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Not everyone is in favor of the US Department of Defense’s recommendation that the US stockpile $120.43 million worth of heavy rare earths.
The warning comes in the wake of the completion of the DoD’s biannual Strategic and Critical Materials 2013 Report on Stockpile Requirements, which recommends stockpiling $120.43 million worth of heavy rare earth elements (HREEs).
“The root cause of these material shortages is our ongoing dependence on Chinese suppliers,” said the Council’s executive director, Jeff Green. “While it is encouraging that DoD acknowledges these risks, we urge DoD to move from theoretical studies to the only appropriate and permanent solution — the creation and nurturing of a U.S. based rare earth supply chain.”
The DoD’s rare earth stockpile recommendation accounts for more than one-third of a $319.74-million stockpiling plan aimed at mitigating a $1.2-billion shortfall of 23 strategic and critical materials, according to the Council. The Council also noted that the recommendation contrasts dramatically with previous DoD assessments stating that domestic sources could meet all military requirements by 2013, except for yttrium, and that substitution would be a viable approach to risk mitigation for HREEs.
“It is equally encouraging that the Department is acknowledging the increased acquisition cost and engineering challenges posed by substitution strategies. However the U.S. must not rely on research projects and substitution alone to close the current supply gap,” said Green.
Lynas on the move
Shares of Australia’s Lynas Corporation (ASX:LYC) rose after the company confirmed that a Malaysian court has dismissed protesters’ challenge against its long-delayed rare earth processing plant.
The $800-million rare earth facility finally began production in November last year following lengthy environmental and safety disputes with local residents and the Save Malaysia Stop Lynas (SMSL) protest group. Lynas said the Federal Court has dismissed SMSL’s appeal to seek a judicial review of the decision to grant Lynas a temporary operating license.
“SMSL has now exhausted all avenues of appeal in the Malaysian Courts with respect to this challenge,” Lynas said in a statement.
Shares of the company rose to a high of AU$0.61 following the announcement, half the level it was 12 months ago.
China’s REE export numbers rise in February
China’s exports of rare earth primary materials increased by 289.12 percent in February, to 1,106 metric tons (MT), compared with the same month in 2012; prices continue to drop month-on-month.
An industry analyst told Metal-Pages that China’s exports of rare earths increased sharply in February because the country exported only 284 MT in the same period last year and was assisted when prices continued to fall throughout the month, which in turn encouraged buyers to restock.
The average price for rare earths in February was $22,650 per MT, down 11.32 percent compared with $25,540 per MT in January.
“Exports increased due to low prices. Many consumers will restock before March when sales are stronger. In addition, many consumers restarted production after the Chinese New Year in February,” the analyst added.
Market round-up
China’s rare earth prices have continued to weaken, with little business reported on the spot market and producers unwilling to sell product at lower prices due to high production costs. Prices for light rare earths and some heavies, such as dysprosium and gadolinium are unchanged, while prices for rare earths of fluorescent powder, such as europium, terbium and yttrium, have edged down slightly.
Reports from Metal-Pages note that market participants remain bearish on the future of rare earths and are expecting prices to decline in the short term, with supply outweighing limited demand from downstream industries.
Traders confirmed that 99-percent praseodymium-neodymium metal is being offered at $61,984 per MT, while the Chinese 99-percent praseodymium oxide market remains quiet due to weak demand. Current prices for dysprosium oxide 99 percent are unchanged at $322 per kilogram, while prices for ferrodysprosium are still at $338 per kilogram, according to Metal-Pages.
China’s terbium oxide market has been described as flat with sporadic trading in the spot market. Industry sources state prices are likely to fall slightly in the near term given lackluster demand from the downstream fluorescent powder industry. Current prices for terbium oxide 99 percent are at $603 per kilogram.
The 99-percent cerium oxide market is sluggish due to weak demand, with most suppliers putting 99-percent cerium oxide prices at $5,956 per MT.
Company news
Search Minerals (TSXV:SMY) announced a revised preliminary economic assessment (PEA) for its Foxtrot REE project in Labrador, Canada.
Highlights include a reduction in capital costs to $221 million from $469 million, with a 3.8-year payback period. Further, net revenue has increased $110 per MT milled and opex costs have increased $38 per MT. The revised project will focus on higher-grade REE material mined over life of mineof 0.89-percent total REE (TREE) on average, which compares to the 0.58-percent TREE on average for the original bulk open-pit concept.
The updated PEA scenario also allows for a smaller environmental footprint (smaller open pit, smaller waste dump and smaller tailings pond) and good potential for an extended mine life.
Frontier Rare Earths (TSX:FRO) announced that the preliminary feasibility study (PFS) at its Zandkopsdrift REE project in South Africa is nearing completion.
With preparation of the PFS now at a very advanced stage, planning has commenced for the definitive feasibility study (DFS) on Zandkopsdrift. That will begin immediately after the PFS and is expected to take 12 months to complete. Frontier is fully funded to complete the PFS and DFS on Zandkopsdrift from its existing cash resources. Along with its strategic partner, Korea Resources, Frontier intends to commence production in 2016, with a target production capacity of 20,000 MT of separated rare earth oxides per annum.
Matamec Explorations (TSXV:MAT) received C$1.041 million from Toyotsu Rare Earth Canada, a subsidiary of Toyota Tsusho (TSE:8015), in support of the Kipawa mine project, which will supply Toyota with HREEs for hybrid and electric vehicles.
To date, Matamec has received C$14,236,608 of the maximum C$16 million for the completion of a DFS on the Kipawa HREE deposit, which is on budget and on track for completion by the end of the second quarter of 2013.
Matamec’s president and CEO, Andre Gauthier, said: “[t]he financial support that Matamec has received from Toyotsu is a clear indication to the market the progress which has been achieved in the completion of the feasibility study.”
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.
Related reading:
Lynas Corporation: One Step Forward, Two Steps Back
Lynas Rare Earth Plant Starts Production
Future of Lynas Rare Earth Project Looking More Positive
Lynas Corporation: The End of the Road?
Lynas Project Delayed Once Again
Lynas Operating License: Potential Game Changer for Rare Earths Market?
