The recent reduction in Chinese rare exports quotas coupled
with the interruptions to rare earths supply to Japan from
China have made diversity of supply a key issue in maintaining
the sustainability of the many supply chains within which rare
earths play a critical role. In the resultant self-serving
panic created by the promoters of some nascent rare earths
projects, the issues associated with the development of a rare
earths project have been underestimated.
However, the ‘norm’ is
that it may take between seven and twenty years to develop a
project.
For example, the Mt Weld rare
earths deposit, Western Australia, was discovered by Molycorp
in 1970, detailed development studies were undertaken by Ashton
Mining from 1990 to 2000; but production will not commence
until 2011 under the stewardship of Lynas Corp.
The rare earths market is small
(approximately $2-3bn pa) and highly specialised, such that the
major and mid-size mining companies have, to date, shown no
interest in entering the market. As a result, most of the rare
earths projects under construction or study are owned by single
purpose companies with no other existing source of revenue.
Accordingly, the non-recourse project funding required for
construction (usually a mix of debt and equity) has to be based
upon a proven project design and firm sales contracts.
Rare earths are not commodities;
they are customer-specific chemicals, produced to precise
chemical and physical specifications. As a result, before a
customer is willing to enter into a sales contract, that may
subsequently be used to underwrite the project, they require
the potential producer to demonstrate their capability to do so
through a continuously operated pilot plant.
The issue of demonstrating the
capability to supply a customer is further complicated by the
fact that his/her needs are continually evolving; which
requires the suppliers to become an integral link in the supply
chain. This can often involve the joint funding of research
into new products and processes for both parties to remain
competitive; a somewhat difficult undertaking when the rare
earths extraction process itself is being developed.
10 steps to commercial rare earths production
Step 1: Establish resource
In common with other mining/processing projects the first step
is the establishment of a mineral resource that meets the
requirements of the local stock market and requisite
professional geological institute.
The grade of the resource and the
REO distribution are key to the viability of the project. A
high concentration of the higher value heavy rare earths is
advantageous. The location of the deposit with respect to the
availability of supporting infrastructure (power, water,
chemicals and skilled labour) is also a consideration. This
step can take two to five years or more.
Step 2: Understanding mineralogy
This can be the most critical step in the early evaluation of a
project; to be carried out in conjunction with resource
evaluation. The identification of the mineral(s) containing the
rare earths is an important stage in determining the
amenability of the ore to cost-effective processing.
Bastnaesite, monazite and xenotime
are well-known rare earth minerals and, therefore, their
processing is well understood; whereas the processing of
‘new’ minerals is likely to be a costly and time
consuming development exercise.
The liberation size of the rare
earth mineral(s) should not be too fine so that they are
amenable to conventional beneficiation techniques such as
flotation, gravity and magnetic separation. In the view of
IMCOA, to be viable, the beneficiation stage should yield a
rare earth mineral concentrate of no less than 30% REO, or
maybe 20% if it is a heavy rare earths resource. Lower grades
tend to be associated with higher chemical costs.
Step 3: Scoping study
This is the step required to justify the expenditure to
undertake a Definitive Feasibility Study and usually
includes:
-
A resource estimate to an ‘inferred’ level;
-
A process proven at a bench scale (possibly two
alternatives to be evaluated in the pilot plant);
-
A site selected for the processing facilities;
-
Baseline environmental studies;
-
An order of magnitude (±30%) capex and opex
indicating the project is viable;
-
Support from the local community and by the relevant
government agency.
This step could take one to three
years, particularly if a new process has to be developed for a
‘new’ ore.
Steps 4-6: Pilot plant(s) -
beneficiation, extraction & separation
The successful operation of a
(three-stage) pilot plant is the heart of developing a
successful project. It is a time and money consuming exercise
which has the following objectives:
-
To demonstrate the technical viability of the project;
-
To generate data for the Definitive Feasibility Study;
-
To produce samples for customer evaluation from a
three-stage pilot plant that has operated continuously
for at least 10 days;
-
To generate the data for the Environmental Impact
Statement; noting that all rare earth minerals contain
uranium and thorium for which acceptable waste disposal
techniques have to be demonstrated.
This stage may take two to 10 years
as operating the pilot plant on a continuous basis usually
identifies a number of technical problems that have to be
successfully solved and the pilot plant re-run.
Step 7: Environmental approval
The preparation, public review and environmental approval of a
rare earths project is no easy matter although the benefits of
the associated long term employment are considerable.
The extraction process, separation
process, associated chemical transport and storage and the
radioactive waste management facets of a project are always
subjected to detailed study by the local environmental
authority and the public; such that additional pilot plant
studies may be required to satisfy their detailed specific
requirements.
Step 8: Letters of Intent
To be successful a rare earths company has to integrate its
operation into the supply chains of its customers, which
requires mutual trust. Accordingly developing customer
relations needs to start in the early stages of the project, as
their specifications are the basis for the operation of the
pilot plants.
Generally, LOIs for a substantial
portion of proposed production would be required prior to the
final pilot plant run and the commencement of the DFS.
Step 9: DFS & funding
The Definitive Feasibility Study is the document upon which
funds for project construction is raised and LOIs are converted
to sales contracts. The required level of accuracy
(±15%) of the capex and opex dictates that 25% of the
engineering will have had to be completed; indicating a DFS
cost of 8-12% of the capex and a timeline of 18-30 months (in
which there may be some level of overlap with the pilot plant
work).
For example, the cost of a DFS for
a project with a capacity of 10,000 tpa REO could well be
$30-50m. Furthermore, the rare earths resource will need to be
upgraded to a measured reserve for the project to be funded. As
indicated above the funding of a rare earths project is no easy
matter and can take six to12 months.
Step 10: Engineering, procurement, construction &
start-up
A rare earths production facility is a complex chemical
processing operation that requires a sophisticated level of
engineering more appropriate to a chemical plant than a mining
operation.
Therefore engineering, procurement,
construction and start-up require a high level of chemical
expertise and rare earths operational experience which is not
readily available today outside China. This final step of the
development may well take two to three years and the build-up
to full operational capacity another two to three years.
The first mine blast since 2002 at Molycorp’s
Mountain Pass bastnaesite mine in California,
USA, occurred in December 2010
Costs & schedule
The capital costs (including working capital, which must not be
overlooked) of a rare earths project are significant; based on
the data from the Mountain Pass and Mt Weld projects this can
be of the order of $40-50,000/tonne REO annual production. This
is in addition to the development costs identified above.
Based upon the experience of the
rare earths projects under study over the past decade, once a
rare earths resource has been defined, to take a project
through to the completion of a DFS (including environmental
approval) is unlikely to be completed within six years. Adding
the funding and construction periods a timeline of nine years
appears to be the minimum for a project to be brought
online.
In the light of all the above
factors IMCOA is of the view that with the exception of the Mt
Weld and Mountain Pass projects it is unlikely that any other
major project will be in substantive production before 2015.
However, it is acknowledged that there may be small additional
contributions to ROW production by the Dubbo (Australia), Dong
Pao (Vietnam), Indian Rare Earths (expansion sponsored by
Toyota Tsusho) and Steenkramskaal (South Africa) by then
(see figure - 10 steps to commercial rare earths
production).
Contributor: Dudley Kingsnorth, executive director at
Industrial Minerals Co. of Australia Pty Ltd (IMCOA). Email: djk@imcoa.com.au