John Kaiser: Alternative Energy Fuels a Mining Bloom
Source: Karen Roche and JT Long of
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.
Cliffs Natural Resources Inc.
EMC Metals Corp
First Point Minerals Corp.
Lithic Resources Ltd.
Orbite VSPA Inc.
PhosCan Chemical Corp.
Teck Resources Ltd.
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?
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.
Based on developments like this, what is the outlook for scandium
supply and demand in the future?
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
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
Because of this latent demand, a few companies are addressing
the supply problem. In Q112,
EMC Metals Corp. (
plans to deliver a feasibility study for the development of the
Nyngan Gilgai Project in Australia. Nyngan has an unusually high
scandium grade; what EMC hopes to bring to the table is an
improved recovery process designed by its chief technology
officer, Willem Duyvesteyn.
So, EMC Metals' strategic advantage is this better method of
extracting scandium from the ore and then going and finding
similar deposits which were previously not feasible using
conventional recovery processes?
That's right. The days of discovering large high-grade deposits
of any nature in readily-accessible regions are gone. The new
game is to apply innovative extraction technologies to deposits
regarded as too low grade or metallurgically challenged to be
economical. EMC is looking for deposits with elevated scandium
grades previously considered worthless. It just picked up some
properties in Norway where pegmatite formations contain fairly
large scandium crystals. The company will test its metallurgical
bag of tricks to see if they can extract scandium from these
complex minerals and provide a supply from that part of the
Are there any other scandium projects in the works?
While EMC is looking at primary scandium production plays, others
are looking at scandium as a byproduct.
Orbite VSPA Inc. (TSX.V:ORT)
is developing an alumina clay deposit in Québec using a new
proprietary process involving solvent extraction. The company
hopes to sell metallurgical grade alumina to the dozen aluminum
smelters across the St. Lawrence River where they have access to
cheap hydroelectricity. Electricity is key to refining aluminum,
so smelters are always built near an abundant supply of cheap
electricity. Today, the smelters import alumina from tropical
regions such as Jamaica and Brazil where it is derived from
laterite deposits called bauxite which are double the grade of
alumina clay deposits. Tomorrow, If Orbite can produce and sell
its alumina at a competitive price, without the transportation
cost risk, its deposit could replace the Quebec aluminum smelter
industry's dependency on imported alumina.
As a bonus, Orbite believes the company can extract low-grade
scandium as well as gallium from the alumina clay. Gallium, used
by the electronics industry and a key input for a new style of
thin-film photovoltaic solar panels, is currently recovered as a
byproduct of alumina production from bauxite using an expensive
process. If Orbite can get scandium and gallium as a byproduct of
their alumina clay process, and scale up the alumina production,
they could provide a significant supply of scandium to world
markets, a feat possibly more profitable than providing a secure
local supply of alumina to smelters. The trick is to demonstrate
that the scandium and gallium do not end up with the 3% portion
of impurities in the alumina sold to the smelter, and that
Orbite's process enables it to selectively and cost-effectively
extract the scandium and gallium remaining in the solution.
Proving this will be a high impact milestone for Orbite.
Are advances in other alternative energy technologies driving
demand for metals?
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.
Teck Resources Ltd. (NYSE:TCK; TSX:TCK.A,
produces indium as a byproduct of its monster Red Dog zinc mine
in Alaska. Because it smelts its own zinc concentrates, it
profits from the indium byproduct. Red Dog's production rate,
however, is a function of global zinc demand and the permitted
operating infrastructure; it is simply not responsive to indium
demand and price, which presents a crisis in terms of simplistic
free market capitalism.
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
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, examples
like Red Dog or Neves Corvo in Portugal excepted, 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.
Other than in China, what companies are finding indium and
One of the companies I have been following is
Lithic Resources Ltd. (TSX-V: LTH)
. It has a zinc deposit in, of all places, Utah, 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 by
Lithic 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
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. Lithic
is now in the process of raising money to do step out drilling
following an independent consultant's recommendation that the
resource be boosted at least 50% to make it feasible at base-case
prices, which reflect the dismal reality of the past three years
rather than considerably higher spot prices. 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."
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?
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. One of the companies I have been
Verde Potash (TSX.V:NPK)
, formerly known as Amazon Mining. The company owns about 15
billion tons of glauconite, a silicate-based potash existing at
surface in Brazil's agricultural heartland. At 9%-11% K2O
(potassium oxide), glauconite is lower grade than the 20%-30%
grade of sylvite, the salt-based potash also known as potassium
chloride mined from deep evaporite beds or extracted from brines.
Brazil's glauconite deposits were first recognized during the
eighties, but never developed because imported conventional
potash was so much cheaper. But with $400/ton potash, this stuff
suddenly becomes feasible to develop. The company plans to
convert the glauconite into "ThermoPotash," a whole rock product
that can be blended into fertilizer blends. Brazil's government
is very supportive of Verde Potash, but the reality is that
glauconite processed and marketed as ThermoPotash will never
replace more than 15% of Brazil's import dependency.
But, once again, entrepreneurial capitalism has come into
play. Verde Potash commissioned a scientist at Cambridge
University, Dr. Derek Fray, to investigate the possibility of a
process for converting the silica-based glauconite into
conventional salt-based potash products that can serve as a
complete replacement for imported potassium chloride. A patent
application for such a process was filed in December 2010 and
Verde Potash is now setting up independent metallurgical studies
to demonstrate that glauconite can be cost effectively converted
into conventional potash fertilizers. If it works, Verde Potash's
process would allow its huge glauconite deposit to replace all of
Brazil's import dependency. Because similar low-grade
silicate-based potash deposits exist elsewhere in the world,
other agricultural economies armed with a technology license from
Verde Potash could also turn their "worthless" glauconite
deposits into a game-changing solution to fertilizer import
Any other fertilizer companies you are following?
PhosCan Chemical Corp. (
has a phosphate deposit in Ontario that was stranded
mid-development when the market fell apart in 2008. At the time,
PhosCan had grandiose goals of becoming a vertically-integrated
phosphate fertilizer producer based on skyrocketing fertilizer
prices. Although fertilizer prices have rebounded from the 2008
crash, they are still well below peak 2008 prices. PhosCan has
shelved its capital cost-intensive plan for a
vertically-integrated plant in favor of investigating the
feasibility of developing itself as a producer of phosphate rock
to existing fertilizer giants such as Cargill with costs offset
by byproduct credits from niobium and rare earths. With the help
of a $60M war chest built up during 2008 and still largely
intact, PhosCan hopes to turn the Martison deposit into a
multi-stream mine that serves both the fertilizer and clean
What other little nuggets do you have John?
First Point Minerals Corp. (TSX-V:FPX)
is an exciting, energy-related company. It has identified a type
of low-grade nickel deposit where the majority of the nickel
content occurs as a nickel-iron alloy technically known as
and more commonly described as a natural stainless steel-the host
rocks never look rusty. This type of deposit occurs within
belts-black oceanic rocks that have been shoved onto the
continent. The ultramafic rocks normally contain about 0.25%
nickel, but this nickel is locked up in the crystal lattice of a
mineral called olivine. Extracting nickel from olivine is
hopelessly expensive. Under the right metamorphic conditions
Mother Nature squeezes the nickel out of the olivine so that it
is able to combine with iron to create grains of nickel-iron
alloy also known as awaruite.
Cliffs Natural Resources Inc. (
, a producer of key inputs for the steel-making industry,
optioned the Decar Project in British Columbia in late 2009 and
bought a 14% equity stake in First Point. The key here is that
even though Decar is low grade, about two-thirds of the nickel
grade occurs as nickel-iron alloy which Cliffs and First Point
believe can be recovered through gravity and magnetic separation.
In stark contrast to laterite and sulphide nickel ores, no
chemicals and very low energy inputs are needed. Plus, the
tailings are fairly benign in terms of acid-generating waste. We
hope to learn by the end of the second quarter how much of
Decar's nickel grade is recoverable and at what cost.
Not only has First Point's management thought outside the box
in targeting a low-grade style of nickel deposit that could do
for nickel what porphyry deposits did for copper during the 50s,
but it has put its experience in geochemistry to use in
developing an efficient geochemical method for establishing what
percentage of a rock's fire-assayed nickel grade is due to
nickel-iron alloy. During 2010, an independent lab and
metallurgist certified this method as valid. Armed with this low
cost and quick turnaround tool for assessing the awaruite content
of otherwise mediocre looking black rock, First Point is now
scouring the world looking for similar deposits. Hopefully, in
the next 6 to 12 months, the company will announce that it has
acquired several billion ton deposits of this style of low-grade
natural stainless steel (nickel-iron alloy) deposit. Such an
achievement would make First Point of enormous value to countries
such as China, which is looking for a source of nickel whose
production is not tied to expensive, energy-intensive,
environmentally-hazardous chemical processes. That is why this
$0.77 stock could be worth an awful lot more.
Thank you for your time. This has been great.
, a mining analyst with over 25 years' experience, is editor
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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1) Karen Roche and JT Long of
The Energy Report
conducted this interview. They personally and/or their families
own shares of the following companies mentioned in this
2) The following companies mentioned in the interview are
The Energy Report
: Verde Potash.
3) John Kaiser: I personally and/or my family own shares of the
following companies mentioned in this interview: EMC, Orbite,
First Point, Lithic. I personally and/or my family am paid by the
following companies mentioned in this interview: None.
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