Afghanistan’s rare earth element bonanza – by Alan Dowd – Fraser Institute (Mining.com – January 15, 2014)

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After more than a decade of war and nation building, members of the International Security Assistance Force (ISAF) in Afghanistan are heading for the exits. Although what ISAF will leave behind is better than what was there in 2001, Afghanistan remains a battered land. However, the resources Afghanistan’s land holds — copper, cobalt, iron, barite, sulfur, lead, silver, zinc, niobium, and 1.4 million metric tons of rare-earth elements (REEs) — may be a silver lining.

U.S. agencies estimate Afghanistan’s mineral deposits to be worth upwards of $1 trillion. In fact, a classified Pentagon memo called Afghanistan the “Saudi Arabia of lithium.” (Although lithium is technically not a rare earth element, it serves some of the same purposes.)

Of course, the fact that Afghanistan is rich in minerals is not necessarily new information. The Soviets identified mineral deposits in Afghanistan during their decade-long occupation. What is new is the volume and precision of mineral-related information. Afghanistan has been mapped using what is known as “broad-scale hyper-spectral data” — highly precise technologies deployed by aircraft that, in effect, allow U.S. military and geological experts to peer beneath Afghanistan’s skin and paint a picture of its vast mineral wealth. According to Jim Bullion, who heads a Pentagon task force on postwar development, these maps reveal that Afghanistan could “become a world leader in the minerals sector.”

There’s another set of factors at work today that were not present during the Soviet period: REEs are in high demand, the dependability of the REE supply chain is in question, and Afghanistan’s mineral wealth may be able to help knit the country back together after decades of war.

But simply having a rich mineral endowment doesn’t mean that Afghanistan is poised to tap it quickly. Challenges abound.

Supply Chain Worries

The importance of REEs to the global economy cannot be overstated. They are essential to the manufacture of a host of modern technologies, including cell phones, televisions, hybrid engines, computer components, lasers, batteries, fiber optics, and superconductors. Congressional findings have called rare earth elements “critical to national security,” and understandably so. REEs are key to the production of tank navigation systems, missile guidance systems, fighter jet engines, missile defense components, satellites, and military grade communications gear.

The supply of REEs and similar minerals is critical to today’s technology-dependent economy, which is highly dependent on a reliable supply chain. Regrettably, the main supplier of REEs, China, has proven itself undependable.

The Chinese produce 97 percent of the world’s REEs, but have begun to manipulate the global REE market by dramatically slowing, and in some cases halting, export of these materials. After a maritime dispute with Japan, China stopped supplying REEs to Japanese customers, reduced overall global exports by 72 percent in the second half of 2010,cut export quotas for the first half of 2011 by 35 percent, and slashed REE mining permits by 41 percent in 2012, claiming its actions were a function of efforts to fight pollution.

Although Beijing has resumed delivery of REEs, China’s actions have prompted the United States, Japan, and Europe to explore alternative sources. The good news is that market forces are already at work diversifying the REE supply chain.

Australia has new REE mines coming online, and mines in Brazil, Canada, Vietnam, and the United States could start producing REEs by 2015. Thanks to REE finds, Mongolia’s GDP is also primed to triple in the next 10 years.

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