Rare Earth Metals: Not So Rare, But Still Valuable

November 04, 2008

 

The prices of most REM rose in 2007, and with the exception of neodymium and praseodymium (both metal and oxides) and terbium (oxide), the prices of most REM (metals and oxides) have either remained the same, or continued to rise in 2008.

 

 

Price - US$/Kg

Name

Oxide

Metal

 

End-2007

End-Oct 2008

End-2007

End-Oct 2008

Cerium

3.60

3.80

7.10

10.50

Dysprosium

94.00

118.00

125.00

153.00

Erbium

35.00

35.00

N/A

N/A

Europium

368.00

525.00

560.00

700.00

Gadolinium

N/A

N/A

25.00

28.00

Lanthanum

4.60

8.00

6.00

13.00

Lutetium

550.00

550.00

N/A

N/A

Neodymium

30.00

20.00

40.00

29.00

Praseodymium

28.00

20.00

37.00

29.00

Samarium

4.40

4.40

14.00

26.00

Terbium

633.00

621.00

750.00

793.00

Ytterbium

55.00

55.00

N/A

N/A

Yttrium

12.00

12.00

29.00

42.00

Misch Metal (48% Ce)

6.00

8.00

Misch Metal (25% La)

12.00

14.00

Source: Tianjiao International

 

With such strong domestic demand for REM in China, there are now controls on production and exports (tariffs and quotas). And in some places, because of environmental concerns, among other things, there are both mining restrictions and mining quotas.

According to Roskill's 2007 report on the economics of rare earths and yttrium, this has "brought fundamental change to the global industry, taking it from oversupply to demand shortages."

Indeed, in its report, Roskill envisaged that, with demand growth for rare earths forecast at 8-11% per annum, and should China's strict control persist, there will be a significant need for "new non-Chinese capacity in the next 3 to 4 years."

 

2007 - Supply/Demand Forecast

Source: Roskill

 

Opportunities In Rare Earths

As with the minor metals, there are no exchanges on which REM are traded. Both the physical metals and their different oxides can, however, be bought from various specialist rare earth companies.

It seems reasonable to assume that there will always be demand for rare earths metals. While there are substitutes, these are usually not as effective. Since no REM are currently mined in the U.S., and Molycorp is a wholly-owned subsidiary of Chevron, no direct investment in any significant U.S. mining operations for these metals is possible. Looking overseas, there are, however, some opportunities for exposure.

India, unfortunately, is out, as all three rare earth production companies are government-owned.

A recent news snippet about the Japanese chemical group Showa Denko (Bloomberg Ticker - SHWDF:US) was of particular interest on two counts. Not only did it state that the company had set up a joint venture to extract dysprosium in Vietnam, but also that it was doing so because it wanted to secure a "stable supply" of rare earth magnetic materials as, currently, it relies on China - where, indeed, it currently has two subsidiaries (Baotou and Ganzhou).

 

China

If, however, the world's largest REM producer is of interest, then, among the Chinese companies mining REM in Bayan Obo, is the quoted Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co Ltd (Baogang) (Bloomberg Ticker - 600111:CH).

Quoted companies mining REM elsewhere in China include: China Rare Earth Holdings Ltd (Bloomberg Ticker - CREQF:US), Aluminum Corporation of China (aka Chinalco) (Bloomberg Ticker - ACH:US), Neo Material Technologies (Bloomberg Ticker - NEM:CN).

Recently, however, the mines in Sichuan were shut down, and there are strict quotas in places in Fujian, Guangdong, Hunan and Jiangxi, where there has been severe environmental damage.

 

Australia

In Australia, there are currently a number of rare earth mining projects at various stages of development.

According to an ASX announcement at the beginning of July this year, the "Demonstration Pilot Plant" at Alkane Resources' (Bloomberg Ticker - ALK:AU) Dubbo Zirconia project was set to go 24/7 in late July, and it stated that "(l)aboratory scale testing for recovery of the rare earth elements is scheduled to commence in July."

Arafura Resources (Bloomberg Ticker - AFAFF:US) expects the rare earths processing plant at its Nolans Project in the country's Northern Territory to be in production in 2011.

 

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