| Molycorp's Mountain Pass processing
One might be forgiven for thinking that Molycorp president,
Constantin Karayannopoulos, would be all but sunk under the
deluge of bad news that has hit the
rare earthscompany over the last few months.
A succession of dismal financial results in 2013,
investigations into company disclosures, a lawsuit over engineering deficiencies
and sluggish production at the companys Mountain Pass
production facility in California, US, led the company to ask
for more fundingin
But when IM met
Karayannopoulos, who will be stepping aside as CEO in December
to let Geoff Bedford take the reins, he was upbeat and
In terms of delivering on our promises, it's taken longer than
expected, but over the next few quarters we expect continuous
output, Karayannopoulos told IM, adding:
We are very close; we really need to deliver what we
Karayannopoulos was attending the 2013 Rare Earths
Conference in Hong Kong, where he presented on the
companys progress with its Mountain Pass project and its
associated production facilities.
The presentation, entitled Lessons from the
Trenches, aptly described the embattled miners
struggle with operational difficulties and spiralling
Stockpiled inventories, falling pricesand
substitution of rare earths for other materials have also
assailed the US company, and the rare earths industry as a
whole, meaning that the economics of many potential new
projects failed to stand up on a cost per tonne
A lot of folks had major projects, but then with what happened
in the industry two years ago, theyre gone,
The industry has lost confidence and the supply
chain has lost confidence, he admitted.
I don't think we thought it was sustainable in 2011 when we saw
prices running up, because of the substitution that would
cause. Pricing speculation was a double whammy.
It wasn't just the price it was also
that, for downstream consumers, stuff just stopped showing up,
and that is when the panic set in, he
In order for customers to trust rare earths producers
again, Karayannopoulos believes the industry needs to
security of supply: things need to show up on time, on
spec and with no surprises, he said.
At the same time, they need to plan [for the] longer term
and be prepared to enter into long term contracts with
consumers, he explained.
Long term contracts
With a rare earths trading exchange being
established in China and with other mineral industries moving
towards spot pricing, it may seem erroneous to consider long
term contracts a necessity of the rare earths market. But,
explained Karayannopoulos, this is what the industry
From my perspective, what needs to change is the
strategy. Right now everything is done on the spot
market. It's hand to mouth. We are saying we can guarantee
long term contracts and long term prices, Karayannopoulos said.
Although its hard to believe end users would sacrifice
the ability afforded by spot pricing to control costs
themselves in favour of long term contracts, in the largely
Chinese-monopolised rare earths business, it is plausible that
customers would want to move into long term future agreements
to secure supply.
In the last 20 years, it's been totally impossible to
enter into long term contracts, Karayannopoulos explained.
There's always been a group in the industry that made it
impossible to offer long term pricing. But some of
the industry are eager for longer term contracts. The
automotive industry want three year contracts, he
Some of the technology
companies are also very interested in longer term
contracts, he added. They cannot continue to take
the risk that the industry has taken with spot
In his presentation, Karayannopoulos outlined that he believed environmental pressures
in China would mean prices will recover although he
added he did not believe the market would see the 6,000%
increases witnessed in 2011.
China is clamping down on illegal mining, and on the process
and smelting industries also. The Chinese government can't
ignore this; illegal operations take a huge toll on the
environment, he told IM.
Another factor that he believes is key to the confidence
returning to the rare earths industry is rational regulation.
The price spikes witnessed in 2011 resulted from the reduction
of rare earths export quotas, implemented by Chinas
Ministry of Information and Technology (MIIT)
I'm sure the MIIT had good reasons, but by restricting
exports this drove panic buying, which led to a spike in price.
We need rational regulation to be implemented that takes these
outcomes into account, Karayannopoulos said.
Lessons from the trenches
Although Molycorp is in a place where it feels it can issue
lessons from the trenches the truth is that the
company is still very much in the warzone. However, as Mountain
Pass starts to ramp up in the coming quarters, Karayannopoulos said he believed the future will
start to brighten.
We have seen several sectors returning: magnetic powers
remain strong, chemical oxides markets are coming up, as is the
phosphor market, he said.
At Mountain Pass, the cost of production will improve as
we see more volumes and we should be able to see improvements
quarter after quarter, Karayannopoulos said.
It's a tricky time when you are transitioning from a
start up operation to a producer, he added.
the cerium wastewater product the company created to treat its
own waste, the company believes it could be a gamechanger, but
it will take time years, not weeks, months or
quarters for the industry to catch on,
In terms of the challenges faced by the company, Karayannopoulos said that the sheer scale of the
project put forward in the time allocated was probably the
Getting Mountain Pass up and running was a very ambitious
project, and it was done very, very quickly. The scope of the
plan and the amount of time it took was really extraordinary.
If we were to do it all over again, we would add a couple of
years, he said.
The projects location in California, with its tough as
nails approach to environmental regulation, also meant that
costs were elevated as environmental compliance formed such a
large part of the project.
[California] is the toughest place in the world to
operate an extraction process, but you don't have a choice.
It's where it is. We have to play by the rules,
The mines environmental credentials will
curry favour with green technology consumers, such as wind
turbines and electric vehicles, hoping to distance themselves
from dirty mining.
A lot of industries that you serve
are the in the so-called green industry so you can't work in an
environmentally unsound way. You have to be environmentally
responsible every step of the way, Karayannopoulos said.