Before all this “Rare Earth Saga” started last September, only a handful of people actually knew about the existence of it. Today, it is a hot global media topic, an international mining investment trend and most importantly the key ingredient to a greener and better future.So how did the storyline begin in the first place?
On September, 7 2010, a Chinese fishing boat collided with a Japanese Coast Guard patrol and the crew was held in custody pending possible charges. On the same day, China showed the world that they are the new global “bully”. China demanded for immediate release of the crew. All rare earth shipments to Japan were stopped soon after the incident. The Chinese government denied of such actions. It was an unannounced ban, an embargo – at least that’s how the rest of the world perceived the situation. With the strong opposition from the Chinese government and with the need of the rare earth shipments, Japan had no option but to release the crew only after a week. The release of the crew did not resume the shipments and it took another two months for China to restart the shipments to Japan. For the Japanese high-tech industries this action was a major threat which brought great uncertainty and fear. Japan finally realized that they cannot be dependent on China on its most crucial industrial raw material – rare earth elements.
Rare earth elements, perhaps which are more correctly referred to as lanthanides after lanthanum (atomic number 57) the first element in the series of 15 elements. The first rare earth element – yttrium was discovered in 1787. Through the early 1940s, these elements were largely a chemist's curiosity. But then US chemist Frank Spedding figured out a way to separate and purify rare earth elements. Twenty years later, researchers began discovering their usefulness. What makes rare earth elements special is that these elements are a group of materials that have unique electrical, magnetic, fluorescent and thermal properties that make them indispensable in the manufacturing of many “modern day living” such as laptops, LCDs, auto catalysts, energy efficient lighting and hybrid vehicles. Yttrium and scandium, which are also chemically similar to lanthanides, are also included in the family of rare earth elements, taking the total to 17.
Without these 17 elements on the Mendeleev periodic table, one would have to imagine a world without cell phones, flat screen TVs or even jet engines. Let me put it this way. You, Mr. Consumer, would have lived in a world without mobile connectivity where it is just not possible to call your little girl or your lovely fiancée anytime you want. You, Mr. Consumer, would have lived in a world with no laptops and color TVs where portable technology and entertainment are just mere words. And yes, You, Mr. Consumer, would have lived in a world that offers not-that-reliable civil aviation where flying could be on the list of “10 crazy things you should do before you die”. Without the 17 elements, most of our mainstays of modern life just wouldn't be possible.
The importance of rare earth elements is not only limited to consumer based products. It is also the basis of “enabler technologies” such as superconductors, lasers and imaging systems, while rare earth metals are mainly used to improve the performance of permanent magnets, catalysts (emission control systems) and rechargeable batteries. Rare earth metals are vital to the technology of Wind Turbine Power Generator, or simply known as wind turbine which is seen to be the key technology in reducing carbon emissions along with other green renewable energy technologies. Rare earth elements are categorized as strategically important in some of the developed nations for a different reason – national security. According to the U.S Department of Defense, rare earth elements are used in the production of number of missiles including the deadly Tomahawk cruise missile, radar surveillance systems, Abrams M1A1 Tanks and F15 Fighter Jets etc. Rare earth elements are undoubtedly important, so what’s the fuss about? The problem is China in four words: single source of supply. Today, almost 97% of the world’s rare earth supply comes solely from China and out of that, about 95% is extracted at Bayan-Obo mine, the largest deposit known up to date, in Baotou (Mongolian: Бугат), Inner Mongolia. The Bayan-Obo deposit lies only 80 kilometers outside of the Southern border of Mongolia. It is estimated that the deposit accommodates over 300 million tonnes of rare earth oxide ore with an average grade of 1.5% (this means only 1.5% of the total deposit is actual rare earth oxide and the rest is earth’s crust) Single source of supply is not a new idea and definitely not a new concern. The issue has been simmering for the past decade or so. Even prior to the discovery of Bayan-Obo, Mountain Pass deposit in California, United States was the monopolistic supplier of rare earth. But the new wrinkle "is the prospects of an explosion in demand for certain relatively obscure elements for new clean-energy technologies," says Roderick Eggert, a minerals economist at the Colorado School of Mines in Golden.
According to Credit Suisse, a major global financial services company, the overall rare earth market was barely 1.3 billion USD in 2008 with a total volume of 124 thousand tonnes, which was equivalent to only 6% of the copper market that year. This is because minimal amount of rare earth is required, but necessary to produce various high tech devices. However, market forecast shows a promising estimate that global consumption will increase to 220 thousand tonnes by 2012, a 77% increase from 2008. On the supply side, Chinese export quotas crimped worldwide industries and as a result, prices have climbed sevenfold in the last six months for cerium oxide, which is used for polishing semiconductors, and other elements have more than doubled, according to Metal-Pages Ltd. in London, which tracks rare-earth prices. Actions by China have drawn criticism from U.S. lawmakers and officials in Japan and Germany. Bloomberg reported that China reduced its second-half export quota for the minerals by 72 percent in July.
Chinese control of the base of the rare earth supply chain has increasingly made China the go-to location for the intermediate goods made from rare earth elements. As new rare earth supplies cannot be brought online overnight, China will enjoy a very powerful position at least in the short term. Mount Weld deposit in Australia is planning to begin production in late 2011, which will become the first major supplier of rare earth outside of China. The re-establishment of the Mountain Pass deposit follows with a few others. Even with all the new suppliers marching into the rare earth market in the upcoming years, it will still be hard to keep up with the rapidly increasing demand.
Multinational corporations and countries that have significant stake in rare earth related industries have already started pursuing new investments opportunities at new locations. This is where Mongolia came into the picture along with other emerging nations in the quest to finding the “treasure chest”. Ever since the China-Japan dispute, Mongolia has been an international focus regarding the rare earth sector. On October, 2 2010 Japanese Prime Minister Naoto Kan and Mongolian Prime Minister Sukhbaatar Batbold agreed on to cooperate in promoting projects to develop rare earth minerals in Mongolia as it seeks to diversify sources of materials needed for high-tech products during a meeting in Tokyo. "Development of mine resources in resource-rich Mongolia will benefit both countries. Our country's research team will launch exploration of rare metals this month," Mr. Kan said during the meeting. Japan expressed strong interest to help Mongolia look for rare earth elements and other metals with its technologies under the agreement. Not long after, Mr. Kan met Elbegdorj Tsakhia, the President of Mongolia, and furthermore agreed to build a strategic partnership and to secure mutually beneficial cooperation in developing various mineral resources in Mongolia.
After the Second World War, the Soviet Union started extensive explorations within its satellite countries as well as Mongolia with the ambitious goal to discover major uranium deposits. Currently there are over 60 registered rare earth occurrences in Mongolia, all of which were discovered during these explorations as a byproduct. However, these explorations mainly covered Southern and Western Mongolia while the remaining parts are mostly untapped and unexplored. It is believed among experts that Mongolia has some potential to become the next major “rare earth player” in the global market. There are 4 deposits in Mongolia known up to date. The largest one out of the 4 deposits is the Mushgia Khudag deposit, located in the Omnogobi province. It is estimated to have around 200 million tonnes of rare earth oxide ore with an average grade of 1.5%, which is comparable in size to the Bayan-Obo deposit in Inner Mongolia. Khotgor, the second largest deposit is expected to deliver another 200 million tonnes of rare earth ore at a lower average grade of 0.7%. The remaining 2 deposits are also estimated to be respectable in size.
It is still a couple of years away before any rare earth production starts in Mongolia and there are a few roadblocks that the government has to maneuver through. First of all, rare earth deposits aren’t even considered to be strategic yet in Mongolia. With no doubt the status will become “strategic” and as a consequence there will be a lot of changes at different levels. Secondly, there is no existing legal framework “tailored” for rare earth elements. It is necessary to have one because rare earth elements will need “special care” – a different type of approach compared to bulk commodity mining. The development of a new legal framework will be time consuming and investors will not start spending big money until everything is in the right place. Apart from it, there is another, probably a more sensitive side to the whole rare earth story. Despite their name, rare earth elements are actually not so rare. According to US Geological Survey (USGS), at the current consumption rates, the total rare earth reserves will represent a comfortable life expectancy of nearly 800 years. However, their extraction and production are rather expensive due to their similar chemical properties and their tendency to mix with each other. Not only it is expensive but also rare earth extraction is one of the most environmentally unfriendly processes in the mining industry. The Mountain Pass mine in California, once the dominant producer of world’s rare earth elements, was closed down due to environmental reasons. Due to the radioactive nature of the rare earth ores, the waste water was a serious problem with Mountain Pass. On the other hand, extracting a small amount of rare earth requires digging and moving vast amounts earth’s crust. Some people believe that the reason China started imposing export quotas is partially because of the environmental issues they were facing. Whatever the reason is, with Mongolia already heavily suffering from extreme climate change and improper mining activities, there will be one question that need be answered: All these potential rare earth in Mongolia – a blessing or a curse?
1 comments :
Well written. Good job
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