Stocks in heavyweight rare earth miners soared on Thursday with Molycorp adding 2.5% after trading up over 4% earlier and Lynas Corp wiping out losses it suffered on delays at its Malaysian refinery, gaining 4% on huge volumes.
REE stocks are usually volatile but investors digested a lot of news this week: first there was the discovery of massive marine rare earth deposits which was quickly followed by deep scepticism, then the WTO ruled China’s export restrictions violate trade rules and now some analysts believe of the 150 listed REE projects only five will ever enter production.
MINING.com reports China’s rare earth export restrictions were slapped down by the World Trade Organization:
The United States, European Union and Mexico lodged the complaint in 2009. China argued unsuccessfully that the restrictions were put in place to protect its environment. China’s Ministry of Commerce was unhappy with the ruling, and a report from Xinhuanet says that there will likely be an appeal.
MINING.com reported Monday on the Japanese discovery of deep sea mud rich in rare earth elements:
“We estimate that an area of just one square kilometre, surrounding one of the sampling sites, could provide one-fifth of the current annual world consumption of these elements,” wrote Yasuhiro Kato, lead author of the study and an associate professor of earth science at the University of Tokyo.
Other sources also questioned the rumored size of the deposits, saying that the sample concentrations could not be extrapolated to suggest such significant levels of resources.
Perhaps more importantly, the economics of extracting minerals from sand more than two miles underwater are unlikely to lend themselves to exploitation of the resource in the foreseeable future. The rare earths industry is, relative to other minerals, very small, and the capital investment required to develop the Pacific floor deposits would be huge.
Technology Metals Research believes that of the 150 listed companies across the globe claiming REE potential today, five will survive to production. In two to three years the global ex-China supply of REEs will jump significantly such that China will lose its position of dominance and control. There will clearly be ongoing growth on the demand side, but TMR suggests that in three years time there may not even be a global shortage. In the meantime, the cost of REE production will simply outweigh the revenues for junior miners starting from scratch.
The five that survive will include, according to TMR, Molycorp in the US and Lynas Corp in Australia. The reason is that these two companies boast commercially viable quantities of the key REE dysprosium. The "heavy" REEs are far more valuable than the "light" REEs, and dysprosium, which is used to make powerful permanent magnets, is the jewel in the crown.