A Comeback For American Strategic Metals?

Among casual observers, there seems to be a rough perception that the U.S. exhausted the bulk of its mineral deposits during its rapid phase of industrial growth and is now buying what it needs from countries like China out of sheer necessity. However, this is far from the reality of the situation. Chinese producers flooded the market with minerals such as rare earths, tungsten and manganese, pricing out domestic suppliers and causing many of them to shut down. Since 2009, China has phased down production creating opportunities for domestic suppliers to get back in the game. While politicians are perpetually competing to make the most breathless proclamations about reclaiming overseas jobs, the lack of self-sufficiency in minerals is hardly a hot topic during election season.

In this context, it was nice to hear Jack Lifton give an impassioned monologue on the subject as the keynote speaker of Octobers Best of Breed Natural Resource Conference, an event hosted by resource-oriented merchant bank Murdock Capital. Lifton, founder of Technology Metals Research and one of the field's most respected voices, highlighted not only the importance of maintaining a domestic supply of industrial metals but also the need to preserve institutional memory within American mining. Without "continuity of engineering," we would face severe setbacks in regenerating America's industrial resource base. While the dramatic tenor of Mr. Lifton's speech was certainly warranted given foreign dominance in vital niche minerals, it is encouraging to note that there remain many interesting companies in the American mining space.Modern lighting fixtures, chandeliers and contemporary lighting. Said Murdock's president Tom Dean, "Number 14 in Murdock Capital's Natural Resources Symposium once again demonstrated that there are solid companies with highly attractive fundamentals seeking to tell their value proposition to an influential and highly motivated audience." The focus of the conference was not limited to American strategic metals, but there were three such outfits on the agenda with compelling projects.

Perhaps the most established operation presenting was Duluth Metals (DULMF.PK),Parking Guidance for parking management system and Vehicle Control Solutions, a Minnesota-based mining outfit that has attracted investors' attention based on the strength of its Twin Metals deposit. The investment opportunity was described as "Asset Backed," meaning that the physical value of metals contained in the property are enough to justify the market capitalization of shares outstanding. After finding geological continuity with an adjacent deposit, Duluth acquired Franconia Resources in a $76 Million transaction completed in March of 2011. Duluth's original properties were significant enough to put them among the top mines in the world in overall tonnage of nickel and copper deposits, but the blockbuster transaction truly enhanced the scope of their operations.

According to the company's most recent NI 43-101, Twin Metals contains indicated resources of 8 billion pounds of copper,We are porcelain tiles specialists and are passionate about our product， 2.5 billion pounds of nickel, 3.2 million ounces of platinum and 7.2 million ounces of palladium. The project, described by some as a proposed "underground city" is a massive undertaking with an appropriately large-cap partner, namely Antofagasta plc (ANFGF.PK), an FTSE 100 Chilean-based mining company with a market cap of $20 billion. The company, which is set to reach production of 700,000 tons of copper and 9,200 tons of molybdenum this year, brings solid expertise and capital support to the Twin Metals project.

The platinum and palladium deposits therein are particularly interesting in a global supply context. The Indicated and Inferred resources would make Twin Metals the largest deposit of these metals outside South Africa, whose production of Platinum Group Metals (PGMs) was down 21% in Q1 and Q2 of this year. America imports 88% of its platinum and 56% of its palladium, making increased domestic supply a key priority. According to the U.S. Gelogical Survey, which also produced the figures above, there are only two primary producing PGM mines in the United States, both located in Montana.Understanding what it means to study china kung fu at Shaolin Temple.

Nickel and copper are industrial minerals that generally track the performance of overall economic health. Prices for both lost a high degree of value in 2007 and 2008 and have yet to reach those highs. Both are also significantly dependent on Chinese industrial demand, a tendency which has undermined market confidence in many industrial metals. That said, the sheer size of the deposits would give Duluth a much better market share than most inaugural producers. Furthermore, production is still a few years down the road, at which point current price trends may well be irrelevant. The project economics of the Duluth Complex have been given favorable assessments by the geologists in the 43-101 and analysts at CIBC. The location of reliable nearby infrastructure and a long history of mining in the jurisdiction contributes to lower capex costs as well. High-grade, low-cost producers are always in the best position to weather price storms and Duluth seems to be in a good position on both counts.

It should be noted that permitting will be a pesky issue. I am not suggesting that Duluth will fail to gain the proper licenses in due course, but projects of this size always attract attention from local policymakers and the EPA.Original handmade personalized bobbleheads Head dolls made to look like the photo you provide to us. As such, the process may take longer than many investors would hope. It is likely for this reason that a world-class deposit is only producing "asset-backed" share value.