Australian Rare Earth Elements- Issues
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Rare Earth Oxides are widely seen as being the rate limiting step for the 21st Century's Electron-Economy.
"There is oil in the Middle East.there is Rare Earth in China". Deng Xiaoping (1992)
That same year, the State Council approved the establishment of the Baotou Rare Earth Hi-tech Industrial Development Zone. During his 1999 visit to Baotou, President Jiang Zemin wrote, "Improve the development and applications of rare earth, and change the resource advantage into economic superiority." Then President Jiang repeated the strategic importance of developing China's rare earth industry, which has caught worldwide attention. "The reason why rare earth, a small industry with annual consumption of only 75,000 tons REO and a market value below US$100 million, has been given attention by Chinese leaders at all levels is due to its uses in modern hi-tech industries because of its special chemical and physical properties. As a matter of fact, rare earth has been listed in the category of strategic elements in many countries, such as the USA and Japan. Some experts predict technological innovation will be impossible without the global development and application of rare earth." Read more
As can be seen by the chart above China acted on Deng Xiaoping and President Jiang's directives and now in 2010 is the world's dominant (only) supplier of Rare Earth Oxides. Recently there has been world-wide discussion and recognition of the downside that exists when one country controls the destiny of the world's electron economy.
Read Jack Lifton's view of the REE "war":
It Seems that Jack Lifton has spotlighted an emerging hot issue according to this -
The Financial Times' article: China’s rare earth monopoly threatens global suppliers, rival producers claim
This article outlines aspects of REEs as viewed by China.
China Policy on Rare Earth Update: China further tightens Rare Earth Production and Exports
"The Ministry of Commerce of the People’s Republic of China released a dramatic cut in the second half of 2010 Rare Earths export quota. In total the export quota for 2010 was 40% less than the total export quota for 2009.
This 40% reduction is a significant decrease in product availability for export which is likely to significantly reduce any remaining stocks in inventory through the supply chain outside China and put pressure on increasing prices. Below is a table setting out the Chinese Rare Earths export quota for foreign invested firms and local firms for the past two years.".....From Lynas Corp's June 2010 Quarterly Report
Note the massive reductions in REE export quotas from the first half of 2010 to the second half of 2010.
The solution to this current problem of Chinese dominance probably lies within several Australian companies with substantial (JORC) Rare Earth Deposits. The problem is that Australia's Rare Earth Companies have miniscule market caps, with all but one (Lynas Corp) having market caps of less than $150m and consequently are very vulnerable. In total the market caps of all of Australia's companies with JORC REE deposits is less than $1.5b and our Australian Federal Govvernment and State Governments have not taken a helpful let alone a pro-active stance by providing project finance or easing the barriers due to excessive permitting restrictions.
One Australian company Arufura Resources (ASX Code: ARU) has already seen China based interests take a major stake, however the tide to China's world wide dominance of the REEs supply chain might be turning with Australia's Foreign Investment Review Board (FIRB) (October 09) rejecting a 51% bid by China Non-Ferrous Metal Mining (CNMC) that would have seen the world's richest deposit Mt Weld* held by Lynas Corp's ASX: LYC with CNMC as its majority shareholder. The heat is now on for another very large Australian held deposit by Greenland Energy and Minerals ASX: GGG in Greenland where much political manouvering is currently occurring.
Lynas Corp the owner of the world's richest Rare Earth Deposit now has a market cap of just over $1b (24/07/2010) and is currently mining Rare Earth Elements and is well along the path to establishing a large processing facility in Malaysia to produce the highly valuable Rare Earth Oxides. June 2010 Quarterly Report
The processing of China's abundant REEs to the usable REOs in the past allowed China to dominate the international market as when they felt threatend they could flood the market with REOs and drive other countries out of the market. This situation has changed on two major fronts:
China now needs nearly all of the REO's that it can produce to satisfy its own internal demand and as mentioned Australia is about to become a REO supplier in its own right. Consequently Australia may well become the world's swing producer of Rare Earth Elements in the near future and could even break China's dominant Rare Earth Oxides supplier position, if our Australian investment community begins to provide support.
Australia as the world's swing producer was an unlikely scenario a year or so ago but recently three major factors have emerged:
- Australian companies now hold almost as much if not slightly more rare earth elements resources as does China. See the pie chart below.
- Australia is about to become a major rare earth oxide producer.
- Further China is no longer in the position of be readily able to kill off their competitors by dropping REO supplies to below cost of production as they are barely keeping up with their domestic demand (and have even recently started to impose export bans and tariff's).
And now that countries like Korea, Japan and the USA have suddenly woken up to the fact that their ticket to the 21st century's "electron-economy" is going to be clipped by access to REEs (especially the heavy REEs) they are now actively seeking ways around the road-block and this coupled with Australia emergence of a REE mining industry and soon to be REO producer status has changed the balance.
Clearly the race is on, we almost lost a lot of ground during 2009 and we can only hope that the Australian and International investing public are watching and perhaps the Australian Govt. could help with a "flow through share relief scheme".
The chart below will probably suprise you....
Update: New resource statement 18th june 2009 confirms Kvanefjeld as one of the largest rare earth resources in the world at 4.79mt REO.
(The chart data above could be several months out of date and it is quite difficult to acquire the underlying data. Nonetheless Australia probably now has over 50% of the World's mineable REE deposits.)
The chart below published by Alkane Resources is important for two reasons.
Firstly it shows which countries out side of China have significant Rare Earth Deposits and secondly the distribution of the Heay Rare Earths that are vital compnents for the powerful magnets required for wind turbines, hybrid and elctric cars etc.
Rare Earths Pricing
Lynas Corp provides a weekly update of REO pricing here
REOs and Rare Earth Metals Prices Shanghai Metal Exchange 29/1/2010
(Prices are in RMB Exchange rate on the day of publication was I RMB = 0.1465 USD)
