Alkane’s Chalmers sees positive REE market signs; Indian output near to start
He bases this projection on two factors. One, those end-users who started building stockpiles in 2011 are now running them down, and in many cases may be close to having run them down entirely. Two, an improvement in the global economy should see a lift in all the applications for rare earth elements, from television sets to computers to wind turbines.
One problem which has been weighing heavily on the market is the dumping of REE by the smaller and medium-sized Chinese producers. He says the information coming out of China suggests that some of these producers are selling at less than cost, and this has forced down prices and generated so much pessimism in the sector.
“It’s always been a complex business — and it’s even more complex now,” says Chalmers. The divergence has kept growing in regard to the saleability of the various elements. Those companies trying to sell the lights, especially lanthanum and cerium, have the hardest job of all. And then you have the factor of the inter-relationship: a miner may have to keep on producing those two lights as part of the process of also extracting the neodymium and dysprosium, so that all impacts on overall revenue.
As for Lynas Corp setting minimum prices for their output, Chalmers says it was a brave move, but he understands why they had to do it. “Someone had to take the lead,” he adds. In other words, producers cannot allow a situation where prices erode to such an extent that it threatens viability.
Take yttrium: it was selling at between $80/kg and $90/kg a year ago. Chalmers says it is fetching around $20/kg at present, not too far above production costs. And lanthanum and cerium are bringing in less than $10/kg. Dysprosium FOB out of China is now $500/kg, less than half of what it was fetching 18 months ago (and being supplied to Chinese buyers at RMB1,200, or about $196/kg).
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Chalmers believes the transition by which we will see more non-China production is going to be slower than was expected a couple of years ago, and it may take as long as three years out before we see a critical mass of non-China output.
Chalmers also makes the point that, while the mining end of the business has been suffering, the other end — the end users — is in fairly good shape in terms of demand for electronics and cars. But, with Lynas and Molycorp in operation, he cannot see much room for more addition production of the light rare earths, especially if anyone has a mind to add 10,000 tonnes or more a year.
So far as Alkane’s Dubbo project in Australia is concerned, he is reasonably relaxed: about 50% of revenue is coming from zirconium and niobium while the company expects to sell all the rare earths, including the approximate combined total of 2,500 tonnes a year of lanthanum and cerium, along with all the neodymium and praseodymium, and that the shortages of dysprosium and terbium will continue. Alkane’s production levels are modest enough that they will not create market issues, he adds.
It’s been a long haul for Alkane. They acquired the Dubbo project in 1987, started work on the rare earths in 1998 and persevered even though, by 2002, as Chalmers says, you could not have given away rare earths (fortunately the company had it gold mine to keep revenues flowing). Then in 2005 the company really ramped up work and by 2008 had its pilot plant in operation.
Now there’s just the matter of raising that $1 billion for development. Chalmers is confident; there are no technical issues at Dubbo, the company is in good shape financially, and he hopes the financing will be in place in time for the start button to be pressed about this time next year.
RARE EARTHS: Talking of non-China production, the Nikkei news service says Indian output of rare earth metals will get going this northern autumn when the Toyota Tsusho Corp.-Indian Rare Earths Ltd joint gears up to supply 4,000 tonnes a year to Japan.
Nikkei says the operation should be at full capacity by the end of 2013. Indian Rare Earths will extract the uranium and thorium and the Toyota arm will refine the rare earth metals, including neodymium. The report reminds us that start-up has been delayed by disagreement between the partners on pricing: the Indians wanted prices set above present market levels, but the Japanese argued this would ensure financial losses. The impasse was resolved during talks between the two prime ministers, Shinzo Abe and Manmohan Singh, when they met last month. The Japanese stressed that the Indian operation would have to compete on price with Lynas and Molycorp, an argument which Nikkei says brought the Indians around to an agreement.
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