Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
The share price performance of those non-Chinese rare earth miners closest to production – Molycorp in the US, Australia’s Lynas and Great Western Minerals in South Africa – is in stark contrast to what is happening to rare earth oxide prices, some of which have more than halved over the last three months.
Shares in Lynas Corporation (ASX:LYC) have surged 22.5% since the start of the year as investors speculate that Malaysian atomic energy authorities will give the go-ahead for the company to start processing rare earths at its Kuantan facility shipped from its Mount Weld mine in Western Australia.
Malaysians have protested against the $230 million rare earth refinery over health and safety concerns, but the plant, originally scheduled to start processing rare earths in the third quarter of 2011, is now more than 80% built. This week Lynas also upped the resource estimates at the mine providing a further boost to its stock and bringing its market value to A$2.2 billion by the end of the week. The counter is still down 37% over the last 12 months.
Great Western Minerals Group (TSX Venture:GWG) earlier this month signed a joint venture agreement with Ganzhou Qiandong Rare Earth Group of China for the construction of a rare earth separation plant in South Africa close to its 74%-owned Steenkampskraal operation where the previously operating mine is being refurbished. The small-cap stock is up 31.7% this year and is worth some $207 million on the Toronto venture board. Great Western Minerals is 21.7% cheaper than this time a year ago and trading volumes remain thin.
Molycorp (NYSE:MCP), also in the process of expanding and modernizing a mine and processing plant closed down in 2002, is worth $2.4 billion today after gaining 21.4% since the start of the year. The company sees annualized production of just over 19,000 tonnes by Q4 this year and 40,000 metric tons by mid-2013 at its Mountain Pass, California project. Despite the gains in 2012, Molycorp is still trading 36% lower than during January 2011.
Lynas together with US Molycorp will become the dominant suppliers outside China, which currently controls more than 90% of world output. Lynas has a breakdown of China’s export versus local pricing showing a dramatic fall-off in the export prices of many REEs.
Abundant, less valuable REEs such as lanthanum have experienced sharp pull-backs. Lanthanum oxide for example rose from a price of $8.71/kg in 2008 to $117/kg in the third quarter 2011 but has now (as at January 16, 2012) sunk to $52.00. However, that $52 export price compares to the domestic price in China of $16.67 in January 2012.
Cerium oxide used to polish TV screens and lenses, has seen similar falls and is now trading at $45 from $118 in the third quarter. The price for cerium oxide was $4.56 in 2008.
The prices for scarcer REEs which have generally held up while the light REEs have been declining have now also fallen back. A kilogram of samarium oxide used in jet fighter electrical systems increased dramatically from $5.20 in 2008 to average $129 in the third quarter of last year and is now trading at $80. The domestic price in China is only $12.70 for samarium.
Neodymium oxide used in windmills have seen a dramatic slump – from $338/kg in Q3 2011 to $200/kg at the start of 2012.
The reversal in the dysprosium oxide price has been most startling. A hybrid vehicle ingredient, dysprosium rocketed from a price of $118.49/kg in 2008 to $921.20/kg in the second quarter of 2011 and $2,300/kg by September last year. Dysprosium, also used in conjunction with vanadium and other elements in making laser materials, has now given up more than $840 per kilogram and goes for $1,420.
A similar pattern is seen for europium and terbium, by far the most expensive of the REEs.
An article by The New York Times, cited by MINING.com last November, explains the price drop for a number of rare earth elements is on the manufacturing side, as big companies in the US, Europe and Japan that use REES in manufacturing move operations to China, draw down inventories, and look for lower-cost substitutes.
2 Comments
Pitfalcon6
If glass and also LCDs remain the normal way and substitutes for REE remain less effective or less likeable to look at or use in LCDs and what not , I then accept that Rare Earth Minerals are here to stay . Even if China were to turn the tap back on again , the long term metric would seem to be good .
Long term more Resources are going to be found , the world keeps growing though . Thus a steady improvement for the Rarest REE and also some of the middleish REE seems likely . The more common REE seems less certain though .
Whether it is Gold , Silver , Paladium , Platinum , REE , Etc …It is probably not getting more common on the earth .
Aubrey
Rare earths will be supplied in abundance by Orbit Aluminae’s new green extraction process.