Offering a rare earths supply chain proposition for a looming trade disruption with China
Canada Rare Earth Corporation‘s (TSXV: LL) Chief Executive Officer, Tracy Moore, has a clear business proposition to global manufacturers who depend on supplies of rare earth minerals (REEs, rare earths) to make electronic goods: we can mitigate your risk.
There are 200 or so global manufacturers who depend on Chinese deliveries of rare earths. That’s because each of the world’s 30 or so REE refineries are located in China. And almost a decade ago, China sent REE prices skyrocketing when it threatened to disrupt supplies to other nations including Japan.
For that group of REE-dependent manufacturers, they currently have three options – either take the risk on relying on a constant flow of supply from China, build factories in the world’s most populous nation, or eliminate REEs through R&D. All of those options are quite hard to do. The opening of a refinery in Laos in southeast Asia would provide a fourth option to those manufacturers, allowing REE mining projects to sell material to a non-Chinese firm, Moore said.
“You have to be aware of the supply chain issues,” Moore told InvestorIntel. “We are in discussions for concentrates on a number of fronts.”
The prospect of a supply chain disruption has returned to the fore with the growing trade conflict between China and the United States. US President Donald Trump said last week that he might apply import levies on all Chinese goods, threatening the return of protectionism to world markets. The Trump government has drawn up a list of strategic materials where the United States is dependent on certain materials, and REEs are on that list. The US may promote the development of alternatives sources of those materials.
Rare earths are often only used in trace amounts but play key roles in modern technology. Of the rare earths, europium creates the red color in television screens. Most rare earths are mined, refined and manufactured in China into television sets and PC monitors, while others find their way into hybrid cars and wind turbines.
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The building of a 250,000 square-foot refinery in Laos started 8 years ago and has been effectively ready for the past 5 years, but has been held up by the lack of an operating permit. The delay may have emanated from environmental setbacks that Australian producer Lynas Corp. has had with its refinery in Gebeng, Malaysia. Canada Rare Earth has an agreement in place with the plant’s owners to acquire a stake in the refinery as and when the permit is granted. Moore said the company understands that the permit is forthcoming.
Canada Rare Earth is already an active player in the global REE market. The company sells REE concentrates and has a longstanding relationship with Singapore-based commodities trading house Noble Group. The company has sold REEs to manufacturers in Canada, Europe and the United States.
With a capacity of 3,000 tons a year, the Laos refinery would process about 2% of the world’s supply and would be a game changer in terms of global supply and demand, Moore said. The company plans to add more refinery capacity in the future, as and when the initial step of operating the Laos plant is completed, he said. The company may also get involved in some mining activity, but would mainly act as a conduit for miners to get their ore processed.
Matt Craze works with New York-based management consultancy 10EQS and is the founder of Spheric Research, a firm dedicated to global seafood industry research. Matt ... <Read more about Matt Craze>