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Europe has finally acknowledged that there is a serious problem in the rare earths sphere. But what can it do to tackle it? Analysts are divided in their opinion.
By Cyrus S Darabshaw Exclusive To Rare Earth Investing News
Finally, some one, somewhere, has woken up to the fact that China has a stranglehold on the world’s stash of rare earths. Investors may recall that some time late last year, at the invitation of EU industry ministers, an expert group had been set up by the European Commission (EC) to refine the draft list.
In December 2009, the group had gone on to expand this list to include 19 new substances, bringing the total to 39. Now, we stumbled upon the following piece of information earlier last week, filed by news agency Reuters. The news report is based on a lengthy report published by the EC on raw materials and their global shortage. What we are producing here are extracts from that report, particularly in reference to REE.
The report states that with the world’s population growing, industrialization rising and the competition for raw materials intensifying, concerns have been raised on the access to key natural resources for the European industry. EU industries, and particularly those active in telecom, aerospace and other hi-tech sectors, are facing fierce competition for natural resources from emerging economies.
China and India, for instance, are increasingly using raw materials from Africa and Latin America, which are home to some of Earth’s largest reserves of minerals and metals. As a response, in November 2008, the EC had presented a new ‘integrated strategy’ for raw materials.
The EU executive’s 2008 assessment contained a preliminary list of 20 raw materials considered to be potentially critical for the EU economy. These include niobium, platinum and titanium.
Of particular worry to Europeans, says the report, are rare earths, collections of metals and elements found in a wide range of gadgets and consumer goods, including batteries used in electric cars. Among the rare earths where shortages are likely is neodymium.
Neodymium is the key component of an alloy used to make the high-power, lightweight magnets used in electric motors of hybrid cars, such as the Prius, Honda Insight and Ford Focus, as well as in generators for wind turbines, Reuters reported.
The problem is that 95 per cent of global production and about 60 per cent of consumption currently originates from China, according to the US geological survey. “We have already identified access difficulties, with China obviously being one of the countries where we have identified access difficulties,” said the EU official, speaking on condition of anonymity, as quoted by Reuters.
While experts debate about the Chinese monopoly, leading agency marketwire quoting experts in the REE realm, said shortages in supply were unavoidable. Global use of rare earth metals has more than quadrupled in the last years to 125,000 tons per year. Analysts expect demand to reach 200,000 tons in 2014, and, by that time, China will need all it produces for its own use.
“Chinese exports of rare earth metals will be reduced to zero over time,” the report said, quoting Christian Hocquard, Economist and raw materials expert at the French geological service BRGM. This means several high-tech industries in Europe, Asia and the US will be without essential raw materials.
According to Hocquard, says the report, there were only two ways to avoid this – relocate factories to China or open new mines for rare earth metals outside China. The following paragraph is essentially why we decided to quote from this report. It makes a point long forgotten by many analysts.
China actually has only 53 per cent of the world supplies of REE within its borders. The Western mines were forced to shut down because of overproduction and low prices in the 1990s. The recent increase in demand has overturned that situation. But it will cost a lot to reopen the old mines. The report goes on to add that Europe has no role to play. It has no major deposits of rare earth minerals in the ground and must depend on the rest of the world for supplies.
If China stops the supply, the EU will have acute shortages, the report states.
So, while the EC has sat up and taken note of the REE shortage issue, the solution is not yet clear. Watch this space for more updates.
Movement in REE
Last week saw a lot of developments in the world of REE. Junior explorer First Gold ( TSX V: EFG) reported a discovery of rare earth metals on its property near James Bay in north-eastern Quebec, including lithium, beryllium, tantalum, and niobium. A 4.4-metre section contained 2,922 grams per tonne of rubidium, used in night-vision sensors and fibre-optic cable. The drill core is being retested for rubidium because the readings were off the scale of the original lab equipment.
First Gold’s success has spurred other companies to try and emulate it. Many have rushed in now to grab their share of land. Alix Resources Corp (TSX VENTURE:AIX) is one such. The company said this week that it had entered into an agreement to acquire a 100 per cent interest in the ground adjacent to First Gold Exploration. Conway Resources Inc (TSX VENTURE:CWY) is yet another company to make a move on the lines of Alix. A third company, BonTerra Resources Inc (TSX Venture: BTR), too, has signed an agreement for claims to acquire a 100 per cent interest in the ground adjacent to the First Gold exploration site. President Mitchell Adam said in a statement that the company was pleased to have negotiated a decent property in a region that is “very hot” in rare earth elements and lithium market.
The discovery news sent the company’s shares on the Toronto Stock Exchange on Monday to a new high – from 34 cents to a high of 95 cents, finally ending the day at 68 cents, a 113 per cent gain. The news even sparked near-panic buying. Investors traded 9.3 million EFG shares by the end of the day – a whopping 4,000 per cent increase over the stock’s 3-month average daily volume.
Yankee Hat Minerals Ltd (TSX V: KHT), has announced its operating plans for 2010. Yankee is a publicly held resource company that utilizes its management’s expertise in mineral exploration and evaluation, and financial acumen, to identify, acquire, and develop mineral prospects in mining friendly jurisdictions with the potential to host large-scale discoveries.
The company’s strategic focus is on advanced stage projects and commodities that have strong underlying price fundamentals such as gold and precious metals, rare earth elements and tungsten. The Company said it intends to focus on three key assets that with the proposed work programs and proper funding management for this year.
These are: Advance exploration of the Fran property located near Mount Milligan of British Columbia, update historical exploration on its Lancer Rare Earth Property in the Yukon territory, among others. The Lancer Property is located in south central Yukon Territory and is unique because it is one of only a few rare earth projects in North America that are relatively accessible.
Historically this property has provided extremely attractive values of rare earth elements. These results, which are not NI 43-101 compliant, were first discovered in 1976 by Chevron Minerals and Kerr Addison.
Some more good news…
International Montoro Resources Inc, (TSX V: IMT), a company with focus on advancing its 100-per cent optioned Elliot Lake uranium project in northern Ontario, Canada, has acquired 1,818.6 ha contiguous to and adjoining Spectrum Mining Corp’s recently reported rare earth discovery, located 80 km northeast of Prince George, BC.
In late October, Spectrum Mining had reported significant rare earth element mineralization on its Wicheeda carbonatite-syenite breccia intrusive complex rare earth discovery. For more, one can click here.
Company news
Japanese car manufacturer Toyota has evinced interest in setting up a processing plant for rare earth chloride, one of the products of monazite. The auto major is in advanced stage of negotiations with Orissa Sands Complex (OSCOM), a unit of Indian Rare Earths Ltd, for setting up the plant near OSCOM’s site at Matikahal, near Chhatrapur. The capacity of the proposed plant and the investment figure are yet to be worked out.
The rare earth metals used in manufacturing several electronics items, magnet and automobile tools are in high demand in the international markets.The officials have anticipated that several other companies will come forward to set up their plants to process the individual rare earths in the area.
Artha Resources Corporation (TSX V: AHC) also announced this week that it had successfully staked over 100,000 hectares of ground highly prospective for a variety of rare earth, precious and base metals in Jujuy and Salta Provinces, NW Argentina. The rare earths licences, covering over 300 square kilometers, include the Susques Property, which covers more than 20,000 hectares in southern Jujuy Province, NW Argentina.
Susques is known to be prospective for a variety of rare earths elements, including yttrium, and thorium has been historically mined on a small scale. The properties were identified as part of the company’s continuous target generation strategy where new opportunities are constantly being reviewed to provide ongoing feedstock for our expansion and growth.
In a similar move, Artemis ( ASX: ARV) has acquired the Yangibana Rare Earth Element Project in Western Australia. The company aims to commence exploration for REE from the current quarter based on an in house review that talks of potentially significant rare earths deposit at Yangibana.
Yangibana hosts rare earth mineralisation with values up to 20 per cent neodymium oxide (Nd2O5) and 1,600ppm europium oxide (Eu2O3) (neodymium is used in batteries and magnets, while europium is used in televisions and fluoro lamps). The company, in a statement, said its views rare earth metals as strategic metals owing to strong market fundamentals, the hi-tech applications of REE’s and the dominance of China as a world supplier to an increasing market.
Yangibana is regarded as one of Western Australia’s more important REE occurrences and is located 260 km northeast of the regional centre of Carnarvon in Western Australia. Previous exploration at Yangibana has shown average grades of around 2.84 per cent total rare earth oxides.