Rare Earth Materials Supply Chain

12 January 2011

Peter C. Dent Electron Energy Corporation

924 Links Avenue, Landisville, PA 17538 www.electronenergy.com

Outline •  Introduction & Applications •  Context •  Production Issues & Opportunities •  Government Activities •  Summary

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Introduction to Rare Earths    

•  17 total •  Rare earth

Misnomer •  Also Sc and Y •  Light-Heavy •  radioactivity

typical around deposits (Thorium)

3  IVEC  2010  5/18/2010   Light Rare Earths (LRE’s)

Heavy Rare Earths (HRE’s)

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Rare Earths- Defense Technology Backbone

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Rare Earths - Green Technology’s Backbone    

–     

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Applica(ons  

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….Applica(ons  -­‐-­‐well  over  a  1000  in  total  

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Rare  Earth  Value  Chain  RE Magnets

RE Magnet Alloys

Pure RE Metals

Individual RE Separation (oxides, carbonates, etc.)

Mixed Concentrates

Mining- Rare Earth Ore Production (all RE’s)

Magnet  Processing  

Magnetizing & Testing

Induction Melting

Ball milling or Jet milling to ~ 2-5 µm

Sintering, Solution and

Heat treatment

~ 200 - 500 µm

Crush into

Pressing

Grinding, lapping, honing, Or wire EDM

Machining

Raw Materials Sm, Co, Fe,Cu, Zr (2:17)

Sm, Co (1:5)

Crushing

Abundance  of  Rare  Earths    •  Figure  4.  Abundance  (atom  

frac>on)  of  the  chemical  elements  in  Earth’s  upper  con>nental  crust  as  a  func>on  of  atomic  number.  Many  of  the  elements  are  classified  into  (par>ally  overlapping)  categories:  (1)  rock-­‐forming  elements  (major  elements  in  green  field  and  minor  elements  in  light  green  field);  (2)  rare  earth  elements  (lanthanides,  La–Lu,  and  Y;  labeled  in  blue);  (3)  major  industrial  metals  (global  produc>on  >~3x107  kg/year;  labeled  in  bold);  (4)  precious  metals  (italic);  and  (5)  the  nine  rarest  “metals”—the  six  pla>num  group  elements  plus  Au,  Re,  and  Te  (a  metalloid).    

10  3/13/12   Source; U.S. Geological Survey Fact Sheet 087-02 10  

Item 2008 Mine Prod. (Metric Tonnes)

Item 2008 Mine Prod. (Metric Tonnes)

Raw Steel 1,360,000,000 Uranium (2007) 41,279

Pig Iron 958,000,000 Lithium 27,400

Aluminum 39,700,000 Silver 20,900

Copper 15,700,000 Cadmium 20,800

Manganese 14,000,000 Bismuth 5,800

Zinc 11,300,000 Boron 4,100

Lead 3,800,000 Gold 2,330

Nickel 1,610,000 Selenium 1,590

Magnesium 808,000 Zirconium 1,360

Strontium Materials 512,000 Tantalum 815

Molybdenum 212,000 Yttrium (2001) 600

Antimony 165,000 Indium 568

Rare Earths (mixed, oxides)

124,000 Palladium 206

Cobalt 71,800 Platinum 200

Vanadium 60,000 Rhenium 45

Niobium (Columbium) 60,000 Rhodium 30

Tungsten 54,000 Hafnium 25

Global Metal Production 2008 - Record Year

Courtesy:

Jack Lifton 3/13/12   11  

-A steel world (90%)

-Recycling effectiveness of large vs. small,

mid size -expectations

-Large users volume have

mature recycling

infrastructure

-Rare metals have high price

and big incentives

Cri(cality  Matrix  (US  Na(onal  Academies,  2008)  This  matrix  was  devised  by  the  U.S.  Na(onal  Academies  and  published  in  2008  in  Minerals,  Cri(cal  Minerals,  and  the  U.S.  Economy  (2008).    The  matrix  preceded  by  a  detailed  explana(on  of  the  conclusions  from  which  it  was  created  is  (free)  on  the  Internet  at  hQp://books.nap.edu/openbook.php?record_id=12034&page=165#p200140369960165001    

-Increase use of periodic table of elements

-Semiconductors- 24 plus new elements used in 2000 and beyond

-11.3 Tons/year per person non-fuel minerals

-Careful with stats

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US is very dependent of

foreign supply of Rare earth

and other minerals

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Global RE Production

• China overcapacity drives out all other producers • Inner Mongolia 80% • Molycorp suspended operations 2002 • China National Offshore Oil Corp 2004 bid -UNOCAL • High risk for other producers to invest on added capacity

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Source  -­‐  US  Geological  Survey  

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Strategic Economic Weaponry “Improve the development

and applications of rare earth, and change the resource advantage into economic superiority.” President Jiang Zemin 1999

“There is oil in the Middle East; there are rare earths in China. We must take full advantage of this resource.” President Deng Xiaoping 1992

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China Dominates Magnet Materials

WW Total Market Size $7B 2010, $15B by 2020

NdFeB magnets 75%

Rare Earth Oxide Ore production 97%

Rare Earth pure Metals nearly 100%

Hard ferrites 85+ %

Approx ½ WW Alnico & SmCo production

Japan, US, European producers close plants, move production

CHINA

5/18/2010   IVEC  2010  3/13/12   16  

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Chinese Rare Earth Elements Actions

•  Chinese Ministry of Industry & Information Technology –  Media firestorm over August 2009 suggestion to stop Tb, Dy, Y

exports –  RFI for RE producer standards issued May 2010 - scale,

technology, resource utilization, environment (300,000 LREO Ton/year, 3,000 Tons/year HREO)

•  Export quotas of REE’s traded among producers, adding to export price $20-45/kg

•  Crackdown on illegal mining & exports (up to 30% or REE total production) – jail sentences imposed

•  China Planning massive environmental clean up •  Consolidation of production to perhaps just 3 vertically integrated

REE producers

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Chinese Rare Earth Elements Actions

•  Chinese export quota impacts on price

–  Average prices of REO ranged from $10 to $13 per kg in 2008 –  June 2010 to January 2011 Sm metal from $21/kg to $100/kg –  In China in 2009 so much excess SmO & CeO, dumping it away as

waste –  Dual price structure of Inside & outside China pricing –  Prices in China still low for Sm and Ce (Sept 29, 2010 Asian Metal

Pages Sm metal inside China $16.96/kg export $41/kg, CeO $3.99 internal China price $39/kg export price)

–  Reference prices, e.g. Metal pages, Asian Metal Pages, are surveys of transactions and are typically low compare to real prices paid

–  No London Metals Exchange or equivalent for pricing

Chinese Rare Earth Elements Actions

•  Export taxes increase to 25% from 10% in 2008 (US Import duty is 5%) •  Suggest potential depletion of HRE’s in China in short term •  China producers in 2005 established $100/ton fine for violations to price

minimums •  Trying to increase prices •  Want pricing sufficient to afford environmentally responsible Rare Earth

Element (REE) industry •  Rare earth metal buybacks from Chinese customers mandated at sub

market level in 2008 •  China views downstream implications of price increases having positive

effects •  Rise of “Indigenous Innovation” –i.e. manufacturing in China must also bring

in related foreign IP to allow access to Chinese market and raw materials

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 China  RE  Export  Quotas  •  July 2010 China reduces export

quota by –  72% for H2 2010 –  40% for CY 2010

•  CY 2010 quota 30,250 metric Tons •  7,979 mT H2 2010 vs. 28,419 mT

H2 2009 •  Chinese exporters may sell more

HRE’s at high $/kg vs. Ce, La, Sm, Gd

•  Dramatic price increases seen of 5-10X on LRE

•  ROW demand 50-55 thousand mT •  Short term Supply access issues

Implemented 30,250 mT 2010 & 14,500 mT H1 2011 3/13/12   20  

Current  China  Rare  Earth  Trade  Ques(ons  

•  How does China justify Export Quotas? •  Why does China have export duties on rare earths? Export

duties & quotas not allowed under China’s WTO accession protocol. Currently US Trade Representative has case on bauxite, manganese, coke, etc. regarding export quotas and taxes. USTR potential action on green technology which would include rare earths.

•  Japanese REE users appeared to be cut off from supply in late 2010.What happened? –for about two months Japanese firms were cut off from receipt of rare earth maybe they are s in an undeclared embargo for political reasons.

•  Were US & EU REE users cut off too?- EEC believes export quotas for 2010 were essentially used up and nothing was available until January 2011 besides sporadic, politically motivated, opportunistic or black market shipments

•  What will export quotas be for 2011? First half of 20110 indicated 11% reduction from 2010. 3/13/12   21  

Rare Earth Supply-Demand

Source: Industrial Minerals Company of Australia

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Rare  Earth  Prices  

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-Fe, Co, Tb, Ce, Au, Re price comparisons

-REE price disparities ($3/kg-$500/kg pre July 8, 2010, $10-12/kg avg.)

Rare  Earth  Oxide   Demand   Supply/Produc>on  REO  Tonnes   %   REO  Tonnes   %  

Lanthanum   51,050   28.40%   54,750   26.90%  Cerium   65,750   36.50%   81,750   40.20%  Praseodymium   7,900   4.40%   10,000   4.90%  Neodymium   34,900   19.40%   33,000   16.30%  Samarium   1,390   0.80%   4,000   2.00%  Europium   840   0.50%   850   0.40%  Gadolinium   2,300   1.30%   3,000   1.50%  Terbium   590   0.30%   350   0.20%  Dysprosium   2,040   1.10%   1,750   0.90%  Erbium   940   0.50%   1,000   0.50%  Ygrium   12,100   6.70%   11,750   5.70%  Ho-­‐Tm-­‐Yb-­‐Lu   200   0.10%   1,300   0.50%  Total   180,000   100%   203,500   100.00%  

Forecast Global Demand for Individual Rare Earths in 2014 (±15%) (Im)balance of Supply-Demand

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Source: Dudley J Kingsnorth IMOCA 2009

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- Air Products O2, N2 -steel

-Reduce use of higher demand

-Increase use of lower demand (Ce, Sm) – unsold material = cost, wildcard

-Thorium?

Rare Earth Mineral Production •  Expensive $100-500 million site investments •  $30,000- $40,000 capital per metric ton annual output •  Individual Buyer- Seller Transactions (no –exchanges,

e.g. LME) •  $1.5 billion current market (at pre- July 2010 prices) •  100 plus potential mining sites for REE’s being

developed or promoted for investment worldwide •  5-6 new non-Chinese mining operations will likely need

to be developed •  Lots of investment is flowing to major REE producers –

well funded 3/13/12   25  25  

Rare Earth Mineral Production  •  Get all 17 REE's together in differing

concentrations •  Balance Supply-Demand (overall- elementally) •  Project site specific geology – implies site

specific processes •  Processes scale up, start & shut down very

poorly •  Significant technology risks in separations,

metals conversion •  Art to design and operate separation systems •  Open pit, surface mining 3/13/12   26  

Rare Earth Mineral Production •  Water, power, chemicals (HCl-NaOH) – key

operating costs •  Chemically similar - difficult to separate •  Very limited recycling •  Shortage of RE experts •  Long ROI payback times •  LRE 98-99% of total REE •  Large price/demand disparities (Ce vs. Tb)

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Non- Chinese Rare Earth Mineral Production

•  Numerous potential sites •  Various stages of development •  Long development times (10 years typical from start) •  LRE – HRE concentrations •  Established firms, junior mining, extensions of other

mining sites (U, Th) •  Mine-Market strategies •  All majors adding RE metal production •  All trying to compress schedules to go on line •  Prices will remain high especially Tb, Dy, Y, Nd

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Core Non Chinese Production Issues •  Capital acquisition challenges •  “Rare Earth” sells stock– credibility issues •  Small-medium mining operations •  What will be impact of new RE applications

(wind power NdFeB vs. induction machines vs. superconducting, Li vs. NiMH batteries, lighting florescent vs. LED, others to be invented) ?

•  Who will make it to market profitably? •  What will China do? •  Can capital markets fix problems alone? 3/13/12   29  

Molycorp Minerals LLC •  Mountain Pass, CA •  Former producer •  Funding, re-start •  20,000 (40,000 T potential)

capacity •  2 T/day NdO •  July 2010 IPO raised more than

$350million required •  Stock up 3-4X since IPO, market

cap approx $5 B •  RE on-site metals •  NdFeB magnets •  9.2% REO (1% HRE) •  Online late 2012 •  Efficiencies, lower costs 3/13/12   30  

Lynas Corporation •  Mt. Weld, Australia •  Partially developed producer •  In construction •  22,000 T annual capacity •  $450million private placement

(China bid) •  Well funded, stock prices high •  RE metals Malaysia •  9.7% REO (3% HRE) •  Online mid 2011 at 11,000T/yr •  Efficiencies, low costs

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Great Western Minerals Corporation

•  Hodias Lake & other Canadian properties

•  Online post 2014 •  Process definition •  3-5,000 T annual capacity •  RE metals, alloys MI, UK •  2.6% REO (7% HRE) •  Lower capital investments

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Great Western Minerals Corporation

•  Steenkampskraal, South Africa •  5000 T annual capacity •  Restart January 2013 •  Prior mining, permitted for

nuclear materials •  RE metals, alloys MI, UK •  13kg/tonne HRE –very high •  Lower capital investments

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Avalon •  Nachalacho Northwest

Territories, Canada •  3-5,000 T annual capacity •  Process definition •  RE metals locally •  2.1% REO (20% HRE) •  Online post 2014

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Arafura Resources Ltd •  Nolans, Alice Springs,

Australia •  2014 start? •  Pilot plant, LOI •  20,000 tons annually •  2.8% REO (4%HRE) •  Remote

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US Rare Earths, Inc. •  Lemhi Pass Idaho,

Montana USA •  Early stage, USGS •  Up to 4.7% REO

(1%HRE) •  Thorium presence •  Production 2016-2018

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Rare Element Resources •  Bear Lodge,

Wyoming, USA •  Defining processes •  4.1% REO

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Other sources •  Greenland Mineral & Energy, Kvanefield

– 1.0 REO (14% HRE) – Uranium issues

•  Orissa India 10,000T/yr (Toyota) •  Ulba Kazakhstan HREE (Sumitomo) •  Dong Pao, Vietnam (Toyota, others)

– 6.9% REO 3/13/12   38  

US  Magne(c  Materials  Associa(on    6  Point  Plan  

1.  Establish a baseline - Studies by DOE, DOD, GAO 2.  Stockpile – DLA procurements 5.  Ensure fair trade – USTR 6.  DOE led grant and loan guarantee for US mining and

refining operations 7.  Defense critical components support -Defense

Production Act programs 8.  Innovation, training and workforce development

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Government Actions •  Creation of an interagency

working group •  “RESTART” legislation

introduced by Rep. Coffman & Sen. Murkowski for rare earth supply chain support

•  H.R. 6160 passed •  Studies DOE, DOD IP, others •  White House OSTP

Interagency effort •  Bills consolidated 2011

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Non-­‐Chinese,  US  Produc(on  -­‐  Vital  •  Supply Chain Security = National & Technology

Security •  Chinese domestic consumption of REE's to outpace

domestic supply within the next several years & perhaps become a net importer

•  RE supply chain needs government help •  China uncertainty, vulnerability •  Critical US defense material supplier •  US Needs an Industrial Policy

Can we avert a Rare Earth crisis? 3/13/12   41  

Peter  C  .  Dent  (717)  459-­‐1001  direct  (610)  349-­‐5525  cell  pcd@electronenergy.com  

Electron Energy Corporation 924 Links Avenue Landisville, PA 17538 (717) 898-2294    

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www.electronenergy.com  www.usmagnetmaterials.com  

Questions

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