Rare earths facing the uncertainty's of supply


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Rare earths facing the uncertainty's of supply

  1. 1. byby Judith Chegwidden & Dudley J KingsnorthJudith Chegwidden & Dudley J Kingsnorth Roskill Information Services Ltd & Industrial Minerals Company of Australia Pty Ltd 66thth International Rare Earths ConferenceInternational Rare Earths Conference Hong Kong, November 2010 ““Rare Earths:Rare Earths: Facing the Uncertainties of SupplyFacing the Uncertainties of Supply””
  2. 2. DISCLAIMERDISCLAIMER 2 The statements in this presentation represent the considered views of the Industrial Minerals Company of Australia Pty Ltd (IMCOA) and Roskill Information Services Ltd (Roskill). It includes certain statements that may be deemed "forward‐looking statements." All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward‐looking statements. Although IMCOA and Roskill believe the outcomes expressed in such forward‐looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward‐looking statements. Factors that could cause actual results to differ materially from those in forward‐looking statements include new rare earth applications, the development of economic rare earth substitutes and general economic, market or business conditions. While, IMCOA and Roskill have made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only.
  3. 3. Summary of PresentationSummary of Presentation –– DemandDemand 3 The last 18‐24 months The rare earths industry today China Present and future global demand Rest of World demand Where to in 2020? 3
  4. 4. The Last 18The Last 18‐‐24 Months24 Months 4 China unofficially temporarily suspends shipments of rare earths to Japan (September and October 2010) Chinese export quotas reduced significantly (July 2010) Global financial crisis (Growth set back 2 years) China declares ‘heavy’ rare earths resources are finite (approximately 15 years) Chinese rare earths industry consolidation Mt Weld & Mountain Pass to move seamlessly to production capacity of 20,000tpa REO each 4
  5. 5. China: Export Quota HistoryChina: Export Quota History 5 Chinese Export Quota History 2005-2010 (Tonnes Product) Year Rare Earth Quotas ROW Demand Domestic Companies Foreign Companies Total Change 2005 48,040t 17,659t 65,609t 0% 46,000t 2006 45,752t 16,069t 61,821t -6% 50,000t 2007 43,574t 16,069t 59,643t -4% 50,000t 2008 Actual: 34,156t Adjusted: 40,987t* Actual:13,293t Adjusted: 15,834t* Actual: 47,449t Adjusted: 56,939t* -5½%* 50,000t 2009 33,300t 16,845t 50,145t -12% 25,000t 2010 22,512t 7,746t 30,258t -40% 48,000t Note: * Quotas adjusted to an equivalent 12 month quota as there was a change in the dates for which they were issued; so that now they are for a calendar year
  6. 6. Global Rare Earths Consumption in 2010Global Rare Earths Consumption in 2010 Estimated Global Rare Earths Demand in 2010 (t REO ±15%) (Source: IMCOA, Roskill and Rare Earths Industry Stakeholders) Application China Japan & NE Asia USA Others Total Market Share Catalysts 9,000 3,000 9,000 3,500 24,500 20% Glass 7,000 1,500 1,000 1,500 11,000 9% Polishing 10,500 6,000 1,000 1,500 19,000 15% Metal Alloys 15,500 4,500 1,00 1,000 22,000 18% Magnets 21,000 3,500 500 1,000 26,000 21% Phosphors 5,500 2,000 500 500 8,500 7% Ceramics 2,500 2,500 1,500 500 7,000 5% Other 4,000 2,000 500 500 7,000 5% Total 75,000 25,000 15,000 10,000 125,000 100% Market Share 60% 20% 12% 8% 100% - 6 Source: IMCOA
  7. 7. Rare Earths Growth in ConsumptionRare Earths Growth in Consumption 2010 to 20152010 to 2015 Global Rare Earths Demand in 2010 & 2015 (tpa REO) ± 15% Application Consumption tpa REO Rate of Growth 2010-15 Market Share 20152010 f 2015 f Catalysts 24,500 28,500 3-5%pa 15½% Glass 11,000 11,000 Negligible 6% Polishing 19,000 30,500 8-10% 16½% Metal Alloys 22,000 35,000 8-12% 19% Magnets 26,000 48,000 10-15% 26% Phosphors 8,500 13,000 6-10% 6% Ceramics 7,000 9,500 6-8% 5½% Other 7,000 9,500 6-8% 5½% Totals 125,000 185,000 6-10% 100% 7 Source: IMCOA
  8. 8. Global Rare Earths Consumption in 2015Global Rare Earths Consumption in 2015 Estimated Global Rare Earths Demand in 2015 (t REO ±15%) (Source: IMCOA and Rare Earths Industry Stakeholders) Application China Japan & NE Asia USA Others Total Market Share Catalysts 12,500 3,000 10,000 3,000 28,500 15½% Glass 7,000 2,000 1,000 1,000 11,000 6% Polishing 12,500 10,000 4,000 4,000 30,500 16½% Metal Alloys 25,000 7,000 2,000 1,000 35,000 19% Magnets 37,000 6,000 3,000 2,000 48,000 26% Phosphors 8,000 3,000 1,000 1,000 13,000 6% Ceramics 3,000 3,000 2,000 1,500 9,500 5½% Other 6,000 2,500 500 500 9,500 5½% Total 111,000 36,500 23,500 14,000 185,000 100% Market Share 60% 20% 13% 7% 100% - 8 Source: IMCOA
  9. 9. Global Rare Earths Demand 2005Global Rare Earths Demand 2005‐‐1515 99 Source: IMCOA
  10. 10. Summary of PresentationSummary of Presentation –– SupplySupply 10 Rare earths resources and reserves Overview of current supply – focus on China Existing supply from the Rest of the World Forecast potential supply from the Rest of the World Rest of World historical price trends 10
  11. 11. Deposits vary greatlyDeposits vary greatly ‐‐ matching the ratio in the naturalmatching the ratio in the natural occurrence of REOs to the demands of the market is a keyoccurrence of REOs to the demands of the market is a key considerationconsideration Rare earths content of major source minerals (% total REO) Basnaesite Ion adsorption clays Monazite Loparite Bayan Obo Inner Mongolia Mountain Pass USA Xunwu Jiangxi Lognan Jiangxi Mount Weld Guangdong Lovozersky Russia La2 O3 23.0 33.2 43.4 1.8 25.5 23.0 28.0 CeO2 50.0 49.1 2.4 0.4 46.7 42.7 57.5 Pr6 O11 6.2 4.3 9.0 0.7 5.3 4.1 3.8 Nd2 O3 18.5 12.0 31.7 3.0 18.5 17.0 8.8 Eu2 O3 0.2 0.1 0.5 0.1 0.4 0.1 0.1 Tb4 O7 0.1 trace trace 1.3 0.1 0.7 0.1 Dy2 O3 0.1 trace trace 6.7 0.1 0.8 0.1 Y2 O3 trace 0.1 8.0 65.0 0.3 2.4 trace 1111
  12. 12. Components of rare earth supply in 2008/2009Components of rare earth supply in 2008/2009 China o 124,800t REO in chemical concentrates in 2008, falling to 120,000t in 2009 o Mainly from bastnaesite from Baotou and ion adsorption clay from southern provinces o Circa 15,000‐20,000t REO from “unofficial” sources Russia o 2,470t REO in chemical concentrates from mine output , falling to 1,898t in 2009 India o Circa 50t REO in chemical concentrates from tailings, possibly 75t REO in 2009 USA o 1,700t REO in chemical concentrates from stockpiled ore arising from mining in the 1990s Others o Small amounts of monazite and xenotime from south east Asia 12
  13. 13. Facets of Chinese supply to RFacets of Chinese supply to R‐‐OO‐‐WW • Positive impact on supply: o Reserves >25Mt REO o Excess secondary processing capacity o Access to relatively low cost processing chemicals o Heavy investment in research and technology • Negative impact on supply of REO and RE metals to R‐O‐W: o Finite heavy rare earth resources (15‐20 year mine life) o Increasingly rigorous environmental legislation (plus clean–up costs) o Policies to encourage downstream processing o No new exploration and mining licences until 2011 (at the earliest) o Export taxes o Tighter mining and export quotas o Uncertainty over future availability – very mixed messages in Q4 2010 13
  14. 14. Comparison of mine and separation quotas and estimatedComparison of mine and separation quotas and estimated production in Chinaproduction in China Year NDRC/MIIT concentrate Quotas Estimated mine output (1) NDRC/MIIT separation quotas Estimated separation output 2007 131,780 120,800 118,700 126,000 2008 129,178 124,800 118,700 135,300 2009 119,500 120,000 110,700 129,400 2010 89,200 110,000f 86,000 110,000f Source: CREIC, NDRC/MIIT, Roskill Note: (1): Includes estimate for illegal mining f: forecast NDRC = National Development & Reform Commission MIIT = Ministry of Industry and Information Technology14
  15. 15. Measuring the impact of diminishingMeasuring the impact of diminishing quotasquotas –– 40% decline in 201040% decline in 2010
  16. 16. China: Exports of selected rare earths,China: Exports of selected rare earths, 20012001‐‐2010 (t)2010 (t) 0 5,000 10,000 15,000 20,000 25,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan‐ Aug Cerium oxide Rare earth oxides other than of cerium Cerium Compounds, Nes Lanthanum oxide 16 Source: Global Trade Atlas
  17. 17. Decline in Japanese imports of rare earth compounds andDecline in Japanese imports of rare earth compounds and metals since 2007metals since 2007 –– replaced by imports of processedreplaced by imports of processed materials?materials? Japan is overwhelmingly dependent on supply from China 99% of lanthanum oxide sourced from China 89% of cerium oxide. 90% of yttrium oxide Source: Global Trade Atlas 1: Including intermediate compounds 0 500 1,000 1,500 2,000 2,500 3,000 3,500 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Yttrium oxide Cerium oxide Cerium compounds Lanthanum oxide Rare earth metals 17 Japan: Imports of rare earth compounds and metals, 1999‐2009 (t)
  18. 18. Existing and potential supply fromExisting and potential supply from the Rest of the Worldthe Rest of the World
  19. 19. Existing RExisting R‐‐OO‐‐W producers accounted for less thanW producers accounted for less than 5% of supply in 20095% of supply in 2009 Company Location Ore type Capacity (tpy REO) Notes Molycorp Minerals Mountain Pass, CA Bastnaesite Current 2,000‐3000 Currently processing ore from stockpile, main products are mixed rare earth oxides for FCC catalyst and didymium oxide, lanthanum compounds and SEG concentrate Lovozersky Mining Company/ Solikamsk Magnesium Works Kamasurt Mine , Kola Peninsula, Russia Solikamsk processing plant, Urals, Russia Loparite, processed to yield rare earth carbonate, which is shipped to Estonia, Kazakhstan, Austria and China for further processing Up to 4,400 Levels of radioactivity in some zones of the mine Indian Rare Earths Mineral sands from Orissa, Tamil Nadu and Kerala have in the past been processed at Udyogamandal, Kerala. Current output from stockpiles of Th rich residues Monazite from extensive deposits of mineral sands 25‐100 Plans for a new monazite processing plant but start‐ up has been delayed (new jv with Toyota) IREL is under the control of the Department of Atomic Energy Other Vietnam, Thailand, Malaysia Monazite 1,800‐2,000 Monazite has a significant Th content19
  20. 20. Rare earth operations under developmentRare earth operations under development –– Lynas CorpLynas Corp Mount Weld deposit, Western Australia, and a processing plant in Gebeng, Malaysia Resource of 17.49Mt at 8.1% REO (equivalent to 1.42Mt REO) Capital raising in October 2009 raised A$450M which is being used to finance Phase 1 development, completing construction at Mount Weld and Gebeng Concentrator will produce 35ktpy of concentrate grading 40% REO Phase 1 plant at Gebeng has the capacity to produce 10,500tpy REO Possible expansion to 21,000tpy REO (fund raising started?) Start up planned for late 2011, full production by 2012 Four sales contracts in place – including with Rhodia, plus further letters of intent 20
  21. 21. Rare earth operations under developmentRare earth operations under development –– MolycorpMolycorp Minerals LLCMinerals LLC Over 50 years of production history at Mountain Pass, California, USA Proven reserves 40,000t of REO contained in 0.48Mt ore at average grade of 9.38% Probable reserves of 960,000t of REO in 13.8Mt ore at average grade of 8.2% Projected mine life of 30 years Mining scheduled to re‐start at the end of 2010 Production of REOs at the rate of 19,090tpy by 2012/2013 Possible expansion to circa 40,000t REO Plans for conversion of REOs to metal and alloys and then magnet manufacture Raised US$394M in August 2010 from IPO – plan to spend US$511M on modernisation and expansion of mine and processing facilities 21
  22. 22. Rare earth operations under developmentRare earth operations under development –– Japanese investments in potential producers ofJapanese investments in potential producers of REEsREEs Sumitomo/Kazatomprom o SARECO JV plans to build refinery to treat Y‐rich uranium ore tailings, uranium ores and rare earth concentrates to produce REOs and RE metals o Output could be 3,000tpy REO by 2011 rising to a possible 15,000tpy REO by 2015 o However – still the subject of a feasibility study Toyota/Sojitz/Govt. of Vietnam o Dong Pao consists of number of ore bodies with a total reserve of ~9.7Mt REO. The most prospective deposit contains 0.65Mt REO o Scheduled to produce 2‐3,00tpy REO by 2013, rising to 5,000tpy o Mine life of around 20 years Toyota/Indian Rare Earths jv o New monazite processing plant in Orissa with a capacity of 10,000tpy concentrate o Previously subject to local opposition Mitsubishi/Neo Material Technologies o Undertaking research to extract HREEs from tailings at Mineracao Taboca’s Sn, Ta and Nb mine at Pitinga, Brazil o Tailings reported to contain 8.5% REO – with a high grade of Dy 22
  23. 23. The search forThe search for heavy rare earthsheavy rare earths –– but at whatbut at what costcost? Alkane Resources o Proposed production of HREEs as by‐product of zirconium production at Dubbo, NSW, Australia o Base case of 2,000tpy LREO and 600tpy HREO could be produced by 2013/14 with potential to expand to 6,000tpy. o Undertaking definitive feasibility study by early 2011 Avalon Rare Metals Inc o Nechalacho deposit rich in HREEs in NWT, Canada, low ore grade overall (176Mt at 1.43% REO) but high ratio of heavies o BFS could be completed by 2012, construction could start in 2013 resulting in production of 5,000tpy REO by 2015, rising to 10,000tpy REO. o Capital costs could be up to US$890M for mine, mill and metallurgical plant – including US$346M for separation plant Quest Rare Metals o Strange Lake and others in Quebec/Labrador, Canada. High proportion of HREEs in Strange Lake deposit Ucore o Bokan‐Dotson Ridge project, Alaska. Comprehensive suite of HREEs Matamec o Kipawa deposit in Quebec, Canada contains 3 major types of REE mineralisation (eudialyte, yittrio‐titanite, and britholite), including LREEs, HREEs and Y 23
  24. 24. The majority of deposits are rich inThe majority of deposits are rich in LREEsLREEs ‐‐ projectsprojects where feasibility studies are underway includewhere feasibility studies are underway include:: Rareco, Steenkramskaal, South Africa ‐ reopening and reequipping underground mine, undertaking pre‐feasibility study, mining permits received Arafura, Nolan’s project, Australia. Bankable feasibility study underway. Construction could begin in 2012. Target production of 10,000toy REO by 2013 with possible expansion to 20,000tpy. Processing complex to be built at Whyalla Great Western Minerals Group, Hoidas Lake, Canada – prefeasibility underway, could produce 3‐5,000tpy by 2014. Relatively small resource Rare Element Resources, Bear Lodge, Wyoming, USA – inferred resource of 17.5Mt at 3.46% REO. Scoping study completed, pre‐ feasibility and pilot plant for 2011, possible production from 2015 Stans Energy Corp, studying feasibility of reopening Kutessay ll Mine, Kyrgyz Republic, and utilising processing plant at Orlovka (50:50 LREEs and HREEs) 24
  25. 25. The search continues: Over 200 rareThe search continues: Over 200 rare earth projects identified by mid 2010earth projects identified by mid 2010
  26. 26. But commercial considerations are key:But commercial considerations are key: Rare earths are not commodities – in many cases they are customer specific The rare earth projects that have emerged in the west are single project companies (debt has to be non‐recourse project funded) Developing a rare earth mine and processing plant is capital intensive (>US$40,000/t capacity) History shows that the development time can be very long (10‐15 years) Limited technical expertise on mining, cracking and separating outside China Percentage REO content is only half the story – REO distribution and amenable mineralogy are important Most deposits contain radioactive material that has to be contained and stored – a cost rather than a benefit for the moment Projects that rely on shipping low grade concentrate over 100s of km are going to be costly 26
  27. 27. Will production from the rest of the world plug theWill production from the rest of the world plug the forecast supply gap?forecast supply gap? Rest of the World: Mine production of REOs, 2004‐2015 (t) 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2004 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f 27 Source: Roskill
  28. 28. Historical price trendsHistorical price trends
  29. 29. How have rare earth prices performed in relationHow have rare earth prices performed in relation to IMF Commodity Price Indexto IMF Commodity Price Index‐‐Metals?Metals? 29 0 100 200 300 400 500 600 700 800 900 1000 Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10 IMF Metals Index Lanthanum oxide Cerium oxide Neodymium oxide Source: Roskill, Metal Pages, IMF IMF basket comprises copper, aluminium, iron ore, tin, nickel, zinc, lead, uranium
  30. 30. The impact of the export quota on prices hasThe impact of the export quota on prices has disproportionately affected those rare earths withdisproportionately affected those rare earths with lower selling prices and magnet raw materialslower selling prices and magnet raw materials 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 Jan‐06 Apr‐06 Jul‐06 Oct‐06 Jan‐07 Apr‐07 Jul‐07Oct‐07 Jan‐08 Apr‐08 Jul‐08 Oct‐08 Jan‐09 Apr‐09 Jul‐09Oct‐09 Jan‐10 Apr‐10 Jul‐10 US$/kg Lanthanum oxide Cerium oxide Praseodymium oxide Neodymium oxide 30 Source: Metal Pages
  31. 31. Prices for high value rare earths have risenPrices for high value rare earths have risen –– but impact has been limitedbut impact has been limited 0.00 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00Jan‐06 Apr‐06 Jul‐06 Oct‐06 Jan‐07 Apr‐07 Jul‐07 Oct‐07 Jan‐08 Apr‐08 Jul‐08 Oct‐08 Jan‐09 Apr‐09 Jul‐09 Oct‐09 Jan‐10 Apr‐10 Jul‐10 US$/kg Europium oxide Dysprosium oxide Terbium oxide Yttrium oxide 31 Source: Metal Pages
  32. 32. Comparison of Chinese domestic price andComparison of Chinese domestic price and FOB price for selected rare earth oxidesFOB price for selected rare earth oxides (%age difference)(%age difference) ‐ 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 Nov‐07 Jan‐08M ar‐08M ay‐08 Jul‐08Sep‐08Nov‐08Jan‐09M ar‐09M ay‐09 Jul‐09 Sep‐09Nov‐09Jan‐10M ar‐10M ay‐10 Jul‐10Sep‐10 Nd,Eu,Dy,Tb ‐ 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00 900.00 1,000.00 La,Ce Neodymium oxide Europium oxide Dysprosium oxide Terbium oxide Lanthanum oxide Cerium oxide 32 Source: Roskill, Metal Pages
  33. 33. Evaluating the supply/demandEvaluating the supply/demand balance to 2015balance to 2015
  34. 34. 20152015 –– Surplus or DeficitSurplus or Deficit 34 0 50 100 150 200 250 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f (000tREO) China Supply ROW Supply Global demand China Demand Source: IMCOA, Roskill
  35. 35. The Issue ofThe Issue of ‘‘BalanceBalance’’ in 2015in 2015 Forecast Supply and Demand for Selected Rare Earths in 2015 Rare Earth Oxide Demand @ 180,000tpa REO Supply @ 208,500tpa REO Cerium 63-68,000t REO 80-85,000t REO Neodymium 35-40,000t REO 30-35,000t REO Europium 725-775t REO 575-625t REO Terbium 450-500t REO 375-425t REO Dysprosium 2,500-3,000t REO 1,600-2,000t REO 35 Source: IMCOA
  36. 36. Impacts on Demand Trends in 2015Impacts on Demand Trends in 2015‐‐2020 Greater availability of non‐Chinese products Price Potential impact of substitution Electric Vehicles Location of value‐add manufacturing 36
  37. 37. SupplySupply –– Where to in 2020?Where to in 2020? Recycling Further consolidation of industry in China Emphasis on heavy rare earths Bayan Obo (iron ore prices falling)
  38. 38. Dudley J KingsnorthDudley J Kingsnorth Industrial Minerals Company of Australia Pty LtdIndustrial Minerals Company of Australia Pty Ltd djk@imcoa.co.audjk@imcoa.co.au Judith ChegwiddenJudith Chegwidden Roskill Information Services LtdRoskill Information Services Ltd judith@roskill.co.ukjudith@roskill.co.uk Thank you