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Rare earth elements - Global market overview

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Rare earth elements - Global market overview

  1. 1. Rare earth elements: Global market overview JAMES SEAN DICKSON FGS
  2. 2. Disclaimer You agree that your use of any of the material in this presentation (the “Content”) is at your sole risk and responsibility and acknowledge that all Content is provided "as is" and "as available". The Content is made available for your general information and any advice, opinion, statement or other information forming part of the Content is not intended for trading or to address your particular requirements. The Content does not constitute any form of advice, recommendation or arrangement by us (including, without limitation, investment advice or an offer or solicitation to buy or sell any security, financial product or other investment) and is not intended to be relied upon by users in making (or refraining from making) any specific investment or other decisions. Appropriate independent advice should be obtained before making any such decision. The Content may include inaccuracies or typographical errors. Changes are periodically made to the Content. Save as provided in these terms, neither we nor our representatives make any representations or warranties and, to the fullest extent allowed by law, exclude all implied warranties (including, but not limited to, warranties of merchantability, title and fitness for a particular purpose) regarding (a) the suitability of the information; (b) the accuracy, availability, reliability, completeness or timeliness of our Content; or (c) the results obtained from using any Content. Further, we do not represent or warrant that (a) defects will be corrected; nor (b) the use of any of the Content will not infringe the intellectual property rights of any third party.
  3. 3. Industrial Minerals  Magazine founded in 1967 as a spin-off from Metal Bulletin with a non- metallic minerals focus  2009: Online news service launched at www.indmin.com  Industrial Minerals Events  Pricing for industrial minerals  Premium, high-precision graphite and fluorspar pricing  Rare earth industry news and analysis  Follow us: @indmin, @jdickson_indmin, @lsyrett, @lizgyeke etc.
  4. 4. Rare earth elements = Industrial Minerals pricing
  5. 5. LREE vs HREE Light rare earths (LREE)*  Scandium (Sc)  Yttrium (Y)  Lanthanum (La)  Cerium (Ce)  Praseodymium (Pr)  Neodymium (Nd)  Promethium (Pm)  Samarium (Sm) Heavy rare earths (HREE)*  Europium (Eu)  Gadolinium (Gd)  Terbium (Tb)  Dysprosium (Dy)  Holmium (Ho)  Erbium (Er)  Thulium (Tm)  Ytterbium (Yb)  Lutetium (Lu) Bold = decreed “critical” by the US Department of Energy in the “Critical Materials Strategy 2010” report. This designation is given by policy makers and commercially minded developers and is not a chemical subgroup. *As referred to by industry. The sciences focus on electron configuration as the light-heavy defining characteristic.
  6. 6. Uses  High-technology applications  Polishing powders  Fluorescent lighting  Lighter flints  Arc lighting  Data storage devices  Lantern mantles  Catalytic converters  Magnets Ferrofluid on glass, resting on a high- strength rare earth magnet (Gregory F Maxwell, Wikimedia)
  7. 7. Source rocks Major sources  Carbonatites  Ion adsorption clays  Monazite hosted in heavy mineral sand deposits Smaller or potential sources  By-product of phosphate fertiliser production  By-product of uranium processing  By-product of alumina red mud processing  Peralkaline igneous rocks  Pegmatites  Monazite ± apatite veins
  8. 8. Reserves vs production Reserves, tonnes (USGS)Mine production, tonnes (USGS) Proportion of REE, less Y, contributed by producing countries in 2015 (Gambogi, 2015a). Global distribution of REE resources in 2014, excluding Y (Gambogi, 2015a).
  9. 9. Chinese dominance Rare earth production during the last half of the 20th century and early 21st century (BMacZero, Wikimedia).  China has dominated production since the 1990s  Mountain Pass the majority supplier until that period  Low labour costs and lax environmental standards allowed dominance  Not thought to be related to resource abundance or particularly advantageous deposit properties
  10. 10. Boom and bust Boom  Diplomatic dispute between China and Japan results in temporary export ban to major consumer  In addition, export quota were reduced  Inexperienced investors enter sector  Prices rose in some cases by multiple thousands of percent  Cerium, for example, rose in price by 2400% between June 2010 and August 2011 from $6/kg to $149.5/kg Bust  Consumers substitute rare earth alternatives  New production comes online in the US and Australia  Illegal miners ramp up production in China  WTO rules against Chinese “protectionism”  Prices fell back by up to 98%
  11. 11. Power of language  Totemic language used by inexperienced investors  US defence industry often said to be at China’s mercy concerning rare earth supply  Others (e.g. Tim Worstall) argue that the monopoly was broken as soon as it became a concern to the world, therefore it is not a problem “The Middle East has oil. China has rare earths.” – Deng Xiaoping, 1992
  12. 12. Prices 1 10 100 1,000 10,000 Pricesin$/kg(Log(10)) Rare earth oxide prices, minimum 99%, FOB, China, $/kg, bulk Cerium Low Cerium High Dysprosium Low Dysprosium High Europium Low Europium High Lanthanum Low Lanthanum High Neodymium Low Neodymium High Praseodymium Low Praseodymium High Samarium Low Samarium High
  13. 13. Oversupply  Deposits typically biased towards LREE  Illegal mining  Molycorp and Lynas Corp. enter production  High prices increase output  High prices cause demand destruction  WTO ruling removes export restrictions The grade of in situ REO at Lynas’s Mount Weld Duncan and Lanthanide deposits, and Molycorp’s Mountain Pass mine. From Technology Metals Research (2015).
  14. 14. Element specific issues  Europium phosphors traditionally used to add warmth to fluorescent lighting tubes and for red in CRT televisions  Europium phosphors likely to be phased out by LED lighting  LCD/OLED/plasma televisions  Substantial demand destruction could see prices soften further in the future  Other metals face potential headwinds (cerium, dysprosium) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 03/01/2011 03/01/2012 03/01/2013 03/01/2014 03/01/2015 $/kg Europium oxide, minimum 99%, FOB, China, $/kg, Bulk Low High
  15. 15. Case for development  HREE market conditions more positive than LREE market conditions  Rare earth permanent magnet demand projected to increase (electric vehicles, wind power etc.)  Chinese reforms starting to have an effect(?) Electric vehicle companies like Tesla are driving interest in permanent magnets (raneko, Flickr).
  16. 16. Chinese reforms Positive for development  Consolidation will result in six approved rare earths miners in China  Illegal mining crackdown  Export taxes and quota replaced with resource taxes and production quota (partially WTO mandated)  More stringent environmental standards (raising costs) Negative for development  Industry may become more opaque via professionalisation of Chinese interests, yielding less data and information  Large grants given to Baotou and Ganzhou to develop high-technology, high-return products
  17. 17. The West Molycorp  Declared bankruptcy in June 2015  Mountain Pass rare earths mine held in “care and maintenance” mode as of late October  Debts stand at $1.9bn as of early November  Plans to write-down debts or split into saleable business units Lynas Corp.  Marginally more favourable rare earth distribution in Mount Weld than Mountain Pass  Smaller (but still substantial) debts  Starting to generate positive free cash flow  Recently met requirements to reduce lending interest rates
  18. 18. Barriers to entry  Low prices  Processing complexity and costs  Supply chain complexity  Investor wariness  Demand destruction  Chinese reforms There is a metaphorical wall lining off rare earths juniors from the production side of the sector (Jakub Halun, Wikimedia).
  19. 19. Looking ahead  LREE production-based market entry no longer viable  HREE markets are stronger with a greater ability to absorb fresh supply  Interest in deposits with high proportions of magnet-utilised rare earths is increasing  Innovative processing technologies are largely unproven but could change industry dynamics substantially
  20. 20. HREE approach Wolverine deposit (Browns Range) rare earth distribution Praseodymium Lanthanum Neodymium Cerium Europium Lutecium Thulium Terbium Holmium Samarium Ytterbium Erbium Gadolinium Dysprosium Yttrium Mount Weld Central Lanthanide Deposit rare earth distribution Praseodymium Lanthanum Neodymium Cerium Europium Lutecium Thulium Terbium Holmium Samarium Ytterbium Erbium Gadolinium Dysprosium Yttrium Rare earth distributions at the Wolverine deposit of Northern Minerals’ Browns Range project (Northern Minerals). Rare earth distributions at the Central Lanthanide Deposit of Lynas Corp’s Mount Weld mine (Technology Metals Research).
  21. 21. Magnet approach “Everybody talks about 'lights’ and 'heavies’ - but what really matters when it comes to rare earths is magnetics.” - Ian Bamborough, Spectrum Rare Earths “It’s all about the magnet metals.” - Peak Resources The proportional value of REO consumed by various industries from 2011-2014 (Industrial Minerals Company of Australia, 2015). The permanent magnet sector is, proportionally, increasing in importance on a total consumption value basis.
  22. 22. Processing approach  Early removal of cerium and lanthanum  Molecular recognition technology (Ucore Rare Metals)  Continuous ion exchange/chromatography improvements (Texas Rare Earth Resources)  Heap leaching (Texas Rare Earth Resources)  Free flow electrophoresis (Geomega Resources)  Offtake with chemical companies (e.g. Tantalus Rare Earths, Rare Earth Salts) Rare earths separation is complex and costly (Arafura Resources).