Hybrid cars are the fastest growth area within the rare earth market, says a leading expert on the exotic elements.
Lanthanum, used in the batteries which power hybrid electric-gas vehicles, is just one of the rare elements with booming high tech and industrial applications, Dudley Kingsnorth, of the Industrial Minerals Company of Australia, said Sunday at a commodities outlook forum, at the annual convention of the Prospectors and Developers Association of Canada, one the world's largest mining conferences held annually in Toronto.
Over the next eight years, demand for rare earth oxides, such as yttrium, dysprosium, terbium and cerium, is expected to increase by more than 50% to 200,000 tonnes per year by 2015, Kingsnorth said.
The most important key trend in the world of rare earth oxides, says Kingsnorth, is the fact that China, which covers 95% of global demand, is clamping down on exports with production quotas and export restrictions such as high taxes of 15-25%.
By making it expensive for buyers to take the raw materials out of the country, China is hoping to encourage buyers of the rare elements to set up manufacturing plants in Asian powerhouse. (China is also the world's largest consumer, driving 60% of demand.) Rare earth oxides are used to make TV and computer monitors, compact fluorescent lights, tiny magnets used in iPods and other MP3 players, polishing powders, hybrid cars, communications, military equipment, wind turbines and catalysts for oil refining.
China's actions have resulted in a huge opportunity for non-Chinese producers to get into the market, since most foreign manufacturers do not want all their overseas operations to be in one country, for risk management reasons. Kingsnorth estimates the 2008 market's current value at about US$1.5 to $2 billion (for about 124,000 tonnes), Kingsnorth says. Rare earth oxides sell for an average price of about US$10-15 per kilogram. Prices vary widely depending on the element. Phosphors, for instance, comprise 7% of the rare earth market in terms of volume, but represent 37% of the value of the total market. Magnets are 21% of volume, but 38% in terms of value, Kingsnorth said.
"There's a very real possibility exports out of China are not going to meet non-Chinese demand," Kingsnorth said.
The best-known North American source of rare earths is the mine, mill and plant at Mountain Pass, California, which has been operating since 1951, but it was recently acquired by Molycorp Minerals LLC (a private equity consortium).
Meanwhile, Australia's Lynas Corporation Ltd.; a supplier of light rare earths, announced last month it would have to suspend operations at Mt Weld in western Australia due to a financing disagreement.
Potential rare earths projects include:
- Dubbo Zirconia (Australia) - operated by Alkane Resources Ltd., Australia (ASX:ALK)
- Nolans (Australia) -- Arafura Resources Ltd. (ASX:ARU)
- Hoidas Lake, Sask. (Canada) - Great Western Minerals Group Ltd., Saskatoon, Sask. (TSX-V:GWG) or US Symbol: GWMGF
-Thor Lake, N.W.T. (Canada) - Avalon Rare Metals Inc., Toronto (TSX:A)
- Kvanefjeld (Greenland) - Greenland Minerals and Energy Ltd., West Perth, Australia (ASX:GGG)
- Bear Lodge, Wyoming (USA) - Rare Element Resources Ltd., Vancouver (TSX-V:RSV)
Laura Bobak is a business and investing reporter based in Toronto, Canada. She has worked for a wide range of media outlets, including the Canadian Press wire service, the Investment Executive newspaper for financial advisors, and the Toronto Sun. Her business writing has also appeared in the Globe and Mail and the Toronto Star and she has made numerous appearances on both radio and television. She graduated from the Carleton University School of Journalism in Ottawa in 1993.