It has been an eventful week for the rare earth sector, despite markets remaining relatively flat. Rare earth investors shifted their focus to China as the Information Office of the State Council published the country’s first ever white paper outlining China’s rare earth industry.
The paper highlights issues including uncertainty about the level of rare earth exports and the future global supply of critical raw materials. It also underlines that China currently hosts just 23 percent of the world’s rare earth element (REE) supply as opposed to the 36 percent analysts suggest, and that investment in China’s REE industry has experienced “rapid growth,” with the value of the market currently approaching $15.8 billion.
The document is an in-depth overview of the characteristics of the country’s supply, and emphasizes that radioactive elements associated with REEs pose major risks to the country’s environment; for example, most of China’s light rare earth deposits are industrially mined.
These points are in line with recent comments made by Zhu Hongren, chief engineer of the Ministry of Industry and Information Technology, when questioned about the country’s controversial REE export quota policy. At the time, he said, “[a]ll these measures, such as export quota controls, are meant to diminish environmental risks that have resulted from the disorderly development of the rare-earth industry.” He added that a lack of regulation will increase harm to the environment.
Rare earth stocks react to negative forecasts
Negative forecasts for future Chinese production levels have caused rare earth stocks to react. According to a recent Forbes report, negative market sentiment has propped up slumping rare earth stocks, which are now “likely” to continue trading between 5 and 10 percent higher than normal, presenting short-term buying opportunities. The news also sparked a rally in what has been deemed a severely depressed market.
However, some critics suggest that the government’s warnings that REEs in major mining areas have already been depleted are nothing more than an excuse to justify the nation’s controversial export quotas.
Lynas to finally begin Malaysian operations
Lynas Corporation (ASX:LYC), a company focused on creating a fully-integrated source of rare earth from mine through to market, is set to finally see progress on its delayed REE plant after Malaysian lawmakers requested that the government issue a temporary operating license (TOL) despite community safety concerns. Experts suggest that the plant could begin operating within four months of the issuance of a TOL.
“Among all the rare earths factories in operation, they (Lynas) are the most advanced, we were told by international experts,” select committee chairman Mohamed Khaled Nordin told reporters.
The project gained global attention when protesters in the city of Kuantan claimed there is a risk of dangerous radiation from the plant – something that few believe the Malaysian government could cope with if leakage were to occur.
Market price update
Despite stock reactions, REE prices remained relatively flat, with some elements displaying minor movements based on increasing supply.
Terbium metal prices recorded the largest drop, plunging 10 percent to trade between $3,000 and $3,100 per kilogram, while praseodymium oxide dipped 4.35 percent to $105,000 per metric ton (pmt). Neodymium prices remained flat, closing out the week at $100,500 pmt.
Yttrium oxide prices fell 1.85 percent to $25,100 pmt, and dysprosium metal dipped slightly to trade at $911.14 per kilogram. All other rare earth price points traded sideways for most of the week, recording no notable fluctuations.
Highlights of the program include the discovery of a possibly extensive REE-bearing alkali granite/syenite unit in the northern part of the Lopez trend. The company intersected lengthy intervals of REE mineralization, including 32 feet of 1.05% total rare earth oxides (TREO) with a 6 foot zone containing 3.28% total REO. Desirable and valuable heavy REEs comprise up to 18 percent of the REE mineralization encountered in the unit.
Updated results suggest that the company is able to generate oxide yields of scandium at 93.11 percent and yttrium at 87.47 percent. Product samples representative of the final commercial phase are now available, and pilot phase assays for the other heavy elements are currently underway.
Stans Energy (TSXV:HRE) received an extension to its Licence Agreement and will be able to mine REEs until December 31, 2014. Once the project is production ready at that time, Stans Energy will be governed by its existing Mining Licence which is valid through to December 2029.
According to the company, this period will provide it with the necessary time to prepare Kutessay II for production. Kutessay II is the only past-producing heavy REEs mine in the world outside of China. The agreement allows Stans Energy and the government of Kyrgyzstan to structure a framework for a private-public partnership that will be negotiated over the next three months.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.