EDITOR: | December 26th, 2012

The Pulse: Billions of rare earths in slag; Silver down but not out

| December 26, 2012 | No Comments

the-pulse-300x2541Here’s something that will make you sit up and take notice: the Chinese say they have something like $80 billion worth of rare earths contained in slag that has already been mined and treated from their biggest REE mine.

According to the Beijing-based Caixin business service, that is the estimated value of the tailings dam in Inner Mongolia owned by Baotou’s rare earth operation. The environmental hazards have been covered in the world press; a few years ago, London’s Daily Mail published a photo essay showing the devastation.

But here’s the aspect of the tailings dam that will interest readers of ProEdgewire: the article quotes Baosteel Rare Earth Research Institute director Ma Pengqi saying the resource value of all that sludge contained by 20 metre high concrete walls is equivalent to what still remains to be extracted from the Bayan Obo mine itself. That rare earth deposit retains a reserve of 36 million tonnes, which Ma says is 36 per cent of the world’s total. (Editorial note: this figure is provided by Baotou and does not reflect the actual state of world rare earths reserves, nor does it allow for the potential of increasing non-China REE resources from exploration and assessments now under way.)

The Chinese company says researchers found the value of rare earths in the 180 million tonnes of slag was higher that the estimated remaining elements contained ore at the Bayan Obo mine. The average grade of rare earths averages 7% compared to 5.5% in the mine. However, Ma gives a value to what is in the tailings dam: about 1 trillion yuan ($160 billion), half from rare earths and half from other minerals.

However, Caixin also reports that “the Baosteel tailings pool was the result of inefficient mining practices and the by-product created will make further mineral extraction more difficult”. More difficult, perhaps, but you have to wonder why this story is being floated now. Is it just another strand in the complex Chinese strategy concerning rare earths which seems to be to discourage competitors and dangle the prospect of Chinese production being lifted?

Here’s another point: treating tailings and slag dumps is nothing new in the mining business. Much present era production – of everything from gold to tungsten – comes from mining companies reworking waste dumps left behind as a result of “inefficient” mining practices of previous decades and centuries.

Silver: Of all the precious metals, silver is the most sensitive to swings in risk appetite. Up until December 17, silver was the best precious metals performer of 2012, and then it plunged. So from nearly $35/oz in early November to a Christmas close at $29.81.

In January-June, the net inflows to silver exchange-traded funds totalled 9.7 million ounces; in July-December, the net inflows have been 30 million ounces. Silver coin sales in 2012 were robust (although not as high as in 2011).

BNP Paribas in London sees silver investment interest reviving in line with an expected bounce-back in gold.

It is interesting to note though that, unlike gold, industrial applications for silver now account for 55% of silver end-use, followed by jewellery (18%), coins and medals (14%), photography (8%) and silverware (5%).

BNP says silver production will come primarily from the gold mining sector (as a by-product) and in particular from the Pueblo Viejo mine in the Dominican Republic – which started mining last August – and the Concheno mine in Mexico which has a 2013 start-up.

Watch China, the report urges. The country is now the second largest silver fabricator with a share of 17% and s heading to become the world’s second largest producer. Trading of silver contracts on the Shanghai Futures Exchange and the Shanghai Gold Exchange have given the white metal a big boost in that country.

Disclaimer: The above is an opinion written by Robin Bromby, and he is not a licensed investment advisor.



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