South African Mine May Dent China’s Rare-Earths Dominance

by Irma Venter- Mining Weekly – Published: September 17, 2010

Earlier this year, the increasingly tight rare earths supply situation prompted one environmental journalist in the US to exclaim that we should all kiss our wind turbines goodbye.

To be fair, he did lean towards the more apocalyptic scenarios favoured by the more extreme proponents of the green agenda, but he did have a point.

Last year, China produced 97% (120 000 t) of the world’s rare earth oxides, while it also controls half of the earth’s known reserves. India, Brazil and Malaysia made up the rest of 2009’s rare earths production volumes.

So what, you may ask. South Africa has 75% of the world’s known platinum-group metals (PGMs) reserves, used in industrial applications such as car exhaust catalysts and fuel cells, and nobody is crying foul?

But what if South Africa decided to cut exports dramatically, and prohibit any company outside its borders from obtaining PGMs mining rights?

To some degree, this is what has been happening in China. The Asian giant in July slashed its export quota by 72% for the second half of 2010 in a bid to force international companies to manufacture rare earth products within its borders.

Speculation is rife that these cuts are not the last.

It also appears that China aims to limit mining rights for rare earths to a few State-controlled mining companies.

Again, to be fair, China may not be as villainous as painted, but rather, perhaps, starving for more.

Rare earths guru Jack Lifton, once a product developer using rare earths, in August reported at a conference in China that this country may need to import rare earths from 2015, such is demand for the 17 elements from the middle of the Periodic Table, used in hybrid electric motors and batteries, computer hard drives, mobile phones, cameras, stadium lights, fibre optics and energy efficient light bulbs . . . and, yes, wind turbines.

Lifton even noted that China was hoping that it would be able to, one day, buy rare earths from sources such as the US Mountain Pass mine, which Molycorp Minerals is struggling to revive. It currently only produces rare earth oxides from ore mined years ago.

This comes as China installed 13 GW of wind turbine electricity generating capacity last year, using rare earth permanent magnets for increased efficiency, and to ensure low maintenance costs.

By 2020, says Lifton, it is predicted that China will install a mind-blowing 330 GW more wind capacity, with each 1,5-MW generator requiring 1 t of neodymium-iron-boron magnet alloys. This would mean that China would require a further 70 000 t of the rare earth neodymium, which is around 3,5 times the 2008 production of that metal.

Rare earths demand is expected to increase to around 180 000 t/y by 2014, up from the current 120 000 t.

To make matters even more interesting, the current rare earths supply chain has forced a situation where the world may now face the stuff the more gripping political thriller is made of: the US Department of Defence DDG-51 hybrid electric drive ship programme uses permanent-magnet motors using neodymium magnets from the country rivalling it for political and economic dominance, China.

One more example: the same department’s M1A2 Abrams tank has a reference and navigation system that uses samarium cobalt permanent magnets, with the samarium coming from China.

However, now a dormant production site called the Steenkampskraal mine may deliver marginal reprieve as Canadian-listed Great Western Minerals Group (GWMG) and South Africa’s Rareco push to deliver rare earths from the Western Cape location by late 2012.

It may make only a small contribution to the global rare earth numbers, but its significance as a non-Chinese producer is such that South Africa was mentioned in a US Government Accountability Office report on rare earth materials in the defence supply chain made to the committees on Armed Services of the Senate and House of Representatives earlier this year.

A History Lesson

Steenkampskraal, in the Western Cape, has an interesting history.

It is owned by Rareco.

The deposit, with a significant amount of thorium present, was discovered in the late 1940s, and then mined by Monazite & Mineral Ventures, a wholly owned subsidiary of Anglo American, from 1953.

The mine produced the fuel for the thorium-based nuclear power reactors operating at the time, says Rareco CEO Robbie Louw.

However, by the late 1960s these reactors were decommissioned as uranium reactors were built, and the market for thorium collapsed, he explains.

The Steenkampskraal mine closed in 1963, and Monazite & Mineral Ventures was liquidated in 1967.

“The discovery of high-temperature superconductors in the late 1980s was a milestone in the development of the market for rare earths,” says Louw.

This triggered the acquisition of Steenkampskraal by European investors, and Rareco was formed shortly thereafter.

The company was listed on the venture capital board of the JSE in 1994, but then delisted in 2006.

The company is now owned by the people who bought shares on the JSE. Most of the founding members who formed Rareco in the late 1980s are also still shareholders of the company, says Louw.

The Steenkampskraal Workers Trust owns 26% of Rareco, and is the black economic-empowerment partner.

So, what went wrong in 2006?

At the time of the formation of Rareco, rare earths prices were high and the planned venture appeared very profitable, explains Louw.

“It was, however, at this time that China started flooding the market with low-priced rare earths, produced as by-products of iron-ore mining.

“Prices collapsed to a level so low that it was not economically viable to reopen Steenkampskraal.” (The US and Australia were the predominant suppliers of rare earths until China’s price position forced them out of the market.)

Louw says the prices for rare earths remained low during the recent commodities boom, with the recession not helping either.

However, prices have now recovered, and the prospects for Steenkampskraal with it.

Rare earths prices have doubled, and doubled again over the last 18 months, says a pleased GWMG vice-president of operations, Richard Hogan.

GWMG is a major consumer of rare earth compounds in its US and UK factories that produce magnetic alloys and battery alloys. What it boils down to is that GWMG owns two companies – one which develops magnets, and one which develops batteries. Securing supply from Steenkampskraal is vital in securing the company’s future.

In August, GWMG signed an offtake agreement with Rareco, covering all the rare-earth metals to be produced from the mine, which would be settled at market prices.

The deal is conditional on GWMG either completing a feasibility study for the mine by the end of 2011, followed by financing for the project outlined in the study two months later, or on providing certain financing outlined in the agreement before the end of 2010, thereby fast-tracking the development process.

Hogan says there are ongoing talks with regard to GWMG possibly buying the Steenkampskraal mine.

He believes developing Steenkampskraal is important as it creates an alternative source of rare earths for the world, with China “requiring its production more and more for itself, thereby shutting down supply to the outside world that depends on rare earths”.

“We are determined that Rareco and GWMG will become the first producer of heavy rare earths outside China,” says Hogan.

Why Steenkampskraal Could Be First

Hogan describes developing Steenkampskraal as a “big opportunity”, as it is the highest grade known rare earth deposit in the world.

He says: “We can produce a large amount of rare earth material by processing small amounts of material compared with the rest of the world. What we consider waste is considered the cutoff grade at other operations.”

Hogan says there are many known deposits of rare earths in the world, belying the name ‘rare’ earths, but adds but that the “vast majority” are populated with metals which do not allow for efficient extraction.

Also, most deposits do not have the heavy rare earths currently in demand, but rather the light rare earths.

The Mountain Pass operation does not, for example, have significant deposits of heavy rare earths that are used in the magnets that power hybrid electric vehicles, for example.

Steenkampskraal contains heavy rare earths.

In essence, it is a monazite mine. Monazite is a reddish-brown phosphate mineral containing rare earth metals, and is an important source of lanthanum and cerium.

It also has thorium, which can be used as an alternative to uranium as a nuclear fuel.

Rareco chairperson Trevor Blench says that the thorium can become an additional asset to the mine as it develops in stature as a nuclear fuel.

“We plan to extract the thorium and secure it on site while we wait for the market to develop.”

This is exactly why Rareco executive director Berry van Biljon believes mining Steenkampskraal will provide another service to the community – apart from the 150 to 200 jobs it can create in a economically depressed area – as it will remove the radioactive thorium material from the ground as the slimes dams and mine dumps are also to be remined.

Blench also emphasises the importance of the lanthanum to be mined at Steenkampskraal.

“Lanthanum is a vital catalyst in oil refineries. Oil refineries produce jet fuel, and China almost has a monopoly on lanthanum. This means China can close down the whole US air force, navy and so forth, within months, for example.”

“You can’t have a cat scan without a rare earth magnet,” adds Hogan. “Our lifestyle is very fragile.”

Development Timetable

The plan is for Steenkampskraal to be commissioned in late 2012, says Hogan.

“This is a very [hectic] schedule.”

He believes the bankable feasibility study for the project can be delivered in November next year, and then used to possibly fund mine rehabilitation and construction.

South Africa’s Department of Mineral Resources has already granted the project neworder mining rights.

Following the start of mining, Hogan says GWMG aims to beneficiate the ore mined at Steenkampskraal.

The first step would be to create monazite concentrate, followed by the production of mixed rare earth products, with this mixed compound then split into each rare earth.

“Each step adds further value, creating more jobs,” explains Louw.

Hogan says one of the biggest advantages Steenkampskraal can deliver – apart from being a previously mined deposit, which erases many unknowns – is that its high grade equates to a low-cost development.

“Mining and two stages of beneficiation could cost between $30-million and $50-million,” says Blench.

Production could reach between 2 500 t and 2 700 t of rare earth oxides a year, which would be 2% of the global market, he adds. There are around ten years of known reserves in the ground.

Hogan emphasises that this “is very low cost” compared with the costs of other projects in the world – which is indeed so when considering that it would probably cost $500-million to revive the Mountain Pass mine.

Rareco and GWMG do not want to stop there – their ambitions go much further.

“Rareco has applied for prospecting rights on more than 53 000 ha of farms surrounding Steenkampskraal,” says Van Biljon.

What About The Rest Of Africa?

Exploration capital expenditure in most African countries is mostly focused on precious and base metal discovery, says Council for Geoscience economic and exploration geologist Dr Elisa Long’a Tongu.

He says diversifying into rare earth metals would benefit economies such as Ghana, Nigeria and Zambia, “through technology transfer and human capital development, and so contribute to local production, industrial and technological innovations”.

Tongu adds that it is likely that, because of their tropical locations, most African countries unknowingly possess significant ion-adsorption rare-earth element resources of the type presently exploited in China.

He notes that he knows of a number of rare earths projects that exist within Africa, including one in South Africa’s Northern Cape, but adds that he cannot discuss these owing to confidentiality conditions.