The [global] race for rare metals – by Geoffrey York and Brenda Bouw (Globe and Mail – July 16, 2011)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media. Brenda Bouw is the Globe’s mining reporter.

VANRHYNSDORP, SOUTH AFRICA, VANCOUVER – Filled with radioactive waste, its buildings gutted and crumbling after 48 years of disuse, the abandoned Steenkampskraal mine would seem to hold little value to anyone.

Until recently, the decaying apartheid-era mine in a remote patch of South African desert was mainly of interest to scientists studying the effects of high radiation on the thousands of bats that hibernate in the empty mine shaft.

But soon the bats will be evicted, the radioactive waste will be buried and the shaft refurbished. The Canadian owners of this mine are scrambling to tap the mine’s rare-earth minerals – possibly the hottest commodity on the planet these days, with immense strategic and technological significance, and pivotal to a global geopolitical rivalry.

As prices soar, there is a frantic global rush to develop new sources of rare earths. These obscure minerals – 17 different elements with futuristic names such as neodymium, samarium, yttrium and lanthanum – are crucial for everything from guided missiles and hybrid cars to flat-screen televisions, iPods and BlackBerry phones.

Western leaders are increasingly anxious about China’s chokehold on a 97 per cent share of the supply, controlling the market with its abundant, low-cost production. The country dominates with just 37 per cent of the world’s proven reserves. It produced 118,900 tonnes of rare earths in 2010, and exported just over 30,000 tonnes. Leaders have watched nervously as China restricts its exports, resulting in price rises of up to tenfold for some rare earths over the past year.

China updated its rare earth quotas this week, which put them on par for 2011 with last year’s numbers. The U.S. and the European Union later complained that Beijing had, in fact, added products to the list, and are calling for a new, fairer export restrictions policy.

The new quotas came after the World Trade Organization recently ruled against China for limiting exports of nine raw materials such as coke, zinc and bauxite. The case is expected to empower the U.S. and the European Union to file another complaint against China over its quotas on the export of rare-earth materials. Beijing maintains its rare-earth quotas fall within trade regulations.

China has openly used its monopoly as a political weapon, dramatically raising the stakes in the rare-earth business by cutting off supplies to Japan during a territorial dispute last year.

This, in turn, has triggered the interest of U.S. politicians, who allege that Chinese “hoarding” is a threat to the Pentagon’s missiles and California’s high-tech sector. Even Sarah Palin, the populist Republican, has complained that China is “bending us over a barrel” by controlling the rare-earth industry and forcing the United States to become dependent on Chinese production.

Never has an industry enjoyed so much influence from so little production. The global rare-earth industry is worth only $1.5-billion, yet the industries relying on it are worth an estimated $4.8-trillion. And they are vital to some of the world’s fastest-growing products: smart phones, electric cars, high-tech weaponry, wind turbines, and almost anything with miniature electronics.

Working ‘25/8’ in South Africa

The mine at Steenkampskraal contains some of the world’s richest grades of rare earths. But the ore also contains thorium, which is highly radioactive, creating problems of storage and disposal. This small tract of desert is one of the most radioactive sites in the world, according to a consultant at the mine.

The mine site is riddled with radioactive waste from its production years of 1952 to 1963. Even the crumbling buildings, segregated under apartheid rules into detached houses for white employees and hostel dormitories for black workers, still contain radioactive material. And none of it was cleaned up when the mine shut down.

Great Western Minerals Group Ltd. of Saskatoon, a small company with a market valuation of less than $300-million and a stock price below $1, is hoping to reopen the long-abandoned mine as swiftly as possible, as it races against a group of other upstart rare-earth companies to bring new production to market. It’s a daunting task fraught with risk, especially given that rare earths are difficult to mine due to their low concentrations. That, along with the need to remove radioactive elements, can inflate costs to the point of being uneconomic.

“I’m working 25/8,” says Vincent Mora, the newly hired project director at the site. “The company gets e-mails from me at 1 o’clock in the morning and 3 o’clock in the morning. I’m holding a minimum of two to three meetings a day with different contractors. If the contractors can work at the same time, we do it. We don’t wait for the signature of the contract – they start working right away.”

Because of the radiation at the mine site, Mr. Mora and his colleagues are required to carry dosimeters and wear plastic covers on their shoes as they tramp around the mine site. The site is fenced off, with signs warning of the radiation risk, although it fails to deter the neighbouring sheep farmers who drive their truck into the mine site to discuss the jackals and lynxes that are killing their animals.

Great Western is competing with other companies such as Lynas Corp. in Australia and Molycorp Inc. in the United States to develop new sources of rare-earth supply outside China. The company is aiming to start production in South Africa by the end of next year, about 18 months ahead of the original schedule. The South African mine can produce a range of rare-earth minerals, and it will be integrated into a supply chain with Great Western’s downstream production plants.

“If we’re first into production with all of the rare earths and the downstream capacity, it will make us a leader in this game,” says president and chief executive officer James Engdahl.

Great Western acquired the mine by purchasing the South African company Rare Earth Extraction Co. Ltd. (Rareco) for about $20-million, and is planning to spend a further $60-million to put the abandoned mine into production and build a separation facility. By acquiring Rareco, it inherited a deal with the South African government that exempts it from royalty payments
if it cleans up the radioactive waste material on the mine site, which would otherwise be the government’s liability.

Great Western says the radioactive waste will be processed and then stored underground at the mine site in a layer of impermeable clay. The storage would be safe because the clay is thick and the site is remote and arid.

Great Western already has plants in Britain and the United States where it produces rare-earth alloys for use in magnets, batteries and aerospace products. It aims to produce about 5,000 tonnes of rare-earth oxides annually at the South African mine – almost double its original plan of 2,700 tonnes.

The Pentagon gets interested

For the rest of this article, please go to the Globe and Mail website: