Galileo Resources PLC - Rare Earth Elements

Possess numerous unique properties, making them indispensable to modern technology required to sustain the needs of today’s society

“Green” technologies such as fuel cells, hybrid vehicles, wind turbines

China produces over 95% of the world’s Rare Earths and are cutting back on exports continually

Rapidly growing industry allied to global technology advances

Global demand forecast for 180kt – 200kt by 2014 (from 120kt in 2010)


			Diagram 1/2: Global Rare Earth supply & demand / Forecast global supply & demand [click to view full size version]		Diagram 3: Chinese Rare Earth Quotas [click to view full size version]

Recent developments in China
In April 2011, China increased the 2011 production quota of REEs by 5 per cent year-on-year. The government has taken significant steps to curb illegal mining operations, due to environmental concerns – illegal mining accounts for some 30 kt to 40 kt of REO per annum. Chinese officials have also suspended new mining licenses until June 2012.

Export tariffs have also been imposed on REE shipments, typically US$9.22 per tonne of LREE. The Chinese government recently created the Baotou Rare-Earth Products Exchange, which is scheduled for registration in August 2011. The exchange will be the first REE product exchange in the world and will focus on spot products only (no trading of futures).

In May 2011, it was reported that the Chinese State Council plans to consolidate the local REE industry, allowing three major producers to control more than 80 per cent of the industry within the next two years.

Pricing and trading of REEs
REEs are not exchange traded in the same way that precious metals (e.g. gold and silver) or non-ferrous metals (e.g. nickel, tin, copper, and aluminium) are traded. REEs are sold on the private market, which makes their pricing difficult to monitor. However, prices are published periodically on several websites. The 17 elements are not usually sold in their pure form, but instead are distributed in mixtures of varying purity. Therefore, pricing can vary based on the quantity and quality required by the end users’ application. The tables below illustrate the recent pronounced trend in REE prices.

Quarterly REO prices, Q1 2010 to Q1 2011

Rare Earth Oxide
(purity 99% min.)

Average price (US$/kg)

Q1 2010

Q4 2010

Q1 2011

Lanthanum oxide

6.08

52.49

75.87

Cerium oxide

4.46

52.62

77.52

Neodymium oxide

27.56

81.38

130.23

Praseodymium oxide

26.13

78.62

119.65

Samarium oxide

3.40

36.58

72.75

Dysprosium oxide

156.50

287.85

412.90

Europium oxide

512.40

611.54

719.20

Terbium oxide

478.90

620.38

717.60

Source: www.seekingalpha.com

REEs are a set of 17 chemical elements in the periodic table, specifically the fifteen lanthanides plus scandium and yttrium. Scandium and yttrium are considered REEs as they occur in the same ore deposits as the lanthanides and exhibit similar chemical properties.

Despite their name, REEs are relatively plentiful in the Earth’s crust, with cerium being the 25th most abundant element at 68 parts per million (similar to copper). However, because of their geochemical properties REEs are typically dispersed and not often found in concentrated and economically exploitable forms known as rare earth minerals. REEs can be divided into Light REEs (LREEs) and Heavy REEs (HREEs).

LREEs have a monoclinic molecular structure and include the elements lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, and gadolinium. HREEs have a tetragonal structure; these include terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium.

REEs are most concentrated, commercially, in alkalic igneous rocks (peralkaline granites and hyperalkaline syenite); carbonatites (and associated supergene deposits); and primary deposits. In terms of most common commercial REE minerals, these have been presented in the Table below, from most common (top) to least (bottom).

REEs Common, commercial REE minerals

Mineral

Formula (R = Rare Earth Oxide)

REO (%)

Bastnaesite

R CO₃ F

Monazite

(R,Th) PO₄

Xenotime

Y PO₄

Parisite

R₂ Ca(CO₃)₃ F₂

Synchisite

R Ca(CO₃)₂ F

Britholite

(R, Ca) (SiO₄, PO₄)₃ (OH,F)

Allanite

(Ca, R)₂(Al,Fe)₃(SiO₄)₃(OH)

Eudialyte

Na1₅Ca₆(Fe,Mn)₃Zr₃(Si,Nb)Si₂₅O₇₃(OH,Cl,H2O)₅

Uses
REEs are used extensively in a wide variety of applications to make technologies lighter, stronger, more efficient, and easier to use. Currently, the dominant end uses for REEs are for magnets; as additive in steel manufacture; auto catalysts; and petroleum refining catalysts. Other major end uses for REEs include use in phosphors in colour televisions, LED's, LCD's, and flat panel displays on cell phones, portable DVD's, and laptops; medical devices; polishing materials; industrial glasses; defence applications such as jet fighter engines, missile guidance systems, satellite and communication systems.

HREEs are increasingly sought out for a number of key applications: terbium is used in phosphors and permanent magnets; dysprosium is also used in permanent magnets; erbium in phosphors and fibre optics; yttrium in fluorescent lamps, ceramics, and as a metal alloy agent; europium as red colour for television and computer screens; gadolinium in magnets; and ytterbium in lasers and steel alloys.

While many REEs are finding important uses in a variety of applications, the most important REEs are the so-called big four magnet metals: neodymium and praseodymium (LREEs) and dysprosium and terbium (HREEs). These four elements make up 90 per cent of REE permanent magnets used currently and will be critical for the increasing number of permanent magnets required by future technologies.

Global supply
China produces over 97 per cent of the world’s rare earth supply, mostly in Inner Mongolia, although it only has 37 per cent (or 36 Mt equivalent) of proven reserves. All of the world’s HREEs (such as dysprosium) come from Chinese REE sources such as the polymetallic Bayan Obo deposit and the ion-adsorption clay deposits of Longnan and Xunwu.

In 2010, world demand for REEs was estimated at 134 thousand tonnes (kt) per year, with global production around 124 kt annually. The difference was covered by historical inventories. By 2012, world demand is expected to rise to 190 kt annually although no new mine output is expected in the short term. Most new mining projects will take 10 years to reach full production. In the long-run, however, the USGS expects that global reserves and undiscovered resources are large enough to meet demand.

Supply constraints/concerns have intensified due to export quotas imposed by China. On 1 September 2009, China announced plans to reduce its export quota to 35 kt per year for the period 2010-2015, ostensibly to conserve scarce resources and protect the environment. At the end of 2010, China announced that the first round of export quotas in 2011 for REEs would be 14.4 kt which was a 35 per cent decrease from the previous first round of quotas in 2010.

In 2010, Chinese LREE mineral reserves were projected to meet demand for the next 50 years, whilst their HREE mineral reserves may last for some 20 years.

New projects/alternative source of REEs
Searches for alternative sources, principally, in Australia, Brazil, Canada, South Africa, Greenland, and the United States are ongoing. Mines in these countries were closed when China undercut world prices in the 1990s, and it will take a few years to restart production as there are many barriers to entry. Currently, outside of China, there are several mines planning to become fully operational. These include Mount Weld (Australia); Mountain Pass (USA), Thor Lake and Hoidas Lake (Canada) and Steenkampskraal (South Africa). Mountain Pass and Mount Weld are scheduled to begin full production within the next two years. Other significant sites under development include the Nolans Project (Central Australia) and Kvanefjeld (Greenland). Vietnam signed an agreement in October 2010 to supply Japan with REEs from its north-western Lai Châu Province.

In early 2011, Australian mining company Lynas Corporation developed its US$230 million REE refinery near Kuantan (Malaysia). The plant will refine ore from the Mount Weld mine in Australia.

Another recently developed source of REEs is electronic waste. New advances in recycling technology have made extraction of REEs from these materials feasible, and recycling plants are currently operating in Japan, where there is an estimated 300 kt of REEs stored in unused electronics.

Significant quantities of REEs are found in tailings accumulated from 50 years of uranium ore, shale and loparite mining at Sillamäe, Estonia. Due to rising REE prices, extraction of these oxides has become economically viable. The country currently exports around 3 ktpa (2 per cent of world production).

Outlook
Outlook As China increasingly restricts exports in order to supply its domestic markets, the short term will likely see supply pressures worldwide. It is also worth noting that many REEs, including the HREEs, cannot be separately mined. Therefore, in order to meet the demands for some specific elements such as neodymium, dysprosium, terbium and europium, quantities of ore larger than overall demand need to be mined. In order to meet the world demand of 190 kt of REO in 2012, depending on the percentage breakdown of each element demanded, some 220 kt to 240 kt may actually need to be produced. Assuming that China will produce 140 kt to 160 kt, other nations will have to produce 60 kt to 80 kt in 2012.

Other countries have the resources, but not the capacity. It is unlikely that demand will be met with current projects in the start up, assessment and approval stage. By 2015, it is expected that the supply of REEs (approximately 208 kt), in general, will begin to meet demand. However, it is projected that specific REEs production, such as that of dysprosium oxide, will reach 2 kt per year in 2015, well short of the projected demand of 2.5 kt to 3.0 kt. Similarly, the supply of terbium, europium, neodymium, erbium and yttrium could also be constrained. Prices for HREEs are likely to remain high for the next few years, while prices for cerium and lanthanum may decrease.

There is a small possibility that within the next 10 years, there may be an oversupply of LREEs, specifically cerium and lanthanum, which often make up a large bulk of many REE deposits. Lanthanum may find an emerging market in lanthanum-nickelhydride car batteries, if they prove more effective than the lithium-ion battery in new generations of hybrid and electric vehicles.

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