Molycorp’s shares are trading at the lowest point yet; they have crossed the negative side of the ‘not so magical’ USD 6.00/share floor this week, finding bottom at USD$ 5.73/share on the last Thursday in February and started to recover a little on the first day of March. Many stocks experienced a topsy-turvy trading week and many could attribute the moody pattern to the fears about the results of the Italian elections and their impact on the Euro – and as a result on prospects for a European economic recovery. However, Molycorp has no such luxurious excuse; its stock has been feeling the impact of its decision to postpone the filing of its fourth-quarter report with the Securities and Exchange Commission.

Molycorp needs more time to calculate – or perhaps to prepare investors’ stomachs – the sum of a goodwill impairment charge that will be noted for the fourth quarter related to its USD$ 1.3 billion acquisition of Neo Materials (Molycorp Canada) last spring. This news stings all the more given how it contrasts with news that Lynas Corp (ASX: LYC) has officially launched production. Apart from Molycorp, then, Lynas is the only listed company outside of China able to supply rare earth metals, from mine to finished product, in 2013. Indeed, Lynas is producing rare earths in Malaysia, with ore from its own deposit material in Mount Weld. The level of production will soon rival Molycorp as the Company expects to produce 11,000 tons of REE in the second quarter of 2013.

Accordingly, Lynas shares rose by at least 4.3%; Molycorp dropped by twice that percentage. Nevertheless, is Molycorp actually the one that should be blamed? Perhaps not. Demand for rare earths exists. The U.S. Department of Energy estimated in late 2011 that there was a real risk for the production of wind turbines with synchronous motors using permanent magnets treated with dysprosium. These engines are very popular because they are much more efficient than induction motors using copper, improving performance and usability – given that they can function with less wind. Then there are the heavy rare earths (europium, terbium and yttrium) powder phosphors needed in video screens and light bulbs. In 2010 China produced 81% of magnetic alloys for permanent magnets; 13% were made in Japan and North-East Asia (i.e. South Korea), 2% in the United States on foreign license and 4% in the rest of the world including Europe.

A similar pattern explains the geographic distribution for producing powder phosphors. China is not the one to blame for its dominance – and why should it? After all China was handed the rare earths industry dominance on a silver (perhaps masquerading as dysprosium) platter. Europe and the United States, in contrast, have sinned by lacking vision and strategy; they have squandered their expertise and scientific knowledge and not just in rare earths. Indeed, the technology for processing rare earths has completely American and European (mostly French) roots.

The chemistry to separate rare earths speaks was developed in France thanks to the experiments by Paul Lecoq de Boisbaudran (1838-1912) who discovered samarium and dysprosium and Georges Urbain (1872-1938) who discovered lutetium and invented fractional crystallization. Then there is the Manhattan Project, which resulted in the atom bomb while also leading to devising a hydrometallurgical process (ion exchange and later solvent in 1953) to process rare earths. The Manhattan Project first explored the separation of lanthanides before separating radioactive actinides. In Europe, there was the good sense to maintain separation and purification technology at La Rochelle. Molycorp and Lynas were supposed to help reverse the trend, also because China itself may soon to go beyond its domestic rare earths supplies. Technology is increasingly controlled by China. This is odd because the patents for separating and processing rare earths are owned in the West (and Japan). General Motors and Sumitomo announced discovering the process to make neodymium-iron-boron magnets in 1982.

Magnequench, originally a subsidiary of General Motors, was established in 1986 to produce Nd-Fe-B magnets in Anderson (Indiana). Then there was the beginning of the end of the western dominance. In 1995, Magnequench was sold to Sextant Group, an American but Chinese controlled company, which then promptly moved the production line to China in 1998, shutting down US operations. Magnequench returned to the West through Neo Material Technologies, a Canadian corporation acquired in 2012 by Molycorp, whose concentrates required for the production of permanent magnets are still exported to China.

The Molycorp woes are, in a sense, keeping the United States dependent on China for neodymium-iron-boron. Hitachi of Japan now owns the original Sumitomo patents after the 2007 merger between Sumitomo Special Metals Co. and Hitachi Metals. There are also agreements between Hitachi and cross Magnequench. Overall, the framework is favorable to the rebirth of a North American or Western rare earth industry. For Molycorp, the question now is to what extent the write-down will affect its long term business. If we assume that the mine-to-magnet business is the right approach, then the write down will have very short term impact and one probably already absorbed by the market over the past two days. Molycorp’s strategy may yet pay off; however, it will only become a winner if the West changes its attitude to technological know-how – sending it off to cheaper labor markets simply to save a buck has been a short-sighted policy and not just in rare earths.


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Lynas Corp has no doubt been one of the headline leaders in February. After a protracted legal ordeal to confront environmental activists, at the end of February, Lynas started producing rare earth products at its LAMP processing plant in Malaysia. Lynas is expected to ramp up production by the second quarter of 2013 at a rate of 11,000 tons per year. The start of production and the preparations for the first official shipment have shifted have officially shifted Lynas’ mode from development to production. This shift is reflected in CEO Nick Curtis’ decision to step down from his chief executive role to remain as Chairman. He will be replaced by Eric Noyrez at the end of March and whereas the news may appear as a bombshell, the change at the executive floor reflects a planned transition and Lynas’ official switch from development to production. Indeed, Mr. Curtis, who will remain at Lynas as non-executive Chairman and who has led the company through a particularly challenging period, will leave on a high note in the wake of the start of production announcement. Eric Noyrez, , has extensive experience in chemical processing companies having held executive positions at Rhodia Group and Shell. Many will recall that Rhodia owns a rare earth processing facility in La Rochelle, France.

Lynas completed its initial commercial product samples, en route to nominal Phase 1 capacity (which is expected before Q3 2013).  Lynas also announced that it would receive an AUD$15.2 million rebate payment from the Australian Taxation Office (for R&D expenditures generated in 2012) in March. Nevertheless, rare earths prices continued to suffer in February, reflecting the trend from January. Nevertheless, the scenario is more complex.  Lower prices were seen in praseodymium oxide, yttrium, neodymium oxide, terbium oxide, rare earth carbonate, dysprosium oxide and europium oxide.  The remaining metals in the index actually managed to post gains for the month with neodymium, lanthanum oxide, and praseodymium neodymium leading the list of gainers.

                 

A combination of new supply and weaker domestic demand out of China is being viewed as the reason for the falling Rare Earths prices but it is important to look at individual examples in the metals index because these negative moves are not seen in all areas.  Export numbers for Chinese rare earth products have been the subject of debate (as different sources have reported different figures and Hong Po’s recent articles have highlighted some recent numbers), but all of the available data suggests that increased on-stream supply continues.

Chinese producer Rare Earths Global (LSE:REG) released a statement saying it is unlikely 2012 profit forecasts will be met, and that “normalized” losses will be seen on broader downside price changes in the rare earths market.  The company cited rapid industry changes and governmental uncertainties (the election of a new Chinese leadership body, changing statements from the Ministry of Commerce, and a recent white paper on rare earths).  Rare Earths Global said the added uncertainty is creating major delays for the reception of its production quota (an export quota was not received in 2012).

These factors are seen inhibiting operations in the company’s trading divisions and separation plant.  Rare Earths Global explained it is open to the possibility of joint ventures and believes demand for rare earths oxides will rise along with increased regulation and control of production. Meanwhile, Great Western Minerals (TSXV: GWG | OTCQX: GWMGF) entered its commercial production phase at its Less Common Metals subsidiary, with confirmation that specialty alloys have been sold to three existing clients.  The program is set to ramp up production with its second strip casting furnace before the end of the current quarter.   Tasman Metals (TSXV:TSM | NYSE MKT: TAS) released information relating to its Olserum heavy rare earth project in Sweden, saying the resource comes in at 4.5 million tonnes grading 0.6% TREO, with an inferred resource of 3.3 million tonnes grading 0.63% TREO (both with a 0.4% TREO cut-off).


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After falling 22.8 percent, lanthanum oxide was the biggest mover in this week. Cerium oxide weakened by 17.0 percent. Rare earth carbonate finished the week after falling 15.4 percent.

Neodymium oxide dropped 8 percent over the past week. Europium oxide prices fell $30 per kilogram, down from a week ago. Europium oxide saw a 3.4 percent drop-off this week. The past week saw praseodymium neodymium oxide close after a 3.2 percent decline.

Praseodymium oxide fell 0.7 percent over the past week.

Neodymium prices held steady from the previous week. The week also finished with no movement for samarium oxide, terbium metal, terbium oxide, yttria and yttrium.

          


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There is a growing realisation within the rare-earths extraction sector that those development projects that do not have well understood geologies would find it increasingly difficult to attract financing, which may result in those projects falling by the wayside in the medium-term.

The chairperson of South Africa-focused project developer Frontier Rare Earths, which is developing its flagship Zandkopsdrift project in the Northern Cape, Phillip Kenny, told Mining Weekly Online during the Prospectors and Developers Association of Canada’s recent show, which 30 147 investors, analysts, mining executives, geologists and government officials attended, that if a prospective rare earths company had not already identified one of the three well understood rare-earths ores, chances were slim to attract capital.

Kenny explained rare earths are most economically extracted with proven processes from the minerals bastnaesite, monazite and xenotime. Any other of the more than 200 minerals known to contain essential or significant rare earth elements (REE) would require extensive research and development to find an economically sensible process with which to extract REEs, which would take a lot of time and cost excessive amounts of money.

Financiers were increasingly asking for process flow sheets before they would consider borrowing developers a dime.

“The race is on to become the next rare-earths producer, and we are ahead, owing to being the only rare-earths junior which already has a significant strategic off-take partner. We are also well funded and the Zandkopsdrift project’s mainly monazite resource would enable us to produce rare earths at very economical cost,” Kenny aid.

         

Finance in place

He was referring to a deal closed in December with Korean Government-owned mining and natural resource investment company Korea Resources Corporation (Kores), which had acquired a 10% interest in Frontier's Zandkopsdrift rare-earths project, along with an offtake right and obligation for 10% of the production.

The company said it believed the C$23.8-million deal made it the only junior company in the rare-earths sector to have signed and completed a definitive agreement with a significant strategic partner.

Under the terms of the agreement, Kores has the option to increase its participation in Zandkopsdrift up to 50%, together with an offtake right and obligation for up to half of the production from the project.

Further, Kores had agreed to arrange project finance to develop the entire project on the best-available market terms and to provide pro rata funding for the portion of Zandkopsdrift development costs not covered by the project finance, while it would also be responsible for providing technical and operating experience for the design, construction and operation of the Zandkopsdrift facilities.

Frontier added that it was willing to cooperate with Kores with regard to downstream opportunities in the area of rare-earth metals, alloys and magnets.

Frontier said its cash balance was boosted by the transaction to C$52-million and was expected to be sufficient to fund the completion of a preliminary feasibility study (PFS) and a definitive feasibility study at Zandkopsdrift, work on the company's other proposed exploration and development programs and corporate overheads.

Kores was also required to pay Frontier 10% of all operating costs and expenses related to Zandkopsdrift from July onwards, amounting to about C$400 000 as at the end November.

Potent resource

In April 2012 Frontier started work on a Canadian National Instrument 43-101-compliant PFS on Zandkopsdrift. Kenny said most of the requisite ancillary studies were now either completed or were at an advanced stage.

“The group of REE-development companies have indeed already become smaller, as pressure on rare-earths prices have made many projects uneconomical,” he said.

However, he believed prices have bottomed out and with growing demand from producers of smartphons, electric vehicles and magnets, REE prices were expected to climb.

Kenny pointed out the Zandkopsdrift project would be an integrated operation, meaning it would export the separated REEs to Korea.

The highest-value heavy rare-earth oxides, namely europium, terbium and dysprosium, are contained at elevated levels at Zandkopsdrift, compared with several other deposits being evaluated in Australia and North America.

The levels of thorium – 178 parts per million (ppm) – and uranium (47 ppm) in the Zandkopsdrift deposit are low, and compare favourably with many of the more advanced rare earths projects worldwide. This also reduces the potential environmental implications that may arise, should mine development be undertaken at Zandkopsdrift.

There are about 22.92-million tons containing 532 000 t of total rare-earth oxide (TREO) at an average grade of 2.32% at Zandkopsdrift in the indicated resource category, with an additional 20.81-million tons containing 415 000 t of TREO in the inferred resource category, with a 1% TREO cutoff grade.

It is also important to note that there are a series of higher-grade zones within the overall resource estimate at Zandkopsdrift, which are considered to be sufficient in size for exploitation as discrete units within the deposit.

The 2.5% cutoff zone is a discrete area referred to as the Zandkopsdrift B zone, which contains about 450 000 t of rare-earth oxide and is expected to be the initial focus of the company’s activities.

Rival company Great Western Minerals Group is developing the Steenkampskraal REE project, also located within the Northern Cape province.


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Despite precipitous falls in several constituent price points – lanthanum oxide, cerium oxide and neodymium among them – the monthly Rare Earths MMI® held steady over the past month for a March reading of 43, on par with February’s value.

This comes after two straight months of declines for the index, and it, along with our Renewables MMI®, shares the dubious distinction of spending its entire existence under the Jan. 2012 baseline of 100. The majority of the price points in the complex held steady over the past month. But nothing has really changed to skew our existing long-term outlook for this minor metals market.

As we reported on last month’s rare earths index, the trouble for downstream demand of rare earth metals, minerals and oxides is far from over. Industry sources report that China demand for rare earths for the balance of 2013 is likely to remain sluggish, mainly because downstream end-use sectors are not holding up their end, according to metal-pages.com.

Certainly not helping the demand situation is more supply coming on stream. Lynas Corp. reported in a Feb. 27 company statement that the company has finally produced rare earths for customers, including a handy dandy flowchart of its process. Of course, it’ll take a bit to scale this operation, but the fundamental reality of future supply increases portend a depressed rare earths market as far as prices may be concerned over the next few years.

“We are watching the rare earth metal price index very closely because we believe a price floor has finally formed,” said Lisa Reisman, managing editor of MetalMiner. “Now whether that means prices will begin ticking up remains to be seen, but we have struggled to see a floor.”

Primary Price Drivers of Rare Earths Index

After remaining essentially unchanged the previous month, the price of lanthanum oxide fell 22.8 percent. The price of cerium oxide dropped 17 percent. Rare earth carbonate prices dropped by 15.4 percent this month.

The price of neodymium fell 6.6 percent. The price of dysprosium oxide fell 2.4 percent over the past month, the second straight month of declines.The prices of yttrium, terbium oxide, yttria, terbium metal and praseodymium neodymium oxide, among others, kept steady over February 2013.


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The stop of production for protecting the price seems fails to achieve the desired results, for the rare earth prices remain sluggish. Under the pressure of the production, the three rare earth giant, including Baotou Steel Rare Earth, Minmetals and Chinalco Rare Earth, resume the production after nearly four months' production halts.

With the coming of the traditional rush season of rare earth consumption in March and April, the downstream application providers are expected to launch a new round of supplementing inventory, and there's a common wish of rises in rare earth prices among industries.

Enterprises gradually resume production

According to the reporters learning from Baotou Steel Rare Earth, the range of the corprorations resuming production covers the smelter directly under Baotou Steel Rare Earth, Huamei Corp., Hefa Corp.,Ganoderma company as well as the Quannan Jinhuan Corp. and Xinfeng Xinli smelting separation plant. Also, Minmetals Rare Earth and Chinalco resumed production after the Spring Festival as well.

"Generally speaking, there comes the traditional peak season of consumption of rare earth in March and April. In terms of corporations, several companies halted for a long time. Therefore, the resumption of production sounds reasonable to come along with the rush season at present," said an analyst, "however, from the current point of view, the downstream demand is not active."

Constrained by excess production capacity and sluggish downstreams demand, the price of rare earth in 2012 experienced a sharp decline in the stock market. For example, the offer of praseodymium nedymium oxide was 760.000 at the beginning of 2012, while it has dropped to 400.000 by the end of last year.

Under the pressure of price, Baotou Steel Rare Earth was the first to announce halts. Subsequently, the other two rare earth giant, Minmetals Rare Earth and Chinalco Corp. annnounced as well. Despite these giants,
some small and medium-sized enterprises have also joined in it, such as some small companies doing with rare earth smelting separation and magnetic materials.

                 

Looking forward to a bottom price of rare earth

However, the strategy of protecting the price by halting production did not reach a desirable result. For instance, the price of praseodymium nedymium oxide only realized a rise of 10% in a short term of the shutdown and sank down later. Now its price is just around 350.000.

As it is analized, there're two main reasons for its low effection. One is the diversity of the sales channels, which led to a gap between the price of formal-produced and illegal-produced rare earth. the other reason is that downstream demand is indeed the doldrums and the overseas supply began to increase.

According to media reports, the U.S. energy company Molycorp and Australia's Lynas Mining Corporation's Mount Weld mine were to start second mining. These two companies were expected to achieve an annual output of rare earth of about 40,000 tons, which will have a direct impact on the export of China's rare earth industry.

As far as we understand, there're still some small rare earth separating enterprises which do not resume production until now, and their downstream demand remains slowdown. Presently, with the coming of the rush season, whether the rare earth price will bottom up depends on the demands of the downstreams.


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China may only have 30 percent of the rare earths in the world, but they essentially have a monopoly--which the rest of the world has been tirelessly trying to work around. (To wit: Japan looks to Vietnam, the U.S. looks to California and Missouri, everyone looks under the sea.) In a slightly devilish business move, China sought to tighten their grip and raise prices by eliminating all sales to its major buyers, the U.S., Japan, and Europe, for one month.

During the sales freeze, China is also consolidating its various rare earths businesses and buying more rare earths. At the moment, about 60 percent of the country's rare earths supply is controlled by a single company, called Inner Mongolia Baotou Steel Rare-Earth. That company is artificially created and listed as a state-owned company, as China has already forced some 35 local companies to either absorb into Inner Mongolia Baotou Steel Rare-Earth, or fade away.

Analysts, according to the AP, think the plan will probably work; rare earths prices have been sliding downward lately, a trend China would certainly like to reverse, and it'll also give the country an opportunity to work on its locally-produced rare earths magnet industry--a much more profitable enterprise than simply selling raw materials. Of course, it's not going to do much to discourage, you know, every other country on the planet from trying to find an alternative to buying rare earths from China.

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Honda developed a new method, which is extracting rare earth metals from the waste batteries and other products for recycling and manufacturing new batteries again.

There is no doubt that electric vehicles and hybrid electric vehicles are cleaner cars. Compared to fuel vehicles, they emit lower, even zero exhaust gas.

Whether grid charging emits greenhouse gas depends on the source, but the battery itself is also a problem. In addition to the greenhouse gas, mining rare earth metals also produce pollution.

Recycling can reduce the demand for raw materials extraction, such as aluminum, whose recycling utilization rate of 100%. Compared with mining aluminum ore, recycling consumes less time and energy, and lowers greenhouse gas emissions at the same time.

Honda revealed they can extract more than 80% of the rare earth metal from those used batteries to make new electrodes of  new batteries. In this way, The demand for new materials will be reduced to below 20%.

Later, Honda plans to expand the recycling project to other rare earth sources, including old batteries from electric motorcycles as well as scrap metal recycle bins.

                  


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The key construction project in Shaoguan City --- the Xinfeng rare earth separation project of the Zhongse Southern Rare Earth to process 7,000 tons of rare earth per year, has passed the assessment of the international consulting firm and the Ministry of Environmental Protection Department and entered the land pre-trial and social stability maintenance risk assessment stage.

Early at the beginning of the workday of this year, Xinfeng county has organized a theory-learning group and invited Tu Ganhua, the deputy general manager of the Xinfeng Corp., Zhongse Southern Rare Earth and rare earth expert, to carry out the "understanding of rare earth seminars and collectively learned Rare Earthindustrial development-related knowledge and complicity of rare earth industry development plan. Nearly 300 people including the county authority and the principal leaders of the towns (street).

Mr. Tu firstly introduced the latest news about the city's key construction projects, that is the rare earth product of processing 7.000 tons of rare earth of Xinfeng Corp. Subsequently, he explained in detail the basic knowledge of the rare earth elements, and carried out the analysis of the situation of China's rare earth resources, introduced rare earth products' wide range of applications and discussed with the participants on how to develop, use and protect the local rare earth resources in Xinfen, so as to cultivate feature industry and accelerate the development of the economy.

             


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