Rare Earth Elements cause international trade dispute

Rare earth minerals: From smart bombs to smartphones – what four major economies are fighting over

by Josh Rubin, Toronto Star


Rare earths can be found in everything from big screen TVs to smartphone and smart bombs, which is why a global trade dispute has erupted over them.
Krzysztof Grzymaj¬ao/Dreamstime
A fight over obscure minerals used in the electronics industry pits four of the world’s largest economies against each other in a massive trade dispute that could take several years to resolve.

Tuesday, the U.S., Japan and EU filed a complaint with the World Trade Organization claiming that China was illegally restricting the export of several so-called rare earth minerals, favouring Chinese manufacturers in the process.

U.S. president Barack Obama railed against China’s efforts to restrict the exports, saying it was hampering competition in the electronics manufacturing market. China currently uses 70 per cent of the world’s supply of “rare earths,” including several used in the making of everything from glass on smart phones to industrial coatings and smart bombs.

“We want our companies building those products right here in America,” Obama told an audience in Washington, D.C. “But to do that, American manufacturers need to have access to rare earth materials, which China supplies.”

Here’s a look at what the dispute’s about, what it all means, and why Canada’s not actively taking part — at least not for now:

Lantha-what?

Though rare earths aren’t exactly household names, the minerals are found over much of the planet’s surface. The “rare” part of the name comes because they’re often spread so thinly, or mixed with so many other material, that extracting them can be a giant pain.

Among the rare earths are such fun-to-pronounce minerals as lanthanum, dysprosium oxide and neodymium oxide. A form of lanthanum oxide is used in fuel cells for hybrid cars.

Who cares?

Manufacturers outside of China are keeping a close eye on the trade dispute. That’s because they’re more vulnerable than ever to interruptions in their supply chain, says Duncan Stewart, head of technology research at Deloitte Canada.

“Decades ago, companies would have several month’s supply of parts and materials on hand. Now, that’s just not the case any more. Supply interruptions can have a real ripple effect,” said Stewart.

Still, Stewart says most manufacturers haven’t experienced major shortages of rare earth minerals. At least not yet.

A rare price

China could be attempting to drive up the price of the various rare earths it mines, as well as ensuring its own manufacturers have a steady supply, says lawyer John Boscariol, head of the international trade division at McCarthy Tetrault.

Those would both be no-nos, according to Boscariol.

“If you’re doing this to favour Chinese companies, or drive up the price, the WTO rules say you can’t,” said Boscariol, adding the U.S.-led trade complaint is a strong one.

“There’s a legitimate case here.”

The West heads to WTO over China's rare earths hegemony

U.S.A., European Union and Japan oppose China's rare earth metals monopoly

by JOE MCDONALD, BRUSSELS — Reuters

The European Union, United States and Japan formally asked the World Trade Organization on Tuesday to settle a dispute with China over Beijing’s restriction on exports of raw materials, including rare earth elements critical to major industries.

The EU’s trade chief, Karel De Gucht, said the three trading powers were making the dispute settlement request, the first step before filing a full trade case, following a successful EU challenge at the WTO on similar restrictions earlier this year.

“China’s restrictions on rare earths and other products violate international trade rules and must be removed,” Mr. De Gucht said. “These measures hurt our producers and consumers in the EU and across the world, including manufacturers of pioneering hi-tech and ‘green’ business applications.”

China accounts for about 97 per cent of the world’s output of the 17 rare earth metals, which are crucial for global electronics production and the defence and renewable-energy industries. They are also used in a wide range of consumer products, from mobile phones to electric cars.

The dispute is one of several between Beijing and the world’s other three largest economic powers, as China’s rise changes the world economic order. It is the first case to be jointly filed by the EU, United States and Japan with the WTO, an EU official said.

Mr. De Gucht said during a recent visit to Hong Kong that China needed to be sensitive to perceptions that its huge economy is a threat in Europe. The cost to EU businesses of China’s export restrictions runs into the billions of euros, officials say.

Trade between the EU and China has boomed in recent years, reaching almost €400-billion ($524-billion U.S.) in 2010, but EU complaints against Chinese dumping range from the shoe industry to steel fasteners. De Gucht has in the past complained that China subsidizes “nearly everything,” making it hard to compete.

An EU decision to make all airlines using EU airports pay for carbon emissions has brought threats of retaliation from China, as well as from the United States and Russia.

Critics complain it is a tax, which infringes sovereignty. The EU says it is not a tax because it is based on buying and selling allowances on a market and airlines can avoid costs by finding other ways to offset their emissions.

Japan has been worried about supply of rare earths, especially after fears that China held back shipments of rare earths as punishment after the territorial dispute last year.

U.S. President Barack Obama is currently toughening his stance on China trade ahead of November’s presidential election. He recently created a new interagency trade enforcement centre, which is expected to be up and running in the coming months and whose primary focus is to make sure China honours WTO rules.

Obama administration officials also have been considering a WTO complaint against anti-dumping and countervailing duties that China imposed late last year on U.S. auto exports.

Beijing’s restrictions on exports of the valuable minerals became a flash point in 2010, when China halted rare earth shipments to Japan during a diplomatic dispute.

The United States and the EU have long been expected to file a WTO case against China’s rare earth mineral export curbs, but appeared to be awaiting the outcome of a separate case against Beijing’s exports on a long list of other raw materials.

That dispute was finally decided in favour of the United States, EU and Mexico in January after China lost an appeal to keep its raw material export curbs. Beijing has not yet announced how it intends to comply with the January ruling.

MolyCorp deal for rare earths technology worries some

Deal Shows China's Sway in Rare-Earth Minerals

from Wall Street Journal

SHANGHAI—Molycorp Inc.'s $1.3 billion deal to acquire a key processor of rare-earth minerals has sparked a warning from industry officials that it could reinforce China as the main source for specialized magnets used in consumer electronics and sophisticated weapons.

Molycorp said Thursday it plans to buy Toronto-listed Neo Material Technologies Inc., one of the world's leading experts in chemistry needed to transform rare earths—minerals used in applications that range from car batteries to advanced weaponry—into specialized magnets. Molycorp said the deal creates the most diversified rare-earth company outside of China, which dominates the industry.

The transaction, said Mark A. Smith, president and chief executive of Greenwood Village, Colo.-based Molycorp, links a world-class miner with a world-class processing company.

But the deal also paves the way for Molycorp to ship minerals from its California mine to the Chinese operations of a Neo Material arm called Magnequench, in a reminder of how much technological rare-earth capability resides in China.

Ed Richardson, president of the U.S. Magnetic Materials Association, says the plan is worrisome. The U.S. is already "dangerously dependent on China" for rare-earth-magnet materials, including to supply its weapons systems, Mr. Richardson said in an email. Molycorp's "export of U.S. rare earth assets into China will only exacerbate this problem," he added.

Mr. Smith played down political and historical implications of the deal that now ties Molycorp, Magnequench and China. He said sending rare-earth oxides to China is a bid for "higher volume, higher margin" that will only reduce production costs in the U.S. and by implication boost supply of the metals for industrial users. "It does not in any way deplete our ability to serve the market outside of China whatsoever," Mr. Smith said.

While much of the debate over China's hold on the rare-earths market has focused on mining, the Molycorp deal highlights China's ability to process mined oxides into metals that help electric cars hold their charge, make wind turbines turn and bring precision to military gyroscopes.

Like most developments in the tiny but critical rare-earth industry, the merger is a response to China's market supremacy. Companies such as Molycorp and Australia's Lynas Corp. are trying to provide supply alternatives to China, which has 90% market share in many aspects of the industry. It comes as analysts predict a formal challenge of China at the World Trade Organization over its rules to limit export of some rare-earth materials, rules that Beijing says are meant to protect the environment but Washington labels a trade barrier.

Analysts concur with Molycorp's assertion that the acquisition of Neo Material gives it significant new technological capability, particularly in powders used in sophisticated high-performance bonded magnets. The U.S. company becomes more global, with production and sales in a number of new markets. Molycorp argues that the deal also can lower production costs as the company restarts its California mine, which was once the world's No. 1 rare-earth mine before it was closed several years ago due to falling rare-earth prices and environmental concerns.

Molycorp's acquisition includes magnet-materials maker Magnequench, the name of a Neo Material predecessor that started in the U.S. and later moved primary operations to China. Western nations, including the U.S., remain reluctant to permit often-polluting rare-earth processing. Molycorp itself last year dropped plans to build a rare-earth magnet plant in the U.S. in partnership with Hitachi Ltd. of Japan.

General Motors Co. divested itself of Magnequench in 1995, and a group of investors including government-owned China National Non-Ferrous Metals Import & Export Corp. acquired the highly specialized producer of magnet materials. The investment group then opened a facility in the Chinese city Tianjin and closed an Indiana plant. For many rare-earth industry experts, that chain of events marked a shift toward China's domination of the industry that U.S. policy makers didn't expect.

Neo Material's Tianjin plant and its other facility in China have spare processing capacity that Molycorp's Mr. Smith said he intends to exploit by sending output from the California mine to be processed there. Molycorp sold no material to Neo Technology in China last year, he said.

The acquisition—coming amid cooling prices for rare earths and shares of the production companies such as Molycorp—will give existing shareholders of Neo Material about 14% of the combined company, a written statement from the companies said.

Molycorp and Neo Material executives told analysts in a conference call Friday they had informed authorities in Washington and Beijing about the deal hours after the announcement and that they don't expect regulatory hurdles in either country.

Constantine Karayannopoulos, the CEO of Neo Materials, said he expects Chinese authorities to honor existing quotas that permit its export of material the company produces once it becomes U.S.-owned. "The early indications are there shouldn't be any issue," he said.

California's Mojave Desert hosts USA's only rare eath minerals mine

A Visit to the Only American Mine for Rare Earth Metals

by iFixit cofounder Kyle Wiens, from TheAtlantic.com



That big hole in the ground? It's a pit mine at the Molycorp Mountain Pass rare earth facility in California's Mojave Desert. Metals mined from pits like that were used to make the cell phone in your pocket and the computer screen you're staring at right now. I visited Molycorp two weeks ago, as part of our investigation into the sources and consequences of consumer electronics manufacturing.


WHAT ARE RARE EARTHS?

Molycorp is the only US company that produces the rare earth metals used in devices ranging from wind turbines and electric vehicles to missile-guidance systems and compact fluorescent lightbulbs. There are seventeen rare earth elements, including praseodymium (used to make photographic filters), neodymium (used to make permanent magnets in hard drives and other electronics), and europium (used to make fluorescent light bulbs and TV screens).

Rare earths are used in a wide variety of electronics and clean energy technology. Somewhat counterintuitively, rare earths are not rare in the earth's crust; however, they tend to be dispersed in tiny quantities throughout the crust. They're often located within minerals such as bastnaesite and monazite, which makes them difficult and expensive to mine.



THE RISE AND FALL "AND RISE AGAIN" OF MOLYCORP

At one point, the majority of the world's rare earths were mined at the Mountain Pass facility. Then, in 1998, Molycorp halted chemical processing at the mine following an environmental disaster; radioactive wastewater flooded the nearby Ivanpah Dry Lake. At the same time, China was dramatically increasing its rare earth production.

The resulting lower market prices forced Molycorp to close their mine in 2002. Although Molycorp has continued to extract metals from stockpiles of ore mined at Mountain Pass, China now produces between 96% and 99% of the world's total rare earth supply. The government carefully allocates supply to individual companies to support domestic electronics production. In 2009, they cut export quotas of rare earths from 50,000 to 30,000 tonnes, sending already-high prices on international markets even higher.

Molycorp has been working for several years to begin mining for rare earths once again, to help wean US manufacturers off Chinese imports. This year, they will reopen the Mountain Pass mine, an operation they've aptly named "Project Phoenix." Getting to this point, however, has been expensive -- about $1 billion so far -- and has required a lot of special environmental permits.

In July 2010, Molycorp went public on the NYSE with an Initial Public Offering of $394 million. In December 2010, they secured permits to start building a mining and manufacturing center so they could resume mining light rare earth elements such as neodymium and europium. The next month, they started mining bastnaesite ore.

In October 2011, Molycorp announced that they discovered a heavy rare earth deposit near their Mountain Pass facility and received permission to drill two months later. The heavy rare earths terbium, yttrium, and dysprosium are necessary for manufacturing wind turbines and solar cells, so the government has a particular interest in finding sources of those elements within the US.



GOVERNMENT INVOLVEMENT

The Department of Energy released a Critical Materials Strategy report last month, which found that rare earths are necessary for clean energy technology, that the supply of those heavy rare earths is particularly at risk, and that Molycorp is the most promising rare earth project outside of China.


WHAT'S HAPPENING AT MOUNTAIN PASS TODAY?

I first visited Mountain Pass just over a year ago, when I took the (HDR) photo above. The signs of Molycorp's expansion since then are striking: there are many more buildings (some presumably part of the new processing facility), lots of cars in the parking lot, and employees buzzing around.


A few weeks ago, Molycorp reported that more than 75% of their Phase 1 production (i.e. all the rare earths they will produce between now and the end of September, about 19,050 tonnes) has been spoken for. In preparation, Molycorp has been hiring and expanding dramatically: it plans to hire 25 people every quarter until it reaches 200 employees.

Molycorp declined repeated requests to comment. When I stopped to take pictures of the mine, I got a chance to speak to a Molycorp geologist who was hired about 9 months ago and wouldn't give his name. He told me that the mine runs 24/7 because the equipment is hugely expensive; it couldn't be profitable otherwise. Most Molycorp Mountain Pass employees today have been hired within the last year, and most of them commute from Las Vegas. There isn't much in the way of housing in Mountain Pass, which has a population of 30.

Around the facility, employees drive large Dodge trucks. The trucks have little orange safety flags on a tall pole so they don't get run over by excavators. No one's been run over yet, the geologist assured me.


WHY DOES IT MATTER?

By controlling the world supply of rare earths, China is trying to create a barrier for anyone attempting to manufacture electronics elsewhere.

While most electronics are still manufactured in China, plants are opening around the world. The electronics manufacturing giant Foxconn, for example, has several plants in Europe, India, and Mexico, and is about to open a plant in Brazil. All of these plants are currently subject to China's export taxes and artificial limitations of supply -- if Mountain Pass production is as high as expected, that may change.

Also, though they're not actually rare earth elements, I'm excited to hear about two other items of the list of materials Molycorp will be producing: niobium and tantalum, used to make electronic capacitors. Having a domestic, ethically mined source of niobium and tantalum would be a huge boon for US electronics manufacturers. Currently, recycled devices are the only domestic source of tantalum.

Regardless, we'll be keeping our eyes on Molycorp this year.

Quest Rare Minerals (CVE:QRM)(AMEX:QRM) B-Zone update

QRM provides progress update on its B-Zone Heavy Rare Earth project at Strange Lake, Quebec

from ProactiveInvestors.co.uk

Wednesday morning, the company's shares ticked up 1.35% to $3.

Quest is advancing the project to deliver a pre-feasibility study (PFS) for the deposit in the second half of 2012. At that time, the company said it will have a more accurate idea as to the delivery timelines for its definitive feasibility study and for mine start-up.

The company is following a parallel path for the collection of the necessary data for use in the subsequent definitive feasibility study. A budget of $2.5 million has been allocated for completion of this work, the company said.

In a conference call, Quest's president and CEO Peter Cashin said: "We have been working on a PFS but also on a full feasibility study in parallel in order to accelerate delivery."

"Our 2011 prefeasibility work is advancing well, important changes in the scope of the project are being made when compared to how it was developed in our September 2010 Preliminary Economic Assessment (PEA).

"Changes include consolidating the mine and mill complex at Strange Lake, Quebec, in proximity to the B-Zone to capture the power, infrastructure and heat synergies of a combined operation. This will allow for more streamlined permitting timelines related to a single footprint site.

"The modifications also include the construction of a 160 km access road to the Labrador coast and port facility as opposed to the originally-conceived road and slurry pipeline for delivery of crushed ore to a coastal Mill Complex.

"As well, in order to accelerate the completion of the metallurgical flow sheet of B-Zone ore to saleable product, Quest has engaged a second metallurgical laboratory, Process Research ORTECH to work in parallel to Hazen Research."

The Strange Lake property, located 220 km northeast of Schefferville and 125 km west of the Voisey Bay Nickel-Copper-Cobalt Mine, covers an area of 54,000 hectares.

Quest's 2009 exploration program led to the discovery of a significant new Rare Earth metal deposit, the B-Zone, at Strange Lake.

An April 2010, an NI 43-101 preliminary resource estimate of the B Zone completed by Wardrop Engineering indicated that at a 0.95% total rare earth oxides (TREO) base-case cut-off grade, the B Zone contains an Indicated Resource of 36.4 million tonnes grading 1.16% TREO, 2.17% zirconium oxide, 0.24% niobium pentoxide, 0.05% hafnium oxide and 0.12% beryllium oxide.

This resource calculation demonstrated the extremely heavy rare earth oxide-rich nature of the B Zone, representing between 40 percent and 51 percent of the TREO in the deposit.

Quest said a total of 23 geotechnical drillholes for 953 metres were completed on the project, with the holes being used for rock
stability testing, groundwater flow testing, condemnation drilling over proposed tailings and mine complex sites and for a proposed airstrip site.

Quest's pre-feasibility team is in the process of updating project capital costs and incorporating their findings into capital expenditure models for the project. A project cost optimization process will determine where maximum cost efficiencies can be realized for the final project scope.

Considerable effort is being undertaken to minimize the capital cost escalation that many projects are experiencing around the world.

Reno Pressacco, vice president of Operations, said: "The work on revising the project scope when compared to our 2010 PEA will serve to optimize the economic potential of the B-Zone deposit over its notional production life.

"This revised project scope offers the advantage of using a single power supply for the entire project, removes the risks associated with a pipeline transportation system in those climate and terrain conditions, improving the management of the operation and simplifying and streamlining the permitting processes.

"We have been very encouraged by recent positive findings from our metallurgical test work and are confident that a final metallurgical solution for Strange Lake mineralization will be developed."

The company is also in the process of a rare earth market study in order to better understand the market and target potential buyers. Quest is targeting the production of niobium, zirconium and potentially berylllium at the B-Zone deposit.

Additionally, the company is looking to add a beryllium contribution to its model in the wake of recent comments from Canada's government was looking to buld a strategic stockpile for military use.

Beryllium has been used as a component in next-generation fighter jets and in both military and civillian aircraft as brake components in landing gear.

Earlier this year, Quest released the results of its successful B-Zone definition diamond drilling program.

Final results for holes BZ-11-118 to BZ-11-255 returned multiple, high grade intersections of between 1.12% and 6.11% total rare earth oxide (TREO), over thicknesses of 2.34 to 147.0 metres, the company said.

The higher in value heavy rare earth oxide (HREO) represents between 22.4% and 76.5% of the TREO content intersected in the new drilling.

Among the best holes of the infill program, BZ11218 hit 1.44% TREO over 144.4 metres, and hole BZ11189 returned 1.23% TREO over 116.1 metres, including 3.04% TREO over 11.7 metres and 4.9% TREO over 4.9 metres.

The 2012 pre-feasibility study work program will include completion of the metallurgical solution for the B-Zone, finishing of the preliminary engineering for the project, execution of the financial analysis for the project and delivery of the final National Instrument 43-101 compliant Pre-Feasibility Study technical report.

This program has been budgeted at $21.0 million for Quest's 2012 fiscal year.

Quest Rare Minerals is a Canadian exploration company focused on the identification and discovery of new and significant Rare Earth deposit opportunities.

Quest is currently advancing several high-potential projects in Canada's premier exploration areas: the Strange Lake and Misery Lake areas of northeastern Quebec and the Plaster Rock area of northwestern New Brunswick.

LYC up on news of Malaysian rare earths metals mine

Lynas shares closed 19% higher at A$1.590 on the Australian Securities Exchange.

Once completed, the plant is expected to be one of the biggest sources of supply of rare earth elements outside China.

Rare earths are used in products such as hybrid cars and flat screen TVs.

"It is a huge deal. This is their only processing plant and it has take some time to get it up and running," David Lennox a mining and resources analyst at Fat Prophets told the BBC.


Lynas' plans to open the refining plant had resulted in various protests in Malaysia with critics saying that the process would cause environmental damage to the region.

As a result the Malaysian authorities have granted the approval for an initial period of just two years and asked the miner to adhere to strict safety conditions.

Lynas said that it will work towards allaying any fears about the impact of its operations.

"Lynas recognises its responsibility to the community to operate the plant in a safe and sustainable manner," said Nicholas Curtis the company's executive chairman.

Analysts said though the approval had been received well by the markets and investors, an element of uncertainty continues to surround the plant.

"There were a lot of extra terms and conditions imposed on it compared to what was known when they planned and started construction on the plant," said Fat Prophets' Mr Lennox.

"The serious bit is that there is a two year review period after which the government could actually impose further technical and production restrictions or in a worst case scenario even close it down."




SOURCE: http://www.bbc.co.uk/news/business-16848268

Is Vanadium the next big metal?

Vanadium is NOT a rare earth metal, however it has the right to be included when discussing the group, as it will be a player in the global roll-out of clean green energy technology.

Here are some vanadium stocks to keep an eye on:

American Vanadium (TSX-V: AVC) owns a deposit in Nevada, and is looking to partner with battery makers to sell them vanadium at a lower price while sharing profits from the value-added battery. CEO Bill Radvak is certainly excited: "Vanadium has all that rare earth-type opportunity, yet it has a very stable base on the steel-strengthening side, It's just about to take off in the next year or two."

Largo Resources (TSX-V: LGO)

Apella Resources (TSX-V: APA)

Energizer Resources (OTC: ENZR)