Obama’s climate initiative to benefit the mining industry
U.S. President Obama has decided to take action on ‘climate change’, or at least that is the guise under which the new plan to develop alternative energy sources is being presented. The plan includes tighter regulations for coal-fired power plants and incentives for wind turbines and solar panels. The tighter regulations will involve stricter carbon dioxide emissions for coal fired power stations. In the wider scheme, President Obama may even decide to participate in a global climate change agreement, which would truly add some weight to the expansion and development of alternative energy – notwithstanding the fact that nuclear reactors offer the most efficient compromise between reducing greenhouse gases and addressing the energy needs of a growing world population.
Promoters of the initiative see the action plan as being positive for the U.S. economy and the economies of other countries as European politicians hope that the U.S. would then have a beam effect to in other countries. Obama’s plan is the largest alternative energy plan yet by a U.S. president and presumably they will help reduce ‘emissions’ of CO2 by 17%. Greenpeace is certainly happy; however, given that the organization is in a leader of the ‘protesting’ racket, it still finds plenty of room for improvement. All environmentalist hype aside; this plan will certainly help to make new winners and new losers. It will also affect mining in the United States directly, given that the Obama administration wants to set aside federal land in six key western States such as Colorado, New Mexico and Utah for the exclusive use of solar panels to generate power. This would then preclude such lands from any mining activity.
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This is not actually bad for the mining industry and two sectors come to mind that have much to gain, regardless of how a rational thinking person might be persuaded by the climate change hype. The benefits are available to both climate change evangelists and infidels. By limiting Federal Bureau of Land Management (BLM) permits in the Western states, the Obama administration would make the various potash miners that have recently been granted – or in the last stages thereof – BLM permits much more valuable. The beneficiaries here would be Potash Minerals (ASX: POK) and the other potash companies operating in Utah’s Paradox Basin, including EPM Ventures (TSXV: EPK | OTCQX: EPKMF) and Magna Resources (‘Magna’, CNSX: MNA). IC Potash (TSX: ICP | OTCQX: ICPTF), which is operating in New Mexico, should also benefit as the new regulations will help to limit the entry of additional potash plays, addressing one of the factors being blamed for the commodity’s failure to rise beyond its current USD$ 400/ton price. Indeed, the fact that over the past week, the potash miners in Utah’s Paradox Basin all witnessed share price increases.
The U.S. can also expect a boost in gas fracking companies as gas-fired power plants emit less greenhouse gases than coal. But rare earth miners should see the biggest benefits as Obama is pushing to use wide spaces of BLM controlled public land for equally vast new solar and wind farms, requiring rare earth metals to produce, especially considering that the plan aims to use this energy to supply an initial 10 000 megawatts (MW) for 2.6 million households by 2020. This is revolutionary in the US, considering that Germany already produces 65 000 MW from solar and wind power. However, Germany is a leader in renewables and it has also – for the time being – renounced nuclear power, even though it still has to import nuclear generated electricity from France. But the plan goes beyond the solar and wind generation. The benefits for rare earth, and even graphite, suppliers will also be fueled by the incentives to appliance manufacturers as Obama also wants to pass legislation demanding more fuel-efficient refrigerators, appliances and better insulated houses, to achieve three billion tons of greenhouse gas savings by 2030. This goal needs technology and only rare earths and graphite can make the kind of efficient batteries, electric motors and lightweight structures that will make such breakthroughs possible.
Obama can enforce these measures without the Congress – he will instruct the EPA to develop CO2 emission standards and other greenhouse gases in cooperation with individual States and industry by June 2014. As for the mining industry, which is facing major challenges to control ballooning development and operational costs, the use of renewable energy and its path toward greater energy independence away from ever more expensive oil would certainly be welcome.
The mining companies are very interested in “smart” solutions to energy challenges and the large mines themselves might serve as test beds for new projects. Energy savings are often touted as advantages in mining projects, given the heat required for metallurgical processing. The proposed BLM projects are located in remote parts of the country with the potential to be set up near the mines such that renewable power supplies in their vicinity might bring immediate benefits and simplified logistics. Large-scale photovoltaic projects could provide a solution to the energy supply in arid areas and actually make more projects possible. Clearly, all of this will ultimately be good for investors.