Rare earths consumers wary of China's near-monopoly on global supply may be relieved that several non-Chinese projects are nearing production, but when it comes to the heavy rare earths - generally the rarest and most pricy - China will be remain the major supplier for at least five more years.
This quandary is underscored by the recent frenzy over Chinese export quotas for rare earth elements (REEs) in 2011, sending stock prices soaring this week for several companies with advanced projects. It is not clear that next year's Chinese quotas really constitute much of a change from 2010 levels in terms of overall effect on consumers. But the fact remains that certain REEs are undersupplied, particularly the nine REEs in the so-called yttrium or heavy rare earths group.
The two late-stage projects slated to enter production over the next 24 months or so should begin to significantly challenge China's hold on REEs supply. Neither project will produce much in the way of heavy REEs, however, or at least not on a game-changing level for many consumers.
US-based Molycorp Inc. has just begun pre-stripping operations at its Mountain Pass project in California and could produce newly mined ore by late in 2011 or early 2012, and will be the first large-scale non-Chinese project to come on stream in many years. By 2012, the mine is forecast to produce at a rate of nearly 20,000 metric tonnes/year - roughly 16% of Chinese REE production last year, estimated at about 120,000 tonnes.
Most rare earth ore bodies contain relatively small percentages of heavy REEs. Of eight projects that may be developed outside China over the next 10 years, Mountain Pass has the lowest percentage of heavy REEs of any: approximately 1%. Molycorp's ore body, which has been more extensively explored than most, also has unusually high amounts of cerium and lanthanum (82% combined), which are the REEs in greatest supply.
In addition, Mountain Pass has smaller percentages (approximately 17% combined) of praseodymium, neodymium and samarium, the more valuable of the light REEs group - than most other projects being explored or developed.
Mountain Pass has a major advantage, however, in that it has been a working mine in the past (although output in the past was relatively limited). It is fully completed, permitted and on the brink of production. In addition, Molycorp is relatively well-funded thanks to its initial public offering earlier this year. Most projects are currently years away from production.
The Mountain Pass ore body also boasts much richer ore grades than most other projects. Together with Molycorp's head start in development and production, this promises to make Molycorp quite competitive on a cost basis regardless of its mix of REEs.
In Australia, Lynas Corp. is working to bring its Mt. Weld project into production in 2011 and plans to produce as much as 11,000 tonnes of REEs on an annual basis by 2012. The Mt. Weld project also has a small percentage of heavy REEs compared to many other projects, however, at about 2%. It also has relatively high amounts of cerium and lanthanum at a combined 73%. On the other hand, Mt. Weld is blessed with greater percentages of praseodymium, neodymium and samarium, totaling about 25-26% combined.
Consumers of heavy REEs will have to wait at least until 2015 for more significant non-Chinese sources to make their way to market. That's when Canada-based Avalon Rare Metals has indicated it may be able to bring its Nechalcho project into production. (The project was formerly known as Thor Lake.)
The Nechalcho ore body, based on exploration results to date, contains unusually high amounts of heavy REEs at approximately 9%. The project also contains relatively low percentages of cerium and lanthanum: approximately 62% combined. This means Nechalcho also contains higher amounts of praseodymium, neodymium and samarium - at a combined 29%.
Brett Hartke is a contributor to ResourceInvestor.com who has more than 20 years of experience researching and writing about commodities and the metals markets.