By Matthew Hill – Mining Weekly – Published: December 29, 2010
TORONTO (miningweekly.com) – China’s announcement on Tuesday of a 35% cut to rare earth element export quotas in the first half of 2011 was in line with expectations, an analyst at Technology Metals Research said on Wednesday.
The country, which accounted for over 95% of global supply of the metals used in hybrid electric vehicles and advanced bombs, allocated 14 508 t of rare-earth export quotas to 32 different companies in China, for the first half of 2011, compared with 22 282 t for the same period the previous year.
“It’s not far off what I was expecting, if in the second half they do a similar number to the first half, which they’ve tended to do,” Gareth Hatch said in an interview, adding that similar increases were likely next year.
China has more than halved the amount of rare-earth elements it allowed companies to export in the last five, causing prices to skyrocket, some more than quadrupling this year.
The wave of higher prices and increased investor interest has also catapulted share prices of juniors exploring for the elements.
US-based Molycorp, which is restarting the shuttered Mountain Pass mine has seen a four-fold rise in its share price since listing in July. The company climbed 6,5% in New York on Wednesday to $3,01 a share.
Rare Element Resources and Avalon Rare Metals were both up 38% on Wednesday afternoon.
Hatch said many of the smaller companies that had enjoyed similar rises in their share prices hadn’t done anything to justify it.
“That smells like a bubble to me,” he commented.
Still, demand for rare earths was likely to rise, and supply constraints out of China would keep prices high at least until Western production came on stream in two to three years time.
“Two to three years from now, I don’t know there will be a crash,” said Hatch.
He noted there were about 180 companies exploring 270 rare earth prospects in 28 different countries.
Of these, 15 projects are advanced (have a 43-101 compliant resource) and these are owned by 13 or 14 companies.
Reuters reported on Tuesday that China would soon launch an association working under Beijing to oversee the rare earth industry.
The group would include the biggest 93 domestic miners of the elements.
Hatch said this would be positive for the rare earth industry globally.
“If you have folks involved in those decisions that know the industry well, it is better for the industry than for some bureaucrat making all the decisions,” he said in a telephone interview from Chicago.
Up until now, the Chinese Ministry of Commerce had made all the decisions on reducing export quotas.
Shortly after the Chinese government’s announcement, TSX-V listed Dacha Strategic Metals said it had bought 12 t of heavy rare earth elements for $3,5-million, which it would store in a warehouse in South Korea.
Dacha invests in physical “strategic” metals, with a primary focus on rare earth elements. The company climbed 11% in Toronto to trade at C$0,48 a share on Wednesday.