China’s germanium, gallium ban could cost the US $3.4 billion
According to the USGS, gallium prices could increase by more than 150% and germanium prices by 26% in the event of a total ban.
After surging last week, industry bellwether Molycorp led a slide in rare earth mining stocks with a 5% drop by early afternoon on Thursday on news China is raising REE export quotas for the second half of the year in reaction to a WTO ruling.
The exact impact of the decision is not yet clear: the new quotas only bring 2011 exports in line with last year prompting the EU to call it “highly disappointing.” And fresh data from Lynas Corporation, world no. 2 outside China, show the price of a basket of eight REEs jumping 140% in just over two months.
Molycorp which is worth $4.4 billion on the NYSE was trading at $51.57 in early afternoon trade which brought the counter’s losses to just shy of 9% for the week. Other developers such as Avalon Rare Metals, Thompson Creek Metals and Rare Element Resources fared slightly better trading down between 2% and 3%. Australia’s Lynas Corporation, which is set to become the number two producer outside China behind Molycorp once full production starts, was spared the destruction and closed up slightly on the Sydney bourse ahead of the news.
There were exceptions and Toronto’s micro-cap Frontier Rare Earth added a further 11% on Thursday bringing the stock’s gains to 26% since announcing on Wednesday a strategic partnership with state-run Korea Resources Corp to develop Frontier’s Zandkopsdrift project in South Africa.
China raised the quota for 26 companies concentrated in the rare earth mining belt in Inner Mongolia to 15,738 metric tons, according to a statement on the Ministry of Commerce’s website . That compares with 7,976 tons for the year-ago period and brings the limit to 30,184 tons for 2011, little changed on 30,258 tons in 2010, according to government figures.
Data supplied by Lynas show the composite price of eight rare earths at 99% purity found at its Mount Weld project in Western Australia surged to $223.16 a kilogram on July 11 from $92.84 during the first quarter and a mere $11.59 in 2007. That is a 1,825% increase over four years.
24/7 Wall St. reports confusion reigns about the exact impact of China’s decision and that the ministry has apparently added ferrous alloys that include rare earths in their list of export increases. This might mean that less of the raw minerals will be shipped than the headline number indicates.
A week ago MINING.com reported on stocks in heavyweight rare earth miners soaring with Molycorp adding 2.5% after trading up over 4% earlier and Lynas Corp wiping out losses it suffered on delays at its Malaysian refinery. REE stocks are usually volatile but investors digested a lot of news last week: first there was the discovery of massive marine rare earth deposits which was quickly followed by deep scepticism, then the WTO ruled China’s export restrictions violate trade rules and now some analysts believe of the 150 listed REE projects only five will ever enter production.
