Lifton on Chinese illegal rare earths and the impact of the IMF yuan ruling
December 7, 2015 — In a special InvestorIntel interview, Publisher Tracy Weslosky speaks with Jack Lifton, Sr. Editor for InvestorIntel about Rare Mettle author Ann Bridges positioning rare earths as “sexy and fun”. Addressing his recent InvestorIntel column on Professor Kingsnorth’s presentation on how the rare earths industry is “plagued by illegal production in China”, Jack goes on to explain how the intended impact of the WTO ruling has failed. Citing the recent IMF approval of the Chinese yuan to its basket of reserve currencies, Jack explains why this not only “makes a lot of difference” but will be a game-changer to the pricing of technology metals.
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Tracy Weslosky: Well Jack, in lieu of you being jetlagged I’m going to start by asking you about the column we just published on InvestorIntel by Ann Bridges. She describes rare earths as both sexy and fun. Now Jack, would you like to comment on this? Do you feel that rare earths are sexy and fun?
Jack Lifton: No, but of course, she’s probably about 50 years younger than I am. She might have a different perspective then I do.
Tracy Weslosky: Well, our stocks would all be moving north if we were indeed marketing them this way. So let’s move from sexy and fun to Professor Dudley Kingsnorth because that’s an obvious segue here. I know you and Professor Kingsnorth had several conversations in Singapore. He did a presentation called, “The Global Rare Earths Industry Today Plagued by Illegal Production in China”. How about you start by telling us what you think this presentation was all about.
Jack Lifton: Dudley is pointing out that we have to live with so-called illegal production because in fact it seems to be sort of winked at by the Chinese authorities and they have to have it. There is not enough official legal production to meet the demands of the rare earth industry without this so-called illegal production. It’s not just a matter of language. It’s a matter of culture. The Chinese are doing everything they can, of course, to increase employment, make Chinese people richer, have a better standard of living. Anything you do in China to do that is considered to be okay. I think that Dudley pointed out, it’s obvious to me there’s a whole lot of little places doing illegal mining even refining and maybe metal making that are sort of not exactly on the radar, but they provide jobs and security for people and nobody is just arbitrarily stopping this. See I’ve always looked at this as some more insidious thing, like people evading taxes and destroying the land, but in fact Dudley’s position, and he’s probably right — is that this is really just the way things go on in China. Even though the Chinese government would like to regulate everything and know everything that’s going on, they’re more practical than that. They know that there’s a limit to how much they could know and you can’t just stop things without consequences. So this is going to be a long drawn-out affair in this reduction of illegality. It may never happen, but we have to learn to live with it and stop worrying about it because it’s the way it is. When you work out how much material the Chinese are producing you have to add this material in there. The real problem here is we really don’t know exactly how much is being produced, who’s producing it or what it’s selling for. Other than that we’re right on top of this.
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