A Canadian rare-earth company’s aggressive move to reopen a South African mine it recently acquired underscores how the international industry is gearing up to challenge China’s control of the global market for these critical resources, analysts said.
Indeed, Great Western Minerals Group now says it expects to complete refurbishing the previously producing mine shaft at it’s Steenkampskraal rare-earth project by November. As a result, Great Western executives say they expect to begin production by the end of 2012.
That report comes as international mining experts offer conflicting accounts of how long supplies will remain constrained in light of China’s continued export restraints. China controls more than 95 percent of the rare-earth market and has adopted quotas in recent years, saying it needs to protect it domestic supply.
A recent report by the investment bank Goldman Sachs says enough rare earth mines could begin production by 2013 that a global oversupply could begin that year.
But rare-earth bulls argue that unprecedented demand for a wide array of technology products – including critical defense components – will continue to increase demand faster than supply, leading to higher prices.
The bulls say that’s particularly true for the so-called heavy elements of vital importance to the Pentagon. Heavy rare earths are less abundant than the “lights” and are more difficult to process. They form the backbone for small powerful magnets used in a wide array of defense applications.
For its part, Great Western Minerals occupies a unique niche in the industry. It’s considered the only North American player employing a “mine-to-market” strategy. Great Western extracts the rare earths, processes them and sells alloys directly to industrial customers.
In light of the company’s South African advance, Defense Media Network examined the coming stream of rare-earth mines. Here, listed by host country, is a look at how the industry will meet China’s challenge:
The United States
All eyes remain focused on Molycorp Minerals, the only domestic mine currently in operation. Located in Southern California, the Mountain Pass mine has a tortured history – it closed for several years because of environmental concerns.
Analysts say the facility serves a vital role in the overall supply chain. However, they note, as currently configured Mountain Pass will produce mostly light rare earths.
As for the heavies, Alaska’s Bokan Mountain hosts huge deposits of these elements. Ucore Rare Metals has conducted extensive exploration in the area and owns vast tracts there. However, the site remains several years from production.
Meanwhile, Canada-based Rare Element Resources specifically formed as a company to develop Bear Lodge in northeast Wyoming. The U.S. Geological Survey counts Bear Lodge as one of the largest tracts of its kind in North America. The company is investing millions in exploring the deposits but has not announced a production date.
Most of the rare-earth exploration companies call this resource-rich nation home, at least as far as their headquarters are concerned. One main reason: The Toronto Stock Exchange ranks as an important source of liquidity for nascent exploration firms.
Two such companies stand out. Primarily known for its Thor Lake development in the Northwest Territories, Avalon Rare Metals Ltd. owns four other projects. Avalon has three in advanced exploration and is building a war chest – it recently filed with the U.S. Securities and Exchange Commission to raise up to $500 million.
Quest Rare Minerals owns what analysts say also is one of North America’s larger tracts, the Strange Lake project in the Quebec province. It also has claims at Misery Lake area in northeastern Quebec and at Plaster Rock in northwestern New Brunswick.
Industry observers say Norra Kaar, owned by Tasman Metals Ltd., remains the most strategically important rare-earth mine in Europe. The 26-member EU has dedicated itself to spurring “green technology” that require will thousands of tons of rare earths.
Norra Kaar is considered the only European mine that fully complies with an international reporting standard known as 43-101. Located just two hours from where a Swedish military officer discovered rare earths about 225 years ago, Norra Kaar boasts more than a 50 percent concentration of heavies.
Not only is Sweden politically stable, it remains a mining-friendly nation with extensive modern infrastructure. Experts say that gives Nora Kaar a cost advantage over other mines located in remote regions without power or transportation systems.
A small Canadian exploration company has purchased a former Soviet mine in a region that lies near China, India, and Russia. Indeed, Kutessay II previously produced 80 percent of the former Soviet Union’s rare earths from 1960 to 1991.
This is the only mine in the world outside China ever to produce all 10 heavy elements. In fact, at full production, Kutessay II yielded 120 separate compounds and achieved annual production of about 500 metric tons.
New owners Stans Energy Corp. hopes to begin small-scale production next year. Toward that end, the company recently completed acquisition of a processing plant to refine raw materials and a rail complex for shipping.