Rare earths an evaluation of current and
future supply
Judith Chegwidden
Roskill Information Services Ltd.
Roskill
Approachable. Independent. Expert.
Disclaimer
The statements in this presentation represent the considered views of Roskill
Information Services Ltd. It includes certain statements that may be deemed
"forward-looking statements." All statements in this presentation, other than
statements of historical facts, that address future market developments, government
actions and events, are forward-looking statements. Although Roskill Information
Services Ltd. believes the outcomes expressed in such forward-looking statements
are based on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those in
forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include new rare earth
applications, the development of economic rare earth substitutes and general
economic, market or business conditions.
While Roskill Information Services Ltd. has made every reasonable effort to ensure
the veracity of the information presented it cannot expressly guarantee the accuracy
and reliability of the estimates, forecasts and conclusions contained herein.
Accordingly, the statements in the presentation should be used for general guidance
only.
Roskill
Approachable. Independent. Expert.
Outline
 Rare earth reserves and resources
 Overview of current supply
•
Historical perspective
•
The view of supply from the non-Chinese consumer
 A brief review of historical price trends outside China
 Existing and potential supply from the rest of the world
•
Overview of current R-O-W supply
•
Review of key rare earth projects under development
•
Limiting factors
 Roskill forecast of supply from the R-O-W to 2015
Roskill
Approachable. Independent. Expert.
USGS assessment of world reserves
World reserves of rare earths (excluding yttrium) 2007 (Mt REO)
Country
Reserves
Brazil
0.05
China
36.00
Commonwealth of Independent States
19.00
USA
13.00
Australia
5.40
India
3.10
Malaysia
0.03
Others (incl. Canada)
22.00
World Total
99.00
Source: US Geological Survey, January 2010
Roskill
Approachable. Independent. Expert.
Commentary on reserve
calculations
 USGS assumptions
•
Monazite is readily available as a by-product of mineral sands mining
•
The cost of separating monazite is minimal so likely to be major source of rare earths in the future
•
The use of thorium in nuclear power is likely to constitute a growing part of future power generation
 Roskill commentary
•
The use of thorium in nuclear generation is not likely to occur on a significant scale for at least 15 years
•
At current prices there is little incentive for mineral sands companies to separate monazite – particularly if the cost of storing
thorium is factored in
•
By-product monazite is a source of light rare earths – which are abundant in many other deposits
•
It is unlikely that there will be extensive exploitation of by-product monazite for rare earths and thorium in the next decade
•
However, there are adequate reserves of rare earth minerals in other forms to meet expected world demand over the next
decade
Source: Roskill data
Roskill
Approachable. Independent. Expert.
Deposits vary greatly - matching the ratio in
the natural occurrence of REOs to the
demands of the market is key consideration
Rare earth content of major source minerals (% total REO)
Basnaesite
Ion adsorption clays
Monazite
Loparite
Baiyun Obo
Inner
Mongolia
Mountain
Pass
USA
Xunwu
Jiangxi
Lognan
Jiangxi
Mount Weld
Guangdong
Lovozersky
Russia
La2O3
23.0
33.2
43.4
1.8
25.5
23.0
28.0
CeO2
50.0
49.1
2.4
0.4
46.7
42.7
57.5
Pr6O11
6.2
4.3
9.0
0.7
5.3
4.1
3.8
Nd2O3
18.5
12.0
31.7
3.0
18.5
17.0
8.8
Eu2O3
0.2
0.1
0.5
0.1
0.4
0.1
0.1
Tb4O7
0.1
trace
trace
1.3
0.1
0.7
0.1
Dy2O3
0.1
trace
trace
6.7
0.1
0.8
0.1
Y2O3
trace
0.1
8.0
65.0
0.3
2.4
trace
Roskill
Approachable. Independent. Expert.
Overview of supply
Roskill
Approachable. Independent. Expert.
At least 95% of all rare earths currently
originate from China
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
0
China
Source: Roskill data, Company communications, CREIC
ROW
Roskill
Approachable. Independent. Expert.
Components of rare earth supply in
2008
 China
•
124,800t REO in chemical concentrates
•
Mainly from bastnaesite from Baotou and ion adsorption clay from southern provinces
•
Circa 15,000-20,000t REO from “unofficial” sources
 Russia
•
2,470t REO in chemical concentrates from mine output
 India
•
50t REO in chemical concentrates from tailings
 USA
•
1,700t REO in chemical concentrates from stockpiled ore arising form mining in the 1990s
 Others
•
Small amounts of monazite and xenotime from south east Asia
Source: CREIC, Roskill data
Roskill
Approachable. Independent. Expert.
Preliminary evaluation of components
of supply in 2009 (t REO)
China
Source: Roskill, Company reports
120,000
Russia
2,500
USA
2,400
India
25
Total
124,925
Roskill
Approachable. Independent. Expert.
Chinese supply from the viewpoint
of the rest of the world
Roskill
Approachable. Independent. Expert.
Facets of Chinese supply
 Positive impact on supply:
•
Reserves >25Mt REO
•
Excess secondary processing capacity
•
Access to relatively low cost processing chemicals
•
Heavy investment in research and technology
 Negative impact on supply of REO and RE metals to R-O-W
•
Finite heavy rare earth resources (15-20 year mine life)
•
Increasingly rigorous environment legislation
•
Policies to encourage downstream processing
•
No new exploration and mining licences until 2011 (at the earliest)
•
Tighter mining and export quotas
•
Export taxes
Roskill
Approachable. Independent. Expert.
Comparison of mine and separation quotas
and estimated production in China
NDRC/MIIT
concentrate
Quotas
Estimated mine
output (1)
NDRC/MIIT
separation
quotas
Estimated
separation output
2007
131,780
120,800
118,700
126,000
2008
129,178
124,800
118,700
135,300
2009
119,500
120,000
110,700
129,400
2010
89,200
120,000f
86,000
125,000f
Year
Source: CREIC, NDRC/MIIT, Roskill
Note: (1): Includes estimate for illegal mining
f: forecast
MLR = Ministry of Land & Resources
NDRC = National Development & Reform Commission
MIIT = Ministry of Industry and Information Technology
Roskill
Approachable. Independent. Expert.
Total export quota fell by 40% in 2010
History of Chinese export quotas (t REO)
Domestic rare earth quotas
Total including Foreign JV quota
Phase 1
Phase 2
Total
Change
2004
n/a
n/a
48,040
-
65,609
2005
n/a
n/a
48,040
0%
65,609
2006
n/a
n/a
45,752
-5%
61,821
2007
19,600
23,973
43,573
-5%
59,643
2008
22,780
11,3761
37,1892
-15%
53,141
2009
15,043
18,257
33,300
-10%
50,145
2010
16,304
7,976
24,280
-27%
30,258
Source: Chinese Ministry of Commerce website
Notes:
1-In 2008 quotas were allocated for 10months (second tranche was effectively for 4 months) so there was alignment with a calendar year
2-Adjusted for 12 month allocation for comparative purposes
Roskill
Approachable. Independent. Expert.
Impact of quotas and other measures on
exports of cerium compounds
•
Exports of cerium compounds, 2001-2009 (t gross weight)
14,000
12,000
10,000
8,000
•
6,000
4,000
2,000
0
2001
2002
2003
Cerium Oxide
Source: Global Trade Atlas
2004
2005
Cerium Carbonate
2006
2007
2008
2009
Exports of cerium
carbonate are mainly
destined for France,
Japan and the USA –
where further processing
takes place
Exports of cerium oxide
and other cerium
compounds have
declined – partly
because of the relocation
of polishing powder
manufacture to China
Cerium Compounds, Nes
Roskill
Approachable. Independent. Expert.
Impact of quotas and other measures on
exports of compounds of “other” rare earths
•
Exports of “other” rare earth compounds, 2001-2009 (t gross
weight)
25000
20000
•
15000
10000
5000
•
0
2001
2002
2003
2004
2005
2006
2007
Rare earth oxides other than of cerium
Rare earth chlorides
Rare earth fluorides other than of cerium
Rare earth carbonates
Source: Global Trade Atlas
2008
2009
Exports of lower value
chlorides, carbonates
and fluorides declined or
remained flat in the last
decade
Exports of higher value
rare earth oxides
continued to increase
until 2008.
The main markets for
other REOs are Japan
and the USA
Roskill
Approachable. Independent. Expert.
Decline in Japanese imports of rare earth compound
and metals since 2007 – replaced by imports of
processed materials?
Japan: Imports of rare earth compounds and metals, 2006-2009
(gross weight)
•
Overwhelmingly dependent on
supply from China
14,000
–
99% of lanthanum oxide
sourced from China
–
89% of cerium oxide.
–
90% of yttrium oxide
12,000
10,000
8,000
6,000
4,000
2,000
0
2006
Cerium oxide
Cerium compounds
2007
Rare earth metals
Source: Global Trade Atlas
1: Including intermediate compounds
2008
Rare earth compounds1
2009
Lanthanum oxide
Yttrium oxide
Roskill
Approachable. Independent. Expert.
Trends in rare earth prices
(outside China)
Roskill
Approachable. Independent. Expert.
Tightening supply and increasing demand in 2007/8
had a marked impact on the Japanese import value of
rare earths used in magnets and phosphors
Japan: Average value of rare earth compounds and metals, 2001-2009, Yen/kg
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2001
2002
2003
2004
2005
2006
2007
2008
Yttrium oxide
Cerium oxide
Cerium compounds
Lanthanum oxide
Rare earth metals
Other rare earth compounds1
Source: Roskill’s Letter from Japan
1: including intermediate compounds
2009
Roskill
Approachable. Independent. Expert.
How have rare earth prices performed in relation to
other commodities where China dominates global
supply?
Index of FOB China unit values for selected commodities, where China is the predominant source of
supply, 2001-2009
500.0
450.0
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
2001
2002
2003
2004
2005
2006
2007
Tungsten powder
Acidspar
Antimony oxide
Cerium Oxide
Cerium Carbonate
Other rare earth oxides
Source: Global Trade Atlas, Roskill
2008
2009
Natural Graphite
Roskill
Approachable. Independent. Expert.
How have rare earth prices performed in relation to the
IMF Commodity Price Index- Metals?
Comparison of REO prices (FOB China) and the IMF Commodity Price Index - Metals
600
500
400
300
200
100
0
2005
2006
IMF
Source: IMF, Global Trade Atlas, Roskill
2007
La2O3
CeO2
2008
Nd2O3
Eu2O3
2009
Dy2O3
Roskill
Approachable. Independent. Expert.
Existing and potential supply
from the Rest of the World
Roskill
Approachable. Independent. Expert.
Existing R-O-W producers accounted for less than 5% of
supply in 2009
Company
Location
Ore type
Capacity
(tpy REO)
Molycorp Minerals
Mountain Pass, CA
Bastnaesite
Lovozersky Mining
Company/Solikams
k Magnesium
Works
Kamasurt Mine , Kola
Peninsula, Russia
Solikamsk processing plant,
Urals, Russia
Loparite, processed to
yield rare earth
carbonate, which is
shipped to Estonia,
Kazakhstan, Austria and
China for further
processing
Up to 4,400
Indian Rare Earths
Mineral sands from Orissa,
Tamil Nadu and Kerala have in
the past been processed at
Udyogamandal, Kerala.
Current output from stockpiles
of Th rich residues
Monazite from extensive
deposits of mineral sands
25-100
Other
Vietnam, Thailand, Malaysia
Monazite
Notes
Current 2,000-3000
1,800-2,000
Currently processing ore from
stockpile, main products are
mixed rare earth oxides for
FCC catalyst and didymium
oxide, lanthanum compounds
and SEG concentrate
High level of radioactivity in
some zones of the mine
Plans for a new monazite
processing plant but start-up
has been delayed
IRE is under the control of the
Department of Atomic Energy
Monazite
Roskill
Approachable. Independent. Expert.
Composition of new deposits also vary – which
will meet the requirements of the market going
forward?
Rare earth content of ore at projects under development (% total REO)
Trachyte
Apatite
Alanite and
apatite
Fergusonite1
Weathered
monazite
Monazite
Bastnaesite
layer
Dubbo,
Australia
Nolans
Australia
Hoidas Lake,
Canada
Nechalacho,
Canada
Mount Weld
Steenkramskraal
Bear Lodge
La2O3
19.5
20.0
19.8
16.3
25.1
21.7
29.3
CeO2
36.7
48.2
45.6
41.4
48.5
46.7
45.0
Pr6O11
4.0
5.9
5.8
4.8
5.3
5.0
4.8
Nd2O3
14.1
21.5
21.9
18.7
16.7
16.7
16.8
Eu2O3
0.1
0.4
0.6
0.4
0.6
0.1
0.4
Tb4O7
0.3
0.1
0.1
1.8
0.1
0.1
0.1
Dy2O3
2.0
0.3
0.4
0.7
0.2
0.6
0.2
Y2O3
15.8
…
1.3
7.4
0.3
5.0
…
Source: Company data
1: Ore, rather than the normally quoted mineral
Roskill
Approachable. Independent. Expert.
Rare earth operations under development –
Lynas Corp
 Mount Weld deposit, W. Australia, and a processing plant in Gebeng,
Malaysia
 Capital raising in October 2009 raised A$450M which is being used to
finance Phase 1 development, completing construction at Mount Weld and
Gebeng
 Concentrator will produce 35ktpy of concentrate grading 40% REO
 Phase 1 plant at Gebeng has the capacity to produce 10,500tpy REO
 Possible expansion to 21,000tpy REO
 Start up planned for late 2011, full production by 2012
 Four sales contracts in place – including with Rhodia, plus further letters of
intent
Roskill
Approachable. Independent. Expert.
Rare earth operations under development –
Molycorp Minerals LLC
 Over 50 years of production history at Mountain Pass, California, USA
 Proven reserves 40,000t of REO contained in 0.48Mt ore at average grade
of 9.38%
 Probable reserves of 960,000t of REO in 13.8Mt ore at average grade of
8.2%
 Projected mine life of 30 years
 Mining scheduled to re-start at the end of 2010
 Production of REOs at the rate of 19,050tpy by the end of 2012
 Plans for conversion of REOs to metal and alloys and then magnet
manufacture
 Registered an S-1 in July 2010 preparatory to a public offering of stock
(possibly in August?)
 Plan to raise US$420.7M to fund modernisation and expansion plans
Roskill
Approachable. Independent. Expert.
Rare earth operations under development –
Japanese investments in potential producers of REEs
 Sumitomo/Kazatomprom
•
•
•
SARECO JV plans to build refinery to treat Y-rich uranium ore tailings, uranium ores and rare
earth concentrates to produce REOs and RE metals
Output could be 3,000tpy REO by 2011 rising to a possible 15,000tpy REO by 2015
However – still the subject of a feasibility study
 Toyota/Sojitz/Govt. of Vietnam
•
•
•
Dong Pao consists of number of ore bodies with a total reserve of ~9.7Mt REO. The most
prospective deposit contains 0.65Mt REO
Scheduled to produce 2-3,00tpy REO by 2013, rising to 5,000tpy
Mine life of around 20 years
 Mitsubishi/Neo Material Technologies
•
•
Undertaking research to extract HREEs from tailings at Mineracao Taboca’s Sn, Ta and Nb
mine at Pitinga, Brazil
Tailings reported to contain 8.5% REO – with a high grade of Dy
Roskill
Approachable. Independent. Expert.
The search for heavy rare earths – but at what
cost?
 Alkane Resources
•
Proposed production of HREEs as by-product of zirconium production at Dubbo, NSW,
Australia
•
1,200-1,200t REO (yttrium rich) could be produced by 2011/12 with potentail to expand to
3,000tpy.
•
Undertaking definitive feasibility study
 Avalon Rare Metals Inc
•
Nechalacho deposit rich in HREEs in NWT, Canada, low ore grade overall (176Mt at 1.43%
REO) but high ratio of heavies
•
Construction could start in 2013 resulting in production of 5,000tpy REO by 2015, rising to
10,000tpy REO. Capital costs could be up to US$890M for mine, mill and metallurgical plant
 Quest Rare Metals
•
Strange Lake and others in Quebec/Labrador, Canada. High proportion of HREEs in
Strange Lake deposit
 Ucore
•
Bokan-Dotson Ridge project, Alaska. Comprehensive suite of HREEs
 Matamec
•
Kipawa deposit in Quebec, Canada contains 3 major types of REE mineralisation (eudialyte,
yittrio-titanite, and britholite), including LREEs, HREEs and Y
Roskill
Approachable. Independent. Expert.
The majority of deposits are rich in LREEs - projects
where feasibility studies are underway include:
 Rareco, Steenkramskaal, South Africa - reopening and reequipping
underground mine, undertaking pre-feasibility study, mining permits
received
 Arafura, Nolan’s project, Australia. Bankable feasibility study underway.
Targeting production of10,000tpy REO by 2013 but no decision as yet on
site for processing plant
 Great Western Minerals Group, Hoidas Lake, Canada – prefeasibility
underway, could produce 3-5,000tpy by 2014. Relatively small resource
 Rare Element Resources, Bear Lodge, Wyoming, USA – inferred
resource of 17.5Mt at 3.46% REO. Feasibility study scheduled to start in
Q3, 2011
 Stans Energy Corp, studying feasibility of reopening Kutessay ll Mine ,
Kyrgyz Republic, and utilising processing plant at Orlovka (50:50 LREEs
and HREEs)
Roskill
Approachable. Independent. Expert.
The search continues!
Over 200 rare earth projects identified by mid 2010
Roskill
Approachable. Independent. Expert.
But commercial considerations are key:
Rare earths are not commodities – in many cases they are customer specific
Most of the rare earth projects that have emerged in the west are single project
companies (debt has to be non-recourse project funded)
Developing a rare earth mine and processing plant is capital intensive (>US$30,000/t
capacity, probably more for HREE mine)
History shows that the development time can be very long (10-15 years)
Limited technical expertise on mining, cracking and separating outside China
Percentage REO content is only half the story – REO distribution and amenable
mineralogy are important
Most deposits contain radioactive material that has to be contained and stored
Projects that rely on shipping low grade concentrate over 100s of km are going to be
costly
Roskill
Approachable. Independent. Expert.
Will production from the rest of the world plug
the forecast supply gap?
Rest of the World: Mine production of REOs, 2004-2015 (t)
60,000
50,000
40,000
30,000
20,000
10,000
0
2004
2005
2006
2007
2008
2009
2010f
2011f
2012f
2013f
2014f
2015f
ROW supply
Source: Roskill
Roskill
Approachable. Independent. Expert.
Roskill Information Services Ltd.
Contact:
Judith Chegwidden
+44 20 8944 0066
judith@roskill.co.uk.
Roskill
Approachable. Independent. Expert.