The Truth About Rare Earths, Part 2

We should be concerned about monopoly production of rare earth metals by China, but we should not hit the panic button yet.

The United States and other countries have alternative sources, some of which are being prepared to go on line within the next few months. As prices move higher, too, other sites that are currently not being exploited will become more viable and attract investors.

One such site in the United States for rare earth metals is the Mountain Pass Mine. Owned today by Molycorp, the mine in Southern California is the best short-term prospect for resuming production of rare earth elements (REEs) in the United States. Its deposits of bastnasite ore contain 8 percent to 12 percent rare earth oxides, making it one of the richest mines in the world.

Previously the source for US self-sufficiency through the 1980s, processing at the Mountain Pass Mine was discontinued in 1996 after a series of pipeline leaks and spills resulted in a $1.4 million fine. The mine continued to operate and extract ore until it was finally shut down in 2002 due to competition from China.

Molycorp obtained the mine from {complink 6837|ChevronTexaco Technology Ventures LLC} in 2008 and recently completed a $390 million initial public offering to restart production in late 2011 with an output of 20,000 tons annually by 2012. While helpful, the 20,000 tons will not completely bridge the gap, and much-needed refining capabilities will lag ore availability.

North America has abundant sources in the US mountain states and also in the Canadian Northwest Territories and the Quebec region. Numerous efforts are underway to develop those resources. Avalon Rare Earth Minerals and Great Western Minerals Group are two companies with plans to open mines in Canada.

Significant deposits also exist in Australia, Malaysia, South Africa, Brazil, and other countries, although those deposits tend to be of the lower-grade monazite ores. Lynas Corp. and Arafura Resources Ltd. are two companies that are beginning operations in Australia — reportedly with Chinese financial backing.

The United States also has many rich deposits of the monazite ores in the mountain states, but as it is often mixed with radioactive thorium, it presents safety and environmental issues to mine and process.

Governments and industry are awakening to the problem. Toyota Motor Corp. is setting up a rare earth task force. An affiliated trading company, Toyota Tsusho Corp., established a rare earth mining joint venture in Vietnam two years ago. They expect the Vietnam mine to begin supplying minerals to Japan in 2012.

Toyota Tsusho has also invested in a similar project in India, which should begin operating next year. {complink 5648|Toshiba Corp.} and {complink 5271|Sumitomo Corp.} have each launched rare earth joint ventures in Kazakhstan over the past year. The Japan Oil, Gas and Metals National Corporation (JOGMEC) is partnering with Midland Exploration to open a mine in Quebec.

The South Korea government also has plans to secure 1,200 metric tons in rare earth reserves by 2016. The plan will include strategies on developing domestic mines and investing into research for alternative materials and recycling technologies.

In the United States, the RESTART (Rare Earths Supply-Chain Technology and Resources Transformation) Act has been introduced. This act aims to ensure the reintroduction of a competitive domestic rare earth supply chain by all necessary measures including the provision of government-backed loan guarantees, support for innovation, training and workforce development, research into recycling, etc.

For the next three to five years until new sources come on line, expect significant shortages of these essential elements. In all probability prices will continue to rise, and shortages may hamper production and product development. Many times these elements are used in small quantities within components and materials of which you may not be aware.

Pay particular attention to display technologies, ceramics, and any product that contains magnetics or motors. Query your supply base regarding content and contingency plans. Identify usage and develop alternates if possible. Work with industry groups and legislators to streamline the permitting process to get facilities on line more quickly.

For many years, {complink 12808|Design Chain Associates LLC (DCA)} has been advising our clients to obtain full chemical disclosure for the components or materials they purchase even beyond the RoHS 6, JIG-101 list, or the –REACH SVHCs. We advise clients to do this for several reasons, among them to achieve a proactive regulatory stance so they do not have to re-query their supply bases for each new candidate chemical for elimination, control, or disclosure.

Here is another example of why this is useful. If you have a full disclosure database, a simple query will point to the REE uses and potential problems. Absent this database, you are facing a major task to discover, say, that niobium oxide is used in an X7R ceramic capacitor from a major manufacturer. What other hidden surprises are lurking in your parts database?

1 comment on “The Truth About Rare Earths, Part 2

  1. Anna Young
    October 28, 2010

    A monopoly production situation developed and nobody anticipated it? Were we all so blind to the possibility China could drive prices of rare earth elements down and then become the sole supplier of materials that have become critical to electronic production? This has happened in the rare earths market but it might be only one of several other economic segments where China has developed a monopoly or near monopoly situation. Are you aware of any other raw materials China supplies currently as the main or sole supplier that may in future give it a dominant position?

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