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Exploration

Interest in rare earths heats up

February 13, 2014
by Norm Tollinsky
In: Exploration

Canadian Rare Earth Element Network aims for 20 per cent of global production and processing by 2018

Ian London, chair, CREEN.

Junior mining companies, governments, academics and other interested parties in Canada have joined together to counter Chinese dominance in the production and processing of rare earth elements.

The Canadian Rare Earth Element Network (CREEN) was established in October 2013 with the goal of producing and processing 20 per cent of the global supply of critical rare earth elements in Canada by 2018.

The 17 rare earth elements – 15 lanthanides, plus scandium and yttrium – have unique chemical characteristics and offer interesting magnetic, optical and fluorescent properties, according to CREEN chair Ian London.

Used in the consumer electronics, aerospace, automotive, lighting, medical device and defence industries, rare earth elements actually aren’t very rare at all.

“If I go to my cottage and put a shovel in the ground, I’m going to find some rare earths,” said London. The problem is that they’re not usually found in large enough concentrations to make mining them economically viable.

There are over 200 rare earth exploration projects in Canada, but only a handful of any real significance.

China

“China produces 90 per cent of the rare earth elements in the world and close to 99 per cent of the heavy rare earth elements,” said Al Shefsky, president and CEO of Pele Mountain Resources, a junior miner advancing the Eco Ridge Rare Earth and Uranium project in Elliot Lake. “The Chinese have a monopoly on the heavy rare earths and there’s a shortage in the rest of the world.

“China did this deliberately,” said Shefsky. “They saw that rare earths were going to be important, and they saw it before anyone else.

They began formulating their policies in the early ‘90s and, in the late ’90s, they put a lot of low-price rare earths on the market in order to drive the competition out of business.

By controlling the resource, they could control the key downstream industries. They figured this out, they did it and the rest of the world let it happen.”

As a result, China is currently the leading manufacturer of hybrid and electric motor vehicles, direct drive motor wind turbines and high efficiency lighting, said Shefsky. They have reduced exports of rare earths and forced manufacturers from other countries to open factories in China to get access to them, but the U.S., Japan, South Korea and the E.U. are waking up and investing “hundreds of millions of dollars to find new sources.”

Al Shefsky, president and CEO, Pele Mountain Resources.

Elliot Lake

Elliot Lake, 160 kilometres west of Sudbury, was the only mining camp in Canada that produced rare earths commercially.

“Back in the ’80s, Elliot Lake produced 35 per cent of the global supply of yttrium,” Shefsky noted. A preliminary economic assessment prepared for Pele Mountain Resources envisions a 9,000-tonne per day operation with life of mine rare earth production of 141.6 million pounds and 52 per cent of project revenue from rare earths.

There are several other advanced rare earth projects across Canada, including Avalon Rare Metal’s Nechalacho project at Thor Lake in the Northwest Territories, Quest Rare Minerals’ Strange Lake project in northeastern Quebec and Matamec Explorations’ Kipawa deposit in Quebec’s Temiscamingue region, 90 kilometres north-east of North Bay.

“Avalon has completed a feasibility study, they’ve spent more money and done more engineering,” acknowledged Shefsky. “It’s a wonderful deposit, but it’s a remote location with minimal infrastructure. “Elliot Lake, on the other hand, has roads, power, gas, an airport, a railway, a city that was built to support mining, a qualified workforce and just about everything you need to get things going more rapidly – and this is a race. I can’t stress that enough.

“Avalon has good grades of heavy rare earths, but the mineralogy is extremely complex,” he added. “In Elliot Lake, the heavy rare earths are primarily associated with uranium minerals and we’ve seen from the past that they’re easy to extract.”

The Nechalacho and Strange Lake projects are estimating capital costs of $1.5 and $2.5 billion, respectively – significantly more than the $500 million required to bring Pele’s Eco Ridge project into production, observed Shefsky.

“The other advantage we have is we’ll be producing uranium.”

Opportunity

Shefsky thinks Canada can learn a thing or two from the Chinese.

“This is a once in very long-time opportunity – maybe once in 100 years you see an economic opportunity like this where you’re endowed with a wonderful resource you can develop and get all this value-added benefit from it. If we produce the rare earths in Canada and we do the processing and separation here, we have the opportunity to integrate the whole value chain.

“With some foresight, proper policies and some modest support from the government, we can compete and, if we don’t, we’ll miss this opportunity and the foreign jurisdictions will get the jump on us.”

If we don’t get it right, foreign governments, sovereign wealth funds and global manufacturers will sign offtake agreements with Canadian producers and ship mixed rare earth concentrates out of the country, denying Canada all of the downstream benefits.

Finding rare earths is one thing. It’s processing and separating them that’s the real challenge, said London.

“You tend to get all 15 elements together. You never just find neodymium. You find neodymium with all its 14 brothers and sisters. And no two ores are the same, so you get different distributions. When you’re building a magnet or an LED light, you only use one or two of them, so you have to separate them, and that’s tricky.”

It’s important that we aim for rare earth separation in Canada and, ideally, in Elliot Lake, said Shefsky. Larger, established majors in the mining industry have no interest in rare earths, leaving exploration and mine development to junior mining companies with their limited resources.

Molycorp

Molycorp Inc.’s Mountain Pass Mine in California is a good example of the challenges faced by rare earth miners.

Once the world’s largest supplier of rare earths, Molycorp mothballed its Mountain Pass Mine in 2002 and brought it back into production in August 2012. It’s currently putting the finishing touches on a $1.25 billion expansion, reported a loss of $72.8 million in its latest quarter and saw its stock plunge to $4.53 in December from a high of $75 in April 2011.

The price of cerium oxide, a light rare earth that accounts for almost half of its production, plunged to $6 a pound from an all-time high in September 2011 of $118.

Prices shot up in 2011 over concerns about China’s move to cut production and impose strict export quotas. China is also clamping down on unauthorized production, smuggling and pollution from rare earth mining.

According to London, there is currently only room in Canada for a few new suppliers, but demand is expected to grow.

“Fifty per cent of future demand is unknown and 50 per cent of that hasn’t been invented yet,” he said. “The more secure the supply is, the more manufacturers will be enticed to use them,” added Shefsky. “Until they know they can get them, they won’t incorporate them into their products, but they’re clearly superior because of their chemical and physical properties.”

CREEN has emerged out of several rare earth symposia held in conjunction with the Canadian Institute of Mining and Metallurgy’s Conference of Metallurgists in 2012 and 2013, as well as an industry roundtable with Minister of Natural Resources Joe Oliver.

Parallel with the development of CREEN, the federal parliamentary committee for natural resources is currently holding hearings on rare earths.

www.cim.org/en/RareEarth

www.pelemountain.com

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