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.
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.)