Showing posts with label Rare Earth. Show all posts
Showing posts with label Rare Earth. Show all posts

Monday, December 17, 2012

Frontier’s SA project steams ahead as JV deal closes

TSX-listed Frontier Rare Earths on Friday said Korean Government-owned mining and natural resource investment company Korea Resources Corporation (Kores) has completed the acquisition of a 10% interest in Frontier's Zandkopsdrift rare-earths project, in South Africa, along with an off-take right and obligation for 10% of the production.

The company said it believed the C$23.8-million deal made it the only junior company in the rare-earths sector to have signed and completed a definitive agreement with a significant strategic partner.

"The acquisition by Kores of a 10% interest in Zandkopsdrift is a strong vote of confidence in both the potential of the Zandkopsdrift project and the management of Frontier. With our partnership with Kores and a significantly strengthened balance sheet, we believe that Frontier is very well positioned to meet its objective of becoming the next major producer of separated rare earths outside of China,” Frontier CEO James Kenny said.

Under the terms of the agreement, Kores had the option to increase its participation in Zandkopsdrift up to 50%, together with an offtake right and obligation for up to half of the production from the project.

Further, Kores had agreed to arrange project finance to develop the entire project on the best-available market terms and to provide pro rata funding for the portion of Zandkopsdrift development costs not covered by the project finance, while it would also be responsible for providing technical and operating experience for the design, construction and operation of the Zandkopsdrift facilities.
Frontier added that it was also willing to cooperate with Kores with regard to downstream opportunities in the area of rare-earth metals, alloys and magnets.

Frontier said its cash balance was boosted by the transaction to C$52-million and is expected to be sufficient to fund the completion of a preliminary feasibility study (PFS) and a definitive feasibility study at Zandkopsdrift, work on the company's other proposed exploration and development programs and corporate overheads. Kores is also required to pay Frontier 10% of all operating costs and expenses related to Zandkopsdrift from July onwards, amounting to about C$400 000 as at the end November.

In April Frontier started work on a Canadian National Instrument 43-101-compliant PFS on Zandkopsdrift, and on Friday said “good” progress has been made, with most of the requisite studies now either completed or at an advanced stage.

The company’s TSX-listed stock traded 6.35% higher at Friday noon at 67 Canadian cents apiece.

Edited by: Creamer Media Reporter

Monday, November 5, 2012

Great expectations fill Greenland as China eyes minerals

Whether in iron, zinc or rare earth minerals, China is eyeing investments in the Danish-ruled country whose own, increasingly autonomous, national government is looking further afield for investors

Author: Alistair Scrutton

By a remote fjord where icebergs float in silence and hunters stalk reindeer, plans are being drawn up for a huge iron ore mine that would lift Greenland's population by four percent at a stroke - by hiring Chinese workers.

The $2.3-billion project by the small, British company London Mining Plc would also bring diesel power plants, a road and a port near Greenland's capital Nuuk. It would supply China with much needed iron for the steel its economy.

With global warming thawing its Arctic sea lanes, and global industry eyeing minerals under this barren island a quarter the size of the United States, the 57,000 Greenlanders are wrestling with opportunities that offer rich rewards but risk harming a pristine environment and a traditional society that is trying to make its own way in the world after centuries of European rule.

Great expectations could lead to greater disappointments, for locals and investors. Yet a scramble for Greenland already may be under way, in which some see China trying to exploit the icebound territory as a staging ground in a global battle for Arctic resources and strategic control of new shipping routes.

Whether in iron, zinc or rare earth minerals vital for 21st-century technology like smartphones, China, the emerging economic superpower is eyeing investments in the Danish-ruled country whose own, increasingly autonomous, national government is looking further afield for investors.

"This is not just a region of ice and polar bears," Prime Minister Kuupik Kleist told Reuters in the capital Nuuk, formerly known by its Danish name Godthab. "Developing countries are interested in a more political role in opening up of the Arctic. Greenland could serve as a stepping stone."

Talk in Europe or North America of a Chinese grand design to take over the Arctic is mocked as overblown by many in Greenland - an recent exhibition of cartoons recently in Nuuk featured one drawing of an iceberg, Greenland-shaped above the water line, and in the form of China below. Its caption: "Polar Paranoia".

Compared to its investments in Africa or Latin America, Beijing has a light footprint in the Arctic. In Greenland, not one mining or oil project has yet got off the ground. Appetite for exploration is tempered by political polarisation, as Greenland's leaders square off over how to regulate and tax new wealth under a self-government regime just three years old.

"There are great expectations in Greenland, but no results," said Rasmus Ole Rasmussen, a senior researcher specialising in Arctic affairs at the Nordregio institute in Stockholm.

Nonetheless, transformation is approaching rapidly for a land still mostly inhabited by indigenous Inuits engaged in an economy dominated by fishing. And China may play a larger role in this than Europeans and North Americans find comfortable.

"It's fair to say countries like China and South Korea are far more active than Americans and Europeans in showing their interest in investing," said Kleist, who adds that the West, for which Greenland remains part of its Cold War-era NATO defence pact, can appear complacent, despite new geopolitical currents.

In Nuuk, home to 16,000 people on the southwestern coast, 1,000 sea miles north of Newfoundland, there are just two traffic lights. But new construction is everywhere: gleaming office buildings that house foreign companies and even a new mall where one can buy olives and French cheeses - for a price.

Greenland's Bureau of Minerals and Petroleum (BMP) has now awarded overall some 150 licences for mineral exploration compared with only a handful in existence a decade ago, with around $100 million spent by companies last year alone. Oil companies have spent more than $1 billion in exploring offshore.

That includes exploration of rare earth minerals, used in products from wind turbines to hybrid-powered cars. China currently accounts for the vast majority of the world's supply.

UNFROZEN NORTH

Greenland can look like ground zero for global warming. This summer many scientists were shocked as nearly all its massive ice sheet thawed. Hunters no longer prowl offshore ice that has grown too thin to support their dog sleds. A walrus was the talk of Nuuk this year, found drifting far south of its normal range.

But there also benefits from warmer weather - and it is not just dreams of growing strawberries and broccoli in the south.

With ice receding, some estimates suggest the polar ice cap may by 2040 be disappearing entirely during summer. Melting sea ice may open passages north of Canada and Russia and cut sailing distances by up to 40 percent between Shanghai and New York.

"Greenland used to be a big, white blob on the world map," said Aleqa Hammond, an opposition leader and former foreign minister of Greenland. "Now we have a global role."

But she criticised the government for keeping people in the dark about Chinese plans: "We see Chinese delegations everywhere and even the parliament does not know who they are," she said. "We seen them in our hotels, in our fjords and on our streets."

London Mining plans construction at the Isua iron ore deposit next year if Greenland gives the go-ahead. The project, which aims for finance from China, would ship some 15 million tonnes of iron ore annually from fjords near Nuuk to China.

CHINA'S GHOST

An icebreaker completed China's first crossing of the Arctic Ocean this past summer, and diplomacy earlier in the year has also underlined China's interests in the north Atlantic.

Premier Wen Jiabao began a tour of Europe in April with a visit to Iceland, population 320,000, where there has been much talk of a Chinese developer's bid to lease a vast tract of land.

And it was little surprise when President Hu Jintao, leader of the world's most populous nation, paid a three-day visit in June to Denmark, home to just six million people. Many assumed Greenland's riches were on his mind, despite official denials.

Just days before, EU Industry Commissioner Antonio Tajani had flown to Nuuk to sign a letter of intent to cooperate with Greenland on its raw materials: "The letter of intent," said one senior Greenland official, "Was a political message that we would not lock ourselves into to supplying China with minerals."

In Greenland, Kleist spoke of European pressure, saying one EU politician had suggested he limit Chinese mining. The prime minister, whose nation is not part of Denmark's membership of the European Union, refused, saying modern trading rules would not allow it: "Could the EU do that?" he asked. "Of course not."

When U.S. Secretary of State Hillary Clinton visited last year, her bodyguards worried at the near absence of security measures in Greenland. But she had other things on her mind: "One of her first questions was, 'What is happening about rare earths?'" said another Greenland government official.

One deposit alone, in southern Greenland, being explored by Australia's Greenland Minerals and Energy, could contain more than 10 percent of the world's deposits of rare earths.

Oil could have an even greater impact.

Energy consultancy Wood Mackenzie says Greenland may have reserves of 20 billion barrels of oil. The BMP says reserves may be equivalent to as much half of the entire North Sea.

Greenland has approved a sovereign wealth fund on oil-rich Norway's model that would allow it to invest new earnings.

GREENLAND'S "HOLY GRAIL"

Yet a big question is whether such a tiny population can cope, and there are signs of local political unease that may hinder investment, whether Asian or Western.

Four hours north from Nuuk by ship, through melting icebergs and passing whales, lies Maniitsoq, a symbol both of the hope foreigners bring and a reality check for Greenland's ambitions.

U.S. giant Alcoa Inc is considering building an aluminium smelter there, strategically sited between European and North American markets. It would entail the import of thousands of workers, possibly from China.

The smelter would be fed from mines as far apart as Brazil and Australia and shipped out as aluminium to the world market. Alcoa has not decided to go ahead. Among several pending issues, it wants to see whether cheaper foreign labour will be allowed.

After it won greater self-rule in 2009, an annual grant from Denmark which has covered more than half of Greenland's public spending was effectively frozen at around 3.5 billion Danish crowns ($600 million) and will shrink in real value over time.

"There is a need to become independent economically," said Naaja Nathanielsen, a Greenland lawmaker. "Most people see it not as opportunity, but as necessity."

Villages like Maniitsoq are dotted along Greenland's western coast, relying on state subsidies for heating and communications. Unemployment is high and alcoholism rife.

Much of the Maniitsoq fisheries industry has vanished. Locals say shrimp have moved north as southern waters warm. The town is huddled on an outcrop of windswept rocks with Soviet-style housing blocks, empty streets and a few downtrodden bars.

"We need a Big Bang here," said Karl Lyberth, deputy major in Maniitsoq. "Alcoa is the only project that can help us.

The town's population, now 2,715, has fallen by around 200 in a decade. Few will speak against Alcoa, though a local hotel owner made headlines that were uncomfortable for some by saying the town would need a brothel for workers building the smelter.

"It was only half a joke," said Soren Lyberth of the Heilmann Lyberth Hotel. "But people don't want to talk about it."

He touched a sore point in Greenland - some fear that the country cannot absorb so many dollars and foreign workers, and that untrained and poorly educated Greenlanders will lose out.

"They think the holy grail is Alcoa, but it's not true," said Jens Moller, head of a community training project in Maniitsoq. "It could bring a lot of problems."

ENVIRONMENTAL HESITATION

Locals also debate bringing in 2,000 Chinese workers to Nuuk for London Mining, and whether Greenland should let foreign employers undercut local wages. Such arguments stall projects.

To the dismay of investors, a consensus behind foreign companies has frayed. The opposition is calling for more taxes on miners. Environmentalists demand more consultations.

"We need more royalties," said opposition leader Hammond. "The polluter should be paying."

The leftist, pro-independence coalition led by Kleist has more technocratic ministers than a previous government criticised by opponents as nepotistic and inward-looking.

But Kleist, born to an Inuit mother and Danish father in a now abandoned mining village, is aware of communities' problems and his coalition is split on whether to let in low-paid foreign labour. Several mining executives and Greenland officials expressed frustration at the slow pace of projects.

"Our dream is about to come true," said one senior Greenland official, who spoke on condition of anonymity. "But people are getting nervous, asking whether they are ready for this."

Take rare earths. Because they are massed with uranium, neither could be mined without ending Greenland's prohibition on extracting radioactive materials - a policy inherited from Denmark. Greenland's politicians are split on the issue.

"The policy of zero tolerance is the main issue for us," said Ib Laursen, operations manager at Greenland Minerals and Energy. Only by ditching the ban could his project be feasible.

Today there is only one operational mine in Greenland, a gold deposit, which opened in 2004. Oil drilling in 2010 and 2011 has failed to yield any discoveries despite a $1.2 billion campaign led by Britain's Cairn Energy [ID:nL5E8CN0BI].

While Greenlanders wait for any bonanza to start, the notion that it may bring Chinese dominion seems far-fetched to many in a country whose European links stretch back a thousand years to Viking colonists and whose ties to the Americas include the Cold War-era U.S. Thule Air Base, deep inside the Arctic Circle.

Some analysts say China's role in Greenland is exaggerated - and that its ambitions are more economic than geopolitical:

"Many non-Arctic countries, like in Europe, are seeing ghosts and troubles ahead," said Rasmussen at Nordregio, describing such fears as having "little to do with reality".

Greenland's prime minister also stresses the limits to his ambitions for the pace of development: "Our situation is uncertain," said Kleist. "I would say five projects in 10 to 15 years are realistic in terms of the global economic situation and the capacity of Greenland society."

Among capacity constraints are concerns over its ability to protect an ecosystem which, global warming aside, is largely unsoiled by human industry. Some big oil executives say it is simply not worth the risk of a spill to drill in a region where its effects could be devastating and clean-up facilities scarce.

For Mikkel Myrup, chairman of local environmental group AvataQ, the country is unready for industrial development: "Greenland simply does not have the regulatory capacity to take responsibility for monitoring the industry," he said.

Standing on a cliff in Maniitsoq, hotelier Lyberth has put off building a new hotel with a view of snow capped mountains. Alcoa and its foreign executives, for the moment, seem far away.

"This is my dream," he said, smiling as he pointed to a barren piece of flat rock where the hotel would be.

"But so far it's only a dream."

Thursday, August 30, 2012

GWMG on track to start SA rare-earths production by mid-2013

Aspiring integrated rare-earths producer Great Western Minerals Group (GWMG) on Thursday said it was on track to complete the refurbishment of the previously producing rare-earths mine Steenkampskraal, in South Africa’s Northern Cape province, by mid-2013.

The company said that while its focus was mainly set on completing the Steenkampskraal monazite mine project, it was actively evaluating strategic spinoff opportunities for its four exploration properties in North America.

The Steenkampskraal mine is a former high-grade producer of rare-earth metals. Global demand for rare-earth metals, which are used in a variety of applications, including the manufacture of hybrid cars, is increasing, with 95% of the supply provided by China, which is limiting the rare-earth metals it exports.

The company said it was continuing with a “highly successful” drilling programme on the Steenkampskraal property and expected to release an updated National Instrument 43-101 technical report and resource estimate before the end of the year.

GWMG had received the remaining $63.2-million held in escrow as part of its $90-million convertible bond financing. The company filed its first Canadian National Instrument 43-101-compliant resource estimate at the beginning of June, thereby satisfying the escrow release condition.

GWMG had to confirm that at least 20 000 t of total rare-earth oxides, including yttrium, in the sum of the measured, indicated, and inferred resource categories were present at the Steenkampskraal property, using a 1% cut-off grade.

Immediately upon closing the convertible bond offering on April 5, GWMG received $10-million, followed by about $63.2-million on June 6. About $10.8-million remains in escrow to satisfy interest payments.

Meanwhile, the company had reported that additional assay results on the property points to a higher distribution of neodymium, dysprosium and terbium when compared with historical data, all of which were critical elements to GWMG’s alloy manufacturing operations.

The surface refurbishment project was reported to be moving towards its scheduled completion during mid-2013, with the construction of containment ponds and finalising of the headgear, winder and associated electrical equipment.

The development of the Steenkampskraal is managed according to National Nuclear Regulator of South Africa requirements, with all activities and authorisations being up to date.

Recent progress was achieved with the authorisation of pumping and storage of mine water, approval from the Department of Energy for transport of materials, and the submission of worker safety assessments for the forthcoming chloride plant-building phase.

GWMG said it was in the process of awarding the contract for the next phase of underground mining preparations that would focus on the bottom portion of the decline. It was expected this part of the refurbishment project could be completed in about two months.

The company is fixated on achieving the first cash flow from the Steenkampskraal project, which would take place as soon as the mixed-chloride plant is completed.

The decision on the final position of the mixed chloride production plant to be located at the Steenkampskraal site had been revised twice since the two initial locations proved, after sterilisation drilling, to have significant monazite mineralisation beneath them. A final site had now been selected and approved for construction.

A rare-earth solvent extraction separation plant near Steenkampskraal is also planned for the site.

GWMG said it was expecting a final scoping report on both plants to outline capital and operating costs, and timelines for its construction in September.

The company also has two rare-earth alloy manufacturing plants, one being operated by subsidiary Less Common Metals (LCM) in Birkenhead, UK and the other operated by subsidiary Great Western Technologies in Troy, Michigan.

As LCM worked toward its first commercial shipment of alloys using its new strip cast furnace, LCM was also planning for the installation of a second strip cast furnace, scheduled for delivery in 2012. More such furnaces were planned to match alloy production with the ramp up of the Steenkampskraal mining operation, to match production with the availability of oxides from Steenkampskraal.

GWMG said it was looking for a new CEO.

The company’s TSX-V-listed shares traded 1.79% lower at 27 Canadian cents apiece on Thursday morning.

Source: Creamer Media Reporter

Wednesday, July 11, 2012

China blocks WTO rare earths arbitration as US critical minerals bill goes to a vote

China has officially rejected a request by the US, Europe and Japan to have a special panel of the World Trade Organization arbitrate a dispute over the country's controversial policy of restricting exports of rare earths.

China mines roughly 95% of the world's rare earths and is also the globe's top consumer of the 17 elements used in critical components for the automotive, high tech, green energy and defence industries, but the country maintains it only holds 23% of global REE reserves and is actively encouraging others nations to explore and mine REEs.

Platts reports under WTO rules, China can object once to the creation of a panel, but is not allowed to block it a second time when the Dispute Settlement Body meets on the issue:

China "said it was puzzled by the complainants' initiation of the panel process as it has no intention of protecting its domestic industry through means that would distort trade," DSB said Tuesday in a statement announcing China's objection. "It added that at the present meeting, it was not in a position to accept the establishment of a panel."

The news comes as the National Strategic and Critical Minerals Production Act of 2012 (H.R. 4402) goes before the US Congress.

The bill – designed primarily to speed up permitting for mining projects – should pass easily with the support of Republicans in the house.

In the 2012 Ranking of Countries for Mining Investment, out of 25 major mining countries, the United States ranked last with Papua New Guinea in permitting delays, and towards the bottom regarding government take and social issues affecting mining.

US-based RARE – the Association for Rare Earth – said on Wednesday REEs are among the critical minerals whose production will be aided by passage of the bill.

RARE’s President and CEO Adam Falkoff said H.R. 4402 is "the most significant job creation bill to be brought to the floor this year. Passage of this legislation is an important step toward recovering the 22,000 rare earth-related jobs the U.S. has lost since the 1980s.”

Voting is set for Thursday afternoon.

Thursday, June 21, 2012

Molycorp shares rise as China denies interfering with rare earth prices

The lingering uncertainty around Chinese exports sent Molycorp's shares as much as 12.8% higher to $23.29 on Wednesday morning on the NYSE, with the stock later trading up 8.9% at $22.50.

Shares of Molycorp Inc rose more than 12 percent on Wednesday after China denied it was interfering with rare earth prices, saying increases reflected higher customs costs and demands by foreign companies for better-quality products.

China, which exports most of the world's rare earth supplies, also challenged foreign estimates of its resources, saying it has just 23 percent of world totals, not the 36 percent that the United States has estimated.

China's state economic planners are considering ways to reshape the country's program of stockpiling strategic materials and could include metals such as rare earths in the program, according to sources.

The lingering uncertainty around Chinese exports sent Molycorp's shares as much as 12.8 percent higher to $23.29 on Wednesday morning on the New York Stock Exchange, with the stock later trading up 8.9 percent at $22.50.

Molycorp is in the process of modernizing and reopening the Mountain Pass rare earth mine in California, which is expected to come online later this year.

Smaller companies developing rare earth projects in the United States and Canada also climbed, with Rare Element Resources Ltd and Quest Rare Minerals Ltd both soaring more than 10 percent.

China currently produces more than 90 percent of the world's supply of rare earths, essential for everything from smartphones to LED screens. Prices for the group of 17 metals skyrocketed last year as China imposed quotas in what it says is an effort to curtail environmental pollution and resource exhaustion.

"It's remarkable how when they need additional supply, they suddenly find reserves, but when they don't want there to be supply around and it supports their argument, then suddenly the reserves are shrinking," said Jon Hykawy, an analyst with Byron Capital Markets in Toronto.

In March, the European Union, the United States and Japan complained to the World Trade Organization that Beijing had illegally choked off rare earth exports while holding down prices for domestic manufacturers.

Despite a 30,184 tonne export quota in 2011, China says it shipped only 18,600 tonnes last year. The government has said the quota will remain steady in 2012.

Source: Reuters

Wednesday, June 20, 2012

REE Market shakeout and the 5 rare earths that matter

The rare earth market is made up of 4 or 5 distinct, critical rare earths that should be the focus for investors at the moment, says Jack Lifton. A Critical Metals Report interview.

The Critical Metals Report: Can you give us an overview of the rare earth element (REE) market today? What are the most important trends you're following?

Jack Lifton: The REE market today is going through a shakeout. We had a bubble last year-an anomalous speculative blip-that ran REE prices to the sky. It happened just as the junior miners were coming into full bloom. At that time, I would say most of the junior REE exploration companies were overvaluing their projects something fierce. Then the market herd jumped in and ran the prices way up.

Now that the speculative bubble has burst-and I think a lot of it had to do with China repositioning itself-we're back to earth. I would guess that of the 250-260 listed REE public companies, there's just one that is in production. All of the valuations are coming down to earth.

Between 90-95% of the remaining junior miners will be wiped out. Investors should understand there is no single REE market. There is a market for some of the individual REEs-the critical REEs. But for at least half of the REEs, production and usage are tiny and there is no "market" to speak of.

For many REEs, production exceeds demand and will for the foreseeable future. Cerium is a good example of the fact that not all rare earth demand is equivalent. When you produce dysprosium, you are always producing much more cerium than dysprosium. That doesn't mean that there is a market for cerium. In fact, it is more correct to say that some cerium/lanthanum/neodymium deposits contain recoverable dysprosium. Saying it this way really defines the problem.

I follow four or five critical REEs that each have individual markets. One of them is neodymium, because it's the most important REE used in permanent magnets. The others are heavy rare earth elements (HREEs), including europium, terbium, dysprosium and yttrium. The latter isn't really an REE, but it's associated with them. As the market corrects to reasonable prices, people are coming to understand this.

The critical REEs will maintain strong demand and associated pricing. I disagree with people who think all REE prices will collapse, because I see no significant production of REEs outside of China. Today, there's hardly any difference in the ratios of production inside and outside China compared to four years ago. I'm waiting for a producer to come on-line and make a significant difference.

Annual growth projections in the REE permanent magnet market has been about 8-9%. Worldwide production of neodymium is approximately 21-25 Kt/a. Ninety percent is from China. If demand increases at 8% per year for three years, that's about a 30% increase, approximately 7.5 Kt of production. Demand growth will be about the same as new mine supply and that will maintain the price of neodymium.

TCMR: What other critical rare earths are you watching?

JL: The big issue in magnets is the HREE dysprosium. There is not now, nor has there ever been, any production of dysprosium from outside of China. There are several possible significant dysprosium sources coming on-line in the next two to four years from hard-rock sources outside of China.

None of the mines are at any stage where we can predict when they will be commercially producing. Two to four years out would be the earliest any new dysprosium production could occur outside of China. Dysprosium is already in short supply. The total world production of dysprosium in the last 12 months is unlikely to have exceeded 1.4 Kt. The market will be in deficit if dysprosium usage increases due to production of REE permanent magnets. The dysprosium market is in balance at 1.4 Kt. With 8% growth in demand each year, we're going to need about 100 tons (t) a year of additional dysprosium.

I don't see that happening easily. Only four or five new HREE producers could be in production in the next three or four years.

Dysprosium is going be in short supply for some time and will, therefore, maintain its price. Everybody talks about how the price dropped from $2,500-1,200/kilogram (kg) of 99.9% metal. That is comical, because the peak people are using is the speculative bubble last year. The current price of dysprosium is significantly higher than the real long-term baseline. I believe it's going to maintain its price of approximately $1,200/kg for 99.9% metal in China.

Dysprosium is the problem metal for everyone, because no hard-rock source has ever been put into production.

There's also significant dysprosium in Australia, but projects there are quite early. No matter what we do right now, we're going to be short of dysprosium for at least the rest of this decade, if not permanently. If dysprosium supply limitations are not addressed, growth in the use of REE permanent magnet devices for rapid heating and cooling environments will be affected.

TCMR: What other new technologies are increasing REE demand?

JL: In addition to magnets, phosphors in color displays use REEs-in this case europium, terbium and yttrium. The U.S. has a little bit of europium.

Terbium and europium come mainly from China. However, all of the dysprosium hard-rock deposits show significant terbium. World terbium production is only a couple hundred tons. So, 20 t is a significant increase. Compact fluorescent lamps use terbium in the phosphors. It's so important to the lighting makers in Europe

TCMR: You mentioned how the market reacted quickly to REE prices going straight up in bubble fashion and then coming right back down. The government moves a lot slower. Is there government support for development of domestic sources of REEs in the U.S.?

JL: The U.S. government seems to ignore industrial needs.

The latest government REE news is that the Department of Energy has just started a program to find domestic alternatives to REEs and reduce REE demand. It is a $120 million program. I had the misfortune to read this document. It's incredible how people think innovation and success can be legislated. Thomas Edison need not apply.

TCMR: Are you still watching production in Nebraska?

JL: Yes. The United States imports twice as many distinct materials as it did 20 years ago. I think the U.S. was self-sufficient in something like 25 elements 25 years ago, and now it's much less because the country shifted to outsourcing raw material production.

For example, we stopped producing manganese domestically because our ore isn't as rich as ore from West Africa. We have a lot of ore, but it is lower grade. As a country, we are rethinking whether outsourcing raw material production is a good idea. Another example is niobium; it would be a very good idea to have a domestic niobium source like the one in Nebraska. A niobium deposit is often associated with REEs. Having the two together in one deposit lowers the overall cost. It doesn't matter what mineral or metal you're talking about, the low-cost producer with the lowest breakeven will be the winner, even at the lowest point in the economic cycle.

Another factor is availability. We saw what happened when China squeezed availability. The whole REE industry is suddenly running around like Chicken Little. The sky is falling. That's why we need somebody in Nebraska producing niobium.

TCMR: In retrospect, was it China squeezing availability, or was it speculative, free market price behavior?

JL: I'm talking over the last five years. Last year was speculative. Over the long-term, when China coughed, we caught a cold, because we had moved all of our production overseas. Everything is unintended consequences-except that they're very foreseeable.

I remember when this was happening. I said, "What are we going to do if China's demand exceeds its domestic supply, or the Chinese decide they don't want to do this anymore?" I was told that it would never happen. Well, it just seems to have happened. We need domestic supplies-of everything.

TCMR: Is that the message you are trying to deliver about REE supply and demand?

JL: We need to keep government out of this, and we need private equity to finance it. If people stop worrying about tomorrow's returns, and start looking at strategic investments, we'd all be a lot better off. Government's not capable of doing that. It is just not smart enough. Private equity can do it because there is profit involved. But as long as we are thinking short-term, our problems will persist.

Strategic planning, along the lines of what the Chinese are doing, is the winning method of moving an economy forward.

TCMR: Thank you so much for your time, we look forward to speaking with you again.

Jack Lifton has more than 50 years of experience in the global OEM automotive, heavy equipment, electrical, electronic, mining, smelting and refining industries. His background includes sourcing, manufacturing and sales of platinum group metal products, rare earth compounds and ceramic specialties used to make catalytic converters, oxygen sensors, batteries and fuel cells. Lifton is knowledgeable in locating and analyzing new and recycled supplies of "minor metals," including tellurium, selenium, indium, gallium, silicon, germanium, molybdenum, tungsten, manganese, chromium and the rare earth metals. He is a senior fellow of the Institute for the Analysis of Global Security.

Monday, June 4, 2012

China to impose rare earth tax

China is looking to tightly control the sale and production of rare earth minerals by instituting a new tax, even as it pursues a national rare earth reserve to stabilise prices

China is looking to allocate a value-added tax (VAT) permit to rare earth companies in a bid to regulate overproduction of the mineral and to collect revenue. By issuing the special VAT slip, the government will have full control over which companies are exporting rare earths and what quantities they can export.

The Ministry of Industry and Information Technology in China is also considering a national inventory reserve of rare earths and will look at strategic buying and selling, where producers buy up surplus supply when prices fall and sell when prices rise.

China exports more rare earths than any other country in the world, accounting for more than 90% of the world's demand. This commanding position has been achieved despite the fact that the Asian major currently has only about 30% of global rare earth reserves.

Though the percentage of VAT is, as yet, unclear, traders say it is bound to lift prices of rare earths out of China. Once instituted, the tax would be almost impossible to avoid. The government's move would also mean strict control and supervision over the whole process, from production to sale.

Currently, the tax rate of mined light rare earths is 60 yuan per tonne, while that of medium and heavy rare earths is set at 30 yuan per tonne.

The new tax will allow plants with a production capacity of 1,000 million tonnes of light rare earth concentrates, to only sell around 450 to 500 million tonnes of rare earth oxides, that can be produced from the concentrates. If the company sells more, it would amount to underreporting of concentrates or obtaining output from elsewhere and selling illegally.

Though China has enforced a `mandatory production plan' for rare earths since

2007, the new tax would help the government tighten control over exports and production of the valuable metals.

Jia Yinsong, the Director of Rare Earths Office of the Ministry of Industry and Information Technology has been quoted by news reports as saying that according to the 2011 quota, the export volume for rare earths should have been 18,000 tonnes, but the actual amount was around 36,000 tonnes. This would mean that nearly half of the rare earths production was smuggled.

To curb the tendency, the government is all set to issue the new and special VAT.

In the case of the national reserve, the ultimate goal is to create a rare earth trading platform, where China expects legitimate miners to participate. The government is said to be conducting a series of talks with the country's rare earths enterprises to initiate the process. A detailed project plan towards the creation and management of the national reserve will soon be formed.

Reports indicate that rare earth companies in Sichuan and Inner Mongolia are to be the first companies to be allocated the VAT permits, in a bid to regulate the overproduction of the mineral. Companies that have received notification from the government said the tax permit will be issued by the State Administration of Taxation this week.

Rare earth reserves in Sichuan and Inner Mongolia are relatively centralised and easy to supervise, while the reserves in Fujian, Guangdong and others regions are scattered. Reports indicate that the initial steps in Sichuan and Inner Mongolia could well result in the authorities extending VAT to the whole country.

"The special invoice has a two-dimensional code, and will be needed by any producing company who would want to continue operations,'' an official with China Minmetals Rare Earth Company told newswire agencies.

He added that the VAT system would help the government control overcapacity, illegal mining, resource drainage and pollution of mines in the rare earth industry.

Jiangxi province, which has the country's largest reserves of heavy rare earth metals, will also have separate controls on exploration. ``The volume of this year's rare earth exploration in Jiangxi will be equal to that of the previous year, but we will concentrate more on the sustainability of the industry's development,'' Hu Xian, director of the department of land and resources of Jiangxi province told newswire agencies.

Li Shanle, an official with the bureau of industry and information technology in Jiangxi province said the VAT introduction was an important regulatory step. The tax will cover mining and smelting, separation and distribution of rare earths. While it will control illegal mining, the new tax will also differentiate between light rare earths and heavy rare earths.

The booming rare earth industry in China has attracted many firms. Aluminum Corp of China signed a cooperation framework agreement on March 12 with Guangxi Nonferrous Metals Group and Grirem Advanced Materials Company. Together, they are to establish a venture developing rare earth resources in South China's Guangxi Zhuang autonomous region.

Friday, May 18, 2012

No major changes in Chinese REE export update, says analyst

The updated 2012 rare earths export quotas China published on Thursday implied a total of 31 438 t for the year, a slight increase on 2011’s figure, consultancy Technology Metals Research (TMR) said.

The Ministry of Commerce (Mofcom) in December announced a first round of export allocations of 24 904 t for company’s in 2012, telling them it would allow them to export more, provided they met certain environmental requirements by July.

The Chinese Ministry of Environmental Protection, earlier in May, published a list of the companies that had passed pollution control inspections.

According to TMR founding principal Gareth Hatch, Thursday’s Mofcom announcement only included minor adjustments to the companies that had confirmed export allocations.

The December allocation provided for 80% of the 2012 export allocations in the first round, with the remaining 20% to be announced in the Chinese summer.

Rare earths, the group of 17 elements critical to manufacturing items such as smart phones, hybrid cars and guided missiles, became the subject of a World Trade Organisation complaint the US, the European Union and Japan filed earlier this year.

China accounts for over 95% of global supplies, and the complainants argue the country is unfairly abusing its dominant position to boost its own industries.

New York-based Dahlman Rose & Co said in a note on Thursday, minor changes in the Chinese rare earths sector, such as consolidation, should support rare-earth prices over the medium to long term, despite a fall-off last year.

“It is possible that prices decline further in 2013 when two new sources of supply commence, but over the near-term, we expect to hear of further project delays and the possibility that numerous development-stage companies are giving up their development plans,” the analysts said.

China to increase 2012 rare earth exports by 10,680 metric tons

An additional 10,680 tonnes of light and medium to heavy rare earths will be allocated this year to 12 Chinese companies for export, China's Commerce Department has announced.

The Chinese Ministry of Commerce Thursday announced an update to the 2012 rare-earth export quotas, which increased allocations by an additional 10,680 tonnes for a total of 21,226 tonnes this year.

The government had previously insisted its total rare earths export quotas would remain about the same this year as last year at 30,184 tonnes. However, the U.S., the European Union and Japan in March filed a complaint at the World Trade Organization over China's rare earths quotas.

Now, China plans to announce additional annual rare earths quotas this summer.

Of the additional quotas announced Thursday, 9,490 tonnes are light rare earths, while 1,190 tonnes are medium and heavy rare earths, according to the MOC statement.

The extra quotas will be provided to 12 companies, which have received environmental verification by China's Department of Environmental Protection, the ministry said. Those companies include the Baogang Group, China's largest light rare earths producer, and the Aluminum Corporation of China (Chalco).

The MOC stressed that companies who have yet to pass the environmental examination will not get rare earths export rights if they fail to meet the second round of environmental examinations before the end of July. Thus far, China has imposed production caps, stricter environmental standards, and export quotas.

Meanwhile, the Commerce Department also announced the consolidation of the quota allocations for three smelting companies-Changshu Shengchang Rare Earth Smelting, Funing Rare Earth Industry and Jiangsu Zhuo Group Nano Rare Earth-into a single allocation for their parent company Chalco Rare Earth (Jiangsu), a subsidiary of the Aluminum Corporation of China.

On Tuesday, the chief secretary of the Resource Department of China's Ministry of Industry and Information Technology said the central government has a plan to consolidate its many rare earth manufacturers into one large company that represents the entire sector.

In an interview with China Radio International (CRI), Chen Yanhai said the government intends to carry out the merger and upgrade of its rare earths sector within two years. "The government will establish a platform for companies with good reputations in the industry to make the first step," said Yanhai. "Local competitors can later merge into larger enterprises."

Sunday, May 6, 2012

China's rare earth boom comes at grim cost

NANCHANG - A green future made possible through the use of rare earth metals seems a world away from Zhang Yang'e, whose neighborhood well has become unusable as a result of local mining operations.

An unpleasant odor wafts from a well in Zhang's backyard, with the well's brownish-yellow water sitting beneath a tangle of spiderwebs.

"The water used to taste sweet and our neighbors all loved it. But now it has been become undrinkable," said the 73-year-old farmer, a resident of Dingnan county in east China's Jiangxi province.

"Even my vegetables withered after I watered them with well water," she said, referring to the rows of green onions, chives and peas she planted in her backyard.

Zhang has been forced to water her vegetables with tap water. The local government installed taps for her and seven other families in March last year, forcing them to pay an additional 20 yuan ($3.17) each month for clean water.

Zhang has blamed a rare earth mine located just 10 meters from her home for the poor quality of her well water. A green hill where the mine was built has been scraped and turned into a cratered landscape not unlike that of the moon, with piles of rock tailings nearly as high as Zhang's two-story house.

Trees on the hill have been toppled and topsoil has been removed. Chemicals have been pumped into holes drilled in the ground to help recover the rare earth metals located there, Zhang said.

Similar open-pit mines can be found dotting the densely wooded hillsides of Longnan county, which is about a half-hour drive from Dingnan. Plastic pipes and chemical holding tanks can be seen at the foot of the hills. Some of the tanks are filled with a bright blue liquid, while others contain a dark brown solution.

To exploit rare earth metals, some miners use a chemical extraction process that involves digging several holes of just a few feet in depth and feeding pipes into the holes. A concentrated mixture of chemicals is then pumped through the pipes, sinking into the clay below and leaching out rare earth metals as it passes.

It seems incredible that such a low-tech method is used to harvest minerals that are used in some of the world's most technologically advanced products. Rare earth metals are used to build components used in smart phones, wind turbines, electric car batteries and missiles.

China supplies more than 90 percent of the world's rare earth metals, but its reserves only account for about one-third of the world's total. Faced with widespread environmental challenges, the country has launched nationwide campaigns in recent years to clean up its mines.

However, these policies, including production caps, export quota cuts and stricter emission standards, have sparked concerns among foreign consumers.

On March 13, the United States, European Union and Japan teamed up to bring a joint case against China to the World Trade Organization over alleged export controls on rare earth metals, which they claim are hurting their own domestic manufacturers.

Zhang has heard nothing of the trade disputes. These days, she's more worried about the upcoming rainy season.

"When the rains come, the tailings are sometimes swept into the water, flooding our doorways and finally entering our streams," she said. "We don't know if this could cause any health problems."

In Dingnan, Longnan and other counties in the city of Ganzhou, red clay on the hillsides contains a high concentration of heavy rare earth metals that can be easily absorbed through the clay. Local farmers have mastered the art of using high-potency fertilizer to dissolve the clay and obtain the valuable minerals inside.

Although the Ganzhou government has ordered a shutdown of all rare earth mines since October as an effort to regulate the sector, it is not hard for smaller producers to elude the government's reach.

"It seems impossible to completely eradicate illegal mining, as rare earth elements are scattered almost everywhere in the red clay," said Yi Wenbin, deputy magistrate of Longnan county.

Statistics from Ganzhou's mine management bureau indicate that the bureau uncovered 52 instances of illegal rare earth mining in the first three months of this year.

"Although mining methods have been improved over the decades, environmental damage is still inevitable, especially for water supplies," said Zhang Xusheng, chief of Ganzhou's environmental inspection team.

Waste water from mining operations cannot be used for irrigation, even after being processed according to national emission standards, Zhang Xusheng said. He dodged a question about what might happen to people who live downstream from the mines, as many of them rely on rivers and streams for irrigation.

While eliminating new sources of pollution is challenging, cleaning up pollution from older sources is even more difficult. Rare earth mining began in Ganzhou in the 1970s, leaving much of the land scarred by barren tailing ponds and eroded hilltops.

At the Zudong rare earth mine in Longnan, an eight-million-yuan experimental project is being undertaken to reclaim some of the land, with the project's administrators mixing bags of soil with grass seeds and spreading the mixture on the ground to rehabilitate the barren land.

However, the cost of the seeds has proved to be rather high, according to figures provided by Liao Zhennan, director of Longnan's mine management bureau. One type of grass seed imported from the United States costs 80,000 to 100,000 yuan per mu (0.07 hectares) of coverage.

"The spending will multiply if you take the treatment of water pollution into consideration," Liao said.

According to Su Bo, deputy director of the Ministry of Industry and Information Technology, repairing the environmental damage in Ganzhou will cost a total of 38 billion yuan. By contrast, the province's rare earth industry only reaped 6.4 billion yuan in profits in 2011.