10 steps to rare earths supply

Published: Monday, 21 February 2011

China’s downsized rare earth exports have tightened global supply – now RE juniors are looking to fill the gap. Dudley Kingsnorth reviews the 10 steps for project development and highlights candidates for new supply

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).

Dudley Kingsnorth, executive director at Industrial Minerals Co. of Australia Pty Ltd (IMCOA). Email: djk@imcoa.com.au