Rare Earths, Mother Earth and the Return of a Once-Dead U.S. Industry

Rare earth mine in AustraliaRenewable energy and electric cars are eco-friendly. Mining operations? Not so much. But inside wind turbines and electric-car batteries are components made from a family of elements called rare earths. An international political battle has been brewing over supply of these increasingly vital and sought-after raw materials (an Australian mine is pictured here). And it's spurring what could be the revival of an industry once left for dead in the U.S.

China now produces over 95% of the world's rare earth elements, though it holds only a little over a third of the world's deposits. The country said this week that it plans to cut its rare earth exports by 35% and levy higher taxes on some of the elements in 2011, Bloomberg reports. China already cut the quota by 72% in 2010, causing a hike in prices and alarming big users of the minerals in Japan, the U.S. and Europe.

Reports surfaced in September that China had in effect banned all shipments to Japan amid a dispute over ownership of islands in East China Sea. The ban was later lifted. U.S. officials said last week they were considering filing a complaint about China's export reductions with the World Trade Organization.

Not So Friendly to Mother Earth

Seventeen elements are classified as rare earths, according to the U.S. Geological Survey. The term is something of a misnomer because many of them are actually abundant in the Earth's crust. However, they're generally difficult to mine at a commercially viable scale and come from only a handful of sources.

China is able to produce more abundant and cheaper rare earth elements partly because their production is a by-product of iron mining. But mining operations aren't known for being environmentally friendly, and the Chinese government has cited the environmental impact of these operations as a key reason for its curb on rare earth exports.

The government reportedly wants to issue tougher regulations for these mines and plans to form an industry association to better monitor and oversee operations. And, of course, Beijing also wants to make sure China's rare earths go first to its domestic manufacturers, which are investing heavily in clean-energy technologies. China began setting production limits in 2009.

Getting the U.S. Back On-Line

All this is getting a big reaction around the world, and particularly in America. Colorado-based Molycorp (MCP) has taken advantage of the political wrangling and growing demand by holding an initial public offering to finance the reopening of an abandoned rare earth mine in California. Molycorp raised around $394 million from the IPO this summer. The mine is the first new U.S. source for producing these minerals in more than a decade.

News of China's export cuts for 2011 has bumped up Molycorp's shares, which rose 6.76% to close at $49.30 per share Wednesday.

Molycorp's California mine contains bastnäsite, which can be processed into neodymium for making magnets used in many technologies, including wind turbines. The U.S. Department of Energy released a report this month that counted dysprosium, neodymium, terbium, europium and yttrium as critical for producing eco-friendly technologies such as wind turbines, electric cars and efficient lighting.

Teaming Up With Japan

Molycorp says it can currently produce 3,000 tons of rare earth minerals per year, though the minerals are coming from a stockpile accumulated before its mine was closed, reports MIT Technology Review. Molycorp is modernizing its mining process and expects to complete the overhaul by the end of 2012, when it plans to start producing 20,000 tons per year.

Earlier this month, Molycorp announced it will form a joint venture with Hitachi Metals in Japan to produce rare earth alloys and resulting magnets. A week before that announcement, Molycorp had said it was embarking on $531 million plan to build a factory near its mine to produce magnets from the rare earth minerals.

Also in early December, Japan's Sumitomo said it will invest $130 million in equity and debt to in Molycorp, which in return will ship processed rare earth compounds to Sumitomo over the next seven years.

Uncle Sam to the Rescue?


The U.S. government has invested billions of dollars in clean energy development in the past two years in order to rescue the sagging economy and promote technologies that can reduce greenhouse gas emissions. The money, coming from the stimulus package, has gone to a variety of research, manufacturing and renewable-energy-generation projects

For one project alone, the government has distributed $2.4 billion to a myriad of car and battery companies to build electric cars and charging networks.

In another $3 billion program, the government awarded grants to companies that build renewable-energy power plants. In that program, wind-farm developers have been among the big winners. Congress recently extended this grant program for another year, prompting the The Wall Street Journal to pen an editorial calling on Republican lawmakers to get rid of what it calls "green pork."

One man's pork is another man's staple, however, and in the coming battle to produce the next generation of energy-sipping technologies, the U.S. is betting that it's wiser to not let the rare earth and renewable-energy industries starve in this country.

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thenakedshort

REEs also have significant military applications. The need heavy REEs not found at Molycorp. Here's a good rundown:

http://theaccesspartners.com/

January 26 2011 at 10:57 AM Report abuse +1 rate up rate down Reply
mac2jr

The BP oil spill proved one thing, it was the best most modern drilling platform with the most safety controls and a top-notch trained crew and safety officers, BUT it all failed. Every 'fail-safe' failed, every crew member with safety training failed, the techology failed, and the well failed. BP and Transocean failed, and are now fighting paying up for their failure, as was in the EXXON case. This should send 'shock-waves' through the general public, as there are tens of thousands of drilling platforms with NOT nearly the amount of trained personnel, or safety devices......

December 31 2010 at 11:36 AM Report abuse +3 rate up rate down Reply
mac2jr

Mining for Rare Earth materials is ok, providing we do not destroy mountains and valleys and river as the Coal Industry is doing. We do not destroy sealife, seashores, and the lakes, rivers, bays, and oceans as our Oil companies are currently doing. We do not kill people with unsafe practices and greed. .... The industry needs tons of Regulation and Inspections, as it has continued to prove that it CANNOT police itself....

December 31 2010 at 11:30 AM Report abuse +3 rate up rate down Reply
mac2jr

The 500 MPH vehicle. No, not High-speed trains, but something like it. I-10, I-40, _17, I-25, I-80, I-90 are Interstate highways with 'right of way' and large wide lanes and medium strips. Now, we have the 'magnetic levitation' technology, and have had it for decades, if we use the Interstate's free space we can build two lanes or Mag Lev. These can be powered by solar cells and wind turbines every few miles, and the idea is to NOT get rid of the automobile, but help it. You drive your vehicle onto a 'truck' that is computer controlled and Mag Lev, this can then transport you safely at 500 MPG to your exit, where your vehicle can then again run on electic, gasoline, Hydrogen, or biofuels.......

December 31 2010 at 11:26 AM Report abuse +2 rate up rate down Reply
mac2jr

Use their's up and when they have no more, we will still have ours and be on top....

December 31 2010 at 11:21 AM Report abuse rate up rate down Reply
ram

This is a beautiful story. We USA, needs to stick it to the Chinese. They think, they are holding all the good cards. The only reason they hold any cards at all is. We haven't been playing they same game. The USA has all the resources that China has. We even have more then them. We have know how, and logic. I have dealt with them. Without Western know how. they would still be a 3rd world country. Instead of a developing country.

Let China continue to do this kind of business pratice. Their prices will continue to rise. Companies will return to the USA. Look at what happened in Japan 15 years ago.

December 31 2010 at 11:05 AM Report abuse +1 rate up rate down Reply
2 replies to ram's comment
mac2jr

Nope, they will move to Africa, if the Chinese do not get there first....

December 31 2010 at 11:37 AM Report abuse -1 rate up rate down Reply
ram

Africa has to many civil wars, no stability in their Goverments. Many thug gangs. Look at what happened during the World Cup. India is a better choice. But not the best choice. Too many political parties. Theft is a big problem in India. The reason China has been able to develop is. The people there have fear of punishment & loosing face. But now it is changing very quickly. Many two faced business practices.

December 31 2010 at 12:17 PM Report abuse +2 rate up rate down Reply
kent05r

Rare Earth; the president has now agreed to keep in port at all time 50% of your subs at all times. Why would he do that? Is this the defense to keep 50% of your fleet at home? Who is he really looking out for. Not You or me. this last year out of 258 days the man has taken 78 days off for vacation, this too is a record.
Maybe he should invite Van Jones back for advice, or George Soros. His true friends of communism and dictatiorship.

December 31 2010 at 9:07 AM Report abuse +3 rate up rate down Reply
kent05r

Great News for stock # 8003 on the Hong Kong Exhange, Called Great World, Warren and the girls have been here for years, With your tax dollars making billions of dollars doingt so. Truth is there is not battery out there that will last more than two hours. and cost more. Stripping of the mobleization of this country seems to be the head line for the administrations. Do they really think the ones whom have wanted the demize of the US are our friends. With this current administration; Game over, sold out to China and now under there thumb. Thank the elected sell outs that cause this mess for peronal gain. Heney Kissinger is in Soul Korea. the first of the ones to cross the line and Freedoms dome.

December 31 2010 at 9:01 AM Report abuse -1 rate up rate down Reply
1 reply to kent05r's comment
Hello Bob

Kent: You don't make good sense.

December 31 2010 at 5:09 PM Report abuse +2 rate up rate down Reply
improudmom

No mention of Afghanistan in your column where some of these rare earth materials are located? Could this be part of the reason we are battling the Taliban?

December 31 2010 at 8:45 AM Report abuse +3 rate up rate down Reply
oakcourt

This Rare Earth market is small.........$1.5 Billion a year or two ago. But it naturally is increasing in value.
Second, it will not be long before all of the other countries realize that we should start an aggressive recycling program of all types of metals. It is time for government to impose a "green tax" on the sale of electronics so that it can award grants to foster this industry along. Remember when we recycled Coke bottles?
Third...........This panic in the stock market only means one thing...Panic & Greed will get you in trouble.......SOMEONE IS ABOUT TO GET BURNED!

December 31 2010 at 8:35 AM Report abuse +1 rate up rate down Reply