Rare earths deja vu: Chinese crackdown = higher prices

Top management and eight shareholders who control 73.9% of the outstanding shares of TSX-Venture listed Sino Vanadium on Friday announced that they are taking the tiny firm private. The company first listed in June 2009. The share tripled on Friday to 21c and 108,200 shares changed hands compared to the usual 1,000. The company is offering 27c to shareholders who turn in their shares over the next month, so some investors appear to be cashing in early. Sino Vanadium owns 100% of a project in China's Shaanxi Province in the feasibility stage which it says could produce 14% of world vanadium supply.

Chinese-run copper mines in Zambia are routinely mistreating workers and breaking the law by imposing up to 18-hour shifts and flouting international health and safety standards, according to a report from Human Rights Watch. The 122-page report draws on interviews with miners from the country's four Chinese copper operations and the 48 other mines operated my multinational companies. The Chinese companies are subsidiaries of China Non-Ferrous Metals Mining Corporation (CNMC), a state-run firm.

A mining industry consultant says the high processing costs and level of expertise required in bringing rare earth mines into production means most of them will fail. In an interview with Reuters, Jack Lifton, founder of Technology Metals Research, said of the 244 companies hoping to extract REEs, less than 4% will be profitable: "The choke point for all the companies is the question of what they can do with the concentrated REM ore once it's above ground. You can extract the rare earths together, but then you have to separate them...the world's REM separation capacity is 99 percent Chinese and they have unused capacity," Lifton said. "The Chinese overwhelmingly control this and that is the key to the rare earth industry. Without separation capacity, all you have is a loss-making ore concentrate company."

A Chinese government policy that purports to make coal mines safer is triggering local supply disruptions. China's dismal, and tragic, accident record at coal mines led the Chinese government to consolidate thousands of small, often-dangerous coal mines to boost safety. As the largest user and producer of coal, the country became a net importer in 2009 for the first time, as the consolidations led to a drop in domestic coal output. (Read an indepth article on China's place in the global coal market in MINING.com Magazine)

The Ottawa Citizen reports that computer hackers went after potash documents in the Finance Department and Treasury Board networks. An email, pretending to come from an aboriginal group, was opened by department officials. A link in the email installed malware on the worker's computers, which facilitated the attacks. Industry officials believe the attack was launched from China.

Albertan metallurgical coal producer, Grande Cache Coal (TSX:GCE), was acquired by a Japanese and Chinese firms for about $1.0 billion. The purchase, announced on Monday, represented a 112% premium over the 20-day volume weighted average trading price of the company's common shares. Shares of Grande Cache Coal shot up 66% on the news. The new owners are Winsway Coking Coal Holdings Limited and Marubeni Corporation.

The Manawatu Standard reports giant Chinese state-owned Shanxi Coal is understood to be in the running to buy New Zealand's Pike River Coal as part of a joint bid with local miner Solid Energy. Bids closed a week ago, with four players making offers, sources said. One Indian company is believed to have pulled out and another Indian company was still understood to be in the running. The state-owned mine operated by Solid Energy was put up for sale as part of a privatization programme by the New Zealand government and after an enormous methane explosion ripped through the mine near Greymouth on November 19 last year killing 29 men.

Potash Corporation of Saskatchewan Inc. (NYSE:POT) doubled its third quarter earnings, reporting 94 cents per share or $826 million compared to 38 cents per share or $343 million a year ago. The company's stock opened 2.3% higher at $50.65 a share. During the first the first nine-months of 2011, the company's earnings have doubled from $1.39 per share during the same period last year to $2.73 per share today. The company said demand was strong from both North American and international customers.

As the price of iron ore continues to tumble, Chinese buyers of the crucial steelmaking ingredient are backing away from quarterly contracts in favour of cheaper monthly contracts or spot prices. Weakness in the market is “accelerating the move to shorter pricing methods and closer to spot,” said Rio Tinto CEO Tom Albanese, speaking to analysts in Sydney today, Bloomberg reported. While most (86%) of Rio's third-quarter sales were priced quarterly, Bloomberg quoted one JP Morgan Chase & Co. analyst saying that given that spot prices are lagging below quarterly contracts, "it would not be surprising to see some contracts reneged on" and therefore more movement towards spot prices.