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With China dominating rare earth headlines, investors are now looking elsewhere in a bid to lock down resources in a clearly monopolized market. Advanced infrastructure and a thriving mining sector have led to increased investor attention being focused on Australia.
By Adam Currie — Exclusive to Rare Earth Investing News
Australia has a world-renowned reputation for being the “lucky energy country” in that it is one of the few areas that boasts large quantities of commodities accompanied by the infrastructure and capital means to effectively extract them. When it comes to rare earth elements (REEs), the country hosts a minimal, yet strategically important reserve.
According to the Australian government, the largest REE deposit in the world is the Bayan Obo deposit in China, which has resources totalling at least 48 million tonnes of rare earth oxides (REO) out of a total worldwide resource of 95.27 million tonnes. Australia’s share of this amount is somewhat modest at 1.65 million tonnes – 1.73 percent of global Economic Demonstrated Resources (EDR).
There is currently no rare earth production in Australia, but with one REO project under construction in Western Australia and feasibility studies underway in the Northern Territory and New South Wales, it holds the potential to once again become a producer.
A detailed history
Small-scale production of rare earth in Australia has a detailed history dating back to the 1950s, when a small quantity of monazite was processed to produce cerium oxide for glass polishing in New South Wales. From 1969 to 1972, compounds including cerium, lanthanum, yttrium, and thorium compounds were produced at Port Pirie in South Australia from locally-extracted monazite.
According to figures released by Geoscience Australia, Australia has historically exported large quantities of monazite from heavy mineral sands mined for the extraction of both rare earth and thorium in Western Australia, New South Wales, and Queensland. Over 265 kilotonnes of product were exported between 1952 and 1995.
A stable investment climate
Australia’s stable economy, coupled with mining assets and proximity to growing demand in Asia, has helped strengthen both domestic and foreign investment into the country. Its federal government has focused much of its economic stimulus program on the development of infrastructure, with the aim of making a positive contribution to long-term productivity, particularly within the mining sector.
An open approach to foreign investment has long been a feature of Australia’s resources and energy sector policy. According to H.E. Louise Hand PSM, Australia’s High Commissioner to Canada, the country has historically been a capital importing state, and the development of its mining resources will require a continuation of that approach. Overall, Australia is well-placed to develop its REE mining sector, with all local governments determined to pursue good public policy that will support a positive investment climate.
Although there is no current production of REEs in Australia, mining began in 2007 at the Mount Weld deposit in Western Australia, and led to approximately 98,000 cubic meters of ore being stockpiled. It is awaiting the completion of a concentration plant at the mine site. The concentrates are set to be exported by Lynas Corp. (ASX:LYC) to an advanced materials plant currently being constructed in Malaysia.
According to an Asian news source, the Australian-built processing facility has emerged as one of the hottest political issues in the country as street protests intensified following critics stating that the project “lacked a comprehensive long-term waste management program.” Despite setbacks, Lynas hopes to open the $230 million plant in the eastern coastal state of Pahang by mid-2012.
In other REE developments, the Nolans Bore rare earth-phosphate–uranium-thorium deposit in the country’s Northern Territory and the Dubbo Zirconia Project Toongi zirconium-hafnium-niobium-tantalum-REO deposit in New South Wales are currently undergoing feasibility studies.
Highlights of mineral exploration, including REOs, are reviewed annually in the Australian Mineral Exploration Review and Australia’s Identified Mineral Resources.
Mining and exploration opportunities
Alkane Resources Ltd. (ASX:ALK) is currently focusing on the Dubbo Zirconia Project (DZP), which is located approximately 400 kilometres northwest of Sydney in New South Wales. The DZP is based upon one of the world’s largest in-ground resources of the metals zirconium, hafnium, niobium, tantalum, yttrium, and REEs.
According to a company breakdown, while resources identified to date will permit the project to produce for over 100 years, the feasibility study estimated earnings before interest, taxes, depreciation, and amortization of A$6 billion and a net present value of A$1.2 billion based on an initial 20-year mine life. The DZP is a significant and strategic source of zirconium and heavy rare earth, and the project remains on track for initial production in 2014.
In the next few years, Arafura Resources Ltd. (ASX:ARU) is expected to become a long-term supplier of REOs, phosphoric acid, uranium oxide, and gypsum from its 100 percent owned Nolans Project. The Nolans Project is comprised of operations at two sites in Australia: the Nolans Bore Mine in the Northern Territory and the Whyalla Rare Earths Complex in Southern Australia.
According to the company, the project is underpinned by a world-class rare earth deposit which has sufficient resources to support mining and chemical processing operations for at least 20 years. Annual production of 20,000 tonnes of REOs from the Whyalla Rare Earths Complex, equivalent to about ten percent of the world’s supply, is on schedule to commence in 2013. The Nolans Project is a long-term resource development operation, and the Whyalla complex represents a very substantial value-add component.
Orion Metals Ltd. (ASX:ORM) aims to become a leading Australian explorer of REEs. The company has acquired a number of exploration permits throughout Western Australia, as well as in Queensland, that may host REEs.
Orion Metals boasts a number of projects, including the Killi Killi Hills prospect, which was tested extensively in 1969 for uranium potential. Results have confirmed that 20 recent samples contain significant levels of heavy REEs, including dysprosium, ytterbium, and erbium associated with significant levels of other members of the suite of elements. A maximum value for yttrium of 2.06 percent was recorded, and the calculated average yttrium for the 45 samples was 1,327 parts per million (ppm). Uranium was recorded in a number of the samples up to a maximum of 326ppm.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.