there will be no medical imaging devices.

The demand for these valuable and critical rare earth metals on the face of the planet is increasing, but the supply is not. So why is demand increasing and supply not skyrocketing creating an imbalance and alternative investment opportunities?

Steve Forbes likes to say that “more financial literacy, and the resulting financial literacy and empowerment, will open our eyes to alternative investment opportunities and will be the key to recovery from this financial crisis.”

In that spirit, I am going to use this article to briefly introduce rare earths, provide some examples of why they are key to energy technology and the 21st century economy, and highlight the drama unfolding offshore, which is a future imbalance. between supply and demand with key players in Denver, Mt Weld, WA (Western Australia) and The Middle Kingdom.

Why the Middle Kingdom? China’s national leaders study these elements and know that without these elements much of the modern economy will just shut down, so they are trying to control and limit supply (more on that in a minute).

Rare earths are 15 elements on the periodic table called lanthanides. As described in the opening paragraphs, we are addicted to these rare earths because of our modern lifestyle and 21st century energy economy, just as much as we are addicted to oil.

These elements are rare because while they are found on the earth’s surface, it is necessary to find deposits of significant size to justify the economics of mining, milling, and processing.

However, the only people who study these elements are Master / PhD level chemists and solid state physicists and of course national leaders in places like China.

Deng Xiaoping, China’s ruler in the 1980s and 1990s, said that “while there is oil in the Middle East, there is rare earths in China.” In 1999, China’s leader was Jiang Zemin and after a visit to Mongolia’s “rare earth” region, he declared a national goal to achieve “economic superiority” by tapping into China’s vast rare earth resources. They are building industrial cities in Mongolia’s mineral district called the rare earth “mother lode” with more than 15,000 scientists and engineers with PhDs dedicated to working on the world’s most modern rare earth facilities … the West has nothing remotely Similary.

So as China is developing its middle class, it is consuming more, exporting less, and trying to control the market with acquisitions and business practices. For example, if you want access to these minerals from China, or Chinese-owned mines elsewhere on the planet, then you must move your manufacturing facilities to China … which of course provides jobs for its emerging middle class. Right now, China produces 95% of the world’s rare earth supply.

Now, this is where the situation gets interesting.

The US has a mine containing the world’s highest grade rare earth ore located in Mountain Pass, CA, which is east of San Bernardino and Palm Springs … still in California but almost to the Nevada border and Arizona. It is owned by Denver-based MolyCorp.

Previously, Molycorp was owned by Unocal (Union Oil of California) and in 2005, the Chinese tried to buy Unocal … while the Chinese said they wanted access to oil, many believe that the reason was a smoke screen, as the Chinese really wanted to access the only US rare earth deposit located in California.

There are no processing facilities in the US, so all iron ore must be crushed into powder and shipped overseas for final fabrication into material for magnets, batteries, light steel, ceramics, etc.

Furthermore, these metals are highly toxic and have environmentalists hovering over threatening actions to shut down mining operations.

Now for the third leg of this 3 leg stool.

In Australia there is a company called Lynas Corp, based in Sydney, which controls what is believed to be one of the largest rare earth deposits ever discovered on this planet, in Western Australia’s Mt Weld.

Recently, China made an offer to buy Lynas Corp. A few days ago, the Australian Foreign Investment Review Board, although late to the party, issued a ruling that would not allow majority ownership of Australian resource companies by companies. or governments outside Australia, as these rare earth resources have been declared strategic assets. .

China’s monopolistic practices (lowering prices to effectively shut down new start-ups), its attempts to buy and thus limit supply, and its lax rules on environmental safety are putting the Middle Kingdom in the driver’s seat of energy technology of the 21st century. .creating another example of the shift of wealth and power from west to east (see my recent post on one of the 5Es of the “5Es valuation framework”) and setting the stage for more drama on the high seas, so to speak. . .

I trust this article has introduced you to the importance of rare earths for energy technology and the economy of the 21st century. For the past 200 years, the West has been able to industrialize and grow based on an abundance of energy and resources. As we enter an era of scarcity, we need to increase our education, improve our literacy, and monitor and seek alternative wealth creation opportunities as a way out of this economic crisis.

In previous articles, I wrote that many of us are evaluating alternative wealth-building strategies outside of the US dollar … outside of dollar-denominated assets … perhaps emerging markets … perhaps energy assets that are inherently useful as oil rigs. , hydroelectric or methanol plants … maybe precious metals, water rights, oil, natural gas, potassium mines or gold mines … things difficult to build, difficult to replace and expensive to replace … definitely not stocks financials, definitely not retail stocks, definitely not commercial property.

I trust this article will provide a little more information on why emerging markets with a demand for products that are in short supply (such as oil, food, water, precious metals, rare earths, and potash mines) represent alternative wealth creation strategies.

Also, a good book to read would be “Global Paradox” by John Naisbitt, where he provides some insights and clues about potential winners and losers in the global marketplace as new rules emerge for the world economy that will determine the standards of politics and business. behavior from Tokyo to New York to Sydney to Shanghai.

I will continue to monitor rare earth developments and the global resource market and report on alternative wealth creation strategies in future articles and updates on my blog (link to my blog below).