The US Department of Energy has funded a $120m research center to address shortages in rare earth metals and other materials critical for US energy security.

Ames Laboratory in Iowa will lead a team of researchers at the new Critical Materials Institute (CMI).

“Rare earth metals and other critical materials are essential to manufacturing wind turbines, electric vehicles, advanced batteries and a host of other products that are essential to America’s energy and national security,” said assistant secretary for energy efficiency and renewable energy David Danielson.

“The Critical Materials Institute will bring together the best and brightest research minds from universities, national laboratories and the private sector to find innovative technology solutions that will help us avoid a supply shortage that would threaten our clean energy industry as well as our security interests.

The department’s 2011 Critical Materials Strategy reported that supply challenges for five rare earth metals (dysprosium, terbium, europium, neodymium, and yttrium) may affect clean energy technology deployment in the coming years.

In recent years, DOE and others have scaled up work to address these challenges. Among the recent investments, DOE’s Advanced Research Projects Agency–Energy and Office of Energy Efficiency and Renewable Energy have supported more than $40m in magnet, motor and generator research.

Other national labs partnering with Ames include Idaho National Laboratory, Lawrence Livermore National Laborator, and Oak Ridge National Laboratory. University and research partners include Brown University, the Colorado School of Mines, Purdue University, Rutgers University, University of California-Davis, Iowa State University and Florida Industrial and Phosphate Research Institute.

Industry partners that have joined to help advance CMI developed technologies include General Electric, OLI Systems, SpinTek Filtration, Advanced Recovery, Cytec, Molycorp and Simbol Materials.

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Its reported that Lynas expects to return to  commercial rare earth product production within a few weeks at its Malaysian plant, which has been emeshed in ongoing environmental and safety disputes with area residents.

The process has achieved recovery rates of more than 90 percent of contained rare earth oxides through the cracking units, which are now ready for production of individual rare earth products, the company said.

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Last July, the WTO opened an investigation into whether China is unfairly restricting the export of rare earth metals - the substances vital not only to your iPod and smartphone, but also to so many other important things, from missiles to cars to wind turbines to light bulbs.

So how has China responded?

In the quiet of the Western world’s Christmas holiday, it blew a raspberry, tightening export restrictions once again.

“China, the world’s biggest rare earths supplier, cut the first-batch export quota for next year by 27 percent as overseas demand for the elements waned,” Bloomberg News reported in the Taipei Times on Dec. 29.

China’s Ministry of Commerce sets rare earth export limits twice a year. It pegged the first allotment for 2013 at 15,501 tonnes, down from 21,226 tonnes for 2012’s first setting.

To be fair, China had loosened restrictions last August, soon after the WTO began its investigation after the U.S., European Union and Japan complained about Chinese limits and tariffs on the metals. The 9,700 tonnes that China allowed in 2012’s second half brought the full-year limit to a three-year high of 30,996 tonnes, Bloomberg noted.

RARE DOMINANCE

For historical reasons including a disregard for environmental concerns in toxic rare earth mining and processing procedures, China controls about 95 percent of the world’s rare earth market.

Change is afoot in the industry. As Bloomberg noted, one of the reasons China curtailed exports is that worldwide demand has dropped off. You can probably attribute that to the sluggish global economy. Also, companies in Japan and elsewhere are finding ways to reduce their reliance on rare earths. And Western companies like Molycorp in the U.S. have started up rare earth operations, although Molycorp has faced criticism for selling to China rather than to the U.S.

With demand down, prices have fallen. China is not only limiting exports, but it has also limited production - all of which should choke supply and in the rules of supply and demand, help lift prices.

China has also started a massive consolidation of its rare earth industry, led by Baotou Steel Rare-Earth. It says it is doing this for among other reasons, to assert more control over cleaner industrial practices. With China’s central planning prowess, it should also give it greater ability to control the global market that it already dominates.

This year will be a busy one for rare earth developments in China and internationally. Rare earths are of double importance to the economy, not only for their direct use in products, but also because they occur in minerals that  contain thorium and uranium, two nuclear fuels that could help move the world off of CO2- emitting hydrocarbons.

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Frontier Rare Earths shares picked up Tuesday as investors eagerly await the preliminary feasibility study for the company's Zandkopsdrift rare earth project in South Africa - expected out in the first quarter of this year.

Shares in the junior rare earths company were up almost 7 per cent to 80 cents Tuesday afternoon.

In December, the company said that Korea Resources Corp (Kores) - the state-owned mining and natural resource investor - offically acquired the initial 10 per cent stake in Zandkopsdrift.

Along with the 10 per cent interest, Kores has also acquired an off-take right and obligation for 10 per cent of Zandkopsdrift rare earth production, for a total cash payment of C$23.8 million.

The acquisition is part of a strategic alliance agreement initially signed between the two parties in December 2011, with an expanded deal announced in late October last year.

Under the expanded deal, Kores has the option to increase its interest in the project to up to 50 per cent, becoming an equal partner with Frontier, with an off-take right and obligation for up to 50 per cent production from Zandkopsdrift.

Frontier said the acquisition makes it the  only junior company in the rare earths sector to have signed and  completed a definitive agreement with a significant strategic partner.

The option to increase Kores' interest will be given when Frontier files its definitive feasibility study for the project - currently slated for the fourth quarter of next year.

As of late December, the company had $52 million of cash under its belt, which is expected to suffice for both the preliminary and definitive feasibility studies, as well as work on other exploration programs.

The junior rare earths company started the prefeasibility study on the Zandkopsdrift property in April of this year, and says that "good progress" has been made, with most requisite studies now either completed or at an advanced stage.

The report is targeted for the first quarter of this year, after which the company expects to immediately start work on the definitive feasibility study.

Frontier's preliminary economic assessment (PEA) report on the project, released last February, reported that Zandkopsdrift is estimated to contain roughly 950,000 tonnes of total rare earth oxide (TREO), applying a one per cent TREO cut-off, and gave a whopping net present value of $3.65 billion, after tax and royalties, at an 11 per cent discount rate.

Internal rate of return for the project was seen at 52.5 per cent, after tax and royalties, with a two year payback from start of production.

Average production was pegged at 20,000 tonnes of separated rare earth oxides per year over a 20-year mine life, with production due to start in the second half of 2015.

Under the deal with Kores, the Korean company is also to arrange project financing for the entire development and must committ to provide its pro rata share of funding for the portion of  costs not covered by the project financing.

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