Is The Rare Earth Supply Crisis Due to Peak Production Capability or Capacity

The current "crisis" in the media in the supply of rare earth metals is most likely due to nothing more sinister than mining capacity in China, the country which today produces some 97% of the world's supply of rare earth metals.

 

There is sufficient accessible by current technology rare earth mineralization in North America, Australia, Southeast Asia ,Viet Nam, and South Africa to not only make world industry independent of China, but, ultimately, and soon, to supply China's domestic shortfalls.

In November of this year, 2009, in Hong Kong at a rare earth mining themed conference sponsored by Roskill, an in-depth information provider for investors,  the noted and highly respected Australian rare earth's expert, Dudley Kingsnorth, will present the results of a new study by him showing the estimated total size and average grade (percentage concentration) of the world's "largest" rare earth elements ore deposits. His new chart will rank the world's known deposits in order of total rare earths contained and, hopefully, recoverable.

 

Mr. Kingsnorth's data will show conclusively that there is no danger of peak rare earth mining capacity being reached for the indefinite future..

 

I recently asked Mr. Kingsnorth what caused him to include in his chart only 6 or 7 ore bodies when he, and I, knew that there were many more than that now known and also known to be substantial. His answer was that he tried to be very conservative and only included those deposits which would qualify as having been verified, as to size and grade, by the rules and regulations of either the financial securities agencies of the countries in which they were located or by independent third party verification by persons or agencies without conflicts of financial interest.

 

Mr. Kingsnorth will be speaking at the conference on risk management of the supply of critical and strategic metals, which I am co-chairing in Washington, DC, on Oct. 20-22, and I hope to engage him on the topic of the world's reserves of rare earths there in a panel discussion.

 

Let me qualify what i am about to write: I have been "following" the rare earth "space" as an end-use materials engineer and as a mining analyst for nearly 50 years. I am not interested in discussing junior exploration companies that have "suddenly" found rare earth values in their old cores or in reexamining, or retaking, data from old cores. I am very interested in those junior mining companies that knew they had rare earths among other minerals which were their principal interest, those active miners who are now taking a second look at the concentration of rare earths in their residues, and those existing rare earth juniors who have been staking claims and buying shut-down rare earth properties discovered through data mining.

 

Having made the statement above I want to say that Mr. Kingsnorth's chart is and should be the conservative basis of all analysis of the world's rare earth reserves. I however am going to speculate on the potential of many deposits that Mr. Kingsnorth will not have, as of yet, included for the reasons stated above.  

 

As full disclosure I want to repeat what i have written before: I have physically been to Mountain Pass, California, and Thor Lake, Northwest Territories, Canada this summer to survey the properties of MolyCorp and Avalon Rare Metals. I am this coming week, for the second time, going to speak at the Annual General Meeting of Great Western Minerals Group in Saskatoon, Saskatchewan; I have been analyzing the mineralogical data produced in and around the Lemhi Pass, Diamond Creek, and Powder River properties of Thorium Energy, Inc., and I have reviewed data from Frontier Minerals in the Republic of South Africa. All of these companies have paid any expense I incurred on their behalf and one has paid me fees. i have not received any fees from a publicly traded company in any country, nor do i won, or have I ever owned, shares in any publicly traded mining, or mining related, company in any country.

 

First and foremost i want to speculate and say that I believe that Avalon Rare Metals and Great Western Minerals Group will both be producing heavy rare earths within 3 to 5 years in countries outside of China, which countries outside of China are each friendly to the USA, politically, and current major trading partners. (Note to those who find the previous sentence a bit confusing: I may not catch all of the spelling errors or typos I make, but I pride myself on my grammar). I am saying that there will be a major crisis brought about by a supply interruption in the sourcing of the heavy rare earth outside of China if China should terminate immediately and all at once its export of these specific materials but that interruption will be cured by Avalon and Great Western Minerals Group within 3 years and within 5 years the world's principal supplies of heavy rare earths will NOT be from China. China knows this well, by the way, and is taking this into account before taking drastic measures.

 

As for the light rare earths MolyCorp is now supplying 2,200 metric tons a year of lanthanum and neodymium-praeseodymium to the market from its existing pre-2002 reserves. I have been told that MolyCorp will ramp up production from existing ore concentrate stocks to 3,000 MT/yr next year, and plans to restart mining in 2012 and at the same time to ramp up its refining capacity so that it can be producing 20,000 MT a year of rare earth elements in or soon after 2015. I have no doubt that substantial production of light rare earth elements (mainly lanthanum, cerium, and  and neodymium-praseodymium)  will be under way at Avalon and Great Western by 2015 and at the Lemhi Pass District in Idaho and Montana soon after that. I believe that by 2020 at the latest the world will be independent of China s the source of all of its rare earth metals, and I believe that by 2015 or earlier China will be a net importer of rare earth ores or metals.

 

I also believe that the end-uses of the rare earth metals that exist today are more than sufficient to drive the demand to expand rare earth production for the next generation as 6,000,000,000 additional consumers enter the market today serving just the 600,000,000 in the west and upper echelons of the far east.

 

The capability to double (and more than double) today's total volume production (in China) of the rare earth elements is now being constructed in the east and the west. There are large and accessible  reserves of rare earths concentrated not in one place, China, but in several places, North America, Australia, southern Asia outside of China, and South Africa. Politics as well as finance will determine where the productive capacity expands first (or if it ever does).

 

I'm giving a talk, as I said above, at the AGM of GWMG this coming week, and I will publish that talk here next weekend.

 

 

 

 

 

Jack Lifton consults with leading institutions through GLG