Mickey Fulp: Race to Rare Earths Heats Up

Mercenary Geologist Mickey Fulp says that 2009’s “flavor of the year”—rare earth elements—will sport that same label in 2010. A major driving force, the momentum building in green technology, is expected to take global consumption to 200,000 tons annually by 2015 (from approximately 108,000 tons in 2007). At the same time, tight supplies will shrink further for at least another two or three years, until deposits outside China ramp up into production. Among the companies Mickey likes in the space are the integrated mine-to-market players. In this exclusive interview with The Energy Report, he also tells us he’s bullish on uranium, too, but finds it scary to see likes of Kazakhstan emerging as the world’s top supplier.
TER: Last October, you talked to us about rare earths as the “flavor of the year.” We’re now in a new year, a new decade. Will they continue to be the flavor of the year in 2010?

MF: I’ll answer that with an emphatic “yes.” The U.S. government is partly behind this through the green technology economy, which creates additional demand for rare earths. Rolling Stone came out this summer with an article about Goldman Sachs called “The Great American Bubble Machine.” Goldman Sachs is involved with rare earths. Molycorp, owner of the Mountain Pass Mine, is a private company, and Goldman Sachs is a large shareholder.

TER: Hmm.

MF: So I foresee that the rare earth sector will continue to be promoted. Demand certainly will increase. The Chinese are continually making news about curtailing exports. A few weeks ago, The New York Times wrote about the heavy rare earths ionic clays in China, the environmental damage that has gone along with that and the decreasing supply as they enforce environmental regulations., I see increased demand with some supply coming on board in North America or Australia in the short to midterm. I’m still very bullish on the rare earths sector.

TER: Is it a supply-demand issue that’s causing rare earths to go up or the fear that China is going to minimize exports and force production in China?

MF: I think both. But I don’t see that China will be able to supply the world with rare earths. I recently saw a chart that showed increased Chinese demand and rest of worldwide demand.

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TER: Any other comments on uranium?

MF: Sure, I’ll give you some supply and demand ideas about uranium. The “Decade of the ‘Aughts’ (’00s)”, if you will, saw uranium’s spot price go from about $7 to about $45 a pound—so a 600% increase in a decade. Uranium production must grow because demand is increasing on a yearly basis, driven largely by China but there are many nuclear power plants on the drawing boards or under construction worldwide.

We are losing feed from the conversion of nuclear weapons into low enriched uranium. Deals with the Russians are running down, so with uranium demand increasing, mine production must increase.

A scary thing in all of this is the country that became the world’s largest uranium producer in 2009 is Kazakhstan. In the Decade of the Aughts, Kazakhstan went from a 5-million-pound producer to a 36-million-pound producer, and is projecting production of 47 million pounds of uranium in 2010. Kazakhstan’s government is very corrupt, and is not especially friendly to the West. Rumors came out early this month that Kazakhstan signed a uranium supply contract with Iran. In terms of production, Kazakhstan has basically become the Saudi Arabia of uranium production. But that production likely is not sustainable as these are ISR fields that will have fast decay curves.

TER: Is the scary part more who Kazakhstan is willing to sell to or that the large supply is in danger because the government is unstable?

MF: Both.

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