It is perhaps ironic that a good deal of the world’s alternative energy technology depends on minerals that need to be extracted by mining. Wind power may itself be emissions-free, but mining for the rare earth metals that are used in the wind turbines is certainly not. That is also true for the lithium used in batteries that are likely to be the main source of energy for electric vehicles.
There are many miners in every corner of the world already digging out lithium and the rare earth metals, but only a small number can really sway whole industries and markets.
15. Sociedad Química y Minera de Chile S.A. (NYSE: SQM) is the largest lithium miner in the world. The company’s lithium output fell by -26% year-over-year in 2009 to 21,300 metric tons. Revenues fell by -54.5% in 2009, and the outlook for 2010 was also weak due to a 20% price cut the company instituted in September 2009. The price cut was intended to boost sales, and that has apparently worked. In the first half of 2010, SQM’s lithium sales jumped 82% year-over-year compared with the same period a year ago. Revenues are up 48% as well.
The Chilean government considers lithium a strategic resource and strictly controls its exploitation. Of about 100 new lithium mining projects in the world, only two are located in Chile, where the USGS, the United States Geological Survey, estimates that 75% of the world’s lithium supply is locked up. As long as SQM has a stranglehold on Chile’s lithium deposits, it essentially controls the world’s supply of the metal.
16. Molycorp, Inc. (NYSE:MCP) has been a publicly traded US company only since late July 2010, although its chief asset, the Mountain Pass mine in southern California, has been in operation on and off for more than half a century. Molycorp plans to restart mining operations early next year to produce the rare earth elements, REEs, so critical to modern life.
The company offers an alternative to Chinese mines which now produce about 97% of the world’s supply of REEs. The current spat between China and Japan has stopped the flow of REEs to Japan, even though the Chinese government denies having ordered the halt in exports. REEs are used in wind turbines, MRI scanners, consumer electronics, electric cars, and, not least, defense systems.
Molycorp must be wary of China dumping REEs on the market, lowering margins and making it difficult for the US company to turn a profit. Low wages in China and less stringent environmental standards could also make Molycorp’s life difficult. But it’s hard to see how the US government, and especially the defense department, will stand by and let a US producer of critical minerals get shuttered by a foreign government.
Biofuels are defined as transportation fuels produced primarily from renewable plant matter. In the US, almost all biofuel is corn ethanol. The US supports and protects its corn ethanol industry with a $0.45/gallon subsidy on the production of ethanol, and a tariff of $0.54/gallon on imported ethanol. The government also supports the oil and gas industry with plenty of tax breaks and incentives, but that’s not the point.
The point is how effective corn ethanol is in reducing US dependence on imported liquid fuels and how effective it is in reducing carbon emissions. The answer to both questions is, “Not much.” The Congressional Budget Office recently released a report on biofuel tax credits, and found that producers of corn ethanol get $0.73 to provide the same amount of energy as exists in a gallon of gasoline. The cost of reducing CO2 emissions is about $750/metric ton of CO2 avoided. A ton of carbon dioxide on the EU exchange currently fetches less than $20/ton, and has never been higher than $40/ton.
Unfortunately, there is nothing on the horizon that offers a substitute for ethanol. The various other algae-based or non-corn based fuels are barely out of the lab and are even further away from making a difference in the US fuel supply than is corn ethanol.
17. Cosan Ltd. (NYSE:CZZ) is Brazil’s largest producer of sugar cane-derived ethanol. Cosan does not own most of the mills that produce the cane ethanol — the company controls the distribution and retail sale of cane ethanol in a country where about 77% of the nation’s fleet are flex-fuel capable. The company entered a $12 billion joint venture with Royal Dutch Shell earlier this year that will have an annual production of 2 billion liters of ethanol and more than 4,500 service stations to sell from.