Rare earths producers on the up as China is likely to buy next month

24th September 2013 By: Henry Lazenby - Creamer Media Deputy Editor: North America

TORONTO (miningweekly.com) – The stocks of North American rare earth elements companies rose on Tuesday on overnight news that China was indeed likely to start buying billions of yuan rare-earth minerals next month to bolster its strategic reserves.

Around noon, the NYSE-listed stock of Molycorp was up $0.58 to $7.77 apiece, that of Rare Element Resources was up $0.49 at $3.36 apiece and that of Avalon Rare Metals was up $0.14 at $1.07 apiece.

Last week, Molycorp shares rose $0.40 apiece on Tuesday, after a rumour surfaced that China’s State Reserve Bureau planned to start buying these critical metals soon.

China Daily USA quoted market trends firm Baichuan Information analyst Du Shuaibing as saying that six large rare-earth producers were on a list for the purchasing programme, which was launched last year.

This round of purchases would target medium and heavy rare earths, which were more valuable but less common than light rare earths, he said.

Shuaibing added that it was likely that the plan would involve about 10 000 t of rare earths.

The six Chinese companies named in an unofficial list as participating in the transactions included Baotou Steel Rare Earth Hi-Tech Co, China's largest rare earth producer by output; China Minmetal Rare Earth Co; China Nonferrous Metal Industry's Foreign Engineering and Construction Co; Chinalco Rare Earth Jiangsu Co; Rising Nonferrous Metals Share Co and Ganzhou Rare Earth Mineral Industry Co.

On Tuesday, China Nonferrous Metal Industry’s Foreign Engineering and Construction Co, the country’s third-largest rare earths producer, launched a private placement in part to build a processing plant for rare-earth oxides.

The new plant in southern China’s Guandong province was the latest sign that the country’s efforts to consolidate the rare-earth industry and promote value-added processing in the sector were moving forward.

Produced mainly in China, rare earths are essential for making high-tech items such as smartphones, tablets and hybrid vehicles, and are also used in automotive catalysts.

Rare-earth elements consist of 17 elements on the periodic table, including 15 elements beginning with atomic number 57 (lanthanum), extending through to number 71 (lutetium), and including the elements yttrium and scandium, which have similar properties.

These are referred to as “rare” because, although relatively abundant in total quantity, they appear in low concentrations in the earth’s crust and extraction and processing is both difficult and costly.

During 2010, there was global concern when China cut its rare earths exports and appeared to be restricting the world’s access to rare earths, sending the rare earths market into a flurry of action and rare earths prices sky high. This led to a growing realisation that an almost total US dependence on China for rare-earths elements, including oxides, phosphors, metals, alloys and magnets, was a matter of national security.

Until 1948, most of the world’s rare earths were sourced from placer sand deposits in India and Brazil. Through the 1950s, South Africa took the status as the world’s premier rare earths source, after large veins of rare-earth-bearing monazite were discovered in the country. From the 1960s to the 1980s, the Mountain Pass rare earths mine, in California, was the leading producer.

Today, the Indian and South African deposits still produce some rare-earth concentrates, but the scale of Chinese production dwarfs them. China once produced over 95% of the world’s rare-earth supply, mostly in Inner Mongolia - even though it has only 37% of proven reserves - although these numbers have since slipped to 90% of world production and 23% of the world’s reserves.

All of the world’s heavy rare earths, such as dysprosium, come from Chinese rare earths sources such as the polymetallic Bayan Obo deposit.

China is a significant producer of the world’s two strongest magnets, samarium cobalt and neodymium-iron-boron permanent, rare-earth magnets.