Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
April 7, 2011 (Robin Bromby, Editor www.RareMetalBlog.com) – China is going to be a net importer of REE from about 2015, right? Well, that seems the latest consensus. If this proves to be correct, then the various emerging rare earth mines outside China stand to do very well as tightness of supply forces prices beyond even the extraordinary levels (at least for some of the HREE) of today.
Let me state right at the outset that I don’t know what is going to happen in this regard, except that – knowing China – everyone will probably be proved wrong to some extent. In fact, both sides might be partially right: China may, for example, need be short of one or two REE but not most; or vice-versa.
In fact, the only thing you can say with certainty is that REE World and RareMetalBlog are going to be preoccupied with this question 24-7-365 through to 2015 and beyond. So let’s at least look at the range of opinions
But, it’s true, many of the emerging miners are now assuming China as a net importer some time in the future. Recent news reports have quoted Gary Billingsley, chairman at Great Western Minerals Group, getting on board the net importer story, but qualifying it with the words “perhaps” and “beyond 2015”. Molycorp’s Jim Sims, who is director of public affairs at the company, has made a similar prediction. Both men cited the growth in applications depending up REE, like wind turbines along with electric cars and bikes. This argument makes a great deal of sense.
But, for the contrary view, let’s turn to Dudley Kingsnorth, of the Industrial Minerals Co of Australia. He emailed his views on the subject, and leaves no doubt where he stands.
“The idea that China will not be able to meet its own rare earths needs in the near future is fanciful nonsense,” he writes. His case is that the country has between 30 million and 50 million tonnes of REO reserves; it has between 200,000 and 250,000 tonnes a year of processing capacity (admittedly 50 per cent of which is presently shut down but the equipment is there and available.
Furthermore, says Kingsnorth, cash-rich state-owned enterprises have announced multi-million dollar REE expansion plans, with Fujian province unveiling a $US905 million project based on its HREE reserves. From calculations he has done, it appears that between 20 million and 30 million of reserves have suddenly been “lost” in a year when prices have tripled. For him, the figures clearly do not compute. And he concludes: “Above all, China’s policies are driven by the need for social harmony, so believe me they will find the rare earths needed to sustain the high technology manufacturing industry that is dependent on rare earths and employs millions of people”.
However, regarding the last point Kingsnorth makes, finding enough REE to sustain industry does not preclude importing.
I think we can say the jury is out on the issue.
But there is, of course, another factor: more discoveries. The People’s Daily reported three days ago that the Zhejiang Provincial First Geological Team has made what it calls a “mammoth” scandium deposit. It says that “the rare earth deposit contains 17 types of metallic elements” but does not specify whether these include REE apart from scandium, although they do list silver, cadmium, tin, gallium and rhenium. So we can’t rule out other REE discoveries (and you can bet exploration is going on within China) in a country with existing expertise in development and processing of deposits.
Meanwhile, the Xinhua news agency says REE processing companies and “investors with a great amount of speculative capital” have been buying large quantities of REE since Chinese New Year. That suggests stockpiling is taking place, which would not be surprising given China has been doing this with other commodities both to secure future supply and buying now in the expectation that prices will be much higher in the future.
It all shows a good deal can happen between now and 2015.
