GREENWOOD VILLAGE, Colo. — Magnetics 2013 has announced an industry-leading line-up of magnetics experts who will be addressing current market conditions and what's ahead for end-users and the magnetics industry in the years to come. There are rising concerns over cost and foreign control of the current supply of rare earth resources, which has motivated a search for new sources outside of China and for non-rare earth permanent magnets. Magnetics 2013, taking place February 7-8 in Orlando, Fla., will address rare earth (RE) supply chain issues, permanent magnet (PM) alternatives and RE-free magnet options for motor applications, the latest in magnetic materials R&D from leading National Laboratories, and the latest advancements in design and testing.

“The area of rare earths has been a hot topic for the last couple of years. This year’s line up at Magnetics 2013 offers our most diverse coverage to date of the rare earths crisis including supply and demand as well as PM alternatives,” said Heather Krier, conference program manager and editor of Magnetics Business & Technology magazine. “This is a once-a-year opportunity for professionals involved in magnetics technologies to not only get the latest information on the global issues of rare earths, but to learn the latest advancements in magnetic applications, technology and materials.”

Magnetics 2013 is offering informative pre-conference workshops on February 6th to complement its in-depth conference program. The workshops, which have limited seating to ensure each attendee receives individual attention, will sell out.

The conference offers new low rates until January 10th. Special discounts for OEMs are also available.

Magnetics 2013 is co-located with Motor & Drive Systems 2013.

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Australia’s Lynas Corporation yesterday commissioned its controversial rare earth plant in Malaysia.

The first delivery of commercial rare earth product is expected in the next few weeks.

In a statement released yesterday Lynas said they have successfully begun cracking and leaching rare earth extraction units and production will continue to ramp up over the next three to four months.

“This is another significant milestone for Lynas,” said Lynas executive chairman Nicholas Curtis.

Following the announcement the company’s shares rose 14 per cent.

It was a good day for rare earth companies around the world yesterday with Molycorp and Great Western Minerals also seeing their share prices rise by 9.8 per cent and 4 per cent respectively.

At full production Molycorp, Lynas and Great Western are expected to end China's grip on the rare earth market of which China currently controls more than 95 per cent of the global supply, mining.com reported.

In November Australian Mining reported Lynas had received its first shipment of about 100 containers of rare earth concentrate at the Malaysian plant. At the time the company expected the first kiln feed to take place just a couple of days later.

However, the company has been embroiled in legal action launched by the Save Malaysia, Stop Lynas group which aimed to block Lynas from acquiring a temporary operating licence for the new facility.

“The safe and efficient operation of the LAMP is now a reality, and we are providing real-time data that assures people the LAMP is entirely safe for our local communities and the environment,” Curtis said.

Protests took place outside the company’s Sydney head office in November last year amid concerns from the Greens that radio active waste produced at the Malayasian plant would be shipped back to Australia.

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KUANTAN: Lynas Corporation is expecting the production of commercial rare earth products in a few weeks.

This follows the successful commissioning of its kiln to produce mixed rare earth sulphate.

“The process has achieved a recovery rate of more than 90% of contained rare earth oxides.

“The mixed rare earth sulphate is now being fed into the solvent extraction units for ultimate production of individual rare earth products,” Lynas said in a statement on its website yesterday.

It added that the production would be intensified in the next three months.

Lynas executive chairman Nicholas Curtis hailed this as another significant milestone for the company.

“The safe and efficient operation of the Lynas Advanced Materials Plant (LAMP) is now a reality.

“We are providing real-time data that assures people the plant is entirely safe for our local communities and the environment.

“We are excited to start creating value at the LAMP and we look forward to sharing that value with all our key stakeholders, including the communities in which we operate,” Curtis said in the statement.

The statement also said Lynas was now producing sufficient quantities of solid residue to start the production of synthetic gypsum and aggregate co-products.

It said this would enable co-product samples to be produced for testing and market trials for commericial distribution.

During a site visit last month, Lynas Malaysia managing director Datuk Mashal Ahmad said the company had spent RM10mil to build a synthetic aggregate plant to recycle the residue.

Lynas was issued a temporary operating licence effective from Sept 3 last year and announced that it had commenced operations on Nov 30.

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China is responsible for more than 95% of the global supply of rare earths and over the weekend the country's Ministry of Land and Resources (MLR), announced that the first production quota for rare earths this year will be set at 46,900 tonnes.

Another quota will be announced later this year and the allotment is broadly in line with recent output caps.

2012 output has not been disclosed, but production totaled 93,800 tonnes in 2011, according to Bloomberg. The MLR also set production for tungsten concentrate at 43,500 tonnes and antimony at 37,680 tonnes.

In December China pegged 6-month export quotas at 15,501 tonnes, also broadly in line with the 2012 figure.

The export quotas – which Japan and the US took all the way to the World Trade Organization dispute resolution body – appears to have become a meaningless exercise.

China only exported some 13,000 tonnes of rare earths through authorized channels during the whole of last year, a mere 40% of the allowed export.

A crackdown on illegal mining, consolidation of the industry under a few large producers, mothballing mines – China's number one producer recently decided to extend its production halt to three months – and the quotas have not helped to put a floor under REE prices which have continued to fall from 2011's stratospheric levels.

The value of many of the 17 elements used in a variety of industries including green technology, defence systems and consumer electronics are down more than 80%.

While mid-2012 prices looked as if it will begin to stabilize, values continue to soften.

Abundant, less valuable REEs have experienced the sharpest reversals.

Lanthanum oxide – used in ceramics and fuel catalysts – for example rose from a price of just $8.71/kg in 2008 to average $117/kg in the third quarter of 2011. By the third quarter of 2012 it was down to $19.54/kg.

As of 7 January 2013 it’s fallen further to $11/kg. Inside China that same kilogram costs $7.54.

This price behaviour can be seen across the board: cerium oxide, used to polish TV screens and lenses, is trading at $12 from an all-time high of $118 in the September 2011 quarter. In 2008 the price for cerium oxide was $4.56.

Praseodymium, used as an alloy in aircraft engines and welder goggles, was available from China in 2009 for $18/kg. After peaking in the second half of 2011 along with all the other rare earths it was still priced at $163/kg during the first quarter of 2012. Monday's benchmark price was $85, down from $105 last September.

The price of a kilogram of samarium oxide increased dramatically from a mere $3.40/kg in 2009 to average $103/kg in 2011. Used in jet fighter electrical systems among other applications, samarium actually increased in value from the first to the second quarter of 2012, from $73/kg to $82/kg.

Now it has plummeted to $25/kg free-on-board while the domestic price in China is only $7.70 for samarium.

Heavy, scarcer REEs have generally held up better, but some have experienced price declines of more than 50%.

Neodymium oxides, used in windmills, continue to slump – from $338/kg in Q3 2011 to $105.31/kg in Q3 2012 to $80/kg today.

A hybrid vehicle ingredient, dysprosium, rocketed from a price of $118.49/kg in 2008 to average $1,449/kg in 2011. It peaked at an astonishing $2,300 by September of that year.

Dysprosium, also used in conjunction with vanadium and other elements in making laser materials, has now given up more than $1,500 per kilogram and now goes for $630/kg. Inside China it is worth only $385/kg.

The reversal in europium oxide – the priciest REE – which is used in medical imaging and the nuclear and defence industries – has been most startling.

The price of europium increased almost 10-fold from $492/kg in 2009 to average $4,900/kg in the third quarter of 2011. In the first quarter of 2012, importers still had to pay $3,623/kg and stayed above $2,000 for most of the year.

The price is now $1,600 a kilogram. Chinese domestic europium is almost half that at $867/kg.

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China exported only about one-third of its annual export quota for rare earth minerals in the first 10 months of 2012.

According to data from the Customs Statistics Information Center, some 11,312 tons were exported from the beginning of January to the end of October, 36.5 percent of the quota for the year set by the Ministry of Commerce (MOC).

In 2011, China set rare earth export quotas of 30,200 tons but only 18,600 tons were exported, official data shows.

The MOC set the quota for the first batch of export for 2013 at 15,501 tons, without giving the annual total.

Twenty-four companies, such as Baogang Group, China Minmetals Corp. and Aluminum Corp. of China, have obtained their export quotas for this year's first batch, according to the report.

    Baogang, the country's largest producer of rare earth minerals, has the biggest share of the quota. Its four subsidiaries have been allowed to export a combined 1,811 tons.

The United States, European Union, Japan, along with Canada, lodged a complaint with the WTO in March, claiming Beijing was unfairly choking off exports of the commodities to benefit domestic industries.

Rare earths, as vital non-renewable natural resources, are a group of 17 metals vital to a wide range of products and materials like smart phones, wind turbines, electric car batteries, and countless other applications.

China has been insisting that it's unfair to bear the burden of supplying 90 percent of rare-earth demand while only having 23 percent of global reserves, and began to implement stricter environmental standards on mining and refining.

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Molycorp (MCP) mines and produces lanthanide and molybdenum compounds, concentrates, and oxides using open-pit mining techniques. Molycorp's top-level product is bastnasite, which is a mixture of rare earth metals in their flurocarbonate form. From this ore, mischmetal can be extracted. On the other hand, bastnasite can be used in the later purification processes of many rare earth metals. Bastnasite also serves as a high-performance polishing product for optics and sensitive equipment.

Lanthanides (which include cerium, lanthanum, and yttrium) are used in everything from cell phones and computers to X-ray film and television glass. The company is staking its future on the production of rare earth oxides (REOs). Molycorp went public in July 2010 with an initial public offering (IPO). Since its IPO, it has been making acquisitions and investing in joint ventures to further its growth. In its biggest takeover to date, Molycorp acquired rare earth processor Neo Material Technologies for about $1.3 billion in 2012.

Current Rare Earth Metals Landscape

China controls about 95% of the global rare earth metals supply, and its restriction on global access has had an interesting affect on the market. China is the biggest producer, as well as consumer, of rare earth elements. As a result of restrictions by China, manufacturers and miners are currently working on finding alternatives to Chinese supply. At the moment, companies are increasing their presence in Central and Southeast Asia. Electronics manufacturers will continue to increase demand as the demand for products increases. However, the U.S. has not been able to devise a plan to cope with the dependence on one supplier.

Japan, the biggest importer of rare earth elements, has increased its efforts to counter the restrictions by China. China's Bayo Obo mine is in close proximity to Mongolia. As a result, Mongolia is getting substantial offers from miners and manufacturers. Japan recently signed a free trade agreement with Mongolia in order to get access to rare earth metals. In addition, Germany and Kazakhstan signed a $4 billion agreement allowing German mining companies access to Kazakhstan's rare earth elements. Germany will provide technical assistance in modernizing railroads and building chemical plants in exchange for the privilege of mining in Kazakhstan.

Furthermore, Japan is also collaborating with India to decrease dependence on China. The Indian state of Orissa has deposits of rare earth elements, which the country is looking to exploit. India is looking to build facilities in Orissa and Central Asia to get a share of this lucrative market.

Importance to the U.S.

Molycorp products are extremely important for the U.S. defense applications. Rare earth elements are used in underwater mine detection equipment, radar systems, jet engine coatings, optics and scopes, lasers, electronic counter measures, and precision guided bombs. The Department of Defense highlighted the importance of rare earth elements to the country, as well as the consequences of China being the only supplier. Molycorp is the answer to the problem for the U.S. The company has suffered due to lower prices, lower product volumes, and higher transaction costs. Molycorp will benefit from its Canadian acquisition and Phoenix project. I expect the company to see more profitability in 2013. It is also expected that the hoards of rare earth metals will start to decrease, and demand will increase. In addition, stricter regulations from the Chinese government will help bring supply down. The Chinese government is trying to stop the illegal mining in order to decrease supply. Decreasing supply should bring prices up, and we should see some recovery in 2013.

Comparison With Peers

Molycorp peers include Lynas Corporation Ltd. and Avalon Rare Metals, Inc.. The table below lists some important metrics for the sake of comparison between these companies.

Companies in the rare earth metals segment are trading at low forward multiples. However, a look at margins shows that the industry has been hit hard by low prices. All three companies have negative ROE at the moment. Molycorp is the only company among the three to have debt; the other two companies do not have long-term debt.

Summary

Rare earth metals are an integral component of a lot of products. Demand for these products will remain high as the global economy recovers. The recovering global economy will increase consumers' disposable income, resulting in increased demand. Furthermore, the Phoenix project and the Canadian acquisition will help Molycorp improve its profitability.

However, Molycorp has several risks associated with it, and only investors with a high risk tolerance should consider it. The biggest risks are a slow recovery in prices and the company's failure to bring down the costs. Molycorp needs to control its costs in order to bring down its losses. Out of the two biggest risks, high cost is the company-specific risk that Molycorp can control. The company should focus on bringing down its costs and augmenting the profit margins.

There is still a lot of uncertainty about the market at the moment, despite some positive steps taken by the Chinese government. If the proposed measures do not yield expected results, the prices for rare earth elements could remain low during 2013. As a result, Molycorp could suffer and stock price may not move much. That's why I believe only investors with a high risk tolerance should consider investing in Molycorp.

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Australia's Lynas Corp Ltd said on Monday it expects to produce commercial rare earth products in the next few weeks from its controversial plant in Malaysia, after commissioning the plant's cracking and leaching units.

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.

"Lynas anticipates commercial rare earth products will be available in the next few weeks with ramp up of production to take place over the next three months," the company said in a statement.

Lynas shares jumped 8.0 percent to A$0.68 in late morning trade to a five-week high, but are still well below levels above $1.40 around a year ago.

Lynas has been embroiled in lengthy environmental and safety disputes with residents near the plant, and the Malaysian high court is due to hear an application for judicial reviews to block its operations on Feb. 5.

The $800 million plant, which opponents say is environmentally hazardous, began operations in November 2012 after long delays caused by legal challenges and safety disputes. Located in the east coast city of Kuantan, it had been ready to fire up since May 2012.

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China, the world’s biggest supplier of rare-earths, set the first of two production quotas for 2013 at 46,900 metric tons of the ore that is refined for use in mobile phones, hybrid cars and missile systems.

The figure is about half the total quota set last year, according to a Ministry of Land and Resources statement posted on its website on Jan 5. The ministry didn’t make public the production quotas last year, while the figure in 2011 was 93,800 tons.

Output quotas for the rest of the year will be announced in the second quarter, according to the statement.

China also set a production quota for tungsten concentrate at 43,500 tons and antimony ore at 37,680 tons, according to the statement, which gave no comparison with previous years.

Since 2007, China has imposed production limits on rare earths and set export restrictions to preserve supply and conserve the environment. The curbs raised trade disputes with the world’s major users, including the U.S. and Japan.

Rare earths are a group of 17 chemically similar elements gaining increasing usage in the shift to cleaner energy sources, such as magnets in wind turbines, hybrid vehicle batteries and catalysts to reduce automobile exhaust emissions.

China, which provides about 95 percent of global rare earth shipments, also cut the first-lot export quota by 27 percent to 15,501 tons from that of 2012, according to a statement by the Ministry of Commerce on Dec. 28.

Demand for some China rare earths has declined as companies such as Toyota Motor Corp. and Hitachi Ltd. (6501) to recycle the metals and employ substitutes. In November, Japan, the world’s biggest importer of rare earths, signed an agreement to buy more of the metals from India to diversify supply.

Praseodymium-neodymium oxide, a light rare-earth product, traded at 285,000 yuan ($45,756) a ton on Jan. 4 in Shanghai, according to researcher Shanghai Steelhome Information. Prices have tumbled 78 percent from a record 1.28 million yuan set in June 2011.

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Cold-call phone scams have switched from traditional sales staples, such as unlisted shares in obscure companies, to novel new get-rich investment options such as land, wine, and lumps of rare earth metals.

The Independent reports that the sale of rare earth elements by unregulated "boiler room" companies in England has become the latest trend in investment phone scams.

Around 25 to 30 such companies currently operate in the UK, none of which are subject to regulation or oversight by the Financial Services Authority (FSA).

One company in the Midlands offer credulous investors a "green energy bundle" of rare earth metals via cold-call phone marketing.

For 6,744 British pounds retail investors can buy one kilo of dysprosium, one kilo of yttrium and two kilos of lanthanum and neodymium, which purchasers are informed over the phone will surge in value.

Yet based on current market prices the bundle, assuming 99% purity free of oxides, is worth only 900 pounds, equivalent to a 7.5 times price mark-up.

One investor in Bradford was targeted by cold-call investment company Rare Earth Metal Exchange Ltd firm after receiving a substantial inheritance, the public details of which had been data-mined and sold.

The company convinced the investor to spend 45,000 pounds on five kilos of rare earth metal dyprosium which she was informed would surge in value over the next twelve months.

The investor received only one kilo of the metal, while the total value of her purchase was only around 3,500 pounds.

The new wave of scams capitalize upon the vital importance of rare earth metals for modern hi-tech industries, and the increasing media attention they receive due to China's stranglehold on global supply.

The FSA states, however, that there is no "convincing evidence that there is a viable market for investors to make money," with Jonathan Phelan, head of the FSA's unauthorized business department, pointing out that these kinds of industrial metals are traded between specialist firms.

The FSA has achieved modest success in returning money to investors defrauded via unregulated phone scams, yet has called for the government to introduce new legislation to prohibit such activities and protect the unwary.

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The government aims to identify by the first quarter potential mining tenements for the Philippines’s venture into rare earth elements (REE) production, the Mines and Geosciences Bureau (MGB) said on Wednesday.

“In fact, we have already found potential areas to explore and these areas are also close to copper-gold mines. Notably, Palawan and Nueva Vizcaya are the best places to start,” said MGB Director Leo Jasareno.

REE are the raw materials for producing electronics and other modern-day gadgets.

The MGB earlier said P20 million has been set aside for the REE venture.

The Philippines’s bid to develop REE production comes after China capped exports of the commodity more than a year ago.

Manila sought help from state-run China Geological Survey for the exploration program, but no such assistance was forthcoming after tensions between the two countries heightened because of competing claims over portions of the West Philippine Sea, believed a treasure trove of oil and gas reserves.

“So far, we have received no word from them,” Jasareno said.

China, which controls about 97 percent of the world’s rare elements, has reduced its export quota to gain control over global prices of the commodity.

Prices of the metals however have gone down over the past several months, with China’s biggest producers cutting production to halt the slide.

Also called the “metals of the future,” REE are used in the production of weapons guidance systems and other space age technologies.

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