Rare earth elements:

Global market overviewJAMES SEAN DICKSON FGS

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Industrial Minerals

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Rare earth elements

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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.

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)

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

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).

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

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%

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

Prices

1

10

100

1,000

10,000

Pric

es

in $

/kg

(Lo

g(1

0))

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

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).

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

$/k

g

Europium oxide, minimum 99%, FOB, China, $/kg, Bulk

Low High

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).

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

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

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).

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

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).

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.

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 (GeomegaResources)

Offtake with chemical companies (e.g. Tantalus Rare Earths, Rare Earth Salts)

Rare earths separation is complex and costly (Arafura Resources).