-- Posted Friday, 13 May 2011 | | Source: GoldSeek.com
Advances in energy and agriculture are creating demand for previously ignored metals such as scandium, tellurium and indium. In this exclusive interview with The Energy Report, Mining Analyst John Kaiser, editor of Kaiser Research Online, explains the science that could exponentially increase the value of overlooked stocks.
The Energy Report: Thank you John for agreeing to give us a peek at some of the revolutionary changes emerging in the energy markets today. You have written about the push for alternative forms of energy fueled by a growing middle class population in developing countries. In particular, your April 15th Kaiser Bottom-Fish Report focuses on Bloom Box, a solid oxide fuel cell that could jump-start the next generation of electricity with the help of scandia stabilized zirconia. What's the status of this project?
John Kaiser: Solid oxide fuel cells have been around for a long time but they have had technical problems such as the decomposition of the electrolyte core due to the fuel cell's high internal temperature. Bloom Energy tackled this problem by doping the zirconium core with scandium. The result is a robust box ready for production, with the caveat that it will take a decade to truly demonstrate that frequent replacement of the core is not necessary. The company has installed 140 of them already in California commercial buildings at a cost of $800,000 each and expects to have 200 of them in place by the end of 2011. The next step will be scaling down to residential capacity at a cost-effective price. If the company can actually make this work, the market would be extraordinary.
Like most clean energy technologies, the Bloom Box involves a high upfront capital cost; and because natural gas is not free like wind or sunshine, you may ask why a consumer is not better off just paying the price of electricity generated through traditional gas power plants on an as-needed basis. The answer lies in the near doubling of electricity generated by the same unit of fuel using a Bloom Box. Ironically, the more expensive natural gas becomes over time, the faster the payback. If we add a carbon price the payback is even quicker.
California is largely powered by natural gas combustion, which delivers efficiency of about 35% compared to the 60% of power harnessed in the non-combustion solid oxide chemical-electrical process. Gaseous fuels—hydrogen, methane, any biogas—can be input and the only residuals are electricity, carbon dioxide and water. The bottom line is a smaller carbon footprint.
TER: Based on developments like this, what is the outlook for scandium supply and demand in the future?
JK: No scandium mines exist in the world right now. Five tons or so come from scrap metal and stockpiles left over from former uranium mines in the Ukraine. The strategic metal is mainly used to make a light, strong aluminum alloy that can be welded. That makes it popular in the aerospace and defense industries. Scandium is one of these "Field of Dreams" stories. If you build a supply, all kinds of technology commercialization becomes feasible. More than 100 patents have been filed in the last 50 years for uses involving scandium. An accessible scandium supply would pave the way for all kinds of new technologies. The key here is efficiency. In the case of the Bloom Box, it provides functionality that allows this electrochemical process to be effective. But for most of these other applications it's all about aluminum scandium alloys, making items more durable, more efficient and lighter. That leads to lower energy cost to move cars, planes or anything else engineers can imagine. And if things last longer there is also an energy savings.
TER: Are advances in other alternative energy technologies driving demand for metals?
JK: Definitely. A new tellurium-based solar panel is making a refinery byproduct metal suddenly valuable. Unfortunately, no one mines for tellurium. It is produced as a refinery byproduct of certain copper concentrates. The USGS estimates annual tellurium production at about 300,000 lbs., which at the current price of $200/lb. makes the tellurium market worth about $60 million per year, which is "peanuts" compared to the $100 billion-plus value of annual copper production.
Maybe the existing applications that require tellurium use so little that a price jump to $1,000/lb. would barely dent the profitability of the end-product. You would think that all you need is a higher commodity price to generate the supply needed to meet demand. The problem with critical metals recovered by refining base metal concentrates is that their production is linked to the global business cycle. No company is going to increase copper production because demand for tellurium is going through the roof. Those copper /tellurium byproduct mines are likely already mining copper ore at capacity. Furthermore, a dirty secret of the refining and smelting industry is that it does not pay anything to the producer for critical metals such as indium, tellurium and selenium that it recovers from the refinery slag. The entrepreneurial challenge for resource juniors is to find a base or precious metals deposit with an elevated grade for a critical metal such as tellurium and get a partner with sufficient clout to force the smelters and refiners to treat critical metals as payables.
Indium, typically recovered by zinc refineries, is another example of an obscure metal hijacked by technology innovation. Demand surged during the last decade when it turned out that indium was useful in display panels. The price is now $700/kg. compared to less than $100/kg. at the start of the past decade when cathode ray tube monitors still ruled. Thin-film copper-indium-gallium-selenium (CIGS) photovoltaic cells stand to generate new demand for indium and gallium as consumers hop onto the local solar energy bandwagon.
The problem for solar panel manufacturers is that the mining industry is not geared to delivering a supply response to higher prices when they involve these critical byproduct metals. The mining industry is subject to the supply-demand cycles of the major metals such as copper, nickel, zinc, lead, iron and aluminum. However, the beauty of entrepreneurial capitalism is that thoughtful individuals can and will identify niche opportunities for which they can deploy specialized exploitation strategies.
For example, resource juniors are now searching for zinc deposits with elevated indium grades on the premise that in a world awash with a glut of zinc supply, future development priority will be given to zinc deposits with a conventional zinc grade but an exceptional indium grade. This is an opportunity for the juniors to investigate because the markets for these metals have generally been too small for the big mining companies who prefer to focus on large scale base metal mines, which tend not to have a meaningful indium credit. China has been an indium source because the country is home to numerous zinc deposits exploited through small scale mining methods. However, the government has added indium to its restricted list with the result that the world may suffer indium supply shortages in much the same way it is suffering from China's strategic decision to allocate rare earth production to domestic users.
TER: Other than in China, where are companies finding indium?
JK: Utah is home of monster world-class mines such as Bingham Canyon. The Crypto deposit, discovered decades ago and sidelined as an interesting but marginal skarn-style zinc deposit, has been demonstrated to have an unusually high indium grade along with its zinc, copper, silver and gold, which will be the bread and butter of a future mine. The indium, however, has the potential to be the gravy.
America, despite its wide open spaces bathed in sunshine, lags Germany, Spain and Japan in the deployment of solar energy capacity. China, the world's primary producer of indium and gallium, lags in tenth place but is pushing hard to become the dominant deployer and provider of solar energy technology. In my view, unless you subscribe to the belief that raw material prices reflect "bubble" conditions, Crypto is feasible without the extra tonnage. But if the juniors can boost the tonnage with exploration drilling while the zinc mountain in the warehouses finally peaks, this "boring" zinc deposit with the indium icing will be able to withstand the more pessimistic scenarios bandied about by the "apocaholics."
TER: Agriculture is another global resource problem looking for a mineral solution. In your December newsletter you said fertilizer plays are becoming hot again as the world contemplates the deadly combination of climate change-driven disruption of crop harvests and the growing appetite of developing nations. What about potash companies? Are you seeing those as part of the supply chain that is going to benefit from these factors?
JK: Yes, potash demand is going to go up because emerging middle classes in India and China are developing an appetite for meat, which takes 10 times as much grain to produce as grain for bread. The limited amount of fertile land available will increase the demand for fertilizer. This will increase demand for potash and probably increase potash prices.
Location is an important factor for fertilizer. Brazil is one of the few countries that actually has an enormous amount of arable land available for agriculture. But it has a 90% potash import dependency. Importing potash from the Ukraine or Canada consumes a large amount of energy. Those transportation costs are added to the potash price.
TER: Thank you for your time. This has been great.
JK: You're welcome.
John Kaiser, a mining analyst with over 25 years' experience, is editor of Kaiser Research Online. He specializes in high-risk speculative Canadian securities and the resource sector is the primary focus for an investment approach he developed that combines his "bottom-fishing strategy" with his "rational speculation model." Kaiser began work in January 1983 as a research assistant with Continental Carlisle Douglas, a Vancouver brokerage firm that specialized in Vancouver Stock Exchange listed securities. In 1989 he moved to Pacific International Securities Inc., where he was research director until April 1994 when he moved to the United States with his family. He launched the Kaiser Bottom-Fishing Report (now Kaiser Research Online) as an independent publication in October 1994 and developed it into an online commentary and information portal. He has written extensively about the junior resource sector, is frequently quoted by the media, and is a regular speaker at investment conferences. Since 2008 he has developed a focus on security of supply issues and how they relate to critical metals such as rare earths.
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-- Posted Friday, 13 May 2011 | Digg This Article
| Source: GoldSeek.com
