The media frenzy being played out under the guise of the US-China trade tariff dispute is misplaced.

Like a slow-boiling frog, consumers have either ignored or merely croaked about China’s increasing dominance of the rare earths market, when they should have been hopping to develop alternative supplies. The media frenzy being played out under the guise of the US-China trade tariff dispute is misplaced. As China advances its economic and environmental agendas, its technological and trade advantages grow, threatening the security of other nations. China is often portrayed as the villain in this story, but the rest of the world must accept responsibility for helping to create this situation and move fast to change it.

Rare earths: why should we care?

Rare earths are 17 elements referred to as the ‘vitamins of industry’, due to the minute amounts required for a range of advanced technologies on which developed nations depend.

China first realised the importance of rare earths some 40 years ago when Deng Xiaoping said ‘The Middle East has oil, but China has rare earths’. China proceeded to quietly invest hundreds of billions of dollars in domestic rare earth resources, research and industry – a strategy spelt out in the Made in China 2025 policy – creating a value-added supply chain for rare earth products comprising 90% of global output. The rest of the world largely stood by and watched.

Call it foresight or luck but rare earths are critical to today’s clean and green economy, where zero carbon emissions targets are the new normal. The clean energy and clean transport megatrends are major drivers of the US$3-5 billion rare earths market. China turns rare earths into finished products in high demand, including smart devices, wind turbines, electric motors, vehicles and hybrids, reaping massive returns.

China’s cleaning up. What’s wrong with that?

China’s objective is to become a sustainable, developed country of equal standing to other G20 nations. China’s transformation is the sum of many moving parts, not least of which is the race for 400 million Chinese baby boomers to become rich before they grow old, while another is the imperative to create an environmentally sustainable, circular economy.

Waging ‘war on pollution’, China is committed to reducing its reliance on coal, the source of 70% of China’s energy and much of its air pollution. The crackdown on water and soil polluters will be even more severe, with thousands of chemical factories facing the risk of closure at a moment’s notice, plus massive remediation costs.

Water scarcity in northern China has reached crisis as people, agriculture, energy and industry compete for this precious resource. Cheap Chinese exports consume vast quantities of water, but this is changing fast. China’s Three Red Lines policies balance economic growth against limited water resources and environmental sustainability. China is especially targeting polluting industries with low GDP contributions and high water and energy consumption. The textile industry and paper industries have already been hit, and the chemicals industry is next.

As China tightens environmental standards, supply chains for thousands of products are now vulnerable to long-term supply disruptions.

Stand by for rare earth supply disruptions. Whose fault are they?

Decades of unrestrained growth created unsustainable Chinese supply chains for millions of products as rest-of-world companies closed down and we bought from China. Short-sighted companies and purchasing managers, motivated by short-term objectives and personal incentives, talked about supply security and sustainability but continued to buy the lowest priced commodities from polluting Chinese companies. They demanded that new, non-Chinese projects matched, or even undercut, Chinese prices, and were not prepared to invest in new projects themselves, for their own long-term supply security. Unfortunately, it will probably take supply disruptions to change this behaviour, and that means there will be a long lag before new projects replace Chinese supply.

(Securing lithium supply for batteries is a recent exception to this behaviour pattern, but devices and vehicles requiring lithium batteries also need rare earths.)

A Chinese ban on rare earth exports happened briefly in 2010, resulting in rare earth prices jumping 300-1,600%. Japan’s response to the crisis was to create a US$1billion fund to finance non-Chinese rare earths projects to support Japanese industry. In the rush for development, most of this fund was wasted on bad projects, but Lynas emerged as a beacon of hope, and prospers today thanks to ongoing support from its Japanese partners.

In the next decade, at least three more projects of equivalent size to Lynas are needed to meet continued exponential demand growth for electric vehicles, with China leading demand. China could become a net importer of rare earths. What will other nations do then?

Australia has a new rare earths project. Who’s smart enough to hop on board?

Typically, the Chinese aren’t waiting for a crisis to occur. Private and state-owned Chinese companies are moving to control rare earth resources in Australia, Africa and elsewhere, before the rest of the world realises that we’re in hot water. The Chinese will buy cheap raw materials abroad and capture most of the value at home.

Cash-strapped small mining companies ultimately turn to China for financing and offtake agreements, and their countries consequently lose sovereignty over their resources as well as losing the greater processed value of their minerals.

It doesn’t have to be this way.

In central-west NSW, Alkane Resources’ Dubbo Project can supply 6,500 tonnes of rare earth oxides annually (including approx. 1,400 tonnes of the key rare earths used in permanent magnets), for 75+ years. The most advanced project of its kind outside China, its strategic value is clearly high and increasing. To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here.

Climate change action depends on supply of critical elements

To prevent catastrophic climate change, we must rapidly reduce emissions of carbon dioxide and other greenhouse gases, replace fossil fuels with clean, renewable energy sources and make much more efficient use of resources.

A critical point is that these urgent tasks cannot be achieved unless we have a secure supply of elements essential to advanced technologies for clean energy, transport and manufacturing: rare earths, hafnium, zirconium and niobium.

To mitigate climate change, we need rare earths (RE) for:

  • permanent magnets in wind turbines, eliminating the need for gear boxes, thereby improving reliability, which is particularly important for off-shore wind power generators. RE magnets also facilitate larger wind power generator designs.
  • permanent magnets in electric motors
  • electric motors and electronic control systems for solar power generation
  • nickel-metal (RE alloy) hydride batteries for electric and hybrid vehicles and rechargeable electronic devices
  • energy efficient lighting (fluorescents and LEDs)
  • energy efficient communication through fibre optic signal amplification
  • hydrogen storage alloys for clean transport and energy
  • ceramics for hydrogen fuel cell vehicles and power generation, and
  • catalytic converters to reduce harmful emissions in exhaust gases.

Applications of hafnium and/or zirconium that help to mitigate climate change include:

  • efficient microelectronics, capacitors and computer chips and memory devices
  • solid oxide membranes for clean metal production
  • nuclear power fuel assemblies and construction materials, and
  • gas sensors of all types.

Niobium enables the construction of robust, safe structures using less steel. In the transport sector, this produces better fuel efficiencies and lower carbon dioxide emissions.

To act on climate change, we must secure a supply of these essential elements that is:

  • sustainable and traceable
  • not monopolised by any single nation or bloc
  • designed for complementary sourcing of other essential materials and
  • has the potential for ‘urban mining’ (i.e. recycling materials from technology at the end of its useful life).

The world-class Dubbo Project in NSW, Australia, meets these criteria and can supply these essential elements for 80+ years. To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here

Further reading:

https://setis.ec.europa.eu/sites/default/files/reports/JRC-report-Critical-Metals-Energy-Sector.pdf

Vital vanadium’s very short, so niobium’s needed instead

The specialty metal vanadium has attracted attention in commodity and investment markets over the past year as strong demand widens the supply gap. Prices for its iron alloy, ferrovanadium (FeV), have increased 540% since early 2017.

FeV is a hardening, strengthening and anti-corrosive additive for steels. Minor (typically less than 0.1% weight) additions of FeV enable the construction of robust, safe structures with less steel and therefore lower costs. This application accounts for around 90% of vanadium demand. Other applications of vanadium include chemical catalysts, aerospace alloys and batteries.

Vanadium supply depends mostly on its extraction from steel slags, with only 18% coming from few primary ores. 77% of vanadium supply (raw material) is controlled by China, Russia and South Africa.

Vanadium producers can’t meet growing demand

China has dominated the vanadium market, producing 55% of global supply, extracted mostly from titano-magnetite blast-furnace slags from steel production, but also from stone coal (anthracite). However, the Chinese government’s new, tougher limits on waste streams and environmental pollution are reducing vanadium production from these sources.

Vanitec estimates that last year, global vanadium demand (88,600 tonnes) exceeded production by 10%. Vanadium demand is forecast to increase by 50% to 130,000 tpa by 2025.

One driver for increasing demand is China’s introduction of higher strength standards for rebar (steel bars or mesh used to reinforce concrete) to enhance resistance to earthquakes. If all Chinese rebar production moves to the new standards, vanadium demand for this purpose will increase to 42,000t.

Other applications for vanadium promise to stimulate further demand, including redox flow batteries that use vanadium electrolytes and enable wider use of renewable power generation from wind and solar energy.

Clearly, new vanadium sources and/or an alternative are urgently needed.

Niobium to the rescue

Niobium – vanadium’s downstairs-neighbour on the periodic table – has similar valuable properties. Niobium can’t completely replace vanadium but is an important alternative. Historically, vanadium prices have lagged niobium prices, but are now 300% higher – a strong economic incentive for substitution.

Spot ferroniobium (FeNb) prices have increased by almost 50% since early 2017 and could increase further as steel companies substitute it for FeV. Specific consumption of niobium in China is low, so prospects for greater demand and further price gains are good.

In addition, niobium is critical for advanced alloys used in aerospace. For example, it is the main (89%) constituent in the C-103 alloy employed in re-usable rocket nozzles by Space X and NASA.

But niobium suppliers are few and far between: world-leader CBMM in Brazil produces 85% of global supply and IAMGOLD in Canada follows, producing around 9%. No new mines have been developed for over 40 years. To fill the vanadium supply gap, this situation needs to change, fast.

In 2010, WikiLeaks released a US government list of key foreign resources vital to US interests, on which niobium appeared multiple times. The strategic importance of niobium is witnessed by the following investments by countries and companies in recent years:

  • In March 2011, a Japanese investor group (JFE Steel, Nippon Steel, Sojitz and Japan Oil, Gas and Metals National Corporation) and a Korean investor group (POSCO and the National Pension Service) jointly purchased 15% of CBMM for US$1.95billion
  • In August 2011, in an apparently identical deal, a Chinese group (Baoshan Iron and Steel, CITIC Group, Anshan Iron and Steel Group, Shougang and Taiyuan Iron and Steel Group) purchased 15% of CBMM for US$1.95billion
  • In October 2016, China Molybdenum purchased Anglo America’s niobium and phospahet businesses in Brazil for US$1.7billion.

Nb – chemical symbol for niobium / abbreviation for Latin nota bene: ‘note well’

Take note: Australia has a rare opportunity to secure a strategic alternative to vanadium and to existing niobium supply, for 80+ years: Alkane Resources’ world-class Dubbo Project plans to produce around 3,000 tpa of FeNb. With a sustainable supply chain, Alkane Resources offers customers transparency, reliability, product value and shorter lead times.

To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here

Advanced defence technology depends on Dubbo

To monitor threats and defeat hostile actions, we expect advanced defence forces to deploy – increasingly by remote control – high-performance machines and systems that can withstand extreme environments, including space. Producing these advanced technologies requires a sustainable supply of critical materials: rare earths, zirconium, hafnium, and niobium.

The United States, Japan, Korea, and European nations already rely heavily on these essential materials for military and civilian technologies, and demand is growing as applications expand. Of concern for those nations, one country – China – dominates rare earths supply and the Zirconium market.

Luckily, Australia’s mineral resources include a wealth of these critical elements. This presents a strategic opportunity to expand Australia’s role in global security, while sustaining economic wellbeing by adding value to our raw resources.

The elements of defence

Rare earths are a group of 17 elements, known as the ‘vitamins of industry’ because many applications require only minute – but essential – amounts. Permanent magnets are an exception, being composed of ~31% rare earths. Permanent magnets have multiple applications in advanced technology, including electric motors and guidance systems for vehicles, submarines, drones, missiles and robots. China controls 85% of the rare earth permanent magnet supply chain.

Rare earths, zirconium, hafnium and niobium are essential to the production of electronic sensors, and microprocessors in smart devices and computers. These elements are used for heat resistant alloys and coatings for aircraft, spacecraft, missile and rocket engines, as well as in armour for personnel and vehicles.

Alkane’s Dubbo Project is a large in-ground resource of rare earths, zirconium, hafnium and niobium, and the most advanced project of its kind outside China, with a potential mine life of 75+ years. Given the numerous high-tech applications of these elements in defence and beyond, the strategic importance of developing this project is clearly high. Delaying development risks further disruption of supply from China and a missed opportunity for Australia.

Adding value multiplies benefits

We can take lessons from China in extracting maximum economic and social benefit by adding value to our raw resources. My colleague Alister MacDonald has previously explained how the ‘dig it and ship it’ (and buy it back in processed form at retail prices) mentality of the old Australian economy must change to ‘dig it, process it, use it and ship it’. The Dubbo Project goes far beyond mining, by processing materials to standard and customised specifications, delivering advanced products for global markets.

Downstream processing of critical elements – transforming oxides to metals, advanced alloys, and other materials for defence or other applications – requires a skilled workforce of scientists, engineers, and technicians. In tandem with resource development, Australia must plug the ‘brain drain’, invest in education and training, and build our IP portfolio.

By adding value along the supply chain, Australia will create new, sustainable enterprises that will generate employment, reduce our dependence on imported products, and build national security. Technologies developed for defence will transfer to new and improved products and services for civilians. GPS navigation and drones are examples of military technologies applied to everyday life.

The first step is to invest in the source of this future wellbeing. To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here

Investors in the clean metals megatrend will clean up

The megatrend towards clean energy sources and industrial processes is driven by consumers and governments holding industry accountable for environmental sustainability and accelerated by research and innovation.

A major source of greenhouse gas emissions is the extraction of metals from their ores, traditionally involving reduction with carbon at high temperatures, or electrolysis. Both processes are ‘dirty’ because they produce carbon dioxide, a greenhouse gas. Unless renewable energy is used, these processes also contribute to greenhouse emissions through the burning of fossil fuels to generate the electricity consumed in metal extraction.

Under social and political pressure to reduce greenhouse emissions, clever researchers and innovative companies are developing cleaner metal extraction techniques.

Canada goes carbon-free in aluminium production

Aluminium is often called ‘solid electricity’ due to the huge energy demands of its extraction. Global production of aluminium last year was over 60 million tonnes consuming 14,151 kWH of energy per tonne.

In May, Alcoa and Rio Tinto announced the world’s first carbon-free aluminium smelting process that eliminates all direct greenhouse gas emissions from the traditional extraction process, producing oxygen as a by-product instead.

To commercialise the process, a joint venture company, Elysis, has been formed with combined investment of CAD188million from Alcoa, Rio Tinto, the Canadian Government, the Government of Quebec, and Apple. Use of the Elysis technology could eliminate 6.5million metric tonnes of greenhouse gas emissions in Canada alone, equivalent to taking 1.8million cars off the road.

YSZ? Because it’s clean and there are SOMany high-tech applications

Producing zero direct carbon emissions and reducing energy consumption by up to 50%, another new, clean means of metal extraction is energy-efficient electrolysis using solid oxide membranes (SOM) made from yttria-stabilised zirconia (YSZ). YSZ is a ceramic comprising zirconium dioxide made stable at room and elevated temperatures with yttrium oxide. Using an yttrium flux for electrolysis extends the life of the YSZ.

SOM electrolysis can purify aluminium, magnesium, and titanium – key industrial and aerospace metals – as well as rare earths, zirconium, hafnium, and niobium. The high-tech applications of these latter elements include permanent magnets for electric vehicles, wind turbines, robots and medical devices, semiconductors used in photovoltaics and electronics, surgical implants and electrical capacitors, and lightweight structural materials with aerospace applications.

Expect a rush on yttrium and zirconium

Commercialisation of SOM technology for extraction of any of the major industrial metals would create unprecedented demand for both yttrium and zirconium. Currently, China dominates global zirconium production with doubtful sustainability.

China also has a stranglehold on yttrium supply, as a by-product from rare earths processing. The Industrial Minerals Company of Australia estimates current global yttrium oxide production is 10,000 tpa in 2018, with supply exceeding demand by 30%. Yttrium was previously in high demand due to its applications in television cathode ray tubes, other luminescent displays and energy-efficient lighting, but demand slumped due to adoption of LEDs, with prices falling to USD3/kg.

This is likely to change fast with increasing demand for YSZ and yttrium fluxes for SOM technology. In addition, YSZ is used in gas and aviation turbines, automotive sensors, fibre-optic connectors, fuel cell components, and various ceramic products including knives and smart phone cases.

All this bodes well, not only for the planet, but also for ASM’ Dubbo Project, which is able to produce over 16,000 tpa of zirconia and over 1,000 tpa of yttrium oxide at full capacity.

A clean metal future

Carbon-free, energy-efficient metals production complements other clean, green megatrends. Consumer choice is based on price and performance, but growing awareness of responsible manufacturing and supply chain sustainability is increasing demand for products with small carbon and energy footprints too.

You’ll want to know that your electric vehicle or smart phone was manufactured using clean metals production – without a cost penalty – won’t you? Expect more exciting announcements about clean metals technologies as they scale up to meet global demand.

New US Defence Law Bans Magnets from China, Creates New Demand Potential

  • New US Defence law prevents purchase of rare earth magnets from China
  • Signed into law by President Trump this week, increases defence spending
  • Alkane says this to increase interest in its rare earths project as independent supply source

United States President Donald Trump this week signed into law the John S. McCain National Defense Authorization Act which sets an increased budget for defence expenditure.

Section 871 of the act prevents purchase of rare earths magnets from prohibited countries, like China, Russia, North Korea and Iran.

Multi-commodity explorer and miner, Alkane Resources (ASX: ALK)* sees this as a boost for its A$1.3 billion Dubbo project, which contains deposits of rare earths, hafnium, niobium and zirconium, since it represents an independent supply source from China.

A principal use for rare earths metals from the project is magnets, used across the automobile, renewable energy, aerospace, robotics and telecommunications industries globally.

Currently China produces 85-90 per cent of the world’s rare earth magnets, some 90% of rare earths magnets consumed by the US military are produced by China, world demand is outstripping supply and a shortfall of rare earths magnets is predicted by 2020.

This development follows a statement earlier this year by Prime Minister Turnbull at the time of his visit to the United States, which indicated an intended joint cooperation with the US on rare earths and high-performance metals.

According to Alkane Managing Director, Nic Earner, US needs could not be met without investment in new rare earths projects.

“Alkane’s Dubbo project is one of the few in the world which does not have a major Chinese shareholding or offtake committed to China,” Mr Earner said.

“This US development also opens the door for Australia in the downstream value adding manufacture of rare earth magnets,” Mr Earner said.

Alkane’s Dubbo project, which has a mine life of over 70 years, is construction ready with approvals in place and is awaiting financing.

Funding of the project to date has been assisted by Alkane’s nearby Tomingley Gold Mine, which generated A$60.1 million in cash flow for the year to June 2018, and currently Alkane has cash reserves of A$80 million.

In signing the act into law, President Trump described it as “the most significant investment in our military … in modern history”.

* Owner and operator of Alkane’s Dubbo project is wholly-owned subsidiary, Australian Strategic Metals Ltd.

Media Release: PM Turnbull Flags Greater Cooperation with USA on Rare Earths and Strategic Materials

  • PM flags strengthening ties with United States
  • Key components are infrastructure, trade and a Strategic Partnership on Energy
  • Energy Partnership to focus on “rare earths and high performance metals”

As Prime Minster Turnbull concluded his recent visit to the United States, he issued a statement indicating joint cooperation with the US on rare earths and high performance metals.

This has direct relevance for multi commodity explorer and miner, Alkane Resources (ASX: ALK)*, which is moving towards final commitments and financing of its A$1.3 billion Dubbo Project which contains deposits of rare earths, hafnium, niobium and zirconium.

These minerals have been designated “critical” in the USand the Prime Minister’s statement said:

“We launched the Australia-United States Strategic Partnership on Energy in the Indo-Pacific, and intend to work together on strategic minerals exploration, extraction, processing, and research and development of rare earths and high performance metals.”

A feature of Alkane’s Dubbo Project, in central west New South Wales, is that it offers a source of critical technology metals that is independent of China and traditional titanium sands production.

According to Alkane Managing Director, Nic Earner, the governments of Australia and the United States have recognised the value of an alternative source of rare earths and high performance metals.

“As there is increasing demand for the metals that are critical for uses in aerospace, renewable energy and electric cars, Alkane as a future supplier of these metals is likely to benefit from this new government prioritisation which puts the project directly into the national interest of both countries,” Mr Earner said.

Future production from Alkane’s Dubbo Project and uses of these metals includes:

  • Rare earths – for permanent magnets for wind power turbines, electric vehicles and industrial robots, as well as applications in medical imaging and smartphones
  • Hafnium – for increasing high temperature resistance, especially in space, aerospace and separate uses in semi-conductors, with Alkane’s resource positioning it as a leading source of supply
  • Niobium – a steel strengthening agent, with aerospace applications
  • Zirconium – for ceramics, fuel cells, jet turbine coatings and medical and smartphone applications

Establishing the importance of Alkane’s independent positioning is that China currently produces more than 95% of the world’s zirconium chemicals, over 90% of high-value rare earths, with Brazil providing 85% of the world’s niobium.

Alkane’s Dubbo Project is construction ready subject to financing and has a mine life of over 70 years.

Funding of the project to date has been assisted by Alkane’s nearby Tomingley Gold Operations, which in 2017 produced revenue of A$117.5m and profit before tax and non-recurring items of A$17.1m.

* Owner and operator of Alkane’s Dubbo project is wholly owned subsidiary, Australian Strategic Materials Ltd.

 

Hafnium Product Breakthrough Consolidates Dubbo Project Business Case

  • Alkane’s wholly owned subsidiary, Australian Strategic Materials Ltd (ASM), has developed high-purity hafnium dioxide products tailored to meet market requirements.
  • Hafnium oxide exceeding 99.8% HfO2, and 99.9% (Hf+Zr) O2, has been produced using a proprietary process to separate hafnium from zirconium at the demonstration pilot plant at ANSTO.
  • Over the past 12 months, ASM has consulted extensively with industry to confirm growing market demand for high-purity hafnium, which currently depends on supply from the production of zirconium metal for specialty alloys and the nuclear industry.
  • Global shortage of hafnium anticipated as demand is poised to outstrip current supply.
  • Hafnium metal for super alloys is currently trading in a US$800 ‐ $900/kg range. The ASM business case assumes a conservative product price of US$500/kg for its oxide.
  • ASM will initially produce 25tpa hafnium to meet projected market demand, ramping up to higher quantities as required.

Read more.

How to secure our critical rare earths supply: lessons from China

Not to advance is to drop back – Chinese proverb

Rare earths are a group of 17 elements, known as the ‘vitamins of industry’ because many applications require only minute – but critical – amounts. Permanent magnets are an exception, being composed of 31% rare earths. Permanent magnets are the main driver of the US$3-4billion global rare earths market, accounting for just 20-25% of volume, but 80-85% of value, due to their multiple applications in advanced technology for transport, information and communications, defence and medicine. Permanent magnets are critical for high performance electric vehicles, wind turbines, smartphones, computers, and magnetic resonance imaging, for example.

Dig the well before you are thirsty – Chinese proverb

In 1992, Deng Xiaoping said ‘There is oil in the Middle East. There is Rare Earth in China.’ China’s rare earths industry began with mining and extraction and extended to downstream manufacturing. China has now conquered more than 90% of the rare earths market.

Most people are unaware of the critical role of rare earths in technologies we use daily, and on which our future industries and wellbeing will depend. Consequently, they are unaware of the threat presented by China’s near monopoly in rare earths supply. Single country domination in the production of minerals essential for clean and efficient energy generation, advanced computing and communications, and high-tech defence applications, has the potential to disrupt economies and the security of all nations. While the US, Canada, Japan, Korea and Europe are taking action to secure their rare earths supply, Australia has no such strategy in place.

When you drink the water, remember the spring – Chinese proverb

Companies who buy materials and technology without concern for the origins of their components are enabling China’s dominance of supply. Purchase specifications usually focus on performance criteria and prices, ignoring the source of components. A traceable supply chain from mineral sources through to products requires elemental mapping of materials and devices, and is the first step to addressing the risk of supply monopoly.

There are three truths: my truth, your truth, and the truth – Chinese proverb

Industry platforms quote daily rare earths prices, and news items about market developments provide other price data. Estimating supply is more difficult, as actual rare earths production appears to be much higher than official Chinese government production quotas. Inspections by China’s Ministry of Environmental Protection have identified widespread non-compliance, illegal activities and corruption in rare earths production.

The best way to determine the true state of the rare earths market is to study demand for the rare earths in permanent magnets, which leads price increases. Prices for praseodymium/neodymium (Pr/Nd) oxide, the main magnet rare earths, have increased by over 70% since the beginning of this year.

When the winds of change blow, some build shelter while others build windmills – Chinese proverb

Based on data provided by Professor Dudley Kingsnorth from the Industrial Minerals Company of Australia, some of the big changes affecting the price of rare earths in recent years are as follows:

  • In 2011, China had more than 150 companies involved in mining, processing and marketing rare earths. Consolidation since 2014 has resulted in just six state-owned enterprises, and their subsidiary companies, controlling the rare earths market.
  • In 2015, China removed export taxes of 15-25% from rare earths.
  • The Made in China 2025 initiative is providing $US hundreds of billions in Chinese government support for ten high-tech industries to achieve 70-80% domestic supply by 2025. Electric vehicles, wind power and industrial robots are included industries, which require permanent magnets.
  • Demand for Pr/Nd oxide for permanent magnets has increased from 27,500t in 2011 to an estimated 46,500t in 2017 – a compound annual growth rate of 9%.
  • China’s ‘war on pollution’ (announced in 2014) is showing signs of being a permanent campaign. The cost of rectifying the environmental damage caused by mining and processing over the past 30 years is estimated at US$30-40 billion, driving up rare earths prices.
  • Since 2011, illegal Pr/Nd oxide production has increased by around 3.3 times to 24,500t, or 50% of total supply. (This is a conservative estimate, based on Chinese domestic consumption only.) The Chinese government’s attempts to stop illegal mining – partly to prevent further environmental damage – have driven prices up as customers compete to secure legal supplies.
  • Production shortfall for Pr/Nd oxide has increased from 35-40,000t to 100-120,000t.

Opportunities multiply as they are seized – Chinese proverb

In summary, China’s ‘war on pollution’ appears to be reducing its illegal rare earth supply while domestic demand is increasing with support from government policies. With demand for permanent magnets set to grow at 9% p.a. or more, where will extra supply come from to feed insatiable demand from China and the rest of the world? Chinese companies are not waiting for legal Chinese supply to increase to match demand, but are actively seeking foreign sources of rare earths to fill the gap.

ASM’ Dubbo Project is construction-ready, having received all necessary government approvals. With a substantial estimated mine life, it will produce critical zirconia, niobium, and light and heavy rare earths.

It doesn’t require the wisdom of Confucius to know that Australians should seize this opportunity to secure our high-tech future and economic wellbeing.

The best time to plant a tree was twenty years ago. The second-best time is now – Chinese proverb

ASM