Replies to post #1675 on The Rising Influence of Rising Affluence

[DewDiligence]

This is the radioactive effluent pond from a rare-earth factory in Northern China:



No wonder 97% of the world’s rare-earth output currently comes from China.

Image source: NY Times

[DewDiligence]

Taking a Risk for Rare Earths

http://www.nytimes.com/2011/03/09/business/energy-environment/09rare.html

›March 8, 2011
By KEITH BRADSHER

KUANTAN, Malaysia — A colossal construction project here could help determine whether the world can break China’s chokehold on the strategic metals crucial to products as diverse as Apple’s iPhone, Toyota’s Prius and Boeing’s smart bombs.

As many as 2,500 construction workers will soon be racing to finish the world’s largest refinery for so-called rare earth metals — the first rare earth ore processing plant to be built outside China in nearly three decades.

For Malaysia and the world’s most advanced technology companies, the plant is a gamble that the processing can be done safely enough to make the local environmental risks worth the promised global rewards.

Once little known outside chemistry circles, rare earth metals have become increasingly vital to high-tech manufacturing. But as Malaysia learned the hard way a few decades ago, refining rare earth ore usually leaves thousands of tons of low-level radioactive waste behind.

So the world has largely left the dirty work to Chinese refineries — processing factories that are barely regulated and in some cases illegally operated, and have created vast toxic waste sites.

But other countries’ wariness has meant that China now mines and refines at least 95 percent of the global supply of rare earths. And Beijing has aroused international alarm by wielding that virtual monopoly as a global trade weapon.

Last September, for example, China imposed a two-month embargo on rare earth shipments to Japan during a territorial dispute, and for a short time even blocked some shipments to the United States and Europe. Beijing’s behavior, which has also included lowering the export limit on its rare earths, has helped propel world prices of the material to record highs — and sent industrial countries scrambling for alternatives.

Even now, though, countries with their own rare earth ore deposits are not always eager to play host to the refineries that process them. An American company, Molycorp, plans to reopen an abandoned mine near Death Valley in California; but Molycorp must completely rebuild the adjacent refinery to address environmental concerns.

All of this helps explain why a giant Australian mining company, Lynas, is hurrying to finish a $230 million rare earth refinery here, on the northern outskirts of Malaysia’s industrial port of Kuantan. The plant will refine slightly radioactive ore from the Mount Weld mine deep in the Australian desert, 2,500 miles away. The ore will be trucked to the Australian port of Fremantle and transported by container ship from there.

Within two years, Lynas says, the refinery will be able to meet nearly a third of the world’s demand for rare earth materials — not counting China, which has its own abundant supplies.

Nicholas Curtis, Lynas’s executive chairman, said it would cost four times as much to build and operate such a refinery in Australia, which has much higher labor and construction costs. Australia is also home to an environmentally minded and politically powerful Green party.

Despite the potential hazards, the Malaysian government was eager for investment by Lynas, even offering a 12-year tax holiday. If rare earth prices stay at current lofty levels, the refinery will generate $1.7 billion a year in exports starting late next year, equal to nearly 1 percent of the entire Malaysian economy.

Raja Dato Abdul Aziz bin Raja Adnan, the director general of the Malaysian Atomic Energy Licensing Board, said his country approved the Lynas project only after an interagency review indicated the imported ore and subsequent waste would have low enough levels of radioactivity to be manageable and safe.

Malaysia had reason to be cautious: Its last rare earth refinery, operated by the Japanese company Mitsubishi Chemical, is now one of Asia’s largest radioactive waste cleanup sites.

“We have learned we shouldn’t give anybody a free hand,” Raja Adnan said.

Despite such assurances, critics are not convinced that the low-level radioactive materials at the Lynas project will be safe.

“The word ‘low’ here is just a matter of perception — it’s a carcinogen,” said Dr. Jayabalan A. Thambyappa, a general practitioner physician and toxicologist. He has treated leukemia victims whose illnesses he and others have attributed to the old Mitsubishi Chemical refinery.

That plant, on the other side of the Malay peninsula, closed in 1992 after years of sometimes violent demonstrations by citizens protesting its polluting effects. Now, in an engineering effort that has largely escaped the outside world’s notice, Mitsubishi is engaged in a $100 million cleanup.

Rare earths, a group of 17 elements, are not radioactive themselves. But virtually every rare earth ore deposit around the world contains, in varying concentrations, a slightly radioactive element called thorium.

Radiation concerns — along with low-cost Chinese competition — eventually forced the closing of all rare earth refineries in Japan. It was during this phase-out that Mitsubishi moved its refining operation to Malaysia, where old tin mines had left behind thousands of tons of semiprocessed slag that was rich in rare earth ore. It also had extremely high levels of radioactive thorium.

The new Lynas refinery, with nearly two dozen interconnected buildings and 50 acres of floor space, will house the latest in pollution control equipment and radiation sensors. A signature feature will be 12 acres of interim storage pools that will be lined with dense plastic and sit atop nearly impermeable clay, to hold the slightly radioactive byproducts until they can be carted away.

But carted to where? That is still an open question.

Building the lined storage pools was one of the promises Lynas had made to win permission to put the refinery here, in an area already environmentally damaged by the chemical plants that line the narrow, muddy Balok River.

Mr. Curtis, the Lynas chairman, insists that the new factory will be much cleaner and far safer than the old Mitsubishi plant, which “never should have been built,” he said recently, as he led a tour of the sprawling Lynas refinery construction site here.

One big difference, he said, is that the ore being imported from Australia is much less radioactive. It will have only 3 to 5 percent of the thorium per ton found in the tin mine tailings that Mitsubishi had processed. And he said the Lynas factory would also process 10 times as much ore with only twice as many employees — about 450 in all — thanks to automation that will keep workers away from potentially harmful materials.

But the long-term storage of the Lynas plant’s radioactive thorium waste is still unresolved.

After using sulfuric acid to dissolve the rare earths out of the concentrated ore, Lynas plans to mix the radioactive part of the waste with lime. The aim is to dilute it to a thorium concentration of less than 0.05 percent — the maximum permitted under international standards to allow the material to be disposed with few restrictions.

Lynas wants to turn this mixture into large concrete shapes known as tetrapods that are used to build artificial reefs for fish and as sea walls to prevent beach erosion.

Local residents seem to be of two minds about the sprawling plant being built near the river. The river empties into the ocean several miles away, next to an impoverished fishing village, where on a recent evening a small group of fisherman sat at the end of a wooden dock.

Muhamad Ishmail, age 56, said pollution from the chemical factories that started opening upstream in the 1990s had forced local fishing — a river industry for generations — to move primarily out to sea. Although one of his five children works in the nearby industrial district, Mr. Ishmail said he did not want Lynas or anyone else to open any more factories.

“This river used to be clean, and you could catch fish right here,” he said.

But Muhamad Anuar, 30, said his community needed the reliable paychecks that Lynas might offer. “I have two kids, and I don’t want them to be fishermen,” he said. “It’s a hard job.”‹

[DewDiligence]

Rare Earths Will Soon Be Less Rare, Says GS

[See #msg-55194118 and #msg-60745271 for related stories.]

http://online.wsj.com/article/SB10001424052748703992704576304712512256774.html

›MAY 6, 2011
By DAVID FICKLING

SYDNEY—Demand for rare earth elements that has driven up prices more than tenfold since 2009 is likely to be met by a surplus of supply by 2013, as Western companies start up new mines to compete with the Chinese firms that now dominate the market, Goldman Sachs analysts predicted Thursday.

The forecast calls into question the sustainability of the current boom in rare earths, a suite of 17 elements used in products from high-powered magnets, and fuel refining to energy-efficient light bulbs and mobile phone screens, as well as the shares of companies seeking to produce them.

Prices of rare earths hovered between $5 a kilogram and $20 a kilo from the early 1990s until 2010. But a 40% cut in export quotas by China, which accounts for 90% of global rare earth production, sent prices soaring. The basket price of rare earths held in Lynas Corp. Ltd.'s Mount Weld deposit in western Australia—the largest non-Chinese mine, due to come to production in the next few years—has jumped to an average of $162.66 kilos from just $10.32 kilos in 2009.

Goldman's view differs from that of miners. In a presentation last month, Lynas forecast that global demand for rare earths, which include neodymium, cerium and lanthanum, will outstrip supply by 35,000 tons this year and in 2012. Annual supply shortfalls of around 20,000 tons are expected in 2013 and 2014, it added. It predicted long-term prices in the $120/kg-to-$180/kg range.

Lynas Chief Executive Nicholas Curtis says China is on the verge of becoming a net importer of the elements, a transformation that would be similar to those that drove major shifts in global markets for coal in 2009 and oil in the mid-1990s, and could accentuate the current price spike.

"China will become a net importer because its consumption for its own domestic value-added industry is going to drive very high [demand] growth for these resources. They've explored every inch of China for what's available and if they had more rare earths deposits of any size, it would be being developed now," he said in a recent interview.

Lynas shares have risen fourfold since China announced the quota cuts in July 2010.

Goldman Sachs analyst Malcolm Southwood, however, said the price boom is nearing its peak. The supply deficit will peak at 18,734 tons this year, equivalent to 13.2% of a forecast 141,524 tons of demand, before the market slips into a slight surplus in 2013, he said in the report published Thursday. The surplus will rise to 5,860 tons or 3.2% of projected demand in the following year, the report said.

Initially, at least, prices will likely continue to rise, he said. The basket price for the Mount Weld rare earths should climb to $227 a kilogram next year, a gain of about 40%. Prices may eventually moderate to an average of $82 a kilogram, but that will happen only in 2015, the third consecutive year of a global surplus, the report said.

"We envisage a closely balanced market in 2013, and modest surpluses thereafter—at least, for some of the more abundant light rare earths—with some price softening in the 2013-2015 period," according to the report.

Goldman's view matches the outlook of many other market participants who believe the current boom is overdone. "For [the rare earths such as] cerium and lanthanum, there will certainly be some surplus," said a major European rare earths trader, who didn't want to be named because of the sensitivity of trading relationships.

"When you have these high prices, people immediately start to look for substitutes, and it takes one to two years, but people can switch out of rare earths."

He cited the glass industry, which has replaced its consumption of cerium with selenium over the past year as prices of the rare earth rose to $135 per kilo currently from just $3.88 per kilo in 2009.

Other analysts see prices falling much closer to historic averages as new projects come onstream, particularly if continued high prices encourage the development of major deposits such as Greenland Minerals & Energy Ltd.'s Kvanefjeld site, which is more than twice the size of Mountain Pass and Mount Weld combined, but located on an isolated mountainside just south of the Arctic circle.

"Lynas has said their production costs are $10 per kilogram. If they think they can sell their material at $150 a kilogram, a markup of 15 times, I don't know customers are going to be prepared to pay for it," said Dudley Kingsnorth, executive director of Industrial Minerals Company of Australia, a rare earths analysis house.

"Once these new mines come onstream, there will be a fall in price, and if miners insist on multiples of 15-20, they're going to face more competitors. They're going to have to face a little bit of reality."‹

[DewDiligence]

Rare-Earth Deposits Found on Pacific Ocean Floor

[Whether development of these deposits is economic remains to be seen.]

http://online.wsj.com/article/SB10001424052702304760604576425230759407002.html

›JULY 5, 2011
By DENNY KURIEN

SINGAPORE—Japanese explorers have found large deposits of rare-earth minerals on the floor of the Pacific Ocean, British journal Nature Geoscience reported.

While the discovery has the potential to alter the dynamics of the global market for the metals, the difficulty of extracting the minerals from the sea floor present a big challenge.

The Japanese team found deep-sea mud containing high concentrations of rare-earth elements and yttrium at numerous sites throughout the southeastern and north-central parts of the Pacific Ocean, the journal said in its online edition over the weekend.

"We estimate that an area of just one square kilometer [0.39 square mile], surrounding one of the sampling sites, could provide one-fifth of the current annual world consumption of these elements," team leader Yasuhiro Kato, an associate professor of earth sciences at Tokyo University, said in the report.

Rare-earth minerals are used in a variety of high-technology products such as electronics, magnets and batteries used in hybrid automobiles and mobile phones.

The minerals are recoverable from the mud by acid leaching, making deep-sea mud a highly promising and potentially huge resource for these elements.

The Japanese team estimated the size of the discovery at around 80 billion to 100 billion metric tons (88 billion to 101 billion short tons), nearly a thousand times more than current proven reserves of 110 million tons as estimated by the U.S. Geological Survey.

Those proven reserves are mostly in China, Russia and the U.S. But China is by far the biggest miner of rare-earth minerals on a commercial scale, making it a dominant supplier with around 95% of the global market. Recent moves by Beijing to restrict exports of rare-earth materials have pushed prices of these minerals up around tenfold from a year ago, spurring searches for alternative sources of supply.

Chinese exports of rare-earth materials in the first five months of this year fell 8.8% from a year earlier, while revenue from those exports more than tripled to $1.6 billion.

The commercial viability of mining the minerals from the Pacific remains a question.

"Accessing the treasure trove of key elements on the ocean floor will be very expensive and potentially harmful to sea-floor ecology," Nature Geoscience said in a related article.

The lower concentrations at Chinese mines are economically viable because the material is easier to access. "That is not true for mud located below four or five kilometers [2.5 or three miles] of water, which would require expensive ship time and equipment to pull up," Gareth Hatch, a founder of the Technology Metals Research consulting firm in Carpentersville, Ill., told the journal. "People talk about mining on the asteroids or the moon. This isn't that hard, but it's similar," Mr. Hatch said. "There are better options."

Other industry specialists expressed skepticism that the discovery would lead to lower prices for rare-earth minerals soon.

An official with a Japanese rare-metal trading house said that commercialization could take up to 20 years. "We knew before there were likely such resources on the sea floor, and we still face the challenges of how the mining rights would be divvied up and how the technological issues would be resolved," the official said.

World production of rare-earth metals is around 110,000 metric tons a year.

Despite their name, the minerals are not particularly rare, with the British Geological Survey identifying 53 separate deposits around the world, of which just half a dozen are either in production or development.

Some deposits are considerably larger than those identified by the Japanese team. A 0.39 square mile section of ocean floor near Hawaii containing 25,000 tons of rare-earth elements is dwarfed by Lynas Corporation Ltd.'s Mount Weld deposit in Western Australia, which contains 1.4 million metric tons of rare-earth oxides in a comparable area.

Nautilus Minerals Inc. says deep-sea mining needn't be significantly more difficult than work currently undertaken by offshore petroleum companies and undersea cable operators. Nautilus hopes to start mining copper from 1,600 meters, or about a mile, below the surface in the Bismarck Sea, off the coast of Papua New Guinea, starting at the end of 2013.

"The technology we're developing is an adaptation of existing technologies. We're not remaking the wheel here," said Joe Dowling, a company spokesman in Brisbane, Australia.

Mining at the depths of the rare-earth-mineral discoveries would present "different challenges," he said. But the improved grade of many undersea deposits offsets such difficulties, he said.

Since the early 1970s, several companies have investigated underwater mining in the Pacific of manganese nodules—highly mineralized, slow-growing pebbles found on parts of the sea floor.

Diamond Fields International Ltd. has extracted about 158,200 carats of diamonds from the sea of the coast of Namibia since 2005 and plans to mine zinc and copper from the floor of the Red Sea, off the coast of Saudi Arabia.‹