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Old 01-14-2010, 02:28 AM
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Default The Battle over the Rare Earths update by Jack Lifton

The Battle Over Rare Earth Metals

Tuesday, 12 January 2010 00:00 Jack Lifton



Rare earth metals are most simply defined as those chemical elements that have atomic numbers between 57 to 71. These include lanthanum, from which rare earth metals get their collective chemical name of lanthanides, to lutetium. For reasons of chemical similarity, two additional metals, scandium and yttrium, are commonly found in rare earth metal deposits, and so are frequently referred to as rare earth metals, resulting in a total number of 17 rare earth elements — all of which are metals.



Table from the US Geological Survey


These 15 consecutive lanthanide elements have, uniquely among all the elements in the periodic table, chemical properties so similar that they are difficult and expensive to separate from one another. However, once these metals have been separated from one another, the individual physical properties of these materials put them in today’s top tier of the rarest and in many cases the most critical of metals for technological application. These metals are used to manufacture environmentally friendly products such as electric cars and in alternative power generating technologies such as wind turbines.




Table: Rare Earth Elements Periodic Chart


China’s Monopoly Over Rare Earth Elements
All is not well in the world of rare earths. The main accessible concentrations of the rare earths are found in China, where more than 95% of rare earths are now produced. Over the last seven years, China has reduced the amount of rare earths available for export by some 40%.



Even existing mineral production may be in danger. The necessity for industry restructuring seems to be the case. It is obvious that in order to clean up the damage from decades of mining and refining operations, China’s rare earth industry must slow or even stop temporarily its activities. This must be carried out in order to assess the environmental impact of past mining operations and then to plan strategies for mitigating future environmental damage. Such steps would allow China to resume and perhaps ultimately to enlarge its production of the rare earth elements.

For the rest of the world, the problem is that the rare earths which the Chinese deem so important to their technological and green future are already critical for maintaining the West’s technological and green present, let alone a future of green growth and sustainable production. For example, China has announced that over the life of the next two five-year plans, 2010-2020, it will construct some 133 gigawatts of wind turbine generated electricity. This is likely to dramatically impact the supply of the rare earth metal neodymium. (it could take up to half a ton of neodymium to make a permanent magnet for a very large wind turbine) If China chooses to go with the wind turbine generator design that uses a rare earth permanent magnet based on neodymium, praseodymium, dysprosium, and terbium, (the last two of which are among the rarest of the rare earth metals) then this will require that China increase its current production levels in order to meet additional demand. The alternative is that China substantially reduce its exports of the required metals under the terms of present production levels. Modern, smaller, high performance and high efficiency electric motors and generators are also increasingly dependent on the unique properties of these metals.



The interruption of the supply of these metals to non-Chinese manufacturers and end users would upset both the civilian and military markets in the West. A shortage would surely mean that, first of all, the West would have to choose between “guns and butter.” Secondly, it would mean that technological advancements would stagnate or stop altogether in alternative energy production and uses where these metals are critical.



This is a direct challenge to the West’s march toward a greener future.
In 2002 the United States' most important rare earth mine, operated by Molycorp in Mountain Pass, California was shut down. This was due, at least in part, to Chinese predatory pricing. Rare earths from China’s Bayanobo region were shipped to California and sold for less than the cost of producing the same rare earths at Mountain Pass, even with a 5% duty assessed against the imports. It was unknown then, as it is now, whether Chinese mining companies were “dumping” their product, i.e., selling it for less than the cost of production.



China’s gradual reduction of its export of raw ores and ore concentrates has forced the rare earth refining, separating, metal and alloy production industries to move to China. Therefore investment in China and the employment of Chinese laborers and engineers is the surest way for a foreign company to assure a supply allocation of rare earths for its own end-use.
The West has now been essentially denuded or contrarily has denuded itself of almost all its rare earth mine-to-market supply and value chains. Only some of the final assembly of permanent magnet using devices such as DC electric motors and electric generators for civilian use remain anywhere outside of China today. The US military and the allies it equips require that the final manufacture and assembly of all munitions or guidance devices and components be within the US or in an allied country such as the UK. Even so, rare earth metals — from which military components such as permanent magnet electric motors and generators, lasers, and infrared and sonar sensors are constructed all or in part — are exclusively imported from China and then alloyed and fabricated in the US or in another allied military contractor’s country.



This is an incredible and truly inconvenient truth. It should also be noted that Canada also has large and high grade deposits under development.


It is important to realize that the situation regarding the supply security of rare earth supply elements has been fundamentally driven by China’s growing domestic demand. Western industry, both civilian and military, could be cut off with little or no notice from these elements at a time when there is no alternative supplier of these elements from someplace other than China.
Western free-market mining, banking and institutional investors have to use this current reality to reassess factors such as the availability of strategic or critical rare metals, and the valuation of the entire supply chain to political and economic advantage. US policy makers should consider all options, including government incentives if necessary, to return US supply back to the point that it can satisfy at least US national defense requirements.



The US Department of Interior must now, through the Bureau of Land Management (which supervises mining claims) and its subsidiary the US Geological Survey, (which monitors the market and end use of natural resources) step forward. It needs to identify and measure US domestic reserves of rare metals which are strategic and critical for America’s industrial and military needs. These steps should be administratively codified by the Departments of Defense and Commerce and be used to catalyze the sourcing of these resources in the most beneficial way for the US economy.



To be clear, the security of the US supply chain for rare earths, and their availability, must be the focus of whatever actions are undertaken.
Also equal to supply concerns regarding rare earths is the fact that even if tomorrow the US would restart the mining of heavy rare earths it lacks the capacity to refine these elements. Thus, should the United States begin to mine its heavy rare earth oxides, it would still be dependent on overseas refineries for further elemental and alloy processing.



Transportation alternatives such as electric cars, electricity generating technologies such as wind turbines, communications’ technologies, such as iPhones, and even medical equipment such as X-ray machines and MRI machines all require rare earths for their manufacture.



Getting onto the green road is not the same as staying on it.

Jack Lifton is a Senior Fellow at the Institute for the Analysis of Global Security. He is an independent consultant, writer and lecturer focusing on the market fundamentals and end uses of the "technology metals," a category name he coined in 2007 to describe those typically rare metals, without which the implementation of modern technologies would not be possible. He also produces the Jack Lifton Report at www.jackliftonreport.com

Editor’s note: This important topic will be explored more fully at TREM ’10: Technology and Rare Earth Metals for National Security and Clean Energy Policy Conference, 17-18 March 2010 in Washington, DC.

Read full story

www.AustralianRareEarths.com has information for investors and those that are interested in how Australia controls over 40% of the world's economic REEs.

 

Disclaimer: The author of this post, may or may not be a shareholder of any of the companies mentioned in this column. No company mentioned has sponsored or paid for this content. Comments on this forum should never be taken as investment advice.

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