Rare earths get more complex

When Curtin University adjunct professor Dudley Kingsnorth recently returned from a trip to Europe, he brought back a snippet of information that on first hearing sounds trivial but actually points to a big transformation in the supply chain.

Kingsnorth was in Europe drumming up some business for his Centre for Research in Energy and Minerals Economics unit at the university and while visiting three large multinationals he discovered the procurement managers of each company had been replaced within the past 18 months.

Gone were the legal eagles that could screw down prices. In their place were intellectual types promoted from the research and development departments. The boffins take a more holistic view of supply issues.

The message Kingsnorth got is that companies dealing in large product volumes, such as car manufacturers, are becoming more interested in the entire supply chain.

Japanese companies have thought this way for years and recently their focus has turned to rare earth metals – a group of elements that are needed in a range of energy and lighting technologies.

Concerned about the availability of rare earths, Toyota is financing the construction of a rare earths processing plant in India and other Japanese giants such as Mitsubishi and Sumitomo are scouring the world in search of rare earth projects where they can facilitate production through capital and research capability.

Rare earths are a set of 30 minerals with names you might hear in a spelling bee, such as praseodymium, neodymium, lanthanum and cerium.

However, it is the 15 minerals in the lanthanide series in the periodic table, along with the chemically similar elements scandium and yttrium, that are commonly referred to when discussing rare earths.

They are used in everything from touch screens on electronic devices to the magnets that move electric car windows up and down, to wind turbine technology and to create fuel additives to limit pollution.

Despite their name, rare earths aren’t actually rare. In fact, they are abundant in the earth’s crust and mantle. However, the difficulty is in finding sufficient quantities in a single location to make mining economic.

It takes 10 to 15 years to develop a rare earths project from the date of discovery, Alkane Resources managing director Ian Chalmers says.

Alkane is developing a mine in Dubbo, NSW, and has spent the past five years proving a process to extract the minerals. Its pilot plant is at the nuclear research and development facility ANSTO at Lucas Heights in southern Sydney.

Each rare earth extracted has to be designed for individual customers’ needs, so producing rare earths is not a mining operation but a chemical process, Chalmers says.

A rare earth operation is a billion dollar investment that typically relies on three or four key people.

Of the 400 rare earth projects being looked at in 150 countries by some 250 companies, Kingsnorth expects just 30 to 40 to come to fruition.

Kingsnorth is a former general manager of the Mount Weld rare earths project that is now the key platform of Lynas Corporation’s production-ready mine in Western Australia. Its associated processing plant in Malaysia was supposed to start pumping out product in coming months but has faced approval delays in Malaysia and environmental concerns about the transport of materials to Freemantle port.

There are no short cuts to developing a rare earths project. Recently Kingsnorth had some investment managers ask for information for a project they were investing in that was moving to the pilot plant stage but had no environmental approvals in place.

As rare earths contain radioactive elements such as uranium and thorium – even if in very small quantities – by the time the fund managers left Kingsnorth’s office they were considerably more sombre and reflective.

Their mood would not have improved if they had watched China’s vice-minister of industry and information technology, Su Bo, at a Beijing press conference on June 20 in effect making rare earth supply disappear.

He brandished photographs depicting the devastation rare earth mining has done to Chinese farming land: the cost of China supplying 95 per cent of the world’s rare earths. Certainly it’s not what the buyer of your average electric car that uses rare earths in its battery would have had in mind.

Bo was justifying export quotas and tougher environmental legislation that China introduced last year when it capped rare earth exports at 30,000 tonnes a year.

As more of its producers meet environmental standards, it has relaxed the quotas but the message for the rest of the world is: find alternative supplies.

The United States and European Union have sought World Trade Organisation intervention to get China’s rare earth production flowing again. However, Kingsnorth says this is a waste of time as by 2016, production outside of China will grow tenfold from its current rate of 6000 tonnes a year.

The first companies to get into production will be Lynas Corporation, Indian Rare Earths and Alkane Resources, while US-based Molycorp will substantially boost current production rates.

Given that two of these projects are in Australia, it’s important to note the environmental devastation that Bo referred to in his press conference is not because of any peculiar brutality in the mining of rare earths but more an example of how China develops an industry.

“It’s a bit like what happened in iron and steel,” Kingsnorth says.

“China throws open the doors and offers incentives to develop an industry and then . . . it moves to consolidate players to create dominant corporations.”

That open-door policy also decimated rare earth production outside China as no one could compete with the Chinese cost of production because of its lack of environmental controls.

Molycorp was a victim of China’s open slather development but it weathered the storm and has emerged as the largest non-Chinese rare earths producer, with a forward book of projects to develop.

Alkane’s Chalmers says Chinese changes to its policies are not just environmental but also resource preservation.

It has used its rare earth abundance to build a massive manufacturing base and is becoming a leading user of rare earth minerals.

While there are some 70 companies undertaking rare earth operations in China, Kingsnorth expects that will now consolidate and morph to between four and eight big state-owned enterprises.

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