Uranium – Now Rare Earths: How wars hype demand for critical materials
It’s the 1950s and there is a new enemy to fight during the cold war, communism. In response to this threat, and during the actual battle in the Korean War, the US implemented the Defense Production Act of 1950 (DPA 1950). The act allowed the government to dramatically pump up the production of materials seen as critical for national defense. The effect was huge with development extending into Canada’s Elliot Lake region.
The cold war story is done but it set the stage for the second act which started this past summer. The players are the same. So are the scenes. And so is the potential for a dramatic mining story.
Back then, the Act of 1950 gave government executive authority to spur the domestic industry to rapidly build capacity to provide the essential materials needed for defense, similar to the War Measures Act for WWII. In the 1950s the Act covered activities for the Armed Forces, the Atomic Energy Commission and other departments concerned with national defense.
With this act in hand, the US military met the arms and technology challenge of the atomic age and built its atomic arsenal and stockpile of uranium. Actually, there was very little domestic uranium production or resources in the US. Instead, they looked to their neighbours and allies in Canada to source their needs.
A mining camp rises to the call
Elliot Lake sits at the center of the largest deposit of uranium known in North America at the time. The Elliot Lake mining camp launched into existence with the help of the Eldorado Mining and Refining Company. This Canadian government-owned agency provided a guarantee to buy over C$1 billion of uranium over five years — enough to make a jaw-dropping 15,000 atomic bombs — to supply the contract with US Atomic Energy Commission and their military. The contract started in 1957 and continued for five years.
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Never before in Canada was so much money funneled so fast into one location. Over C$300 million at the time (current value of C$2.74 billion) served to build 11 mines in the area.
A different war today
There is a new arms race on now. Or is it the same one? Today it is called a trade war. There are the same foes, the communists. This time, the fight is for defense, security and technology. Rare earths are now being weaponized as part of the US-China trade dispute. These elements are vital to fuel the new race to win technological supremacy and to answer the green energy challenge.
Recently President Trump made an addition to the materials covered under the DPA 1950 to include rare earth elements. President Trump highlighted the urgency of this need by quipping that the US buy Greenland, in part for its rare earth deposits. The US is also in talks with Australia, one of the few producers of rare earths outside of China, who controls the market.
New demand today points to the same location
If history can serve us, why not look near home to the substantial rare earth deposits in Canada, the closest neighbour and ally to the US?
Significant resources of rare earth elements lay waiting in the Elliot Lake camp. In fact the grade of rare earths is approximately 3x as high as the uranium in the same deposits. In the past, it was the largest commercial producer of rare earth elements in Canada. The mines in Elliot Lake simply closed due to market prices for uranium, not resource depletion.
The largest company in the area that holds these resources is Appia Energy Corp. (CSE: API | OTCQB: APAAF) where I am a long-term holder of their stock. Appia is in the north part of the Elliot Lake camp. From estimates, their compliant and historic resources in Elliot Lake could host approaching one billion pounds of rare earth elements, in addition to the known uranium. Several of the resource zones are open for substantial expansion.
Elliot Lake contains known deposits. The history of past production proves the rare earth resources exist at Elliot Lake and are recoverable within an established major mining camp. The site has the capacity to work for decades.
Appia is also looking for rare earth elements and uranium in Saskatchewan. At that location, their Alces Lake project hosts some of the highest reported grades for rare earth elements in the world.
Now that rare earth elements are listed as critical in this new era of technology, security and defense why not use the powers of the DPA 1950 to secure them with the help of Canadian allies as in the cold war? Why not in the same place? The camp is there, ready for act two.
Ronald Wortel, MBA, P.Eng. is a mining investment professional with extensive experience in analysis of companies, projects and markets. He worked as both a sell-side ... <Read more about Ron Wortel>