The Economist has a report on Greenland's rare earth potential - Why does Greenland’s election have global implications?.

The world may not often be very interested in Greenland but it is fascinated by what lies beneath it. As the country’s ice cap melts, hidden mineral wealth is coming tantalisingly within reach. The country’s riches include “rare earth” metals that are essential in the production of many electronic devices, from electric-car batteries to television screens. Metals such as cerium (used in glass manufacturing) and yttrium (which goes into electronic displays) are among those that are hidden under the ice. Many rare earths are not as scarce as their misleading name suggests, but they are scattered thinly and can be difficult to extract. In Greenland they are often mixed up with uranium, which under the country's current laws is illegal to mine. Most of the precious metals therefore remain underground. ...

Should Ms Hammond’s plans go ahead, and Greenland manage to ramp up its extraction of rare earths, it could deliver a jolt to the market for the valuable metals. At the moment rare-earth supply is dominated by China. In recent years China has restricted its exports of rare earths, citing environmental concerns. Extraction of the metals is dirty and dangerous, and stories of poisoning are common. But some see an ulterior motive in China’s cutbacks: by controlling the supply of high-value materials, China can also control their use in finished products. That could help it in its broader strategy to move from low- to high-value manufacturing. If Greenland becomes a big supplier of those same minerals, China’s grip on the market could loosen, and prices around the world may fall. Polar politics therefore matter to many more than the 57,000 people who live in Greenland.

The New York Times has a look at the jockeying going on in Greenland to try and extract resources from previously ice-covered lands - A Melting Greenland Weighs Perils Against Potential (via Smart Planet).

As icebergs in the Kayak Harbor pop and hiss while melting away, this remote Arctic town and its culture are also disappearing in a changing climate.

Narsaq’s largest employer, a shrimp factory, closed a few years ago after the crustaceans fled north to cooler water. Where once there were eight commercial fishing vessels, there is now one.

As a result, the population here, one of southern Greenland’s major towns, has been halved to 1,500 in just a decade. Suicides are up.

“Fishing is the heart of this town,” said Hans Kaspersen, 63, a fisherman. “Lots of people have lost their livelihoods.”

But even as warming temperatures are upending traditional Greenlandic life, they are also offering up intriguing new opportunities for this state of 57,000 — perhaps nowhere more so than here in Narsaq.

Vast new deposits of minerals and gems are being discovered as Greenland’s massive ice cap recedes, forming the basis of a potentially lucrative mining industry.

One of the world’s largest deposits of rare earth metals — essential for manufacturing cellphones, wind turbines and electric cars — sits just outside Narsaq.

This could be momentous for Greenland, which has long relied on half a billion dollars a year in welfare payments from Denmark, its parent state. Mining profits could help Greenland become economically self sufficient, and may someday even render it the first sovereign nation created by global warming.

“One of our goals is to obtain independence,” said Vittus Qujaukitsoq, a prominent labor union leader.

But the rapid transition from a society of individual fishermen and hunters to an economy supported by corporate mining raises difficult questions. How would Greenland’s insular settlements tolerate an influx of thousands of Polish or Chinese construction workers, as has been proposed? Will mining despoil a natural environment essential to Greenland’s national identity — the whales and seals, the silent icy fjords, and mythic polar bears? Can fishermen reinvent themselves as miners?

“I think mining will be the future, but this is a difficult phase,” said Jens B. Frederiksen, Greenland’s housing and infrastructure minister and a deputy premier. “It’s a plan that not everyone wants. It’s about traditions, the freedom of a boat, family professions.”

The Arctic is warming even faster than other parts of the planet, and the rapidly melting ice is causing alarm among scientists about sea-level rise. In northeastern Greenland, average yearly temperature have risen 4.5 degrees in the past 15 years, and scientists predict the area could warm by 14 to 21 degrees by the end of the century.

Energy companies should not drill for crude oil in Arctic waters because the environmental risks are too high, Total SA Chief Executive Officer Christophe de Margerie said in the Financial Times on Wednesday. The newspaper described de Margerie's comments as the first time a major oil company has publicly criticised offshore exploration in the Arctic.

The risk of an oil spill in such an environmentally sensitive area was simply too high, according to de Margerie. "Oil on Greenland would be a disaster. A leak would do too much damage to the image of the company," he said.

The NYT reports that the boom in rare earth prices seems to be over now - Prices of Rare Earth Metals Declining Sharply.

After nearly three years of soaring prices for rare earth metals, with the cost per ton of some of these elements rising nearly thirtyfold, the market is rapidly coming back down.

International prices for some light rare earths, like cerium and lanthanum, used in industries like the polishing of flat-screen televisions and oil refining, respectively, have fallen by two-thirds since August and are still dropping. Prices have declined almost as quickly for highly magnetic rare earths, like neodymium, needed for products like smartphones, computers and large wind turbines.

Big companies in the United States, Europe and Japan have been moving operations to China, drawing down inventories, switching to alternative materials or even curtailing production to avoid paying extremely high prices that prevailed outside China over the summer, executives said at an annual conference in Hong Kong on Wednesday.

As demand for rare earths has wilted outside China, speculators have been dumping inventories, feeding the downward plunge. Cerium peaked at $170 per kilogram, or $77 a pound, in August but now sells for $45 to $60 per kilogram.

That is still far above its price of $6 a pound three years ago, before China, the world’s dominant producer, began sharply reducing exports by cutting its export quotas.

“We all learned a hard lesson in July and August, how high these prices can go before customers begin yelling,” said Mark Smith, the chief executive and president of Molycorp, the only U.S. producer of rare earths.

He added that rare earth mining outside China remained very profitable even with the decline in prices, which has brought the market back down to its level last spring.

The sharp decline in demand and prices outside China could yet create another shortage next year, said Constantine Karayannopoulos, the chief executive of Neo Material Technologies, a Canadian company that has its factories in China.

That is because Chinese exporters are very unlikely to use all of their export quotas this year, and the Chinese Commerce Ministry has historically penalized exporters that do not use all of their quotas by giving them smaller quotas the next year.

China mines 94 percent of the rare earth metals in the world. Through 2008, it supplied almost all of the rest of the global annual demand of 50,000 to 55,000 tons. But it cut export quotas to a little more than 30,000 tons last year and again this year, and imposed steep export taxes, producing a shortage outside China.

The SMH has an article on the rare earth potential embedded within BHP's Olympic Dam mine - Let's not waste a rare earth opportunity.

Over the past two decades, China has dominated global production and satisfied 90 per cent or more of global demand. But recently, China announced that it would severely restrict its exports of REEs due to rising problems with its mines. There is evidence of polluted waterways and radiation exposure affecting not only workers, but entire communities.

The minerals which contain REEs invariably contain some thorium and uranium, both radioactive elements. It’s not the sort of stuff you want to manage poorly, as China recently admitted.

While lack of supply due to China’s restrictions might be a short-term problem, the key long-term issues are what volume of REE resources actually exist, and how can the mining and processing be managed – especially the radioactive waste.

Surprisingly, on both fronts we can be justifiably positive.

In the past, the world had little use for REEs, so miners never bothered to look for them. Given the strong expected growth in REE demand for gadgets and green technology, however, there has been a global scramble over the past year to identify REE deposits. Mining companies are now looking very hard for any trace of REEs – and they will continue to find them.

According to Geoscience Australia, Australia has 59.4 megatonnes of sub-economic REE resources in addition to its 1.65 megatonnes of economic REEs. Some 53 Mt of the sub-economic variety can be found in the giant Olympic Dam orebody in South Australia.

At the moment, the metals extracted from Olympic Dam include copper (valued at $671 billion), uranium ($287 billion), gold ($134 billion) and silver ($15 billion). Compare this with the estimated value of the REEs in the same orebody – a whopping $4,195 billion. That’s four times Australia’s current GDP.

In its current expansion plans, BHP Billiton (owner of the Olympic Dam site) is ignoring this remarkable value. The miner considers REE extraction to be “uneconomic" and claims the technology isn’t available, despite it being similar in most steps to the current processing at Olympic Dam.

The SMH has a look at Australia's entrant into the rare earths industry and the problems facing its Malaysian processing plant - The global race is on for rare earths and Lynas.

WHEN a Chinese trawler fishing in disputed waters collided with Japanese coastguard patrol boats early on September 7, the global supply of rare earths - crucial for producing smartphones, flatscreen televisions, hybrid cars and iPads - was plunged into turmoil, even if it was not immediately apparent.

And Australia's crucial role in the lucrative trade was also to be thrust firmly into the international spotlight.

The errant vessel's skipper was arrested and detained, calls for his release went unheeded, and a diplomatic row, seeded by a long-standing territorial feud, erupted between the two Asian nations. For two weeks, tensions worsened with no resolution in sight - until China decided to hit Japan where it hurt.

On September 22, Chinese Premier Wen Jiabao banned rare-earth exports to Japan, and threatened ''further action'' if the fisherman was not released. Two days later, the man was set free.

''In order to further grow our mutually beneficial relationship based on strategic interests, I believe it is necessary for Japan and China to handle matters calmly,'' Japanese Prime Minister Naoto Kan said at the time.

The export ban was swiftly revoked, but the world had received a nasty wake-up call. China has a stranglehold on the rare-earths market, accounting for 97 per cent of worldwide production. And it was clear it was prepared to use that dominance for political, as well as economic, gain.

Japan, in particular, had to find alternative sources of rare earths, or risk whole industries being affected.

New applications for rare earths are being discovered all the time. The 17 closely related elements have remarkable magnetivity and help make phones smaller, TVs bigger and display panels brighter. They also represent our best-known chance to make energy-efficient technologies, such as electric vehicles, wind turbines and solar cells financially viable.

''We are as addicted to rare earths as we are to oil, we just don't know it,'' says Nicholas Curtis, chief executive of Australian rare-earths miner Lynas Corporation.

Even before the diplomatic incident, China had begun to restrict exports of rare earths, to ensure it could meet the demand from its local industry. Shipments have been cut from 67,500 tonnes in 2005 to 30,250 tonnes last year. With prices of some rare earths having soared up to five times since the start of the year, the worldwide race to break China's stranglehold is officially on. ''I think the situation has become more acute more rapidly than anybody would have ever predicted,'' Curtis says. ''The crisis in the supply of rare earths in the last year or so has resulted from a combination of events that came together and created this perfect storm - and that focused policymakers very heavily on the strategic implications on rare earths.''

With California-based Molycorp also in the mix, Australia's Lynas is widely considered to be leading the pack. Much like Andrew Forrest's Fortescue Metals in its infancy, Lynas has rocketed from a penny-dreadful stock to a company worth $3 billion almost on expectation alone - it has yet to start production.

CNet reports that Chinese efforts to restrict the export of rare earths have been criticised by the WTO - China to reform rare-earth exports after WTO ruling.

China will reform its export of rare earths based in part on World Trade Organization rules, state media reported today, a day after the global trade governing body ruled against its curbs on exports.

The Ministry of Commerce will study and take steps forward in rare-earth export management, "according to relevant laws and World Trade Organization rules," the official Xinhua news agency quoted China's vice commerce minister, Zhong Shan, as saying.

The WTO ruled yesterday that China broke international law when it curbed exports of coveted raw materials such as bauxite, coke, and magnesium used in the production of steel, electronics, and medicines.

That ruling, initiated by a complaint filed by the United States, the European Union, and Mexico in 2009, was seen as a landmark that could have implications for the legality of China's rare-earth export quotas.

China produces 97 percent of the world's supplies of rare earths, a group of 17 minerals used in electronics and defense and renewable-energy industries.

Insisting that its high output levels are unsustainable and damaging to the environment, the central government slashed rare-earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts.

The decision has choked off global supplies, boosted prices, and angered China's trading partners.

An underwater bonanza of rare earth deposits discovered by Japanese scientists poses little threat to miners already developing major rare earth projects on solid ground.

Companies such as Molycorp, Lynas and Avalon Rare Metals may rest assured that developing the offshore bounty could take decades and cost billions, making it little more than a pipe dream, analysts say.

"'Desperado', that's the first word that comes to mind," said Jacob Securities analyst Luisa Moreno. "It makes for some nice headlines, but I don't think it would really be feasible to do this."

The discovery of the vast deposits, located on the floor of the Pacific Ocean, 3,500 to 6,000 meters (11,500 to 20,000 feet) below sea level, marks the latest bid by the Japanese to secure their own supply of rare earths, which are critical ingredients in the production of high tech products.

Prices for rare earth metals have skyrocketed over the last year as China, producer of some 97 percent of the global supply, has repeatedly clamped down on exports.

Dysprosium, which is used to make magnets for hybrid cars and smartphones, has soared to $3,600 a kilogram, up from $300 a kg a year ago, while neodymium, also used in magnets, is hovering at about $450 a kg, up from $45 late last year.

Outside China, Japan is the largest consumer of the group of 17 metals, and the breakneck price jumps have hit it hard. The country's demand for rare earths is expected to shrink by as much as 30 percent in 2011 as companies cut usage, sources told Reuters. "Obviously they are very frustrated and very desperate for alternatives," Moreno said.

She noted that the Japanese have been experimenting with rare earth recycling, and are also looking to invest in rare earth exploration projects around the world. "They want to be independent from China," she said. "These materials are really, really critical for their economy."

PUMP AND SEPARATE

With some 80 billion to 100 billion tonnes of contained rare earths, the underwater deposits outlined by Japan are certainly larger than any deposits found on solid ground -- but the feasibility of harvesting the metals from sea sludge is less clear.

According to Japanese scientists, it is simply a matter of pumping up the material from the ocean floor and using acid to extract the rare earths from the mud.

But analysts aren't so sure.

They point out that rare earths are notoriously tricky to process on a commercial level, and that development of the deposits, located miles underneath the sea, would be costly.

"The technology you would need, with the pressure and the corrosive factors that are there," said Dahlman Rose analyst Anthony Young. "I think this one falls into the camp of something that is less likely to ever be developed."

Certainly there are mining companies that see value in the ocean floor. Canada's Nautilus Minerals plans to develop an underwater copper project off the coast of Papua New Guinea, while the diamond industry has been mining off the Namibian shoreline for years.

But with hundreds of companies exploring and developing rare earth deposits on solid ground, analysts say the value of mining the metals underwater remains unclear.

"The cost of undersea mining, necessarily, is going to be high," said Byron Capital Markets analyst Jon Hykawy. "The value of the mined products must therefore be high "Rare earths have become pricier, but they are by no means pushing the levels of the prices of really rare materials such as gold."

The SMH reports that Japanese researchers have found large rare earth deposits on the bottom of the Pacific Ocean (the plan to perform acid leaching at sea doesn’t sound very environmentally friendly though) - Rare earth deposits used to make iPads found in ocean.

Vast deposits of rare earth minerals, crucial in making high-tech electronics products, have been found on the floor of the Pacific Ocean and can be readily extracted, Japanese scientists said. … The discovery was made by a team led by Kato and including researchers from the Japan Agency for Marine-Earth Science and Technology.

They found the minerals in sea mud extracted from depths of 3500 to 6000 metres below the ocean surface at 78 locations. One-third of the sites yielded rich contents of rare earths and the metal yttrium, Kato said in a telephone interview. The deposits are in international waters in an area stretching east and west of Hawaii, as well as east of Tahiti in French Polynesia, he said.

He estimated rare earths contained in the deposits amounted to 80 to 100 billion tonnes, compared to global reserves currently confirmed by the US Geological Survey of just 110 million tonnes that have been found mainly in China, Russia and other former Soviet countries, and the United States.

The level of uranium and thorium - radioactive ingredients that are usually contained in such deposits that can pose environmental hazards - was found to be one-fifth of those in deposits on land, Kato said.

A chronic shortage of rare earths, vital for making a range of high-technology electronics, magnets and batteries, has encouraged mining projects for them in recent years. China, which accounts for 97 per cent of global rare earth supplies, has been tightening trade in the strategic metals, sparking an explosion in prices.

Japan, which accounts for a third of global demand, has been stung badly, and has been looking to diversify its supply sources, particularly of heavy rare earths such as dysprosium used in magnets.

Kato said the sea mud was especially rich in heavier rare earths such as gadolinium, lutetium, terbium and dysprosium. ...

Extracting the deposits requires pumping up material from the ocean floor. "Sea mud can be brought up to ships and we can extract rare earths right there using simple acid leaching," he said. "Using diluted acid, the process is fast, and within a few hours we can extract 80-90 per cent of rare earths from the mud."

The SMH has an article on an increased interest in recycling (and eventually, in "design for disassembly") as a result of restricted availability of rare earths for manufacturing - Japan boosts recycling to ease China squeeze.

It takes two Hitachi workers eight minutes to slice open the metal casing of the used air conditioner compressor. The prize inside: four wafer-thin magnets containing about 30 grams of rare earth metals.

Hitachi, Japan's third-biggest company, uses as much as 600 tons of rare earth metals each year in products such as motors for Toyota's Prius hybrid. Hitachi is one of hundreds of manufacturers depending on rare earth shipments from China, which controls 97 per cent of world supply of the lightweight, malleable metals essential to hybrid cars, cell phones and hard disk drives.

China's decision this year to slash exports of the metals has driven up prices and spurred a drive among Japanese companies, the world's biggest users of rare earths, to find other supplies. While trading houses Sojitz and Sumitomo consider investing in mines outside China, Hitachi said it expects recycling to meet 10 per cent of its needs by 2013 from almost zero now.

“We need to make sure we have a stable supply of these materials and recycling is part of that,” Kenji Baba, general manager of Hitachi's resource recycling office, said this week at a test site north of Tokyo. “Now we have to work on bringing costs down.”

Inside the site in a warehouse in Matsudo City, Hitachi demonstrated the results of the one-year, $US1.5 million ($1.5 million) research project partly funded by Japan's government. Four refrigerator-sized devices use saws to open up compressors without damaging the rare earth magnets inside. A separate conveyor belt feeds disk drives into a machine about the size of a ship container. The drives come out the other end in pieces ready for rare earth harvesting. Hitachi says the machines are the first of their kind.

Rising prices

Last year, China's government clamped down on its rare earth industry, setting production quotas to bolster prices. China said in July this year it would reduce export quotas 72 per cent in the second half to supply its own electronics industry and overhaul a mining sector blamed for causing widespread environmental damage.

The drop in output and exports combined with rising demand caused the price of neodymium used in batteries for Toyota's Prius to surge fourfold to $US80 a kilogram from $US19.12 in 2009, according to Sydney-based rare-earth miner Lynas Corp. Lynas is building a $550 million rare earths mine at Mount Weld in Western Australia.

Sojitz, one of Japan's biggest importers of rare earths, last month agreed with Lynas to buy 8,000 tons to 9,000 tons annually from its Mount Weld mine over the next 10 years. ...

Copper processor Mitsubishi Materials Corp., which has recycling ventures with Panasonic and Sharp, last year started researching the cost of extracting neodymium and dysposium from washing machines and air conditioners.

“We're trying to reduce costs by automating the process,” said Isato Matsubara, a spokesman at the company. “How profitable the business can be depends on the prices of materials and getting our costs down.” ...

For recyclers, extracting components is the first step. Magnets from air conditioning compressors are 25 per cent rare earth metal and a chemical process is needed to refine out the rare earths, Hitachi's Baba said.

“We've succeeded in processing the metals in small quantities without using acids,” Baba said. “Now we're working on methods to increase the scale.”

Even China's supply is not unlimited, some of the heavy rare earths it has will only last about 15 years, Ali Izadi- Najafabadi, a Tokyo-based analyst at Bloomberg New Energy Finance, said.

“So if we're going to have a clean energy revolution and electric vehicles and other things, recycling would have to be part of the infrastructure,” he said.

Technology Review has a look at the US rare earth mining industry - Can the U.S. Rare-Earth Industry Rebound?.

Rare-earth elements were obscure until the past year, when China, their primary producer, tightened export quotas on the materials. Rare-earth elements are used in a multitude of technologies, including magnets for wind turbines, hybrid-car batteries, fluorescent lightbulbs, and hard drives.

China is not the only country with significant reserves of these valuable materials; in fact, the U.S. was their primary producer until the 1990s, when the Chinese began undercutting the Americans on cost. Now companies in the U.S. and Australia are ramping up production at two rich sites for rare earths, but the process will take years. Getting from rocks to the pure metals and alloys required for manufacturing requires several steps that U.S. companies no longer have the infrastructure or the intellectual property to perform.

Contrary to their name, rare-earth metals are abundant in the Earth's crust, and significant reserves are concentrated in the United States, Australia, Brazil, and other countries. According to the U.S. Geological Survey, there are 13 million tons of extractable rare earths in the United States, 5.4 million in Australia, and 19 million in Russia and neighboring countries. In 2009, China had 36 million.

In the 1970s and 1980s, the Mountain Pass mine in California produced over 70 percent of the world's supply. Yet in 2009, none were produced in the United States, and it will be difficult, costly, and time-consuming to ramp up again. "When you stop mining in this country, as investment goes down, expertise on cutting-edge technologies is exported as well," says Carol Raulston, spokeswoman for the National Mining Association. Rare-earth researcher Karl Geschneidner of the Ames National Laboratory in Iowa also sees a lack of what he calls "intellectual infrastructure" for rare-earth technology development in the United States.

The two mines that will be stepping up production soonest are Mountain Pass, being developed by Molycorp, and the Mount Weld mine, which is being developed by Lynas, outside Perth, Australia. Mountain Pass has the edge of already having been established. But the company cannot use the processes used in the mine's heyday: they're both economically and environmentally unsustainable.

Several factors make purification of rare earths complicated. First, the 17 elements all tend to occur together in the same mineral deposits, and because they have similar properties, it's difficult to separate them from one another. They also tend to occur in deposits with radioactive elements, particularly thorium and uranium. Those elements can become a threat if the "tailings," the slushy waste product of the first step in separating rare earths from the rocks they're found in, are not dealt with properly.

Mountain Pass went into decline in the 1990s when Chinese producers began to undercut the mine on price at the same time as it had safety issues with tailings. When the Mountain Pass mine was operating at full capacity, it produced 850 gallons of waste saltwater containing these radioactive elements every hour, every day of the year. The tailings were transported down an eleven-mile pipeline to evaporation ponds. In 1998, Mountain Pass, which was then owned by a subsidiary of oil company Unocal, had a problem with tailing leaks when the pipeline burst; four years later, the company's permit for storing the tailings lapsed.

Meanwhile, throughout the 1990s, Chinese mines exploited their foothold in the rare-earth market. The Chinese began unearthing the elements as a byproduct of an iron-ore mine called Bayan Obo in the northern part of the country; getting both products from the same site helped keep prices low initially. And the country invested in R&D around rare-earth element processing, eventually opening several smaller mines, and then encouraging manufacturers that use these metals to set up facilities in the country.

Meanwhile, worldwide demand for rare-earth elements has been growing. This year demand was 125,000 tons; by 2015, it is expected to grow to 225,000 tons, and Molycorp spokesman Jim Sims notes that this projection does not include the wind-turbine industry, which is expected to be a major market. State-of-the-art wind turbines like those that will be installed at the world's largest wind farm, an 845-megawatt facility in Oregon, use high-efficiency rare-earth magnets. They can be 10 times lighter and smaller than comparable magnets but equally strong. Each of these magnets requires a ton of rare earths, Sims says.

Molycorp renewed the Mountain Pass mining permit and began R&D of its own in 2004. This year, using rock that was mined before a previous permit expired and new separation technologies it has developed, the company will sell 3,000 tons of rare earths. By 2012, Molycorp expects to produce 20,000 tons a year, and under its current mining permits could double capacity to 40,000 tons. Sims also says the company will produce rare-earth products at half the cost of the Chinese in 2012. According to the company, these savings will be made possible by several changes, such as eliminating the production of waste saltwater. Molycorp will use a closed-loop system, converting the waste back into the acids and bases required for separation and eliminating the need to buy such chemicals. The company will also install a natural-gas power cogeneration facility onsite to cut energy costs.

But Ames Lab's Geschneidner notes that one major source of cost in the separation process can't be eliminated--the fact that it simply takes a long time. Milled rock is shaken again and again in a mixture of solvents to separate the elements by weight; depending on the ultimate purity that's required, this must be done 10,000 to 100,000 times. The result is then sold as a concentrate or treated to produce rare-earth metal oxides.

Even if Molycorp does succeed in reducing the costs of separation by half, the next step in production may cause a hiccup. Rare-earth oxides and concentrates do have a market, for example as catalysts for the petroleum industry, but they can't be made into magnets. To make magnets, rare-earth oxides must first be converted into pure metals, a process that produces caustic byproducts, and is done solely in China today. Sims says that Molycorp is investigating pathways that are environmentally friendly and aren't covered under intellectual property owned by foreign companies. These metals must next be made into alloys suitable for the magnets, another capability that's concentrated overseas, mostly in Japan and Germany.

The Business Spectator has a look at a new rare earth producer in Australia - Australia's rare earth potential.

About 97 per cent of the world’s rare earth capacity is in China, including the essential refineries which western countries have tended to shun because of environmental objections.

China’s internal usage of rare earths has been rising and it now uses about two thirds of its capacity internally and it plans to cut exports. This will lock in vast numbers of manufacturing industries to China.

When the Japanese arrested the Chinese fishing boat captain, the Chinese cut off exports of rare earths to Japan. The captain was quickly returned but there is still the issue of apology.

As things now stand, China controls the growth of its competitors in so many industries.

Presumably 'sustainable' means that China does not want to run down its reserves too fast and that the price will be increased to fulfil the predictions of Deng Xiaoping.

When someone uses the word 'sustainable' they are often making a political statement to suit their own ends. So in the rare earths context, if you want rare earths you must be nice to China. The Japanese fishing affair showed the power of this weapon.

Europe and the US are pressing China to revalue its currency and the US has some nasty measures before the House of Representatives. As I explained yesterday (China's currency powder-keg, October 7), revaluing the Chinese currency presents problems for China which at this stage it does not want to tackle. If the US wants to press the currency issue, they only have to see what China did to Japan to work out China’s reaction – there will be a declaration that exporting rare earths to the US is 'not sustainable'. It may bring the US to heel just as it did to Japan.

But dominance may not last forever. That’s where Australia comes in.

There are a number of major rare earth deposits outside China, including one in WA owned by Lynas. Stephen Bartholomeusz told the remarkable Lynas story (Lynas' Chinese gift, September 23). But for intervention by the Foreign Investment Review Board, Lynas would now be controlled by China.

Instead, the Lynas Mount Weld concentrate will be processed at Lynas’ facility in Malaysia, the first to be built outside China for decades. Australia will be a player in this market.

But that’s some years off. Meanwhile, the word 'sustainable' is not innocuous when it comes to rare earths.

Ronald Bailey at Reason - a long time skeptic of peak oil - has a new article looking at some other potential resource extraction peaks (peak lithium, peak neodymium, and peak phosphorus), arguing - correctly in my view - that substitution and recycling can overcome these problems - (Peak Everything ?.

Peak Lithium

Lithium is the element at the heart of the electric car revolution that many green energy enthusiasts are trying to foment. For example, the Chevy Volt, scheduled to be at dealers this fall, will be energized by 400 pounds of lithium ion batteries, plus a gasoline engine to produce electricity to extend the car’s range of travel once the batteries are drained. In 2007, William Tahil, an analyst with the France-based consultancy, Meridian International Research, issued a report that alarmingly concluded that there is “insufficient economically recoverable lithium available in the Earth's crust to sustain electric vehicle manufacture in the volumes required.” Tahil added, “Depletion rates would exceed current oil depletion rates and switch dependency from one diminishing resource to another.” Not everyone agrees with Tahil’s peak lithium prognostications. ...

Even Tahil’s original report argued that there were alternative battery technologies in the works using far more common substances that could substitute for lithium. For example, the Swiss company ReVolt is developing rechargeable zinc-air batteries which hold 300 percent more charge than lithium ion batteries and cost half as much. And then there is Fluidic Energy which claims that it can develop a metal air battery that will hold 11 times the charge of the best lithium ion batteries for less than one-third the cost. A car running on such batteries would have a range of 400 to 500 miles on a single charge. These batteries are made from far more available materials which can be fairly easily recycled.

Peak Neodymium

Neodymium is a rare earth metal used extensively to produce permanent magnets found in everything from computer magnetic disks and cell phones to wind turbines and automobiles. For example, the magnets that drive a Prius hybrid’s electric motor use more than two pounds of neodymium. Interestingly, neodymium magnets were invented in the 1980s to overcome the global cobalt supply shock that occurred as the result of internal warfare in Zaire. Because China can more cheaply produce neodymium than any other country in the world, that country is now the source of 95 percent of the world’s neodymium. ...

On the other hand, if neodymium supplies really are a problem, perhaps there is a technical fix. For example, the privately held Chorus Motors has invented and developed an improved AC induction motor that completely eliminates the permanent neodymium magnets to supply the energy needed to accelerate hybrid or electric vehicles. If this technology is widely adopted, it would free up neodymium supplies for other uses and also tend to lower the metal’s price.

Peak Phosphorus

In the 1840s, scientists discovered that plants need the element phosphorus to grow. The phosphorus fertilizer industry grew rapidly, initially by exploiting vast deposits of seabird guano left on oceanic islands. Today phosphate rocks are mined to produce the fertilizer. The Global Phosphorus Research Initiative (GPRI) notes that modern agriculture is dependent on continual inputs of phosphorus fertilizer and that known reserves could be depleted within the next 50 to 100 years. The current issue of Foreign Policy ominously warns that failing to meet the challenge of “peak phosphorus” would mean that “humanity faces a Malthusian trap of widespread famine on a scale that we have not yet experienced.” But unlike petroleum or natural gas, phosphorus, as an element, is not destroyed when it’s used and so could be recovered and recycled.

The folks at the GPRI point out that the phosphorus in just one person’s urine would be close to the amount needed to fertilize the food supply for one person. So why not recycle urine? ...

Stanford University economist Paul Romer has observed, "Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding: possibilities do not merely add up; they multiply.” The above examples show that while the production of physical supplies of resources may peak, there is no sign that human creativity is about to peak.

Jamais Cascio has a post on the kerfuffle about Chinese rare earth export restrictions and how the best solution is innovation - Innovation as Resource and China's New Magnetism.

You've probably seen "neodymium" (actually neodymium-iron-boron) magnets advertised in techie-oriented magazines and gadget blogs. They're actually the strongest type of magnet available, and a pair of them can easily smash fingers. They're also incredibly useful, with small neodymium magnets found in everything from hard drives to wind turbines. Neodymium is one of 17 "rare-earth metals," and these elements have turned out to be critical to the rapidly-growing green technology industries. Rare-earth metals are used in hybrid and electric cars and low-energy lightbulbs, along with windmills (and numerous other greentech applications).

And China is the source for over 95% of the rare-earth metals now in use--something that increasingly looks like a problem. How we respond to this problem can tell us something about how we can respond to other imminent resource and sustainability crises.

Conventional wisdom says that we live in a globalized economy and if China can offer the metals at cheaper prices than other sources (namely, now-closed mines in South Africa, Greenland, and Canada), it's good for us all, right? The fact that many high-tech military technologies rely on Chinese rare-earth metals may give some people pause, but so far, so good. But that model assumes that China is willing to sell as much mineral as it can produce, to whomever wants to buy--and that assumption may no longer be true.

The U.K.'s Independent reports that China has been gradually cutting the amount of rare-earth elements it exports, now down 40% from seven years ago. China now exports only 25% of the rare-earth elements it mines. [...]

So what are our options? We (as in, the non-China parts of the industrialized world) could try to pressure China to sell more, but that's unlikely to work--and China tends not to respond well to even mild criticism. We could try to rapidly reopen the now-closed rare-earth element mines, but mining is, frankly, an environmental nightmare and incredibly dangerous--hardly a sustainable practice.

Our best option is to innovate our way out of the problem.

I've seen some investment newsletters touting a Greenland based mining development that is "foil China's master plan" to achieve dominance in rare earth mineral production - this article from The Times back in October discusses the company being promoted - Greenland challenge to Chinese over rare earth metals.

An obscure, desolate plateau on the southwestern shores of Greenland could transform the future of consumer technology and shift the balance of power in the global supply of rare earth metals.

The treasure trove beneath the rocks and ice of the Ilimaussaq Intrusion represents the world’s largest known reserve of rare earth metals, the “technology” group of lanthanide elements used in products from mobile phones and low-energy light bulbs to hybrid cars and missile guidance systems.

The find has the potential, its developers claim, to severely dent China’s global monopoly over rare earth production, a 95 per cent dominance of total worldwide output that Beijing has strategically nurtured for 15 years and recently has started to treat as a potent trade weapon.

According to the Australian mining company with rights to develop it, the site could also spectacularly change the national fortunes of Greenland, which is undergoing significant political change as it draws closer to independence from Denmark. From January next year, Greenland will gain full sovereignty over its natural resources. The rare earths alone have the potential to double the country’s effective GDP.

Studies of the site show that the Ilimaussaq reserves would comfortably meet at least 25 per cent of global rare earth demand for the next halfcentury.

“This site is a country-maker for Greenland and the first big opportunity to represent a monopoly-breaker of Chinese dominance,” Roderick McIllree, the chief executive of Greenland Minerals & Energy, said.

The company has engaged advisers with a view to listing on the main board of the London Stock Exchange early next year, The Times has learnt. The site is expected to be able to produce about 50,000 tonnes per year of rare earth-bearing ore by 2014. The chairman of the subsidiary operating in Greenland will include Lars Emil Johansen, the country’s former prime minister.

The cost of extracting the rare earths will be offset by the profits from extracting uranium from the same site, effectively preventing China from undercutting the operation on price, which is how it obtained its dominance over the world market in the first place.

The New York Times ha a new article in the "China trying to corner rare earths" genre - China’s Threat Revives Race for Rare Minerals.

A Chinese threat to halt exports of rare minerals — vital for high-performance electric motors in wind turbines, hybrid cars and missiles — appears to have backfired.

With control of more than 99 percent of the world’s production of these minerals, China could try to use a ban to force other countries to buy the crucial motors for these high-tech end products, instead of just the minerals, directly from China. But other governments and businesses reacted quickly as word of the proposed ban spread late this summer.

The Chinese threat has touched off a frenzied international effort to develop alternative mines, much as the 1973-74 Arab oil embargo’s repeated increases in oil prices prompted a global hunt for oil reserves.

In Washington, the House and Senate amended their defense budget authorization bills to require the Defense Department to review the military’s almost complete dependence on Chinese supplies of rare-earth minerals. In Australia, the government blocked a Chinese state-owned company on Thursday from acquiring a majority stake in a large mine being developed for these minerals, also called rare earths. Meanwhile, Wall Street is financing exploration as the share prices of rare-earths mining companies soar — as much as sevenfold since March.

But, slowly but surely, things are starting to stir in Congo-Brazzaville. Mining hasn’t had much of a look in there because of the nation’s oil and gas riches, which account for 92 per cent of the country’s exports. ... Now comes potash. There is already one established potash project owned by Canadian company MagIndustries.

It is not surprising that Elemental Minerals (ELM) got a 125 per cent boost to its share price on Thursday, when it announced it had picked up the Sintoukoula potash project in Congo-Brazzaville. Significantly, this ground is just 50km from the country’s port for overseas shipping, Pointe Noire. There has already been work done there, and the Canadian ground to the south includes the Holle mine, which operated from 1969 until 1977, when it was flooded and closed down. That mine produced sylvite, which is potassium chloride and essential to fertilisers.

Here’s the point: if ELM’s project gets legs, then there are going to be a good many players becoming interested - especially the Chinese, who are scouring the world for sources of potash and phosphate. This is not only because of the need to maintain food production in China. What is happening now is that China is looking to Africa as a future food source.

The dodgy Ambrose Evans-Pritchard in the UK Daily telegraph has an article on the possibility of China's ceasing to export rare earths required for clean technologies - World faces hi-tech crunch as China eyes ban on rare metal exports.

A draft report by China’s Ministry of Industry and Information Technology has called for a total ban on foreign shipments of terbium, dysprosium, yttrium, thulium, and lutetium. Other metals such as neodymium, europium, cerium, and lanthanum will be restricted to a combined export quota of 35,000 tonnes a year, far below global needs.

China mines over 95pc of the world’s rare earth minerals, mostly in Inner Mongolia. The move to hoard reserves is the clearest sign to date that the global struggle for diminishing resources is shifting into a new phase. Countries may find it hard to obtain key materials at any price.

Alistair Stephens, from Australia’s rare metals group Arafura, said his contacts in China had been shown a copy of the draft -- `Rare Earths Industry Devlopment Plan 2009-2015’. Any decision will be made by China’s State Council.

“This isn’t about the China holding the world to ransom. They are saying we need these resources to develop our own economy and achieve energy efficiency, so go find your own supplies”, he said.

Mr Stephens said China had put global competitors out of business in the early 1990s by flooding the market, leading to the closure of the biggest US rare earth mine at Mountain Pass in California - now being revived by Molycorp Minerals.

New technologies have since increased the value and strategic importance of these metals, but it will take years for fresh supply to come on stream from deposits in Australia, North America, and South Africa. The rare earth family are hard to find, and harder to extract.

Mr Stephens said Arafura’s project in Western Australia produces terbium, which sells for $800,000 a tonne. It is a key ingredient in low-energy light-bulbs. China needs all the terbium it produces as the country switches wholesale from tungsten bulbs to the latest low-wattage bulbs that cut power costs by 40pc.

No replacement has been found for neodymium that enhances the power of magnets at high heat and is crucial for hard-disk drives, wind turbines, and the electric motors of hybrid cars. Each Toyota Prius uses 25 pounds of rare earth elements. Cerium and lanthanum are used in catalytic converters for diesel engines. Europium is used in lasers.

Blackberries, iPods, mobile phones, plams TVs, navigation systems, and air defence missiles all use a sprinkling of rare earth metals. They are used to filter viruses and bacteria from water, and cleaning up Sarin gas and VX nerve agents.
Arafura, Mountain Pass, and Lynas Corp in Australia, will be able to produce some 50,000 tonnes of rare earth metals by the mid-decade but that is not enough to meet surging world demand.

The Prius hybrid automobile is popular for its fuel efficiency, but its electric motor and battery guzzle rare earth metals, a little-known class of elements found in a wide range of gadgets and consumer goods.

That makes Toyota's market-leading gasoline-electric hybrid car and other similar vehicles vulnerable to a supply crunch predicted by experts as China, the world's dominant rare earths producer, limits exports while global demand swells.

Worldwide demand for rare earths, covering 15 entries on the periodic table of elements, is expected to exceed supply by some 40,000 tonnes annually in several years unless major new production sources are developed. One promising U.S. source is a rare earths mine slated to reopen in California by 2012.

Among the rare earths that would be most affected in a shortage is neodymium, the key component of an alloy used to make the high-power, lightweight magnets for electric motors of hybrid cars, such as the Prius, Honda Insight and Ford Focus, as well as in generators for wind turbines.

Close cousins terbium and dysprosium are added in smaller amounts to the alloy to preserve neodymium's magnetic properties at high temperatures. Yet another rare earth metal, lanthanum, is a major ingredient for hybrid car batteries.

Production of both hybrids cars and wind turbines is expected to climb sharply amid the clamor for cleaner transportation and energy alternatives that reduce dependence on fossil fuels blamed for global climate change.

Toyota has 70 percent of the U.S. market for vehicles powered by a combination of an internal-combustion engine and electric motor. The Prius is its No. 1 hybrid seller.

Jack Lifton, an independent commodities consultant and strategic metals expert, calls the Prius "the biggest user of rare earths of any object in the world."

Each electric Prius motor requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum. That number will nearly double under Toyota's plans to boost the car's fuel economy, he said.

Toyota plans to sell 100,000 Prius cars in the United States alone for 2009, and 180,000 next year. The company forecasts sales of 1 million units per year starting in 2010.

As China's industries begin to consume most of its own rare earth production, Toyota and other companies are seeking to secure reliable reserves for themselves.

Reuters reported last year that Japanese firms are showing strong interest in a Canadian rare earth site under development at Thor Lake in the Northwest Territories.

The Chinese economy is a "command" economy, not a free market economy. This means that the state sets, among other things, manufacturing goals and resource allocations. The Chinese central government decides what is important to the economy and makes certain that money and credit flow to those sectors of the economy it has chosen. At the beginning of each five-year economic planning cycle the central government adopts a "five-year plan" to be followed rigorously. Individual and business success in China means meeting the goals of the five year plan as it applies to your sector of the economy.

Thus it is, and can be, no surprise at all to any informed observer of the Chinese economy that various, official, industry-specific planning commissions are now submitting their ideas to the China State Council in Beijing, which will review those ideas and adopt or modify them for political as well as economic reasons and then discard or include them, as the China State Council wishes, in the official listing of goals of the next Five-Year Plan for the period 2010-15.

It is amazing to me that anyone could believe that a "draft" plan for a segment of the economy is a final plan and that in addition it would be released, unofficially, to a foreigner with a vested financial interest in construing and misrepresenting a draft as a final plan. Nonetheless, this is what ill-informed or compromised reporters for Mineweb apparently believe.

Anyone who is following the news about the market fundamentals of the rare earths in order to judge their potential as investments should read the article on Mineweb.com with extreme skepticism both for what it reports and for what is gets very wrong about the Chinese rare earth mining industry.

First of all, the article purports to point to a "draft" report supposed to be an internal document from a Chinese study group commissioned for and addressed to the China State Council. The Mineweb article says

the Chinese draft report, entitled Rare Earths Industry development Plan 2009‐2015, has been submitted to the China State Council for review and implementation in 2010, and outlines plans to restrict Chinese administration of rare earth quotas, totally banning the export of some rare earths and consolidating a large number of Chinese rare earth facilities.

We are supposed to believe that the China State Council is just waiting around for the rare earth industry to tell it what to do, so it can "implement" those recommendations. We are also supposed to believe that the words

…outlines plans to restrict Chinese administration of rare earth quotas, totally banning the export of some rare earths and consolidating a large number of Chinese rare earth facilities

are intended to have meaning in the English language. The author or editor probably means to say that Chinese rare earth quotas are to continue to decline, as they have been doing for several years, but that some exports of specific rare earths will be immediately banned. Further, the author or editor may be trying to say that the central Chinese government is pressuring the rare earth industry to consolidate to become more efficient and less polluting-as we have read elsewhere recently more coherently. I can’t help asking if any of you who believe that the rare earth industry is telling the Chinese State Council what to do might want to also buy a bridge connecting Manhattan to Brooklyn?

The Mineweb article further on lets us know that it is the “heavy rare earths” the export of which is to be immediately banned. ...

There is actually just one single solitary deposit of REEs today being worked and processed to recover the HREEs commercially. These are the so-called ionic clays of Szechuan, China, in which nature performed some ancient ion exchange chemistry for us.

Why does any of this matter?

It is because two of the HREEs have unique properties that greatly influence the properties of permanent magnets made with the LREEs.

The HREE's dysprosium and terbium, when added to the neodymium-iron-boron permanent magnet alloys that are today essential components of the electric motors and generators used in cleantech and military applications, raise the temperature at which the magnetic strength of the permanent magnets diminishes or vanishes (The temperature at which a permanent magnet loses its magnetism is called the "curie" point after its discoverer-the brilliant physicist whose fame was eclipsed historically by his much more famous wife, Madame Curie).

It is extremely important that an electric motor or electric generator be able to operate at as high a temperature as possible in places such as under the hood of a car or in an aircraft or ship. It is also important that transport dependent on electric motors or generators be able to run in the desert.

The People's Republic of China today is the world's sole producer of the HREEs.

For the last five years China has been systematically reducing its export allocation of all of the rare earths. Just at the end of last June (2009) the Chinese government announced that the rare earth allocation for 2009 would be around 32,000 metric tons; For 2008 the total export allocation had been around 38,000 tons. Just for comparison it should be well noted that Japan’s projected total usage of rare earths for 2008, before the economic slowdown, was 40,000 metric tons.

Those who view China’s continuous reduction of its export allocation of rare earth metals over the last five years as an economic ploy to maintain the prices of the rare earths do not understand that the rate of growth of China’s domestic demand for rare earths has exceeded the rate of growth of China’s domestic production for every year of the twenty-first century. Thus it is certain that China’s domestic demand for rare earth metals will exceed its domestic production in the near future. This, in fact, is the main driver for China’s reduced allocation of exports of rare earths. The most optimistic of projections of Chinese production and demand now show that Chinese domestic demand will extinguish its ability to produce before 2014, at the latest.

Therefore unless there is substantial non Chinese production of rare earths in the very near future there will be shortages of rare earths for production outside of China followed by an end to such exports.

The critical period will have begun when and if China suspends exports of the HREEs, dysprosium and terbium. These two HREEs are first and foremost indispensable and irreplaceable in military applications where performance, not cost, is the key. The militaries of the world’s great powers today know only too well that increased weight and decreased performance are the wrong way to go with smart weapons, aircraft, satellites, and spacecraft.

Designers of wind turbines, full hybrid, plug-in hybrid, and battery powered cars know that performance is dependent on temperature range for peak efficiency, and that for all permanent magnet using DC motors and generators substituting ferrite magnets for rare earth magnets adds weight and decreases performance and that without HREEs rare earth permanent magnets are temperature limited.

The USA, Australia, Canada, Greenland, South Africa, and India have a variety of rare earth deposits and projects in various stages of development all the way from exploration to one in actual, limited, production (Molycorp’s Mountain Pass, California, mine is being readied to resume mining, the company says, after a so-far seven year hiatus. Mountain Pass is now producing 2 mt/day of neodymium/praseodymium oxide and 4 mt/day of lanthanum oxide from concentrates above ground mined and beneficiated prior to 2002).

The free market has not been kind to the rare earth mining industry. Australia’s world class REE deposits, Lynas Corp (LYSCF.PK), and Arafura Resources [ARU:SYD], have been on the edge of LREE concentrates production for several years but have had a steady stream of financing problems that have resulted today in Chinese financing being in place or on the table for both while political battles hold up both from going forward. Even if either or both were to go forward there is today no refinery outside of China prepared to process the ores from either-to be fair the Lynas business plan includes such a refinery to be built in Malaysia, but that is held up for financing today also. ...

Canada has two rare earth deposits under development. One is in Saskatchewan at Hoidas Lake and is being developed by Great Western Minerals Group, [GWG:TSXV], which also has several other rare earth deposits in the USA, Canada, and the Republic of South Africa. The other Canadian rare earth project is in the Northwest Territories at Thor Lake and is owned by Avalon Rare Metals [AVL:TSX)] [AVARF: OTCGX] . Thor Lake is well under way in its pre-feasibility study, and I urge you to look at the detailed data on Avalon’s web site.

No deposits outside of China other than Lynas, Arafura, Mountain Pass, Hoidas lake, or Thor Lake can be developed in time to stave off a supply interruption crisis.

But no matter which of the above deposits outside of China is developed it will have to include the parallel development of Avalon’s Thor Lake if the rare earth end user industry outside of China is to remain independent and even continue.

Thor Lake’s very large deposit of rare earth ores is unique in that it has a great deal of fergusonite, which is unusually rich in the HREEs. No other accessible economically mineable deposit of REEs in the world outside of China’s ionic clays has anywhere near the potential of supplying the HREEs necessary for the production of high performance rare earth magnets capable of operating at high temperatures.

The only solution to the high probability of the west being cut off from China’s REEs in the first half of the next decade is the development of Molycorp’s Mountain Pass mine, or Lynas’ Mt. Weld, or Arafura’s Nolan’s Bore, or Thorium Energy’s Lemhi Pass, or one of Great Western’s North American deposits AND Avalon’s Thor Lake deposit. Then and only then will there be a complete supply of REEs available from sources outside of China.

Chinese, now joined by Japanese, economic nationalism is moving to close off several of the above avenues by taking control of one of the major LREE deposits named above. Japan’s Toyota (TM) has even agreed to finance the development of a potentially very large and high grade rare earth deposit in Vietnam, but that is many years off. Chinese mining companies are aggressively moving into Australia and have already bought a substantial portion of Arafura and have offered to buy control of Lynas. These Chinese investments are not however to develop REEs for the world market but to insure the continued dynamic growth of the Chinese domestic end-using REE based industry, so in fact such investments by China will only reduce the number of candidates for the supply of the LREEs outside of China. Industry in the west won't fare much better if the Japanese gain control of any portion of the non-Chinese supply of REEs. In either case the interruption of supply to North America and Europe of the REEs will mean a decrease in high tech and clean tech manufacturing jobs and a further erosion of technological leadership.

The pros and cons of economic nationalism are not up for debate any longer in Asia or even Europe. If Americans wish to continue to have the capability to produce wealth in the twenty-first century age of technology that is upon us we need to improve our supply of and our control over the critical resources of rare metals that are slipping away from us. America can only remain competitive in high tech and clean tech by being self sufficient in the raw materials. It's up to you.