In the rare-earths sector a very important and under-reported story is coming to the surface. A senior executive at a rare-earth junior said to me at PDAC in Toronto earlier this week that the 800-pound gorilla in every rare-earth venture’s room, was the radioactive thorium- and/or uranium-bearing waste that will be generated by the extraction, separation, and refining operations that are the supply chain steps immediately following mining and mechanical concentration.
It is my understanding that Lynas’ first business plan for the Mt Weld operation put out in 2005 called for only raw ore to be produced in Australia. Every further step in the supply chain was, in that plan, to be done in China, and, at the conclusion the idea was that China would either ship finished rare-earth metals to Lynas’ customers or buy the rare-earth metals at that point or earlier in the supply chain from Lynas. This original Lynas plan faltered on the failure of the Chinese to give guarantees that the ore would remain the property of Lynas, after Chinese work product was added to it. Chinese law on the ownership of natural resources by the State was not specific on when such ownership vested if the goods were imported, and this made institutional investors gun-shy of the project.
One of the major advantages of Lynas’ original plan was that any radioactive residue would have been a Chinese disposal problem, and in those days the Chinese were more flexible about that than they have now become.
The story upon which I am commenting is not going to go away, and in order to estimate the probability of success of any rare-earth mining or processing project, it is necessary to decide what weight to give to the problems arising from the necessity to obtain a legal permit to dispose of or store radioactive waste in the country involved. One should not be fooled by the idea that some countries are ‘third world’ and so care little for the health of their citizens, when measured against jobs to be gained from a project. This is no longer true!
I believe that thorium is going to be an asset not a liability as the public realizes that uranium-enhanced thorium reactors (the real name of the so-called ‘thorium’ reactor fuel) can be brought into operation and sharply reduce or eliminate the ability of the end-user of such a reactor from building fission based nuclear weapons. Certainly the Chinese, Indians, and Russians are already moving in this direction. Atomic Energy of Canada, has, in fact, I’ve been told, successfully demonstrated the conversion of its iconic CANDU reactor type to uranium-enhanced thorium fuel. Also, if a rare-earth mining/refining operation can produce uranium at below market cost, then it will be able to sell such production immediately into the world market.
To summarize: Any rare-earth mining and concentrating operation must increase the radioactive content of the concentrate over the mineral in the ground. So the issue of allowable radiation levels will need to almost always be addressed.
The environmentalist in Malaysia and Australia seem to be on the warpath. Can Americans,Canadians, Greenlanders, Namibians, and South Africans be far behind?
This problem is universal, and I am not trying to highlight a “problem” unique to Lynas.
The issue can be solved; and when it is successfully solved, it is a basically matter of added cost and increased time to get licenses. Time and money are the solution here as they are in every one of our endeavors.
Disclosure: At the time of writing, Jack Lifton holds no stock positions in any of the companies mentioned above.