Tuesday, January 19, 2010

China Dominates The Global Rare Earth Metals Industry TNR.v, CZX.v, AVL.to, RES.v, QUC.v, WLC.v, LI.v, RM.v, LMR.v, ABN.v, HAO.v, BYDDY, NSANY, TM, F

Contrary to the reply of Chinese expert, we think that this global expansion by Chinese companies in REE sector is already under way. China still remembers how it was blocked in U.S. in energy deals in Oil sector and in Australia in Rare Earth Elements, they can chose this time a low profile approach in Canada.
Now we can have an another view on some recent investments by Chinese companies. Conclusion could be made, that by making a low profile investments in Canadian juniors Chinese companies are actually developing a well planed strategy if not to control, but at least to secure access not only to basic commodities like Zinc and Copper, but to strategic resources of Lithium and REE on a world-wide basis:

"One day we can wake up with new shareholders in TNR Gold with a very deep pockets. Recent news on Tongling acquiring Copper assets in Ecuador with Chinese Railway Construction Corporation speaks for itself about place of this company in Chinese Government circles. It is no surprise that Los Azules has attracted their attention.
China's second largest copper producer, Tongling Nonferrous Metals Group Holdings Co, has joined with China Railway Construction Corp (CRCC) to make an agreed bid for Canada's Corriente Resources Inc."

Idea of Rare Earth Elements' importance for the high tech and clean energy industries is filtering through mass media on the investors radar screens. We are expecting a great deal of government push into this sector in all countries, including China, and investors will follow with their money later.

"It is our second investment bottleneck. This investment area could have even more potential then very exciting Lithium opportunity itself. If in Lithium space resources are presented in more or less available form even in a tightly controlled market, REE market is controlled by China with over 95% of the market under its influence."

SAI is very provocative this time with their headline:

"Here's How China Came To Kick The World's Ass, And Dominate The Global Rare Earth Metals Industry

Joe Weisenthal Jan. 18, 2010, 12:09 PM
The latest edition of The China Analyst hits on the hot topic of rare earth metals, and includes an excellent interview with Chinese professor Fu Zhongde, a scientist deeply involved in the country's advancement of this industry. (via MineWeb)
Will the Chinese government encourage domestic rare earths companies to ‘go global'?
I am afraid the government will not do so. If, on the one hand, the Chinese government regulates the industry and limits rare earth exports, while on the other hand encouraging REE companies to go global, it would be contradictory and unfair. I do not think the government will do this. (S-???)
What is currently the status of Chinese rare earth processing technology compared to the rest of the world? How advanced is it exactly? Will China require technological assistance from overseas?
Rare earth processing technology in China is highly advanced and can be regarded as filling an important gap in the world. China can supply REE products as pure as 99.9999%, while for example French companies can only produce 99.999% pure products and Japanese firms generally produce 99.9% purity products. In addition to the purity, Chinese technology now uses low energy consumption, creates no pollution, and utilises a zero discharge process. So in terms of rare earths processing technology, China definitely leads the world and is certainly very competitive. I can attest to that myself, being the owner of a few patents in the field of ion exchange technology.
The full interview and more is found in the report below.


MineWeb has put a very good overview of REE sector recently:


Rare Earths in China: Cornering the market or a victim of its own success?

A closer look at the history of the rare earth industry in China, the recent controversies surrounding it, and some of the upcoming trends to watch.

Author: Lilian Luca Posted: Sunday , 17 Jan 2010
In addition to all the other trade disputes involving China-tyres, steel pipes, books, chicken, etc.-2009 has also brought up a relatively obscure issue that keeps coming back with a worrying consistency. This is the issue of rare earths, where China has a dominant position as producer. The Chinese government has imposed ever-increasing export duties and quotas on the rare earths industry, and there are recurring rumours that the most valuable of these elements will be banned from leaving China.
What are rare earths and why are they important?
The Rare Earth Elements (REEs) are a group of 15 chemically-similar elements called lanthanides (from element 57, lanthanum, to 71, lutetium). Commercially, REEs also include two elements not strictly in the REE group, but which share with REEs some chemical, functional, and occurrent features: scandium and yttrium. They are all usually soft, ductile metals, with very unique properties: catalytic, magnetic, optical and others. REEs are sometimes referred to as ‘industrial vitamins' due to the fact that tiny quantities of them, when added to other elements, tend to confer unique properties on the latter. In many applications, moreover, no substitute has been identified for a particular REE.
The REE elements surround us in our everyday lives by being a part of common high-technology and modern equipment. Of the more familiar applications of REEs, neodymium is probably the most widely known, as it is used in the light magnets found in earphones, mobile phones, hard disk drives, and hi-fi speakers, among others. Europium is present in the LCDs (liquid crystal displays) of computer displays and flat-panel television sets, while fibre optic cables that power the Internet depend on erbium. The lenses in photo and video cameras are almost exclusively polished with cerium oxide, and the even more popular high-efficiency fluorescent light bulbs contain a few different REEs. Other common applications of REEs include as catalysts in oil refinement and as an aid for the cleaner burning of fuel in automobiles, lasers, pigments, superconductors, medical imaging devices, as well as in a range of other metallurgical and nuclear applications.
REEs are not, strictly speaking, that rare. The least common of them, lutetium, is more common in nature than silver, while the most abundant REE, cerium, is more prevalent than copper. The problem with mining REEs, however, is that they are rarely found in economically viable concentrations, and tend to occur together as a group, creating additional issues with separation. Furthermore, the so-called light rare earths (LREEs) such as cerium and neodymium are more common and therefore cheaper than the less common and therefore very expensive, heavy rare earths (HREEs) such as dysprosium and terbium
Burning issues with rare earths
The latest controversy surrounding REEs is, in a nutshell, the following: China controls over 93% of the world's REE production. Every year China reduces export quotas and raises the export duties for REEs, yet advanced ‘industries of tomorrow' (for example, wind turbines, electric and hybrid cars) worldwide depend on the availability and affordability of REEs. Moreover, important defence applications (anti-missile defences, jet engines, missile guidance systems, etc.) also use REEs widely, thus making the issue of Chinese-only supply especially sensitive.
China possesses around 50% of the world's REE reserves, and has over the past two decades supplanted the US as the premier world REE supplier, due to a few significant factors. First, the development of REE resources has over the years received Chinese government support (some sources even quote Deng Xiaoping saying that one day China will become ‘the Saudi Arabia of rare earths'). Second, at the world's largest deposit of REEs, Bayan Obo (Baiyunebo) in Inner Mongolia, rare earths are produced as by-products of iron ore mining, which dramatically lowers their cost. Thirdly, China has also benefited from being naturally-endowed with rich, accessible HREE-containing deposits, such as the ion-absorption ores in the south of China. Lastly, the numerous small players active in mining and processing REEs are highly competitive, while the ‘China factor' helps keep production costs among the lowest in the world, in a fashion similar to China's other manufacturing industries.
In a way, China's REE industry has become a victim of its own success. On the one hand, low production costs in China have made deposits outside China uneconomic, while at the same time increasing the range of viable REE applications. With new applications and a multitude of competitive local suppliers, China has also developed a vibrant, sophisticated group of REE-based product suppliers for downstream applications (REE oxides, neodymium magnets, electric motors). The recent successes of Chinese wind turbine producers and the ever-growing number of electric bicycles on the streets in China are, to some extent, due to the local availability and affordability of neodymium-containing permanent magnet components of electric motors and generators, and an integrated Chinese supply chain for such products. World leaders in REE applications, such as Rhodia of France and Showa Denko of Japan have built manufacturing facilities in China, thus increasing the share of value being added to REE products in China, and transferring some of their skills and know-how to Chinese industry.

But on the other hand, the fragmented nature of the Chinese REE processing industry has also generated various problems-pollution, overly-intensive mining, smuggling of REE materials abroad, low extraction rates, and low R&D expenditure by most players due to a lack of scale. The Chinese government has over the years been steadily reducing the REEs available for export via quotas and export duties, while also actively encouraging M&A activity to increase scale and sophistication. This year, significant progress has been achieved in consolidating China's REE industry-three major players in China (Baotou Steel's REE division, Minmetals and Jiangxi Copper) have been identified as the companies to receive government support and were chosen to lead the industry's consolidation. Additionally, Baotou Steel has announced a joint venture with China Investment Corporation, which means additional financial and political support.

Recent developments
As with virtually every other traded commodity, REEs saw significant price increases in 2006-2008. The global financial crisis introduced some price corrections, and currently suppliers in China do not have any problems meeting market demand. But with increasing demand from booming industries such as hybrid and electric vehicles, electric bicycles, wind turbines, car batteries, and other ‘green' applications, combined with the Chinese government's plans to limit supply and consolidate the industry, it is certain that new sources of supply outside China will be required.
There are quite a few production sites being developed at the moment, for example, in Australia, Canada, South Africa and Greenland. Unfortunately, most of them will not be able to ramp up output until 3-4 years from now, and significant environmental, technological and financing concerns may yet keep production costs high and supply outside China uncertain. According to Roskill, this new supply will become available just in time, as by 2012 China's own elevated demand due to the growth in high-tech industries will have outstripped local supply.
The implications are sobering for the world's mining community and for investors, as well as for governments. The Chinese supply of REEs may become increasingly expensive and priority may be given in the future to China-based users (which can, however, be foreign-owned). In our opinion, China is tightening control as a means of ensuring a stable and affordable supply to its domestic high-tech firms, as well as to increase the value being added to REEs in China. It is most likely not trying to ‘corner the market' in REEs or attempting to extract higher prices from buyers.
Most REE properties outside China are risky investment propositions due to their need to be mined as standalone minerals (rather than by-products), high environmental and technological costs, and lack of large-scale, efficient processing facilities, and momentary dearth of capital. Without significant government or substantial corporate support (from leading world manufacturers that use REEs such as Toyota or GE) deposits outside China risk not being developed in time to meet growing demand, which puts high-tech industries in the US, EU and Japan at significant risk of tight supplies and escalating costs for REEs."

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