EDITOR: | October 27th, 2014 | 31 Comments

Hostilities between China and Japan heat up in the American Courtroom over Patents

| October 27, 2014 | 31 Comments
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From the point of view of China — Japan is the number one competitor/impediment to its total domination of the global rare earth industry at its currently most profitable point, the manufacture and sale both of the components and of the myriad of consumer devices enabled by the electromagnetic properties of the rare earths.

China-Japan-Patent-WarThe economic system of the People’s Republic of China is described in English with a translation of a common Chinese usage by the phrase  as “Capitalism with Chinese Characteristics,” the purpose of which (Capitalism) is to support “Socialism with Chinese Characteristics,” the purpose of which is to ultimately create a self-sustaining economy for a Communist China. The 100 million members of the Chinese Communist Party elect from their membership a Central Committee, from whom are chosen the “top” (“Top” is a favorite word in English translation of the Chinese term for ultimate holder of authority-the ancient Romans called this authority “imperium”) leaders with 10 year terms who sit on the “State Council,” euphoniously described as “China’s Cabinet” by the Western press. Theoretically China is “governed” by this council, but its “chairman” and the “chairman of its military committee” are normally the top decision makers. Today both of these positions are held by one man, Xi Jinping, who has just published a book called (in official translation) “The Governance of China.”

In this book he emphasizes that the most important job for a Chinese leader is to ensure the growth of Chinese wealth and power to insure stability (i.e., the continuation in power of the Communist Party) and tranquility (i.e., a satisfied proletariat). The levers of power to affect both goals are securely in his hands.

Xi Jinping appears to have decided that the continuing  drop in the growth of China’s GDP from year to year from its lofty double digit level to its present level of 7.5% cannot be sustained even at that level without a major change in its focus. Up until now, and for the last 25 years, since Deng Xioping put it onto its present course, China’s economy has been driven by exporting its advantages in the cost of labor. The immense amount of money earned by China’s economy through this strategy has gone to build in just one generation an infrastructure of material and intellectual wealth that no other nation in history has achieved in such a short time.

The quality of life of the average Chinese person has improved so dramatically in the last 25 years that China has just now surpassed the USA in what the IMF calls purchasing power parity (PPP). PPP is a measure of the quality and quantity of goods and services a citizen of a country can buy with an average income. The United States had led in this category since the late nineteenth century.

The world’s mining industry has been, in my opinion — most directly affected by China’s growth in the last generation. Today 60% of all of the new metal produced in the world flows to China. The most striking result of this Sino-centric shift in the demand for metals is the simple fact that today —                              in 2014, China produces one-half of the world’s steel and directly exports as raw steel-only 10% of that figure. Detailed and thoughtful discussions of the impact of the rate of growth of the Chinese economy upon the world’s iron miners permeate the press coverage in resource-focused export economies such as those of Canada, Australia, Brazil, and India. China imports more than half of its needs for iron ore from those countries, because their deposits are larger and of higher grade and better mineralogy than most of those of China and thus require less energy to be fashioned into steel.

It is the same for most other base metals such as aluminum, chrome, manganese, and aluminum.

However superficial and uninformed reporting has confused investors into thinking that China has all along planned to monopolize the production of key technology metals such as the rare earths, tungsten, molybdenum, and antimony to facilitate Chinese military and economic power. In fact China has adopted as its economic planning has developed, the most efficient technique of maximizing its domestic resources of materials, labor, and manufacturing capacity along with the immense position in the reserve currency, the U.S. dollar, which it has acquired. This technique is the monopolization of the production of goods for which it has or has developed a monopoly of critical raw materials in particular of technology metals. The purpose of this monopolization is to create and maintain a self-sufficient Chinese domestic economy.

China is now restructuring its economy away from its total dependence on savings, infrastructure development, urbanization and exports to one driven by domestic consumption and individual credit expansion.

Chinese government policy has until now fiercely protected jobs. It is now moving to insure that protection by protecting industries. This protection means first of all the restructuring of predominantly private industries from the chaos of cowboy (unrestricted and unregulated) capitalism with its ruthless overbuilding of capacity and the bloated inefficiencies, and then, now, of massive state owned manufacturing enterprises with their widespread corruption. The new paradigm is lean and mean efficient enterprises that protect jobs as well as Chinese critical natural resources and recognize that domestic conservation is served by consuming those same resources in balance with recycling and overseas sourcing.

Perspective is the key to objectivity. Neither sound-bites nor word-bites alone can ever provide the necessary breadth of perspective.  We all “know,” for example, that until Molycorp and Lynas (?) went into production in the last two years, 2012-14, it was China (since the late 1990s) that produced 95-97% of all of the rare earths utilized by global industry in the twenty-first century. I fully expect to see stock market promoters soon telling us that China’s share of the legal and official production of rare earths for calendar 2014 will have dropped to 85% of the world’s total due to the ramp up of Molycorp and, perhaps, of Lynas. This drop-off in Chinese production, if used to promote the “success” of non-Chinese producers, will be misleading either purposefully or through ignorance.  At the same time another “cause and effect” story making the rounds has it that China’s “crack down” on illegal mining (and refining!) has been the cause of the downgrade in overall “reported” rare earth production.

China has in fact reduced its “allowed” production (quota) for rare earths to just over 100,000 metric tons for calendar 2014. In recent years the official, legal, reported production had been as high as 130,000 mt. But today for a number of reasons, the chief of which are lessened demand and a comprehensive total rare earth industry restructuring (read: “downsizing”), China is reducing its production of rare earths. This reduction is not symmetric by which I mean it is not the same reduction proportionately for all of the rare earths. The light rare earths cerium and lanthanum, which constitute on average 80-85% of all large rare earth deposits are not only in surplus but are probably only being produced today in China so that the neodymium and praseodymium, critical for the production of the most common rare earth permanent magnets, the NdFeB type, always co-produced with them, can continue to be produced in quantities that the REPM market requires.

The perspective from which to evaluate this change in the structural demand for the rare earths is that of the geopolitical aspects of the global rare earth permanent magnet industry, which accounts for at least 50% of the revenue derived from rare earth enabled products. North Americans seem to have a distorted view of this most important segment of the global rare earth industry.

Since 2007 I have been watching closely as Molycorp, in my opinion, patched together, seemingly at random, and, in any case, inconsistently, an attempt to create and establish itself as a vertically integrated total rare earth permanent magnet, REPM, supply chain company that would enter the market most profitably as an REPM manufacturer. This business model, not visible at the beginning of the revival of Molycorp in 2007, was born, I believe, out of a kind of desperation to keep up, and be “current,” and be “relevant,” which desperation came from an early realization that just supplying both individual separated and customer-specified blended “oxides” was not a viable business model/plan. Molycorp’s business model’s inconsistency now looks to be drawing to a close as its mine bleeds cash and erodes the value of its wholly owned subsidiary, Magnequench, the successor in interest to the last  of the partially integrated North American originated rare earth permanent magnet manufacturers, Neo Materials Technologies, formerly of Toronto, Ontario, Canada, and now known as Molycorp China.

Only in China, until Molycorp’s acquisition of Neo Materials, were there ever genuine integrated total rare earth supply chain companies that produced REPMs and were anchored on mines. But the Chinese companies had grown (logically(?)) over decades of brutal competition beginning with large successful (defined as profitable) ventures in mining, such as Baotou, or in REPMs, such as GQD and integrating downstream (Baotou) or upstream (GQD) with careful analysis of the targeted acquisition’s skills, markets, and managements before making the acquisitions. The Chinese integrated ventures were anything but random and inconsistent. They were however overoptimistic. Today independent (i.e. not part of vertically integrated ventures) Chinese REPM manufacturing has vast overcapacity, but it must also be noted that the independent Chinese REPM manufacturers still produce the majority of Chinese made REPMs.

I have come to realize that all of the subsequent puffing during the last seven years by the junior rare earth miners about each of them creating a total rare earth supply chain, anchored of course on their undeveloped deposits, was done in blissful ignorance of the real deployment then and current status now of the details of the technologies and markets of such well-developed industries as the global rare earth permanent magnet manufacturing industry. The idea, as a business model for a North American junior rare earth venture, of such a vertically integrated total supply chain by a non-Chinese rare earth mining venture was first announced by Great Western Minerals Group in, I believe, 2008-10. The concept was called “Mine to Magnet” by GWMG. In 2010, shortly after an aborted attempt by Molycorp to buy GWMG, Molycorp’s original CEO, Mark Smith, announced that Molycorp’s business model was to create a “Mine to Market” vertically integrated total rare earth supply chain  company described as one that would be producing rare earth permanent magnets as a focus. This target was reinforced by immediate announcements about “relationships” with Hitachi, then as now the world’s largest REPM manufacturer.

The majority of the 250 or so rare earth juniors after that time adopted the “mine to market” strategy even though that was, at a time when none of them even knew what rare earth separation was or what it entailed. They believed that the “market” was in fact the one for mixed concentrates out of their planned hydrometallurgical operations. They, the juniors would produce them and (another) “they” would buy them. None of them that at that time, or until actually very recently, that I knew of, ever said their goal was to produce rare earth permanent magnets except for GWMG, and, by actual practice, Molycorp. I have always referred to this business model as the “The Field of Dreams” model.

I just recently (On Weds, October 1, 2014) spoke at and moderated a panel at the CWIEME, the Coil Winding Expo, in Chicago. This is a gathering of the world’s companies that make the equipment to produce, as well as the components (including REPMs) themselves of, electric motors and generators. This international group is now more than ever concerned with the security of their supplies of rare earth permanent magnets and even the Chinese members of this trade association are concerned with the security of the supplies of the rare earth magnet metals, neodymium, praseodymium, samarium, terbium, and dysprosium and the alloys of them from which all REPMs are made

China’s rare earth permanent magnet manufacturing industry, which accounts for 80% or more of the world’s annual production of rare earth permanent magnets is in an existential crisis. There are several reasons for this including:

  1. China’s economy,
  2. Overcapacity,
  3. Reorganization of their supply base, and
  4. Raw material uncertainty

In the real world of industrial demand, not the one described in the junior mining share promoting financial press, the Japanese Global1000 company, Hitachi, dominates the REPM industry technologically. In fact the total of all of the Japanese REPM makers or their subsidiaries, JVs, and licensees (outside of as well as in China) make nearly half of the globe’s REPMs (Although it must be noted here again that 80% of the actual manufacturing of REPMs is in China). Hitachi scientists first developed the commercial forms of REPMs and put them into mass production. These events happened over a period beginning in the late 1970s and allowed the miniaturization of electrical and electronic devices and allowed the largest and heaviest components, such as electric motors, speaker magnets and displays, to be replaced by much smaller and lighter components based on the electromagnetic properties of the rare earths. The consumer products we take for granted today as relatively inexpensive and small enough to be non-obtrusive exist courtesy of the magnetic and electronic properties of just a few of the rare earths principally neodymium, praseodymium, samarium, europium, terbium, and dysprosium. If any rare earths are critical in 2014 and the near future it is these six.

Using a patent strategy to get around Western anti-trust/anti-monopoly laws, for which strategy some American companies are famous, Hitachi Metals built up a patent portfolio from the very beginning and has continued to file patents on the composition of and the manufacturing processes for REPMs up to the present. Today it holds several hundred active patents, although many of the key original ones are expired or are in their final months of coverage. Hitachi continues to file new patents, partly, I believe, in the hope of being able to confuse the issue of the expiration of the key ones. This exact strategy it should be noted has allowed America’s Corning Glass to dominate the manufacturing and sale of the synthetic cordierite “honeycomb” substrates for automotive exhaust emission catalytic converters for more than 35 years. In the case of Corning, however the company has been issued more than 5,000 patents for compositions and methods of manufacturing them. Hitachi has “only” 600 for the NdFeB REPM.

Hitachi’s strategy has worked well up until recently, so that even though China’s REPM industry is in aggregate  larger than that of Japan’s the only suppliers of mass produced REPMs that are able to supply to the Global1000 supply chains have primarily been Japan’s Hitachi and the relatively few holders of “Hitachi licenses” mainly in China.  This is because  although it has been Hitachi’s tactic to go after, aggressively, for patent infringement, those who it believes have infringed on their patented compositions or manufacturing technologies this has been in practice done only if they, the alleged infringers, are targeting large volume, Global1000, end-use customers. This tactic has worked to keep the most lucrative high volume contracts in the hands of Hitachi and its licensees.

Until quite recently Japanese REPM manufacturers, other than Hitachi, were reluctant to outsource production and opposed the outsourcing of the production of patented and proprietary REPMs to China in particular, because of their concern with not creating competitors and in particular their belief that proprietary knowledge (i.e., “know-how”) could not be protected effectively in a Chinese toll-manufacturing setting. But the rare earth raw material squeeze, which entered high gear in the 11th five year plan, 2011-2015, forced even Hitachi to move some of its own production to China to make sure that the priority access to raw materials given to Chinese owned manufacturers did not become a major disadvantage. Hitachi’s fear was that given the choice between being shut down or “re-engineering” their REPM specifications to allow for “unlicensed” Chinese REPMs even the Japanese car and appliance makers in China would themselves re-engineer, much less the foreign and Chinese manufacturers producing mostly for the export markets.

Up until now American car makers have refused to re-engineer REPMs just to get lower prices for fear of a perceived Chinese lack of credibility in engineering to their specifications and the Chinese lack of experience in just-in-time supply chain maintenance in the North American market.

An alliance of 7 Chinese REPM manufacturers with a combined capacity of more than 3 times the total demand of the North American OEM automotive industry is determined to break the Hitachi patent monopoly with high volume customers.

The alliance was formed specifically to “break” the Hitachi monopoly by having their patents rescinded or narrowed in their coverage.

The Chinese REPM manufacturer’s alliance is not a marketing group; it has specifically been formed to clear the way for Chinese owned and operated REPM manufacturers to set up marketing operations outside of China, primarily in the USA and Europe, and go after high volume REPM customers with their own patented and proprietary  REPM technology. If and when this goal is achieved-and it is going the way of the Chinese litigants in the US Patent Court-then the alliance members plan to immediately set up marketing operations in the American market and then, if and only if, domestic supplies of their critical rare earths, particularly of the heavy rare earths dysprosium and terbium are available outside of China, to build manufacturing facilities in the USA using domestic American raw materials.

This program applies to Europe, an even larger market for REPMs than the USA, also.

Note well that such manufacturing outside of China using non-Chinese materials will not interfere with, it will in fact accelerate, the Chinese focus on utilizing their domestic raw materials increasingly for manufacturing for domestic consumption.

Such overseas expansion would reduce the pressure on the overcapacities in the Chinese domestic REPM manufacturing market and would create a flow of capital (in profits) into China at a time when such flows from exports are to be reduced.

Of course this business model by Chinese REPM manufacturers does not impact the non-existent US REPM manufacturing industry. It is however a direct threat to the Japanese REPM manufacturing industry, which is the dominant player in the USA today. The same is true on Europe although Europe has a fair size REPM manufacturing industry, but the influence of the “Hitachi patents” is much less in Europe today as the principal ones have already or are soon to expire.

America’s, Europe’s, and Australia’s heavy rare earth themed “juniors” stand to benefit from a victory by the Chinese REPM manufacturing industry in its contest with the Japanese, because it is much more likely that the mature Chinese REPM industry will enter the US market at price points with which domestic manufacturers dependent as they are on Chinese raw materials at “export prices” cannot compete.

Chinese investors who are well aware of the changes in their government’s attitude in this area are already openly investing in juniors with significant heavy rare earths such as Australia’s  Northern Minerals Limited (ASX: NTU) and Greenland Minerals. North American and European investors and even large Global1000 end-users profess to be well aware of the problems of rare earth supply yet they are reluctant to capitalize the solution to the problem through mine development. Chinese investors have no such problem, because they have a home market ready to accept all of the SEGs and HREEs and, I suspect, the neodymium and praseodymium that can be produced outside of China in profitable mixes of elements.

China already has a large total supply chain for rare earth enabled devices such as magnets, phosphors, alloys, and lasers. But China is seeing the growth of demand in the export markets pitted against the growth of such demand in its domestic markets. In either case shortages of SEGs and HREEs and even of neodymium and praseodymium have either already become apparent or are looming.

No one anywhere is going to build capacity to make rare earth metals and alloys and REPMs until and unless the supply of neodymium, praseodymium, terbium, and dysprosium is assured and secured for a reasonable foreseeable future.

Non-Chinese investors who wait-and-see are going to be left out of the future profits from the growth of the rare earth utilization industry.

Australia’s Northern Minerals and Greenland/Denmark’s Greenland Minerals are already under way because their national governments have welcomed Chinese investors. But both of them have to overcome hurdles of infrastructure and process reagent supplies (more so in the case of Greenland Minerals than of Northern Minerals).

Much easier HREE themed projects to develop such as:

  • Tasman Metals Ltd. (TSXV: TSM | NYSE MKT: TAS),
  • Ucore Rare Metals Inc. (TSXV: UCU | OTCQX: UURAF)
  • Rare Element Resources Ltd. (TSX: RES | NYSE MKT: REE), and
  • Texas Rare Earth Resources Corp. (OTCQX: TRER)

Are in need of investment to develop their deposits into mines.

Investors need to be aware of the fact that disruptive technologies based on long understood and long practiced chemical principals are close to commercialization in North America. These newly applied technologies will sharply reduce the cost both of increasing the efficiency of hydrometallurgical extraction of desired values from ore bodies and of separating and purifying the individual elements in closely related mixtures such as those of the rare earths or of the platinum group metals.

I know that North American and European technology allied with North American, European, and Australian capital could turn both America and Europe into producers of rare earth alloying elements and rare earth magnet alloys to rival China in total volume by 2020.

I in fact think this is exactly what is going to happen, but It is up to the institutional investors of North America and Europe whether or not this new volume of material flows to Asia bringing raw materials and profits to Chinese investors or ignites a revival of high tech rare earth based manufacturing in North America and Europe of finished goods.

China is determined that ultimately North American and European high tech that is not manufactured in China should not be available competitively to the Chinese domestic market. They can make sure of this now simply by buying control of the rare earth juniors named above. They have already begun with Greenland Minerals and have a strong position in Northern Minerals.

But we have a short breather; China first target for elimination from the global market for manufacturing high tech devices enabled by the electromagnetic properties of the rare earths is Japan.

China just this week inaugurated a new Asian international development bank to promote investments in infrastructure with a 100 billion dollar initial capitalization. China has pledged 50% of the bank’s first capital. Neither Japan nor South Korea have joined in this effort.

Follow developments such as these before you follow the herd away from or towards the flavor of the moment.

Devices enabled by the electromagnetic properties and the alloying properties of the rare earths make our life style and our safety secure. Don’t let either one of these slip away from our control.


Jack Lifton

Editor:

Jack Lifton is the Sr. Editor for InvestorIntel Corp. and is the CEO for Jack Lifton, LLC. He is also a consultant, author, and lecturer ... <Read more about Jack Lifton>


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Comments

  • motherearth

    Nice article Jack, two questions, can the “Field of Dreams’ be pulled off by Great Western and you mentioned GQD in this piece, is this the same GQD Great Western has a JV with?

    October 27, 2014 - 3:33 PM

  • Daniel

    Asian Infrastructure Investment Bank. We live in interesting time. As the new competitor to Bretton woods formed World Bank and Asian Development Bank they can undercut and out finance all projects on infrastructure in the world requiring a feasibility study for Pension, Insurance and Private Funds in PPP partnership. By increasing the geography to include all of Eurasia to Africa to create a market where patents do not exist they rebuild the old Silk Road and form a new World Order that combines the military technology in Shanghai Cooperation Organization with a free trade zone Regional Comprehensive Economic Partnership. The US have certain mistakes that combined Russia India Iran and China together to create a new SWIFT system dual banking system and bypass the USD for international payments with S.Korea and Australia racing to become the next Yuan Hub. The Big Picture is to create a market the size of Eurasia and Africa where the currency is RMB and demand for consumer goods. The Miracle that brought 1.2 billion people out of poverty is about to go global to lift half the world’s population out of poverty and China will pay for the transportation linkage investment to build the railroads to connect them all.
    Technology as an American “Dream” is a false dream when technology doesn’t work like the missile defense shield on supersonic solid fuel missiles. The technology for Ucore and RES might as well be financed by “BUY AMERICAN” which the US lost in WTO because Trillions of USD out of the US is coming home.

    October 27, 2014 - 3:54 PM

  • Jack Lifton

    Motherearth,

    To the best of my knowledge the relationship between GWMG and GQD was broken off last year when GWMG found that the cost of building a small SX facility would be 60+ million USD rather than 30+ million USD. I was told that GQD found out from the Chinese government that in order to go ahead it would have to use an “approved” (by the Chinese gov’t) Chinese contractor rather than doing the work itself. The additional costs I was told sank the project. GQD is a very good company and is totally vertically integrated, and I think it wanted to go forward, but…

    Jack

    October 27, 2014 - 5:40 PM

  • motherearth

    Jack I would love to know where you got that info, if you look on GWMGs website GQD is still part of their corporate structure.

    October 27, 2014 - 6:10 PM

  • David Mortimer

    Ucore is moving nicely into the frame and timing its run perfectly for the up take in REE.

    October 27, 2014 - 6:24 PM

  • merlion

    Jack, love your work. Your very last line was a gem. “Devices enabled by the electromagnetic properties and the alloying properties of the rare earths make our life style and our safety secure. Don’t let either one of these slip away from our control.”

    Last year I attended a Futurologist’s take on the future rate of invention that wil lead, in due course, to those kinds of life-changing devices you allude to.

    Naturally, he cited “Moore’s Law”. What made my jaw drop was academia’s assessment of where we are right now on the Moore’s Law map.

    He argued that the Moore’s Law map is a chessboard. Starting at row 1, bottom left, and first moving to the right, each move of one square represents a doubling of new patents for new device intelligence.

    As of today, we’ve done 3 rows and a few squares. Math nerds will tell us what all that doubling has amassed numerically. And what’s the patent count when we’ve moved to row 8?

    We have not crossed the chessboard’s equator!

    What might that do to the outlook for RE Miners, SX labs, alloy makers and Japanese gadget engineers?

    October 27, 2014 - 6:55 PM

  • jack cummins

    Jack- you still don’t, or want, to write about Stans Energy. Why don’t you examine why the Chinese are trying so hard by bribing Kyrg government officials to take away Stans mining license? You call it the old,run-down, out-dated Russian mine and equipment. But it is the only mine outside of China that has produced HREE, and 80% of the Russian rare earth requirements. There is a VERY REAL BATTLE going-on for control of Stans’ license and mine by the Chinese. Now Stans has relationships with Russian investors and hopefully will be able to retain its’ mining license. I believe you are missing a really big story here. Yes, the mine is old and located in a country whose government is unstable; mainly caused by bribery of Kyrg officials by the Chinese. But the mine contains HREEs and Stans, with Russian technology has the old processing plant and ability to process the “hard rocks.” I am asking you to; PLEASE look-into the Stans story. You are highly respected and widely read. The Rare Earth industry,companies, and governments need to know what is going on in Kyrgystan

    October 28, 2014 - 5:43 AM

  • Mortimer

    I think Jack has talked about Stans before but because of their current situation there is not much point talking about it unless they sort out the license with the kyrygs . I agree with your sentiments and all is factual but at least Stans has won an extension in the Canadian courts on seizing Centerra shares owned by the Kyrg government watch this space….

    October 28, 2014 - 6:51 AM

  • Bill Keenes

    Excellent article, thanks Jack.

    You stated (and I agree) …… “No one anywhere is going to build capacity to make rare earth metals and alloys and REPMs until and unless the supply of neodymium, praseodymium, terbium, and dysprosium is assured and secured for a reasonable foreseeable future.”

    ……….. this really puts it into perspective.

    October 28, 2014 - 7:34 AM

  • Tim Ainsworth

    “America’s, Europe’s, and Australia’s heavy rare earth themed “juniors” stand to benefit from a victory by the Chinese REPM manufacturing industry in its contest with the Japanese, because it is much more likely that the mature Chinese REPM industry will enter the US market at price points with which domestic manufacturers dependent as they are on Chinese raw materials at “export prices” cannot compete.”

    Jack, would you mind expanding on that one given:
    1. The WTO ruling finding Chinese tariffs “illegal”, theoretically leaving the Chinese VAT partial rebate as the major price difference. Mooted production taxes could also be partially or fully rebated but that’s purely speculative at this point.
    2. Of your ROW preferences one is using $845kg Dy pricing in their PEA, the other $724kg for Dy in a 92% TREO mix, both more than 2x current pricing.

    Looks more to me that it is the ROW HRE juniors that will struggle to compete, particularly post WTO implications.

    October 28, 2014 - 9:04 AM

  • Jack Lifton

    Tim,

    There simply isn’t enough terbium and dysprosium being produced, and it looks like China cannot and will not increase the production of these. In addition it also even looks like there isn’t enough neodymium and praseodymium to meet the projections of future growth in demand for them. This applies not only for the REPM magnet industry but also for the the nascent and would-be-substantial aluminum and magnesium high strength alloy industries.
    The Chinese are well aware of this problem of shortage, and, as I said, are moving into investment in non Chinese sources.
    I am not a conspiracy theorist, but I have become suspicious of the low prices of the heavy rare earths, in particular, this year. In a transparent world I would ask China’s national government if it is paying higher prices to producers for the national “stockpile” and then having material directed, instead of to the stockpile, to selected end-users (or at least to the metal makers) at lower “advertised” prices. I don’t know, but China’s goal is to keep the most profitable aspects of the rare earth supply chain domestically in China. What better way to do that than to make certain that overseas production of critical rare earths cannot be economical, and at the same time make overseas investments in rare earth mining that non Chinese investors will not make due to low prices for rare earths.
    To break China’s monopoly we need a market, backed by physical metal, outside of China, and a total supply chain outside of China. China knows this and China also knows that Western demands on capital for a “quick” return are of no consequence in a country that measures time in five-year ticks of the clock.

    October 28, 2014 - 9:47 AM

  • motherearth

    Good morning Jack, you have talked about rare earth juniors to go the way of a toller to do their processing. Mintek is developing a centralized processing facility in SA and they will also import radio-active material , some companies have piles of tailings just waiting to be processed, sounds like this might be the way to go? Could I please get your thoughts on this? thanks Rare Earth Element Extraction Plant
    Posted by Mintek Web Administrator on Oct 24, 2014
    Back to List
    MINTEK’S HYDROMETALLURGY DIVISION is involved in a number of rare earth element processing projects. In addition, they are also developing a sustainable flow sheet for a centralised processing facility. Read More… Rare Earth Element Extraction Plant

    October 28, 2014 - 10:27 AM

  • Jack Lifton

    Motherearth,

    I have been expecting this announcement for some time. I have clients not only in the rare earth sector, but also in the platinum group metals sector, in which sector Mintek is also active. I am reluctant to say that this solves the “next step in the value added chain” for GWMG, Frontier, or Namibia (or Montero) under their current business models and management, but I will say that this should be a wake-up call for North America and for Australia.
    Let’s see what the feedstock requirements turn out to be for Mintek’s facility and let’s see the purity and quality of sustained output before we decide that Mintek is a central processing player. Radioactives will still have to be managed at the minesite(s), and South Africa like Brazil regulates the production and transportation of radioactive materials closely.
    But to be fair. This looks like a very good move.

    October 28, 2014 - 10:44 AM

  • motherearth

    Mintek says they can import radio active material, would that not mean scooping up the tailings and sending them to Minteks facility to be processed?

    October 28, 2014 - 10:54 AM

  • Jake

    Mother Earth,
    My understanding is that GW has a license to store thorium but I doubt any radioactive material can be transported out of steenkampskraal. (Don’t want to get into the same mess as Lynas) So GW still has to build the (pilot) plant to process the tailings so they can get to Mintek .

    Feel free jack to correct me if I am mistaken.

    Jake

    October 28, 2014 - 11:38 AM

  • motherearth

    Jake we are talking about SA , Mintek clear says they can import radio active material , that tells me bring it in and we’ll do the processing for you. GWG could likely take their tailings to Mintek for full processing .

    October 28, 2014 - 12:28 PM

  • Jack Lifton

    Motherearth and Jake,

    I disagree. One of the pluses of SKK was that, as I was told, it could be used to store the thorium residues from its own mining and, I was told, also, that of others that “could be legally transported to the site.” One cannot make an all encompassing statement such that since Mintek says they have “permission” to treat thorium bearing material this means that thorium laden concentrates and residues can simply be transported to and from Mintek’s proposed site. In fact he issue always is the radioactivity of the specific material transported. There are international standards for this along with (in many cases stricter) intra-national standards. The majority of ore concentrates in fact CANNOT be transported internationally or within their country (State, Province) of origin unless they have had their U/Th content reduced to below the lowest applicable standard. South Africa, the only nation in history to have built and then decommissioned a nuclear arsenal, is particularly strict on transportation and disposal of radioactive materials.

    Jack

    October 28, 2014 - 12:57 PM

  • Michael

    Prices in China are set to rise in the near term. Beijing has announced a more serious crackdown and if the statistics are correct 40% of the Chinese rare earth supply is illegal. If this new crackdown is successful supply will decrease and this effect could be substantial. On the demand side of the equation, rare earth shipments are being sent to the State Reserve Bureau. There is a recent strengthening in the prices and demand for terbium and dysprosium. I predicted a price rise over the course of 2014, although it looks to be a 2015 event.

    October 28, 2014 - 6:44 PM

  • Gwgtozero

    Jack, please comment on Stans Energy’s situation. And why are you ignoring the questions asked by jack cummins and Mortimer? Answer the question. Or pleased let us know that I you respectively decline.

    October 28, 2014 - 7:53 PM

  • Mr keen

    There isn’t much to say about stans. They are going to zero. Run away

    October 28, 2014 - 8:17 PM

  • Greg

    C0pied directly from Mintek’s website. Note sentence regarding registered to….

    Rare Earth Element Extraction Plant
    MINTEK’S HYDROMETALLURGY DIVISION is involved in a number of rare earth element processing projects. In addition, they are also developing a sustainable flow sheet for a centralised processing facility.
    According to Dr Leon Kruger, Manager at the Hydrometallurgy division, Mintek holds a unique position within the rare earths sphere, providing services across the entire R&D spectrum, from mineralogy through to metal. As far as I am aware, no other research institute can offer the full range of services for this niche sector. We also have strong modelling capabilities across the entire process and are registered to
    acquire, possess, use, transport, import and export radio-active material which is critical when dealing with rare earths, which in many instances contain thorium and uranium.
    No other R&D facility can offer the same capabilities as our recently commissioned REE Extraction pilot plant. Mintek’s REE solvent extraction plant, built for the fractionation of the REE groups and the isolation of individual REE clearly demonstrates Mintek’s ability to process rare earths from beginning to end, with minimal operational expenditure. It is evident that rare earth element capabilities at Mintek are becoming increasingly recognised, locally and internationally. Since the 1970’s, Mintek has been involved in almost every REE project in Africa, providing a variety of testing and verification services to multiple juniors in South Africa, Namibia, Tanzania and Malawi.

    October 28, 2014 - 11:01 PM

  • motherearth

    Jack what do you think? It clearly says that Mintek can transport and import radioactive material (thorium and uranium). Now the cost would all depend on how far it had to be shipped, so that being said the SA government must have given them the go a head to transport this radioactive material. Thank you again and have a nice day!

    October 29, 2014 - 9:34 AM

  • Gwgtozero

    @mr keen: Haters gonna hate

    October 29, 2014 - 10:41 AM

  • Mr keen

    Jack can you read Greg post and reply to mothers question? Could you be wrong? You were wrong about the rare earth sector this year. It’s ok we all get things wrong sometimes.

    October 29, 2014 - 12:10 PM

  • Mortimer

    What do you think of UCORE recent presentation Jack , it seemed very upbeat and looks like they are confident of a solid timeline now.

    October 29, 2014 - 12:59 PM

  • Mortimer

    Stans is in a game of cat and mouse with the Kyrygs at the moment , we know that the Chinese are behind all of Stans energy troubles because of bribes paid to some rather nasty members of the Kyryg parliament but hopefully the massive 118 million $ arbitration award and the seizing of centerra shares in the Canadian Ontario court will focus their minds and make them more open to negotiating a deal with stans that will be to every ones benefit….then maybe Jack will start to believe in Stans merits as one of the best REE mines outside of China ………….

    October 29, 2014 - 1:06 PM

  • Cem

    I suppose, Jack’s observation;
    ‘North American and European investors and even large Global1000 end-users profess to be well aware of the problems of rare earth supply yet they are reluctant to capitalize the solution to the problem through mine development.’
    and plea;
    ‘Devices enabled by the electromagnetic properties and the alloying properties of the rare earths make our life style and our safety secure. Don’t let either one of these slip away from our control.’
    has been acknowledged and is on its way to be met by two Western financial backers prepared to back up Peak Resources Ltd’s Ngualla rare earth project, in Tanzania, as per the recent announcements.
    Good news I would say…

    October 29, 2014 - 1:17 PM

  • Tim Ainsworth

    Jack, sounds like a couple of levels of conjecture.

    In the meantime the company with the question mark, subject to execution of course, is poised to deliver circa 5300tpa NdPr to the open market, probably representing 12% global NdFeB inputs, and perhaps 35% of Chinese illegals, taking a line thru Kingsnorth’s latest intel: http://www.youtube.com/watch?v=vxp-nNFP8iI

    Same question mark has the capability to deliver 55tpa DyO (subject to recoveries of course) via La Rochelle.

    Not discounting the metals stage but running a line thru Siemens statements re Dy thrifting to the point of 0.7%, and falling, it would appear the question mark has the capability to deliver the complete NdFeB suite to approximate 12% current global demand.

    Not 3/4yrs hence, not subject to feasibility studies based on historical pricing or conjecture, not subject to financing or construction, but 2015 based on successful execution.

    BTW, same question mark has the capability to deliver 35% global Eu demand & 6% Tb, but that’s spoken for.

    October 31, 2014 - 8:41 AM

  • Jim

    Jack, your list of want-to-be rare earth producers may as well be a list of ebola victims… +70% of China’s rare earth production is a byproduct of some other commodity. How do these undercapitalized Jr. mining companies, with 100% direct cots, compete ? Answer: they do not.

    Even if one or more some how survive, the ‘west’ still does not have a fully integrated value chain (metals, alloys, magnets, garnets, etc).

    So now your silly little Jr. rare earth companies become suppliers to China’s massive (spanning 2 cities) rare earth value chain. These companies just become resource suppliers to China.

    How is that a win?

    October 31, 2014 - 11:20 AM

  • Tim Ainsworth

    Jim, and that’s purely on the assumption that ROW OEM’s have been sitting patsy for the past 3/4yrs. I reckon they are a tad smarter than that.
    Time to move on from Dysy 1.01, China clearly overplayed Deng’s hand, result remains in the balance.

    November 9, 2014 - 11:58 AM

  • Mike Sellers

    Jack,

    Given your premise that we need a non-Chinese supply chain in order to protect our technology, etc.. how would you currently assess he efforts of Lynas and Moly Corp ?

    November 9, 2014 - 10:08 PM

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