Are Rare Earth’s Rare?
September 25, 2010 by E.M.Smith
http://chiefio.wordpress.com/2010/09/25/are-rare-earths-rare/
In a recent ‘spat’ over water and fishing rights, China put an embargo
on sales of “rare earth” elements to Japan. These have economic and
strategic importance in that they are widely used in electric motors,
high performance magnets, and a variety of electronics. Since China is
presently the source of over 90% of the rare earths, this was a
significant boot to the neck of Japan.
So, many folks have leapt to the conclusion that China has some
special lock on the global distribution of rare earth minerals. Are we
in fact slave to China having the natural abundance and the rest of us
impoverished?
Common Rare Earths
From the wiki, we learn that at one time rare earths were rare, as
they were thought to come only from rare oxide deposits:
The term “rare earth” arises from the rare earth minerals from
which they were first isolated, which were uncommon oxide-type
minerals (earths) found in Gadolinite extracted from one mine in the
village of Ytterby, Sweden. However, with the exception of the highly-
unstable promethium, rare earth elements are found in relatively high
concentrations in the earth’s crust, with cerium being the 25th most
abundant element in the Earth’s crust at 68 parts per million.
Hmm, that doesn’t sound so rare…
Are they hard to extract? Well, they used to be. Now we use a variety
of techniques.
In the 1940s Frank Spedding developed an ion exchange procedure
for separating and purifying the rare earth elements.
“Ion exchange”. That’s what is used in your water softener. I’m sure
the rare earth ion exchange is more complicated, and probably uses a
far more expensive ion to exchange than ‘salt’. But still, it’s not
that hard a process. A mineral or resin has one type of ion absorbed
into it, a liquid solution is run over it and the ion in the resin
moves into the liquid while the desired ion goes into the resin in
exchange. When the ‘regenerating fluid’ is run into the reactant bed,
the swap goes the other way. In the process, a very dilute
concentration in the original liquid becomes a very high concentration
in the effluent of the reactor (and a fairly clean solution in that it
contains the target ions and the reactant ions primarily).
The principal sources of rare earth elements are the minerals
bastnäsite, monazite, and loparite and the lateritic ion-adsorption
clays. Despite their high relative abundance, rare earth minerals are
more difficult to mine and extract than equivalent sources of
transition metals (due in part to their similar chemical properties),
making the rare earth elements relatively expensive. Their industrial
use was very limited until efficient separation techniques were
developed, such as ion exchange, fractional crystallization and liquid-
liquid extraction during the late 1950s and early 1960s.[3]
So they are more expensive due to the extraction and separation from a
bunch of similar ions, but folks have worked out ways to do that. So
the cost is not from scarcity of ore, but from the process.
Of these, “monazite” caught my eye. This is a modestly common mineral
(often a sand) used to mine Thorium. Thorium can be (and presently is
being) used in nuclear reactors to generate power much as Uranium is
used. In fact, Thorium is turned into U233 during the fuel burn up.
From:
http://www.galleries.com/minerals/phosphat/monazite/monazite.htm
Notable Occurrences are wide spread and diverse. They include
beach and river sand deposits from Travancore, India; Australia;
Brazil; Sri Lanka; Malaysia; Nigeria; Florida and North Carolina, USA.
Pegmatite sources include Encampment, Wyoming; Petaca District, New
Mexico; Amelia Court House, Virginia; Climax Mines, Colorado; Maine;
Alexander and Madison Counties, North Carolina, USA as well as
Callipampa, Bolivia; Madagascar; Norway; Austia; Switzerland; Joaquim
Felicio, Minas Gerais, Brazil and Finland.
Humphf… Sounds pretty common to me…
But What About The Graph?
Doesn’t that show the USA running out and China taking over?
Nope.
It shows the USA shutting down production, but not running out.
Like most other manufactures, it’s simply cheaper to do it with labor
at $2 / day and with hardly any regulations (and very low capital
gains taxes) than to do it in the USA with $50/hour (or more) Union
wages, busloads of regulatory paperwork needing $500 / hour lawyers to
review, agency permits that are not granted (try getting a mine open
in California… we used to mine rare earths, but shut the mine as it
was too much trouble to keep it open and Chinese prices undercut the
market) and then you face the 2nd highest capital gains tax rate in
the world if you do get past those hurdles.
So we have mining and refining running off to China.
We are shutting down, not for lack of resources, but due to the
mercantilist policies of China.
Why Does This Matter?
Because rare earths are necessary for a large number of critical
devices. Everything from exotic lenses ( I have a lanthanum eyepiece
for my telescope, for example) to electric motors and electronic
parts, to parts in cruise missiles and other weapons systems and
medical equipment like x-ray machines.
And now we know that China is quite happy to use it’s economic
position as a weapon to get what it wants. Japan folded the next day
and gave in to Chinese demands…
So how will the USA react when, for example, China says it’s time to
hand over Taiwan, or perhaps to shut down those bases in Japan that we
don’t need any more? And how will we react when told that there will
be no more goods sold to the USA until those things are done?
Think we would just say no? Go to a department store and visit the
clothing, housewares, toy department, you name it. Look at the country
of origin. I just did this at a teacher supply store. I found one
thing (a floor jigsaw puzzle of the US Presidents) made in America.
One each from Korea and Taiwan, and an endless stream of “Made in
China”.
Any Other Problems?
Oddly, the mining of rare earths from things like the Monazite Sands
in the Carolina’s is complicated by the presence of Thorium. Rather
than us the Thorium for energy production, we treat it as waste. And
even mildly radioactive waste causes “issues”.
From: http://www.marketoracle.co.uk/Article20622.html
There are contaminants that can limit the ability to conduct
economic work on a deposit or even limit the ability to exploit it at
all. Thorium is one of the more common contaminants that you find
accompanying many rare earth element deposits. Thorium is a
radioactive element that someday may have uses in the nuclear power
industry but, right now, if you have enough of it in a deposit, your
tailings are radioactive. You must have the appropriate permitting to
store those tailings, or you’re never going to start a mine.
Looks to me like a ‘win-win’ to just mine BOTH Thorium and Rare
Earths. Get energy independence AND high tech resources…
from: http://www.evs.anl.gov/pub/doc/Thorium.pdf
Where Does It Come From? Thorium is widely distributed in small
amounts in the earth’s crust. The chief commercial
source is monazite sands in the United States (in North Carolina,
South Carolina, Idaho, Colorado, Montana, and Florida)
as well as in Brazil, India, Australia, and South Africa. The
concentration of thorium oxide in monazite sands is about 3 to
10%. Thorium is also found in the minerals thorite (thorium
silicate) and thorianite (mixed thorium and uranium oxides).
The isotope thorium-230, a decay product of uranium-238, is found
in uranium deposits as well as in uranium mill tailings.
So what is Monazite? (Ce, La, Th, Nd, Y)PO4, Cerium Lanthanum Thorium
Neodymium Yttrium Phosphate.
Notice that we get phosphate too. So lets think about this for a
minute. Some folks are just all crazy over the pending demise of
civilization from running out of energy, phosphate fertilizer, and the
limited availability of Rare Earths. Yet in some of the most common
rocks (and sands) on the planet we get a bunch of rare earths, Thorium
for energy for the next 30,000 years, and , oh yes, phosphate.
Somehow I’m not worried about “running out”…
And is it India and the Carolinas that are so uniquely blessed? Nope.
Look again at that quote from the USGS article about Thorium:
The chief commercial
source is monazite sands in the United States (in North Carolina,
South Carolina, Idaho, Colorado, Montana, and Florida)
as well as in Brazil, India, Australia, and South Africa.
All over the USA, Brazil, Australia. Just waiting to be needed.
Back To China
As an interesting insight to the mercantilism of China, they also
observe this about the general Chinese restrictions on total exports
(not just the Japanese embargo):
That’s not what the Chinese are envisioning, though. I think that
by limiting the export of these materials, China is intending to move
a lot of those refining operations and a lot of those final assembly
operations into China. This is a still a very labor-intensive
operation at that stage, and China is trying to bring those higher
value jobs back to China. Unless we actually produce alternative
sources of REEs outside of China, frankly, the companies in the U.S.
and Europe and elsewhere will have no choice; those jobs will go to
China because that’s where the material is. We still consume most of
the end products; it is not the Chinese buying electric cars. It’s
Europeans and Asians in Japan and Korea and people in Europe who are
buying those, but it’s the Chinese who are going to be ultimately
building those for the next few years, unless we find alternatives.
So much for Obama and the Dimocrats notion that we’re going to build
all that ‘green stuff’ here and dominate e-cars globally. Hey Obama!:
China has your number and is planning on eating your lunch! Good Luck
with that…
The “Marketoracle” article is a good one and worth reading. It talks
about particular mines in places like the USA and Australia. So hit
the link and read the article (and it’s disclaimers) if you have
interest.
Going Forward
What was ‘the worlds largest rare earth mine’ is in California. It was
shut down when China was selling all you wanted dirt cheap. With luck,
we can find a way to get it back open (there are efforts underway to
do that for 2011, but who knows what California will do.) The Mountain
Pass Mine.
http://en.wikipedia.org/wiki/Mountain_Pass_rare_earth_mine owned by
Molycorp.
The Mountain Pass deposit is in a 1.4 billion year old Precambrian
carbonatite intruded into gneiss, and contains 8% to 12% rare earth
oxides, mostly contained in the mineral bastnäsite. Gangue minerals
include calcite, barite, and dolomite. It is regarded as a world-class
rare-earth mineral deposit. The metals that can be extracted from it
include:
Cerium
Lanthanum
Neodymium
Europium
Known remaining reserves were estimated to exceed 20 million tons
of ore as of 2008, using a 5% cutoff grade, and averaging 8.9% rare
earth oxides
Notice that reserves are measured in MILLIONS of tons; while on the
graph, world production is in KILO tons. Not exactly a shortage…
The Mollycorp chart?
I’d be willing to buy a ‘tiny’ of it but be cautious with any ‘rocket
ride story stock’ like this, they will often crash as the news fades.
But given the Chinese behaviour, I expect a US Government driven
initiative for some USA capacity and would also expect some Japanese
makers might want a 10% or so ‘second source’ as insurance…
What about the kind of mineralization at the mine?
In 1949, the huge carbonatite-hosted bastnäsite deposit was
discovered at Mountain Pass, San Bernardino County, California. This
discovery alerted geologists as the existence of a whole new class of
rare earth deposit: the rare earth containing carbonatite. Other
examples were soon recognized, particularly in Africa and China. The
exploitation of this deposit began in the mid-1960s after it had been
purchased by Molycorp (Molybdenum Corporation of America). The
lanthanide composition of the ore included 0.1% europium oxide, which
was sorely needed by the burgeoning color television industry, to
provide the red phosphor, so as to maximize picture brightness. The
composition of the lanthanides was about 49% cerium, 33% lanthanum,
12% neodymium, and 5% praseodymium, with some samarium and gadolinium,
or distinctly more lanthanum and less neodymium and heavies as
compared to commercial monazite. However, the europium content was at
least double that of a typical monazite. Mountain Pass bastnäsite was
the world’s major source of lanthanides from the 1960s to the 1980s.
Thereafter, China became increasingly important to world rare earth
supply. Chinese deposits of bastnäsite include several in Sichuan
Province, and the massive deposit at Bayan Obo, Inner Mongolia, which
had been discovered early in the 20th century, but not exploited until
much later. Bayan Obo is currently (2008) providing the lion’s share
of the world’s lanthanides. Bayan Obo bastnäsite occurs in association
with monazite (plus enough magnetite to sustain one of the largest
steel mills in China), and unlike carbonatite bastnäsites, is
relatively closer to monazite lanthanide compositions, with the
exception of its generous 0.2% content of europium.
So we have very similar ore in both places. Looks like mostly just
Sovereign Risk, taxes, and labor costs keeping Molycorp in check. I
expect China will find it acceptable to have a small competitor
hanging on with small contracts, and will not drop prices to predatory
levels nor flood the market with production; but that risk exists. The
history of Molycorp shows it was consumed by an oil company, kicked
around as a subsidiary, and was since spun out (though perhaps minus
some lubricant / moly-grease parts…)
I’d also expect that the Sovereign Risk from California will be kept
in check by the US Military concerns…
In Conclusion
This is an example of how you take a news story (China embargoing
Japan on Rare Earths) and working through the background find an
investment thesis and a target stock. Still not in this example is
looking at the actual financial background of the company, sales, etc.
So I’d buy a ‘tiny’ as a reminder or toy, but not a large position
without a bit more homework on the stock. And some investigation of
other competitors in the world.