Canadian Firms Step Up Search for Rare-Earth Metals

“Great Western Minerals Group, Rare Element Resources, Avalon Rare Metals and Neo Material Technologies are among the Canadian companies exploring for resources outside China. Their shares have surged in recent weeks amid strong volumes.”

BANGALORE — China may lose its near-monopoly on producing so-called rare-earth metals used in hybrid cars and computer hard disks as a host of smaller Canadian companies develop fresh sources of supply over the coming years.

The drive to open new mines comes as Beijing shows signs of tightening restrictions on exports of the metals. Their great magnetic capacity and resistance to high temperatures make the minerals essential components in a variety of technologies, including fuel-efficient cars and wind energy turbines.

Demand for rare-earth metals is likely to increase between 10 percent and 20 percent each year, analysts say, thanks to growing demand for elements like neodymium, which is used in making hybrid electric vehicles and generators for wind turbines.

But supplies are limited. China, which produces about 97 percent of world’s rare-earth metals, curbs exports through quotas and additional duties. In addition, rare-earth metals like neodymium, terbium, dysprosium and yttrium are difficult to mine and process.

Against that backdrop, a handful of Canadian miners are exploring for new supplies in South Africa, Brazil and the United States while pushing ahead with existing projects. Their success could ease fears that manufacturers may find themselves with few, if any, reliable sources of vital rare-earth metals. Such concerns have also raised the share prices of many of these speciality miners.

“There has been increased interest to look into ways to mine rare earth out of China, specially given the protectionism China is applying to its resources,” said Frederic Bastien, an analyst at Raymond James.

Great Western Minerals Group…..

Rare Element Resources…..

Avalon Rare Metals….

and Neo Material Technologies are among the Canadian companies exploring for resources outside China. Their shares have surged in recent weeks amid strong volumes.

Analysts say the rally is partly fueled by speculation that these companies would stand to gain if China goes ahead with proposed export curbs.

In August, China’s Ministry of Industry and Information Technology submitted a report on its rare-earth industry that includes proposals for further restrictions on exports and an outright ban on foreign shipments of a few key rare-earth metals.

But surely, Mr. Bastien said, companies face an uphill task to make their projects commercially viable, and it could take a few years for them to do so.

Jack Lifton, an independent rare-earth metals expert, said that China had reduced exports of the metals since 2004. If that policy continues, the world could face a huge shortfall.

“At end of 2015, China will no longer be exporting rare-earth metals,” he said. “If the West has not found its own manufacturing, then the West will be no longer making rare-earth-based end products.”

Rare-earth metals companies outside China, mostly based in Canada, Australia and the United States, expect to begin their projects in next three to four years.

By 2014, said James Engdahl, chief executive of Great Western Minerals, China will essentially have shut off exports of the minerals because its industries will be requiring everything produced there. “We as a company have been preparing for that.”

The junior explorer, which owns rare-earth properties in Canada and is based in the province of Saskatchewan, now gets raw materials from China to feed alloy plants in the United States. It expects to start production of the metals from its South African project within the next three years.

Constantine Karayannopoulos, chief executive of Neo Material Technologies, one of the few Western companies to have rare-earth processing plants in China, said that China would continue to regulate the sector.

However, he said he did not expect a complete ban on exports of heavy rare-earth metals like dysprosium and terbium.

Analysts expect demand for the metals to skyrocket as they are used in hybrid cars to preserve magnetic properties of metal alloys at high temperatures.

“The draft report is more sort of a flagpole test for reaction reflecting Chinese policy,” Mr. Karayannopoulos said.

“I think for any modern state and any state signatory to the W.T.O.,” he said, referring to the World Trade Organization, “restricting the export of any material which has a stranglehold in the world is just a nonstarter.”

That said, the relationship that Neo Material has cemented with Mitsubishi suggests the level of concern within Japan about Chinese rare-earth supplies.

Neo Material, which is also involved in development of heavy rare-earth resources at the Pitinga tin mine in Brazil, has signed an agreement with Mitsubishi under which the two companies would explore outside of China. The Japanese company is also financing development costs of Neo’s Brazil project.

Japan is one of the largest consumer of rare-earth metals, using them mainly in manufacturing batteries, cameras and laser equipment.