An End in Sight for Chinese Dominance over Rare Earths

- January 17th, 2011

Companies are looking to develop electric motors with a reduced percentage of rare earth oxides, after a turbulent market sparked by Chinese trading policy destabilized the market and influenced prices. Also the massive investments in new rare earth mines worldwide will provide non-Chinese REE’s to fill in supply gaps.

By Michael Montgomery—Exclusive to Rare Earth Investing News

The cutbacks to mining and export quotas in China is well documented as has affected the market so drastically that rare earth elements were one of the biggest stories in the commodities world in 2010. Lawmakers scrambled to provide loan guarantees to rare earth companies in the US like Molycorp. There were rumors World Trade Organization trade disputes, and a politically charged showdown between Japan and China.

China has benefited from this supercharged market through skyrocketing prices and increased tariffs. However, the volatility and risk associated with the rare earth market may also have unintended consequences for China, mainly the desire of high tech manufactures looking for alternatives to REE’s. When coupled with the increase of upstart mining firms filling in the supply gaps in the future, the era of China’s rare earth dominance may be coming to an end.

While alternatives to REE’s in numerous high tech products are mainly in the developmental phase, many companies are looking to reduce the use of the elements in their products. Continental AG, a German auto parts manufacturer, and Toyota have started developing electric motors for its hybrid vehicles based on ferrous magnets. However, Toyota isn’t moving away from rare earths too quickly, as they announced a rare earth processing plant underway in India.

Wind turbine manufacturer General Electric has also stated a desire to produce turbines with a highly reduced percentage of rare earths such as neodymium. GE “is working on a project partly funded by the U.S. Department of Energy that aims to reduce the amount of rare earths in its electricity-generating wind turbines by up to 80 percent,” reported Scott Malone, for Reuters. The move away from REE’s in electric motors is a huge demand side reduction that could equalize the supply shortages.

The strategy of enticing manufacturing companies that use rare earths to produce their products in China may also backfire due to the policies of the Chinese government. Not only have many of these manufacturing firms incurred costs in developing current production facilities, but the “lax intellectual-property protections will continue to discourage production in China,” stated Joesph Sternburg, for The Wall Street Journal. China was hoping to entice companies to avoid export quotas by moving facilities to China, along with higher paying jobs.

The increase in mining activities in the market is also an equalizing factor in terms of the supply/demand fundamentals. Molycorp (NYSE:MCP) is working towards full production on their Mt. Pass mine, which is slated to produce new oxides in 2012. They also have loans from the US federal government, as well as a partner in Hitachi Metals Ltd. for their “mine to magnets” strategy. There is something to look out for on this stock next week; on Jan. 25th Molycorp insiders are allowed to sell shares from the company’s IPO for the first time, which may affect share price from share holders potentially seeking profit taking.

Lynas Corporation Ltd. (ASX:LYC) of Australia will start producing on its Mt. Weld deposit in the third quarter of this year. The company is hoping to produce 11,000 tonnes of rare earth oxides in the first year of production, at a nearly $80 per Kg average composition price.

Great Western Minerals (TSXV:GWG) has partnered with Rare Earth Extraction Company’s Steenkampskraal Mine in South Africa, and has an agreement to purchase 100 percent of its output, and is currently purchasing all of Rareco’s shares. Great Western also has four rare earth projects in North America, as well as a processing plant in the US, under the subsidiary Great Western Technology. The acquisition of the mine, as well as owning its own processing facility, puts Great Western in a good position to profit off of the rare earth frenzy.

Stans Energy Corp’s (TSXV:RUU) main deposit Kutessay II is in Kyrgyzstan. The company just announced that it will “purchase 100% of  KCMP’s Rare Earth (RE) processing complex, including a private rail terminal, for a total of $5,500,000 USD,”  according to the press release. The mine once supplied 80 percent of the former Soviet Union’s rare earth needs until in closed in 1991. The addition of these facilities to process and ship REE’s from their mine is a major step forward for the company.

There are some factors that will reduce China’s dominance over the rare earth market. While they may not heavily affect the market in the coming year, the reduction of power is something to plan for in the long run. Chinese President Hu Jintao is meeting with President Obama this week to discuss the economic ties between the two nations. Senator Chuck Schumer, who has been vocal about the valuation of the Yuan, is also hoping that the Obama administration sparks a discussion about the Asian nation’s “hoarding its reserves of rare-earth metals, making life difficult for a range of manufacturers,” stated Gerald Seib, for The Wall Street Journal.  Whether the rare earth conversation occurs between the two leaders is up in the air, but is something to look for this week.

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18 responses to “An End in Sight for Chinese Dominance over Rare Earths

  1. Stick to the 6 Non Chinese Miners in production by 2015: Alkane, Arafura, Avalon, Great Western, Molycorp and Lynas.

    American Security Project 1 February 2011 links:

    A prestigious U.S. defense think tank says the country’s current dependence on Chinese rare earth metals will harm future U.S. military and economic needs.

    http://americansecurityproject.org/news/2011/u-s-security-think-tank-urges-feds-to-get-moving-on-rare-earths-strategy/

    http://americansecurityproject.org/news/2011/new-report-highlights-us-national-security-challenges-given-us-dependence-on-rare-earth-metals-in-china/

    http://americansecurityproject.org/wp-content/uploads/2011/02/Rare-Earth-Metals-and-US-Security-FINAL.pdf

    http://americansecurityproject.org/wp-content/uploads/2011/02/PRESS-RELEASE-Rare-Earth-Metals-FINAL.pdf

  2. Stick to the 6 Non Chinese Miners in production by 2015: Alkane, Arafura, Avalon, Great Western, Molycorp and Lynas.

    American Security Project 1 February 2011 links:

    A prestigious U.S. defense think tank says the country’s current dependence on Chinese rare earth metals will harm future U.S. military and economic needs.

    http://americansecurityproject.org/news/2011/u-s-security-think-tank-urges-feds-to-get-moving-on-rare-earths-strategy/

    http://americansecurityproject.org/news/2011/new-report-highlights-us-national-security-challenges-given-us-dependence-on-rare-earth-metals-in-china/

    http://americansecurityproject.org/wp-content/uploads/2011/02/Rare-Earth-Metals-and-US-Security-FINAL.pdf

    http://americansecurityproject.org/wp-content/uploads/2011/02/PRESS-RELEASE-Rare-Earth-Metals-FINAL.pdf

  3. Stick to the 6 Non Chinese Miners in production by 2015: Alkane, Arafura, Avalon, Great Western, Molycorp and Lynas.

    American Security Project 1 February 2011 links:

    A prestigious U.S. defense think tank says the country’s current dependence on Chinese rare earth metals will harm future U.S. military and economic needs.

    http://americansecurityproject.org/news/2011/u-s-security-think-tank-urges-feds-to-get-moving-on-rare-earths-strategy/

    http://americansecurityproject.org/news/2011/new-report-highlights-us-national-security-challenges-given-us-dependence-on-rare-earth-metals-in-china/

    http://americansecurityproject.org/wp-content/uploads/2011/02/Rare-Earth-Metals-and-US-Security-FINAL.pdf

    http://americansecurityproject.org/wp-content/uploads/2011/02/PRESS-RELEASE-Rare-Earth-Metals-FINAL.pdf

  4. Stick to the 6 Non Chinese Miners in production by 2015: Alkane, Arafura, Avalon, Great Western, Molycorp and Lynas.

    American Security Project 1 February 2011 links:

    A prestigious U.S. defense think tank says the country’s current dependence on Chinese rare earth metals will harm future U.S. military and economic needs.

    http://americansecurityproject.org/news/2011/u-s-security-think-tank-urges-feds-to-get-moving-on-rare-earths-strategy/

    http://americansecurityproject.org/news/2011/new-report-highlights-us-national-security-challenges-given-us-dependence-on-rare-earth-metals-in-china/

    http://americansecurityproject.org/wp-content/uploads/2011/02/Rare-Earth-Metals-and-US-Security-FINAL.pdf

    http://americansecurityproject.org/wp-content/uploads/2011/02/PRESS-RELEASE-Rare-Earth-Metals-FINAL.pdf

  5. Michael, apart from your viewpoint, I’m sure China is fully aware that other sources of competition would arise but it would rather not have its resources exploited and depleted in less than a decade only to satisfy growing world demand.

  6. Michael, apart from your viewpoint, I’m sure China is fully aware that other sources of competition would arise but it would rather not have its resources exploited and depleted in less than a decade only to satisfy growing world demand.

  7. According to the USA Department of Energy in any case scenario there shall be critical Rare Earth shortages for the next 15 years. Particularly critical for Dy Tb Y Nd Eu.

    Page 72 identifies only 7 Non Chinese companies in Rare Earth Production by 2015: Alkane Lynas and Arafura in Australia, Great Western and Avalon in Canada, Molycorp in the USA and Dong Pao in Vietnam.

    See USA Department of Energy summary and full reports, and Center for Strategic and International Studies (CSIS) video presentation links:

    http://www.energy.gov/news/documents/Critical_Materials_Summary.pdf

    http://www.energy.gov/news/documents/criticalmaterialsstrategy.pdf

    http://csis.org/multimedia/video-rare-earth-elements-keynote

    http://www.slideshare.net/confirm/MjkxNzk5NzE7cmVuZGU=/4921989-bea53725e5115226981cf4b1be1664acb05765b1-slideshow

    Zhang Anwen a leading Chinese government advisor and Deputy Secretary General of Inner Mongolia Rare Earth Guild who in Beijing conference Spring 2010 said:

    “Foreign countries should calmly and logically think about this and develop their own mines for their own needs. Our (China) resources are diminishing and we (China) need these minerals for our own use.”

    (Minutes 2:46 to 3:20 in the 6:19 minute video)

    http://www.youtube.com/watch?v=MHs2lGsqFKU&p=19D44B68A08E1850

  8. According to the USA Department of Energy in any case scenario there shall be critical Rare Earth shortages for the next 15 years. Particularly critical for Dy Tb Y Nd Eu.

    Page 72 identifies only 7 Non Chinese companies in Rare Earth Production by 2015: Alkane Lynas and Arafura in Australia, Great Western and Avalon in Canada, Molycorp in the USA and Dong Pao in Vietnam.

    See USA Department of Energy summary and full reports, and Center for Strategic and International Studies (CSIS) video presentation links:

    http://www.energy.gov/news/documents/Critical_Materials_Summary.pdf

    http://www.energy.gov/news/documents/criticalmaterialsstrategy.pdf

    http://csis.org/multimedia/video-rare-earth-elements-keynote

    http://www.slideshare.net/confirm/MjkxNzk5NzE7cmVuZGU=/4921989-bea53725e5115226981cf4b1be1664acb05765b1-slideshow

    Zhang Anwen a leading Chinese government advisor and Deputy Secretary General of Inner Mongolia Rare Earth Guild who in Beijing conference Spring 2010 said:

    “Foreign countries should calmly and logically think about this and develop their own mines for their own needs. Our (China) resources are diminishing and we (China) need these minerals for our own use.”

    (Minutes 2:46 to 3:20 in the 6:19 minute video)

    http://www.youtube.com/watch?v=MHs2lGsqFKU&p=19D44B68A08E1850

  9. whining USA
    if the situation was reversed USA would be very dismissive
    the USA let this happen – and now complaining about the monopoly when their whole country has practically outsourced every industry it once owned and controlled
    boo hooo

    move on

  10. whining USA
    if the situation was reversed USA would be very dismissive
    the USA let this happen – and now complaining about the monopoly when their whole country has practically outsourced every industry it once owned and controlled
    boo hooo

    move on

  11. “China cut its 2010 rare earth export quota 39 percent year on year while rare earth development and production capacities were reduced by 25 percent and 23 percent, respectively, he said.

    In addition, China has added a 15- to 25-percent export duty on rare earth exports while banning the export of 41 rare earth-related processed products.”

    See link: http://business.globaltimes.cn/china-economy/2010-11/592588.html

    Curiosity which “41 rare earth-related processed products” are banned for Chinese export?

    Any vital to USA military?

    Why doesn’t USA secure their own Rare Earth supply including manufactured rare earth products?

    Might come in handy in “war time”?

  12. “China cut its 2010 rare earth export quota 39 percent year on year while rare earth development and production capacities were reduced by 25 percent and 23 percent, respectively, he said.

    In addition, China has added a 15- to 25-percent export duty on rare earth exports while banning the export of 41 rare earth-related processed products.”

    See link: http://business.globaltimes.cn/china-economy/2010-11/592588.html

    Curiosity which “41 rare earth-related processed products” are banned for Chinese export?

    Any vital to USA military?

    Why doesn’t USA secure their own Rare Earth supply including manufactured rare earth products?

    Might come in handy in “war time”?

  13. The Chinese attempted to buy 3 Non Chinese Rare Earth companies, namely Molycorp (4 attempts) dating from 1995, and both Northern Uranium and Lynas of Australia.

    The 11 companies I have researched namely Northern Uranium, Greenland Minerals, Alkane, Lynas, Arafura, Great Western, Avalon, Rare Elements Minerals, Molycorp, Quest, U-Core or those listed in the TMR index (see posting above) are all under threat of buyout by the Monopolist Chinese!

    All these companies in my opinion (or that of TMR Index) have significant resources.

    Only Non Chinese financial resources will secure these assets from the Rare Earth Monopolist China.

    3/11 were almost picked off by the Chinese (Northern Uranium, Lynas and Molycorp).

    China will try to pick off a few more this year.

    China: the Rare Earth Monopolist

    the world: International Security more important than “price point”?

  14. The Chinese attempted to buy 3 Non Chinese Rare Earth companies, namely Molycorp (4 attempts) dating from 1995, and both Northern Uranium and Lynas of Australia.

    The 11 companies I have researched namely Northern Uranium, Greenland Minerals, Alkane, Lynas, Arafura, Great Western, Avalon, Rare Elements Minerals, Molycorp, Quest, U-Core or those listed in the TMR index (see posting above) are all under threat of buyout by the Monopolist Chinese!

    All these companies in my opinion (or that of TMR Index) have significant resources.

    Only Non Chinese financial resources will secure these assets from the Rare Earth Monopolist China.

    3/11 were almost picked off by the Chinese (Northern Uranium, Lynas and Molycorp).

    China will try to pick off a few more this year.

    China: the Rare Earth Monopolist

    the world: International Security more important than “price point”?

  15. Home » TMR Advanced Rare-Earth Projects Index
    TMR Advanced Rare-Earth Projects Index
    PRINT
    TMR is first and foremost interested in the rare-earths sector from the strategic point of view. We are interested in the potential value that specific rare-earth deposits and their development could have, in the furtherance of the needs and demands of the overall technology supply chain.

    The TMR Advanced Rare-Earth Projects Index consists of rare-earth projects currently underway around the world, which have been either:

    formally defined as a mineral resource or reserve under the guidelines of a relevant scheme such as NI 43-101 or the JORC Code, or
    subject to past mining campaigns, and for which reliable historical data is available, even if not formally compliant with a relevant scheme.
    The Index, last updated on January 4, 2011, currently consists of 17 advanced rare-earth projects, being worked on by 16 different companies and located in 8 different countries, as shown in the table below.

    TMR Advanced Rare-Earth Projects Index
    Project Location First Production1 Owner(s) Ticker Symbol(s)
    Bear Lodge (Bull Hill Zone) Wyoming USA 2015 Rare Element Resources Ltd. TSX.V:RES, AMEX:REE
    Cummins Range Western Australia AUS N/A Navigator Resources Limited ASX:NAV
    Dubbo New South Wales AUS 2012-2013 Alkane Resources Ltd. ASX:ALK, PK:ALKEF
    Hoidas Lake Saskatchewan CAN N/A Great Western Minerals Group Ltd. TSX.V:GWG, OTCBB:GWMGF
    Kangankunde Balaka MWI N/A Lynas Corporation Ltd. ASX:LYC, PK:LYSCF
    Kutessay II Chui KGZ N/A Stans Energy Corp. TSX.V:RUU, PK:STZYF
    Kvanefjeld Kujalleq GRL 2016 Greenland Minerals and Energy Ltd. ASX:GGG, PK:GDLNF
    Mount Weld Western Australia AUS 2011 Lynas Corporation Ltd. ASX:LYC. PK:LYSCF
    Mountain Pass California USA 2012-2013 Molycorp Inc. NYSE:MCP
    Nechalacho (Thor Lake Basal) Northwest Territories CAN 2015-2016 Avalon Rare Metals Inc. TSX:AVL, AMEX:AVL
    Nolans Bore Northern Territory AUS 2013 Arafura Resources Ltd. ASX:ARU, PK:ARAFF
    Norra Karr Småland SWE N/A Tasman Metals Ltd. TSX.V:TSM, PK:TASXF, F:T61
    Sarfartoq (ST1 Zone) Qaasuitsup GRL N/A Hudson Resources Inc. TSX.V:HUD, OTCQX:HUDRF
    Steenkampskraal Western Cape ZAF 2013 Great Western Minerals Group Ltd. &
    Rare Earth Extraction Co. Ltd. TSX.V:GWG, OTCBB:GWMGF
    N/A
    Strange Lake (B Zone) Quebec CAN 2016 Quest Rare Minerals Ltd. TSX.V:QRM, PK:QSURD
    Zandkopsdrift Northern Cape ZAF 2014 Frontier Rare Earths Ltd. TSX:FRO
    Zeus (Kipawa) Quebec CAN N/A Matamec Explorations Inc. TSX.V:MAT, PK:MTCEF
    1Published company estimates

    Other Notes:

    Over time, the Index will expand as mineral-resource estimates for additional projects are defined.
    The Index includes advanced rare-earth projects known to Technology Metals Research, LLC (TMR), based on public-domain information only. Therefore, it is possible that there are other advanced rare-earth projects currently in development or operation, which are not included in the Index, and / or at the time of the last update, were not known to TMR.
    Only advanced rare-earth projects that are fully or partially owned or operated by corporations, or other non-state-run entities, are included in the Index.
    At present, the Index deliberately excludes any advanced rare-earth projects (as defined above) located in either China or India.
    Disclosures concerning the above companies: Gareth Hatch is neither a shareholder of, nor a consultant to, any of the companies listed in the TMR Advanced Rare-Earth Projects Index. Jack Lifton holds a long stock position in Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF)

  16. Home » TMR Advanced Rare-Earth Projects Index
    TMR Advanced Rare-Earth Projects Index
    PRINT
    TMR is first and foremost interested in the rare-earths sector from the strategic point of view. We are interested in the potential value that specific rare-earth deposits and their development could have, in the furtherance of the needs and demands of the overall technology supply chain.

    The TMR Advanced Rare-Earth Projects Index consists of rare-earth projects currently underway around the world, which have been either:

    formally defined as a mineral resource or reserve under the guidelines of a relevant scheme such as NI 43-101 or the JORC Code, or
    subject to past mining campaigns, and for which reliable historical data is available, even if not formally compliant with a relevant scheme.
    The Index, last updated on January 4, 2011, currently consists of 17 advanced rare-earth projects, being worked on by 16 different companies and located in 8 different countries, as shown in the table below.

    TMR Advanced Rare-Earth Projects Index
    Project Location First Production1 Owner(s) Ticker Symbol(s)
    Bear Lodge (Bull Hill Zone) Wyoming USA 2015 Rare Element Resources Ltd. TSX.V:RES, AMEX:REE
    Cummins Range Western Australia AUS N/A Navigator Resources Limited ASX:NAV
    Dubbo New South Wales AUS 2012-2013 Alkane Resources Ltd. ASX:ALK, PK:ALKEF
    Hoidas Lake Saskatchewan CAN N/A Great Western Minerals Group Ltd. TSX.V:GWG, OTCBB:GWMGF
    Kangankunde Balaka MWI N/A Lynas Corporation Ltd. ASX:LYC, PK:LYSCF
    Kutessay II Chui KGZ N/A Stans Energy Corp. TSX.V:RUU, PK:STZYF
    Kvanefjeld Kujalleq GRL 2016 Greenland Minerals and Energy Ltd. ASX:GGG, PK:GDLNF
    Mount Weld Western Australia AUS 2011 Lynas Corporation Ltd. ASX:LYC. PK:LYSCF
    Mountain Pass California USA 2012-2013 Molycorp Inc. NYSE:MCP
    Nechalacho (Thor Lake Basal) Northwest Territories CAN 2015-2016 Avalon Rare Metals Inc. TSX:AVL, AMEX:AVL
    Nolans Bore Northern Territory AUS 2013 Arafura Resources Ltd. ASX:ARU, PK:ARAFF
    Norra Karr Småland SWE N/A Tasman Metals Ltd. TSX.V:TSM, PK:TASXF, F:T61
    Sarfartoq (ST1 Zone) Qaasuitsup GRL N/A Hudson Resources Inc. TSX.V:HUD, OTCQX:HUDRF
    Steenkampskraal Western Cape ZAF 2013 Great Western Minerals Group Ltd. &
    Rare Earth Extraction Co. Ltd. TSX.V:GWG, OTCBB:GWMGF
    N/A
    Strange Lake (B Zone) Quebec CAN 2016 Quest Rare Minerals Ltd. TSX.V:QRM, PK:QSURD
    Zandkopsdrift Northern Cape ZAF 2014 Frontier Rare Earths Ltd. TSX:FRO
    Zeus (Kipawa) Quebec CAN N/A Matamec Explorations Inc. TSX.V:MAT, PK:MTCEF
    1Published company estimates

    Other Notes:

    Over time, the Index will expand as mineral-resource estimates for additional projects are defined.
    The Index includes advanced rare-earth projects known to Technology Metals Research, LLC (TMR), based on public-domain information only. Therefore, it is possible that there are other advanced rare-earth projects currently in development or operation, which are not included in the Index, and / or at the time of the last update, were not known to TMR.
    Only advanced rare-earth projects that are fully or partially owned or operated by corporations, or other non-state-run entities, are included in the Index.
    At present, the Index deliberately excludes any advanced rare-earth projects (as defined above) located in either China or India.
    Disclosures concerning the above companies: Gareth Hatch is neither a shareholder of, nor a consultant to, any of the companies listed in the TMR Advanced Rare-Earth Projects Index. Jack Lifton holds a long stock position in Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF)

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