Insider Insight into the Rare Earth Market

The dispute is one of several between Beijing and the EU, US, and Japan, but is the first case to be jointly filed at the WTO by the three economic powers, an EU official confirmed.

While some critics claim that the move will result in very little in the form of forcing China to alter its export system, others feel that it presents a unique opportunity for both exploration and rare earth element (REE) production companies moving forward.

Rare Earth Investing News sat down with three different REE company executives recently in the hope of gauging just what the feel in the market is in relation to the WTO’s investigation.

REIN spoke with David Barwick, Chairman of Orion Metals Ltd. (ASX:ORM), an REE exploration company with four project focuses in Australia, and Mark Saxon, President and CEO of Tasman Metals Ltd. (NYSE:TAS), a Canadian mineral exploration and development company focused on strategic metals in the European region.

Also included in the discussion was Anne Hite, Director of Investor Relations at Rare Element Resources (TSX:RES), a company with a 100 percent interest in the Bear Lodge Property in the US, which contains one of the largest disseminated REE deposits in North America.

REIN: How does your company feel the current dispute between the WTO and China will affect the REE market moving forward in relation to export quotas?

ORM: There may be a short-term effect in respect to raising funds for further exploration of REE projects. I do believe that because the demand for REE will remain, it will be a short-term problem.

TAS: After the price spike and supply disruptions of 2011, consumers of REEs remain concerned about both access to material and price uncertainty, and are therefore acting to reduce their dependence on these metals. If successful, the WTO action will provide more certainty to consumers, and we are likely to see significantly expanded volumes of REEs being consumed.

RES: Rare Element Resources generally doesn’t comment on politics, but suffice it to say that the situation does bring focus on the REE market to the world stage and put into context the importance of these metals.

Additionally, some of the experts in this area have been saying that China may end up being an importer of REEs using all of their own production, and then some. If this were to be the case, sources outside of China may very well end up being the only sources of rare earths for the market.

REIN: Do you feel that the result of this dispute will affect your company’s plans at all moving forward?

ORM: No, not at all.

TAS: Tasman is focused on heavy REEs, in particular dysprosium and yttrium. China has abundant resources of light REEs, but have indicated that their supplies of heavy REEs are limited. As a result, even if the quota is varied/removed, heavy REEs are unlikely to become significantly more available.

RES: Our plans have been, and continue to be, the advancement of the Bear Lodge project.

REIN: How do you foresee the REE market landscape in three years’ time? Will prices have surged/contracted, and is this affecting your corporate strategies?

ORM: I think prices will rise as demand continues its growth.

TAS: Individual REEs all have unique price drivers that make for a complex and broad market. For light REEs, Molycorp (NYSE:MCP) and Lynas Corp. (ASX:LYC) will be major suppliers within three years, and I would anticipate that prices will contract towards their cost of production.

In contrast, there will be little western production of heavy REEs within three years, and consequently we forecast prices to remain strong.

RES: We feel that REE prices have been rather stagnant, but this is a very difficult market to predict.

Simply putting a price on our basket of REEs for our pre-feasibility study caused concern among those sell-side analysts that cover us. Some felt we used too high a price, some too low. There is no clear consensus among the experts.

REIN: Do you feel that this dispute might open up more market opportunities for players outside of China? If China keeps controlling export amounts, will the market cast attention to projects elsewhere in the world?

ORM: I think other opportunities will arise. Orion has a strategic stake in South Korea which we positioned ourselves into so that we were not completely reliant on any one country for our future exploration/development.

TAS: There is already plenty of opportunity for REE companies with quality projects outside of China. As the REE market is not large, the current five to ten companies that are exploring these projects can secure REE supply for the western world, independent of Chinese supply, for many years to come.

RES: Competition does seem to be a good thing in any marketplace. We believe that we can offer a good basket of REEs and do so at a reasonable cost.

Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.