Would-be North American producers of rare earth minerals
might be in competition for the same slice of market share, but
that doesn't keep them from agreeing on one thing the
development of new rare earth projects, while challenging, is
China supplies as much as 97 percent of rare earths, a
complex of 17 elements vital to the advancement of green
technologies and high-technology weapon systems. It has been
able to provide an adequate supply of rare earths for export,
but with the emerging nation's internal demand on the rise,
market sources say the need to develop non-Chinese projects is
stronger than ever.
"I don't think there's going to be a 'trade war,' but what
you're going to find is China's internal demand is increasing
and they will take care of their demand first. It's not like
they're out to hurt someone else, but they have their own
demand," said Ian London, vice president of market development
and energy advisor at Toronto-based exploration company Avalon
Rare Metals Inc., which hopes to bring its Nechalacho project
in the Northwest Territories online by the second half of 2014.
"Under those realities of them building their own economy, it
falls on suppliers in other parts of the world to develop their
own strategies," he said.
Edward F. Cowle, chief executive officer of Salt Lake City,
Utah-based exploration venture U.S. Rare Earths Inc., agreed
that securing a Western supply of rare earth minerals should be
an international priority despite assertions from some analysts
that the concern has been overblown.
"Some experts say that there is no crisis, that it's
overblown, that by 2015 supply and demand will match. But what
if there is a crisis from China? Do you really want your weapon
systems in this country dependent on China? If there is a
domestic supply and it's accessible and it's minable and it's
near roads, power and water, it just makes sense to me to have
it," Cowle said. His company owns rights to the yet-undeveloped
Diamond Creek and Lemhi Pass properties in Idaho and
The solution can't be on a nation-by-nation basis, but must
be on a global scale if the Western World hopes to keep up with
the Chinese, sources said.
"I've never taken the position that it should be U.S. only
or North American only. What we need is a worldwide solution,"
Mark A. Smith, chief executive officer of rare earths producer
Molycorp Minerals LLC.
"We don't believe it's a U.S. vs. Canadian vs. Mexican vs.
European issue," London agreed. "We have to get the rest of the
world's technologies moving."
While potential producers agree that a Western rare earths
solution is necessary, a number of stumbling blocks still stand
between miners and the ore, not the least of which is project
Greenwood Village, Colo.-based Molycorp, considered the
furthest along in terms of U.S. rare earth projects, boasts a
2012 estimated start date for its Mountain Pass project in
California, but it is short on capital, Smith told a U.S. House
of Representatives Science and Technology subcommittee in
Just days after testifying, Rep. Mike Coffman (R., Colo.)
introduced a bill that includes a loan-guarantee program for
U.S. rare earth producers-but until such a bill is signed into
law, financing could be difficult for domestic producers.
"Certainly the financing is just something that we'll have
to go through," Smith told AMM, noting that a
government-backed loan-guarantee program would be a "very
At presstime, Molycorp filed a registration statement with
the U.S. Securities and Exchange Commission, outlining plans to
raise $350 million. Additional funding will be required, the
company told AMM.
Cowle agreed that the government could be a logical solution
to the rare earths financing difficulties. "You're not going to
be profitable for a long time because you're going to need an
awful lot of money to get started. Who has the pockets to do
that? Obviously, the federal government," he said.
But as the buzz around rare earths grows louder, more and
more investors also are taking a closer look.
"We're looking at proposals," Cowle said, noting that U.S.
Rare Earths is likely to sell offtake to raise money even
before production begins. "I would like to end up selling
production or offtakes before we actually start producing
realistically. It may not be the end-users, the big
corporations; it may be financial institutions."
Financing also could come from rare earth funds, at least
two of which are already in the works Saint-Cergue,
Switzerland-based Dolefin SA's REE Fund, which intends to
invest in global rare earth companies; and Toronto-based Dacha
Capital Inc., which plans to provide investors access to
physically stockpiled material.
"We don't have all the financing lined up, but we don't have
a great concern over that," London said. "This is all part of
the whole green economy and new economy (movement), so it has a
But even with funding in place, the lack of a specialized
work force also is a challenge for would-be producers. North
America has seen an exodus to China of technical experts in
rare earths, and without the country investing in training for
the next generation of workers the skilled labor supply is fast
approaching zero, producer sources said.
"We have no curriculum in this country that focuses on rare
earths processing and technologies whatsoever," Smith said.
"What we have to do is hire people with no experience, bring
them to our facility and then train them in all of these
different processing techniques. This has worked out very well
so far, but the employment side of this is going to ramp up
quite significantly as early as later this year, and that's
when it will start to become more of an issue."
If the U.S. is successful in implementing a full
mining-to-magnets strategy-that is, shifting an entire supply
chain ability stateside-some 900 new high-skilled jobs will be
created, Smith said.
London agreed that the work force issue is a big challenge,
noting that Avalon has hired workers with general mining
competency and fine-tuned their skills on-site to match the
needs of the rare earths sector.
But financing and labor aside, the biggest deterrent to
Western rare earths production is time, sources said. By some
estimates, it takes at least a decade before a new discovery
can start to produce, and even the most advanced projects in
the pipeline are still some 24 months away.
"Since bringing a mine on-stream takes from seven to 10
years on average, then I believe there definitely should be
cause for concern," said Gary L. Billingsley, executive
chairman of Great Western Minerals Group Ltd., Saskatoon,
Saskatchewan. "We identified a potential crisis over 10 years
ago when we first looked at rare earths but nobody seemed
concerned until very recently, and unless rare earth sources
are developed very quickly outside China there could be a
The two Great Western projects closest to development-the
Steenkampskraal Mine in South Africa and the Hoidas Lake rare
earths deposit in Saskatchewan-are due to come online in 2012
and 2014, respectively, he said.
Cowle, whose company's nearest-term project is still some
six to seven years away from production, said some projects
might move along faster due to a recently heightened awareness
in Washington. "With this national crisis, maybe some of the
red tape could be cut, but to get a mining operation up and
pulling rare earths out of the ground and processing is a long
process," he said. ANNE RILEY