Approachable. Independent. Expert.
Roskill
Rare earths -an evaluation of current and
future supply
Judith ChegwiddenRoskill Information Services Ltd.
Approachable. Independent. Expert.
Roskill
The statements in this presentation represent the considered views of Roskill Information Services Ltd. 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 Roskill Information Services Ltd. believes 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 Roskill Information Services Ltd. has 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.
Disclaimer
Approachable. Independent. Expert.
Roskill
Rare earth reserves and resources
Overview of current supply
• Historical perspective
• The view of supply from the non-Chinese consumer
A brief review of historical price trends outside China
Existing and potential supply from the rest of the world
• Overview of current R-O-W supply
• Review of key rare earth projects under development
• Limiting factors
Roskill forecast of supply from the R-O-W to 2015
Outline
Approachable. Independent. Expert.
Roskill
USGS assessment of world reserves
Source: US Geological Survey, January 2010
World reserves of rare earths (excluding yttrium) 2007 (Mt REO)
Country Reserves
Brazil 0.05
China 36.00
Commonwealth of Independent States 19.00
USA 13.00
Australia 5.40
India 3.10
Malaysia 0.03
Others (incl. Canada) 22.00
World Total 99.00
Approachable. Independent. Expert.
Roskill
USGS assumptions
• Monazite is readily available as a by-product of mineral sands mining
• The cost of separating monazite is minimal so likely to be major source of rare earths in the future
• The use of thorium in nuclear power is likely to constitute a growing part of future power generation
Roskill commentary
• The use of thorium in nuclear generation is not likely to occur on a significant scale for at least 15 years
• At current prices there is little incentive for mineral sands companies to separate monazite – particularly if the cost of storing
thorium is factored in
• By-product monazite is a source of light rare earths – which are abundant in many other deposits
• It is unlikely that there will be extensive exploitation of by-product monazite for rare earths and thorium in the next decade
• However, there are adequate reserves of rare earth minerals in other forms to meet expected world demand over the next
decade
Commentary on reserve calculations
Source: Roskill data
Approachable. Independent. Expert.
Roskill
Deposits vary greatly - matching the ratio in the natural occurrence of REOs to the demands of the market is key consideration
Rare earth content of major source minerals (% total REO)
Basnaesite Ion adsorption clays Monazite Loparite
Baiyun OboInner
Mongolia
Mountain PassUSA
Xunwu Jiangxi
LognanJiangxi
Mount Weld Guangdong LovozerskyRussia
La2O3 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
Pr6O11 6.2 4.3 9.0 0.7 5.3 4.1 3.8
Nd2O3 18.5 12.0 31.7 3.0 18.5 17.0 8.8
Eu2O3 0.2 0.1 0.5 0.1 0.4 0.1 0.1
Tb4O7 0.1 trace trace 1.3 0.1 0.7 0.1
Dy2O3 0.1 trace trace 6.7 0.1 0.8 0.1
Y2O3 trace 0.1 8.0 65.0 0.3 2.4 trace
Approachable. Independent. Expert.
Roskill
Overview of supply
Approachable. Independent. Expert.
Roskill
At least 95% of all rare earths currently originate from China
Source: Roskill data, Company communications, CREIC
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
China ROW
Approachable. Independent. Expert.
Roskill
China
• 124,800t REO in chemical concentrates
• Mainly from bastnaesite from Baotou and ion adsorption clay from southern provinces
• Circa 15,000-20,000t REO from “unofficial” sources
Russia
• 2,470t REO in chemical concentrates from mine output
India
• 50t REO in chemical concentrates from tailings
USA
• 1,700t REO in chemical concentrates from stockpiled ore arising form mining in the 1990s
Others
• Small amounts of monazite and xenotime from south east Asia
Components of rare earth supply in 2008
Source: CREIC, Roskill data
Approachable. Independent. Expert.
Roskill
Preliminary evaluation of components of supply in 2009 (t REO)
China 120,000
Russia 2,500
USA 2,400
India 25
Total 124,925
Source: Roskill, Company reports
Approachable. Independent. Expert.
Roskill
Chinese supply from the viewpoint of the rest of the world
Approachable. Independent. Expert.
Roskill
Positive impact on supply:
• Reserves >25Mt REO
• Excess secondary processing capacity
• Access to relatively low cost processing chemicals
• Heavy investment in research and technology
Negative impact on supply of REO and RE metals to R-O-W
• Finite heavy rare earth resources (15-20 year mine life)
• Increasingly rigorous environment legislation
• Policies to encourage downstream processing
• No new exploration and mining licences until 2011 (at the earliest)
• Tighter mining and export quotas
• Export taxes
Facets of Chinese supply
Approachable. Independent. Expert.
Roskill
Comparison of mine and separation quotas and estimated production in China
Year
NDRC/MIIT concentrate
Quotas
Estimated mine output (1)
NDRC/MIITseparation
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 89,200 120,000f 86,000 125,000f
Source: CREIC, NDRC/MIIT, Roskill Note: (1): Includes estimate for illegal mining
f: forecast MLR = Ministry of Land & Resources NDRC = National Development & Reform Commission MIIT = Ministry of Industry and Information Technology
Approachable. Independent. Expert.
Roskill
Total export quota fell by 40% in 2010
History of Chinese export quotas (t REO)
Domestic rare earth quotas Total including Foreign JV quota
Phase 1 Phase 2 Total Change
2004 n/a n/a 48,040 - 65,609
2005 n/a n/a 48,040 0% 65,609
2006 n/a n/a 45,752 -5% 61,821
2007 19,600 23,973 43,573 -5% 59,643
2008 22,780 11,3761 37,1892 -15% 53,141
2009 15,043 18,257 33,300 -10% 50,145
2010 16,304 7,976 24,280 -27% 30,258
Source: Chinese Ministry of Commerce websiteNotes: 1-In 2008 quotas were allocated for 10months (second tranche was effectively for 4 months) so there was alignment with a calendar year2-Adjusted for 12 month allocation for comparative purposes
Approachable. Independent. Expert.
Roskill
Impact of quotas and other measures on exports of cerium compounds
Exports of cerium compounds, 2001-2009 (t gross weight)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Cerium Oxide Cerium Carbonate Cerium Compounds, Nes
• Exports of cerium carbonate are mainly destined for France, Japan and the USA – where further processing takes place
• Exports of cerium oxide and other cerium compounds have declined – partly because of the relocation of polishing powder manufacture to China
Source: Global Trade Atlas
Approachable. Independent. Expert.
Roskill
Impact of quotas and other measures on exports of compounds of “other” rare earths
Exports of “other” rare earth compounds, 2001-2009 (t gross weight)
0
5000
10000
15000
20000
25000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Rare earth oxides other than of cerium Rare earth chlorides
Rare earth fluorides other than of cerium Rare earth carbonates
• Exports of lower value chlorides, carbonates and fluorides declined or remained flat in the last decade
• Exports of higher value rare earth oxides continued to increase until 2008.
• The main markets for other REOs are Japan and the USA
Source: Global Trade Atlas
Approachable. Independent. Expert.
Roskill
Decline in Japanese imports of rare earth compound and metals since 2007 – replaced by imports of processed materials?
• Overwhelmingly dependent on supply from China
– 99% of lanthanum oxide sourced from China
– 89% of cerium oxide.
– 90% of yttrium oxide
Source: Global Trade Atlas1: Including intermediate compounds
Japan: Imports of rare earth compounds and metals, 2006-2009 (gross weight)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2006 2007 2008 2009
Cerium oxide Cerium compounds Rare earth metals Rare earth compounds1 Lanthanum oxide Yttrium oxide
Approachable. Independent. Expert.
Roskill
Trends in rare earth prices (outside China)
Approachable. Independent. Expert.
Roskill
Tightening supply and increasing demand in 2007/8 had a marked impact on the Japanese import value of rare earths used in magnets and phosphors
Source: Roskill’s Letter from Japan1: including intermediate compounds
Japan: Average value of rare earth compounds and metals, 2001-2009, Yen/kg
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Yttrium oxide Cerium oxide Cerium compounds
Lanthanum oxide Rare earth metals Other rare earth compounds1
Approachable. Independent. Expert.
Roskill
How have rare earth prices performed in relation to other commodities where China dominates global supply?
Source: Global Trade Atlas, Roskill
Index of FOB China unit values for selected commodities, where China is the predominant source of supply, 2001-2009
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Tungsten powder Acidspar Antimony oxide Natural Graphite
Cerium Oxide Cerium Carbonate Other rare earth oxides
Approachable. Independent. Expert.
Roskill
How have rare earth prices performed in relation to the IMF Commodity Price Index- Metals?
Source: IMF, Global Trade Atlas, Roskill
Comparison of REO prices (FOB China) and the IMF Commodity Price Index - Metals
0
100
200
300
400
500
600
2005 2006 2007 2008 2009
IMF La2O3 CeO2 Nd2O3 Eu2O3 Dy2O3
Approachable. Independent. Expert.
Roskill
Existing and potential supply from the Rest of the World
Approachable. Independent. Expert.
Roskill
Existing R-O-W producers accounted for less than 5% 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 High level 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
IRE is under the control of the Department of Atomic Energy
Other Vietnam, Thailand, Malaysia Monazite 1,800-2,000 Monazite
Approachable. Independent. Expert.
Roskill
Composition of new deposits also vary – which will meet the requirements of the market going forward?
Rare earth content of ore at projects under development (% total REO)
Trachyte Apatite Alanite and apatite
Fergusonite1 Weathered monazite
Monazite Bastnaesite layer
Dubbo, Australia
NolansAustralia
Hoidas Lake, Canada
Nechalacho, Canada
Mount Weld Steenkrams-kraal
Bear Lodge
La2O3 19.5 20.0 19.8 16.3 25.1 21.7 29.3
CeO2 36.7 48.2 45.6 41.4 48.5 46.7 45.0
Pr6O11 4.0 5.9 5.8 4.8 5.3 5.0 4.8
Nd2O3 14.1 21.5 21.9 18.7 16.7 16.7 16.8
Eu2O3 0.1 0.4 0.6 0.4 0.6 0.1 0.4
Tb4O7 0.3 0.1 0.1 1.8 0.1 0.1 0.1
Dy2O3 2.0 0.3 0.4 0.7 0.2 0.6 0.2
Y2O3 15.8 … 1.3 7.4 0.3 5.0 …
Source: Company data1: Ore, rather than the normally quoted mineral
Approachable. Independent. Expert.
Roskill
Rare earth operations under development – Lynas Corp
Mount Weld deposit, W. Australia, and a processing plant in Gebeng, Malaysia
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
Start up planned for late 2011, full production by 2012
Four sales contracts in place – including with Rhodia, plus further letters of intent
Approachable. Independent. Expert.
Roskill
Rare earth operations under development – Molycorp Minerals 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 19,050tpy by the end of 2012 Plans for conversion of REOs to metal and alloys and then magnet
manufacture Registered an S-1 in July 2010 preparatory to a public offering of stock
(possibly in August?) Plan to raise US$420.7M to fund modernisation and expansion plans
Approachable. Independent. Expert.
Roskill
Rare earth operations under development – Japanese investments in potential producers of REEs
Sumitomo/Kazatomprom• 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
• Output could be 3,000tpy REO by 2011 rising to a possible 15,000tpy REO by 2015
• However – still the subject of a feasibility study
Toyota/Sojitz/Govt. of Vietnam• Dong Pao consists of number of ore bodies with a total reserve of ~9.7Mt REO. The most
prospective deposit contains 0.65Mt REO
• Scheduled to produce 2-3,00tpy REO by 2013, rising to 5,000tpy
• Mine life of around 20 years
Mitsubishi/Neo Material Technologies• Undertaking research to extract HREEs from tailings at Mineracao Taboca’s Sn, Ta and Nb
mine at Pitinga, Brazil
• Tailings reported to contain 8.5% REO – with a high grade of Dy
Approachable. Independent. Expert.
Roskill
The search for heavy rare earths – but at what cost?
Alkane Resources• Proposed production of HREEs as by-product of zirconium production at Dubbo, NSW,
Australia
• 1,200-1,200t REO (yttrium rich) could be produced by 2011/12 with potentail to expand to 3,000tpy.
• Undertaking definitive feasibility study
Avalon Rare Metals Inc• Nechalacho deposit rich in HREEs in NWT, Canada, low ore grade overall (176Mt at 1.43%
REO) but high ratio of heavies
• Construction could start in 2013 resulting in production of 5,000tpy REO by 2015, rising to 10,000tpy REO. Capital costs could be up to US$890M for mine, mill and metallurgical plant
Quest Rare Metals • Strange Lake and others in Quebec/Labrador, Canada. High proportion of HREEs in
Strange Lake deposit
Ucore• Bokan-Dotson Ridge project, Alaska. Comprehensive suite of HREEs
Matamec• Kipawa deposit in Quebec, Canada contains 3 major types of REE mineralisation (eudialyte,
yittrio-titanite, and britholite), including LREEs, HREEs and Y
Approachable. Independent. Expert.
Roskill
The majority of deposits are rich in LREEs - projects where 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. Targeting production of10,000tpy REO by 2013 but no decision as yet on site for processing plant
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. Feasibility study scheduled to start in Q3, 2011
Stans Energy Corp, studying feasibility of reopening Kutessay ll Mine , Kyrgyz Republic, and utilising processing plant at Orlovka (50:50 LREEs and HREEs)
Approachable. Independent. Expert.
Roskill
The search continues!
Over 200 rare earth projects identified by mid 2010
Approachable. Independent. Expert.
Roskill
But commercial considerations are key:
Rare earths are not commodities – in many cases they are customer specific
Most of 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$30,000/t
capacity, probably more for HREE mine)
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
Projects that rely on shipping low grade concentrate over 100s of km are going to be
costly
Approachable. Independent. Expert.
Roskill
Will production from the rest of the world plug the forecast supply gap?
Source: Roskill
Rest of the World: Mine production of REOs, 2004-2015 (t)
0
10,000
20,000
30,000
40,000
50,000
60,000
2004 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f
ROW supply
Approachable. Independent. Expert.
Roskill
Roskill Information Services Ltd.
Contact:Judith Chegwidden+44 20 8944 0066