Surging Rare-Earth Prices Spur Mining in Kazakhstan

(Bloomberg) -- Surging rare-earth prices are spurring developments of deposits in Kazakhstan, Kyrgyzstan and Greenland as China cuts exports of the metals used in BlackBerrys, televisions and Toyota Motor Corp.’s hybrid cars.

Sumitomo Corp., Japan’s third-largest trading house, and its local partner in Kazakhstan plan to start a pilot plant about the end of next year to produce rare earths using uranium tailings, said Yerzhan Ishanov, deputy director of general affairs at Summit Atom Rare Earth Co., Sumitomo’s venture with Kazatomprom, Kazakhstan’s state-owned nuclear company.

China, the source of more than 90 percent of the world’s rare earths, in July reduced its second-half export quota by 72 percent to ensure domestic supply. Prices have jumped as much as sevenfold in the past six months, prompting companies including Glencore International AG, Stans Energy Corp. and Greenland Minerals & Energy Ltd. to seek to restart and open mines.

“For main applications like rare-earth magnets and glass catalysts, the (demand) increase is from 10 to 15 percent a year,” Summit Atom’s Ishanov said. Japan’s consumption of the metal products is around 40,000 metric tons at present, he said.

China’s move to constrain supply has soured diplomatic relations with Japan, which is moving to secure supplies from Vietnam, the U.S., India and Germany. Rare earths are also used in Boeing Co. helicopter blades and Raytheon Co. missiles.

iPod, Laptops

Rare earths are 17 chemically similar elements, including neodymium and dysprosium. Prices of neodymium oxide, which is used in mini hard drives in laptops and headphones in Apple’s iPod, have surged four-fold to $80 kilogram from $19.12 in 2009, according to Lynas Corp., whose Chief Executive Officer Nicholas Curtis is scheduled to attend the 6th International Rare Earths Conference starting today in Hong Kong.

Stans Energy may restart operations at an open-pit mine in Kyrgyzstan within 18 months to 24 months, Robert Mackay, president and chief executive officer of the Toronto-based company, said in an e-mail in response to Bloomberg questions.

Ramping up of global production “may be somewhat protracted given the time it takes to obtain the necessary permits and establish a supply chain for such complex materials,” Mackay said.

Summit Atom aims to produce 1,100 tons of rare-earth concentrates a year from the pilot plant to supply Japan, Ishanov said. The company may increase its production capacity to between 10,000 tons and 15,000 tons by 2014-2015, he said.

Global demand for rare earths will rise to about 225,000 tons by 2015, compared with 125,000 tons this year, Molycorp Inc. said last month, citing research from Roskill, a U.K.-based metals and minerals research company. Molycorp, owner of the world’s largest non-Chinese deposit of rare-earth metals, and Lynas both plan to open mines in the next two years.

Greenland Project

Greenland Minerals plans to start production at a mine in the southwest of Greenland in 2016, Damien Krebs, metallurgy manager of the Perth, Australia-based company, said in an interview.

The company aims to trade its shares on the London Stock Exchange next year to raise about $100 million to finish the initial study of the project, Krebs said. An initial estimate of the capital cost for the project was $2.2 billion, including a processing plant, he said.

Government agencies of Japan and South Korea and companies including General Electric Co. have approached Greenland to see how they “can secure the rare-earths in the future,” Krebs said.

China has come to dominate the market because it has been able to produce the elements more cheaply and with fewer environmental restrictions than its competitors. While the elements aren’t as rare in nature as the name implies, they are difficult to find in profitable concentrations, expensive for Western producers to extract and often laced with radioactive elements.