International regulations pertaining to thorium
have played a significant role in distorting
today’s rare earths market. The concentration of
supply in China has caused severe economic dislocation and
national security problems for the US, Japan, Korea, the
European Union and other nations.
Private interests worldwide have invested around
$6bn in an effort to challenge China’s market
dominance in rare earths. The governments of Japan, India and
Korea have also made direct investments into the sector, but
both private and state-backed efforts to develop supply sources
outside China have, to date, largely failed.
A solution to this problem is required, but
traditional 'free market’ strategies are failing.
The US Congress has proposed legislation that would resolve
this market imbalance through the creation of a multi-national
rare earth cooperative and thorium storage, energy and
industrial products corporation, with participation in both
organisations open to sovereign states, sovereign funds,
producers and consumers of such products.
This article examines the situation as it
currently stands and examines how the new US legislation could
provide an answer.
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Fears about the safety of nuclear energy
have held this industry back, but proposals for
a new Thorium Corporation in the US relies on new
'safe’ nuclear power taking off.
James Marvin Pervis
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Regulations and unintended
consequences
The rare earths industry was initially built on
monazite, a common by- or co-product of placer mining between
1950 and 1964. Thorium bearing rare earth element
phosphate ores (Th-REE-Ps), principally monazite, were the
primary commercial source of rare earths until the mid-1960s.
From 1965 to 1984, these Th-REE-P materials supplied nearly
half of the world’s rare earths requirements, and
nearly 100% of the world’s heavy rare earth
elements.
Th-REE-Ps and Th-U-REE-Ps (rare earth-bearing
apatites from phosphates that typically contain thorium and
uranium) are mineralogically superior to low-thorium
bearing minerals like bastnaesite because they typically
contain recoverable quantities of all 16 rare earth elements
(promethium, although included in the lanthanide series, does
not occur naturally in the earth’s crust).
These materials were also typically a low- or no-cost
by-product of mining some other commodity, such as titanium,
zircon, iron ore or phosphates.
The proliferation of regulations reflecting
international standards regarding the definition of "source
material" eliminated these high value rare earths from the
value chain for most of the world.
Under the US Atomic Energy Act (AEA) Section 11,
the following definitions apply to source material:
The term "source material" means (1) uranium,
thorium, or any other material which is determined by the
Commission (i.e., the US Nuclear Research Council)
pursuant to the provisions of section 61 to be source
material; or (2) ores containing one or more of the foregoing
materials, in such concentration as the Commission may by
regulation determine from time to time.
According to the definitions contained in Title
10 Code of Federal Regulations Part 40, Section 40.4 (10 CFR
40.4), source material means:
(1) uranium or thorium, or any combination
thereof, in any physical or chemical form or (2) ores which
contain by weight, one-twentieth of 1% (0.05%) or more of: (i)
uranium, (ii) thorium or (iii) any combination thereof.
Under regulation 10 CFR 40.13(c),
"Exemptions for low thorium-bearing ores":
Any person is exempt from the regulation in this
part and from the requirements for a licence set forth in
section 62 of the Act to the extent that such person receives,
possesses, uses, or transfers:
(1) (vi) rare earth metals and compounds,
mixtures, and products containing not more than 0.25% by weight
thorium, uranium, or any combination of these.
The exemptions above fit the project
characteristics of the only remaining US producer of rare
earths – the Mountain Pass mine in California, now
operated by Molycorp Inc. As a precaution, US law specifically
exempted this mine’s ore from source material
classification.
With its higher mining cost and lower value
resources, Mountain Pass struggled to compete with China in the
1990s, where most rare earths production was and still is a
by-product of iron ore mining.
However, it was a tailings pipeline discharge of
thorium that caused Mountain Pass to close in 2002.
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Figure 1: World history of rare
earth production
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The rare earth industry was initially
built on monazite, a common by/co-product of placer
mining
from 1950 to 1964. From 1965 to 1984, monazite
supplied nearly half of the world’s rare
earths
and nearly 100% of the world’s heavy rare
earths. Molycorp did not produce any commercial
heavy
rare earths for the period indicated above. Graphics
modified from USGS (2002) Rare Earth Elements:
Critical Resources for High Technology. Fact
Sheet 087-02.
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The rejection of source
material
Beginning in around 1980, refineries no longer
wanted to accept monazite as it constituted source material
(the natural thorium content of monazite ranges from 3-15%) and
the traditional producers of these valuable Th-REE-P byproducts
began blending the Th-REE-P ore back into the recently depleted
ore-body or dumping it into tailings lakes.
No longer able to utilise Th-REE-P resources, US,
Japanese and European value chains were at a disadvantage
compared with China. Over the next two decades, most of these
refineries and metallurgical facilities were closed, relocated
to China or fell into a state of underinvestment.
The Chinese market was unconstrained by these
regulations, meanwhile, and filled the breach. The Chinese
government elected to actively support the development of its
rare earth industry as a National Industrial Policy (Programmes
863 and 973). China’s forward-thinking industrial
policy included direct and indirect investment and support for
rare earth related enterprises, including large scale state
sponsored research and development and targeted
acquisitions.
Life without Th-REE-P
Rare earth minerals like bastnaesite that do not
meet the source material threshold have several disadvantages,
including: low-thorium levels that equate to low (sub-recovery)
levels of heavy rare earths; the fact that the minerals are
directly mined means that 100% of the mining cost must be
covered from the sale of the rare earths extracted (versus
China, where more than 70% of rare earths production is a
byproduct of iron ore mining); and, the typical chemical
distribution of bastnaesite is disproportionately apportioned
to elements with the lowest economic value, typically >80%
cerium and lanthanum.
Today, Mountain Pass and other deposits that are
being financed and developed or re-developed are selected for
their low-thorium content, but this is not a viable answer to
the problem because these types of deposits cannot produce the
full spectrum of rare earths (typically only eight of 16
elements).
The primary bastnaesite mineralisation of this
deposit has very low levels of thorium, but also lacks
recoverable quantities of heavy rare earths (terbium,
dysprosium, holmium, erbium, thulium, ytterbium, lutetium and
scandium).
More than 83% of the rare earths produced are
lanthanum or cerium, the lowest value rare earths.
Historically, these oxides sold at or below cost due to their
abundance. Today, these materials are selling at well below
cost, offsetting the profits from the more valuable rare
earths.
In mid-February, Molycorp’s stock
wass trading well below $1/share, from a high of $75/share in
April 2011 and is at risk of being delisted from the New York
Sock Exchange.
The economic prospects for this strategy are not
promising. If the disadvantages listed above were not reasons
enough for caution, the complete lack of fully integrated
refining assets and expansive rare earth value chains outside
China is a major concern for buyers of rare earths.
Another recently financed rare earth mining
company, Australia-based Lynas Corp., which mines rare earths
at its Mount Weld project in Western Australia and processes
the ore at a rare earths refinery – the Lynas Advanced
Materials Plant (LAMP) – in Kuantan, Malaysia, is also
struggling.
For Lynas, concern over thorium prevented the
company from starting production for almost a year, causing it
to burn through its cash reserves to maintain the
non-operational facility while simultaneously fighting legal
battles with anti-LAMP protest groups. This required the
company to raise additional financing, thereby undermining its
capital structure.
The high cost of directly mining a relatively low
value ore (>70% lanthanum and cerium) and then shipping it
abroad for refining may prove too much for Lynas to sustain.
In June 2014 the company reported that it had
less than 60 days of operating cash on hand, before completing
a small secondary stock offering to pay down its near-term debt
obligations.
In January, the stock was trading below
$0.05/share and despite recording positive cash flow in
December 2014, the company said that this position was unlikely
to be sustained and that its losses look set to continue until
prices for light rare earths increase.
Despite these factors, Molycorp and Lynas have
both continued to ramp up production of light rare earths,
disproportionately expanding the supply of cerium and
lanthanum, and thus widening their losses.
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A lack of constraints over thorium
production
in China helped the country to build up its
monopoly in the rare earths market.
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Rare earths independence
The economic dislocation and national security
concerns resulting from China’s monopoly have
forced the US Congress to consider ways of overcoming this
'market failure’ in the rare earths sector.
The US Congress has considered a number of
legislative changes that would reduce permitting and
environmental standards for rare earth mines, believing that
mine production is the problem.
For example, the following summarises a bill
passed by the US House of Representitives in the 2013-2014
session:
H.R. 762 – 113th Congress:
Provides exemptions from federal regulations including the
National Environmental Policy Act of 1969 (NEPA) and other
federal regulations including governing special areas, all
areas of identified mineral resources in land use designations
(other than non-development land use designations); apply such
exemption to all additional routes and areas that the agency
finds necessary to facilitate the construction, operation,
maintenance and restoration of the areas of the identified
mineral resources; and continue to apply such exemptions after
approval of the Minerals Plan of Operations for the
unit.
Recklessly opening new mines with lower
environmental standards is not a solution, however.
Creating a fully integrated value chain is a much
larger and strategically important challenge.
China’s rare earth value chain is comprised of
hundreds of independent companies, spanning two cities almost
exclusively dedicated to rare earths research and production,
each providing highly differentiated technologies, processing,
formulation or component specific applications. Stand-alone
mining companies cannot hope to replicate an equivalent value
chain.
Molycorp spent over $1bn on its Mountain Pass
mine and oxide facilities that generate substantial losses. The
company’s operational profits are generated inside
China, where Molycorp ships all of its most valuable rare earth
oxides for refining and value-addition into metals, alloys and
magnets.
The protracted political and financial problems
that dogged Lynas’ LAMP in Malaysia, cost more
than $1bn. This facility is also generating sizable operational
losses, demonstrating that the financial risks associated with
even the first stage of refining rare earths into basic oxides
may be too great for any one company.
New producers are likely to expand on
Molycorp’s model and ship all of their
concentrates (or oxides) to China for refining and value adding
into oxides, metals, alloys, magnets and industrial components.
This would be a step backward for nations hoping to rectify
economic and national security concerns.
A cooperative solution?
An alternative to lowering environmental
standards requires a solution to the thorium problem.
Developing a fully integrated rare earth value chain could be
met by the formation of a cooperative.
Historically, the US has used cooperatives to
overcome market failures in high capital, low margin businesses
like farming. Cooperatives were originally developed to spread
financial risk, gain access to low-cost capital and expand
market access, thus assuring the production and lowering the
cost for critical resources and services, such as food or rural
electric power distribution.
Recently introduced bills in the US Congress are
designed to address the rare earth-thorium problem through a
cooperative model.
For example, the National Rare Earth Cooperative
Act 2014 (NRECA – HR 4883 & S.2006) is designed
to:
• Utilise existing and available Th-REE-P
and Th-U-REE-P resources;
• Operate within a federally chartered rare
earth cooperative (and thorium corporation);
• Serve as a fully integrated value chain
for rare earth materials;
• Be owned and funded by multi-national
corporations, defense contractors, sovereign nation agencies
such as Japan Oil, Gas and Metals National Corp. (JOGMEC) and
Korea Resources Corp. (KORES), sovereign wealth funds,
commercial end-user, organisations, and suppliers who commit
capital.
By creating an old-fashioned cooperative, the US
could solve the very modern problem of meeting its rare earth
needs. Rare earth end users from around the world would
be able to invest directly in a cooperative value chain, which
would be tailored to produce products (oxides, metals, alloys,
standardised magnets and components) according to its
owners’ requirements.
The owner end-users of this cooperative would
purchase their value-added rare earth products at market prices
(initially set by China, but becoming more dynamic as the
industry opens up).
Excess inventory not consumed by the owners would
be sold on to external, non-owner customers – again at
market prices.
Profits from this system, if any, would be
redistributed back to the cooperative’s owners and
all members would ultimately acquire their value added rare
earths goods at prices free from the influences of manipulation
and speculation.
Bringing back Th-REE-P
By utilising abundant and available Th-REE-P and
Th-U-REE-P resources, the need to make large investments into
low-thorium, low value rare earth mines is eliminated.
Because the Th-U-REE-P is typically a by-product of some other
commodity, the cost of producing rare earths in this way is
near zero.
The US mining industry could meet over 65% of
today’s global rare earth demand with Th-U-REE-P
by-products from ongoing non-rare earth mining operations if
the source material issue was resolved.
The bill posits a solution of creating a
federally chartered Thorium Energy and Industrial Products
Corporation that will take all liability and safely store all
thorium and associated actinide liabilities from the rare earth
cooperative. This facility would comply with all Nuclear
Regulatory Commission (NRC) regulations.
The management and safe storage of thorium does
not pose any technical challenges and the economic challenge
can be overcome by sharing the cost of storage with a number of
end user cooperative members and non-members who purchase the
finished rare earth products.
The cost of long-term thorium storage would
amount to a fractional surcharge on rare earths selling prices,
while the storage facility would take ownership of the thorium
and be given Congressional authority to develop industrial uses
and markets for the material. The commercial prospects
should be adequately compelling to attract the level of
investment necessary to create new uses for thorium.
The Thorium Corporation would be given
Congressional authority to establish a multi-national corporate
platform to develop industrial uses and markets for thorium
(including decay products), such as alloys, catalysts, medical
isotopes and other uses.
It will also be tasked with the commercial
development of thorium energy systems that include solid fuels,
solid-fuel reactor technology, beam/accelerator-driven reactors
and liquid-fuel reactor technology, incorporating electric
power, thermal energy, synthetic liquid fuel production,
desalination, nuclear waste reduction (actinide burners) and
hardened and deployable energy systems. Any uranium
by-production would be sold into the nuclear fuel value chain
to finance the activities of the Thorium Corporation.
'Safe’ nuclear
The Thorium Energy Corporation would be required
to seek out direct investment from sovereign entities,
sovereign funds, multi-national institutions and the producers
and industrial consumers of energy.
Various configurations of high-temperature
liquid-fueled reactors (molten salts or metals) or
beam/accelerator-driven reactors do not share the risk profile
of light water reactors (LWRs), which can be subject to
meltdowns and explosive events.
High-temperature thorium liquid-fueled molten
salt reactors can eliminate the risk of widespread radiation
release (water/hydrogen event) and greatly reduce issues
related to long-lived spent-fuel and the proliferation of
weapon-grade material.
Public concern and perception of what may be
termed 'primary risk factors’ –
meltdowns, explosions, wide spread radiation release and the
long term storage of spent fuel (commonly referred to as
nuclear waste) may be statistically unfounded or
disproportional, but the resulting political response and
capital costs are the primary obstacles to the rapid deployment
of nuclear energy outside of China.
Safer reactors, not subject to these primary risk
factors and the prohibitive capital costs associated
with LWRs could be widely accepted and rapidly deployed. The
potential benefits of eliminating and/or offsetting greenhouse
gas emissions and ocean acidification are greater still.
Why thorium now?
One more high profile nuclear accident could
induce other nations to reject nuclear energy, potentially
triggering a domino effect which would have profound economic
and environmental consequences on the global community.
The nuclear industry does not have a contingency
plan for such a scenario or any alternative systems in
the pipeline that address the public’s primary
fears associated with LWR technology.
High temperature, thorium liquid fueled molten
salt reactors are technologically obtainable. The US
built and operated three liquid fueled reactors at Oak Ridge
National Laboratory between 1954 and 1973.
These reactors may also prove to be a socially
and politically acceptable alternative to LWRs. Liquid fueled
molten salt reactors cannot blow up, melt down, cause wide
spread radiation release and can use nearly 100% of the
fuel’s fissionable energy, greatly minimising
spent fuel and waste issues, and can reduce geologic storage
requirements by as much as 99.995%. These advantages are also
largely obtainable in various configurations of
beam/accelerator-driven reactors.
Under the proposed legislation in the US, all
stake holders within the nuclear industry, sovereign states and
the producers and consumers of energy could share the
development costs and economic benefits of thorium
energy.
The bulk of research and development costs have
largely been dealt with by the Oak Ridge programme, meaning
that only a relatively modest investment from each of the
potential stake holders is necessary under this collaborative
structure.
The successful deployment of next generation
thorium-based reactors could greatly augment the economic
status of all stakeholders.
Nuclear technology providers and producers and
large industrial consumers of energy could economically hedge
themselves to benefit from the transitions to a thorium energy
based economy.
Even the uranium mining industry could benefit,
as the thorium fuel cycle requires fissile isotopes to
initiate, and in most applications, sustain the reaction.
A solution to the rare earth problem and
prospects for launching a true nuclear renaissance exist and
the status quo is not risk free. However, broad international
support and participation must be the centerpiece of this
effort, as it is only through collective action that the
benefits can be shared.
Nuclear energy is arguably the only viable
solution to climate change. Yet nuclear energy must also
conform to the social and political realities of the world we
live in.
The timing of this multi-national platform
coincides with enhanced fears about traditional LWR technology,
with Germany, Belgium and Japan having seemingly opted out of
nuclear energy, at least in its current configuration.
References
US Regulation 10 CRF 40
US Senate Bill S. 2006
US House Bill HR 4883
US House Bill HR 762
Emsbo, Poul; Patrick I McLaughlin; George N
Breit; Edward A du Bray; Alan Koenig (2015): Rare Earth
Elements in Sedimentary Phosphate Deposits: Solution to the
Global REE Crisis? 1342-937X/Published by Elsevier BV on
behalf of International Association for Gondwana
Research.Volume 27, Issue 2, February 2015, PP.
776–785.
*James Kennedy, ThREE Consulting LLC, St.
Louis Missouri, US
**John Kutsch, The Thorium Alliance, Harvard
Illinois, US
This article is based on a paper prepared for
the International Atomic Energy Agency and the URAM - Symposium
on Uranium and Raw Materials for the Nuclear Fuel Cycle:
Exploration, Mining, Production, Supply and Demand, Economics
& Environmental Issues, IAEA Headquarters, Vienna Austria,
23-27 June, 2014