REE - Mongolia has become a leading contender in the new rush for REE resources.

Mongolia has become a leading contender in

the new rush for REE resources.

Source for Rare Earths, Rare Metals, and Critical Metals Investor Intelligence

In light of Chinese restrictions, Mongolia has become a leading contender in the new rush for Rare Earth Elements (REEs) resources.

China’s announcement earlier this year that it would restrict the export of rare earths caused a wave of anxiety among manufacturers, as the elements are used in the construction of everything from iPhones to cruise missiles. China’s sole source for the rare earths is a mine complex in Inner Mongolia near Baotou city. Beijing’s announcement has intensified efforts to find alternative sources of the vital minerals, with neighboring Mongolia quickly becoming a focus of international interest. Adding to Mongolia’s attractiveness is that its government has striven to become more investor friendly, with its Parliament amending the country’s Mining Law to take account of foreign investor concerns.

BACKGROUND: Seventeen metals are classified as rare earth elements (REEs), which are used in eco-friendly industries to mass-produce everything from wind turbines, solar cells and low-energy light-bulbs as well as iPhones and X-ray machines. RREs are also a strategic component of U.S. weapons systems, being used in the guidance systems of missiles and laser-guided munitions.

According to a 2009 estimation by the U.S. Geological Survey, Mongolia has 31 million tons of rare earth reserves, or 16.77 percent of the world’s total, exceeded only by China, currently the world's largest producer of rare earths. Within Mongolia six REE provinces have been identified: the Altai, North Mongolian Hentii, Hangai, Southeast Mongolian, and South Mongolian provinces. Recent restrictions by Beijing on rare earth exports have combined with the liberalization of Mongolia’s Mining Law to focus foreign investors ever more closely on Mongolia’s mining sector, which had previously been dominated by its gold and copper reserves.

Among the most useful REEs is neodymium, an essential element of neodymium-iron-boron magnets used in hyper-efficient motors and generators with every wind turbine using up to two tons of neodymium. Lanthanum is a major ingredient for hybrid car batteries, terbium is a key component of low-energy light bulbs and cerium is used in automobile catalytic converters.

Nearly all of China's REE supply is produced by a single mine near Baotou city in Inner Mongolia, with the remainder being produced by small and frequently illegal mines in the south of the country, often causing massive pollution from the poisonous and sometimes radioactive ores.

Western concerns over possible Chinese export bans on rare earths, whose mines account for 97 percent of global supplies, began last year. Since 2003, China has reduced the amount of rare earths available for export by 40 percent. Over the past decade global demand has tripled from 40,000 tons to 120,000 tons.

In early 2011, however, China curtailed its total output of rare earth oxides to 93,800 tons, up only 5 percent from 2010 production levels, and has also raised taxes on rare earth elements for the second time in recent months, increasing foreign concerns that cheap rare earths are becoming a thing of the past. China posted a 568 percent year-on-year surge in the value of rare earth exports to US$ 314 million in the first two months of 2011. The price for rare earth materials has increased for 15 months straight, breaking through the US$ 1,000 per ton mark at the beginning of 2011.

In the course of industrialization, China has gone from exporting 75 percent of the raw ore it produces to shipping just 25 percent. Analysts speculate that that by 2012 China is likely to be producing only enough REE ore to satisfy its own increasing domestic demand, creating a potential crisis as Western countries struggle to find alternative supplies and mining companies rush to open new mines in locations from South Africa to Greenland to satisfy international demand.

IMPLICATIONS: In light of Chinese restrictions, Mongolia has become a leading contender in the new rush for REE resources. Mongolia's mining sector has some of the world's richest deposits of gold and copper, uranium, coal and fluorspar as well as RREs such as tantalum, niobium, thorium, yttrium and zircon.

In 2006, Mongolia's Mineral Law was amended to increase government royalties and licensing fees, reduce tax incentives, set duration terms for exploration licenses, and provide for up to 50 percent government ownership of strategically important resources when jointly funded by the state and private investors. On 25 August 2009 the Ulsyn Ikh Khural (State Great Hural, or Parliament) finally repealed the 68 percent windfall profit tax, effective from January 1, 2011, setting the stage for massive foreign investment.

At present, Mongolia trucks its output into China. Mongolia is already laying in a massive increase in its transportation infrastructure, planning to quadruple its rail network in order to ship coal, copper and RRE production via 3,542 miles of new railway track across the country to Russia’s Far East. This will allow it to reach markets further afield such as Japan and South Korea while reducing its dependence on the Chinese market and boost economic development. Later this year, Mongolia will begin the construction of a 300 mile railway spur link from the Tavan Tolgoi coal basin and Oyuu Tolgoi copper deposit, two of the world’s largest untapped resources, which will join up with an existing rail line running northwards to Russia and southwards to China. The expanded railway network will eventually run directly from Tavan Tolgoi to both China and Russia and extend the railroad west and north to link with untapped metal deposits according to Eurasia Capital, Mongolia’s biggest investment bank. In December 2010, Russia wrote off about 98 percent of Mongolia’s US$ 172 million debt. Russian Railways owns a stake in Mongolia’s national operator AO UlanBator Railways and in October 2010 underwrote a loan for it from the Russian state-controlled VTB Group to buy locomotives.

CONCLUSIONS: Since April 2010 Mongolia’s benchmark MSE Top 20 Index has been the world’s best performer and its currency, the tugrik, the fifth-biggest gainer against the dollar. The International Monetary Fund says that Mongolia’s economic growth may surge to 23 percent in 2013, more than twice the forecast expansion in China, as large mining projects such as the Oyu Tolgoi copper and gold facility begins production.

In February, California-based Green Technology Solutions (GTSO) and Rare Earth Exporters of Mongolia formed a joint venture to exploit Mongolia’s RRE potential. GTSO President and CEO John Shearer said, “Stable supplies of rare earths are vital to the security and economy of the U.S., Japan and South Korea … We are not waiting for 2012 or 2013 to help solve this worldwide supply crisis in rare earths.”

The joint venture intends to truck its RRE ore output to a railway hub in Ulaanbaatar, for transport to Russia’s Pacific Vladivostok port. GTSO’s first shipment of ore reached Vladivostok in April, where the ore was put up for auction, with South Korea submitting the winning bid.

The question now is how Mongolia will reconcile the conflicting agendas of its giant neighbors, particularly China. China remains Mongolia's largest trading partner, accounting for around 80 percent of Mongolia's export revenues, predominantly copper and coal, and 43 percent of imports. If Beijing feels its de facto RRE global monopoly is threatened, then Ulaanbaatar should expect some consequences from its primary trading partner.

Mongolia joins Rare Earth quest

Japan has agreed to help Mongolia develop mines to exploit rare earth metals in the wake of its bilateral ruckus with China over supplies of the crucial elements.

The accord was struck Saturday between Prime Minister Naoto Kan and his visiting counterpart, Sukhbaatar Batbold, Japanese officials said.
"Mongolia has high potential in mineral material development and this will serve the two countries" national interests," Kan was quoted as saying.
Batbold said Mongolia will be able to produce value-added products by using advanced Japanese technology, the officials said.
The meeting, which was also attended by senior Japanese officials from top trading houses and other companies, comes a day after the government unveiled policies to secure stabler supplies of rare earth metals. The steps include stockpiling and plans to diversify suppliers to reduce Japan"s heavy dependence on China.
Batbold is visiting Tokyo to attend Sunday"s retirement ceremony for Mongolian sumo wrestler Asashoryu, a yokozuna, or grand champion, who left the sport in February.
Rare earth metal imports from China suddenly dried up last month as Japan and China engaged in a tit-for-tat spat over the arrest of a Chinese fishing boat captain last month whose trawler collided with Japan Coast Guard cutters near the Senkaku Islands, which are controlled by Japan but claimed by China and Taiwan.
Kan last met with Batbold in late September in New York on the sidelines of U.N. General Assembly meetings.
Rare earth metals are a class of 17 elements including neodymium, dysprosium and cerium that are used to produce high-tech products ranging from cell phones and digital cameras to flat-panel TVs and hybrid cars.
China accounts for about 97 percent of the world"s supply of rare earths and Japan is almost 90 percent dependent on China to obtain them, according to the Ministry of Economy, Trade and Industry.
A METI official said there are also precious reserves of rare earths in Kazakhstan and Vietnam, and that Tokyo will try to acquire stakes in mines beyond China to ensure supplies.

Rare Earth Assay Results: What They Tell You and What They Don’t

There are a LOT of companies coming out with rare earth assay results now. REEs have become a hot topic, and many companies are now throwing their assay results into the ring — hoping to become the next contender in the rare earth sector.
Assay results are often what companies use to project their legitimacy in the marketplace, and therefore it is critical to understand what these tests are really telling us. According to the US Bureau of Mines (as provided by EduMine here) “assay” is defined as following:

Definition: assay
To analyze the proportions of metals in an ore; to test an ore or mineral for composition, purity, weight, or other properties of commercial interest.

So what do assay results tell us?
1. How much rare earth is in that particular sample. Usually expressed in parts per million (ppm), assay results show the composition of a given sample of ore (or potential ore). This gives a sense, in general terms, of what elements are found in the sample. It is often converted to a percentage as well. They often don’t test for all of the REEs or show “trace” for the amounts.
2. The comparative percentage of one element to another. This can show if the rare earth content of the sample skews towards the light rare earths (LREEs) or the heavies (HREEs). Also, certain values of elements other than the REEs can provide clues as to the environment in which the REEs are found.

What rare earths found within?
It is also important to know what assay results DO NOT tell us:
1. What is the rare earth mineral (or minerals)? Sometimes it is assumed that you may have a particular mineral when you have a given set of assay results — I have made this assumption in the past myself. It is true that certain minerals may have a typical distribution of rare earths, but there may be other rare earth minerals involved. A good example of this would be Thor Lake, which can have a number of rare earth-bearing minerals in a given sample. Other testing methods must be used to ensure that the rare earth minerals are properly identified. After all, it is critical to correctly identify the mineral that hosts the rare earths.
2. Is the assayed sample representative? Beware of the infamous “grab sample”. Many companies take special care to take samples only from what they believe to be the prospective ore body. However, it is often difficult to resist assaying the fantastic grab sample – perhaps that one sample found 40 meters up the cliff face that has that giant perfect crystal of bigdollarite! Just make sure that the results that you are looking at come from samples that are taken from areas that are representative of the potential ore body.
3. Metallurgy. You can receive fabulous assay results from complex mineralogy. However, it may not ever be economic to get the REEs out the minerals. It takes lots of time, effort, and money to properly determine a process to create a saleable concentrate of rare earths. Many companies are taking the proper steps to establish the processing needed to pull out the REEs, but beware of the assumption that the REEs can be easily pulled out of the ground. If a company has $500 rock in the ground, but it takes you $2500 to pull out the rare earths – that project may not be feasible.

Seabed Nodules and

Rare Earth Elements

Manganese nodules, about the size of potatoes, litter the deep-water seabed. Sometimes they are so abundant that they cover 70% of the seabed surface. They have been tantalizing potential miners for decades, and now they are suddenly back in play.

Manganese nodules at 5000m in the South Pacific (teara.govt.nz)

A nodule grows slowly, adding about 1cm to its diameter over the course of several million years. It grows around a core – a tiny fragment of shell or sand – with concentric layers of iron and manganese hydroxides, along with copper, nickel and cobalt oxides, precipitating from the water around it, reaching 5-10cm in diameter. Most of the nodules lie on the abyssal plains, 4000-6000m deep.

A manganese module split in half (nytimes.com).

The Challenger expedition of 1872 first dragged some up. Serious efforts to try to exploit them didn’t occur until the 1970s and 1980s, but the practical, economic and political problems were just too great to resolve.
For problems there are. For instance, who do the nodules belong to? Because they lie mostly in deep water, beyond the 200 mile limits of Exclusive Ecological Zones, the UN Law of the Sea eventually established that they are the Common Heritage of Mankind: whoever succeeds in mining them will have to share the profits with the rest of the world. Not exactly an attractive prospect for profit-oriented corporations.
Besides the question of who owns the nodules, and the taxes that will accompany any deep seabed mining venture, how do we get them to the surface? No one yet has a particularly good idea. Imagine trying to control a vacuum cleaner with a hose a few km long.
The biggest problem, though, is that, pure as the nodules might be, there are land-based sources of manganese, iron, copper and nickel where the costs of mining the ore have remained much less than any estimated for retrieving nodules from such deep water.
So nothing much has happened.
Until now. Since a publication in 1968, we have known that the nodules also contain low levels of Rare Earth Elements (REEs), and very recently Rare Earth Elements have caught everyone’s attention. They are the elements that are piled up in a ‘pull-out’ near the bottom of the Periodic Table with unfamiliar names such as Cerium, Dysprosium, Yttrium, and Lanthanium.

The 16 Rare Earth Elements on the Periodic Table (pubs. usgs.gov)

Modern technology can’t do without Rare Earth Elements. We use them increasingly in magnets, lasers, fiber optics, disc drives, memory chips, superconductors, liquid crystal displays, rechargeable batteries, smart phones, smart bombs. The magnets of green technologies of wind turbines and hybrid cars depend on them.
The 16 Rare Earth Elements aren’t actually rare, they just rarely occur in economically exploitable ore pockets. China now has 95% of world production, acquired through its familiar combination of low labor costs and particularly lax regulation of the environmental hazards – which include strip mining, acidification of watersheds, creation of toxic reservoirs, and accumulation of radioactive sludge. A reminder that our potentially green economy is currently dependent on very dirty mineral extraction.

China's monopoly is a recent development (pubs.usgs.gov)

Rare Earth mineral mining in China - strip mining, acid reservoirs, radioactive thorium accumulation (

And then a couple of months ago, China stopped shipment of REEs when Japan arrested one of its fishing vessels. The five week embargo caught the world’s attention. Though China eventually lifted the embargo, it says it needs most of what it produces its for own uses, and has told other countries to mine their own REEs, or move their companies to China.
So everyone is now looking at other sources of REEs. Companies are emerging in California, Greenland, Australia, Canada, South Africa and unfortunately Congo Republic to mine them, but it will still be about 10 years before the dependency on China will be broken.
And that brings us back to the seabed nodules. The value of their common minerals has been increasing, and now their REEs have become very attractive as well. Soon, despite the problems of profit sharing and accessibility, a new seabed mining industry will develop.
Competitive, high seas, deepwater seabed vacuuming. What could go wrong with that?

REE: Chinese rare earth expert calls for immediate stockpiling

TNR.v, CZX.v, AVL.to, RES.v, QUC.v, BYDDY, NSANY,

TTM, TM, F, DAI, BMW, RNO, RIMM, GOOG

"Rare Earth Elements (REEs) are a group of specialty metals with unique physical, chemical and light-emitting properties that are seeing dramatic increases in demand, owing to their technological applications. The unique properties of REEs make them critical materials to many emerging technologies which are becoming increasingly commonplace in today’s society. While global consumption has been steadily increasing, supply of REEs has tightened dramatically. For the last 10 years, China has dominated global supply, but owing to the importance of REE availability to internal industries, China is prioritizing its domestic markets through steadily increasing export taxes on REEs in tandem with reducing export quotas. As a result, REEs are in short supply, and with demand forecast to progressively increase, the world drastically needs new suppliers of REEs."

"Real story in market movers was again in REE. Avalon Rare metals AVL.to is on fire today with Rare Elements Resources RES.v advancing 15-20% - money is coming back into the sector after recent consolidation phase. Today's news from TNR Gold is another positive development for this global Lithium and REE play."

Yesterday's move in Rare Earth Elements plays could be also contributed to the article below: Chinese are very serious in their ambitions with Green Mobility and there is only one step from stockpiling to export restrictions - this is why REE become strategic commodities for the future.

"RareMetalMedia: Chinese rare earth expert calls for immediate stockpiling

November 2, 2009 - China should use its reserves of foreign currency to buy rare earths for stockpiling in a bid to protect strategic resources, said a senior Chinese researcher on rare earths.
“I hope the Chinese government can invest about $ 1 billion to buy rare earths and thorium for stockpiling as China presently has sufficient reserves of foreign currencies and market prices for rare earths are comparatively low at this moment,” said Mr. Xu Guangxian, professor at Peking University in an interview with the China Economy Times.
“We must set up a stockpiling system for rare earths and thorium and support leading domestic producers like Baogang, Minmetals and Jiangxi Copper to implement the stockpiling,” Mr. Xu, also an academician at the Chinese Academy of Sciences said. He is regarded as the "Father of Rare Earths" in the industry in China.
China produces over 95% of the world's rare earth supply. However, there has been much criticism in China that the country's rare earths have been overproduced and undersold in the last decade.
“Japan and South Korea have built up stockpiles which are enough for 20 years of consumption by taking advantage of low market prices before 2008 when China began to restrict production but China hasn’t set up a stockpiling system yet,” Xu criticized.
“We must take action soon to protect rare earth reserves otherwise they could be exhausted in only ten years in some major producing regions,’ Xu warned. “There were around 1.5 million tonnes of industrial reserves of medium and heavy rare earths in southern China but now only 600,000 tonnes is there after years of overexploitation.”
Besides production restrictions and a stockpiling system, Mr. Xualso called for industry integration to prevent waste of resources.
“China has around 70-80 producers for rare earth separation butt here is only one in Europe. Most of them are very small and harmful because they cause unfair trade by undercutting each other when market prices fluctuate. So we must support major producers like Baogang, Minmetals and Jiangxi Copper to lead the integration,” Xu said.

TODAY’S STUDY: THE WHAT, WHERE AND

WHEN OF RARE EARTH ELEMENTS

Marc Humphries, September 6, 2011 (Congressional Research Service)

Summary

The concentration of production of rare earth elements (REEs) outside the United States raises the important issue of supply vulnerability. REEs are used for new energy technologies and national security applications. Is the United States vulnerable to supply disruptions of REEs? Are these elements essential to U.S. national security and economic well-being?

There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus yttrium and scandium. The lanthanides consist of the following: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Rare earths are moderately abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum. While more abundant than many other minerals, REEs are not concentrated enough to make them easily exploitable economically. The United States was once self-reliant in domestically produced REEs, but over the past 15 years has become 100% reliant on imports, primarily from China, because of lower-cost operations.


There is no rare earth mine production in the United States. U.S.-based Molycorp operates a separation plant at Mountain Pass, CA, and sells the rare earth concentrates and refined products from previously mined above-ground stocks. Neodymium, praseodymium, and lanthanum oxides are produced for further processing but these materials are not turned into rare earth metal in the United States. Molycorp anticipates reopening its Mountain Pass mine (as a low-cost producer) in 2012.

Some of the major end uses for rare earth elements include use in automotive catalytic converters, fluid cracking catalysts in petroleum refining, phosphors in color television and flat panel displays (cell phones, portable DVDs, and laptops), permanent magnets and rechargeable batteries for hybrid and electric vehicles, and generators for wind turbines, and numerous medical devices. There are important defense applications, such as jet fighter engines, missile guidance systems, antimissile defense, and space-based satellites and communication systems.

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World demand for rare earth elements is estimated at 136,000 tons per year, with global production around 133,600 tons in 2010. The difference is covered by previously mined aboveground stocks. World demand is projected to rise to at least 185,000 tons annually by 2015. Additional mine capacity at Mt. Weld Australia is expected to come on stream later in 2011, to help close the raw materials gap in the short term. Other new mining projects could easily take 10 years to reach production. In the long run, however, the USGS expects that global reserves and undiscovered resources are large enough to meet demand.

Several legislative proposals have been introduced in the 112th Congress in the House and Senate to address the potential of U.S. supply vulnerability and to support domestic production and supply chain development of REEs because of their applications for national security/defense systems and clean energy technologies. The House Committee on Natural Resources approved H.R. 2011, the National Strategic and Critical Minerals Policy Act of 2011, on July 20, 2011…

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What Are Rare Earth Elements?

There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus yttrium and scandium. The lanthanides consist of the following: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Rare earths are moderately abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum. While some are more abundant than many other minerals, most REEs are not concentrated enough to make them easily exploitable economically.2 The United States was once self-reliant in domestically produced REEs, but over the past 15 years has become 100% reliant on imports, primarily from China, because of lower-cost operations.3 The lanthnides are often broken into two groups: light rare earth elements (LREEs)—lanthanum through europium (atomic numbers 57-63) and the heavier rare earth elements (HREEs)—gadolinium through lutetium (atomic numbers 64-71). Yttrium is typically classified as a heavy element.4

Major End Uses and Applications

Currently, the dominant end uses for rare earth elements in the United States are for automobile catalysts and petroleum refining catalysts, use in phosphors in color television and flat panel displays (cell phones, portable DVDs, and laptops), permanent magnets and rechargeable batteries for hybrid and electric vehicles, and numerous medical devices (see Table 1). There are important defense applications such as jet fighter engines, missile guidance systems, anti-missile defense, and satellite and communication systems. Permanent magnets containing neodymium, gadolinium, dysprosium, and terbium are used in numerous electrical and electronic components and new-generation generators for wind turbines. About 75% of permanent magnet production is concentrated in China. See Table 1 for selected end uses of rare earth elements…

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Rare Earth Resources and Production Potential

Rare earth elements often occur with other elements, such as copper, gold, uranium, phosphates, and iron, and have often been produced as a byproduct. The lighter elements such as lanthanum, cerium, praseodymium, and neodymium are more abundant and concentrated and usually make up about 80%-99% of a total deposit. The heavier elements—gadolinium through lutetium and yttrium—are scarcer but very “desirable,” according to USGS commodity analysts…

Most REEs throughout the world are located in deposits of the minerals bastnaesite…and monazite…Bastnaesite deposits in the United States and China account for the largest concentrations of REEs, while monazite deposits in Australia, South Africa, China, Brazil, Malaysia, and India account for the second largest concentrations of REEs. Bastnaesite occurs as a primary mineral, while monazite is found in primary deposits of other ores and typically recovered as a byproduct. Over 90% of the world’s economically recoverable rare earth elements are found in primary mineral deposits (i.e., in bastnaesite ores)…

Concerns over radioactive hazards associated with monazites (because it contains thorium) have nearly eliminated it as a REE source in the United States. There are high costs associated with thorium disposal. Bastnaesite, a low-thorium mineral (dominated by lanthanum, cerium, and neodymium) is shipped from stocks in Mountain Pass, CA. The more desirable HREEs account for only 0.4% of the total stock. Monazites have been produced as a minor byproduct of uranium and niobium processing. Rare earth element reserves and resources are found in Colorado, Idaho, Montana, Missouri, Utah, and Wyoming. HREEs dominate in the Quebec-Labrador (Strange Lake) and Northwest Territories (Thor Lake) areas of Canada. There are high-grade deposits in Bayan Obo, Inner Mongolia, China (where much of the world’s REE production is taking place) and lower-grade deposits in South China provinces providing a major source of the heavy rare earth elements…Areas considered to be attractive for REE development include Strange Lake and Thor Lake in Canada; Karonga, Burundi; and Wigu Hill in Southern Tanzania…

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Supply Chain Issues

The supply chain for rare earth elements generally consists of mining, separation, refining, alloying, and manufacturing (devices and component parts). A major issue for REE development in the United States is the lack of refining, alloying, and fabricating capacity that could process any future rare earth production. One U.S. company, Electron Energy Corporation (EEC) in Landisville, PA, produces samarium cobalt (SmCo) permanent magnets, while there are no U.S. producers of the more desirable neodymium iron-boron (NdFeB) magnets needed for numerous consumer electronics, energy, and defense applications. EEC, in its production of its SmCo permanent magnet, uses small amounts of gadolinium—an REE of which there is no U.S. production. Even the REEs needed for these magnets that operate at the highest temperatures include small amounts of dysprosium and terbium, both available only from China at the moment. EEC imports magnet alloys used for its magnet production from China.

The underinvestment in U.S. supply chain capacity (including processing, workforce development, R&D) has left the United States nearly 100% import dependent on all aspects of the REE supply chain and dependent on a sole source for much of the material. An April 2010 Government Accountability Office (GAO) report illustrates the lack of U.S. presence in the REE global supply chain at each of the five stages of mining, separation, refining oxides into metal, fabrication of alloys and the manufacturing of magnets and other components. According to the GAO report, China produces about 95% of the REE raw materials, about 97% of rare earth oxides, and is the only exporter of commercial quantities of rare earth metals (Japan produces some metal for its own use for alloys and magnet production). About 90% of the metal alloys are produced in China (small production in the United States) and China manufactures 75% of the NeFeB magnets and 60% of the SmCo magnets. A small number of SmCo magnets are produced in the United States. Thus, even if U.S. rare earth production ramps up, much of the processing/alloying and metal fabrication would occur in China…

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Molycorp’s “Mine to Magnet” Vertical Integration Approach for Rebuilding the U.S. Rare Earth Supply Chain

From the mid-1960s through the 1980s, Molycorp’s Mountain Pass mine was the world’s dominant source of rare earth oxides. The ramp up in production had been driven primarily by Molycorp’s higher grade, its relatively low cost, and a rapid rise in the demand for the LREEs, particularly europium used for red phosphors in television and computer monitors, and cerium for glass polishing.38 However, by 2000, nearly all of the separated rare earth oxides were imported, primarily from China. Because of China’s oversupply, lower cost production, and a number of environmental (e.g., a pipeline spill carrying contaminated water) and regulatory issues at Mountain Pass, Molycorp ceased production at its mine in 2002. Since then, the United States has lost nearly all of its capacity in the rare earth supply chain, including intellectual capacity. However, under new ownership since 2008, Molycorp has embarked upon a campaign to change the rare earth position in the United States with its “mine to magnet” (vertical integration) business model.

After major energy producer Chevron purchased Union Oil Company of California (UNOCAL), which included the rare earth mine at Mountain Pass, Chevron wanted to focus on its energy business. They were willing to sell-off its non energy Molycorp Mountain Pass asset.

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When investor groups purchased Molycorp from Chevron in 2008, they did not inherit the environmental liability that resulted from the pipeline spill. Chevron continued the cleanup that resulted from an earlier ruptured water disposal pipeline carrying some chemical contaminants from the oxide separation facility. Since its purchase by the new owners, Molycorp CEO and engineers have been adamant about minimizing their environmental footprint during the separation phase of the process. Molycorp designed a proprietary oxide separation process that would use fewer reagents and recycle the waste water, thus doing without a disposal pond. Molycorp recently broke ground for their new separation facility at the Mountain Pass mine. This complex process separates out the individual elements which follows the mining of the raw material. Molycorp is in the process of reopening the mine in 2012 as the lowest-cost operator, according to their calculation. They expect production costs at around $2.77/kg versus an estimated $5.58/kg in China and a potentially much higher cost operation at Lynas at about $10.11/kg. Molycorp engineers suggest that they will use one-half the amount of ore to get the same amount of usable end product. In addition, they will use fewer reagents, use “full loop” recycling, and no evaporation ponds…

All permits are in place to commence mining with the exception of a permit to transport natural gas that will be used to power the separation facility. The rights of way for a pipeline must beapproved by the Bureau of Land Management (BLM) and the pipeline permit by Federal Energy Regulatory Commission (FERC). In the meantime, Molycorp will truck in liquid natural gas for its energy source until the pipeline is approved…

Molycorp recently acquired the Japanese subsidiary Santoku America in Tolleson, AZ, and renamed it Molycorp Metals and Alloys (MMA). This acquisition is part of the firm’s strategy to become a vertically integrated company. It produces both NdFeB and SmCo alloys used in the production of permanent magnets. Molycorp Metals and Alloys is the sole U.S. producer of the NdFeB alloy. Their intention is to modernize the facility and expand metals and metal alloy production…Molycorp also recently purchased a majority interest in AS Silmet, an Estonian based rare earth element and rare metals processor, which will double its capacity for rare earth oxide and metal production (separation) in the near-term, according to Molycorp officials.

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Molycorp has entered into a cooperative research and development agreement (CRADA) with U.S. Department of Energy’s Ames Laboratory to study new methods to create commercial-grade permanent magnets used in commercial applications. Development of downstream activities such as refining, rare earth metals alloying, and permanent magnet manufacturing will require a large amount of financing, a skilled workforce, and a sizeable U.S. market, all of which could be more completely developed in the long term. A potential barrier to entry to permanent magnet manufacturing, in the short term, is the intellectual property rights for permanent magnet manufacturing held by two firms: Hitachi in Japan and Magnequench (formerly a U.S. firm) which is owned by the Chinese. Months-long talks between Hitachi and Molycorp to jointly pursue permanent production in the United States were suspended in August 2011. Some investor because of the intellectual property rights issue.

The management at MMA is also examining ways to improve metal recycling. Much of their recycling research is focused on the magnets and the highly valued HREEs. They want to probe into the commercial feasibility of recycling materials contained in permanent magnets used in consumer goods. Sourcing sufficient quantities of end-use materials and understanding the metallurgical processes for extracting the heavy rare earth elements such as the dysprosium and terbium is an important part of the research. Testing the quality of the recyclable material and evaluating the economics will determine the project’s success. Molycorp is also evaluating nearterm opportunities to recycle energy efficient light bulbs for the phosphors…

Keeping and recruiting top talent (in engineering, science, and finance) that can help Molycorp achieve its mine-to-magnet mission is one of the company’s top priorities, according to company officials. Their aim is to consistently invest in the right people and the right training to accomplish its goal…

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Role of China

State-run (“State-Key”) labs in China have consistently been involved in research and development of REEs for over fifty years. There are two State-Key labs: (1) Rare Earth Materials Chemistry and Applications, which has focused on rare earth separation techniques and is affiliated with Peking University, and (2) Rare Earth Resource Utilization, which is associated with the Changchun Institute of Applied Chemistry. Additional labs concentrating on rare earth elements include the Baotou Research Institute of Rare Earths, the largest rare earth research institution in the world, established in 1963, and the General Research Institute for Nonferrous Metals established in 1952…This long term outlook and investment has yielded significant results for China’s rare earth industry.

Major iron deposits at Bayan Obo in Inner Mongolia contain significant rare earth elements recovered as a byproduct or co-product of iron ore mining. China has pursued policies that would use Bayan Obo as the center of rare earth production and R&D. REEs are produced in the following provinces of China: Baotao (Inner Mongolia) Shangdong, Jiangxi, Guangdong, Hunan, Guangxi, Fujian, and Sichuan. Between 1978 and 1989, China’s annual production of rare earth elements increased by 40%. Exports rose in the 1990s, driving down prices. In 2007, China had 130 neodymium-iron boron magnet producers with a total capacity of 80,000 tons. Output grew from 2,600 tons in 1996 to 39,000 tons in 2006.

Spurred by economic growth and increased consumer demand, China is ramping up for increased production of wind turbines, consumer electronics, and other sectors, which would require more of its domestic rare earth elements. Safety and environmental issues may eventually increase the costs of operations in China’s rare earth industry as domestic consumption is becoming a priority for China. REE manufacturing is set to power China’s surging demand for consumer electronics—cell phones, laptops and green energy technologies. According to the report by Hurst, China is anticipating going from 12 gigawatts (GW) of wind energy in 2009 to 100 GW in 2020. Neodymium magnets are needed for this growth…

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China’s policy initiatives restrict the exports of rare earth raw materials, especially dysprosium, terbium, thulium, lutetium, yttrium, and other heavy rare earths. It is unclear how much the export restrictions affect exports of downstream metal and magnets. According to Hurst, China wants an expanded and fully integrated REE industry where exports of value-added materials are preferred (including consumer products). It is common for a country to want to develop more value-added production and exports if it is possible.45 China’s goal is to build-out and serve its domestic manufacturing industry and attract foreign investors to participate by locating foreign-owned facilities in China in exchange for access to rare earths and other raw materials, metals and alloys, as well as access to the emerging Chinese market.

Some foreign investors are hesitant to invest in China because of the concerns related to technology sharing. Also, the September 2010 maritime conflict between China and Japan in which Japanese officials claimed that China held up rare earth shipments to Japan (denied by Chinese officials) has heightened the urgency among many buyers to seek diversity in its sources of rare earth materials.

Some have urged the U.S. Trade Representative to bring a dispute resolution case against China in the WTO, similar to a case the United States brought against China in 2009 over its export restrictions (such as export quotas and taxes) on certain raw materials (including, bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc). The United States charges that such policies are intended to lower prices for Chinese firms (especially the steel, aluminum, and chemical sectors) in order to help them obtain an unfair competitive advantage. China claims that these restraints are intended to conserve the environment and exhaustible natural resources. According to some press reports, a WTO panel in April 2011 ruled that China’s export restraints on raw materials violated WTO rules.

According to a press account, a letter written by four U.S. Senators in March 2011 urged the Obama Administration to instruct the U.S. Executive Director at each multilateral bank, including the World Bank, to oppose the approval of any new financing to the Chinese government for rare earth projects in China.46 The letter also urged the Administration to impose the same types of restrictions on Chinese investment in mineral exploration and purchases in the United States as China imposes on foreign investment in rare earth in China…

The Chinese government announced in 2010 that it intends to restructure the rare earth mining industry under the umbrella of a few world-class mining and metal conglomerates for greater efficiencies and to reduce environmental degradation. In addition to the consolidation of the industry and environmental cleanup efforts, investor analyst Jack Lifton reports that China is building strategic stockpiles of rare earths and other critical materials that could meet domestic demand for several years. South Korea and Japan are also building strategic stockpiles.48 The level of stockpiling could have a dramatic impact on the market, particularly for HREEs.

The value of U.S. rare earth imports from China rose from $42 million in 2005 to $129 million in 2010, an increase of 207.1%. However, the quantity of rare earth imports from China fell from a high of 24,239 metric tons in 2006 to 13,907 metric tons in 2010, a 42.6% decline…

…Japan’s Interests…Selected Possible Policy Options…Research and Development…Authorize and Appropriate Funding for a USGS Assessment…Support and Encourage Greater Exploration for REE…Challenge China on Its Export Policy…Establish a Stockpile…

Beijing is “funny.” It “shies away” from buyers with whom it cooperated for 20 years by saying that it has folded its policy on rare earth metals export. Those who produce high technology are facing a crisis. They tried to soothe and threaten with no result. It seems that this decision - which has recently attracted the world’s attention - may open a favorable opportunity for Mongolia. Once, the World Bank estimated that Mongolia had resources of rare earth elements worth USD10 billion. In 2009, the United States Geological Survey announced that Mongolia’s resources in rare earth metals took the second place after China. Japanese interests that had been captivated by Mongolia’s land for some time have revived and a research team was sent here. It is generally agreed in Mongolia that it is the right option to put the country’s rare earth minerals into economic circulation within a short period of time - if only not to miss the coach - and use it to improve its citizens’ life. It is also understood that this should be done only by abiding by environmentally friendly policies.

“High technology vitamins”

In 1794, Johan Gadolin, a Finnish chemist, discovered the first rare earth element. Later Martin Klaprot divided the rare earth elements into cerium /light/ group and yttrium /heavy/ group. Since that time, 17 out of the 114 elements of the periodic table have been referred as belonging to the group of rare earth minerals. The name was obtained as the scientists said that “very rare elements” had been discovered. But these elements are not as rare as their name suggests. A look at natural resources throughout the world determined that rare earth elements are 10 fold more than lead, 50 fold more than molybdenum and 165 fold more than tungsten. The rare earth elements are used in many sectors for the manufacturing of explosives, radio electronic products, engineering equipments, household goods, but also in the chemical industry, metallurgy etc. It means that the vehicle you drive, the cellular phone you hold and the TV you watch all hold some of the 17 rare elements. Moreover, two rare earth elements – cerium and lanthanum – will be surely required when Mongolia starts processing its oil domestically.

In recent years, the demand for rare earth elements has steadily increased as the development and demand for high technology products in households throughout the world has become stronger. This explains why rare earth minerals are also called “high technology vitamins;” and the principal consumers of these “vitamins” are the high technology manufacturers or highly developed countries.

Chinese’s “sudden gift”

Mongolia’s southern neighbour holds over 90 percent of the rare earth elements market. Gary Billingsley, Executive Chairman of the Board of Great Western Minerals Group, remarked that however, two thirds of the world total reserves are in other countries. If so, how was China able to have such power?

Until the end of the 1980s, the United States were the leader on the rare earth elements market. But it lost its position as most of its natural resources were depleted. Using this opportunity, China strengthened its monopoly and put its competitors “out of the race” by applying a “cheap price” policy. Once the People’s Republic of China (PRC) supplied developing countries with such minerals at the cheapest price, it became unprofitable for other countries to spend fund for high-cost rare earth metals extraction projects. In 2008, 124 thousand tons of rare earth elements were mined out throughout the world, of which 120 thousand tons were produced by China only.

Last summer, China presented “a sudden gift” to developed countries. In the second half of 2010, the rulers of the PRC reduced its export of rare earth elements by 72% and this year they announced that they will reduce that amount further by 11.4%, while increasing tax levied on rare earth metals export. Xinhua agency informed that all these started from the conclusion made by the country’s scientists that if mining were to be conducted at the current rate, Chinese resources in rare earth minerals would be depleted after 15 to 20 years, forcing the country to import from foreign nations.

A look at the estimation made by a survey organization at the US Congress shows that the world’s annual consumption of rare earth elements is 124 thousand tons, by 2012 consumption will reach 180 thousand tons, and by 2014 it will exceed 200 thousand tons. Therefore, Chinese reduction of rare earth elements export threatens high technology manufacturers. This is why the US Congress issued a decision to render government support to companies running rare earth minerals exploration operations.

Bloomberg reported that Germany considered it a necessity to have a proper and positive mutual understanding with China. “Take a look at reality. At least 5 to 10 years are needed to wait for new Mongolian, African and Greenland resources. Several years are going to be spent deciding infrastructure in these countries,” explained Walker Shteinbach, Head of the Commodity Agency of Germany. In fact, like the US and Japan, the Federal Republic of Germany started to cooperate with India and Vietnam in order to ensure its supply of rare earth elements. Last November, Mongolia’s National Development and Innovation Committee in cooperation with the German Agency for Technical Cooperation (GTZ) organized a conference themed Opportunity for Developing an Industry relying upon Rare Earth Elements. During the conference, Stefan Hanselmann, Project Director, GTZ, told “Our country will provide all the support necessary to Mongolia to start the exploration and mining of rare earth minerals.” It seems that Germany had time include Mongolia in its list too.

Partnering with the Land of the Rising Sun …

Japan is 90 percent dependent on China when it comes to rare earth elements. Since China’s decision to lower its export of rare earth elements, the Japanese government collected funds of USD150 million to conduct exploration and mining operations in the US, Canada, Australia and Mongolia, with the intention of securing its supply of rare earth metals.

Two years ago, the Toyota Corporation founded another joint rare earth elements company in Vietnam, like it previously did in India. The joint venture is expected to start its commercial operations this year. Following in the footsteps of Toyota, Sumitomo and Toshiba corporations also started to develop rare earth minerals projects in Kazakhstan last year. Sumitomo Corporation also signed a contract with the US company Molycorp to ship rare earth minerals in large quantity from the US to Japan. The corporation bought shares worth USD100 million from the shares issued newly by Molycorp and plans to grant it a USD30 million loan in addition to making investment of a value of USD130 million to expand Molycorp’s operation.

Meanwhile, it is interesting to see how successful the Mongolian Japanese cooperation is when it comes to rare earth minerals. S. Batbold, Mongolia’s Prime Minister, was able to obtain a rather good agreement with its Japanese partner who sent a survey team to Mongolia to perform analyses. Information was made public that Japan had decided to sell Mongolia satellite observation images for the purpose of assisting and accelerating the exploration of rare earth minerals and uranium ore on its territory.

Five large deposits and 246 occurrences of rare earth minerals discovered

According to an estimation made by the United State Geological Survey (USGS) specialists, Mongolia could be in possession of 31 million tons of rare earth elements. In other words, 16.77% of the world’s total resources could be located on the nation’s territory. Experts established five large deposits and about 246 occurrences of rare earth minerals in Mongolia. But domestic geologists state that there is almost no area in the country where detailed studies were conducted and proven reserve established. As it is impossible to determine an exact price for rare earth elements - unlike copper price, for example, at the London Exchange Stock - it is probable that the amount of USD10 billion roughly calculated by the World Bank vary.
Before 1990, scientists from the former Soviet Union did conduct rare earth elements survey in Mongolia. At that time, reserves of rare earth elements were established in the areas in Khovd, Uvs, Khentii, Sukhbaatar and Khovsgol, allowing us to assume that rare earth elements are abundantly distributed throughout Mongolia.

According to the survey report made by experts of Eurasia Capital Company, it was mentioned that Rio Co. Ltd. spent USD3.6 million on the Luugiin Gol deposit between 2005 and 2009. Before that, explorations were conducted at the Luugiin Gol, Mushgia Khudag, Khotgor and Khalzanburgedei deposits and according to results, it is likely that the deposits hold a total of about 6.6 million tons of rare earth minerals. In 1974, Russian and Mongolian geologists surveyed the Mushigia Khudag deposit in Mandalgobi soum, Omnogobi aimag. That time, it was considered that the reserve of the Mushigia Khudag deposit was 400 thousand tons. But the USGS estimated the reserves to approximate 5.9 million tons. Since 2005, Mongol Gazar Company has been conducting detailed exploration in this area.

According to a study conducted by Technology Metals Research, 251 rare earth metals projects are ready to be implemented in 24 countries worldwide, except China. Although rare earth minerals are sprayed out throughout the world, only a few are on the economic market. The reason being that the prospecting, exploring and mining of rare earth minerals is very expensive as it requires the use of sophisticated and high cost technology. This is why no substantial work was conducted in Mongolia, although surveys were conducted to a certain extent. Moreover, specialists also explain that due to the lack of legal environment regarding the exploration, mining and use of rare earth minerals in Mongolia, these metals are not put into circulation.

B. Monkhdol, Director of CPS International Company, told that a Mongolian company which conducts operation of lithium exploration was going to make an IPO on the Australian stock exchange. A very favorable time for good a Mongolian company to raise money on the Australian stock exchange.

For the last twenty years, prices for 1kg of rare earth metal fluctuated between USD5 and USD15. Now, prices exceed USD60. However, the price of minerals on the market can be extremely volatile. Specialists therefore recommend that Mongolia conduct extensive surveys to establish the amount and the location of rare earth minerals on its territory using Japan and Germany know-how while these are interested in diversifying their sources of rare earth minerals. Rare earth metals into circulation have Now is a favorable time for Mongolia to put Rare earth minerals into circulation while their prices are up on the world market.