The latest biannual “Strategic and Critical Materials 2013 Report on Stockpile Requirements” (‘The Report’) published by the U.S. Department of Defense (DoD) urges Washington to  accumulate $120.43 million worth of heavy rare earths as part of a $319.74 million program to stockpile 23 critical materials. Each of these materials is ordered along a list arranged in accordance to how much money – and what quantity – should be spent to secure it. The report reflects the need to revise the U.S. government mineral sourcing requirements in view of their growing importance in security matters, including energy security and the shift to the much touted ‘green economy’. The considerations expressed by the DoD reflect the 2013 National Defense Authorization Act through which Congress has revised the way the Defense Department’s acquires and applies strategic materials.

The idea of stockpiling strategic materials is not new; it was started just shortly before World War II in order for the U.S. military and civilian industrial complexes to gain secure access to the materials needed to produce defense platforms. The problem, today, is the proliferation of the ‘outsourcing’ mantra in all areas of the economy, which means that many of the materials the United States needs the most are being sourced beyond the United States and even beyond the its primary allies. Without beating around the proverbial bush, this means that the United States is taking too many risks by relying so much on China as the source of many critical materials. China has shown itself to be more than willing and capable of using quotas to control exports of strategic materials in order to advance its own political and geo-strategic interests.

                 

China is not the only country to have used ‘checks and balances’ on their critical materials exports. Increasingly, companies are paying more attention to non-tangible business risks, sometimes include under the umbrella of corporate sustainability, which preclude their involvement in supplying technologies that have military applications. Such companies as Caterpillar, which makes construction machinery, have been targeted because of the military use of their bulldozers. A camera manufacturer in Japan – or China – may refuse supplying cameras for missiles and other critical parts needed to make munitions or rockets or hardware. This is especially the case as so many technologies today can address dual civilian/military needs with mere software or configuration changes.

At the end of 2012, the DoD took steps to start addressing some of these risks, signing a series of special contracts with U.S. based potential producers of REE magnets (neodymium-iron-boron or ‘neo’) magnets and equivalents from the raw supplies to the finished product. Neo magnets are used to make missile guidance systems, fU.S.es for explosives and satellite communication devices, all of which, evidently, are important to U.S. national security. Thomas & Skinner Inc., Ucore Rare Metals Inc. (‘Ucore’, TSX.V: UCU) and Great Western Minerals Group Ltd. (‘GWMG’, TSX.V: GWG) were among the beneficiaries. The DoD, therefore, has been trying to reduce its vulnerability to the whims of national and corporate material and technology producers which may or may not agree to supply these. In terms of critical materials, and rare earths in particular, the industry has become extremely lopsided in China’s favor and the time and investment needed to get a dependable domestic REE supply is considerable.

The DOD, therefore, has set out to identify alternative REE sources, especially those driving a resurging U.S. domestic REE industry. Nevertheless, while the intentions of the Stockpiling program are valid, the solution to the problem may be flawed. According to the Strategic Materials Advisory Council (SMAC) if the DOD is serious about stockpiling HREE’s it will be limited to China as the source for the time being.  More importantly, the DoD spears to be contradicting itself by failing to promote the need for a greater role of U.S. mining and industry in securing these critical materials while other departments in government are doing more to hurt than to promote the necessary expansion of the U.S. mining industry that would ease dependency on outsiders. The ‘stockpiling’ plan then seems disingenuous, because left to be deployed under the current conditions, it fails to address the main risk: stockpiling, yes, perhaps; but from whom? The answer can only be China.


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Frontier Rare Earths Limited is pleased to provide an update on the National Instrument 43-101 compliant ("NI 43-101")  Preliminary Feasibility Study ("PFS") that is being carried out at its Zandkopsdrift rare earth element project in South Africa ("Zandkopsdrift").

Following completion of a Preliminary Economic Assessment ("PEA") on Zandkopsdrift in Q1 2012, Frontier commenced work in Q2 2012 on the wide range of studies necessary to complete the PFS on Zandkopsdrift.  These studies are being carried out principally by the same multidisciplinary team of specialist consultants that was used by Frontier for the PEA.

Good progress has been made on the PFS since the update issued by the Company in November 2012, with most of the studies required for the PFS now complete. A number of improvements to the flow sheet for the Zandkopsdrift rare earth Processing Plant ("ZPP") have been identified since November 2012. The flow sheet has been revised accordingly and a confirmatory pilot scale metallurgical test program covering all major process steps was successfully completed in Q1 2013, following which the ZPP flow sheet was 'frozen' for the purpose of the PFS. The most significant remaining work required for the PFS is the finalization of engineering design and capital and operating cost estimates for the ZPP, which is currently under way and is scheduled for completion in July 2013. Accordingly, the results of the PFS are expected to be available and announced in Q3 2013.

With preparation of the PFS now at a very advanced stage, planning has commenced for the Definitive Feasibility Study ("DFS") on Zandkopsdrift, which will start immediately after the PFS and is expected to take 9-12 months to complete. Frontier is fully funded to complete the PFS and DFS on Zandkopsdrift from its existing cash resources. Along with its strategic partner, Korea Resources Corporation, which holds a 10% interest in and a 10% off take of production from Zandkopsdrift, Frontier intends to commence rare earth production in 2016, with a target production capacity of 20,000 tonnes of separated rare earth oxides per annum. This would position Frontier as one of the first new major rare earths producers and one of the largest producers of separated rare earths outside China.


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Japan is celebrating the find of an “astronomically” high level of rare earth deposits at the bottom of the Pacific Ocean, a discovery which will further undermine China’s failing attempts to control the global supply of the substances.

The deposits, a vital component in the production of a range of high technology equipment from smartphones to catalytic converters, were found around 5.8km under the ocean surface near Minami Torishima island south-east of Tokyo.

“We detected an astronomically high level of rare earth minerals in the mud we sampled,” Tokyo University boffin Yasuhiro Kato told Reuters.

“When researchers brought back the data to me, I thought they must have made a mistake, the levels were so high. The fact is this discovery could help supply Japan with 60 per cent of its annual needs merely with the contents of a single vessel.”

                

The find follows a much larger discovery by Japanese marine researchers in the Pacific two years ago and if the rare earths can be extracted cheaply enough, it could crucially give Tokyo the tactical upper hand over China in the on-going cat-and-mouse game between the two over supplies.

Beijing halted exports to Japan in September 2010 after a maritime dispute and has actively restricted exports to all countries since in a bid to drive up prices and force manufacturing investment onto its shores.

However, despite being investigated by the WTO for such policies, China has suffered in recent months as a slowdown in global demand combined with other countries re-starting their own mining operations, has sent prices tumbling.

In October last year, its largest mining company for light rare earths, Inner Mongolia Baotou Steel Rare Earth Hi-Tech Company, was forced to suspend operations for a month to let demand pick-up. Japan take more than half of China's supply but is thought to have imported just 10,000 tons in 2012 – its lowest volume in a decade.

While last weekend’s undersea discovery will be well-received in Tokyo,, it’s unlikely to have any big repercussions in the near term, short of forcing China to keep its prices low.

China claims it holds less than a third of global rare earth reserves despite providing more than 90 per cent of the world’s supply.


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ProEdgeWire will host the Second annual Technology Metals Summit 2013 will be held on April 21-22, 2013 in Toronto, Canada and it will be the largest non-Chinese rare earth and critical minerals event of the year. Just days later, in the eastern hemisphere, the Association of China Rare Earth Industry (ACREI) will be holding its annual conference in Shanghai, China at the end of April. Having more than 302 companies as members and covering the whole rare earth industry chain from across the country, ACREI has become the largest rare earth industry organization in the world. It is not unique, but has its counterpart. While the events are no doubt different, especially insofar as the politics realities of rare earths are concerned, both will provide platforms for useful and necessary discussions in the sector.

It is a complex period for the world’s rare earth industry. A sharp drop in rare earth prices over the last year has erased the profits of rare earth producers around the world, including, for instance, Molycorp, which reported heavy losses in 2012. China’s rare earth smelting separation plants have been facing a tidal wave of comprehensive losses due to a persistent slump in domestic market prices in January of this year, according to the latest report from the Association of Jiangsu Rare Earth Industries. Indeed, “2013 may be the most difficult year for the country’s rare earth sector”, Chinese insiders said.

                  

The problem is not the amount but the prices. China exported 1,106 metric tons of rare-earth ore, metals and compounds in February alone, up 289.12 percent compared with the same month of last year, the average export price was USD$ 22,654.13/ton, the total export value was USD$ 25.06 million, moreover, the other rare earth processed products accounted for a total 2,501 metric tons in exports, up 47.5 percent year-on-year with an average export price of USD$ 51,962.42/ton. In January, China exported 1,092 metric tons of rare earth ore, metals and compounds; the average export price was USD$ 25,540.9/ton, while the total export value was $27.89 million, according to the figures released by the China Customs Statistics Information Center on March 21, 2013.

The official figures showed China’s total exports to be 2,198 metric tons of rare earth oxide (REO) products in the first two months of this year, up 8.13 percent compared with the same period in 2012; however, the export prices continue to decline and remain relatively low on a month-on-month basis.

For China, things are a little more complicated. China’s rare earth enterprises faced various tests including industry consolidation, environmental assessments and industry access. Meanwhile, due to the weak demand and a supply glut, prices have dropped as a result; we can see that a light rare earth supply capacity of the rest of the world is starting to grow, which will make prices an issue of concern for the entire rare earth market in 2013. This makes the Toronto and Shanghai conferences in late April very important events as we look forward to the world’s rare earth industry leaders finding new ideas and new wisdom to boost rare earth prices.


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