Gerardo Del Real,
Editor
March 11, 2022
A few weeks ago, I wrote about a Pentagon plan to boost its stockpile of rare earth minerals, cobalt, and lithium so the U.S. government can reduce its long-term dependence on China.
Sounds like the U.S. is pretty dependent on a lot of people for a lot of things, huh?
Included in that plan is The Department of Defense’s Industrial Base Analysis and Sustainment program, which awarded MP Materials (NYSE: MP) $35 million to separate and process heavy rare earth elements at its facility in Mountain Pass, California.
Never mind that Mountain Pass doesn’t have a lot of the heavy rare earth metals, but that’s another conversation for another day.
What was interesting to me about the plan was the Pentagon’s own assessment of the dire situation the U.S. finds itself in as it relates to rare earth elements, lithium, and cobalt among others.
By its own assessment, global demand for these critical minerals is set to skyrocket by 400% to 600% over the next several decades.
And for minerals like lithium and graphite that are used in electric vehicle (EV) batteries, demand will increase by even more — as much as 4,000%.
The report goes on to state:
“Globally, China controls most of the market for processing and refining for cobalt, lithium, rare earths and other critical minerals.”
So you can imagine the conversations being had behind the scenes when Beijing announced sanctions on two American defense contractors while its top diplomat accused the United States of using Taiwan to suppress mainland China.
On February 21, 2022, China’s Foreign Ministry said it would impose sanctions on Lockheed Martin Corp, the maker of F-35 fighter jets, and Raytheon Technologies Corp, the world’s largest producer of guided missiles.
Early last month, Washington approved a deal for the two firms to provide maintenance services to Taiwan’s missile defense systems worth US$100 million.
It’d be very difficult to continue production of F-35s without serious disruptions if China — Russia’s good buddy on the international stage — decides to cut off rare earth supply and simultaneously pull a Russia in Taiwan.
“To safeguard China’s sovereignty and security interests, the Chinese government has decided to take countermeasures in accordance with relevant stipulations in China’s Anti-Foreign Sanctions Law on the infringing acts of Raytheon and Lockheed Martin, both of which are military-industrial enterprises that have long participated in the US arms sales to China’s Taiwan region,” Foreign Ministry Spokesperson Wang Wenbin said.
I’ve seen — and done very well with — mini-bull markets in lithium and rare earth elements. This time is different. These are bull markets that will last into the next decade as supply struggles to keep up with demand and new technological innovations.
Nickel market broken? Check.
Even the Oracle of Omaha Warren Buffett and Charlie Munger are betting on the electrification of everything. Berkshire Hathaway Energy Renewables (BHE Renewables) will announce that this spring, they will break ground on a new demonstration facility in Imperial County, California, to test the commercial viability of their sustainable lithium extraction process from geothermal brine as part of a multibillion-dollar investment in sustainable lithium production over the next five years.
Tesla intends to source high-grade nickel for EV batteries from Talon Metals’ Tamarack nickel project under development in Minnesota. Keyword intends.
Here in Texas, MP Materials recently announced the construction of a rare earth metal, alloy, and magnet manufacturing facility and a long-term supply agreement with General Motors (NYSE: GM) to power the motors in more than a dozen of GM’s EV models.
Production will begin next year, with the capacity to produce enough magnets to power 500,000 EV motors annually.
The report continues:
“DOI will update its Federal list of critical minerals, listing minerals essential to economic or national security and vulnerable to disruption. To focus the work of Federal agencies on sourcing critical minerals, the Administration will direct agencies to prioritize the production and processing of minerals necessary to produce key products like batteries, semiconductors, and permanent magnets, consistent with our strong environmental, social and labor principles.”
The bottom line is the next few years will see innovations not yet imagined that will require metals that are already scarce.
It’ll also see a lot of us doing very well because we positioned ourselves ahead of the trend in the top companies that will be providing these increasingly scarce commodities.
I see thousands of percent ahead on these five stocks alone.
Gerardo Del Real
Editor, Daily Profit Cycle