The apparent rebound seen in many commodity and speciality
mineral markets so far in 2016 appears to have passed over
rare earths.
The group of elements, which five years ago were the poster
child of the "critical minerals" hysteria which swept through
much of the western mining world, have followed the familiar
commodity cycle of boom and bust and rare earths prices today
are lower than they were in 2010 .
The rare earths boom benefitted and ultimately suffered from
the added spice of political sensitivity over supply
concentration in China, the ascendance of rare
earths-consuming green energy applications and some well
publicised investment scams in which fraudsters coldcalled
members of the public in the UK and the US offering to sell
"buckets" of the minerals as a financial speculation.
In the last few years, rare earths have been eclipsed in
terms of exploration and investment fervour by other so-called
critical minerals – first by graphite, then lithium
– and the pool of mining companies that still own up
to wanting to mine them has dwindled significantly from the
2010-2012 peak.
A quick glance through the websites of rare earths producers
and explorers reveals a number of zombie companies, with
"latest news" feeds last updated in 2014 or earlier. Those
that are still active (see table) are generally keeping up
appearances, with slick, user-friendly websites and
well-populated media and investor relations sections and
informative links.
But most of these companies are hedging their bets. Less
than half are pure play explorers, with the majority now
numbering other speciality, industrial and precious metals and
minerals in their portfolios.
"A lot of companies want to keep their hand in the rare
earths game, for if and when the up-cycle comes round again,"
one Canada-based analyst, who preferred not to be named, told
IM. "Lots have done the same with lithium, graphite and
vanadium – in many cases this has paid off. Every dog
has its day".
Of course, predicting the cycle is near enough impossible,
although that doesn’t stop many from trying. In
October, industry consultants IHS issued a note saying that
rare earths prices are now at their lowest point and
therefore must be due for recovery.
"Rare earths prices appear to have hit bottom," wrote KC
Chang, a Toronto, Canada-based senior economist at IHS Global
Insight. "[We] forecast prices to rise slowly over the next 24
months. The current demand environment remains quiet, but
production cutbacks and industry consolidation limits further
downside price risk," Chang continued. "Stronger demand,
accompanied with inventory restocking, could quickly tighten
markets and send prices higher in 2017".
Chang notes that Chinese firms continue to dominate heavy
rare earth element production such as dysprosium, while
non-Chinese miners are now responsible for a significant
portion of the output of light rare earths like lanthanum.
IHS notes that a slight strengthening of demand is starting
to put power back in the hands of rare earths suppliers. "With
producers withholding sales and asking for higher prices, the
shift in the market towards a more balanced condition will be
supportive of heavy rare earth elements," Chang said.
But IHS warns that consumption growth driven by rising
demand for rare earth magnets in electronics and green energy
applications will not be enough to boost the market, noting
that Chinese policies such as production quotas and export
restrictions will also be key in dealing with excess
capacity.
Producer discipline is vital to rebalance the market and
return pricing leverage to suppliers, but for non-Chinese
companies looking to turn a profit from rare earths mining,
producing significant volumes is necessary to bring down costs
and few expect China to cut its output, just so western
companies can gain a foothold in the market.
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Still active non-Chinese rare earths
companies
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| **List of active, non-Chinese rare earths
mining/exploration companies based on their recent stock
exchange activity and corporate announcements (not
exhaustive). |
Neo beginning for Molycorp
The most prominent casualty of the rise and fall of rare
earths was Colorado, US-based miner Molycorp Inc. After
struggling with what ultimately became a $1.7bn debt burden,
engineering faults and the strangulation of cash flow from its
Mountain Pass rare earths mine in California, Molycorp finally
filed for Chapter 11 bankruptcy in June 2015.
The company won approval to exit Chapter 11 in March this
year, before finally emerging from bankruptcy in September
under a plan that will see the firm controlled by its major
creditor, Oaktree Capital Management. Molycorp is being
rebuilt around the Neo Materials processing arm of its
business under the new name, Neo Performance Materials. The
mineral rights to the Californian rare earths deposit and
associated intellectual property have been sold to Molycorp
bondholders, but the mine itself remains up for sale.
In September this year, Neo Performance Materials won a case
against Belgium chemicals manufacturer, Solvay Special Chem,
in a German federal patent court which invalidated a number
of REO patent claims made by Solvay.
The ruling by the court in Munich related to patent number
EP0605274, which covers a method of producing a mixed
zirconium-cerium oxide. It reversed a finding by a Dusseldorf
court in March that Neo, then called Molycorp Chemicals and
Oxides Europe, had infringed two European patents belonging to
Solvay’s Rhodia subsidiaries. Solvay now has the
right to appeal the later judgment.
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Molycorp’s Mountain Pass mine
in Colorado, US is now up for sale
after the company filed for bankruptcy in June 2015.
(Source: Molycorp.) |
It now looks as though Neo Performance Materials will try to
quietly rebuild itself, shunning the limelight it received as
Molycorp. Having relinquished Mountain Pass, the company will
have to source its rare earths from outside the US, meaning
that it can no longer beat the national security drum which
some thought might see the US government sling the ailing
Molycorp a lifeline.
The demise of the US miner left just Australia-based Lynas
Corp. and Indian Rare Earths Ltd (IREL) as the only
non-Chinese rare earths producers of any significance.
IREL’s main income is from its mineral sands
business but its side line in rare earths appears to be
performing steadily.
Lynas, which is a pure play rare earths producer, has seen
its cash flow suffer considerably from the decline in rare
earths prices and also spent significant sums fighting legal
opposition to its processing plant in Malaysia.
In October, Lynas reported a loss of Australian dollar (A$)
94.1m ($71.6m*) for the financial year ending 30 June. This was
down from a loss of A$118.6m the year before.
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The Lynas processing
plant, LAMP, has faced
considerable opposition in Malaysia, where groups
such as Stop Lynas, Save Malaysia have a large
gathering and support from the local community
and opposition politicians. (source: CC Food
Travel, via Flickr ) |
Lynas said its operations continue to face challenges from
the weak rare earths market and warned that it may have to
renegotiate the terms of its debt repayment schedule, having
already delayed repayments once this year. The company had
around $203m in debt outstanding as of the middle of 2016.
The company said it was confident of rearranging its debts,
but its future looks uncertain. Lynas produced 12,630 tonnes
rare earth oxide (REO) in the 12 months to 30 June 2016, which
according to various estimates, represents anything between 5%
and 10% of global consumption in 2015.
*Conversion made October 2016