The Rare Earth Fiasco Comes to an End

It all started in 2007 with a report by the US National Academy of Sciences, entitled “Minerals, Critical Minerals and the U.S. Economy”, which stated the alarming factoid that the US appeared to be vulnerable to China for 97% of its Rare Earth (RE) supply.

What the report didn’t state was that the US, as far back as the 1990s, had voluntarily ceased almost all production of Rare Earth metals from oxides and that General Motors (GM) had freely sold its patents associated with RE products to the highest bidder.

But who wanted to be burdened with the facts? The story made such perfect headlines. The idea that the USA, with its military might, could be reliant on the pesky Chinese for critical and un-substitutable materials was riveting. The idea that some lesser known elements, such as Neodymium or Dysprosium, could possibly threaten the war effort in Afghanistan both humbled us and appealed to our deep collective paranoia and xenophobia to China, leavened with a bit of hangover anti-communism.

In the markets, what started as a hiccup in the USA became a belch in the UK and, finally, a full-blown virus worldwide called, ‘Rare Earth Fever’.

It was not long before the plumber fixing the cistern or the milkman delivering the eggs was a rare earths expert.  Conference organisers, trade journalists, peddlers of hedge funds, hawkers of investment advice to widows and orphans, and Canadian miners, sensed an opportunity, extolling the virtues of rare earth mining, anywhere from South Africa to the Arctic, to bring these much needed elements to the aid of US industry.

The few experts, who had laboured in the rare earth backwaters for decades, were inundated with requests to appear before Congressional or Parliamentary Committees arrayed with the nodding heads of worried politicians, and asked to explain, mainly to the scientifically ignorant, how wind-turbines worked, batteries, magnets and aerospace alloys, and how rare earths, of one shape or another, occasionally assisted their operation.

It was in this context that three rare earth mining houses formed a break from the peloton; and these were ‘Molycorp’ of the US, ‘Great Western Minerals Group’ of Canada, and ‘Lynas’ of Australia.  As this short history now records, Molycorp persuaded the citizens of California to re-certify abandoned production at ‘Mountain Pass’, to bring rare earths supply back to the country that appeared most in need of it.  Lynas in Australia revived the abandoned ‘Rhône-Poulenc’ Mt  Weld monazite deposit, and ‘Great Western Minerals’ bought UKs ‘Less Common Metals’ in order to integrate their mining operation at ‘Steenkampskraal’ in South Africa with the UK magnet and RE alloy maker.

With impeccable timing, witnessing that Neodymium prices, for example, have collapsed from a 2011 peak of $550 per kg to near $80/kg, Lynas has just managed to get approval for its Lynas Advanced Materials Plant (LAMP) facility in Malaysia.

Meanwhile, Molycorp, whose share price was below $10/share in 2008, but rose to above $70/share in 2011 as ‘neodym-ysteria’ spread, is at time of writing just above $8/share.

The one bright spark in the landscape is UK’s ‘Less Common Metals’, whose purchase by Great Western Minerals Group was the best acquisition of the entire period; a glory not just for the UK, but especially for the folk of Ellesmere Port in the North West, who now have a bright new factory converting oxides to metals and making rare earth magnet-alloy outside China using skills built up over the last 30 years.

If there is one single lesson from this  tale, it is that no country is blessed with every element it needs, however great the country, however developed its industry, whether it be China, Russia, India, the USA or Brazil.  The answer to these deficits and surpluses is the same today as it was when Marco Polo plodded off to China. It is called trade.  For people like us it’s also called ‘metal-merchanting’. Why didn’t anyone tell the National Academy of Sciences?

 ©Anthony Lipmann

Mining Journal – February 8th 2013