China Could Scrap REE Export Restrictions by 2015

China has appealed a World Trade Organization (WTO) ruling that its export restrictions on rare earth elements (REEs), molybdenum and tungsten are inconsistent with its obligations as a WTO member, but word on the street is that the Asian nation doesn’t think that appeal will be fruitful.

Reuters reported today that according to an unnamed industry source, Beijing “expects to have little choice but to accept the ruling and could cancel export restrictions” on all three metals “by next year.” And, if that happens “smoothly,” export quotas on other products could also be thrown out the window.

That said, don’t expect China to abandon its long-term plans — namely, “improv[ing] pricing power and gain[ing] market share in lucrative downstream industries.” David Abraham, an independent resource analyst, told the news outlet, “[t]he WTO decision does not change the strategy, just the means at China’s disposal.” Explaining further, he said, “[t]he tools of the day are now taxes, exchanges and regulations to consolidate companies into a few champions.”

Ryan Castilloux of Adamas Intelligence agrees. He told Reuters, “I think they’re looking at what they need to do in the long-term to take what was once an export tariff and turn it into a resource tax so the net result is positive.”

A resource tax may also be good for companies hoping to produce REEs outside of China. David Stringer notes in a Bloomberg article, also published today, that new taxes and regulations could push REE prices up, thereby paving the way for such companies to succeed.

For now, however, the future is up in the air. Reuters states that the Association of China Rare Earth Industry and the Chinese ministries that would be involved in any changes have not yet made any comments.

Company news

It’s been a topsy-turvy couple of days for Molycorp (NYSE:MCP), which yesterday hit a 52-week low of $2.45 per share, according to Seeking Alpha contributor Shock Exchange. The drop may have been driven by concern about the company’s “intangible assets amid consistent operating losses.”

Today, shares of the company are selling for $2.79 each, likely driven upward by investors looking for a bargain.

Junior company news

Last Monday, Bacanora Minerals (TSXV:BCN) said that Rare Earth Minerals (LSE:REM) has given it written notice that it will increase its ownership in Joint Venture #2 — which concerns the San Gabriel, Buenavista and Megalit concessions — from 10 to 30 percent. Rare Earth Minerals has thus paid Bacanora US$500,000; it now has up to six months to provide an additional $1 million.

The next day, Stans Energy (TSXV:HRE,OTCQX:HREEF) announced that an Ontario court decision “involving another illegal expropriation in the Kyrgyz Republic” has given it some hope that “international arbitration awards can be enforced locally.”

That’s of interest to Stans because the Arbitration Court at the Moscow Chamber of Commerce and Industry recently ruled in favor of Stans over the General Prosecutor’s Office of the Kyrgyz Republic. The two had been in arbitration since the General Prosecutor’s Office launched a suit in April 2013 to invalidate the process by which Stans’ 20-year mining licence for Kutessay II was acquired, Stans told Rare Earth Investing News in April. However, following that ruling, the Centre of Court Representation of the Kyrgyz Republic submitted claims aimed at invalidating the Arbitration Court’s jurisdiction.

More recently, Medallion Resources (TSXV:MDL,OTCQX:MLLOF) closed the first tranche of a private placement offering announced on May 21, 2014. The company has issued 4,666,667 units priced at $0.15, gaining $700,000. The proceeds are to be put toward:

  • Financial, technical and environmental studies for Medallion’s proposed REE-processing facility in Oman
  • Monazite feedstock acquisitions efforts
  • Business development and working capital

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

WTO Names China the Loser in REE Export Quota Dispute

What’s Going On? Stans Energy Discusses Arbitration and Kutessay II