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State-Run Resource Colonialism Continues

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July 6, 2010

The trend of resource hungry economies reaching out to control global resources is continuing. State-run companies like JOGMEC (the Japan Oils, Gas and Metals National Corporation), Korea Resources Inc., China Megtallurgical Group Corp and others are hunting for technology metals.

At the beginning of 2010, Toyota Tsusho acquired a 25% stake in Orocobre's Chilean lithium operation. Toyota Tsusho is a partially owned subsidiary (22%) of Toyota, the motor company. Additionally Toyota Tsusho will be responsible for securing a Japanese government-guaranteed low-cost debt facility for at least 60 percent of the Project‟s development costs. This facility is expected to be secured through the Japan Oils, Gas and Metals National Corporation (JOGMEC), a state-owned entity that provides assistance to Japanese companies in securing supplies of mineral resources.

Yesterday, another Japanese trading house (Itochu Corp) announced that it would buy a 20% stake in US lithium extractor Simbol Mining. The deal gives Itochu exclusive rights to market Simbol lithium in Asia. Simbol extracts lithium from geothermal brines in California. Note that at the time of publishing, there is no evidence that a state-owned enterprise is involved. However, Simbol Mining holds an exclusive license to patented silica extraction technology from the Department of Energy,

But it is not just Japan joining into the fray. Last week, a Korean company called Posco (Asia's third-largest steelmaker) purchased the 60% of China's Yongxin Rare Earth Metal Co., along with state-owned Korea Resources Inc.

China is internationally renowned as being the most acquisitive. The most recent news is that despite instability, violence and danger China is ploughing ahead with their resource development plans in Afghanistan. Their copper needs must be desperate. The Aynak copper mine, located in the valley where Al Qaida trained for the 9/11 attacks, will begin production by 2013. The mine is a joint venture between China Megtallurgical Group Corp and Jianxi Copper.

According to a recent Associated Press article, Ghullam Mohammad Yalaqi, the Afghan commerce and industry minister said, "China is the biggest buyer of raw materials in the world, whether that's in Africa, Asia or any other part of the world. So if China wants to come to Afghanistan, why not?"

To the rest of the world, China is seen as a stable partner and an investor. Meanwhile, America has a different reputation, as indicated by the AP article.

Beijing has reaped admiration for projects such as the 350-bed Jamhuriat Hospital. Inaugurated last summer, it was built in three years by 200 Chinese workers who lived on-site in temporary lodgings, said hospital director Ramazan Karimi. The hospital sits empty, though, because the government hasn't allocated any operating funds, he said.

"The Afghan people prefer this gift from China. The Chinese side has done streets, roads and clinics in Afghanistan," Karimi said. "They didn't bring their troops here."

Foreign direct investment and the international flow of capital drives development, and should be looked upon favorably. However, there is a difference between international investment by individuals and private companies, and those companies that are controlled by a foreign government. A problem arises if capital markets are distroted by government willing to invest at a premium in order to gain influence the geopolitical stage. Governments may make investments that are not designed to increase effiency, but rather to destroy it and kill a foreign country's competing industry.

According to IAGS Executive Director Gal Luft's testimony before the House Committee on Foreign Affairs in May 2008,

"Willingness to pay above market prices, use government assets to back up financial deals or manipulate prices to increase returns should all be red flags that trigger response. The U.S. already has a rigorous safeguard mechanisms against undesirable foreign investors. The Committee on Foreign Investment in the U.S. (CFIUS) protects national security assets in sectors such as telecommunications, broadcasting, transportation, energy and minerals in which there is a clear potential danger to national security."

Luft asserts that countries that seek to invest internationally should also allow foreign investment freely.


The Ceremony for Aynak, Afghanistan

Chinese Resources Restrictions Intesifies

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From Bloomberg - June 29, 2010

Bloomberg reports that China, facing a trade probe by the World Trade Organization on raw material export constraints, will continue to curb shipment and production of minor metals to conserve resources and limit pollution, an official said.

Affected minerals identified by Zhang Fengkui at the Ministry of Information Technology and Industry include molybdenum, tungsten and vanadium. China is under investigation by the World Trade Organization to determine whether these policies give Chinese companies an unfair advantage.

According to Ma Quanzhi, deputy general manager of Asia’s largest producer of molybdenum, China produces 37% of the worlds supply of that mineral.

Read the full report here:

http://www.businessweek.com/news/2010-06-29/china-plans-to-maintain-export-limits-on-minor-metals.html

Popular Science: Gal Luft on Afghan Lithium

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According to Popular Science, the discovery of lithium in Afghanistan is good news. According to the article, one site alone may have more lithium than the Salar de Uyuni in Bolivia, which until now has been considered as having half the world's reserves. Seth Fletcher, the author of the article, asserts that this is another counter-argument to the idea that the world is running out of lithium.

He writes that this is big news because, "even if Afghanistan’s lithium never leaves the ground, the sudden, black-swan appearance of a new and potentially massive resource helps further debunk the myth that the world is running out of lithium and that, as a result, an electric-car revival that relies on lithium-based batteries is doomed before it begins."

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Difficulties Getting Raw Materials - In China

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From the government run "People's Daily":

China's management of rare earth resources takes effect June 24, 2010

The Chinese government's control of rare earth materials is producing results, and foreign rare-earth companies are beginning to give up raw materials to develop downstream business.
Bayan Obo Rare Earth Mine


Currently, the largest foreign-invested enterprise specializing in rare earth material separation, Rhodia Group from France, found it hard to obtain raw materials for its plant in Baotou, China, and the production line has been discontinued for a long time. This is not the only case. According to rare earth industry insiders, dozens of foreign-invested rare earth separation enterprises in Jiangsu, Shandong and other places are facing raw material shortages and underproduction.

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Senator Lisa Murkowski Introduces Rare Earth bill

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On June 22, 2010 Senator Lisa Murkowski (R-AK) introduced a bill (S.3521) called "A bill to provide for the reestablishment of a domestic rare earths materials production and supply industry in the United States, and for other purposes". The bill is a companion measure to HR.4866, the Rare Earth Supply-chain Technology And Resources Transformation (RESTART) Act introduced by Congressman Mike Coffman. Congressman Coffman announced his bill publically at TREM10 on March 17, 2010.

Senator Lisa MurkowskiSenator Murkowski's bill would "require--under the leadership of the Secretary of the Interior--the Secretaries of Energy, Agriculture, Defense, Commerce, and State along with the Director of OMB and the Chairman of CEQ to expedite permitting, review supply chains, and consider strategic stockpiling of rare earths. The bill would also provide the rare earth industry with access to federal loan guarantee programs meant to advance clean energy technologies."

The text of her announcement in Senate follows:

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Europe Addresses Critical Minerals

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The European Commission on Enterprise and Industry has received its June 2010 report from the Raw Materials Supply Group. The Commission recommended that the initiative draw up a list of critical materials. It defines there "high tech" metals (or as we call them TREM) as having significant economic importance for key sectors, high supply risks and a lack of substitutes.

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Mongolian Resources Coming Soon to an Exchange Near You

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According to UK newpaper The Independent, Mongolia is planning on floating some of its state-owned resources on various stock exchanges around the world.

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New Videos on TREMCenter.org

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We have posted new videos to the TREM Center website. You can view them on any page on the right hand side: just click the videos tab. Latest videos include

  • Congressman Mike Coffman at TREM10
  • Assistant Energy Secretary David Sandalow at TREM10 (in 2 parts)
  • PBS Newshour: The Bureau for International Reporting's Rare Earth briefing

Illegal Mining In China - Crackdown Begins in June

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China Daily reported on May 21, 2010 that there will be a renewed effort by the Chinese government to stem the flow of illegal rare earth resources. Starting in June, the country will begin a five-month crackdown on illegal mining operations. Wang Min, a vice-minister of land and resources said that long-term monitoring programs will also be initiated. Wang went on to say that even detecting metal resources will be punishable.

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