Reigniting the HREE supply/demand debate

When discussing REE demand, we see a great array of existing applications – catalysts, ceramics, lasers, magnets, refractive glass and so on. But, in its latest foray into REE, the Geopolitical Analysis Quarterly from the VM Group in London for ABN Amro makes a point that should be kept in mind in any discussion about future demand – and that is what the reports terms “futuristic technologies, the sorts of things that are only being dreamt of right now”.

For this reason, VM (formerly Virtual Metals) has a view on the vexed issue of future supply/demand, a subject which has generated some spirited discussion on RareMetalBlog. And, certainly, the last time I reported the views of this team, it set off quite a discussion.

So here we go again.

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On the one hand, says VM/ABN Amro, there is not much risk in the medium term to general REE supply. However, in the longer term, the risk involved the nine heavy rare earths. “China has particularly large deposits of them in Jiangxi region. While these are less in demand right now than the lighter rare earths, the heavy rare earths will be increasingly valuable in the future”.

The report sees Molycorp’s Mountain Pass being the first non-China REE supply to come online “potentially by the end of 2011”. However, less than 1 per cent of its ore comprise heavies, the report says, with lanthanum and cerium together dominating 82 per cent of output. Similarly, the Mt Weld project in Australia carries only 2 per cent HREE. It will not be – and I am still quoting the report – until Avalon Rare Metals’ Thor Lake project comes on line that some balance will be restored. The report continues that, by 2015, Avalon’s 9 per cent of HREE in its project mix will begin to challenge China’s domination in HREE. “And China may well find itself importing heavy rare earths by then”.

Either way, REE will be as strategic a commodity as crude oil or food.

VM also makes another point: that while China produces 97 per cent of current REE supply, it has a far smaller proportion when total global REE reserves are added up, 36.5 per cent in fact. And it adds that in the rest of the world “massive exploration has not previously been pursued with vigour – which suggests that there are far more rare earth element deposits to be discovered”.

But the report acknowledges the significant barriers to entry – the cost of rehabilitating and re-starting old REE mines to the environmental costs of processing REE (as in Malaysia); then there is the “prohibitive cost” of mining REE as a single venture, its view being that such REE projects become profitable only if the elements are mined as by-products of some other metal, or if the elements mined are part of a much longer production and supply chain where the value-adding can offset the extractions costs.

Finally, the report says, REE are rarely discovered deliberately. In most cases, they are found while extracting other, often more profitable metals and minerals such as uranium, or gold or base metals.

The full report can be read at virtualmetals.co.uk.

 

(Writer’s note: while the matters raised in this report cover a number of issues, it occurs to me that it could be the case that many of the newer REE projects have been treated too lightly. The focus has been on the fact that new projects face a decade or more to get into production and so therefore don’t have a role to play in the supply/demand scenario through to 2020; instead, perhaps, we should be assessing them also and equally on the fact that they could – for all the time leads involved – have quite different economic outlooks in 2020 and beyond. That might add a quite different complexion to the issue. Also, it seems an omission not to consider projects other than Thor Lake as HREE sources in the longer term.)


  1. Too lightly indeed, Robin. It’s curious that an entity like VM Metals (and it’s not the first) would go to the trouble of putting a report like this together, and yet completely miss the “here-and-now” reality of the existing development landscape. I find it ironic that the report mentions Green Technology Solutions, the (very) new kid on the block that for whatever reason puts out a press release every time its CEO sneezes, while giving pretty short shrift to the the long-standing developers in this space – and then getting the facts just plain wrong (e.g. claiming that Mountain Pass will come on stream by 2011).

  2. I agree, Gareth. It seems extraordinary that they don’t give any consideration to the other advanced projects (I await the tidal wave of comments from Alkane enthusiasts) such as held by a number of companies represented on this site – Stans, for example, in the HREE space.
    But the big takeaway for me was that perhaps we should not be too dismissive of some of the early stage companies, either (not that the report makes the point – but its mention of “futuristic technologies” sparked the thought). We know it’s a long and exhausting road to production, but – on the other hand – much is going to change in the 10 or more years those companies will be working away on their projects. Many are – like in all mineral commodities – not going to see the light of day, but those that do succeed will face a very different world when they do step up.
    That factor, plus the ongoing debate about supply/demand outlooks, not to mention the fast-changing technologies that provide the reason for all this, make the REE sector so fascinating to follow.

  3. Absolutely, Robin. Whatever the economics and demands of the next 10-50 years, and whoever their future “owners” might be, those mineral deposits will be quite happy where they are, waiting for the right moment in time to be extracted :-)

  4. Byron, yes, this is a big deal. Imagine what could be unlocked if we just had a stable supply from diverse sources. Gareth always pooh-poohs the wild demand driver dynamic of innovation, but I think it’s a big deal and all these new technologies that require REEs makes me think that the sky is the limit for potential REE demand.
    Although who knows. I am rooting hard for MCP and LYC if for nothing else to show the world that yes, we will have a diverse REE supply on the market and they can plan accordingly.
    I don’t think AVL should have changed the name from Thor Lake, but is this a recent report, it’s been Nechalacho forever. Also they have approximately 22% of the HREEs.
    The ALK longs are kinda crazy and have great passion! Puts my QRM support to shame… haha. Have enjoyed your posts as of late, thanks for the contributions.

  5. @prescient11: now now… just because I am a tad skeptical of company-originated claims for new uses of materials that lack peer-reviewed corroboration, doesn’t mean that I don’t believe that there are indeed possibilities of new technologies, which will require new levels of demand for rare earths :-)
    My understanding is that Nechalacho is viewed as a subset of the overall Thor Lake deposit complex.

  6. lol, I know Gareth! When you become a raging bull going on and on about how ALK is going to cure cancer, then I shall sell everything immediately.
    But seriously though, I think going forward there are going to be very interesting R&D in the pipeline and one would think we have only begun to unlock the potential of these elements.
    Good to know they kept Thor Lake for something, I always liked that name!
    My joke about QRM’s names that Tracy joked about is that I think they were named in honor of all those brains that have toiled and suffered in this field for years before anyone was paying attention, i.e., “Misery Lake” and “Strange Lake”. Of course, only any one of us would think that’s funny I guess.

  7. argh, long day, thought you had written this. I like Robin, even with his aussie bias, but as far as recent contributions that comment was meant for you. cheers.

  8. “I await the tidal wave of comments from Alkane enthusiasts”
    Since I bought Alk at 0,30 and am holding Alkane not for trading purposes but rather for retirement a few decades down the road, I don’t really care whether they mention Alkane. What I do care about is this part:
    “But the report acknowledges the significant barriers to entry – the cost of rehabilitating and re-starting old REE mines to the environmental costs of processing REE (as in Malaysia); then there is the “prohibitive cost” of mining REE as a single venture, its view being that such REE projects become profitable only if the elements are mined as by-products of some other metal, or if the elements mined are part of a much longer production and supply chain where the value-adding can offset the extractions costs.”
    … because it tells me that my investment in Alkane is spot on:
    - diversified resource of Zirconiom, Niobium, Y-HREE and LREE, with REE only making up 40% of revenues (conservative calculation, of course, but the upside will take care of itself)
    - lots of HREE in the REE mix
    - 10+ years of research coming to fruition near term (lucky me only found out about Alkane in 2010, so I was spared a lot of frustration while waiting, lol), with a pilot plant up and running
    - 80+ years minelife even at 1 Mtpa (likely szenario, formerly know as blue sky szenario. lol)
    Add the 2 current gold projects + their early stage projects into the mix and there is very little that could kill Alkane (the share price or the company). Which is why I prefer it to most other plays out there …
    P.S. If buying at 0,3 and still holding all shares at 2,5 makes me crazy, so be it … ;-)

  9. despite recent lynas negativity with malaysia..it seems like a good final dip buying situation…everything appears via pre established”typical waste range as an industialist grade factory” declarations…just dont know if they can find something technically/environmentally wrong to halt lynas…doubt it?

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