Africa, Australia and Canada likely hold the key to a geopolitical battle being fought to end China’s stranglehold over obscure elements used to build high-tech items from headphones to missiles.
The three are the most likely home to vast reserves of rare earth elements. The commodities are almost exclusively produced by China, which unnerved global powers last year by threatening to restrict exports to help it settle political scores.
While all three have promise, Africa may offer the most potential, with geologists saying it has more than half the world’s deposits of carbonatites, a type of rock formation seen as prime hunting ground for rare earths.
“That immediately makes Africa a destination of choice if you want to find rare earth elements in carbonatites,” said Paul Nex, senior geologist at Umbono Capital.
Another advantage Africa offers is vast amounts of monazite sands left over from other mining operations on the continent from which rare earths can be extracted, experts said.
Carbonatite deposits are found in most African countries, according to geological surveys, with investment likely going to states with little red tape, infrastructure to take ore to ports and deposits large enough to make ventures profitable.
The Great Western Minerals Group’s Steenkampskraal project in South Africa has some of the highest concentrations of certain types of rare earths of any mine outside of China.
Rare earth — not as rare as their name suggest — are some of the world’s most obscure elements used in some of the world’s most familiar devices including cell phones, flat screen TVs and microwave ovens.
The hunt for rare earths hit a high point at the end of last year when China, which produces about 95% of them, made its threat, prompting South Korea to set aside about $1,4-billion in 2011 for supplies and Japan about $650-million.
As prices for the elements started to rise, so did the interest in reviving mines outside of China that closed years ago when they no longer were cost-effective to run.
“Everybody started looking for these rare earths at about the same time. There is really not a lot of difference between certain African countries and Australia or Canada,” said Judith Kinnaird, professor of economic geology at the University of Witwatersrand in Johannesburg.
“Anyone who can bring something together in three to five years is going to be at a great advantage,” Kinnaird said.
Digging in Africa
Rare earth stocks were the darlings of 2010. Now investors are casting a discerning eye over the sector, betting that only a handful of companies will survive the race to supply the world with the high-tech metals of the future.
For now, the main hunting grounds are a handful of the revived mines in Australia, Canada, South Africa and the United States where rare earths were extracted before China jumped into the field and priced them out of the market.
These include Molycorp’s Mountain Pass mine in California, Great Western Minerals mine in Steenkampskraal, South Africa; Avalon Rare Metals’ operation in Nechalacho, Canada; Lynas’s facility in Mount Weld, Australia; and Arafura Resources mine in Nolans, Australia.
Canadian rare earth processor Great Western Minerals Group says it expects output of 2 700 tonnes a year from its South African rare earth mine in two years’ time.
“Within the next five years, there is going to be extreme pressure on mines outside of China to get into production. There is going to be a significant number of them that are not going to get there based on their own expectations,” CEO Jim Engdahl said in an interview with Reuters.
“It is a very complex business. It is a very complex mining and a very complex metallurgy,” he said. “For the next five years I think you will significant shortages in most of the rare earth elements.”
Analysts said there could be a supply crunch in the next few years when Chinese demand is expected to outpace domestic production, with China then turning into a net importer.
With mining firms eyeing a supply shortage and demand surge, new ventures have been launched around the planet, with several in Africa that include Australia’s Southern Crown Resources’ projects in Zambia, Mozambique and Burundi.
Another promising site is Kangankunde Hill in Malawi, according to the US Geological Survey and Lynas Corp.
But investors should exercise caution given the uncertainties in the field and a new-found push for recyling brought about by Chinese export restrictions.
Geopolitical commodities
One problem that major powers face in Africa is that China has developed cosy ties with many resource-rich states, building roads and supplying loans in exchange for minerals that help fuel the Asian power’s hard charging economy.
Countries including Japan, South Korea and Germany may have to offer technology transfer deals in order to better compete with China in the hunt for African rare earths.
For the United States, which relies on rare earths for almost all of its high-tech weaponry, procurement is a matter of national security, with a US Congressional Research Service report advocating a strategic partnership as a hedge against Chinese rare earth hegemony.
“Supporting/encouraging greater exploration for REE efforts in the United States, Australia, Africa and Canada could be part of broad international strategies,” the late 2010 report said.
The 17 rare earths have names like lanthanum, used for making hybrid engines and metal alloys, neodymium, used for auto catalytic converters, hard drives in laptops and petroleum refining, and ytterbium, used for lasers and steel alloys.
Mining presents challenges that include few places where rare earths are in high enough concentration to merit extraction and a more than 20 year gap in knowledge outside of China in how to find, extract and refine the elements.
But the rewards are great. Prices for some rare earth elements skyrocketed at the end of last year, with lanthanum and cerium shooting up more than ten-fold, mining sources said. – Reuters