A look at the rare-earths industry, and current developments aimed at reducing dependence on Chinese exports
By Simon Walker, European Editor
As the residents of any town where a major supermarket has killed off all of the small independent stores will confirm, there can be significant disadvantages in having to rely on a single supplier. Even worse, should that supplier later decide to close its doors and move elsewhere, the citizens are up the proverbial creek, with no alternative source for their day-to-day needs.
This scenario provides a close analogy with the rare-earths market. Having effectively run competitive producers off the block 10 years or so ago, China has established a level of domination in rare-earths production that is unsurpassed in other mineral commodities. Consumers in the U.S., Japan, Europe and elsewhere have become wholly dependent on imports from China, a position The New York Times highlighted in an article in September 2009.
According to the U.S.-based analyst, John Kaiser, the trigger for the sudden media awakening to this situation arose the previous month with the publication by the Chinese Ministry of Industry and Information Technology of a draft report on the country’s policy for its rare earths industry up to 2015. The inclusion of plans to tighten controls on the supply of rare-earth oxides and downstream products from China, and possibility of an export ban on specific rare-earth metals, provoked industry-wide jitters over the security of supply.
With China later apparently confirming cuts in export quotas, the situation was exacerbated in October this year by the diplomatic spat between China and Japan over the sovereignty of certain islands that lie between the two countries, with Chinese exporters withholding supplies of specific rare earths. Cerium, a key ingredient in abrasives used in the production of polished glass components for flat-panel televisions and hard-disc drives, was one of the metals affected.
Chinese officials attempted to assuage U.S. and Japanese fears over its rare-earth export plans at the ASEAN summit in late October, with the country’s Foreign Minister Yang Jiechi assuring U.S. Secretary of State Hillary Clinton China “will not use rare earths as a diplomatic, political or economic tool in dealing with other countries.” Nonetheless, while accepting this statement, Clinton pointed out the Chinese export restrictions are “a wake-up call” for the world to seek additional sources of rare earths.
So, how did the world’s rare-earth users get into this situation in the first place, and what is being done to develop alternative sources of supply now that China seems almost certain to cut back on its exports? Not, the Chinese say, from the perspective of wishing to exercise an increasing level of control but because of the burgeoning demands from their own domestic industry.
China’s Rise to Dominance
From initial interest in rare earths for limited military purposes, the market expanded slowly during the third quarter of the 20th century. By 1987, major users included the glass and ceramics industries, the production of catalysts for oil refining, and in metallurgy as alloying materials. At that time, less than 5% was being used in electronics and the production of high-intensity magnets. Twenty years on, and the picture is markedly different, according to the U.S. Geological Survey: while metallurgical applications and alloys still take up nearly one-third of demand, rare-earths usage in electronics has risen to a similar proportion.
On the face of it, national governments in the market-economy countries seem to have been remarkably complacent during the 1990s and 2000s, as China became increasingly dominant within the international rare-earths market. Since Chinese producers could supply what was needed at lower costs than established producers in the U.S. and elsewhere, they effectively drove their competitors out of business. From the world’s leading producer, based on the Mountain Pass deposit in California, the U.S. joined the ranks of those dependent on imports to satisfy domestic industrial demand.
China has two principal sources of rare-earth metals: by-product output from the Bayan Obo iron ore mine in Inner Mongolia, and low-grade ion-absorption clay deposits in the provinces of Jiangxi, Guangdong, Hunan, Guangxi and Fujian in southern China. Commercially, the two are complementary, since Bayan Obo’s output is principally of ‘light’ rare earths, while the clays contain a higher proportion of ‘heavy’ elements. What the two have in common is their low cost of production, at least on an historical basis, although recent Chinese awakening to environmental issues and the legacies of past mining practices appear to be whittling away at that advantage. Other Chinese production comes from deposits in Sichuan and Shangdong provinces.
Discovered in 1927, Bayan Obo was initially considered to be an iron ore deposit. However, nine years later its rare-earth potential was recognized, with niobium being added to its list of resources in the late 1950s. According to Mindat, the deposit contains 470 million mt of iron-ore reserves, plus some 40 million mt of mineralization grading 3.5%-4% rare earths, 1 million mt of Nb2O5 and 130 million mt of fluorite. Stratiform and lenticular orebodies occur within quartzite, slate, limestone and dolomite host rocks.
Worldwide, the development of new uses for rare-earth metals has traditionally mirrored their availability, with the U.S. taking the lead in this respect once Mountain Pass came on stream in 1952. Neither was China an exception here, with national scientific and industrial development programs that were put in place during the 1980s and 1990s including studies on new uses for the country’s extensive rare-earth resources.
Thus, not only has China been able to supply virtually all of the rare-earths needed by the rest of the world, but it has also developed its own technical expertise in their use. As a result, domestic demand has surged, not only to supply export-orientated industries such as electronics, but also to satisfy demand from newly emerging technologies such as wind turbines and hybrid cars. With international pressure on China to reduce its carbon emissions, and realization gained during preparations for the 2008 Olympic Games, these have taken on new importance within the national economy.
Annual Output Trends and Reserves
According to statistics gathered by the British Geological Survey, worldwide production of rare earths has been rising steadily over the past 10 years. The data shown in the table on p. 50 clearly illustrate China’s increasing dominance in the world market, with a 50% increase in output over the period from 1999 to 2008. The BGS notes, however, its data set is not complete, and a number of other countries—including Indonesia, Kazakhstan, North Korea, South Korea, Kyrgyzstan, Mozambique, Nigeria, Russia and Vietnam—are believed to have limited rare-earth production.
In a presentation to this year’s SME conference in Phoenix, the USGS’s rare-earths expert, James Hedrick, cited a figure of 124,000 mt of contained rare-earth oxide production worldwide in 2008, of which China had a 97% share, India 2.2%, Brazil 0.5% and Malaysia 0.3%. He also presented a graph of production trends since the early 1950s, which clearly indicates the accelerating trend over the subsequent period as more uses were found for rare earths, and demand rose accordingly.
In terms of world reserves, the USGS reported a total of 99 million mt in its most recent Mineral Commodity Survey publication, although noting the resource base is probably much greater. Bastnaesite deposits in China and the United States hold the greater proportion of current reserves, while the bulk of the remainder is contained in monazite deposits in Australia, Brazil, China, India, Malaysia, South Africa, Sri Lanka, Thailand and the United States. A breakdown of known reserves is shown below.
The risk of Chinese supplies being cut, either in part or in total, has already led some governments to consider introducing national rare-earth stockpiles. At the beginning of October, Japan’s Foreign Minister Akihiro Ohata stated publicly that a stockpile was then under consideration as a buffer against future supply interruptions, with the country’s trade ministry studying which specific rare earths should be included.
Japan’s lead was swiftly followed by South Korea, which has been reported to be planning to invest $15 million in building a 1,200-mt rare-earth stockpile by 2016.
In the U.S., meanwhile, Congress already has the issue on its agenda. In March, Rep. Mike Coffman (R-Colorado) introduced a bill that included a requirement for the Department of Defense to create a stockpile of rare earths considered essential for national security. And, in a separate move, the government has been carrying out an investigation into whether China has been cutting back on its exports to the U.S. as well as to Japan. In October, a spokesperson for the U.S. Trade Representative’s office was reported as saying, “We’re seeking more information...into whether China’s actions and policies are consistent with World Trade Organization rules.”
However, it is not just the consuming countries looking at the possibility of stockpiles, since Baotou Steel Rare-Earth, operator of Bayan Obo, is believed to be working on its own inventory store. With its output of around 55,000 mt this year somewhat greater than the tonnage it is being allowed to export, the surplus could well end up there, with the company having confirmed it had been given permission to build a 200,000-mt-capacity storage facility at Baotou.
On the demand side, rare earths can be found in high-tech applications across the board, as well as in more humble uses such as the flints in disposable cigarette lighters. A list of the rare earths and their characteristics and occurrence can be found in the sidebar article on p. 47.
To cite some examples, yttrium, terbium and europium oxides are used in the red, blue and green phosphor coatings for LCD and plasma TV screens, and computer monitors. They also find uses in low-energy light bulbs. Wind turbine generators need neodymium and other rare-earth magnets, while neo-magnets also help to cut the weight of vehicles, so making them more energy-efficient. Other everyday applications include mobile phones and computer hard drives, while the defense industry uses rare earths for things as diverse as jet engines, radar, night-vision systems and missile guidance, as well as more general electronics.
In a presentation made to the Rare Metals Summit III in October, the Australian producer Lynas Corp. gave an overview of current and projected demand trends for rare earths. The principal end-uses at the moment include magnets (26% of total demand or some 35,000 mt/y of rare earths), the company said, catalysts for hydrocarbon cracking (21,300 mt), polishing powders (19,100 mt) and battery alloys (18,600 mt). Other end-uses encompass metallurgical alloys, glass additives, auto catalysts and phosphors.
By 2014, according to Lynas’s estimations, total demand will have grown from 136,100 mt to 190,100 mt, with the main growth drivers being battery alloys and magnets, and rare-earth use in polishing powders also increasing strongly. In fact, the only area of use predicted not to see any growth is in the most traditional of rare-earth applications: as a colorant in glass-making.
United States Industry Developments...
The threats—real or perceived—from China about future rare-earth supplies have certainly spurred interest across the globe in developing alternative sources. In the United States, Molycorp Minerals has been working toward reopening Mountain Pass in California, while a more recent arrival, Wings Iron Ore, recently finalized an agreement with Glencore over reopening the Pea Ridge mine in Missouri. In Canada, Avalon Rare Metals is evaluating its Nechalacho prospect, Great Western Minerals has its Steenkampskraal project in South Africa, while in Australia, Lynas Corp. is pressing ahead at Mount Weld while Arafura Resources is working at its Nolans tenement. Analyst John Kaiser points out that other juniors involved in the hunt include Alkane Resources, Greenland Minerals & Energy, Hudson Resources, Matamec Explorations, Quest Rare Minerals, Rare Earth Metals, Rare Element Resources, Stans Energy Corp., Tasman Metals and Ucore Rare Metals, all of which are listed in stock exchanges in Canada or Australia.
From the U.S. perspective, the reopening of Mountain Pass would be a major landmark in terms of resuming a level of self-sufficiency in national rare-earths requirements. Opened in 1952 by the Molybdenum Corp. of America, by the mid-1960s the operation had an annual capacity of 10,900 mt of rare-earth concentrates. The renamed Molycorp was subsequently bought out by the oil company, Unocal, which in turn merged with Chevron in 2005. In 1998, however, operations at the processing facility were curtailed as a result of environmental concerns over thorium and radium emissions from plant wastewater, with mining ending in 2002.
The current owner, Molycorp Minerals, bought the operation and its facilities from Chevron in 2008, since when it has been running pilot plant-scale operations on stockpiled feed material. In July of this year, the company raised $379 million in an IPO, with the proceeds being used toward the estimated $511 million cost of renovating the existing facilities and resuming mining in 2012. Its stated aim, under its ‘mine-to-magnets’ strategy, is to become one of the world’s most highly integrated producers of rare-earth products, including oxides, metals, alloys and magnets.
Molycorp Minerals is projecting an output of 19,050 mt/y of rare-earth oxides once Mountain Pass is back to full production. In the meantime, it has entered into a number of agreements with other companies over the development of future downstream activities, including the production of high-strength neodymium-iron-boron magnets. Current revenue is being generated through the sale of lanthanum concentrates to consumers in the catalyst industry.
In its IPO prospectus, the company cited proven reserves of some 40,000 mt of rare-earth oxides at an average grade of 9.38%, plus 962,000 mt of oxides in probable reserves at a grade of 8.2%. This, it said, would give a mine life of over 30 years, with the possibility of increasing output to 40,000 mt/y if the market exists.
In Missouri, meanwhile, privately owned Wings Iron Ore acquired the Pea Ridge property in 2001. Originally owned by Bethlehem Steel and St Joe through Meramec Mining Co., Pea Ridge produced over 27 mt of iron ore products between 1964 and its closure in 2001. Its acquisition by Upland Wings led to a small-scale resumption of production in 2006, based on a tailings-retreatment operation.
Wings has budgeted US$390 million in pre-production costs to bring the mine back into operation at a rate of 3.6 million mt/y of iron-ore products, based on a 136-million-mt magnetite resource. However, the Pea Ridge orebody also contains rare-earths, both in apatite (phosphate rock) within the main ore and also within separate, high-grade breccia pipes. Old tailings also contain recoverable rare earths. More importantly, the company states, Pea Ridge has a higher proportion of heavy rare earths (samarium, europium, gadolinium, terbium and yttrium) than any of the other major rare-earth sources, including Mountain Pass, Bayan Obo and Mount Weld in Western Australia.
In October, Wings signed a marketing deal with Glencore over its future rare-earth output. A feasibility study is scheduled to begin by mid-December, with completion due in the second half of 2011, although development will depend on the partners being able to secure competitive funding. Assuming that this is achieved, a restart to mining is penciled in for 2012 with a ramp-up to full production the following year, including 42,000 mt/y of apatite and 1,900 mt/y of rare-earth oxides.
Situated within one of the main mining districts in Western Australia, Lynas Corp.’s Mount Weld project is based on a carbonatite-hosted resource that contains niobium and tantalum as well as rare earths. The company bought the property in 2001 from Anaconda Nickel (now Minara Resources) for A$5 million. Trial mining in 2007 and 2008 produced 770,000 mt of ore grading 15.4% rare-earth oxides, but construction at the mine site and at Lynas’s advanced minerals plant in Malaysia was suspended in early 2009 when the company lost its source of funding. An equity issue in November last year raised A$450 million, which allowed it to resume work, with concentrator construction scheduled for completion this month. Initial capacity will be 33,000 mt/y of concentrate grading 40% rare-earth oxides, which will be shipped to Malaysia for further processing into 11,000 mt/y of rare-earth oxide products.
The company recently revised its resource estimate for Mount Weld upward to a total of 17.49 million mt grading 8.1% total rare-earth oxides, or 7.9% lanthanides (not including yttrium). It has divided its resource into two distinct zones, the 9.88-million-mt Central Lanthanide Deposit, which grades 10.7% total rare earths, and the 7.62-million-mt Duncan deposit which, although it grades 4.8%, contains a higher proportion of heavy rare-earth metals.
In 2007, Lynas paid US$4 million for the Kangankunde carbonatite-hosted rare-earth resource in Malawi. At the time, the deposit represented an inferred resource of 107,000 mt of rare-earth oxides which, the company noted, could form the basis for an output of at least 5,000 mt/y of rare-earth oxides for processing at its Malaysian refinery.
In Canada’s Northwest Territories, Avalon Rare Metals is just the latest in a sequence of companies that has included Highwood Resources, Placer Dome, Hecla and Navigator Exploration Corp. to have worked on evaluating the mineralization at Thor Lake. Resources at the focus of current attention, the Nechalacho zone, now total 14.48 million mt indicated at 1.82% total rare-earth oxides plus 175.5 million mt inferred at 1.43%, the company stated in June.
As well being relatively enriched in heavy rare earths, the Nechalacho deposit contains tantalum, niobium, gallium and zirconium mineralization. A prefeasibility study completed earlier this year indicated capex costs of virtually C$900 million for an 18-year underground mining operation with an output of around 10,000 mt/y of rare-earth oxides, plus zirconium, niobium and tantalum. In September, Avalon raised C$30 million in a share sale, and a month later received a scoping study for a 25,000 mt/y rare-earth separation plant which, the study suggested, would carry a near-C$350 million price tag.
Canadian-domiciled company Great Western Minerals has a number of rare-earth exploration projects on the go in North America, plus an option over the rehabilitation of the old Steenkampskraal mine in northwestern Cape Province in South Africa. The mine was operated by an Anglo American subsidiary between 1952 and 1963 principally as a thorium producer, with the current owner, South Africa’s Rareco, acquiring it in 1989.
The deposit consists of a tabular monazite-rich orebody hosted in pegmatites, with accessory copper, lead, zircon and ilmenite. The monazite contains an average in-situ grade of 17% total rare-earth oxides, making Steenkampskraal highest-grade rare-earth deposit in the world, the company claims.
Based on historical data, current resources total just under 30,000 mt of rare-earth oxides. The company began a feasibility study on the project in June this year, and subsequently raised C$35 million in a share offering as well as taking a 21% stake in Rareco.
Will the Future be Secure?
There is no doubt that after a considerable period of complacency, the Western World has finally woken up to the potential consequences of China no longer being able to supply all of its rare-earth requirements. There has been a marked increase in exploration activity, with known prospects being revisited and new ones prospected. Not surprisingly, there has been a fair amount of media hype that has helped spur wider interest in the topic on the one hand, and risks creating a ‘rare-earth bubble’ on the other.
Some hard facts remain undisputed, however. Hard drives and wind turbines have a mutual need for high-strength magnets, as do the increasing numbers of motors found in modern cars. Automotive technology is also changing focus, with hybrids increasing their market share and conventional cars needing more effective exhaust catalysts. Nickel-metal hydride batteries are finding more and more applications, while better hydrogen-storage capabilities will be needed as alternative energy-carrier options become more widely available. All of these uses have one thing in common: rare earths.
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