China Is Seizing Our Supply Of Cesium

Last week, I wrote about America’s dependence on China for 20 of the 35 critical mineral commodities on the Department of Interior’s list published in May 2018. I now document a recent development that means yet another critical mineral will be turned over to the Chinese unless steps are taken by the US government to block a proposed sale.

The metal is cesium (Cs) and not surprisingly, the United States is 100% import dependent for the raw material. Fortunately, the world’s only significant cesium mine is located in Canada, our closest friend and ally. Furthermore, the mine and its proprietary manufacturing technology are owned by an American corporation.

Cesium is an obscure, low-use commodity with limited market data. According to the USGS, world production has not been available since 1977 and there has been no US import and consumption data since the late 1980s. World resources are incomplete and largely undocumented.

For what it’s worth, the USGS includes this statement in its annual mineral commodity summary for cesium: “Only a few thousand kilograms (tonnes) of cesium are consumed in the United States every year.”

In my ongoing commodities podcast, now in its ninth year at Kitco.com, cesium did not even warrant its own show when we covered the periodic table of the elements. We lumped it along with rubidium in a podcast on the minor alkali metals (Mercenary Musings Radio, July 11, 2012). There is no trading of cesium and therefore, no world market price is available. That said, it is extremely expensive at high purity levels. The 2018 price for 99.98% pure cesium metal was $79 per gram, or nearly twice the price of a gram of gold. 98% pure cesium formate, which comprises the majority of its use, was priced at $39 for 25 grams.

Cesium production comes from pollucite, a rare zeolite mineral that occurs in lithium-rich granite pegmatites. Historically, about 85% of the world’s supply has come from Cabot Corporation’s Tanco mine in Bernic Lake, Manitoba, where it is produced as a co-product of tantalum operations. Zimbabwe and Namibia also produce small amounts of cesium from lithium mining.

The room and pillar Tanco mine had major collapses during development operations in 2010 and 2013. Mining was shut down in 2015 when the development project was completed and Cabot has since met demand from stockpiled ore.

The USGS position is that Tanco is no longer commercially viable so it does not include the deposit in its list of world cesium reserves.

Although a very minor metal, cesium has an important use in oil and gas exploration. Cesium formate brines are high density, low viscosity additives to drilling fluids and critical for prevention of catastrophic blowouts in deep, over-pressurized, high temperature wells. Because these brines are quite expensive, they are usually rented to drillers, recovered at about 85% when operations cease, and returned to the company for reformulation and recycling.

The opaque supply-demand fundamentals of cesium are only part of a developing story. Let’s start with a review of the company that currently controls the world’s cesium supply:

Cabot Corporation (CBT) is headquartered in Boston, Massachusetts and is a NYSE-listed specialty chemicals company. It is a multi-national organization with 44 manufacturing plants in 21 countries. Many of the company’s operations are in China and it obviously has strong relationships there.

In its 2018 annual report, Cabot reported revenues of $3.2 billion with $253 million of free cash flow, returned $80 million in dividends to shareholders, and repurchased $142 million of its shares. The company has a current share price of about $47 and market capitalization of $2.7 billion.

One of its four divisions is “Specialty Fluids”. These operations produce cesium formate brines and fine cesium chemicals used as catalysts, doping agents, and brazing fluxes. The division produced only 1% of company revenues over the past two years and is not considered a core asset.

The company completed “an additional infrastructure and mining project” at Tanco in 2018. It also entered into a 100% off take contract with Pioneer Resources Ltd, an ASX-listed junior miner, for pollucite from the Sinclair Zone deposit in Western Australia.

In the annual report, Cabot stated it has “sufficient raw material to… supply cesium products for the foreseeable future, based on our anticipated consumption.”

And now the plot thickens:

On January 30, 2019, Cabot Corporation entered into an agreement to sell its Specialty Fluids Division to Sinomine Resource Group Co Ltd., a Chinese exploration, mining, and chemical company listed on the Shenzhen Exchange. The purchase price is $130 million upon closing and up to $5 million in cash royalties for lithium products over a 10-year period.

According to Cabot’s news release, this transaction is subject to regulatory approval with closing expected in Q3. As part of my due diligence, I did a brief perusal of Sinomine’s website and found it woefully obsolete with company news last posted in July of 2015.

My first reaction upon reading the news release was to note the similarity of this transaction with another sad saga that began in 1995 and culminated in 2004. That deal involved an American-based specialty metals technology and manufacturing monopoly, and it proved to be a disaster for our strategic interests.

Let’s review:

In the early 1980s, General Motors (GM) developed permanent rare earth magnets for use in vehicle air bags and mechanical sensors. With research support from the Pentagon, it also produced magnets for motors in laser-guided “smart” missiles and bombs. In 1986, it formed a subsidiary called Magnequench and began manufacturing Nd-Fe-B magnets at plants in Indiana.

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Disclaimer: I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in any report, commentary, this website, interview, and other content ...

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