Whenever you see in the media about western rare earth raw material needing to be processed in China, stop reading and forget about it.

Import and processing of rare earth raw materials for export (“export processing”) has been banned in China many years ago, along with domestic single element monazite mining (that excludes Bayan Obo, as it is not defined as single element mining).

Increased imports of rare earth raw materials per se *will not* lead to more availability of REO for export from China.

China is in the process of implementing total traceability of rare earth from mine to finished product using blockchain, so don’t pin hope on ‘illegal production’ and smuggle.

Already for 2009 China had set a target of maximum export of 30,000 t as REO. The target was repeatedly set, last time in 2016 for 2020.

Following up the Minister of Industry & Information Technology of PR China Xiao Yaqing’s remarks, seeking international cooperation on rare earth, there has been a write-up on China’s WeChat, that is important reading.

Minister of Industry & Information Technology Xiao Yaqing, source The Standard, Hong Kong (2016)

While it carries the usual fair bit of propaganda, such as the imperialist West exploiting China’s rare earth in a coordinated effort, it lifts the curtain a bit on the situation on the ground:

Of the original resources of 1.5 mio tons of TREO in South China 900,000 tons would have been mined and at current forecast demand, resources in China would run dry rather sooner than later, creating an import dependence from resource-rich countries like USA and Japan.

Chinese analysts statethat Bayan Obo’s reserves, the world’s largest rare earth mine, are down to 1/3 of originally assessed reserves.

We would dispute the rare earth resource richness of USA and Japan (if you don’t want to count low TREO silt 4 km below the ocean surface), also that environmental policies in the West are meant to conserve rare earth resources at the expense of China, but the point here is China’s creeping dependence on imports of rare earth raw materials, controlled by non-China or even anti-China entities, and all that in a trade war environment.

Apart from that Minister Xiao bemoans, that rare earths are increasingly rare, but are sold at the price of “earth” (soil).

In average 70% of all rare earth oxide volumes are lanthanum and cerium, output of which is way above the market demand, and it is these two that are sold and exported at the price of “earth”. For almost all the rest of rare earth oxides the China domestic market determines the price.

The current competitive and investment environment for rare earth we laid out in our presentation to the Rare Earth Industry Association’s webinar Rare Earth Market and Geo-Economics on March 11, 2021.

With all due respect for Minister Xiao, we see China’s industrial policy at fault here:

• China is overwhelmingly dominant in the rare earth market.

• For China raw materials policy commands, that the added value is to occur in domestic downstream products of the highest added value (e.g. in rare earth it is EV, hybird, windtowers, airconditiners).

• Since in a free market environment domestic and international prices will inevitably equalize through trade, China took a measure to make domestic rare earth (and other raw materials it dominates) available at perpetually lower cost than internationally.

• Enter the VAT refund upon export. The domestic VAT rate is 13%. While domestic VAT is in-out, cost neutral, there is no VAT refund upon export for rare earth, resulting in 13% higher cost for international users of Chinese rare earth. No matter how high or low the price, the difference of 13% is edged in stone.

  Additionally it is our view, that China built up significant overcapacity in rare earth magnets that, based on strong growth, may only fill up by 2025, preempting all and any investment potential elsewhere.

• In order to drive home the impact of this rare earth cost difference, the VAT refund upon export for rare earth magnets is the full 13%, projecting the raw material cost advantage of Chinese permanent magnets forcefully on the international market of magnets.

• This, we assume, renders all and any rare earth permanent magnet investment in the West problematic, thereby affecting competitiveness of all products further downstream, unless these are based on Chinese magnets. Case at hand: Super-prime rare earth magnet maker Hitachi Metals divesting it’s magnet business upon expiry of its core patents.

It is possible to demonstrate, that changes in the VAT refund upon export, changed rarely but being revisited twice per year, would be passed on to China export prices almost instantly.

If we want to assume for a moment, that all this is not purely coincidental and it was designed on purpose, it is possible for China to undercut feasibility of new rare earth oxide production outside China by establishing a VAT refund upon export for RE of, say, 10%, which would reduce international rare earth price levels by that amount.

Or, another unfavourable scenario, foreign downstream manufacturing is dependent on Chinese magnets:

• China lowers the VAT refund upon export of permanent magnets from 13% to 5%, increasing foreign downstream manufacturers cost by 8% vis-a-vis China peers

Now one may argue, given the negligible size of the rare earth market, all this would be non-consequential, given the small share of rare earth and magnets cost in the added value of downstream sophisiticated products.

We would blunt that argument by pointing out, that the a.m. concept is not limited to rare earth and magnets, it applies to all base materials where China has a dominant function in world trade, and that, for example, includes a whole lot of what goes into EV.

There are no morals or ethics involved here. No developing country in history ever “made it” by applying fair trade and following rules.

Western grandesse with developing countries typically ends, when a developing country is about to become a force to be reckoned with in whatever market.

Playing with tariffs may be an option to enable rare earth and permanent magnet investments, but basically tariffs are a dead-end street.

The only other option is trade negotiation. And that is, what Minister Xiao is probably trying to say.

Refering to Roskill’s chartist-style presentation at the Rare Earth Industry Association’s webinar Rare Earth Market and Geo-Economics on March 11, 2021, which refreshingly differs from the usual parroting of contents of censored China rare earth consultant, we looked again into our pile of China Northern Rare Earth Group files.

We are at China Northern daughter company No. 14 out of more than 50, a really tedious undertaking, as the deeper you dig, work amount increases exponentially.

But interestingly, we stumbled across a China Northern equity investment in Shenghe Resources of ~RMB 170 mio (~US$ 26.2 mio) as well as various smaller China Aluminium group equity investments. This is purely speculative: It is not entirely unusual in China to book advance payments as investments.

China Northern Chairman Zhao Dianqing, the gentleman who promised that there would never again be a rare earth boycott at the rare earth conference in Hong Kong 2018, resigned from all posts at China Northern effective January 29, 2021, after exactly 3 years on the job.

Li Jinling in December 2020, source: China Society of Rare Earth

His successor is Li Jinling, born 1968, entered the CCP in 1990, the year after the Tiananmen Incident. Ahead of this promotion he held various leading roles in China Northern and its state-owned ultimate controller, Baotou Steel Group (Baogang), such as deputy party secretary, where he concurrently serves as a director.

On the same day as Zhao Dianqing, the chairman of Baotou Steel Group, Li Degang, was replaced by Liu Zhengang.

Analysts estimate Baotou Steel’s rare earth resource from stored tailings based on 7.01% TREO to be 13.82 mio t as REO (roughly 10 times Montain Pass).

The transfer price from Baotou Steel to China Northern for 51% concentrate was RMB 12,600/t in 2019 and rolled over in 2020.

The price was increased on March 7 to RMB 16,269/t for 51% concentrate, retrospectively from January 1, 2021. Deviation of TREO content up or down is calculated at RMB 319/t for 1%.

Agreed quantity for 2021 seems to be 200,000 t.

Baotou Steel supplied to China Northern following quantities of concentrate:

• 2017: 170,000 t

• 2018: 272,000 t

• 2019: 163,100 t

Not sure about the 2020 number.

A quick flash light on the prices:

Yttrium and neodymium gave up a little compared to last week.

A day after when Myanmar protesters threatened to sabotage China-owned assets in the country, China heavy rare earth prices dipped briefly and China RE company share prices went up. There is no conceivable logic in this.

One analyst commented, that 2021 is the 100th birthday of the Chinese Communist Party and therefore markets won’t be permitted to head south.

Thanks for reading. Have a nice Sunday and a great week ahead!

//Companies

USA Rare Earth Participates in Search Minerals Private Placement With Strategic Investment of $630,000 (CDN)

On November 10, 2020, Search and USA Rare Earth jointly announced a Technical Collaboration Framework Agreement whereby the two companies would work on several initiatives. 

As part of Search’s and USA Rare Earth’s development plans, the companies intend to expand the collaboration to include discussions regarding separation, marketing and off-take of Search’s future production. These discussions are in line with Search’s ambition to be an important contributor to the development of a North American Critical Material supply chain and USA Rare Earth’s strategy of Mine-to-Magnet processing.

USA Rare Earth is building an integrated Mine-to-Magnet supply chain as the development and funding partner of the Round Top Mountain critical minerals and heavy rare earth project in Hudspeth County, West Texas, the owner of sintered rare earth magnet manufacturing equipment previously owned and operated by Hitachi Metals in North Carolina, and the operator of a a rare earth and critical minerals facility in Wheat Ridge, Colorado, which is commissioning a pilot plant using Continuous Ion Exchange (CIX) extraction, separation and recovery methods using feedstock from Round Top and other non-Chinese sources.

Comment: Foxtrott, Port Hope Simpson is good for indicated-inferred ~150,000 t TREO (~1%). USA Rare Earth dance on many weddings simultaneously, is there focus? Re-assembling the Hitachi facility alone may already be a formidable challenge.

Commercial rare earth recovery to start in coming weeks – Energy Fuels

The first shipments of natural monazite ore from Chemours have arrived at the White Mesa mill, in Blanding, marking the beginning of operations for what Energy Fuels expects will become a burgeoning supply chain.

Implementation of this initiative is subject to successful commercial ramp-up, execution of definitive agreements between the company and Neo, and optimisation of the companies' production processes.

One CEO's decade-long quest to find cost-competitive rare earth minerals outside China

But Karayannopoulos, a 30-year veteran of the rare earths sector and chief executive of Toronto-based Neo Performance Materials Inc., would not be deterred by radioactivity, or even a pandemic. Last April, he started conversations that culminated in a deal earlier this month in which Energy Fuels Inc., a U.S. nuclear energy company has agreed to extract and keep the uranium and thorium, and send the remaining rare earth concentrate to Neo’s facilities in Estonia.

But the byproduct is radioactive, which means it is dangerous, highly regulated and therefore more expensive to store or transport.

Comment: As long as EU politicians don’t solve the permanent waste disposal issue there is little hope for real progress.

Related, in a nutshell:

A US-Europe rare earths partnership is sandwiched by China

But in a reminder of how challenging it will be to build a rare earth supply chain that’s independent of China, both Chemours and Neo Materials—two companies bookending the upstream and downstream segments of the new US-Europe chain—have significant exposures to China.

Neo Materials is the only non-Chinese company in China licensed to process rare earths, according to the investment company Raymond James. Much of the company’s production capacity is also based in China. For example, two of its three critical minerals processing facilities are based in China. But the third facility, in Estonia, is much smaller, and the two Chinese facilities account for almost 80% of total processing capacity, according to the company (pdf). Moreover, 60% of its workforce of 1,850 full-time employees are based in China, according to latest company figures.

Chemours, the firm providing monazite sands to Energy Fuels, similarly has a significance presence in China. The firm has three production facilities in China, including two that are joint ventures with Chinese companies.

The rare earths industry may be so globally integrated that it’s difficult for any one country to be totally self-sufficient. But if the goal is to be more insulated from Beijing, which has not ruled out weaponizing rare earths as a trade weapon, the difficulty of finding suppliers without deep business ties to China seems a cause for concern.

Namibia Critical Metals Closes CDN$662,500 Private Placement

The proceeds of the Private Placement will be used primarily to fund gold exploration and general corporate purposes. The common shares and warrants of the Company issued pursuant to the Private Placement are subject to a four-month hold period expiring July 13, 2021. 

Comment: Gold or rare earth, whatever direction the wind is blowing.

Jack Lifton with Appia’s Tom Drivas and Frederick Kozak on the revival of the Canadian rare earths industry

In a recent InvestorIntel interview, Jack Lifton spoke with Tom Drivas, CEO and Director of Appia Energy Corp.  and Appia’s newly appointed President, Frederick Kozak about the Alces Lake Project that has some of the highest-grade monazite-based rare earths and gallium mineralization in the world.

Comment: “Revival” implies, that it may have ever been alive, has it? Alces Lake >8% TREO is indeed exceptional. Jack Lifton always asks the right questions.

Rio Tinto Provides Aluminium-scandium Alloy For 3D Printing

As per the deal, Rio Tinto will deliver alloy billets made of responsibly produced, low carbon aluminium from its hydro-powered Canadian smelters and high purity scandium oxide from its Rio Tinto Fer et Titane metallurgical complex in Sorel-Tracy, Quebec.

The billets will be processed by Amaero into powder for 3D printing and offered to the market for high temperature applications.

Testing Shows REEs at Canada Project Amenable to X-ray Transmission Sorting

The testing, done by the Saskatchewan Research Council (SRC), showed, for one, REE minerals can be identified in core with this technology. Two, "crushing to -15 mm size particles and using a 5% REE mineral lower cut-off in the sorting algorithm, demonstrated the potential of low-cost front end XRT sorting to upgrade 2.3x from approximately 11% REE mineral content to 25% REE mineral content."

Upgrading the REE mineralization via XRT sorting has the "potential to significantly reduce feed volume forwarded to downstream the hydrometallurgical process," the company stated.

"Defense Metals is excited to establish the amenability of Wicheeda REE mineralization to the application of low-cost front end upgrading via sensor-based sorting technologies. We know from our very successful flotation pilot plant and bench-scale hydrometallurgical test work that early volume reduction and upgrading has significant downstream benefits," CEO Craig Taylor said in the release.

Is the “rollercoaster over” for Lynas Rare Earths?

In the company’s half-year results presentation, it highlighted the apparent effect of global megatrends in renewable energy and electric vehicles (EVs) to underpin continued confidence in rare earth prices. 

When the Sydney Morning Herald questioned Lynas CEO Amanda Lacaze about the boom and bust nature of rare earth prices, her message was simple, “the rollercoaster is over”. 

Comment: *Global* megatrend is perhaps a little rich. Rare earth and magnets happen in China, and less than 10% in Lynas’ benefactors’ home-market, Japan. We would not be so sure about the rollercoaster, as much of the price increase was driven by speculative hoarding.

//Market

Competitive Rare-Earth Metals Market Is Producing Huge Gains. What Investors Need to Know.

Demand for these powerful magnets are poised to see sharp growth in the next decade. Rare-earth magnet applications are forecast to account for roughly 40% of total rare-earth demand by 2030, compared with an estimated 29% in 2020, according to commodity analysis provider Roskill.

If you want to play the rare-earth market, however, investing in that ETF wouldn’t be the best approach, says Handwerger, since it’s mostly made up of Chinese rare-earth companies.

Instead, look to the juniors that are working with major academic institutions and the U.S. Department of Defense, Handwerger says. Rare earths are used in many defense and commercial applications. The DOD said last month it reached a technology investment agreement with Lynas Rare Earths (LYC.Australia).

Brodrick believes it’s a great time to invest in rare-earth miners and processors, with a positive supply/demand picture that is set to grow more bullish over the longer term. “The U.S. government is about to throw money at companies in this industry. Grab a bucket and get busy.”

//Science

Why reducing drivetrain size can make electric cars even greener

Professor Miljavec’s initial task was to choose a smaller, greener motor for the module as he explains: “We increased the speed [of the motor] by a factor of two, from 10,000 [revs per minute] to 20,000, which means, to maintain the same power output, we can halve the size of the motor, which reduces the amount of copper and the amount of magnets.”

This is significant because permanent magnet motors use rare-earth materials that are very environmentally unfriendly to mine. The ores that rare earths are extracted from are often separated using large amounts of toxic compounds such as sulphate, ammonia and hydrochloric acid. Processing one ton of rare earths can result in many more tons of toxic waste.

In addition to halving the use of these materials in their motors, Drivemode also claims the modules are fully recyclable: “You can take out the copper and reuse the parts by melting them down and producing new parts. You can also quite easily remove the magnets and reuse them, so it is 100% recyclable,” Miljavec says.

Scientists Synthesize New High-Temperature Superconductor

"Until 2015, 138 K (or 166 K under pressure) was the record of high-temperature superconductivity. Room-temperature superconductivity, which would have been laughable just five years ago, has become a reality. Right now, the whole point is to attain room-temperature superconductivity at lower pressures," says Dmitry Semenok, a co-author of the paper and a Ph.D. student at Skoltech.

Yttrium hydrides rank amongst the three highest-temperature superconductors known to the scientific community. The top-ranking superconductor is a material with an unknown S-C-H composition and superconductivity at 288 K. This is followed by lanthanum hydride, LaH10, which superconducts at temperatures up to 259 K. Finally, yttrium hydrides, YH6 and YH9, have superconductivity temperatures of 224 K and 243 K, respectively.

Rare‐Earth Incorporated Alloy Catalysts: Synthesis, Properties, and Applications

To improve the performance of metallic catalysts, alloying provides an efficient methodology to design state‐of‐the‐art materials. As emerging functional materials, rare‐earth metal compounds can integrate the unique orbital structure and catalytic behavior of rare earth elements into metallic materials. Such rare‐earth containing alloy catalysts proffer an opportunity to tailor electronic properties, tune charged carrier transport, and synergize surface reactivity, which are expected to significantly improve the performance and stability of catalysis.

Researchers report positive preliminary experience with super pulse thulium fiber laser lithotripsy

North American urologists analyzing outcomes from their initial experience treating urolithiasis with the high-power super pulse thulium fiber (HPTF) laser (Soltive) are encouraged by the results.1 Findings from their retrospective review that included 76 patients treated for a total of 118 upper urinary tract stones showed that the technology performed efficiently for ablating a variety of stone types and had a safety profile similar to the holmium:yttrium-aluminum-garnet (Ho:YAG) laser that is considered the current gold standard.

Rare earth elements in wastewater

Rare earth metals such as cerium and gadolinium are increasingly entering wastewater from industry, but also from hospitals. This is shown by Eawag’s investigations at 63 wastewater treatment plants in Switzerland.

//Politics

U.S., India, Japan and Australia counter China with billion-dose vaccine pact

Suga told reporters he had expressed strong opposition to China’s attempts to change the status quo in the region, and Modi told the session the Quad had “come of age” and would “now remain an important pillar of stability in the region.”

“The four leaders did discuss the challenge posed by China, and they made clear that none of them have any illusions about China,” Sullivan told reporters, adding that they all believed democracy could outcompete “autocracy.”

Freedom of navigation in the South and East China Seas, recent cyberattacks and semi-conductor supply-chain security, were also discussed, along with the North Korean nuclear issue and the coup and “violent repression” in Myanmar, he said.

A new dawn: Quad leaders vow to define the Indo-Pacific century

Sullivan said the leaders agreed to have the group look into the supply chain, "including as it relates to semiconductors, to make sure that we don't have shortages of critical materials going forward, whether it's semiconductors or rare earths."

The four Quad members are expected to disperse supply networks across their countries so as to rely less on China. They will cooperate on procuring rare-earth minerals, which are vital in such applications as batteries and high-performance motors.

Comment: Isolation of China is moving ahead forecfully. China has no strong friends except Russia, which has been a China-adversary for hundreds of years. Not exactly a dream-ally. But what should the end-game look like? The issues seem overwhelming.