Rare earths and why they matter

From iPhones to wind turbines, rare earths are regarded as being crucial in shifting our economies from carbon to something cleaner. But there is a catch, a big one.
Image: Mt Weld Concentration Plant, Lynas Corporation

Rare earths, or rare earth elements, are a subset of seventeen minerals in the periodic table. 15 within the chemical group called lanthanides, plus Yttrium and Scandium. These elements are seen as a crucial component in the shift in our economies from a reliance on carbon to something cleaner and greener.

Why? Because components made from rare earths are in demand for the creation of various clean energy technologies, as well as a vast range of modern consumer and industrial electronics.

The rare earths are: Scandium, Yttrium, Lanthanum, Cerium, Prasedymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium Erbium, Thulium, Ytterbium and Lutetium.

Contrary to the name, most rare earths are relatively plentiful. However, they are not usually found in concentrated amounts, making them difficult to extract, hence the term ‘rare earths’.

Why are they so important?

Rare earths are used to create a wide range of devices, from lasers, florescent lamps, battery electrodes and nuclear batteries, through to cracking agents and clean oil refineries. Even self-cleaning ovens use rare earths in their components.

Lithium batteries, the ones that power your laptop and mobile phone, are made from rare earths. So are the batteries in hybrid vehicles, such as the Toyota Prius. Flat screen televisions, the screens of laptops and smart phones also require rare earths.

In the medical world, they are used for the dyes in MRI scans, PET scan detectors, portable x-ray machines and x-ray tubes.

Much of the modern military capability is also dependent on rare earths. From missile guidance systems, satellite and aircraft electronics, radar and night vision systems,

Rare earths are essential for so much of our modern infrastructure. From effective medical diagnoses through to the production of fuels, energy supplies, the iPhone in your pocket and the hybrid car parked in the street outside.

Supply and demand

Up until quite recently rare earths were sourced quite widely. The US, India, Brazil and South Africa were the largest suppliers of rare earths. Yet in the space of twenty years China has become the dominant player, now producing 95 per cent of the world’s supply.

Technological advancements have massively increased the demand for these minerals. World demand in 2010 was estimated to be approximately 136,000 tonnes. As global production was only 133,600 tonnes the deficit was covered by the use of existing stockpiles. It is also interesting to note that as much as 90 per cent of current global production is as a by-product of some other extraction process.

Supply issues are becoming more pronounced. Specifically, China has reduced its rare earth export volumes over the past several years. Which means that the production of rare-earth based technologies and products outside of China are now being affected by issues around both price and availability.

While China has stated that concerns about the environmental impact of mining for rare earths are the reason for its reduction in supply, other factors are also being raised. For instance, if there is limited access to the minerals outside of China, this will position Chinese companies at the top of the supply chain for any item requiring components made from rare earths. In fact, General Motors has moved one of its entire research teams from the US to China for this reason.

The environmental impact

As with all mining, the careful management of rare earth extraction is required. Slurry produced from the mines can be radioactive, and toxic acids are used in the refining process. Improper management of this can result in significant environmental damage.

The value of rare earth extraction has been historically balanced heavily against local environmental and health concerns. In China, much of the mining and refinement has caused significant damage to the environment and to nearby communities. Birth defects, increased incidences of cancer and death of livestock have all been associated with the poor management of rare earth element mining. But the importance of rare earths has been pushed to the forefront for economic and strategic gain.

It is somewhat of a grim irony that a range of elements that have such a high environmental burden are actually crucial to the development of efficient green technology.

Politics is the key

With increased demand, and decreased supply, the price for rare earths on the global market is soaring. This rapid increase in price has been shadowed by a number of quite valid concerns about the dominance of Chinese production.

Nestled in the south flank of the Clark Mountain Range, California, the Mountain Pass mine, owned by Molycorp Inc once supplied over 50 per cent of the world's rare earth elements. Opened in 1952, production steadily increased in the 60's, 70s's and 80's. However in 2002 the mine was closed due to a combination of falling prices and concerns about the environmental impact of a series of wastewater leaks.

Pricing has been a critical part of this story. In the 80's, without strict environmental controls and with solid political and financial backing China was able to flood the market with low cost rare earths. In response, international competitors were driven to the wall. And by 2000 China exported 47,000 tonnes of rare earths, and claiming over 90 per cent of global production.

And the writing has been on the wall for some time. In 1997 China's ex-premier Deng Xiaoping was quoted as saying that "China would be for rare earth metals what the Middle East was to oil".

Importantly China also has an abundance of refining capacity which in combination with control over raw materials means that they can throttle pricing to make the entry of competitors extremely difficult.

Since 2007 China has increasingly restricted exports and imposed stiff export tariffs. By 2010 only 30,258 tonnes were exported, this dropped to 30,184 in 2011 and around 31,130 is expected in 2012.

In September 2011 China announced the halt in production of three of its eight major rare earth mines, responsible for almost 40 per cent of China's total rare earth production.

While the active encouragement of Western companies to establish production facilities within China has a significant economic and strategic impact, it is the political component that is raising most concern. Fears that were realised in 2010, when a ban on exports to Japan was linked to Beijing's displeasure over a territorial dispute in the South China Sea.

In response the implied threat of tight export quotas and uncertain supply has led to a rapid re-investment in western controlled supplies. For instance the Mountain Pass deposit been reopened, and with Federal subsidies. Strategic and commercial opportunities means that a lot of interest is now being generated around rare earths.

In Australia, significant resources have also been raised in the markets to increase production and refining capacity. The largest local company with a rare earths focus, and a market cap of just over $4 billion, is Lynas Corporation Ltd (click the link for more market news and data) which has two major operations. A high quality deposit at Mount Weld in Western Australia and a rare earths refining facility under construction at Kuantan, Malaysia. This plant, the Lynas Advanced Materials Plant (LAMP) is expected to begin production in 2012. Interestingly, in 2009 a Chinese takeover attempt was rejected by the Australian Foreign Investments Review Board on concern it would threaten supply to non-Chinese buyers.

Some commentators have also reported that the Australian Federal Government and State Governments have not taken a helpful, let alone a pro-active stance by providing project finance or easing the barriers due to excessive permitting restrictions.

Other, generally fairly small, Australian rare earth companies include:

What’s next

The hunt for significant rare earth deposits is on. With exploration occurring in Australia, Brazil, Canada, South Africa, Tanzania, Greenland, and the United States.

However the time and resources required to establish mines and refining capacity means that a lag, of up to ten years, is expected before China’s dominance can be challenged. Particularly as environmental concerns will be given much more consideration than in the past. The opposition Lynas Corporation has faced getting licensing approvals in Malaysia is a case in point.

One positive has come in the form of advances in recycling. The recycling of goods where rare earth minerals can be reclaimed is helping to decrease the supply and demand issue. Increasingly, elements from discarded televisions, phones, batteries and other devices can be salvaged and recycled.

In addition many research projects in Japan and the US are also underway to seek alternative functioning materials. Even old tailings are being mined and rare earths extracted as is occurring in Sillamae Estonia.

Ultimately, the cost of your new iPhone has come at a great cost. So consider recycling your electrical devices wherever possible. Every small action helps decrease the demand for rare earth mineral extraction.

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