China Will Push Increased Demand for Rare Earths
Jack Lifton
Laissez-faire capitalism is alive and well in the rare earth mining sector of the economies of the United States, Canada, Australia, and the Republic of South Africa. None of these top tier industrial economies issues or funds government mandates for the exploration for, production of, or production of end-use products of the rare earth elements and/or thorium. Thus the world’s most competent, experienced, and educationally qualified mining exploration and engineering groups, have only the “free” marketplace to look for funding for such endeavors. The governments of some other nations, particularly, China, but also now including Korea and Japan as well as, most recently, the central governmental regulatory bodies of the European Union take a more pro-active role in securing for themselves, for their domestic use, supplies of materials that they consider critical to their heavy and high tech industries and to their military-industrial complexes. The rare earth elements and thorium are at the top of everyone’s list in the pro-active countries. The same is true for the “reactive” countries, such as today’s USA, Canada, and Australia, but the strength of the reaction has not yet been effective in producing civilian or military sector funding for rare earths or thorium.
At this very moment Australia's parliament is grappling with reacting to a Chinese "private" company's offer to buy 51%, i.e., control, of Australia's largest and best rare earth mining development, ASX listed Lynas Corp (LYSCF.PK), the huge Mt. Weld ore body of which is said to be ready for production.
Apparently Australia's other major rare earth mining company, ASX listed Arafura, has already been approved to sell 25% to a Chinese corporate investor with additional equity for the Chinese investor in negotiation.
In October of 2007 the National Academies published a book entitled “Minerals, Critical Minerals, And The U.S. Economy,” which was an analysis of a two year long study by a group consisting mostly of academics but which also included some selected representatives of the U.S. mining and manufacturing industries. The study identified not only which minerals and metals were critical, i.e., which ones were the bases of technologies that could not be actualized as practical devices without them, but also set out criteria for assessing the impact of the interruption of their supply on U.S. industry, the general economy, and, in an additional volume, “Managing Materials for a Twenty First century Military,” on the capability of the U.S. military to be effective in the event of the interruption of the supply of critical materials. For today’s discussion I want to reproduce the Mission Statement designated as the “Statement of Task” for the first study:
Statement of Task
Understanding the likelihood of disruptive fluctuation in the supply of critical minerals and mineral products for domestic applications, and making decisions about policies to reduce such disruptions, requires thorough understanding of national and international mineral sources, mineral production technology, the key uses of minerals and mineral products in the United States economy, and potential impediments to the mineral supply.
This study will:
Identify the critical minerals and mineral products that are essential for industry and emerging technologies in the domestic economy (addressed in Chapters 1-3 and in culminating discussion in Chapter 4);
Assess the trends in sources and production status of these critical minerals and mineral products worldwide (addressed in Chapters 3 and 4);
Examine the actual or potential constraints, including but not limited to geologic, technological, economic, and political issues, on the availability of these minerals and mineral products for domestic applications (addressed in Chapters 3 and 4);
Identify the impacts of disruptions in supply of critical minerals and mineral products on the domestic workforce and economy (addressed in Chapter 2);
Describe and evaluate the current mineral and mineral product databases and other sources of mineral information available for decision making on mineral policy issues (addressed in Chapter 5); and
Identify types of information and possible research initiatives that will enhance understanding of critical minerals and mineral products in a global context (addressed in Chapter 5).
I want to address item 3 above, because when it is analyzed in further detail, it exposes a serious flaw in strategic planning, which is that prior to assessing the impact of geological, technological, economic, and political issues on the availability of critical minerals it is first necessary to assess the credibility of the numerical data, which is the basis of your analysis. In layman’s terms it comes done to:
Is the data accurate,
Is it complete,
Is the provider truthful, or
Is the provider truthful but incapable of being correct due to ignorance, lack of the appropriate scientific background, incompetence, or inability to assess or measure the credibility of either the data or its provider of that data, and
In any of the cases above is there any hidden agenda coloring the transparency of the data?
When we accept data on resources and reserves from the PRC not only are we facing an unknown degree of data filtration for reasons of commercial competitive advantage, with which we are all, or at least should be, familiar, but also we are facing the filtering imposed by a government that mandates that if a resource level has been declared to be present by a mining operation then that operation will be required to either produce a certain minimum amount or be faced with losing its access to markets and finance through a reduction in its next production allocation. The simple fact of life that failure to meet government imposed production allocations may lead to loss of position without any hope of redeeming one’s economic (job) status or social status is far more important to a Chinese manager than accuracy in reporting the reserves upon which that allocation was based.
In China if you set your goals lower by fudging what you think you have, or can actually produce, and then meet your goal, set for you by and in the five year plan, you have been successful.
As recently as 1993 today’s situation, China as a the ultimate monopolist in rare earths, was far from obvious, and was not even considered likely by western observers.
In a joint survey of the rare earth’s industry published in 1993 as “International Strategic Minerals Inventory Summary Report- Rare-Earth Oxides, U.S. G.S. Survey Circular 930-N it was stated after a detailed analysis of the then known data on rare earth resources and reserves that:
The country having the greatest potential for REO (rare earth oxides-the commonly used identifier for this category) production is South Africa, which could produce 41,280 metric tons per year as compared to an actual production (1993) of 700 metric tons per year; this would be an increase of approximately 59 times the present production. The United States has the capacity to produce about 32,764 metric tons per year, which is a 50% rise over the 1989 actual production of 21,875 metric tons per year. China could undoubtedly produce more REO than is reported, especially if Bayan Obo steel slag could be successfully treated. Australia could produce 11,462 metric tons per year, about half again the present rate, if Olympic Dam and some of the placer operations introduced REO mineral recovery plants. REO output in Brazil could be raised by a factor of five with little trouble.
The difference in the quality and credibility of the data apparently was enough to cause the authors of this study, financed by the UN and the most credible commodity mineral data reporting agencies in the USA, Canada, Australia, The UK, and Germany to not state or estimate, quantitatively, their conclusions about future Chinese production in 1993.
But even before that it was clear to western educated and trained geologists familiar with mining in the Soviet Union that China was far too unsophisticated to provide reliable data on its potential mineral resources. A geologist colleague of mine told me that as he traveled across that part of the Soviet Union’s mining landscape which it was permitted for a foreign, Canadian visitor to see, he was struck even thirty years ago by the quality of the data being obtained as deposits were mapped meticulously while, in stark contrast, his conversations with Russian and other Soviet mining exploration personnel revealed that plate tectonics was not “officially” taught in Soviet universities that were training geologists. Soviet era geologists were thus not very good at the theoretical bases for exploration, he said, and to advance in the political hierarchy one did not disagree with official geological “doctrine.” Those who advanced the use of new or foreign ideas rarely got the resources to test those ideas. No one could benefit officially for example from discovering or developing a gold mine, so those mining cooperatives that did find easily fungible resources were engaged in a constant battle with bureaucrats and corrupt officials for scarce equipment, supplies, and skilled labor for all of which they traded with other similarly situated enterprises outside of the official economy. It goes without saying that “official” data on Soviet mineral resources and reserves were a total fabrication produced in Moscow to showcase Soviet “progressâ frequently with scant regard to the data even for proven resources.